Bayer held an Indian patent on sorafenib, a kidney and liver cancer drug sold as Nexavar. Natco Pharma applied to the Controller of Patents for a compulsory licence to manufacture it in India. In March 2012 the Controller granted that application, the first compulsory licence issued in India under the modern patent regime, and one of the most closely watched IP decisions the country has produced.
The IP move
Indian patent law permits an application for a compulsory licence once a patent has been in force for a defined period, and it sets out three grounds. The first is that the reasonable requirements of the public with respect to the patented invention are not being satisfied. The second is that the patented article is not available to the public at a reasonably affordable price. The third is that the patented invention is not being worked in the territory of India.
The Controller found against Bayer on all three. Bayer's monthly course was priced at roughly ₹2.8 lakh. Natco proposed to supply at somewhere in the region of ₹8,800 a month. Supply volumes in India were modest relative to the patient population, and the drug was being imported rather than manufactured here.
The licence was not free and was not open-ended. Natco was directed to pay Bayer a royalty on net sales, set at six percent at first instance, and to supply on the recorded terms. Bayer challenged the grant through the appellate board and then the High Court without succeeding in overturning it. The patent remained valid throughout the entire episode. What Bayer lost was not the right. It was control over who else could practise it, and on what commercial terms.
The takeaways
A patent in India carries obligations as well as rights. Holding one and doing nothing with it locally is itself a risk position.
Pricing and supply decisions form part of your IP position, because the statute expressly makes them relevant to whether you keep exclusive control.
Working the patent in India, through manufacture or genuine local availability, is a live legal test rather than a formality.
A licence you negotiate is a licence you control, on royalty terms and field-of-use terms you helped write.
A licence imposed on you sets its own royalty, and you argue about it afterwards from a weaker position.
The lesson for your business
If you hold patents in India, treat commercialisation as part of keeping them rather than as a separate commercial question. Decide deliberately how each right will be worked, whether through your own manufacturing, a local partner, or a voluntary licence granted on terms of your choosing to someone you selected. Pricing and availability should be reviewed with the same seriousness as renewals. The alternative is that somebody else makes the application, and the terms of your own patent are settled in a proceeding where you are the respondent.
