TaxTMI 
TaxTMI 
2019 (4) TMI 1626
X X X X Extracts X X X X
X X X X Extracts X X X X
....2017 and the other, in a suit decided in CS (OS) (Comm) 1592/2016 filed by Bayer against the respondent in RFA(OS)(Comm) 6/2017 (Alembic Chemicals Ltd, the defendant in the suit, hereafter called "Alembic"). Both judgments deal with an identical issue, concerning the correct interpretation of Section 107A of the Patents Act, 1970 ("the Act") which is commonly known as the "Bolar provision". 2. Facts in the appeal arising out of the judgment in the writ petition (i.e. in LPA No359/2107) are that Bayer filed a suit [CS(OS) No.1090/2011] for injunction against Natco from making, importing, selling, offering for sale 'Sorafenib', 'Sorafenib Tosylate' ("Bayer drugs") or any generic version or any other drug or product thereof which was a subject matter of Bayer's Patent No.215758. When the suit was pending, Natco applied to the Patent Office for grant of compulsory licence against that patent. This application was granted, on 09.03.2012, by the Patent Controller, under Section 84 of the Patents Act 1970 (hereafter "the Act"). The compulsory licence granted was solely for the purposes of making, using, offering to sell and selling the drug covered by the patent within the territory of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndia, that regulates the manufacture, construction, use, sale or import of any product" clearly pointed to the legislative intention that exports, for the purpose of drug development, in compliance of regulatory law of a country outside India was permissible. 5. The suit, CS(COMM) No. 1592/2016 was filed by Bayer to injunct Alembic from making, selling, distributing, advertising, exporting, offering for sale and in any manner directly or indirectly dealing in Rivaroxaban and any product that infringed its (Bayer's) patent IN 211300 and for ancillary reliefs pleading: (i) that the subject patent is registered in the name of Bayer and is titled "Oxazolidinones and their Use; ii) that Alembic is manufacturing and exporting Rivaroxaban to the European Union; and that Alembic has made multiple Drug Master File submissions to the United States Food and Drug Administration in the United States of America for the drug Rivaroxaban; iv) that a drug Master File is a submission to the United States Food and Drug Administration that is used to provide confidential detailed information about the facilities, processes and articles used in the manufacturing, processin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st be "reasonably related to" the submission of information under the law (in this case, Chinese law). The court also pointed that the WTO Panel had expressly upheld such a wide interpretation of the similarly-worded Canadian Bolar Exemption to be TRIPs compliant and, therefore, not unfairly prejudicial to the patent holder. 9. On the text of Section 107A, the learned single judge noticed the difference between the wordings of that provision and Section 48, noting that the terms "constructing" in Section 107A and "offering for sale" in Section 48 were not important. The learned single judge then held that: "It is thus the purpose for which the said acts are done' which distinguishes, whether the acts constitute infringement of patent or not. If the said purpose is within the confines of Section 107A, the acts so done would not constitute infringement and the patentee cannot prevent a non-patentee from doing them. However, if the purpose of doing the acts of making, using, selling or importing a patented invention is not solely for the purposes prescribed in Section 107A, the said acts would constitute infringement of patent and patentee can prevent non-patentee from doi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'selling' permitted by Section 107A is of a patented invention' i.e. a product' and not of 'information'. The word 'information' is in the context of 'required to be submitted to any authority under any law of India or of a country other than India regulating the manufacture and marketing of any product'. Section 107A, as per its natural / literal / textual meaning requires selling of a patented invention solely for submission of information required under any law for the time being in force in a country other than India that regulates the manufacture, construction, use and sale of any product, to be not considered as infringement of patent right. The counsels for Bayer are unable to dispute that Section 107A envisages development and submission of information required under any law of a country other than India for obtaining approvals for manufacture and marketing of pharmaceutical products in that country. However contend that development of the information, required to be submitted in a country other than India, by making, using and constructing and selling of patented invention in India only. Significantly, the counsels for Bayer, qua 'selling' within India, admit can ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....untry other than India would entail transfer of patented invention i.e. product from India to that country. There is nothing in the language of Section 107A to suggest that only the information generated / collected in India could be transported out of India and not the patented invention. Information generated in India, unless accepted under the law of any other country for granting regulatory approvals for manufacture, sale and import in that country, would be of no use. There is nothing in the language of Section 107A to indicate that the legislature applied itself that the regulatory laws of countries other than India would accept the information generated and collected in India. The counsels for Bayer during the hearing also could not demonstrate that information collected / generated in India would be acceptable for grant of regulatory approvals for manufacture and sale of drugs in other countries. Even otherwise, the interpretation of laws of India cannot be dependent on foreign laws. I have not found any provision elsewhere in the Patents Act requiring the word 'selling' in Section 107A to be restricted to 'within India' only." Contentions of parties: Bayer 11. Mr. Su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....medy clearly shows that it is not the legislative intent to confer an independent right to a party under section 107A of the Act. 13. Learned Senior Counsel relied on the rule that a proviso should be interpreted narrowly, unlike a right which warrants liberal interpretation. Specifically, a proviso must be interpreted keeping in mind the scope of the main enactment to which it forms a proviso. This was recognised by the Supreme Court in The Commissioner of Income Tax v the Indo-Mercentile Bank Ltd. [AIR 1959 SC 713]. 