AN ANALYSIS ON BAYER CORPORATION V. UNION OF INDIA
This article is written by Raseena A, Faculty of Law University of Delhi, LL. B final year student, during her internship at LeDroit India
CONTENTS
Introduction.
Background Of the Patent and Dispute.
Legal Framework: Compulsory Licensing in India.
Facts and Issues.
Arguments By Bayer Corporation.
Arguments By the Government.
Reasoning And Judgement.
Impact On Public Health and Patent Jurisprudence.
Critical Analysis and Conclusion.
Reference.
ABSTRACT
This article examines the significant case of Bayer Corporation v. Union of India (Natco), in which India issued its inaugural compulsory license under Section 84 of the Patents Act for the anti-cancer medication Nexavar. The case underscores a legal dispute between the interests of patent holders and public health, investigating how the Intellectual Property Appellate Board (IPAB) interpreted the “reasonable requirements of the public,” affordability, and local production. It delves into the arguments presented by both sides, the IPAB’s ruling, and the wider implications for compulsory licensing law and access to medications including adherence to TRIPS. The analysis concludes by offering insights for future applications of compulsory licensing and the conduct of patent holders in India.
KEYWORDS: Compulsory licensing, public health, Patents Act, Section 84, Affordable Medicines, TRIPS.
INTRODUCTION
When lifesaving medications are priced out of reach, patent law cannot merely serve as a tool for exclusivity. The Bayer v. Union of India case compelled India to confront this challenging equilibrium balancing the protection of innovation with the preservation of public health. The matter at hand involved Nexavar (sorafenib tosylate), a patented anti-cancer medication whose monthly price (₹ 2.8 lakh) rendered it unaffordable for the majority of Indian cancer patients. Natco Pharma pursued a compulsory license, and in 2013, the Intellectual Property Appellate Board (IPAB) affirmed the grant. This case stands as a pivotal moment in Indian patent law, illustrating that patent rights are not absolute when public health is concerned.
BACKGROUND OF THE PATENT AND DISPUTE
Bayer Corporation held the Indian patent for Sorafenib Tosylate, marketed as Nexavar, a medication utilized in the treatment of advanced renal cell carcinoma and hepatocellular carcinoma. The patent (IN 215758) was granted in India in 2008, providing Bayer with exclusive rights to manufacture, market, and sell Nexavar across the nation. Despite the drug’s significant therapeutic benefits, its commercial availability in India was severely restricted. Bayer only supplied a minimal quantity through imports, and the medication was priced at around ₹2,80,000 per month, which was prohibitively expensive for nearly all Indian patients requiring long-term treatment.
Natco Pharma, an Indian generic manufacturer, approached Bayer seeking a voluntary license, proposing to produce and supply the drug at a substantially lower price of ₹8,800 per month. Bayer rejected this offer. In 2011, Natco submitted an application for a compulsory license under Section 84 of the Patents Act, 1970, contending that Bayer had not
- satisfied the reasonable needs of the public,
- made the drug accessible at a reasonably affordable price, and
- “worked” the invention in India through local manufacturing.
After reviewing evidence regarding availability, pricing, supply levels, and manufacturing strategies, the Controller of Patents granted India’s first compulsory license in March 2012. Bayer appealed this decision to the Intellectual Property Appellate Board (IPAB), which upheld the license, resulting in a landmark ruling that altered the interpretation of patent obligations for lifesaving medications in India.
LEGAL FRAMEWORK: COMPULSORY LICENSING IN INDIA
According to Section 84 of the Patents Act, 1970, an application for a compulsory license may be submitted after a period of three years from the grant, based on the following grounds:
The reasonable needs of the public are not being met;
The invention is not accessible to the public at a price that is reasonably affordable;
The invention is not being “worked” within India.
Furthermore, Section 90 stipulates that the terms of the license, including the royalty, must be deemed “reasonable.” On an international level, the TRIPS Agreement, Article 31, permits WTO members to grant such licenses under specific conditions. Additionally, WIPO’s guide verifies that India’s framework for compulsory licensing is in accordance with the flexibilities provided by TRIPS, which encompass standards related to public interest and affordability.
FACTS AND ISSUES
Bayer held Patent No. IN 215758 for Sorafenib Tosylate (marketed as Nexavar), a medication utilized for advanced renal cell carcinoma and hepatocellular carcinoma. The patent was awarded in India in 2008. Bayer did not produce the drug domestically and depended entirely on imports, providing extremely limited amounts that fell short of national demand. The monthly price of Nexavar was established at around ₹2,80,000, making it unaffordable for nearly all patients affected in India.
