Thursday, March 22, 2012

Section 107A(b) Does Not Refer to International Exhaustion: Proof in Legislative Debates

Finally, I think I have what I need to settle the debate on Section 107A(b). I am still keeping an open mind and I am willing to be convinced otherwise, but this document which I just came across shows that Section 107A(b) does not refer to “international exhaustion” at all. In fact, it refers to “limited parallel import”, something I have argued over and over again in several posts here and elsewhere.

The document I refer to is the “Combined discussion on the Statutory Resolution regarding disapproval of Patents (Amendment) Ordinance, 2004 (No.7 of 2004) and the Patents (Amendment) Bill, 2005”. The title’s pretty much self-explanatory, the document records the legislative debates prior to the passing of the 2005 Amendment to the Patents Act.

I have always insisted on “duly authorized under the law” as being one of the critical pointers to the true meaning of Section 107A(b). I have stated my position of the provision in an ealier post as follows:

“It would be extremely repetitive to reiterate all that I have said in those 9-and-odd posts on the interpretation of this provision, but it is important that I briefly state the line of interpretation I have been inclined to take in those posts. In a line, my take on the provision is that contrary to popular assumed conclusion, Section 107A(b) does not seem to talking about, leave alone endorse, international exhaustion remotely.

Section 107A(b) requires due authorization, not for importation, but to produce and sell or distribute the patented product.

In other words, so long as the patented product is imported from a person who’s been “duly authorized under the law” to produce and sell or distribute, importation from such a person would not amount to infringement of the patent. Since the provision uses “duly authorized under the law”, I took the view that the provision probably does not refer to authorization under foreign law to produce and sell or distribute the product, because that would eviscerate the patentee’s rights under the Indian Act; the authorization to produce and sell or distribute must be under Indian law.

Stated otherwise, lawful production of the product outside India does not necessarily legitimize its import into India. Also, “duly authorized under the law” must be taken to mean specific authorization, as opposed to implied consent by way of international exhaustion. Not just that, the provision may not even be referring to international exhaustion because nowhere does it allude to first sale or exhaustion of rights post the first sale.”

This interpretation now receives support in light of the following portions of the legislative debates on Section 107A(b). Following is the statement of Mr.Pawan Kumar Bansal in the discussion held on March 22, 2005, the Minister for Parliamentary Affairs of the UPA regime between 2004-2009 who says thus in response to concerns raised by the Opposition on affordability of medicines:

“The second point, Madam, which has now been incorporated in the present Bill and as also in the Ordinance, is an amendment to Section 107A(b), providing for parallel import.  Here, this amendment says:  “On import of patented commodity from anywhere in the world, the Government reserves the right.”  Despite the fact that a particular medicine may be patented here by any other company, we have the right to import that patented commodity from anywhere in the world, where it is cheaper, even though it is patented here. Earlier however, this required that the foreign exporter was duly authorised by the patentee.  That was the condition earlier.  I may remind my hon. friends on the other side that it has been taken off. Now, the law would be, as it has been included here in the Bill before us now, that ‘no longer do we only need to stick to that condition that the foreign exporter was duly authorised by the patentee to sell and distribute the products.’  The position now would be that ‘the foreign exporter be authorised under the law, thus making the parallel imports easier.’  This mechanism, as you know, would help in price control.”

This statement leaves nothing to imagination since it clearly says that it is the Government of India which has the right to authorize a "foreign exporter" to facilitate imports into India. Simply put, under Section 107A(b), once a foreign entity is authorized to manufacture and sell the product by the Indian Government, importation of the product from the authorized foreign entity would not amount to infringement of the Indian patent. 

In a way, this is the reverse mechanism of Section 92A. Instead of compulsory license being issued for export, this is a license issued to a foreign manufacturer to sell and distribute the product, from whom the product may be imported.

Some might ask, is there a parallel to this provision anywhere in the world? Yes, there is! The amended Section 15C of the Medicines and Related Substances Control Act of South Africa provides for a similar mechanism which reads as follows:

Section 15C: The minister may prescribe conditions for the supply of more affordable medicines in certain circumstances so as to protect the health of the public, and in particular may-
(a) notwithstanding anything to the contrary contained in the Patents Act, 1978 (Act No. 57 of 1978), determine that the rights with regard to any medicine under a patent granted in the Republic shall not extend to acts in respect of such medicine which has been put onto the market by the owner of the medicine, or with his or her consent;
(b) prescribe the conditions on which any medicine which is identical in composition, meets the same quality standard and is intended to have the same proprietary name as that of another medicine already registered in the Republic, but which is imported by a person other than the person who is the holder of the registration certificate of the medicine already registered and which originates from any site of manufacture of the original manufacturer as approved by the council in the prescribed manner, may be imported:
(c) prescribe the registration procedure for, as well as the use of, the medicine referred to in paragraph (b).

I had the opportunity of presenting this very provision in my talk at NLU Jodhpur. Pawan Kumar Bansal also says in his speech that he received calls from South Africa! I had presented this as an alternative to compulsory licensing for price control. This is exactly what Section 107A(b) aims to achieve and this is exactly what I had said in my earlier post on India’s representations to GATT in the Uruguay Round. A paper of mine capturing these arguments will be shortly published.

With this, I fervently hope we stop reaching summary conclusions of “international exhaustion” without giving “due regard” to the wording of the statute. 

I look forward to comments and thoughts from readers.

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