Delhi High Court: Interpretation of ‘export’ under S. 107A of Patents Act, 1970

In a recent decision dated March 8, 2017 in Bayer Corporation v. Union of India & ORS; W.P.(C) 1971/2014 and Bayer Intellectual Property GMBH & Anr v. Alembic Pharmaceuticals LTD.; CS(COMM) No.1592/2016, Hon’ble  Justice Rajiv Sahai Endlaw of Delhi High Court held that export of a patented invention for experimental purpose is also covered under S. 107 A of the Indian Patents Act and thus does not amount to patent infringement.

Factual Background

• Bayer Corporation (Bayer) had filed a suit numbered CS(OS) No.1090/2011 for restraining Natco from making, importing, selling, offering for sale ‘SORAFENIB’, ‘SORAFENIB TOSYLATE’ or any generic version or any other drug or product thereof which is a subject matter of Bayer’s Patent No.215758.
• Natco during the pendency of the suit approached the Patent Office for grant of Compulsory Licence against the said patent.On March 9, 2012, the Controller of Patents granted Compulsory Licence in Patent No. 215758 under Section 84 of the Patents Act to Natco. In accordance with the terms of the Compulsory Licence, it was solely for the purposes of making, using, offering to sell and selling the drug covered by the patent within the territory of India.Natco, however, manufactured the product covered by the Compulsory Licence for export outside India. A writ petition numbered W.P.(C) No.1971/2014 was filed seeking a mandamus to the Customs Authorities to seize the consignments for export containing products covered by Compulsory Licence including ‘SORAFENAT’ manufactured by Natco.
• On March 26, 2014, notice of writ petition was issued therein the Customs Authorities were directed to ensure that no consignment from India containing ‘SORAFENAT’ covered by Compulsory Licence was exported. However, Natco was given the liberty to apply to the Court for permission to export the drug. Subsequently, on May23, 2014, Natco pointed out that in fact it has already been granted a drug license and it was permitted to export the drug SORAFENIB TOSYLATE‘ not exceeding 15 gm for development / clinical studies and trials. 
•  Natco again applied for permission to export 1 Kg. of Active Pharmaceutical Ingredient (API) SORAFENIB to China for the purposes of conducting development / clinical studies and trials and the said application was contested by Bayer. 
• Natco filed a counter affidavit in the writ petition inter alia pleading that it never exported the finished product ‗SORAFENAT‘ to any party outside India for commercial purpose. 
• Bayer, in its rejoinder to the counter affidavit pleaded export of a product covered by Compulsory Licence under the garb of Section 107A of the Act is abuse of the process of law. 

Issue before the Court

In the present case, the issue is whether the language of S.107A of the Patents Act, 1970 permits export from India of a patented invention, solely for development and submission of information or whether such act would constitute infringement under Patents Act, 1970.

Petitioner’s Submission

Bayer contended that-

•  S. 107A of the Patents Act has no application as the act of making, constructing, using, selling or importing a patented invention are to be performed within the territory of India.
• S.107A of the Act does not contemplate export of product per se but is limited to information generated within the territory of India.
• The word ‘selling’ in Section 107A of the Patents Act means ‘selling in India only’ and does not include export. Further, S. 107A uses the word ‘import’ and there is absence of the word ‘export’.The word ‘buying’ in S. 107A of the Act would have included the word ‘import’ also; however from the fact that besides using the word ‘buying’, the word ‘importing’ has also been used, it follows that buying did not include import. Similarly, selling will not include export. Reading the word ‘export’ in Section 107A would amount to making laws for other countries.
• Therefore, export of a product covered by Compulsory Licence under the garb of Section 107A of the Act is an abuse of the process of the law.

Respondent’s Submission

Natco submitted that-

• The export of the product covered by the Compulsory Licence is not intended for commercial purposes. Exports intended by Natco are only for research and development purposes and to obtain the drug regulatory approvals in the respective countries.
• Section 48 of the Patents Act is subject to other provisions of the Act. S. 107A is not an exception to Section 48. Section 84 of the Patents Act dealing with the grant of Compulsory Licence is also an exception to Section 48.
• The wide ambit of Section 107A is evident from the use of the words ‘reasonably related to the development and submission of information’.
• Sections 107A, 48 and 84 have to be ready harmoniously with Sections 90 and 93 of the Patents Act to contend that grant of Compulsory Licence cannot be in negation to the rights under Section 107 A.

Court’s Observation

The Court opined that Section 107 A prescribes the acts which are not to be considered as infringement of patent rights but there is no provision in the Patents Act prescribing as to what acts constitute infringement of patent rights. Thus, exercise of any of the acts mentioned under S.48 by a non-patentee would be infringement of a patent.

‘Selling’ permitted by Section 107A is of a patented invention i.e. a ‘product’ and not of ‘information’. The word ‘information’ used in Section 107 A is in the context of information, 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. S. 107A, as per its natural / literal / textual meaning requires selling of a patented invention solely for submission of information required under any law. 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.

There is thus nothing in Section 107 A or elsewhere in the Patents Act to restrict the meaning of ‘selling’ in Section 107 A. In the absence of any law prohibiting export of a patented invention for purposes permitted under Section 107 A, no such prohibition can be inferred.

Held

Thus, The Court held that the grant of Compulsory Licence would not come in the way of Natco exercising its rights under Section 107 A as a non-patentee and cannot be deprived of making, constructing and selling by way of export a patented invention for purposes specified in Section 107A.