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Did A Recent Delhi High Court Judgment Take India Over The TRIPS Redline?

BloombergQuintOpinion

A recent judgment by a division bench of the Delhi High Court, upholding a judgment of a single judge, has interpreted the scope of the ‘Bolar’ exception in Indian patent law, to allow for the export of patented pharmaceutical substance for the purposes of generating regulatory information required to secure marketing approval. This interpretation could result in Indian patent law running afoul of India’s obligations under the Agreement on Trade-Related Intellectual Property Rights.

History Of The Bolar Provision

Named after a landmark American case that spurred the enactment of a statutory provision in the United States, the Bolar provision allows generic pharmaceutical or agrochemical companies to manufacture patented substances, during the patent term, for the limited purpose of generating scientific information that can be submitted to the regulators in order to secure the necessary regulatory approvals for generic versions of the patented substances. With these approvals in place, these companies can commence large scale manufacture as soon as the patent expires.

Without this provision, the generics would have to wait until the patent expired before initiating the manufacturing and testing required to secure regulatory approvals.

This can take several months after the patent has expired. In other words, the Bolar exemption reduces the time within which generics can enter the market to compete with the innovator product.

When the European Union challenged a Bolar style provision in Canadian law on the grounds that it was not compatible with Article 27 of the TRIPS, the Dispute Settlement Body of the World Trade Organization ruled in favour of the Canadians. It was held that the Canadian provision was covered under Article 30 of TRIPS which contains certain exceptions to rights of patentees under Article 27. These activities are permitted only if they do not unreasonably conflict with the normal exploitation of a patent and do not unreasonably prejudice the legitimate interests of the patent owner.

Post the WTO ruling, upholding the Bolar style exemption, the Indian Parliament incorporated a similar provision into Section 107(A) of the Patents Act through a statutory amendment in 2002.

The Question Of Law Before The Delhi High Court

The question before the Delhi High Court was whether it was legal for generic manufacturers like Natco and Alembic to export pharmaceutical substances like Sorafenib and Rivaroxabann that were patented by Bayer, to entities in foreign countries such as China, Brazil, and Palestine. The purpose of the export as claimed by the Indian companies was that the importers in those jurisdictions needed to conduct the necessary tests on these drugs to generate the regulatory information required to secure regulatory approvals in those countries.

In other words, the aim of the export was not commercial sale but experimental use.

The language of Section107A is not very clear on whether exports for regulatory purposes are permissible. The provision is reproduced as follows:

107A Certain acts not to be considered as infringement. -For the purposes of this Act,-

(a) any act of making, constructing, 197 [using, selling or importing] a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, 198 [use, sale or import] of any product;

While the provision is clear that patented drugs can be tested in India to generate regulatory information that maybe sent out of India, the provision is not clear whether the patented substance itself can be exported out of the country. Bayer tried arguing that while the provision specifically refers to the word “import” it did not use the phrase “exports”. A literal interpretation, according to Bayer, would prohibit the “export” of the substance. The company conceded that it would be legal for information generated in India to be sent out of the country.

The division bench of the Delhi High Court did not agree with Bayer’s argument on the grounds that the phrase “export” was covered within the definition of “sale”. Unlike “export” the phrase “sale” was mentioned in S. 107A. Examining the usage of the phrase “export” in the Patents Act, the court concluded that “…it cannot be held that the Parliament intended to per se exclude “exports” from the sweep and width of the term “sale” in Section 107A….”.

With these conclusions, the division bench held that the factual issue of whether the drugs were actually being exported for the purpose of generating regulatory information in those countries would have to be established through a trial conducted before a single judge.

Also read: Big Win For Affordable Medicine

Has The Delhi High Court Crossed The Redlines Established Under TRIPS?

Independent of the Delhi High Court’s interpretation of Indian law, is the question of whether Indian law runs the risk of falling afoul of Article 30 of TRIPS.

While Article 30 lays out the broad principles of the permissible exception to patent rights, Article 31 lays down certain specific restrictive requirements that need to be followed in cases where a patented invention is being used without the authorisation of the patentee. One of these exceptions requires that “... such use shall be authorized predominantly for the supply of the domestic market of the Member authorizing such use…”. This provision is one of the reasons that for compulsory licences, a specific exception had to be carved out in the Doha Declaration allowing for the grant of compulsory licences specifically for the purpose of “export”.

The Delhi High Court’s interpretation of an exception to allow for exports, prima facie runs contrary to the aforementioned requirement to confine patent law exceptions to the domestic market.

For patent owning innovator pharmaceutical companies, the Delhi High Court’s judgment creates significant problems. While Natco exported merely 1 kilogram of the patented substance, Alembic had reportedly exported 90 kilograms of the patented substance. Those are commercially significant quantities. It is entirely possible that the single judge after trial eventually issues an injunction or a court in the importing country, restrains import of the product.

The problem, however, is that these legal proceedings will take up a lot more time and money. The present judgment of the division bench is the result of litigation that was initiated in 2014. An earlier lawsuit filed by Bayer against Natco in the year 2011 in relation to one of the drugs is still pending before the Delhi High Court. Clearly then, foreign companies are looking at a complicated scenario and it would not be surprising if some of them nudge their national governments to initiate legal proceedings before the WTO against India.

T Prashant Reddy works at Vidhi Centre for Legal Policy and is co-author of Create, Copy, Disrupt: India’s Intellectual Property Dilemmas.

The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.