Guest Post: Eye witness account of India’s first compulsory license appeal before the IPAB [Part I]

SpicyIP is delighted to bring to our readers a detailed blow-by-blow account to Justice Prabha Sridevan’s seven hour long dictation of the order upholding India’s first compulsory license this Monday. We thank Saranya Murugaiyan, an IP practitioner at the Madras High Court, who witnessed the announcement in the open court for this excellent summary of events. Saranya completed BA,BL (Hons) at the School of Excellence in Law, Chennai and recently completed her Masters from the Benjamin N Cardozo School of Law in 2012. 
For the benefit of readers, Part I of the post outlines three aspects; viz; whether the patentee has right to be heard at preliminary stages of the compulsory application; whether Natco made reasonable efforts to obtain a voluntary license from Bayer and whether Cipla’s alleged infringing sale of the drug has any bearing on the grant of the CL. Part II of the post takes us through the crux of the decision on Sec. 84 (grounds of reasonable requirement of public and working of the invention). Furthermore, aspects on suppression of facts and misrepresentation made by Natco during the proceedings are noted. To see our extensive coverage on India’s first CL, please click here
Part I 
On the 4th of March 2013, the Intellectual Property Appellate Board (IPAB) adjudicated on an appeal from the Controller General’s grant of India’s first compulsory license. Natco Pharma Ltd, (Respondent) an Indian pharmaceutical company which manufactures generic versions of medicinal drugs had obtained a compulsory license to manufacture ‘Sorafenib tosylate’, a palliative drug used in the treatment of advanced stage liver and kidney cancer. Sorafenib tosylate was manufactured and marketed under the name ‘Nexavar’ by Bayer Corporation (Appellant). Bayer Corporation also held the patent for the drug sorafenib tosylate. Bayer sold the drug at a cost of nearly Rs. 2,80,428/- for dosage lasting for one month while Natco wanted to sell the drug at a cost approximated at Rs. 8800/- for a dosage lasting for one month. The compulsory license was granted by the then Controller of Patents P.H. Kurian on 9th March 2012. The Controller found that Bayer did not satisfy the grounds laid down under S. 84 (1) of the Patent Act, 1970. Aggrieved by the Controller’s order, the patentee filed an appeal before the IPAB. Justice Prabha Sridevan dictated the order in her chambers at the IPAB in Chennai on 4th March 2013. The salient points of the order are reproduced below. 
Justice Prabha Sridevan first made a note of the appearance of the concept of compulsory licenses in legislations both domestic and in international treaties. She referenced the Indian Patent Act in this context. As far as the Agreement on the Trade Related Aspects of Intellectual Property (TRIPS Agreement), compulsory licenses are found under ‘other uses without the authorization of the right holder’. The Paris Convention of 1883 says compulsory licenses are granted to prevent abuses which might result from the exercise of exclusive rights. The judge also noted that the TRIPS did not give a carte blanche to its members to grant compulsory licenses but hedged this ‘other use’ with several conditions and mandated that the authorization of such licenses would be considered on a case to case basis on an individual basis. She concluded by saying that compulsory licenses are not an unmentionable word. She noted later on that this case gave rise to several important questions of pure law. 
She further went on to quote from the Iyengar Committee Report that patent rights were created not in the interest of the inventor but the national economy. She also quoted that patent rights were affected by public interest. This was a common theme throughout the order as the judge stated at several places that it was the interest of the public that was paramount and not the interest of the inventor. 
Whether the patentee has a right to be heard at preliminary stages of the CL application?
The first issue decided by the IPAB was whether the patentee had to be given an opportunity to be heard at the prima facie stage of the compulsory license application. This question was answered in the negative. The appellant had raised the objection that they had to be given notice at the prima facie stage itself where the Controller decides whether the application for compulsory license is to be heard or not. The Board held that a plain reading of S. 87 leads to the conclusion that the requirement of establishing a prima facie case precedes notice to the other side. S. 87 (1) is reproduced below:

Where the Controller is satisfied, upon consideration of an application under S. 84, or S. 85, that a prima facie case has been made out for the making of an order, he shall direct the applicant to serve copies of the application upon the patentee and any other person appearing from the register to be interested in the patent in respect of which the application is made, and shall publish the application in the official journal.

