A PROJECT REPORT ON

BAYER CORPORATION
V.
UNION OF INDIA
WRIT PETITION NO. 1323 OF 2014

PANJAB UNIVERSITY
UNIVERSITY INSTITUTE OF LEGAL STUDIES

SUBMITTED TO SUBMITTED BY:

Ms kritika Harshil
Assistant Professor Roll no.- 252/19
Section - E
B.COM LLB(H)
Semester- 10 th

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ACKNOWLEDGEMENT
I would like to express my special thanks of gratitude to my teacher Prof. Kritika who gave me the golden
opportunity to do this wonderful project on the topic “Bayer corporation v. Union of India” on which also
helped me in doing a lot of Research and I came to know about so many new things I am really thankful.

Secondly, I would also like to thank my parents and friends who helped me a lot in finalizing this project

within the limited time frame.

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Table of Contents
ACKNOWLEDGEMENT...............................................................................................................................2
Introduction:............................................................................................................................................4
Background:.............................................................................................................................................4
Issues:......................................................................................................................................................5
Issue 1:.....................................................................................................................................................6
Issue 2:.....................................................................................................................................................6
Issue 3:.....................................................................................................................................................6
Issue 4:.....................................................................................................................................................6
Issue 5:.....................................................................................................................................................7
Findings and decisions:.............................................................................................................................8
Criticism:..................................................................................................................................................9
Compulsory License Regime in India.......................................................................................................10
IPAB Decision:[2]....................................................................................................................................12
High Court Decision:[3]...........................................................................................................................12
Supreme Court decision:.........................................................................................................................14
BIBLIOGRAPHY.......................................................................................................................................16

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Introduction:
Intellectual Property Rights has emerged as an important field as it guarantees individuals right for their
creation and innovation. Ever since Indian generic industry has started contributing in drug industry
globally, its patent linkage policy has been a point of contention. The relationship shared between the patent
status granted to its innovator and the approval for the marketing for the patented product is considered as
patent linkage. The very first case that happens to give a liberal and more flexible interpretation of Indian
patent linkage in accordance with its compulsory license regime and application of bolar provision was the
case of Bayer Corporation v. Union of India and Ors.

Background:
Bayer Corporation, the petitioner in the present case, a company based in USA, researched and developed a
drug for treatment of patients suffering from diseases related to kidney cancer and liver cancer. The
petitioner acquired the patent for the manufactures drug under the name of Sorafenib Tosylate with market
name Nexavar, in the year 2008 in India.

The respondent in the present case is Natco Pharma Ltd. which is a drug manufacturing pharmaceutical
company based in India. They approached the petitioner for procurement of grant of voluntary license.
Natco said that the objective behind their obtaining voluntary license was to provide the patented drug to
public at a reasonable and affordable price as the petitioner was selling the patented drug at a price of Rs.
10,000/ month of therapy rather than at Rs. 2.80, 428/ month of therapy as charged by the petitioner i.e.,
Bayer Corporation. But Bayer denied the application and didnt provide grant of voluntary license to Natco.

Later, after expiration of 3-year period, as per Section 84(1) of the Indian Patents Act,1970, Natco filed an
application for grant of compulsory license to the Controller. According to the Controller, as Natco
complied with the necessary requirements for granting of compulsory license, their application was granted.
Natco was allowed to manufacture and sell the drug patented by Bayer and the former was also asked to pay
6% of the net sale of drugs to Bayer as part of royalty. Besides, Controller also mentioned that the
compulsory license granted to Natco was general in nature and for the balance term of the patent. The
controller also mentioned that Natco cannot assign the patent rights granted to any of their heir as it is non-
assignable or non- transferable right.

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Issues:
1. Application of bolar exemption:
• Is it valid to export a product to foreign country other than India for purpose of submission of any
information?
• Can rights granted under provisions of compulsory license read along with rights mentioned under
S.107A?
2. Compulsory license:
• Whether Natco made enough efforts to procure voluntary license from the Bayer
• Were the reasonable requirements in accordance to public were met?
• Did court take into consideration the supply made by infringers while determining the reasonable
requirement test?
• Availability of patented drug at reasonable and affordable price.
• Working of the patented drug within the territory of India.