In 2010, Natco Pharma submitted a request for a voluntary license to Bayer, proposing stringent conditions, including reduced pricing and restricted usage. Bayer declined the request without presenting a feasible alternative. Following the mandatory three-year period from the grant date, Natco applied for a Compulsory License under Section 84 of the Patents Act in 2011. Natco contended that Bayer had failed on all three statutory grounds: unmet public needs, unaffordable pricing, and lack of local patent utilization.
During the proceedings, the Patent Office reviewed Bayer’s import data, which indicated minimal quantities reaching Indian patients. Affordability was evaluated from the Indian socio-economic viewpoint, rather than global pricing standards. Bayer’s assertion that importation constituted “working” of the patent was dismissed due to the lack of manufacturing, limited supply, and failure to prove obstacles to local production. These factual elements served as the basis for the Controller’s approval of the compulsory license and subsequent affirmation by the IPAB.
ISSUES
- Whether Bayer met the reasonable requirements of the public under Section 84(1)?
- Whether Nexavar was available at a reasonably affordable price?
- Also whether Bayer had worked the patent in India or merely relied on minimal imports?
- Also whether compulsory licensing violated India’s TRIPS obligations?
ARGUMENTS BY BAYER CORPORATION
- Bayer asserted that compulsory licensing ought to be an exception and that the pricing of their products was indicative of the costs associated with research and development (R&D).
- They maintained that the importation of Nexavar fulfilled the “working” requirement, given that local production was impractical.
- Bayer cautioned that the implementation of compulsory licensing would hinder pharmaceutical innovation and establish an unfavorable precedent.
- Additionally, they contended that Natco had not exerted adequate effort to obtain a voluntary license.
ARGUMENTS BY THE GOVERNMENT
- Natco contended that the existing price of ₹ 2.8 lakh per month rendered Nexavar unaffordable for most patients.
- They expressed their willingness to provide a generic alternative at ₹ 8,800 per month, significantly reducing the expense.
- They claimed that “working” should imply manufacturing in India rather than simply importing the product.
- The government highlighted the necessity of balancing patent rights with the obligation to protect public health and guarantee access to medications.
REASONING AND JUDGEMENT
- The IPAB affirmed the Controller’s decision to grant the compulsory license.
- In terms of reasonable requirements, IPAB determined that Bayer’s supply was insufficient, failing to meet public demand.
- When considering affordability, the board evaluated the price from the viewpoint of Indian patients, rather than solely relying on the patentee’s global pricing or research and development expenditures.
- Concerning the issue of working, IPAB dismissed Bayer’s assertion that importation was adequate, and it concluded that Bayer did not demonstrate why local production was unfeasible.
- On the matter of TRIPS compliance, IPAB found that India’s license adhered to international standards, and the royalty rate of 6% constituted a “reasonable” form of remuneration.
IMPACT ON PUBLIC HEALTH AND PATENT JURISPRUDENCE
This case reinforced India’s interpretation of patents with a focus on public health. It illustrated that patent exclusivity is not absolute and should be weighed against societal requirements. The ruling motivated generic manufacturers to seek licenses aimed at improving access; elucidated the definitions of affordability and working has enhanced India’s international standing as a jurisdiction committed to safeguarding access to medicines. Reaffirmed that flexibility provided by TRIPS is vital instrument for promoting public welfare.
CRITICAL ANALYSIS AND CONCLUSION
The Bayer v. Natco ruling is a cornerstone of Indian patent law. By supporting a compulsory license, the IPAB clearly emphasized the importance of patient affordability and access over mere rewards for innovation. This case highlights a crucial truth that patent rights are not absolute, and they must be balanced with constitutional duties such as the right to life and health.
From a public health policy standpoint, the ruling conveyed a strong message: India is prepared to utilize its TRIPS flexibilities assertively when lifesaving medications are prohibitively expensive. The established royalty rate of 6% achieved a delicate equilibrium providing compensation to Bayer while significantly lowering the cost of Nexavar. However, the judgment also brings forth certain concerns. The criteria for “reasonable requirement” and “affordability” lack definitive quantitative measures, which could introduce subjectivity in future rulings. Additionally, the requirement for the patentee to demonstrate the impracticality of local manufacturing imposes a considerable evidentiary burden on international firms.
What steps should be taken next?
- India ought to formulate guidelines or standards to clarify “reasonable affordability” to ensure uniformity.
- Enhance local manufacturing capabilities to lessen dependence on import-based working claims.
- Bolster transparency and oversight of license terms (royalty, output) to avert misuse.
- Leverage this precedent to promote voluntary licensing during global public health emergencies (e.g., pandemics), merging the incentives of patent rewards with the necessity of access.
In conclusion, Bayer v. Union of India transcends being a mere legal reference it stands as a fundamental element of India’s patent and public health framework, serves as a model for developing nations, and serves as a reminder that patent law can function as a tool for equitable innovation rather than solely for private gain.