14. Mr. Chandra argued that the legislative intent behind Section 107A of the Act is only to ensure the availability of a competitor's product immediately after the expiry of patent in the Indian market without having to wait for regulatory approval post patent expiry. However, this intent does not extend to ensuring the availability of the same in other countries. He relies on the Notes on Clauses of the Patents (Amendment) Act 2002 as well as the Joint Parliamentary Committee Report pertaining to the insertion of Section 107A of the Act. Learned Senior Counsel stated that the phrase "in a country other than India" refers to the submission of information in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r corresponding restriction as found in these provisions can be seen in Section 107A of the Act. It is urged that this is significant, given the background of the fact that the term "importing" was specifically included in Section 107A of the Act by the Patents (Amendment) Act, 2005, without any mention of the word export" or "offering for sale". This clearly indicates that the legislature did not intend to include these activities within the ambit of the said Section. The inclusion of "importing" in Section 107A of the Act also reinforces the legislative intent which is to ensure the availability of the drug in the Indian market. Learned Senior Counsel also relied on the Joint Parliamentary Report which clearly states that the purpose of Section 107A of the Act is to bring India's Bolar exemption in line with the global requirements. 16. It is next submitted that the word "selling" does not include exports, because firstly the Act is territorial in nature and explicitly states in Section 1 that it "extends to the whole of India". Clearly, the Act only seeks to regulate activities which take place in India and hence, does not deal with/permit sale outside India. Moreover, as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that "sale" by "export" is mentioned in the Central Sales Tax Act, 1956 ("CST Act") which deals with a "sale said to take place in the course of export". While considering the import of this phrase in Article 286, the Supreme Court held in The Stale of Travancore-Cochin and Ors. v. The Bombay Company Ltd. AIR 1952 SC 366 and The State of Travancore Cochin v. The Shanmugha Vilas Cashew Nut Factory & Ors AIR 1953 SC 333 that two types of sales or purchases would fall within this category: (a) a sale or purchase which itself occasions the export and (b) a sale or purchase affected by a transfer of documents of title to the goods after the goods are put in the export stream (i.e. after they have crossed the customs frontiers of India). Such an interpretation suggests that "sale" per se does not comprehend in itself export, which is a distinct activity, and that sale which occurs in the course of exports is extra-territorial in nature. 20. It is argued that the impugned judgment erroneously found that a plain reading of section 107A of the Act would include the word "exports" as the same would fall within the meaning of the word "selling". The construction placed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....statute and do so with a specific purpose. For instance, Australia permits exports explicitly for patents which have received an extension in their term. Several jurisdictions have also recognised the blatant prejudice this would cause to the rights of the patentee such as the Polish Supreme Court in A.P. Inc. v. SFP SA [IV CSK 92/13] and the German Appellate Court in Astellas v. Polpharma [12-U 68/12]. Therefore, the learned Single Judge returned findings which are not in line with the legislative intent and also in the teeth of the global standards with respect to the Bolar exemption. 23. It is submitted that arguendo if Section 107A of the Act permits exports, the burden of proof must fall on the non-patentee. In this regard, it is stated that it is an established position under the law of evidence that the burden of proof must lie on the party who relies on a fact. This can be seen from Section 106 of the Indian Evidence Act, 1872 [Annexure 19], which provides that any fact(s) must be proved by the party which seeks to rely on the same. This also follows naturally from the fact that Section 107 of the Act is a defence/exception, as shown above. The burden of proof must clear....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that this position is augmented by the prior judicial interpretations of Section 107A of the Act such as in Teva API India Pvt. Ltd, v Merck Sharp & Dohme Corp. [FAO (OS) (COMM) 34/2 016 before DHC (DB)] where the defendants' undertaking in respect of compliance with the foreign regulatory regime as well as the export quantities were taken into consideration. It was submitted that the learned Single Judge, by finding that the court cannot get into an analysis of foreign regulatory regimes, has rendered the phrase "reasonably related to the development and submission of information" otiose. Furthermore, the various safeguards which were pointed out by Bayer before the learned single judge were not taken into consideration and in fact, it has been held by the latter in paragraph 56 of the impugned judgment that: ".... Even if it were to be believed that the patented invention once exported from this Country for the purposes prescribed in Section 107A of the Act may be used for other purposes, it is for the patentee to enforce its rights if any in that country. The laws of this country are only concerned with the sale by way of export from this country being for the pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of export under Section 107A applies both to API and formulations. Pertinently, on 13.05.2011, i.e. before the issuance of the compulsory license, the Drugs Control Administration of Govt. of Andhra Pradesh granted a license to Natco to manufacture Sorafenib Tosylate API for domestic and export purposes. This raw material/bulk form is not covered by the compulsory license issued to Bayer. It is urged that Chinese law does not permit any non-Chinese entity to submit regulatory dossiers based on data and information generated in a country other than China. Similar laws exist in other countries. The studies are required to be conducted in China by a Chinese entity to the satisfaction of Chinese regulatory authorities. Reference is made to the SFDA Order No. 28-Provisions for Drug Registration-Article 10-Provisions of Drug Registration. 29. Mr. Grover submits that Bayer's patent expires on 12.01.2020; Article 19 of the Chinese drug registration law enables an entity other than the patentee to apply for patent registration two years prior to the expiry of its term. Natco denies Bayer's allegation that, under the guise of the grant of compulsory license, it is exporting the formulatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... after conducting animal toxicity studies which are Phase I, II, and III human clinical trials generating information and data which is submitted to the satisfaction of drug regulatory authorities. To avoid repeated clinical trials on patients, regulatory authorities over world permit generic companies to carry on studies such as bioequivalence, bioavailability and stability studies to establishing chemical and functional equivalence of their product with the originator product. This is done on a partial scale commercial production run. Based on such studies, a drug has to satisfy requirements of bioequivalence, bioavailability and stability studies. The precise needs, in terms of quantity of production, is specified by regulatory authorities in various countries; they differ from each other. 