Perusal of bolar provision:

The court while applying the bolar provision, explained the word selling in relation to export as per S.107A
of the Indian Patents Act. The court said that section doesnt restrict selling to a particular geographical
boundary and also mentioned that the given right is in accordance to fundamental right under Article 19 (1)
(g)4 of the Indian Constitution.

The court also was of the view that the rights granted under S.107A doesnt get curtail because of grant of
compulsory license. The court also mentioned that such an export needs to be done in a reasonable manner
i.e., for the objective of development and submission of information. Therefore, claim of Bayer of
prohibiting Natco from exporting drug to foreign country was rejected by the court. Therefore, in order to
ensure that right granted in regards to patent is not misused, proper measures need to made on case-to-case
basis.

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Perusal of compulsory license:
Issue 1:
It was contended by the petitioner that there are essentially two conditions for applying for compulsory
license. The first condition is expiration of three -year period granted to patent holder for the patented drug
and the second condition is that the applicant i.e., Natco in the present case, should have made efforts to
obtain voluntary license from Bayer. According to Bayer, Natco failed to meet the second condition which
also mentioned under Section 84(6) of the Act.

The court, taking into consideration the examination done by the Controller of patent and relying upon the
evidence found, stated that the letters that were exchanged between Bayer and Natco exhibited that Natco
did make efforts to obtain voluntary license for the patented drug. The court also said that it found no
relevant reason to look into the investigation carried out by the appropriate authorities.

Issue 2:
The Controller and Intellectual Property Appellate Board (IPAB), found that the patent holder that is Bayer
failed to meet reasonable requirement for the public. The appellate board listed down the reasonable
requirements had not been and which are as follows:
• Absence of working of the patented invention
• Selling of patented drug at very high price which is not reasonable and affordable,
• Working of the patented invention not done as per commercial scale.
• IPAB stated that the conditions relating to reasonable requirements for public listed down under S.
84(1)(a) has to be fulfilled along with those mentioned under S. 84 (1) (b)(c). The appellate board held that
the facts that the patented drug was too costly and the supply was also very less implied that reasonable
requirements in relation to general public were not fulfilled.

Issue 3:
Bayer contended that the supply made by the infringers i.e., Cipla in present case, is determining factor
while discussing the issue of reasonable requirement of the public for the drug patented. But the authorities
were of the view that such supply of patented drug made by Cipla could not be taken into account as the
court already was aware of injunction suit filed by Bayer against Cipla. This act of Bayer according to Court
represented that Bayer didnt accepted the participation of infringer in relation to supplying of its patented
drug in the market.

Court was of the view that according to Section 84(7) of the Act, the only criteria to look upon while
deciding the reasonable requirement condition is to make sure that the patented drug is made available to
general public at adequate level i.e., to those people who are in need of the patented drug.

Issue 4:
As per Section 90 of the Indian Patents Act, it is the duty of the controller to make sure that the patented
drug which is being made available to public is at a reasonably affordable price. The yardstick to measure
the reasonable and affordable price is the relative price that is being put forward by the patent holder and the
applicant for the grant of the patent. In accordance with the present case, the patent holder i.e., Bayer was
selling the drug at price of Rs. 2,84,000/ month of the therapy whereas the applicant i.e., Natco intended to
sell the same at price of Rs. 8,800/ month of the therapy. According to the test, the price offered by Natco is
to be considered reasonable and affordable for the general public for selling of the patented drug.

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The petitioners argument of deciding to sell the patented drug at the mentioned price was that, it was
inclusive of the cost that the company incurred during the R&D of the drug patented and also included to
cost incurred R&D activities for failed drugs. Controller rejected the contention made by the petitioner as
they were unable to present the detailed report which is showed the cost incurred by petitioner for R&D of
the patented drug.

Issue 5:
The court while looking into the contention made by the petitioner, referred to Section 83 of the Act. The
section provides that it for the petitioner to prove that the patented drug has been worked in the territory of
India. The section is formed to ensure that the patent holder doesnt acquire monopoly over the market of the
patented drug locally and internationally. The respondent i.e., Union of India presented that as per section
for proving the working of patented drug in India, it should be shown that it was manufactured in India. The
petitioner claimed the contrary. Finally, the court supported the view presented by the respondent.

