Bayer Corporation v. Natco Pharma Ltd.
Rule established
IPAB upheld India's first compulsory licence; affordability and local working are valid grounds under S.84; reduced royalty from 6% to 7%
Facts
- In 2012, the Controller of Patents granted Natco Pharma a compulsory licence for Bayer's patented drug sorafenib tosylate (Nexavar, a cancer drug) under S.84 of the Patents Act
- Bayer appealed to IPAB challenging the grant on all three grounds
- Bayer's price: approximately Rs.2.8 lakh per month per patient
- Natco's proposed price: approximately Rs.8,800 per month per patient
- Bayer argued: (a) the drug was available (through import), (b) the price was not "unreasonably" affordable given R&D costs, (c) working in India did not require local manufacture
- Natco argued: all three S.84 grounds were met (reasonable requirements not satisfied, not available at reasonably affordable price, not worked in India)
Issues
- Whether the Controller was correct in finding all three grounds under S.84 satisfied
- Whether "worked in the territory of India" under S.84(1)(c) requires local manufacture or is satisfied by importation
- Whether the royalty rate of 6% was adequate compensation to the patentee
- Whether affordability is a valid consideration under S.84(1)(b)
Held
- Reasonable requirements of the public (S.84(1)(a)): Not satisfied. Only 2% of eligible patients in India could access the drug at Bayer's price. This constituted failure to meet reasonable requirements.
- Reasonably affordable price (S.84(1)(b)): Not met. Rs.2.8 lakh per month is not reasonably affordable in an Indian context where per capita income is far lower. The IPAB confirmed that affordability must be assessed relative to the economic conditions of the country, not global pricing norms.
- Working in India (S.84(1)(c)): Not worked. IPAB held that "worked in the territory of India" under S.84(1)(c) is prima facie satisfied by local manufacture. Importation alone may not constitute "working." However, IPAB noted this ground needed further jurisprudential development.
- Royalty: Modified from 6% to 7% of net sales (Natco to Bayer), finding the slightly higher rate more appropriate compensation.
Ratio Decidendi
A compulsory licence under S.84 is justified where: (a) the patented invention is not available to the Indian public at a reasonably affordable price, (b) the reasonable requirements of the public are not satisfied (measured by actual patient access, not mere theoretical availability), and (c) the patent is not worked in the territory of India (importation alone may be insufficient). Affordability is assessed relative to the economic conditions of the country where the patent is granted, not by reference to global pricing or R&D costs.
How to use it in an exam
- Use alongside Natco Pharma v. Bayer (2012) (Controller's order) as the appellate confirmation. The examiner may ask about the scope of S.84 grounds, meaning of "worked in India," or the balance between patent rights and public health access. IPAB's reasoning on affordability and working is the authoritative interpretation.
- Key line for exam: "Reasonably affordable price must be judged by reference to the economic conditions of the Indian public, not by the patentee's global pricing structure or R&D investment."
Source
Source: IPAB Order
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.