Bayer Corporation v. Natco Pharma Ltd.

1. Case Title & Citation

Bayer Corporation v. Natco Pharma Ltd.

Citation: 2013 (56) PTC 545 (IPAB); OA/21/2012/PT/CH

2. Court Name & Bench

Court: Intellectual Property Appellate Board (IPAB), Chennai

Bench: Justice Prabha Sridevan (Chairperson) and Shri D.P.S. Parmar (Technical Member)

The matter originated from the Controller of Patents and was subsequently challenged in the Bombay High Court and the Supreme Court.

3. Date of Judgment

March 4, 2013 (IPAB decision upholding the Controller’s grant of Compulsory License).

4. Parties Involved

Appellant: Bayer Corporation (A global pharmaceutical giant and the patentee of the drug Sorafenib Tosylate).

Respondent: Natco Pharma Ltd. (An Indian generic pharmaceutical company seeking to manufacture a generic version of the drug).

5. Facts of the Case

1. Patent Grant: In 2008, Bayer was granted a patent in India (Patent No. 215758) for “Sorafenib Tosylate,” a drug used to treat advanced stages of kidney and liver cancer, marketed under the brand name Nexavar.
2. High Cost: Bayer sold the drug at approximately ₹2,84,000 for a month’s dosage (120 tablets).
3. Application for CL: In 2011, Natco Pharma approached Bayer for a voluntary license, which was rejected. Natco then applied to the Controller of Patents for a Compulsory License (CL) under Section 84 of the Patents Act.
4. Controller’s Decision (2012): The Controller granted the CL to Natco, allowing them to sell the drug at ₹8,800 per month, subject to a 6% royalty paid to Bayer.
5. Appeal: Bayer challenged this decision before the IPAB.

6. Issues Raised

• Whether the “reasonable requirements of the public” with respect to the patented invention had been satisfied.
• Whether the patented invention was available to the public at a “reasonably affordable price.”
• Whether the patented invention was “worked in the territory of India.”

7. Arguments of the Parties

Key Contentions by the Appellant (Bayer):

• Reasonable Requirement: Bayer argued that they were meeting the demand and that “public” does not mean “every single person” who needs the drug.
• Pricing: They contended that “reasonably affordable price” must be determined by looking at the costs incurred by the patentee (R&D costs).
• Working in India: Bayer argued that “working” a patent does not necessarily mean local manufacturing; importing the drug should satisfy the requirement.

Key Contentions by the Respondent (Natco):

• Accessibility: Natco provided data showing that Bayer’s drug reached barely 2% of the patient population.
• Affordability: They argued that ₹2.8 Lakhs per month was astronomically high for the Indian public, whereas their version (₹8,800) was affordable.
• Local Working: They argued that under Section 84(1)(c), the patentee must manufacture the drug in India to “work” the patent to the fullest extent possible.

8. Judgment / Final Decision

The IPAB dismissed Bayer’s appeal and upheld the grant of the Compulsory License to Natco.

• Verdict: The Board confirmed that all three conditions under Section 84 were met against Bayer.
• Modifications: The IPAB slightly increased the royalty rate from 6% to 7% to be paid by Natco to Bayer.

9. Legal Reasoning / Ratio Decidendi

The Board applied a strict interpretation of Section 84 of the Patents Act, 1970:

• Reasonable Requirement: The court held that if a drug is available to only a small fraction of the population (roughly 2%), the patentee has failed the public.
• Reasonably Affordable Price: The Board ruled that “affordable price” is determined from the perspective of the public, not the patentee’s R&D expenses.
• Working in India: The IPAB clarified that while “working” could include imports, the patentee must justify why they aren’t manufacturing locally. In this case, Bayer had no plans to manufacture in India despite having the facilities.

10. Conclusion / Observations

This case established that public health takes precedence over patent monopolies in India. It sent a clear message to global pharmaceutical companies that life-saving drugs must be made accessible and affordable to the Indian masses. It remains a foundational precedent for the “flexibilities” provided under the TRIPS agreement to protect public health.