The Court stated that it is for patent holder to make sure that some efforts were made by them for
manufacturing of the patented drug in India to prove its working in the territory for the same.

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Findings and decisions:
The main contention of the present case is in relation to grant of voluntary and compulsory license to Natco
by Bayer along with the application of bolar provision in regards to patent linkage in Indian scenario. The
court stated that the Natco had fulfilled all the requirements mentioned under Section 84(1) clause (a), (b)
and (c) of the Act and therefore, the Controller general of Patent was right in granting compulsory license to
Natco.

The Court also found that the application filed by Natco showing the points where petitioner lacked were
correct. Court was of the view that Bayer being the patent holder failed to meet the reasonable requirement
test of public use of drug and also failed to prove that the drug patented is not worked in the territory of
India. Court also stated that purpose of Section 83(f) of the Act is to prohibit the patent holder from
misusing its patent rights in relation to international trade.

Compulsory licensing and bolar exemption:

The compulsory licensing system and bolar exemption are considered as an obstacle to enjoyment of rights
granted to patentee exclusively by law although it is mentioned by several states that it allows the
government or any third party to use the subject matter of the patent without taking due permission for the
one who holds patent rights over the same. But this is applicable only if the one who is exploiting the
patented substance, did make some efforts to acquire patent rights from the patent holder so as to ask for
protection under Section 84 of Indian Patents Act.

Other than Indian Patents Act, the importance of system of compulsory license is also mentioned under
international agreement such Doha declaration on TRIPS and Paris Convention on Protection of industrial
property, 1883. The present case of Bayer v. Union of India emerged to form a nexus between the above
mentioned two exceptions i.e., compulsory licensing and bolar exemption.

The present case deals with the writ petitions that were filed by Bayer Corporation against Natco and
Alembic Chemicals asking for court to pass an injunction order in furtherance to prohibit them from
manufacturing, selling, distributing, advertising, exporting and offering for sale any product that infringed
Bayers patents with regard to the drugs Sorafenib and Rivaroxaban respectively.

Natco in its defense stated that it was with Bayers permission that they exported the patented product to
other country for the purpose of clinical trial under the purpose of research and development of the drug for
regulatory purpose. Natco also had obtain compulsory license for the patented drug from Bayer. Bayer
contended that Natcos attempt to export drug for research and development purpose is an activity that falls
under the purview of commercial activity and that the said activity infringes Bayers patent rights as per
S.107A of patent acts.

The court taking into consideration the contentions made by both the parties was of the view that Natcos
activity of exporting drug for clinical trial falls under the exception of S.107A and therefore, rejected Bayers
plea. The court said that the activity of Natco was in relation to its effort to obtain the regulatory approval
and doesnt fall under the category of commercial activity. The court, while recognizing the challenges faced
by nations to ensure a strengthened future of curative study, stated that it was unfair to dictate the
behavioural.

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Criticism:
When the court was questioned about the application of bolar exemption in case of compulsory license, the
court said that bolar exemption and the provision of compulsory license are different from each other. The
Court stated that compulsory licensing is to be considered as an exception to S.48 of the Act whereas bolar
exemption is not. Also, the objective behind granting of patent and its usage also differs. But there is certain
lacuna in the explanation given by the court which are as follows:
3. Technical know howCompulsory licenses can most of the times be rendered ineffective, if they are
devoid of the technical know- how. For a country like India which is not well advanced in technology, the
cooperation of the patent holder or the patentee is very crucial for the effective working of compulsory
license regime.The fact that patentee is key player in this regime makes it difficult for the licensee or the
applicant to obtain license for production and selling of the same product at same quantity and quality.
Another challenge to application of compulsory license regime is that condition of patent holder to specify
all the details regarding the working of patented drug is impossible until it has actually been worked upon in
the market.Therefore, it is quite difficult for the licensee to have clear vision of technical know-how of the
patented drug or material unless the patent holder himself helps him in acquiring of the knowledge. It was
Ayyanger Committee that happen to provide a solution for the given problem suggesting the only if the
patent holder willingly provides the knowledge of the patented drug will the licensee be aware of the entire
working of the same. The incentive for the patent holders for helping out with above problem would be the
applicant or licensee giving royalty to patent holder for granting of the patent rights.Now, if this issue is read
along on the lines of bolar exemption, then compulsory licensing will not be on a different stature from that
of bolar exemption. As in bolar exemption, the generic companies need the patent for submission of
information, and thus desire for access of the same in order to work on their generic version. Thus, both the
generic producer and licensee needs to know the technical know- how and requires assistance of the patentee
for the same. Even after the purpose of the exceptions being different, they cannot work effectively without
the technical know- how.
4. S.92 A and Bolar exemption:S. 92 A of The Patents Act 1970 says Compulsory license for export of
patented pharmaceutical products in certain exceptional circumstances. -Compulsory license shall be
available for manufacture and export of patented pharmaceutical products to any country having insufficient
or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health
problems, provided compulsory license has been granted by such country or such country has, by
notification or otherwise, allowed importation of the patented pharmaceutical products from India.

