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

Continuing from the previous guest post on the IPAB’s pronouncement on Bayer’s appeal against grant of CL to Natco, this part takes us through the crux of the decision on Sec. 84 (grounds of reasonable requirement of public and working of the invention). Furthermore, decision on aspects relating to 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 II
Whether the patentee has reasonably met the requirements of public?  
The IPAB then moved on to address the issue of whether the appellant had satisfied the reasonable requirements of the public vis-à-vis adequate supply of the drug to the public at a reasonable affordable price. The Board answered this question in the negative as well. The appellant contended that the drug was a palliative drug only and not a curative drug and that the number of patients affected was not huge. They also contended that market penetration was not easy and they had only been granted approval to market the drug in India from January 2008. They claimed that they had worked the invention for three years. The appellant contended that socioeconomic parameters are only one of the factors to be decided when settling the price of the drug. They also claimed that affordability depends on the nature of the product. Further, it was claimed that the appellant’s patient assistance program (PAP) was being effectively implemented to satisfy the reasonable requirements of the public at a lower cost than the commercially sold drug. The appellant also cited their huge research and development costs as one of the reasons for the high price of the drug. They offered affidavits from Harold Dinter and Dr. Manish Garg to supplement their claim that their drug deserved to be sold at a higher price. They also argued that a differential pricing system targeting the different classes of the public was a more effective system. The appellant claimed that the ‘working’ of the drug did not necessarily mean that the drug has to be locally manufactured. The appellant argued that they could not establish a manufacturing facility in every country in which the drug was marketed. 
The Board began its ruling on this issue with the pricing of the drug. The Board noted that the development of drug is an arduous and laborious process and most experiments end in failure. The Board also noted that the Mr. Dinter and Dr. Garg had not considered reasonable affordability from the viewpoint of the public. The Board looked to the Patents Act to clarify its stand. S. 84 (1) (b) of the Act very explicitly states that the patented invention must be made reasonably affordable to the public if a compulsory license is to be avoided. The Board noted once again that the three conditions under S. 84 (1) are disjunctive and the presence of any one of the conditions is enough to grant a compulsory license. The court considered the affidavit of James Packard Love of Knowledge Ecology International filed against the appellant. The Board held that a reasonably affordable price necessarily has to be fixed from the viewpoint of the public. The word ‘afford’ indicated whether the public can buy the drug. The Board considered whether a price of Rs. 2,80,428/- per month is reasonably affordable to the public. The Board found that it was not a reasonably affordable price and agreed with the Controller’s decision that a reasonably affordable price has to be construed predominantly with respect to the public. 
On the question of whether there had been an adequate supply, the Board found that the appellant’s own supply would not have been adequate even to the number of patients estimated by the appellant as requiring treatment by Nexavar. The Board found that public could neither access nor afford the drug. 
Whether the patentee has been able to work the invention within the territory of India?
The Board then considered whether the drug had been worked within the territory of India. While the Board did not come to an explicit conclusion as to whether Nexavar was worked in India or not, it recognized that the term ‘worked’ had some flexibility built into it. The Board ventured the opinion that some patented inventions would necessarily be imported only and that some patented inventions could only be produced locally. The Board however explicitly stated that, even assuming that importing alone will satisfy the working requirements in the case of the appellant, the import must still be on a commercial scale as required by S. 83 (a) and to an adequate extent so as to meet the needs of the public. The Board then postulated the following: 
-if there is no working of the patented invention the reasonable requirement is not satisfied, 
-if the price is not reasonably affordable the reasonable requirement is not satisfied, 
-if the working of the patented invention is not on a commercial scale then the reasonable requirement is not satisfied. 
The Board went to hold that the appellant’s PAP does not constitute working the invention on a commercial scale. The IPAB held that these programs are conducted at the discretion of the appellant and cannot be looked at when defining the term ‘working the invention’. What must be looked, according to the Board, is the price of the patented invention in the open market, in this case approximately Rs. 2,80,000/-. It agreed with the Controller’s decision that philanthropic efforts could not be construed as steps to work the invention on a commercial scale and held that PAPs cannot satisfy the requirements of S. 84 which concerns itself with the price of the drug in the open market. 
The Board also ruled regarding the Controller’s decision regarding S. 84 (6). The Board held that the appellant could bring down prices after the grant of a compulsory license and not be barred by S. 84 (6) which reads thus: 
In considering the application filed under this section, the Controller shall take into account,-  
(i) the nature of the invention, the time which has elapsed since the sealing of the patent and the measures already taken by the patentee or any licensee to make full use of the invention;  
(ii) the ability of the applicant to work the invention to the public advantage;  
(iii) the capacity of the applicant to undertake the risk in providing capital and working the invention, if the application were granted;  
(iv) as to whether the applicant has made efforts to obtain a license from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit: 
Provided that this clause shall not be applicable in case of national emergency or other circumstances of extreme urgency or in case of public non-commercial use or on establishment of a ground of anti-competitive practices adopted by the patentee, but shall not be required to take into account matters subsequent to the making of the application. 
The Board held that the public interest was paramount and efforts made by the appellant to make the drug available to the public subsequent to the filing of the application seeking a compulsory license are not disallowed. The words of S. 84 (6) are not a taboo to prevent inventor to step down from his position and make the invention available to the public. The provisions of the Patents Act dictate that the patentee must provide the necessary technical information about the patented invention. The provisions favour public interest and not the interests of either the patentee of the compulsory license applicant. The Board held that patents are granted for the benefit of the public and therefore must be easily attainable and affordable by the public. 
The Board also considered the palliative nature of the drug and its market penetration. The Board stated that the law does not contemplate the grant of a compulsory license soon after the grant of a patent. It allows for a gestation period of three years, which the law-makers in their wisdom, thought was sufficient to be worked within the territory of India at a reasonable availability and a reasonably affordable price. The law under S. 86 also allows for the grant of one more year if the patentee can demonstrate that the time has been insufficient to work the invention on a commercial scale. 
The Board noted the contradictory stands taken by the appellant in this regard. It also noted that the appellant was fully aware of the difference between commercial sales and patient support sales. The appellant had disclosed its meager patient support packs and sample packs as the extent of its commercial sale. The Board concluded that not one commercial sale pack had been imported in the year 2010. The Board agreed with the Controller that the small quantity imported did not merit an adjournment under S. 86. It held that the appellant had three years and a bit more and the import of small quantities in 2009 and 2010 was rightly not sufficient to adequately work the drug. 

