SpicyIP Tidbit: Bayer makes an attempt to nix NATCO’s CL for Nexavar

Bayer Corporation, which earlier this year lost its bid to oppose NATCO’s application for a compulsory license (CL) for its Nexavar patent, is now attempting to terminate the CL on the grounds that NATCO has violated the terms and conditions of the CL by exporting its generic version of Nexavar to Pakistan and China. The Controller General’s order was very clear that NATCO was licensed to market the drug only within the territory of India. 

Bayer had raised this ground even in its appeal to the IPAB, against the grant of the CL by the Patent Office. The IPAB had refused to rule on this aspect on the grounds that the issue required factual determinations which were best made by the Controller. This order of the IPAB was dated the 14th of September, 2012. Prior to this order of the IPAB, Bayer had already made an application to the Controller General of the Patent Office, on the 21st of August, under Section 94 of the Patent Act to have the CL cancelled on grounds that NATCO had violated the same by exporting the generic versions authorized by the CL to Pakistan and China. 

For its part NATCO sought an extension of one month on the 18th of September, 2012 to file a reply to Bayer’s application, on the grounds that the evidence was being collected and that it was of a ‘complicated technical nature’. The reply by NATCO was finally filed only on the 29th of October, 2012 wherein it claims that “the products obtained by the Appellant are suspect and orchestrated” and that it had no distributor in Pakistan or China. Natco once again reiterates that “these are possible orchestrated instances for filing present petition”. Further, NATCO also seeks to wash its hands off the entire matter by claiming that once it sells it product in India, its rights are exhausted in the same. 

While denying that its products were available at the pharmacies in Pakistan, NATCO also produces affidavits of its managers, explaining that some of the distributors and online pharmacies buy NATCO products from distributors to whom NATCO sell its products. 

Although NATCO does not spell it out in as many words, it appears to be implying that its products were most probably sold by the distributors, not under its control and that NATCO itself cannot be held liable for the same. 

That answer is simply untenable in the law since NATCO received a CL only on the grounds that it would sell the product in India. In such a case, NATCO would be under an obligation to control the chains of distribution and at the very least it should have included a covenant in its agreement with its distributors restraining them from exporting the impugned product. If NATCO has not included such a covenant in its distribution agreements, it has not complied with the terms of the CL. 

I’m not sure whether the Controller General has passed an order on Bayer’s applications. Any tips would be appreciated.