CASE BRIEF: Bayer Corporation v. Union of India

Introduction 

The case Bayer Corporation vs Union Of India Through The Secretary, decided on 15 July 2014, revolves around a writ petition filed by Bayer Corporation against the Union of India and the Intellectual Property Appellate Board’s decision regarding a compulsory license for its patented drug, Sorafenib Tosylate (marketed as Nexavar).

Bayer Corporation, a company organized under the laws of the State of Indiana, USA, holds the patent for Sorafenib Tosylate, which is used in the treatment of kidney cancer (Renal Cell Carcinoma) and liver cancer (Hepatocellular Carcinoma). The drug was categorized as an “orphan drug” due to the relatively small number of patients suffering from these conditions in the United States. Consequently, Bayer benefited from certain financial incentives for its development under U.S. law.

The case arose after the Controller of Patents granted a compulsory license to Natco Pharmaceuticals Limited, allowing them to manufacture and sell Sorafenib Tosylate. Bayer contested this decision, arguing that the Controller’s approval of the compulsory license and the subsequent ruling by the Intellectual Property Appellate Board were without merit and jurisdiction. The matter highlighted critical aspects of Indian patent law, particularly the application of Section 84 of the Patent Act, 1970, which outlines the conditions under which a compulsory license can be granted, and the implications for public health and access to medications.

The decision in this case had significant implications for pharmaceutical patents in India and the balance between patent rights and public health considerations, especially in the context of the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement. The case also marked a pivotal moment as it was the first instance where compulsory licensing was exercised following India’s commitments to TRIPS after the Doha Declaration in 2001.

Facts of the case 

The facts of the case Bayer Corporation vs Union Of India Through The Secretary are as follows:

5. Parties Involved: The petitioner is Bayer Corporation, a pharmaceutical company incorporated in the State of Indiana, USA. The respondents include the Union of India and the Controller of Patents.
6. Patented Drug: Bayer holds the patent for Sorafenib Tosylate, a drug used for treating patients with Renal Cell Carcinoma (kidney cancer) and Hepatocellular Carcinoma (liver cancer). The patented drug functions primarily as a palliative treatment, alleviating pain and slowing the growth of cancer cells.
7. Regulatory Classification: In the United States, due to the low number of patients suffering from these types of cancer (less than 200,000), Sorafenib Tosylate is classified as an “orphan drug”. This classification allows Bayer to receive reimbursement for 50% of its research and development costs from the U.S. government.
8. Application for Compulsory License: On 6 December 2010, Natco Pharmaceuticals, an Indian generic drug manufacturer, approached Bayer for a voluntary license to manufacture and sell Sorafenib Tosylate in India at a significantly lower price (approximately ₹10,000 per month) compared to Bayer’s selling price (around ₹2,80,428 per month).
9. Opposition to License Grant: Bayer opposed Natco’s application for a compulsory license, asserting that it was committed to making the drug available in India, albeit at a premium price due to its substantial investment in research and development.
10. Grant of Compulsory License: Despite Bayer’s opposition, on 9 March 2012, the Controller of Patents granted Natco a compulsory license to manufacture and sell Sorafenib Tosylate, directing Natco to pay Bayer a royalty of 6% on its net sales. The license granted was non-exclusive and non-assignable.
11. Appeal to the Tribunal: Bayer appealed the Controller’s decision to the Intellectual Property Appellate Board. On 4 March 2013, the Board upheld the Controller’s decision but increased the royalty payable to 7%.
12. Legal Challenge: Bayer subsequently filed a writ petition challenging both the compulsory license and the manner in which Chapter XVI (which governs compulsory licensing) of the Patent Act was applied, arguing that it undermined the rights of patent holders and infringed upon their investment in innovation.

These facts underscore the legal and regulatory complexities surrounding pharmaceutical patents in India, especially in balancing public health needs with the rights of patent holders. The case is notable for its implications on access to essential medicines and the interpretation of Indian patent law in the context of international agreements such as TRIPS.