32. Mr. Grover emphasizes that patent regimes do not countenance continuation of monopoly even a single day more than the permitted patent term. Thus, generic companies need to only conduct development studies, generation of information and data before the expiry of the patent, i.e. during a patent's term, to launch the product in the market immediately on expiry or invalidation of the pate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of information required under any law for the time being in force... In a country other than India, that regulates the manufacture, construction, use, sale or import of any product."It is submitted that hence, Section 107A recognizes that export (of a patented product) to another country for development and submission of information (in that country), is not infringement. In the Canada Dispute, the DSP recognized that the general language of Article 30 was agreed to by the US on the understanding that it would help the US secure the Bolar exemption which was already in place there. The DSP also noted that foreign pre-expiry testing is accepted by the FDA and noted by the US Supreme Court in Intermedix Inc. (Supra). The DP found that such a provision was a "limited exception" within the meaning of Article 30 of TRIPS (Ref. Paras 7.2 to 7.6 DP order). Therefore, the key is not the quantity but the purpose for which production is carried. The DP also noted that the Canadian provision was a "limited exception", irrespective of the quantity involved, because of the narrow scope of its curtailment of Article 28.1 choices (under TRIPS).So long as the exception is confined to conduct n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmercial purposes. Referring to Intermedics, counsel urged that the Federal Circuit court considered the scope of the Bolar provision. The case involved the sale of stents to a party outside the US for development purposes and held that sales to foreign distributors for development studies reasonably related to developing information could be submitted to the FDA and that such development of information need not be restricted to the period just before patent expiry. Thus, export of the patented article to another country was very much part of the patent law in the US at the time of coming into force of the TRIPS Agreement. Likewise, this position was noted in Canada Dispute case, which ruled on Section 55.2 of the Canadian Act. (Ref para 4.38(a) of the decision). 36. Learned Senior Counsel urged that Section 107A should be interpreted in accordance with TRIPS and the interpretation placed on that by the DSP. Furthermore, considering that the Indian law, uses the phrase "in a country other than India," which is absent in the US law, a fortiori India permits export to other countries in accordance with their law for submission of data of development studies. As a result, Section 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was included under the Chapter titled "suits concerning infringement of patents" under Section 107 titled "Defences, etc., in suits for infringement". He concluded correctly that Section 48 does not confer a right to prevent making and selling patented product for purposes solely prescribed in Section 107A. 39. It is urged that Section 48 of the Patents Act is subject to the provisions of Section 84 and 107A of the Patents Act. Section 107A is not subject to the operation of Section 84 or of Chapter XVI of the Act. Thus, Section 84 does not control Section 107A. Section 48 would yield to other provisions of the Patents Act, including Section 107A and, its operation cannot be curtailed by Section 84. In this regard, it is submitted that the effect to both the provisions, Section 107A and 84, has to be given in appropriate circumstances. Both operate in different fields. Section 107A operates on the submission of data generated in the development of the drug to regulatory authorities for marketing approval, that is the patented product is not sold in the market, whereas Section 84 operates on marketing of the patented product for commercial purposes. Stressing on the need to harmo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was applied by Alembic, before the US Food and Drug Administration (FDA); (iii) a no Objection Certificate was obtained by Alembic for exporting Rivaroxaban to Europe. Bayer, however could not prove or establish even prima facie that the acts complained of, fell within the purview of section 48 of the Act, i.e. commercial exploitation of the patented product as opposed to regulatory use. Initially, in the suit, Alembic made a categorical statement that it had neither launched nor commercialized the suit patent in India and that all acts conducted by it pertaining to Rivaroxaban were solely for regulatory purposes in India, and abroad as enumerated under section 107A of the Act. As a result, Alembic committed no act contemplated under section 48. No allegation of diversion of exports too was alleged in the pleadings or documents. Accordingly, the first question arising for consideration is whether based on acts covered under Section 107A, can a party be regarded as an infringer, who is then required to plead Section 107A as a defense to Section 48 of the Act. 42. It is urged that the placement of Section 107A in the Act, as a separate and distinct section, different fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... who asserts a specific claim is required under law to establish/prove it. Even under Section 107A of the Act, save cases which deal with process patents, the onus to establish infringement, both at the prima facie stage and at the final stage, with clear and cogent evidence is on a patentee, and not on the defendant or for that matter a duty of the court, especially as patents rights are private rights. This is reaffirmed upon perusal of Section 106 of Act, which deals with power of courts to grant relief in cases of groundless threats of infringement proceedings wherein again it is for the patentee to prove that '.....the acts in respect of which the proceedings were threatened constitute or, if done, would constitute, an infringement of a patent.' If, therefore, a third party claims that on the basis of its regulatory use, a patentee is groundlessly threatening to sue such party, then, the patentee has establish that the acts of the third party constitute commercial exploitation and is outside the purview of section 107A i.e. regulatory use. If, and only if a patentee can succeed in proving that a complained act results in commercial use or exploitation, can a regulatory use def....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion ought to be imposed upon the term "sale" contained in Section 107A as it is being sought to be done by Bayer by way of judicial interpretation, which in effect amounts to seeking legislative enactment. 