Delhi HC Division Bench Affirms that Export is Allowed under India’s Bolar Exception: Propounds ‘Reasonable Relation’ Test

(This post has been co-authored with Bhavik Shukla, a 4th year student at NLIU, Bhopal)

Recently, in a decision that is likely to have a significant impact on pharmaceutical patents and access to medicines, a Division Bench of the Delhi High Court, upheld a Single Judge’s decision and ruled that the ‘export’ of a patented invention for experimental purposes is also covered under Section 107A of the Patents Act, 1970 (India’s Bolar exception), and thus does not amount to patent infringement. It accordingly dismissed Bayer’s appeal and left it to the trial court to decide if the end use and the purpose of export of Bayer’s patented drug ‘Sorafenib Tosylate’ by Natco and Alembic was reasonably related to research, experiment or was for submission of information to regulatory authorities in a foreign country, as permissible under Section 107A (a) of the Act.

Background

Bayer v. Natco

In 2014, Bayer filed a writ petition before the Delhi High Court seeking a mandamus to the Custom Authorities to restrain Natco from exporting Bayer’s patented drug ‘Sorafenib Tosylate’ (for which it was granted a compulsory license in 2012) to China. It argued that the export was contrary to the terms of the compulsory license which was “solely for the purposes of making, using, offering to sell and selling the drug covered by the patent for the purpose of treating HCC and RCC in humans within the territory of India” and thus constituted infringement of its patent. The court granted an interim order directing the Customs Authorities to ensure that Natco does not export more than 15 grams of the drug for the purpose of conducting development/ clinical studies and trials. Later, during the pendency of the petition, the court permitted Natco to export 1 kg of the drug for this purpose, though on Bayer’s appeal it prohibited Natco from doing so till the decision of the writ petition.

Bayer v. Alembic

During pendency of the decision in the writ petition filed by Natco, Bayer filed a suit against Alembic in December 2016 in order to restrain Alembic from making, selling, distributing, advertising, exporting, offering for sale or dealing in Rivaroxaban, a product it claimed to infringe its patent. In the course of hearing, Alembic claimed that its export of Rivaroxaban was covered under Section 107A of the Act, and that it had not commercially launched the drug. In the same hearing, Bayer contended that Alembic had already exported 90 kilograms of Rivaroxaban, and such large quantities could not be permitted to fall within the scope of the provision. After hearing the parties, the Court referred to Natco’s writ petition involving a similar interpretation of the provision, and indicated towards deciding the matters together. Later, Alembic gave a 15-day notice to Bayer for export of Rivaroxaban to Palestine and Brazil, but the court adjourned the matter in light of the pending decision.

Single Judge’s Decision

The Court (Single Judge) decided the petition against Bayer in 2017, holding that ‘export’ of a patented invention for experimental purposes was covered under Section 107A of the Act, and thus would not amount to patent infringement. It thereby allowed Natco and Alembic to export drugs to other countries for the purposes specified in Section 107A of the Act.

Bayer’s Appeal to the Division Bench

Bayer appealed the decision before the Division Bench, arguing that Section 107A of the Act had to be interpreted narrowly in light of it being a proviso to the exclusive rights of the patentee, and if interpreted accordingly the term “exports” would not be covered within “selling” appearing in the provision. During the hearing of the suit, Natco disputed Bayer’s argument on the scope of “selling”, and contended that “exports” would be covered in the provision if the same were done in compliance with its scope.

Division Bench’s Decision

The Court before dealing with the issues raised in the appeal, suited itself to delve into the history of research-oriented exceptions across the world and the analysis of the legislative history of Section 107A of the Act. The substantive issues were discussed thereafter, the most important and elaborate being the one pertaining to the ambit of the term “selling” found in the provision.

– Interpretation of “selling” in Section 107A (a) and whether it encompasses exporting

Section 107A (a) of the Act, India’s Bolar provision, reads as follows:

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

(a) any act of making, constructing, 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, use, sale or import of any product.”

The main issue before the court was whether the expression “selling” as used in the provision includes ‘exporting’ within its meaning or not. Bayer had argued that it does not, while Natco and Alembic had presented counters to the same as briefly mentioned in the section above. The court divided this issue based on Bayer’s arguments as follows, to analyse each argument comprehensively.

a) Express use of the term “export” in other provisions does not exclude export from the ambit of ‘sale’ under Section 107A (a)

Bayer had argued that the term ‘export’ does not find explicit mention in Section 107A of the Act, and hence export was meant to be excluded from its ambit. To support this argument, Bayer stated that the express mention of ‘importing’ with the term “selling” in the provision indicated that the legislature intended to exclude exporting. It further bolstered this argument by relying on sections 84, 90 and 92A of the Act wherein the term is expressly mentioned, implying that the Legislature intended to per se exclude exporting from the ambit of Section 107A (a). The Court rejected this argument noting that while interpreting a statute, although it is a rule that the same word must be given the same meaning throughout the statute, this rule is neither inflexible nor of universal exception, and the object of the provision is important in determining whether the same meaning is to be attributed to a word in all parts of the statute. With respect to the provisions relied upon by Bayer, the Court observed that the term “export” is used in different contexts in those provisions which primarily deal with compulsory licensing, and thus its omission in Section 107A (a), an exception for research purposes, could not be interpreted to mean that the term “export” was intended to be excluded from the ambit of the term “selling” used in it.