Arguments by the parties 

In the case Bayer Corporation vs Union Of India Through The Secretary, various arguments were put forth by both Bayer Corporation (the petitioner) and the Union of India/Natco Pharmaceuticals (the respondents). These arguments centered around the legality and justification for the grant of a compulsory license for Bayer’s patented drug, Sorafenib Tosylate. Below is a summary of the key arguments made by both parties:

Arguments by Bayer Corporation (Petitioner)

1. Violation of Patent Rights: Bayer argued that the grant of a compulsory license violated its patent rights, which are established under the Patent Act. They contended that the compulsory licensing provisions must be interpreted strictly and should not be used at the cost of patent holders’ rights.
2. Public Requirement Satisfied: Bayer asserted that the reasonable requirements of the public with respect to the patented drug were being met through the existing supply of the drug. They argued that sufficient quantities were available for those in need of treatment.
3. Pricing Justification: Bayer defended its pricing strategy, claiming that the high cost of the drug was justified due to significant investment in research and development (R&D). They argued that the financial returns from the patented drug were necessary to recoup these R&D costs.
4. Inadequate Consideration of Market Dynamics: Bayer claimed that the authorities did not adequately consider the specific market dynamics or the rarity of the conditions treated by the drug in their analysis when granting the compulsory license.
5. Lack of Basis for Compulsory License Grant: Bayer contended that Natco did not adequately demonstrate that it had made genuine efforts to obtain a voluntary license before applying for a compulsory one, as required under Section 84 of the Patent Act.

Arguments by Union of India / Natco Pharmaceuticals (Respondents)

1. Public Health Concerns: The respondents emphasized the public health crisis in India due to the high cost of cancer treatment and argued that access to life-saving medications should take precedence over patent rights, especially for essential medicines such as Sorafenib Tosylate.
2. Affordability Issues: Natco highlighted that the patented drug was not available to the public at a reasonably affordable price, which justified the grant of a compulsory license under Section 84(1)(ii) of the Patent Act.
3. Evidence of Demand: The respondents presented evidence indicating a substantial number of patients requiring Sorafenib Tosylate and argued that Bayer’s supply did not satisfy the reasonable requirement of the public.
4. Market Entry of Generic Drugs: Natco pointed out that allowing them to produce a generic version would enhance market competition, leading to lower prices and better access for patients, thus fulfilling the intended purpose of the compulsory licensing provisions.
5. Compliance with Legal Provisions: The authorities maintained that they followed the statutory requirements when evaluating the application for the compulsory license, and their decision was backed by the necessary evidence showing the unmet public need for the drug.

These arguments by both sides framed the legal discourse around the balance between patent protection and public health, making the case significant in the context of intellectual property rights in India. The ultimate decision considered these conflicting interests, emphasizing the broader implications of patent laws on access to essential medicines. 

Analysis by the court 

The court’s analysis in Bayer Corporation vs Union Of India Through The Secretary focused on evaluating the provisions of Chapter XVI of the Patent Act concerning compulsory licensing. The court acknowledged the necessity to strike a balance between protecting intellectual property rights and addressing public health needs, particularly in the context of life-saving drugs. It examined whether the statutory conditions for granting a compulsory license had been met, specifically under Section 84, which requires an applicant to demonstrate that the reasonable requirement of the public for the patented drug is not being satisfied, that the drug is not available at a reasonably affordable price, or that the patented invention is not being worked in the territory of India.

The court found that Natco had satisfactorily established that these conditions were fulfilled, particularly emphasizing the inadequate availability and pricing of Sorafenib Tosylate, which was beyond the reach of most patients in need of effective cancer treatment. Furthermore, the court considered the efforts made by Natco to obtain a voluntary license from Bayer, concluding that Bayer’s rejection of Natco’s request without a substantive counter-offer indicated a failure to engage genuinely in negotiations. The court also noted the importance of ensuring public interest, particularly in the realm of essential medications, which justified the grant of the compulsory license to Natco. Ultimately, the court upheld the decisions of the Controller of Patents and the Tribunal, affirming that the issuance of the compulsory license was warranted under the circumstances, aligning with India’s obligations under international agreements regarding public health and access to medicines. 

Judgement of the case 

In the case Bayer Corporation vs Union Of India Through The Secretary, the court upheld the decisions of the authorities granting a compulsory license to Natco Pharmaceuticals for the patented drug Sorafenib Tosylate. The judgment emphasized that the grant of the compulsory license was justified based on the findings that Bayer’s patented drug was not available to the public at a reasonably affordable price and that the needs of patients suffering from kidney and liver cancer were not adequately being met. The court confirmed that Natco had made considerable efforts to obtain a voluntary license from Bayer, which were ultimately rebuffed. The court highlighted the importance of prioritizing public interest, particularly in cases involving essential medicines critical for patient care. Consequently, the court ruled that the Controller of Patents acted within the scope of the law under Section 84 of the Patent Act and that the findings regarding the public health implications and the need for access to affordable treatment were sound. The court dismissed Bayer’s petitions challenging the orders of the Controller and the Tribunal, thus allowing Natco to proceed with the production and sale of the generic version of the drug at a significantly lower price than that of Bayer’s patented version.