46. It was argued that if one applies a purposive interpretation to the present case, the fact that other nations/countries have expressly or specifically provided for a bar to export for seeking regulatory approvals in other countries as is the case in the USA and Australia, supports Alembic's contention that it was never the intention of the Act to prevent export of patented invention for regulatory purposes under section 107A of the Act. Further, even though the application of the Bolar Provision in the USA under Section 35 U. S. C. § 271 (e) (1) is limited only to the US, yet, in Intermedics Inc (supra), export of patented product was allowed and held to be non-infringing in nature as it was for the purpose of conducting tests and procuring requisite data which was exclusively used to seek regulatory approval in the USA. Accordingly, in view of the fact that Section 107A specifically provides for uses reasonably related to seeking regulatory approval in countries ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. It is urged that it is a well settled principle of law that it is not open for a party to seek legislative enactments from a court of law under the guise of judicial interpretation. Accordingly, it is not open for the court to put in multiple restrictions while interpreting Section 107A as is sought by Bayer inasmuch as the entire exercise under the present litigation is: (a) to impose unreasonable restrictions on export under Section 107A to the effect of completely excluding it from the purview of the said provision (b) to create an automatic presumption of infringement immediately upon any use, sale or export of patented product even though the same is declared to be for regulatory purposes and there is nothing to prove otherwise, so as to completely shift the onus of infringement from the plaintiff to the defendant. Relevant provisions of the Patents Act: 49. Sections 48, 84, 92A, 107 and 107A of the Act read as follows: "48. Rights of patentees Subject to the other provisions contained in this Act and the conditions specified in section 47, a patent granted under this Act shall confer upon the patentee- (a) where the subjec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fit. (5) Where the Controller directs the patentee to grant a licence he may, as incidental thereto, exercise the powers set out in section 88. (6) In considering the application filed under this section, the Controller shall take into account,- (i) the nature of the invention, the time which has elapsed since the sealing of the patent and the measures already taken by the patentee or any licensee to make full use of the invention; (jj) the ability of the applicant to work the invention to the public advantage; (iii) the capacity of the applicant to undertake the risk in providing capital and working the invention, if the application were granted; (iv) as to whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit: PROVIDED that this clause shall not be applicable in case of national emergency or other circumstances of extreme urgency or in case of public non-commercial use or on establishment of a ground of anticompetitive practices adopted by the patentee, but shall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pulsory licences. - (1) In settling the terms and conditions of a licence under section 84, the Controller shall endeavour to secure- (i) that the royalty and other remuneration, if any, reserved to the patentee or other person beneficially entitled to the patent, is reasonable, having regard to the nature of the invention, the expenditure incurred by the patentee in making the invention or in developing it and obtaining a patent and keeping it in force and other relevant factors; (ii) that the patented invention is worked to the fullest extent by the person to whom the licence is granted and with reasonable profit to him; (iii) that the patented articles are made available to the public at reasonably affordable prices; (iv) that the licence granted is a non-exclusive licence; (v) that the right of the licensee is non-assignable; (vi) that the licence is for the balance term of the patent unless a shorter term is consistent with public interest; 179 [(vii) that the licence is granted with a predominant purpose of supply in the Indian market and that the licensee may also export the patented product, if need be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e without prejudice to the extent to which pharmaceutical products produced under a compulsory license can be exported under any other provision of this Act. Explanation. -For the purposes of this section, 'pharmaceutical products' means any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address public health problems and shall be inclusive of ingredients necessary for their manufacture and diagnostic kits required for their use. XXXXXX XXXXXX XXXXXX 107. Defences, etc ., in suits for infringement. - (1) In any suit for infringement of a patent every ground on which it may be revoked under section 64 shall be available as a ground for defence. (2) In any suit for infringement of a patent by the making, using or importation of any machine, apparatus or other article or by the using of any process or by the importation, use or distribution or any medicine or drug, it shall be a ground for defence that such making, using, importation or distribution is in accordance with any one or more of the conditions specified in section 47. 107A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in violation of the patent laws. The district court recognized that the issue in the case was narrow: did limited use of a patented drug for testing and investigation strictly related to FDA drug approval requirements during the last 6 months of a patent's term constitute a use which, unless licensed, was infringement. The district court held that it was not an infringement. The Federal Circuit Appellate court reversed the trial court's order, holding that: "Bolar may intend to perform "experiments," but unlicensed experiments conducted with a view to the adoption of the patented invention to the experimentor's business is a violation of the rights of the patentee to exclude others from using his patented invention. It is obvious here that it is a misnomer to call the intended use de minimis. It is no trifle in its economic effect on the parties even if the quantity used is small. It is no dilettante affair such as Justice Story envisioned. We cannot construe the experimental use rule so broadly as to allow a violation of the patent laws in the guise of "scientific inquiry," when that inquiry has definite, cognizable, and not insubstantial commercial purposes." 53....