The Court’s reasoning in this regard, however, is not very convincing. When the term ‘export’ is not even used in Section 107A (a), it is not clear as to why it used the interpretation rule of ‘same word, same meaning’ while analyzing Bayer’s argument on explicit use of the term in other provisions of the Act.

b) Section 107A of the Act is an independent provision and not an exception to Section 48

Bayer had contended that Section 107A of the Act is an exception to the exclusive rights granted to the patentee under Section 48 of the Act, and thus the provision has to be strictly interpreted. The Court came hard on this argument stating that it is Section 48 which is made subject to other provisions including Section 107A, and not the other way round. It laudably noted that the provision is not an exception to Section 48 but an independent provision dealing with the right to use the patented invention for research purposes, which was enacted to comply with TRIPS and was subject of vigorous Parliamentary debates and scrutiny of a Joint Committee Report. Accordingly, it rejected Bayer’s argument that Section 107A (a) should be read subordinate to Section 48.

c) Scope of ‘sale’ under Section 107A (a) cannot be restricted to include export of only the information developed in India and not the patented invention itself

In respect of the argument on territoriality, Bayer had stated that reference to laws or regulations of other countries in Section 107A (a) was to be understood in a way that the experimental use of the patented invention has to be made in India alone, and only the information derived from such use could subsequently be exported and not the patented invention itself. The Court dismissed this argument observing that Section 107A (a) clearly allows sale of a patented invention as long as it is for the purpose of research and thus the scope of sale cannot be narrowed down to sale within India only. It further noted that some countries’ laws may even require the research to be carried on within their territory and hence it is undesirable that the Indian law govern the requirements of other nations by limiting the research exception to its territory.  Furthermore, the Court rightly observed that there was no question of any injury to the patentee’s interests if the patented invention is exported solely for the purpose of research. Accordingly, it held that the provision ought to be given the fullest effect and not an artificial narrow interpretation so as to include export of only the information developed in India and not the patented invention itself.

Further, the Court also rejected Bayer’s subsidiary submissions based on the Drugs and Cosmetics Rules, 1945 and the Canada Dispute ruling by the WTO Dispute Settlement Body. 

– Reasonable Relation Test

Having held that the export of a patented invention is allowed under Section 107A (a), the Court also took note of the fact that if exports are not regulated, the Bolar exception could be misused to export beyond what is ‘reasonably related’ to the purpose of developing information for obtaining regulatory approval. It thus held that safeguards were necessary to prevent such misuse. However, it made it clear that there could be no “iron clad rule” (such as that related to the volume of the patented invention etc.) to determine whether the export is ‘reasonably related’ to the research purpose or not, and each case would have to be determined on its individual facts. The Court laid down an indicative list of factors for helping with such a determination as below:

1. The patent in question;
2. The nature of the product or elements to be exported;
3. The details of the party importing the product;
4. The quantity to be exported;
5. Other details with respect to the end use of the product to establish that its solely for research purposes;
6. All details regarding the relevant regulations covering the kind of scope and inquiry;
7. If regulations are in the language of another country, an authentic English translation of the same;
8. Appropriate interim order including an undertaking to compensate the plaintiff in the event the suit were to be decreed in the plaintiff’s favour, and the extent of such compensation;
9. Verification through the Indian mission (and its trade division) abroad regarding the  authentication of the third party vendor and/or its facilities abroad, if necessary; and
10. In case the product to be imported is a generic product, award of suitable restitutionary relief to the defendant to preclude frivolous litigation.

Accordingly, the Court found the Single Judge’s approach, of holding the export of 1000 or 2000 tablets to constitute reasonable use and permitting it without assessment of any of the above factors, to be unacceptable.

– Dismissal of Appeal and Direction for Trial

Further, the court noted that such disputes are the subject matter of a civil suit and not a writ petition, as an investigation into the facts can be done and the full range of reliefs can be granted only in a civil suit. It accordingly dismissed Bayer’s appeal and left it to the trial court to decide if the end use and the purpose of export of Bayer’s patented drug ‘Sorafenib Tosylate’ by Natco and Alembic was ‘reasonably related’ to the purpose of research for submission of information  to regulatory authorities in a foreign country.

Balance between Public and Private Interest

The judgment marks a huge victory for public health as it allows generic companies in India to export patented drugs to other countries for the purpose of generating sufficient regulatory information to warrant an approval in those countries. As such, it helps speed up access to affordable medications in those countries soon after the expiry of the patent. Further, the judgment is also to be hailed for having adopted an approach that strikes a right balance between public interest and private rights of patentees. The application of the ‘reasonable relation’ test for determining whether an export is permitted under Section 107A (a) would ensure that exports genuinely made for research purposes are not restricted, whilst at the same time safeguarding the patentees’ rights.

Image from here