Research Exemption in Indian Patent Law

The research or experimental use exemption permits researchers and product manufacturers to make certain use of a patented invention. The general idea behind this exemption is that it sets boundaries to patent holder rights such that the patent holder cannot prevent third parties from undertaking certain activities with respect to the patented invention. In pharmaceutical context, the experimental use exemption is referred to as “Bolar exemption”. The Bolar exemption provides an exception from patent infringement to the generic manufacturers from using patented drugs for research and development, for the sole purpose of submission of information for regulatory approvals of generic versions of patented products before the concerned patents expire.

            Section 107A of the Indian Patent Act, 1970 is generally referred to as India’s “Bolar exemption”. In the competitive generic market of India, it is important to balance the individual interest i.e. patentee’s rights and societal interest i.e. need for better and cheaper access of products to the society.

Section 107A of the Indian Patent Act, 1970 recites:

107A. 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;

(b) importation of patented products by any person from a person who is duly authorized under the law to produce and sell or distribute the product,

shall not be considered as an infringement of patent rights.”

Delhi High Court Interprets Scope of Section 107A of the Indian Patent Act:

            On November 2014, in Bayer Corporation Vs. Natco Pharma Limited, the High Court of Delhi examined the scope of India’s Bolar exemption. Specifically, the issue to be decided in this case was whether the exportation of an active pharmaceutical ingredient (API) constituted a defense to infringement under Section 107A of the Patents Act.

            Petitioner (Bayer Corporation) was granted a patent (IN215758) for a pharmaceutical product titled “Nexavar” (compound being Sorafenib Tosylate) which is used for the treatment of patients with advanced stages of kidney and liver cancer. Natco (respondent no. 5) applied for and was granted a “compulsory license” to manufacture pharmaceutical products which were covered under the Bayer’s patent on the ground that reasonable requirement of the public with respect to the aforesaid product was not met and it was not made available at reasonable and affordable price. Specifically, the “compulsory license” was “solely for the purpose of making, using, offering for sale and selling the drug covered by the patent for the purpose of treating HCC and RCC in humans within the territory of India”. Subsequently, Natco started manufacturing the product under the brand name ‘Sorafenat’ but was not permitted to export the same.

            Bayer allegedly received information that Natco was exporting the API, Sorafenib Tosylate outside India in violation of the terms of the compulsory license. Consequently, Bayer filed a writ petition with the Court requesting that the product covered under the compulsory license be confiscated and any consignment for export be seized. On March 26, 2014, the Court passed an interim order directing Natco to ensure that no consignment containing Sorafenib Tosylate covered by the compulsory license was exported.

            In the mean time, an application was filed by Natco before the court inter alia praying for permission to export 1 kg of Sorafenib Tosylate (API) to a Chinese pharmaceutical company for the purpose of conducting development/clinical studies and trials. Natco produced a certificate from the Chinese company stating that the company required 1 kg of Sorafenib for the purpose of “formulation R&D purpose and the same was not intended for any commercial purpose”.

            Natco argued that the 1 kg of Sorafenib was required for conducting regulatory studies in China and despite the compulsory license, export of the API was exempt by virtue of Section 107A of the Patents Act, 1970. Bayer argued that the regulatory approvals in China were being sought by the Chinese Pharma company and not by Natco, and hence Section 107A would not apply. Bayer further argued that exportation of Sorafenib was not permitted by the terms of the compulsory license and would not fall within the scope of Section 107A. Bayer stressed that the use of Sorafenib by a third party for development purposes did not entitle Natco to infringe Bayer’s patent. Additionally, Bayer argued that because Natco was not conducting any development studies, exportation of Sorafenib to China could not be construed to be solely for uses related to the development and submission of information required by any regulatory authority. Finally, Bayer noted that Section 107A did not permit export of Bayer’s product because the word “export” was missing from the section 107A.

            After a review of the facts, the Court accepted that the product Natco sought to export was not for commercial purposes since the amount was only sufficient to make 1000 to 2000 tablets (which was approximately the single trial batch size required by the Chinese Regulatory Authorities). Thus, according to the Court, the only question that had to be addressed was whether Section 107A covered export of a patented product for use by an overseas importer to conduct studies and generate data for the purpose of seeking regulatory approval in that country.

            Bayer relied heavily on the history of Bolar exemption in US (which allows sale only in the United States) and the Polish decision ‘Polpharma’ to contend that the applicability of Section 107A of the Act must be restricted to only self-use.

            The Court rejecting the reliance placed by Bayer on ‘Polpharma’, held that a sale which is related to submission of information as required by any law in India or outside India would be permissible by virtue of Section 107A. The Court further stated that the exclusion to a patentee’s right as provided under Section 107A is wider than the exceptions provided by the laws of the U.S.

Specifically, the Court stated:

“India is one of the largest producers of generic versions of drugs around the world. Given the economic realities of our country, providing cheaper medicines is a necessity. The parliament in its wisdom has, thus couched the exclusion to a patent, as provided under Section 107A, in wide terms. The sweep of the plain language of Section 107A, thus, cannot be restricted in the manner as canvassed on behalf of Bayer.

…Plainly, Section 107A of the Act takes within its fold any sale of a patented invention which is required for development and submission of information under any law in a country other than India that regulates the manufacture or sale of any product. Indisputably, under the Chinese Law, submission of studies and data related to bio-equivalence and bio-availability of API in a generic version, is required as discussed earlier and the sale of 1 kg. of Sorafenib to Chinese company can be reasonably stated to be related to the studies that are required to be conducted by Chinese company for obtained the regulatory approvals.

…[t]he language of Section 107A of the Act is determinative of the question whether export as sought for by Natco is permissible within the exemption of Section 107A of the Act. The use of the expression ‘reasonably related to’ as used in Section 107A of the Act would plainly mean a reasonably nexus. Thus, the only question that needs to be answered is whether there is any reasonable nexus between the sale of Sorafenib by Natco to Chinese company and submission of information under the law in force in China. In my view, the answer to this question is clearly in the affirmative.

…It is also important to note that the language of Section 107A of the Act is materially different from the law as applicable in U.S. Whilst, the US Law restricts the safe harbour to a sale within United States and solely for purposes related to information under a Federal Law, Section 107A of the Act is circumscribed by no such conditions. Thus, a sale even outside India would fall within the sweep of Section 107A, provided it is reasonably related to development and submission of information as required under a law in force in India or outside India.”

            The Court also rejected Bayer’s arguments that the language of Section 107A excluded “exports” because this term was not specifically recited. However, the Court stated:

“I am not inclined to accept this contention for the reason that the expression ‘selling’ is wide enough to even include cross border sales (i.e. exports). If the Parliament intended to restrict the exception to only sales within India, the same would have been expressly stated as was done by the US Congress under 35 US Code 271(e)(1).”

            The court stated that the sweep of the plain language of Section 107A, thus, cannot be restricted in the manner as canvassed on behalf of Bayer. Eventually, the court allowed the application filed by Natco on the ground that the sale of 1 kg of Sorafenib Tosylate to the Chinese pharmaceutical company, in China could be reasonably stated to be related to the studies that are required to be conducted for obtaining the regulatory approvals. The Delhi High Court interpreted Section 107A expansively to conclude that Section 107A is applicable when a party exports a patented product to a third party outside India as long as the purpose of export is the facilitation of research.

About the Author: Antony David, Senior Patent Associate at Khurana & Khurana, Advocates and IP Attorneys and can be reached at: antony@khuranaandkhurana.com

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