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed to shelter all products seeking FDA approval, regardless of their projected commercialization date. 56. In Merck KGaA v. Integra Lifesciences Ltd., 545 U.S. 193, 200 (2005), the US Supreme Court had the occasion to consider the experimental exception. Integra owned several patents, including a "short tri-peptide segment of fibronectin" with the amino acid sequence Arg-Gly-Arg, known as the RGD peptide. The defendant, Merck hired one Dr. Cheresh, a scientist at a research institute, to investigate compounds with the same receptor blocking capability as the RGD peptides. Integra offered to license their patents to Merck, which declined the offer. Integra sued Merck, Scripps, and Dr. Cheresh for patent infringement. The district court rejected the defendant's research exception based argument. This ruling was affirmed by the Federal Circuit court, which held that: "the Scripps work sponsored by Merck was not clinical testing to supply information to the FDA, but only general biomedical research to identify new pharmaceutical compounds." 57. The US Supreme Court judgment unanimously reversed the Federal Circuit judgment and disapproved the narrow interpretation of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....out whether something which is known to work in specific conditions, e.g. of soil or weather, will work in different conditions can fairly ... be regarded as experiments. But trials carried out in order to demonstrate to a third party that a product works or, in order to amass information to satisfy a third party, whether a customer or a [regulatory] body such as the PSPS or ACAS, that the product works as its maker claims are not to be regarded as acts done for 'experimental purposes'" 61. Exempted experiments therefore, are those that generate new knowledge, but not those that verifying existing knowledge, for example for getting regulatory clearance. The later decision of the Court of Appeal in Auchinclossv Agricultural and Veterinary Supplies and Others [1999] RPC 397 is in line with this, as it holds that making and experimenting with a patented invention merely for the purposes of gaining official approval would not fall within the Original Experimental Use Exemption. The facts of the Auchincloss case again concern agrochemicals: a sample of a dry watersoluble biocidal composition sent by the defendant to MAFF, the old Ministry of Agriculture, Fisheries and Food. Here,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt under Canadian law is embodied in Section 55.2(1) of its Patent Act which provides that: "It is not an infringement of a patent for any person to make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product." 65. This provision concerns activities relating to the development and submission of information required by a regulatory body. The Canadian provision is agnostic and sector neutral, in that it concerns with regulatory approval for inventions in all areas of technology and is not restricted to pharmaceuticals. The disputes before the Canadian courts are primarily in the pharmaceutical area, most often in the context of generic manufacturers performing tests in respect of a patented drug. Also, this provision relates to information that may be required by a regulatory body anywhere (and not just in Canada). 66. A leading Canadian decision, Merck et al. v. Apotex (2006) FCA 323, (Federal Court of Appeal), was in the context of a generic drug....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y to best sub-serve the contemporary needs of India. Justice Ayyangar's Report on Patent Law Revision of September 1959 was the basis of the Patents Act, 1970. The report noticed that the right of researchers, to use the invention - whether it be an article or a process - for the purposes of carrying out experiments - in the course of research, as distinguished from use for a commercial purpose is one matter in connection with the right of patentees had to be clarified. In this connection, while taking note of the uncertainty of the law on this topic in the U.K., Justice Ayyangar took the view that: "I consider it desirable that the law should specifically exempt use of the patented articles or processes or the use of articles or products made by the use of the patented process or patented machine or apparatus for experimental purposes from being actionable as an infringement." 70. The amendment of 1999 to the Patents Act was pre-dated by a report of the Joint Parliamentary Committee. It recommended introduction of a Bolar exemption provision. The report explained the reason for Clause 51 (which was to be the amendment): "Clause 51: this clause seeks to insert ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 or sale of any product" 75. The Patent (Amendment) Bill, 2003 proposed insertion of the expression "import" as follows: "107A: 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 or sale of any product" 76. Eventually, the Patents Amendment Act, 2005 which proposed the amendment in its present form, was enacted; it reads as follows: "107A: 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 regul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....transactions and uses covered by the provision. It was contended that considerations of extra territorial impact of any provision do not arise. Lastly it was urged that Section 107A - in its placement and having regard to its legislative history is clearly not an exception or proviso, but a special provision which must be given full meaning and effect. 79. Two clear strands of reasoning have prevailed in various judgments of the Supreme Court, while interpreting the meaning and purport of general words. One, that plain and natural meaning should be preferred ordinarily, and two, that the context and purpose of the provision should always be kept in mind. Thus, in Polestar Electronic (Pvt.) Ltd. v Additional Commissioner, Sales Tax and Anr. (1978) 1 SCC 636, it was held: "11. ... If the language of a statute is clear and explicit, effect must be given to it, for in such a case the words best declare the intention of the law-giver. It would not be right to refuse to place on the language of the statute the plain and natural meaning which it must bear on the ground that it produces a consequence which could not have been intended by the legislature. It is only from the lan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inty, friction or confusion into the working of the system (ibid, p. 119). While embarking upon interpretation of words and expressions used in a statute it is possible to find a situation when the same word or expression may have somewhat different meaning at different places depending on the subject or context. This is however an exception which can be resorted to only in the event of repugnancy in the subject or context being spelled out. It has been the consistent view of the Supreme Court that when the legislature used same word or expression in different parts of the same section or statute, there is a presumption that the word is used in the same sense throughout (ibid, p. 263). More correct statement of the rule is, as held by the House of Lords in Farrell v. Alexander All ER at p. 736b, "where the draftsman uses the same word or phrase in similar contexts, he must be presumed to intend it in each place to bear the same meaning". The court having accepted invitation to embark upon interpretative expedition shall identify on its radar the contextual use of the word or expression and then determine its direction avoiding collision with icebergs of inconsistency and repugnancy....
