Bayer v. Ajanta: DHC Erects New Jurisprudence on Public Interest for Injunctions

On 20 December 2016, Justice RK Gauba of the Delhi High Court heard an interlocutory application under Order 39 Rules 1 and 2 of the CPC filed by Bayer Intellectual Property GmbH in a suit concerning IN225529 (3275/DEL/1998) against Ajanta Pharma Ltd. Bayer asserted that the patent covered vardenafil, a drug used to treat erectile dysfunction, and that Ajanta was manufacturing and selling the drug under its brand Valif.

IN225529

The suit patent claims the compound, its derivatives, and pharmaceutical compositions containing them from a priority date of 12 November 1997. The patent was granted to Bayer Healthcare AG, which assigned it to Bayer’s IP holding company in 2013. Contrary to industry practice, Bayer has filed Form 27 to disclose the working of the patent, as mandated by Section 146 of the Patents Act for the years 2013, 2014, 2015, and 2016. In all these filings, Bayer has admitted that the patented invention has not been worked commercially in India because it is evaluating the market for the product.

Globally, Bayer began marketing the drug through a co-promotion agreement with GlaxoSmithKline since 2001. Following the drug’s failure to meet expectations (Bayer admitted to FT that they were unable to stimulate growth [giggity] in the erectile dysfunction market), GSK sold its marketing rights back to Bayer in 2005. As far as the Indian market is concerned, it seems fairly clear that Bayer has exclusive rights to manufacture and market the drug.

Background

It appears that Bayer woke up to smell the coffee in 2016, when it realised that Indian companies were already manufacturing a drug that it was still “evaluating the market” for. On 11 August, it obtained an ex parte injunction against Vipro Lifescience, a company it pleaded was manufacturing vardenafil. Subsequently, Vipro submitted in court that it would cease infringement, and further agreed to give Bayer information about the foreign customers who purchased its shipments of vardenafil so as to enable Bayer to proceed against them abroad. Upon receiving this assurance, Bayer dropped proceedings against Vipro on 22 November. Bayer seems to currently be proceeding against Mehta API Pvt. Ltd., Manus Aktteva Biopharma LLP, Rakshit Pharmaceuticals Ltd., Hetero Drugs Ltd., and Dr. Reddy’s in the Delhi High Court, consistent with its assertion in court that it was suing at least six entities for infringing the vardenafil patent.

Bayer v. Ajanta

The 20 December hearing resulted in an ad interim injunction against Ajanta, and an ex parte injunction against two exporters of the drug. On 4 January 2017, Ajanta filed an application under O39R4 to vary the terms of the injunction. Ajanta’s application was based on multiple factors, including jurisdiction, but primarily invoked Franz Xaver Huemer v. New Yash Industries to plead that non-working of a patent disentitles its holder to injunctive relief. Curiously, Ajanta appeared to suggest that it was not infringing since Section 48 does not explicitly cover export.

In response, Bayer pointed out that the exclusive right under Section 48 covered manufacture regardless, and cited Novartis v. Cipla to argue that although non-working could be a ground for revocation before the Controller, it’s no defence for infringement.

Bayer’s stance is correct, but somewhat misses the point since Ajanta was not claiming non-use as a defence, but merely as a factor to be considered when assessing whether injunctive relief ought to issue. Bayer’s response does not directly engage with Ajanta’s submission because in Novartis, the defendant attempted to argue that as a rule, no prima facie case was made out in situations where the plaintiff was in contravention of Section 83 of the Act, which lays down “general principles applicable to the working of patented inventions”.

While reading Section 83, the defendant has tried to interpret the said section along with the Section 48 of the Act and submits that the monopoly rights granted under Section 48 are subject to Section 83 of the Act and in case there is no compliance of various conditions of section 83, normally no prima facie is made out by the patentee. Section 83 has to be considered while considering the issue of injunction. If patent is not worked and is being misused only by the patentee in order to enjoy the monopoly on importation and the exercise of patents rights ‘impedes promotion of public health and nutrition’ and are abused and if the exercise of patent rights ‘prohibits the Central Government from taking measures to protect public health’. If the product is not made available ‘at reasonably affordable price’ to the public then no prima facie case is made out.

For the non-lawyers reading this, it’s a settled position that applicants for injunctive relief must establish that: (1) they have a prima facie case with a reasonable chance to succeed on merits; (2) denial of the injunction will result in irreparable harm; (3) the balance of convenience favours the grant of an injunction; and (4) the injunction would not oppose the public interest. In Novartis, the defendant argued that non-working would, as a rule, disable applicants from establishing (1). The court disagreed, but held that judicial discretion and the equitable nature of injunctive relief would mean that non-working could still disable applicants from (4), as held in Franz Xaver Huemer and the cases that followed it.

No doubt, it is true that the grounds for the grant of the compulsory licensing, revocation of the patent on the grounds of non working which are distinctly provided under chapter XVI are not available to the defendant to be urged before the civil court hearing the suit for infringement of the patent. However, that does not by itself would mean that the court is precluded from weighing the case of the parties on the touchstone of the well established principles of law governing the field of the patent. The said well-established principles include weighing the case of the plaintiffs on the threshold of the larger public interest which is facet of the balance of the convenience. In the private lis between the parties involving the civil dispute, the grant of temporary injunction normally involves evaluating the balance of convenience of the parties by weighing which of the parties shall be more inconvenienced against the party which is less inconvenienced. There is another facet attached to the balance of convenience which is public interest.

Holding

Justice RK Gauba quoted extensively from Franz Xaver Huemer to hold that in light of the facts before him, the balance of convenience favoured Ajanta. More importantly, he found that the “self-interest of the patentee” had to be “balanced against the larger public interest”. What’s interesting here is the way in which Justice Gauba conceptualises “public interest”. While Indian courts have historically viewed “public interest” in pharma patent litigation as the interests of the patients who need access to the patented drug, this order denies injunctive relief on the ground that it would lead to “not only loss of employment, but revenue to the state as well”.

Why we thought this was Spicy:

Sure, the orders raise important questions, and the variance of the injunction is an interesting development. But here’s why this case is particularly fascinating to me:

1. It demonstrates that an alert defendant can avoid long periods spent under the cloud of an ex parte ad interim injunction. We’ve previously lamented about the ease with which injunctive relief is granted to patentees, and it’s heartening to see some analysis on the balance of convenience and the public interest in an O39R4 proceeding. The seemingly immediate success of Bayer’s original O39R1 injunction application, especially without reasons being recorded in the 20 December order, is still worrying.
2. The availability of Bayer’s unambiguous Form 27 filings is another indicator that some amount of reform has occurred in the patent office and in industry in an area that we’ve blogged about.
3. The facts of this case (alleged infringement through exclusively export-oriented manufacture) raise the question of TRIPS-compliance. At the TRIPS Council in 2011, the Indian delegation expressed the understanding that the denial of injunctive relief in such a case would derogate from extant TRIPS standards (particularly Art. 31.f, which requires unauthorised uses of a patented invention to be predominantly for the supply of the domestic market). They were speaking in the context of Edwards v. CoreValve in the US, but what’s good for the goose must be good for the gander. There’s a valid argument that such an injunction denial exclusively for export would contravene Art. 31.f, but a response to this could be that the terms of Justice Gauba’s order leave it open to Ajanta to sell within the local market, as well. The fact that Ajanta refrains from doing so, it can be argued, is not the court’s business.

Read the 20 December order here, and the 4 January order here.