Compulsory licensing: round two

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The recent rejection of an application to produce a generic version of a patented drug shows India is following the rules, says Deepak Sriniwas of Lex Orbis

Under article 31 of the WTO TRIPS agreement, compulsory licence (CL) is one of the mechanisms for non-voluntary authorization to use a patent, including use by a government or third parties authorized by the government.

Deepak Sriniwas
Deepak Sriniwas

In many instances developed and developing as well as underdeveloped countries have invoked the CL provision to safeguard the interests of public. For example, US courts have granted CLs to Microsoft, Direct TV and Toyota. Italy’s competition authority has granted CLs for antibodies and a drug patented by Merck.

India’s first CL was granted to Natco Pharma to manufacture a generic version of Bayer’s cancer drug Nexavar. While the decision drew lot of opposition, Bayer is positioned to gain a 7% royalty from Natco – a high rate in a case of CL.

Recently, India’s controller general of patents (CG) has rejected the country’s second application for a CL, filed by Mumbai-based BDR Pharmaceuticals for a patent granted to Bristol-Myers Squibb (BMS) in 2006 for the drug dasatinib, used in the treatment of chronic myeloid leukaemia. In its application, BDR proposed to sell the drug at a price that worked out to ₹8,100 (US$130) a month per patient – much less than the cost of the BMS drug.

Background and chronology

India’s Patents Act, 1970, provides that a prima facie case for a CL can be made out only if an applicant first tries to procure a voluntary licence from the patentee. If such an attempt does not succeed, ordinarily within six months from the initial request, the applicant is free to file a CL application.

BDR initially sent a request for a voluntary licence to BMS on 2 February 2012. BMS responded with a series of questions on 13 March 2012. BDR did not answer any of these queries, but filed a CL application on 4 March 2013.

India’s patent office rejected the application, saying that BDR failed to make out a prima facie case under section 87 of the Patents Act. The CG, in a notification dated 4 May, said the applicant had not negotiated in good faith with the patentee in the time prescribed under the act.

After receiving this notification, BDR replied to the patentee’s letter dated 13 March 2012 and replied to the CG’s notification, requesting a hearing. The applicant also filed petitions and written submissions regarding its delay in responding and other procedural irregularities. Following other procedural actions a hearing was held on 6 September.

During the hearing BDR attributed its non-response to the first set of queries from BMS to various factors, arguing that the information was being sought to keep the voluntary licence in abeyance and to impose an indefinite delay for want of specific denial, and that BMS may have used the information in an ongoing patent infringement suit.

After the hearing the CG, in an order dated 29 October, rejected BDR’s application for a CL. In the order, the CG held that on the facts, a prima facia case under section 87 had not been made out. BDR did not follow the scheme and the provisions mandated by law and did not make enough attempts to seek a voluntary licence from the innovator company.

In future, companies seeking a CL should demonstrate that there were adequate negotiations with the innovators.

What the ruling means

The first CL issued in favour of a generic drugs producer created a negative impression of India’s patent office, which was alleged to be taking direction from the government. The CG’s second order, rejecting a CL application, overturns the impression made by India’s first CL.

While these two orders issued by the CG, with a gap of one and half years, are contradictory in nature, on analysing both matters we can see the decisions in both the cases are purely based on the facts and requirements prescribed under the Patents Act.

This decision shows that India is not blindly granting CL to every pharma company to produce patented drugs, and as India’s minister of commerce, Anand Sharma, has stated, India is duty bound to provide a fair and reasonable hearing to all parties involved in CL applications and any decision will be based on judicial principles and will be TRIPS compliant, as opposed to executive invocation.

Deepak Sriniwas is the head of the patent prosecution practice at Lex Orbis IP Practice.