Saturday, March 24, 2012

Bayer Compulsory Licensing Order: Are There Any Lessons to Learn?

As expected, the Bayer Compulsory Licensing Order has generated a lot of discussion in the relevant circles. In the last post, the issue of local manufacture was discussed. In this post, I intend to discuss a few other issues which interest me.

The primary defense on the issue of working that Bayer relied upon was that the manufacture of Nexavar by Cipla (against who Bayer has filed a suit for infringement of its patent) had to be treated as working of the patented invention by Bayer. 

On the face of it, this argument may not find favour with most people. But what exactly are the layers in this argument? Can a patentee rely on an alleged infringer’s activities to establish fulfilment of working requirements that the Act expects of a patentee?

To understand the position of the Act on this question, one must look at Section 84(7)(e). The provision reads thus:

84.(7)(e) For the purposes of this chapter, the reasonable requirements of the public shall be deemed not to have been satisfied, .....if the working of the patented invention in the territory of India on a commercial scale is being prevented or hindered by the importation from abroad of the patented article by-
(i) the patentee or persons claiming under him; or
(ii) persons directly or indirectly purchasing from him; or
(iii) other persons against whom the patentee is not taking or has not taken proceedings for infringement.

The presence of Section 84(7)(e) makes one thing very clear- alleged infringement of a patentee’s invention, and the steps taken by a patentee to restrain such infringement is a relevant fact to be taken into account in the grant of a compulsory license.

The Act, in fact, draws an adverse inference against the patentee if he has not taken reasonable steps to prevent hindrance to the working of the invention by “importation of those directly or indirectly purchasing under him” (Could this be an additional point to support my interpretation of Section 107A(b)?)

This means if the patentee has taken reasonable efforts to prevent infringement, and his efforts have not met the kind of success that he would ideally expect, should the fact that continued infringement hinders working of the invention by patentee, not be a relevant argument? After all, the patentee’s argument is-

“How am I expected to sell my patented invention if an infringer sells it at less than half the price and I have not been successful in securing an interim injunction against him? Why should I be penalized if my best efforts to enforce my statutory rights have not been successful?”

The fact that infringement of a patentee right hinders working of the invention is something the Act clearly recognizes in Section 84(7)(e). Therefore, I am surprised at the Controller’s take that the issue of infringement of the patentee’s right has no bearing on relevance on the patentee’s ability to fulfill the reasonable requirements of the public.

This actually raises the larger question of failure to grant interim injunctions and the adverse consequences it has on the ability of a patentee to fulfill critical obligations under the Act.

Also, without commenting on the facts of the Bayer case, I think it must be understood that commercial working of the patented invention is linked to several factors, most importantly to the demand for the patented invention in the market. A combination of circumstances could prevent a patentee from getting the best out of the market for his patented invention.

In such a situation, what do equity and fairness demand? Either that a compulsory license be not granted if the patentee has put his best foot forward, or if the patented invention actually addresses critical issues such as public health, a compulsory license may certainly be granted, but the terms of such license must be fair to the patentee and must adequately compensate him. Critically, any such order granting a compulsory license in the second situation must refrain from making unqualified adverse comments against the patentee.

In the facts of the Nexavar case, what does come as a surprise is the statistic on working of the invention. The patent was applied for in India in 2001 (National Phase Application), and was granted in 2008. Since Section 11A(7) grants “like and privileges” once an application for a patent is published, it is not incorrect to say that the patentee’s efforts to commercialize the patent assume importance after the publication of the application.

In other words, it is not just efforts after grant of the patent that are relevant, but also steps taken prior to grant but after publication of the application. Simply put, the Controller could have asked Bayer to show reasons for insufficient working of the patent since the publication of the Nexavar patent application.

These and other such issues could and ought to have been discussed in the Bayer Order to set out the first principles of compulsory licensing jurisprudence. It is not enough to arrive at conclusions, even if correct, since it is not conclusions, but the reasons of an order that are applied in the future. In the absence of reasons, the scope of an order’s applicability is restricted to the facts of the case in which it was delivered, with no long term value or utility.

Vision and thoroughness must not be sacrificed at the altar of speed, particularly where public interest is at stake.

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