Suppression of facts & misrepresentation allegations against Natco 
One of the grounds of the appeal was that the respondent had not submitted evidence to support their compulsory license application under Form 70. The Board held that since Form 70 does not seem to indicate filing of evidence at the time of filing of Form 70 and in any case the Controller had all the evidence placed before him before he made a decision regarding the grant of a compulsory license. The Board refused to set aside the Controller’s order on the grounds of a procedural lapse. 
The Board then deliberated on the suppression of CIPLA’s presence and the filing of counterclaims by the respondent and the false statements made by the respondent regarding its patent application for a process patent for the manufacture of sorafenib tocalyte. The respondent had stated that it had already obtained a process patent for the manufacture of sorafenib tocalyte while in reality its patent application was still pending a decision. The Board refused to interfere with the order on this ground citing the public interest resting on the compulsory license. The Board, however expressed its disapproval at the false statements made by the respondent and imposed costs on the respondent to the tune of Rs. 50,000/-. This sum of money is to be donated to the Tata Memorial Center in Mumbai. 
Terms and conditions of the grant of CL
On the issue of the terms and conditions of the compulsory license laid down by the Controller, the Board allowed a partial modification. The Board noted that the appellant’s grievance that the retailer, stockiest and distributor received 30% of the net sales while the appellant gets 6% of the net sales as royalty is a genuine grievance. Therefore the Board increased the royalty by 1%. The appellant will now receive 7% of the net sales as royalty. 
The appellant also raised the issue that the respondent had not been able to satisfy the condition laid down in paragraph 15(h) of the order that the respondent provide the drugs free of charge to 600 needy patients. The Board responded that this was a matter of compliance currently before the Controller and it was the decision of the Controller whether the compulsory license could be revoked on that ground. The Board concerned itself only with the legality of the impugned order. 
Thus the order granting India’s first compulsory license passed review by the Intellectual Property Appellate Board, barring a modification regarding the royalty received by the appellant.


  1. AvatarAnonymous


    Crisp and interesting read, with impartial stance and clear reportage on the key points. 🙂 🙂

    I must say – a much more delightful read than quite a few patent posts by regular authors here.

  2. Avatarlatha

    While reporting such a land mark order one should properly see the contents. There is no form-70 under the Patents Act. Patents Act contains only forms upto 27 were prescribed in Patents Rules. The application for compulsory license is to be made in Form 17.


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