The court, in reference to Natcos activity of exporting the drug patented by Bayer to foreign country for
research and development purpose, observed that if the country to whom the drug is exported is capable to
manufacture the drug, then such an export is allowed under the law.

The application of bolar exemption as per Section 107A has been more existent in countries such as Mexico,
Poland, etc., unlike India. It was only in the present case that Indian courts recognized the relevancy of bolar
exemption in regards to patent linkage. But still the legal mind of court was limited to them interpreting the
words- sale and export in relation to application of Bolar exemption resulting into them missing out on some
very essential points.

For effective implementation and application of provisions of bolar exemption, the jurisprudence of India
needs to look upon following points:
5. Unlike U.S. Indian courts need to make provisions of Bolar exemption applicable to any product. As
Indias stand on bolar provision is very similar to that of Canadas approach towards bolar provision, India
taking a liberal approach, needs to apply the bolar exemption to products manufactured by pharmaceutical
industries. The reason for India failing to do so is because it has to follow the same provision for several
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other products such as aircrafts, motor vehicle, etc. If India is in favor of strengthening its hold on bolar
exemption, then it has to make amendment in relation to same in the Indian Patent Act.
6. While addressing the issue of supply of patented drug being made by third parties or infringers i.e.,
Cipla in the present case, Indian judiciary failed to address as to who qualifies to manufacture, use, sell and
import the invention patented by the patentee for sole purpose of research and development of invention.
There are two possible stances that Indian judiciary would have opted out for i.e., first being the fact it
acknowledges act of supply by infringers as a part of serving the purpose of development and research, as
recognized by German court of law. The second possible stance could be that adopted by courts of Mexico
and Poland of refusing to include the supply done by third parties or infringers within the ambit of bolar
exemption.

The court in present case was right in dismissing the petition filed by Bayer Corporation. The judgement
very well clarified that when there the subject matter of the issue in contention is in relation to public at
large then the top most priority is of public interest as it is in the present case.

The court also throwed some light on the purpose of enacting and the legislative intent behind the
incorporation of Indian Patent Act. It said that the sole purpose of the Act is promote and enhance the
innovation and creativity and also to make sure that such work of is prevented from any sort of damage by
providing the inventor of the work with the patent rights.

The Delhi Hight Courts decision in regards to present case of Bayer Corporation v. Union of India and Ors.,
happened to widen the scope of application of bolar exemption by providing a wider and liberal general
interpretation to the word sale. This judgment happened to strike a balance between the issues pertaining to
public interest and also those made in regards to patentees right.

The Supreme Court, in Bayer Corporation v. Union of India & Ors.[1], in December, 2014 upheld India’s
first compulsory license by dismissing a Special Leave Petition filed by Bayer Corporation.
The Apex Court upheld the decision of the Intellectual Property Appellate Board and the Bombay High
Court, sanctioning the grant of a compulsory license for Bayer’s anti cancer drug ‘Nexavar’.

It was for the first time, after India became a signatory to trade related aspects of Intellectual Property Rights
(TRIPS) followed by the Doha Declaration in 2001 and the amendments to the said Act in 2003 and 2005
that the issue of Compulsory License had come up for the consideration before the authorities.

Compulsory License Regime in India

Compulsory licensing occurs when a government authorizes an organization other than the patent owner to
produce a patented product or process without the patent owner’s consent. It is governed by Chapter XVI of

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the Indian Patents Act, 2005. The patent owner is remunerated for the license but does not have the option to
refuse the license, select the licensee, or determine royalty rates.