X X X X Extracts X X X X
X X X X Extracts X X X X
...."exports" from the sweep and width of the term "sale" in Section 107A regard being had to the disparate and differing objectives of Sections 84, 90 and 92A all of which in some way or the other primarily deal with compulsory licensing and on the other hand, Section 107A is the only provision that allows an exception to be used- construction and sale of a patented article only for research purposes and subject to fulfillment of the conditions specified therein. The next argument which Bayer strongly advanced with respect to exclusion of exports from the term "sale" is that patent rights are territorial in nature, specific allusion was made to Section 48 in this regard. Elaborating, it was contended that the grant of a patent constitutes a negative right to prevent third parties from making, using, forwarding for sale, selling or importing the patented product in India. Secondly, it was urged that the research exception, can be accepted, and needs to be carried out in India if the benefit of that provision is to be secured. 85. It was submitted that Section 107A(a) really constitutes an exception and its effect has to be strictly confined to the extent the terms of the expression ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t arises for consideration is as to what is the scope of a proviso and what is the ambit of an Explanation either to a proviso or to any other statutory provision. We shall first take up the question of the nature, scope and extent of a proviso. The well-established Rule of interpretation of a proviso is that a proviso may have three separate functions. Normally, a proviso is meant to be an exception to something within the main enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. In other words, a proviso cannot be torn apart from the main enactment nor can it be used to nullify or set at naught the real object of the main enactment. (Emphasis supplied)" 87. Likewise, in J.K. Industries Ltd. v Chief Inspector of Factories and Boilers 1996 (6) SCC 665, it was held as follows: "33. A proviso to a provision in a statute has several functions and while interpreting a provision of the statute, the court is required to carefully scrutinise and find out the real object of the proviso appended to that provision. It is not a proper Rule of interpretation of a proviso that the enacting part or the main part ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e IOC's factories and if it was open to the Central Government to nominate any person other than the Director or the occupier. Section 2(n) was amended to say that "occupier" meant the person who had ultimate control over the affairs of the factory and also that in the case of firms or associations; and as to who could be occupiers in the case of firms and association in the case of company (any of the Directors) and in the case of factory owned by the Central Government, "person or persons nominated to manage the affairs of the factory by the State Government, Central Government etc.". Prior to the amendment, the "occupier" did not include the specific designated officials or employees of the company or firms. The Supreme Court held that the requirement of third proviso could really constitute a separate provision, and had to be read as such. The Supreme Court held as follows: "20. Apart from the main part of Section 2(n), the first proviso also indicates that the Legislature intended that the person having ultimate control over the affairs of the factory has to be regarded as occupier of the factory. The proviso to the Section is not in the nature of an exception. In ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the person or persons appointed to manage the affairs of the factory shall have to be deemed to be the occupier, even though for better management of such a factory or factories a corporate form is adopted by the government. 21. Before 1987, when Section 100 was the governing provision, any one of the individual partners of a firm or any one of the members of association of individuals could be punished under Sub-section (I) thereof for any offence for which the occupier of the factory was punishable. The firm or association was given an option to nominate one of its members as the occupier of the factory and if such an option was exercised by giving a notice to the Inspector then he alone was to be deemed to be the occupier of the factory for the said purpose. Under Sub-section (2) if the occupier of the factory was a company then any one of the directors thereof could be prosecuted and punished. A similar option was available to the company, as in the case of a firm and an association of individuals. It is significant to note that it was by way of a proviso to Sub-section (2) which dealt with case of a company that the provision was made for deciding who should be deem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion and either work upon it or "work around" or work it through research so as to be prepared to apply for the patent for approval to market it once the patent tenure ends, there can be no impairment of the patentee's rights. The natural consequence of that sale cannot be curtailed by a contrived interpretation to say that it is only information that can be sold or exported, not the patented invention. Likewise, the reference of another country i.e the export for reasonably complying with the laws of another country in relation to the kind of research and experimentation needed is something that cannot be dictated by interpretation of Indian law alone. It is plausible- even reasonable- that many nations may require experimentation or research to be carried on in their soil nationally so as to be able to supervise the process and then oversee the outcome. It is, therefore, not possible to dictate the behaviour and legal requirements of other nations by confining the research exception within the territory of India. 92. The natural interpretation of the expression "use" is in all its senses. In this context, it would be necessary to recognize that in regard to various products, es....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is rejected on this aspect. 