The Board further held that the issue of hearing of the other side arises only after the notice of opposition is filed. After this hearing the Controller may vacate application or grant the compulsory license. S. 87 (1) reserves only a contemplation of rights; only the question of allowing the application is deliberated upon. 
Whether Natco made reasonable efforts to obtain voluntary license from Bayer?
The second issue decided by the IPAB was whether the respondent had fulfilled the requirements of S. 84 (6) (iv) viz., the respondents had sought to obtain a voluntary license from the appellant for manufacturing ‘Nexavar’. The court concluded that the respondent had done so. The appellant had raised this ground claiming that the letter sent by the respondent date 6th December 2010 seeking a voluntary license was in the nature of a notice or a threat. 
The appellant contended that no reasonable effort had been made by the respondent. The Board also noted that the respondent had stated that the request was made without prejudice to their rights to attack the patent. The respondents had also included the three grounds under S. 84 (1) by which a compulsory license could be obtained. The appellant has also replied to the respondent saying that the client had not considered it appropriate to grant a voluntary license to the respondent since the appellant did not like the cost at which the respondent was proposing to sell the drug. 
The Board held that the letter sent by the respondent stated what, according to the respondent, was a reasonable cost for selling the drug. The Board held that, despite the respondent including the three conditions for grant of a compulsory license, an offer to obtain a voluntary license had been made by the respondent. The Board noted that if there was a veiled threat, there was an equally veiled answer and remarked that the appellant could have responded saying that there was room for negotiation. The Board found that an offer had been made by the respondent and was rejected by the appellant. They saw no reason why the respondent should make another effort when the first one had failed and held that the law does not require subsequent efforts either. The Board also took cognizance of the Controller’s finding that respondent could have been more humble in the letter to the appellant and remarked that as rivals such sensibilities would not have occurred to either party. In conclusion the Board held that the law’s requirement had been met and rejected this objection. 
The Board then spent some time deliberating the relevance of the Iyengar Committee Report. The Board stated that although the Report came into existence before the TRIPS Agreement, it has still not lost significance with respect to patent law. The Board also noted that the members to the TRIPS Agreement affirmed its flexibility, that the members had significant rights with respect to public health and access to medicines. The Board also mentioned the contents of S 83 (b) of the Patent Act which states that patents are not granted for an import monopoly or to impede public health. The Board also stated that the patentee had certain rights and obligations, and one of such obligations is to make the benefit of the patented invention available at a reasonable, affordable price to the public. 
The Board further considered the three conditions laid down in S 84 (1) for the grant of compulsory licenses viz: 

(a) that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or
(b) that the patented invention is not available to the public at a reasonably affordable price, or
(c) that the patented invention is not worked in the territory of India. 

The Board held that it is enough if one condition is satisfied as the three conditions are separated by the disjunctive ‘or’. 
Whether Cipla’s allegedly infringing sale of the drug affect the grant of CL?
The Board then moved to the issue of whether CIPLA’s presence affected the outcome of the matter at hand. CIPLA is an alleged infringer of the drug Nexavar. The appellant has also filed a suit for infringement against CIPLA in the Delhi High Court and the suit is still pending. Although the Delhi High Court refused to grant an injunction, it directed CIPLA to maintain accounts of the sales from the infringing product. In a ludicrous argument, the appellant states that both the appellant and its infringer together meet the reasonable requirements of the Indian public and therefore the compulsory license cannot be granted upon this ground. Both the Controller of Patents and the IPAB rightly rejected this preposterous argument. 
The IPAB held that ‘patented invention’ can only mean that which is made available to the public, if it were otherwise it would mean a monopoly is granted to person who does not make an effort to ensure the invention reaches the public and rests the obligation on a third party. The Board held that CIPLA’s sales are irrelevant and cannot be included. It further held that CIPLA is not the appellant’s licensee and the sales made by CIPLA are not endorsed by the appellant. The IPAB also noted that although order of the Delhi High Court closes the matter of an injunction also ensures that CIPLA cannot refrain from maintaining accounts as directed by the Hon’ble Court. The appellant can always apply for modification of the order in the event that CIPLA does not maintain accounts. 
The IPAB held that while CIPLA’s presence is relevant, the law is clear that the requirements and conditions to be satisfied for the grant of the compulsory license is something to be decided with respect to the patentee alone and not a party whose presence itself is litigious. The Board further stated that the patentee is expected to furnish technical knowledge and render assistance to licensees since the invention is the patentee’s property. The Board was firm that it is the patentee who should make sure that the invention is worked adequately and commercially, failing which the patent can be revoked. The Board concluded that it was not inclined to include CIPLA’s presence with regard to the consideration of reasonable availability of the invention to the public, pricing the invention at a reasonably affordable price and working of the invention within the territory of India.

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