The scheme under Chapter XVI of the Act is that it is applicable to a patented product as well as a patented
process. According to Section 84 of the Act, an application for the grant of Compulsory License can be
made to the Controller on satisfaction of the following two prerequisites-

1. An application for compulsory license can be made only after expiration of three years from the
date of grant of patent to the patent holder
2. The applicant should have put in efforts to obtain a voluntary over the patent from the patent
holder on the reasonable terms and conditions.

Further, the application should base such claim on the basis of the contention that all or one of the three
conditions, as mentioned under Section 84 (1) are satisfied. The three conditions are:

1. reasonable requirement of the public for the patented invention is not being met; or
2. The patented invention is not available to the public at reasonably affordable price; or
3. That the patented invention is not worked in the territory of India

The Controller needs to be satisfied that prima facie conditions exist for the grant of Compulsory License.
In case of grant of a Compulsory License, the terms and conditions of the grant would be in
terms Section 90 of the Act.

The drug at issue is Sorafenib Tosylate which is sold under the trade name of Nexavar. Nexavar got patented
in India, in 2008. An application for compulsory license was then filed by NATCO, at a time when the drug
was being sold by Bayer at Rs. 2, 80,000/- per month. NATCO applied to the controller for grant of
Compulsory License under Section 84 (1) of the Patents Act, after an expiry of three years, as stipulated
under the Act.

CIPLA on the other hand was already selling the drug as Soranib at Rs. 30,000/- per month and presently, at
Rs. 54,000/- per month. It was undergoing litigation in Delhi High Court for infringement of Bayer’s patent.
In the Compulsory License order issued by the then Controller General of Patent, a price of Rs. 8,800/- was
fixed. NATCO was directed to sell the patented drug at this price and also pay a standard royalty rate of six
percent calculated the net price /manufacture. NATCO can sell the drug only in India and has to supply the
drug to at least 600 needy patients each year free of charge.

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It was concluded that the price charged by Bayer contravened the Patents Act as it was not available to the
public at a reasonably affordable price with respect to the purchasing power of the public or in sufficient
quantities.
IPAB Decision:[2]
Bayer appealed against the Controller’s order, contending that the Compulsory License was rendered
redundant because the drug was already available at a lower price (relying on sale by CIPLA at Rs. 5400/-
per month) than the price specified by the Controller.

Bayer hence asserted that if the drug is available in the market at affordable prices, not necessary by the
patentee, in such circumstances, section 84 (1) (b) of the Patents Act will not come into picture.

The IPAB however rejected this contention holding that it was not Bayer that was supplying the drug at a
reasonably affordable price, especially when Bayer had a case pending against CIPLA for the same drug.

It further supplied an interpretation to the words, ‘patented invention’ as used in Section 84, holding that
they refer to:
= the invention that must be made available to the public by the patentee;
= the invention in respect of which reasonable requirements of the public must be satisfied by the patentee
and;
= the invention which the patentee must work in the territory of India.
With respect to the requirement of getting the drug “worked in the territory of India”, Bayer had contended
that the word “work” would include import and not necessarily local manufacture. IPAB ruled that the
inference would depend on a case to case basis and the phrase has a flexible meaning.
The IPAB ruled against Bayer, holding that granting a stay in favor of Bayer would jeopardize the interests
of the public who are in need of the drug.

High Court Decision:[3]

Subsequently, even the High Court dismissed Bayer’s petition challenging the grant of Compulsory License.

The major legal question that rose before the High Court was therefore whether the supplies by infringers of
the patented drug (Cipla and NATCO in this case) have to be taken into account to determine the satisfaction
of the reasonable requirement test?

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The High Court’s decision was rendered on the basis of the fact that even after taking into account Cipla’s
supplies, the public requirement would not be met.

However, considering it as a pure legal issue, the Court held that the obligation to meet the reasonable
requirement of the public is of the patent holder alone, either by itself or through its licensees.