94. This Court also finds unpersuasive, Bayer's subsidiary submission that Rule 122B of the Drugs and Cosmetics Rules, 1945 permits the licensing authority to grant permission (for a product) on the basis of data available from other countries. Thus, Bayer's argument here was that the act of importation in Section 107A refers to all such information which can be used for regulatory purposes of the research and development in India. Here again, the court is of the opinion that the broad nature of the provision - which enables development and research of the product and information related thereto, on fulfilling the regulatory or other legal requirements of India, and other countries- cannot be construed narrowly as to permit development and research of the product only in India, even though the backup research is conducted elsewhere. The object and underlying purpose of Drugs and Cosmetics Act is entirely different from those of the Patent Act. The former deals with the range of regulatory provisions necessary for various classes of drugs to receive licensing, marketing approvals etc. On the other hand, the patent regime is premised solely upon the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....patent, i.e. was manufacturing fine chemicals for purposes which were outside the exception, the patentee would commence infringement litigation against the manufacturer under Sections 54 and 55 of the Patent Act. The manufacturer would then be obliged to prove that it would have been reasonable, objectively, for a party in its position to believe that the use made of its manufactured active ingredients related to the development and submission of information required by law. It would be common commercial practice for the supply contract with the manufacturer to specify the purposes for which the chemicals were being manufactured and to provide an appropriate indemnity against infringement liability. While the matter had not been decided in the courts, the effect of the exception of Section 55.2(2) for the fine chemical producer would appear to be that a third party could acquire intermediate products, or "inputs", such as the bulk fine chemical constituting the active ingredient of a generic drug, for manufacturer and storage during the last six months of the patent term. In other words, both the third party and manufacturer would appear to be covered by the exception." 98. It ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...."limited exception" within the meaning of Article 30 of TRIPS, and that the size of production would not violate patent rights so long as it is solely for regulatory purposes. The DSP flagged the purpose of use in its award, relevant portions of which are extracted below: "7.3 Because of the regulatory review exception's importance to the pharmaceutical industry, the operation of the exception with regard to new pharmaceuticals was explained in some detail by the parties. Information supplied by Canada in the proceedings before the Panel on the process of regulatory approval in Canada for patented and generic drugs can be found in paragraphs 2.2 to 2.7 above and Annexes 3 and 4 to this Report. The information has not been contested by the European Communities. Since patent applications are generally filed as quickly as possible after the invention has been made, actual marketing of the patented product is frequently delayed for a certain period of time because time is required for development of the product in commercial form, after which additional time is required to complete the testing required for government approval. According to the information supplied by Canad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....old to the generic producer which assembles the active ingredient with other agents to create the final product in a form that can be used by the ultimate consumer. In such cases, both producers must engage in conduct that, in the absence of a regulatory review exception, would be potentially infringing, if they are to satisfy the requirements of the regulatory review process - the fine chemical producer in developing, making and selling the necessary amounts of the active ingredient to the generic producer, and the generic producer in combining the various elements to make the final product and then demonstrating its safety, stability and effectiveness by appropriate tests. The regulatory review exception applies to these activities of both producers. 7.5 To qualify for exemption under Section 55.2(1), such activities by either fine chemical producers or generic producers must be "solely for uses reasonably related to the development and submission of information required" by any law, Canadian or nonCanadian, that "regulates the manufacture, construction, use or sale of any product". In answer to a question from the Panel, Canada stated that, although Canadian marketing r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t with the basic patent rights created by national law. Once that initial case is made, the burden will be on the party accused of infringement to prove its defence by establishing that its conduct with respect to foreign regulatory procedures was in compliance with the conditions of Section 55.2(1). 7.47 In reaching this conclusion, the Panel also considered Canada's additional arguments that both the negotiating history of Article 30 of the TRIPS Agreement and the subsequent practices of certain WTO Member governments supported the view that Article 30 was understood to permit regulatory review exceptions similar to Section 55.2(1). The Panel did not accord any weight to either of those arguments, however, because there was no documented evidence of the claimed negotiating understanding, and because the subsequent acts by individual countries did not constitute "practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation" within the meaning of Article 31.3(b) of the Vienna Convention. 7.48 A final objection to the Panel's general conclusion remains to be addressed. Although the point was raised on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'s ability to maintain quality production in commercial volumes373, the statute would allow either fine chemical manufacturers or generic producers to undertake such production runs if they were required by regulations in other countries." 104. The Panel's view on this aspect is clear and unambiguous: "7.45 In the Panel's view, however, Canada's regulatory review exception is a "limited exception" within the meaning of TRIPS Article 30. It is "limited" because of the narrow scope of its curtailment of Article 28.1 rights. As long as the exception is confined to conduct needed to comply with the requirements of the regulatory approval process, the extent of the acts unauthorized by the right holder that are permitted by it will be small and narrowly bounded. Even though regulatory approval processes may require substantial amounts of test production to demonstrate reliable manufacturing, the patent owner's rights themselves are not impaired any further by the size of such production runs, as long as they are solely for regulatory purposes and no commercial use is made of resulting final products. 