Breaking News: Natco Admits to Bad Faith and BMS attempts Patent Linkage!

In a startling revelation, Natco admitted (albeit indirectly) that it had lied in its response to BMS’s quia timet law suit, wherein BMS approached the Delhi High Court in 2009, apprehending imminent infringement of its patent covering Dasatinib, an anti cancer drug. 
In an earlier post, I noted that Natco may have committed a fatal legal blunder by stating on oath before the Delhi High court that:

“It is denied that the Defendants intend to launch a generic version of Dasatinib under the name Dasanat.”  (paragraph 27 of the Natco written statement).

I also noted that in the light of the fact that Natco went on to launch a generic version of Dasatinib under the name Dasanat in June 2012, its statement on oath effectively amounted to a blatant falsehood. As to whether or not this amounts to perjury under Section 340 of the CRPC is contentious. However it reeks of bad faith and is likely to prove prejudicial for Natco.
In a filing before the Delhi High Court yesterday, Natco admitted (albeit indirectly) that, at the time of BMS’ quia timet action in 2009, Natco was actively pursuing a marketing application with the drug controllers’ office (DCGI). I extract from its submission (paragraph 6):

“it is submitted that the suit filed by the Plaintiffs was itself premature in that it was filed when the Defendant had only applied for marketing license which activity is permissible in law.”

In other words, given that Natco was actively pursuing a marketing license for Dasatinib before the regulator, its assertion that it had no intention of launching a generic version of Dasatinib was blatantly untrue. This damning admission is likely to prove prejudicial to Natco, not only in terms of it being seen as a bad faith litigant that took the court for a ride, but also in terms of its potential to be condemned as a contemnor.
No doubt, Natco was well within its rights to pursue a drug regulatory application before the Drug Controller, and our law makes it amply clear that the drug regulatory process is separate and distinct from the patent process and patent infringement claims cannot be used to hinder the drug regulatory process in any way. Why then did Natco have to vacuously claim that it had no intention of making the drug or launching it? It should have simply asserted its right to pursue a drug regulatory application without fear of patent infringement and gone on to claim that the patent was invalid.

In the immediate aftermath of Natco flooding the market with Dasanat in May 2012, BMS filed a second injunction application seeking to restrain Natco. The Delhi High court effectively passed two injunctions against Natco. The first injunction (restraining order) was issued by Justice Kailash Gambhir on June 13, 2012 and states in no unclear terms that:
“The Defandant shall be bound by their statement taken by them in their written statement, particularly in paras 26, 27 and 29.”

(ps: para 29 of the Natco’s written statement effectively states that Natco has no intention of launching a generic version of Dasatinib. 

pps: The order by Justice Gambhir is at the last page of this uploaded document.)
A second injunction was granted by Justice Manmohan Singh of the Delhi High Court on 22nd June 2012, restraining Natco from “manufacturing and selling the product which infringes the plaintiffs patent in any manner”. 
A TOI piece focusses only on the second order above and notes that Natco may be able to shield itself from the contempt charge filed by BMS, given that the court order only restrains it from introducing an infringing version. Natco notes in its recent submissions (at para 7):
“…it is submitted that the product Dasanat does not violate Plaintiff patent no 203937 as the defendant produces a hydrate polymorph i.e. Monohydrate of Dasatinib, which is not covered by the aforesaid patent.”

As to whether or not Natco ultimately succeeds with this non infringement claim remains to be seen.
It sounds awfully similar to Cipla’s claim in the Roche vs Cipla (Tarceva) litigation, a bitter patent battle whose trial is almost complete. As with the Roche vs Cipla matter, it stands to reason that if the BMS suit patent (no 203937) covers the main chemical substance (eg. X), then it does not matter that Natco only uses a polymorphic version of that substance. The very making of a polymorphic version of X would invariably infringe the patent covering X.