With respect to the requirement of getting the drug “worked in the territory of India”, it was ruled that when
a patent holder is faced with an application for Compulsory Licence, it is for the patent holder to show that
the patented invention is working in the territory of India by manufacture or otherwise. However, the patent
holder would nevertheless have to satisfy the authorities under the Act as to why the patented invention was
not being manufactured in India keeping view Section 83 of the Act. In such circumstances, “worked in
India”, according to the Court, could not mean only manufacture in India.
Bayer had conceptualized a dual pricing system under the Patient Assistance Program. Under PAP, when a
patient bought three dosages of the patented drug, he was given the remaining tablets for the entire month,
free of cost. However, this concept was not accepted as a defence for Section 84 (1) (b) of the Act, which
requires that the patented drug should be made available to the public at a reasonably affordable price i.e. to
any member of the public tendering the price.

Section 84(7) of the Act provides a deeming fiction which deems that reasonable requirement of the public
is not satisfied, if the demand for patented article is not met to an “adequate extent”. The Court held that so
far as medicines are concerned, the adequate extent test has to be 100% i.e. to the fullest extent. It
observed, “Medicine has to be made available to every patient and
this cannot be deprived/scarified at the altar of rights of patent holder”.

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Supreme Court decision:
While dismissing the Bayer’s Special Leave Petition, the Supreme Court noted that:

“In the facts of the present case, we are not inclined to interfere. The Special Leave Petition is
dismissed, keeping all questions of law open.”
The decision is open ended, the implications of which are unknown. Keeping all questions of law open
would mean that any subsequent challenge to interpretations as adopted by the High Court can change the
existing interpretations. This decision by the Supreme Court hence restores the uncertainty that was always
attributed to the grant of Compulsory License in India.

Criticism:
Since compulsory licensing limits the right of exclusive ownership conferred by patents, it has long been
controversial.[4] The consensus on its implementation hasn’t been achieved yet.
The entire concept of grant of Compulsory Licenses has been hailed as “damaging to the industry in the
long term”. According to the President of Organization of Pharmaceutical Producers of India, Compulsory
Licenses should only be used in “exceptional circumstances such as times of a national health crisis.”
The grant of Compulsory Licence to NATCO by the Controller General has garnered a response from the
United States Patent and Trademark Office as well, according to which, “compulsory licenses dissuade
pharmaceutical and biotech companies from innovating” and that the grounds for granting a compulsory
license in the case of NATCO “did not meet international standards”[5]. The irony of this statement roots
from the fact that the largest number of compulsory licenses has probably been granted in Canada, under the
1969 law amendment that authorized automatic licenses on pharmaceuticals, and in the USA, under antitrust
laws.[6]
The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) allows members the right
to grant compulsory licenses and determine the grounds for such grant. This is usually used in cases of
‘extreme urgency’ or ‘national emergency’, and in such cases may be granted without first trying for
voluntary licenses.

However, the Doha Declaration states that “Each Member has the right to grant compulsory licenses and
the freedom to determine the grounds upon which such licenses are granted”. Therefore, there are no
restrictions per se on the countries for the grant of a compulsory licence.
After the grant of a Compulsory License to NATCO, India was criticized for its “anti-IP” policies on a large
scale. However, the subsequent refusal for grant of Compulsory Licence for Bristol Myers-Squibb’s

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Dasatinib and Roche’s Trastuzumab tells a different story. BDR’s request for Compulsory Licence for
Dasatinib was rejected because it had failed to try to obtain a voluntary licence from Bristol Myers-Squibb,
as necessitated by Section 84. Bayer’s case was scrutinized by the judiciary at various levels, in compliance
with domestic and international laws.

Hence, despite such criticisms, India’s patent regime is striving to adhere to legally justifiable solutions,
rather than blindly trampling on the rights of patent holders.

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BIBLIOGRAPHY

ELECTRONIC SOURCES

• https://www.legalserviceindia.com/legal/article-475-origin-and-development-ofdesigns-act-

2000.html

• https://www.indiafilings.com/learn/design-registration-2/

• https://www.ipindia.gov.in/faq-designs.htm

• https://articles.manupatra.com/article-details/Industrial-Design-The-Design-Act-2000

• https://www.indiacode.nic.in/bitstream/123456789/1917/1/200016.pdf

• https://www.ipandlegalfilings.com/industrial-design-under-the-design-act-2000/

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