7.46 The Panel found no basis for believing that a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the products sought to be exported, cannot be the subject matter of judicial review proceedings. 107. That brings the question to what is use, sale, etc "reasonably related" for the purpose of developing information, ultimately used for in compliance with regulatory processes and laws in or outside India? Ultimately, on this aspect, there cannot be an ironclad rule or bright line as to what acts are reasonably related to the use or sale of the product, with the object of using the developed information to satisfy the regulations. 108. The Canada dispute case (supra) is a clear authority which instructs that the volume of use, sale, construction, etc of a patented invention - or the quantum is itself inconclusive on the issue. Some guidance is, however, available in this regard by the UK Intellectual Property Office (UKIPO) and Medicines and Healthcare products Regulatory Agency (MHRA). The guidelines issued in this regard are extracted below: "The carrying out of chemical and biological synthetic processes suitable for the making, disposal or keeping of the active substance(s) including the manufacture or the import of batches in quantities sufficient to prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re." 110. Thus, the volume of the patented product and its use for research and development of information cannot be prescribed by any one norm. Each case merits an analysis of the evidence, the proof regarding the regulatory concerns is to be based on it. At the same time, this cannot be short circuited by approaching and seeking relief under Article 226 of the Constitution. Bayer's claim that the court should have directed the authorities to seize or prohibit quantities of articles which Natco, or someone else sought to export, is not based on any obligation cast upon Customs authorities, in law. Further, even for the court to issue blanket directions of the kind, sought by Bayer, in its writ petition, is not feasible, because whether such seizure or prohibition or labelling ought to be mandatory, are aspects to be worked out, at the policy level, by the executive government, and not upon the court's understanding. If Bayer's claim were to succeed on this score, not only would the court become a proactive institution in framing policy and evolving normative standards in respect of spheres that have public repercussions, but would be exposed to the criticism that it would do....
X X X X Extracts X X X X
X X X X Extracts X X X X
....were to be decreed and the extent of such monetary compensation. The affidavit should be of an authorized personnel, and kept alive during the pendency of litigation, duly authenticated by the board of director or other controlling body of the defendant- and whenever the company or entity undergoes amalgamation or transfer, suitable undertaking from the successor organization; (9) If necessary, verification through the Indian mission (and its trade division) abroad regarding the authentication of the third party and/ or its facilities abroad. (10) If it is held by the court that the exporter is not involved in sale or export of any patented product, but a generic article, unprotected by patent law, when denying relief, suitable restitutionary relief should be awarded to the defendants in monetary terms, to preclude litigation that prevents trade or competition. The above aspects are only indicative of the matters that need examination, they are in no way exhaustive and the court may consider any other matter relevant to the subject. Postscript 112. The TRIPS Agreement (1994) mentions in Article 7, as an objective, the need to balance IP rights: "....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rds prescribed by regulatory authorities, further tests are to be conducted. The Roche v Bolar decision elicited immediate Congressional response and the Hutch Waxman Act was enacted, in effect, nullifying that decision. TRIPS recognised the need for Bolar like research provisions, enabling research and development in numerous ways which relieve those involved in such activities, of the charge of patent infringement. Therefore, a constricted and narrow textual interpretation of such provisions is not called for. 116. This court notes, furthermore, that as early as in 1946, the Constitution of the World Health organization (WHO) recognized that the "the enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social condition." Later, the International Covenant on Economic, Social and Cultural Rights, by Article 12 stated that: "1. The States Parties to the present Covenant recognize the right of everyone to the enjoyment of the highest attainable standard of physical and mental health. 2. The steps to be taken by the States Parties to the pre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eneral public is afforded with the end of the bargain which every society guarantees while sealing a patent i.e. access to the technology or invention for generations to come. But for a Bolar exemption, a third party manufacturer would not be able to start experimentation and ready a product, for its availability to the general public after the expiry of the patent term. 119. In the light of the above discussion and findings, it is held and directed as follows: (a) Sale, use, construction of patented products (by individuals and entities that do not hold patents) in terms of Section 107A of the Act for purposes both within the country and abroad is authorized and legal provided the seller ensures that the end use and purpose of sale/export is reasonably related to research and development of information in compliance with regulations or laws of India (or the importing country), for its submission in accordance with such laws. The impugned judgment of the learned single judge and the findings recorded on this aspect are accordingly affirmed. (b) A dispute about the sale, i.e. whether it is legitimately related to the reasonable end use or purpose of research etc....