Irrespective of the final determination of the non infringement argument, Natco could well argue that it does not commit contempt of the second injunction order, since it genuinely believes its product to not infringe the suit patent.
However, there is not enough wiggle room for Natco to avoid a charge of contempt in so far as the first order is concerned. Justice Gambhir’s order prevents Natco from doing any act that conflicts with its undertaking in para 29 that it did not “intend to launch a generic version of Dasatinib under the name Dasanat”.  
In other words, the first injunction order effectively restrains Natco from selling Dasanat. And Natco’s continuing sales amounts to an act of contempt!
I am still at a deep loss to understand as to why a legally savvy corporate such as Natco dug its own grave by making such an obviously false statement to a court. Was this negligence? Or did it have anything to do with our less than optimal regulatory structure and Natco’s desire to avoid sensitising our court or any of us to potential malfeasance/misfeasance on the regulatory front. One hopes to find answers in the days to come.
This strong charge of bad faith and contempt may not impact the final outcome on the merits of the matter i.e. as to whether or not the patent is valid and as to whether or not Natco infringes. Hoever, it is certain to impact Natco’s reputation as a litigant, owing to the court seeing Natco as a bad faith litigant and contemnor. 
More worrying than Natco’s fatal legal blunder is BMS’ alleged attempt to sneak in drug patent linkage, despite our courts holding such linkage to have no valid legal basis in India. Natco alleges that BMS was behind a showcause issued by the Uttarakhand drug regulator to divest Natco of its regulatory approval. 
Natco notes in paragraph 13 of its filing that:
“A perusal of the show cause notice dated 20.06.2012 clearly reveals that the notice was issued at the behest of the Plaintiff. Further, the drug licensing authority had issued a letter suspending the license of the defendants. This order was challenged in the High Court of Uttarakhand and High court has passed an order dated 25th July 2012, directing that the said order (of suspicion of licence) shall remain in abeyance. The Hon’ble High Court of Uttarakhand has remanded the matter to the Drug Licensing authority, directing it to consider the reply of the defendant to the show cause notice and to pass a reasoned and speaking order after hearing the defendant.”

Given that drug patent linkage has been held to have no legal basis in India by both a single judge and an appellate division bench of the Delhi High Court (and effectively confirmed by the Supreme Court as well, which refused to admit the appeal from the Division Bench), BMS will have to answer to a serious charge of bad faith, if Natco’s allegations are indeed true.
Apart from all of the above, this case is an interesting one to me personally, since I’ve begun looking more closely at our drug regulatory regime. The following questions arise:
1. What kind of licence did Natco apply for (from the DCGI office) in 2009? Was this an application for permission to import, export or to manufacture and sell in India?
2. Did Natco finally procure this permission from the DCGI? If not, what accounts for the ensuing delay? Could it be that Natco failed to comply with DCGI pre-requisites for information and data/testing? Or worse still, could it be that that the DCGI deliberately delayed permission to Natco in a bid to erect a trade barrier? Or just that the DCGI is terribly understaffed and takes significant time to clear a single application, as noted in this damning Parliamentary committee report.
One hopes to find answers in the days to come. One also hopes that given the increasing intersection between pharmaceutical patent and regulatory issues, the DCGI would begin exhibiting more transparency and upload details of all new drug applications, generic drug applications, including all relevant data and the indications for which the drugs have been approved. I had recommended such a transparency measure as a “middle path” option some years back in this Mint editorial.
The patent transparency fight began several years ago and it is an absolutely marvel to now have access to all patent data, including most communications between the patent office and the applicant. Controller General Chaitanya Prasad has not only continued as a a fitting successor to PH Kurian, but made a number of sophisticated changes to our IP databases and systems, making information retrieval far better, simpler and quicker. He has also initiated the commendable task of building an internal search engine (IPATS) for the Indian Patent Office.
Though some of the patent data is incorrect, one is still thankful for this revolutionary transition from opacity to transparency. In a similar manner, those of us who care about public health ought to ensure that the DCGI processes are also subjected to greater transparency and accountability. Unfortunately, while on the patent front, we had one set of parties (generics) willing to slug it out with drug originators and support transparency initiatives, on the drug regulatory front, both drug orginators and generics are likely to cosy up and perpetuate a regulatory regime that is both lax and opaque.
Tags: , ,

About The Author

2 thoughts on “Breaking News: Natco Admits to Bad Faith and BMS attempts Patent Linkage!”

  1. I raise a point which has been haunting me in the IP litigation cases. Can a court injunct a person from “manufacturing” in an interim injunction order whether it be infringement/passing off of trade mark or any other IPR law? To my mind the court can restrain a person from selling, offering for sale, advertising etc. but not from manufacturing. You have mentioned in this blog that HMJ Manmohan Singh had restrained the NATCO from “manufacturing and selling the product which infringes the plaintiffs patent in any manner” by an order dated 22nd June, 2012.
    After all it is an interim injunction order. Tomorrow in the suit the plaintiff may not be able to prove the case and may not be granted the decree of permanent injunction. The defendant may manufacture and keep it in stock considering that the suit will be dismissed in due course and he would not have to loose time for manufacturing and then selling. How can defendant be restrained from manufacturing?

    This above question gains importance for me as I have come across a case where the only relief claimed by the plaintiff is that the defendant should be restrained from manufacturing goods ABC and this is also the relief in interim injunction application.

  2. Hi Anon:

    Manufacturing is part of the arsenal of exclusive rights granted to a patentee (the only exception being manufacturing for the purpose of testing under 107A bolar provision). The concerns you raise with a wrong interim play out for all IP infringement activities (selling etc) and not just for manufacturing. If I get the injunction order wrong, effectively I’m prejudicing not only the competitor but also the public. Therefore, it makes sense to dispense with interim injunctions and move straight to trials.

Leave a Comment

Scroll to Top