Abstract
The article looks at how jurisprudence has evolved in Indian courts on granting or refusing injunctions to patentees, especially when such patentees are not working/commercially using their patented product in India. The author also presents his views on the recent Eisai v. Dr Reddys case.
India has, for many years, been a net technology importer. Amongst multiple stakeholders, a thinking resonates that many patent holders secure Indian patents with no intention of working them in India. The Ayyangar Report had alluded to the same, 1 way back in 1959.
Within this framework, we have the 1996 decision of the Division Bench of the Delhi HC – Franz Xaver Huemer
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(that in turn, relied on older decisions from multiple other Indian Courts), which had held that: 11. Even so, the question is whether, while exercising discretion under Order 39, Rule 1, CPC for granting temporary injunction, it is not open to the Court to rely on the conduct of the plaintiff in not using his patent or virtually “suppressing” his patent for all practical purposes in India?
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22. For the above reasons, the plaintiff who has registered patents in India in 1984 but has not used them in India cannot, (Emphasis, mine)
In the pharmaceutical domain, this rationale, initially, had a role to play in the Vardenafil case. 3 Bayer had Indian patent(s) related to the drug Vardenafil but had not registered the drug with Indian health authority, let alone make it commercially available in India. On the other hand, defendant, Ajanta, an Indian generic company, was making and exporting the drug from India to countries where Bayer did not have the corresponding patent. Bayer sued Ajanta for infringement of its patent(s) on account of such export and secured an interim injunction.
Thereafter, Ajanta, basing its defense on Franz Huemer (above) argued that: (4) … since there is no evidence of actual user in India, the plaintiff, the owner of foreign patent registered in India ought not enjoy the equitable relief of injunction in the present case since it would amount to subordinating the public purpose of the grant to the self-interest of the patentee. 13. … particularly the admitted non-user in India of the patents by the plaintiff till date and the fact that neither sides sells its products in India, bearing in mind the elements of public interest and equity, as indeed the balance of convenience, the ex-parte ad interim injunction granted by order dated 20th December, 2016 is modified … it is clarified that the earlier order of ad interim injunction against making/manufacturing, distribution, offer for sale or sale of the impugned products for purposes of exports stands suspended.
However, the application of this ratio has not always been in a linear manner. Shortly after the issuance of the Ajanta decision in Jan 2017, a different outcome was seen in a case for the same molecule in front of another Judge of the same Court.
Bayer secured an interim injunction against BDR. 5 BDR, also wanting to export, relied on the Ajanta Order argued that Franz Huemer ratio applied and hence an interim injunction was not warranted. However, this Judge of the Delhi High Court did not agree with the Franz Huemer ratio, qua its application for exports and continued with the interim injunction on BDR for the export of Vardenafil. 6
Thus, we see that two coordinate judges of the same Court, in a span of less than two months, gave different orders for same patent and similar facts, while both were bound by the Franz Huemer holding.
However, post 2017, we see a more disturbing scenario emerge.
Lorcaserin case
In October 2018, Eisai (a Japanese pharmaceutical company) had filed a suit [CS(COMM) 1169/2018] against Dr Reddys, seeking a permanent as well as an interim injunction restraining it from infringing its patent (IN215528, granted on 27 February 2008) on the drug Lorcaserin, naming a key personnel of Dr Reddy’s as 1st defendant—a defendant-masking practice that has been noted in one of my earlier articles. 7
At the time of the filing of the suit in October 2018, Eisai had launched the drug in other countries quite some time back (e.g. US FDA Approval – June 2012) but it had not even secured marketing approval for the drug in India. On the other hand, Dr Reddys had spent considerable financial resources towards its planned India launch—it obtained the Subject Expert Committee’s approval in August 2018 and the New Drug Approval on 22 October 2018. Dr Reddys stated that it intended to launch it in India by January 2019.
In court, Dr Reddy’s relied on Franz Huemer (amongst other grounds) and argued against the issuance of any interim injunction in favor of Eisai as Eisai was not working its invention in India. Eisai, on the other hand, based its defense on the BDR ruling (noted earlier).
The Single Judge of the same court (Delhi High Court) gave a detailed order granting an interim injunction in favor of Eisai and rejected Dr Reddy’s argument on non-working of the patent, noting as follows:
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50.11 With respect to the defendants’ contention that the plaintiffs have not worked out the suit patent in India; the defendants had a remedy to seek a compulsory License under Sections 83 and 84 of the Patents Act, 1970. However, the defendants, instead of applying for either a voluntary license or a compulsory license, decided to go ahead on their own volition and seek a marketing approval. The non-working of a patent particularly for a pharmaceutical product cannot have a bearing on the rights of a patentee under Section 48 of the Patents Act, 1970. Reference be made to Cipla v. Novartis; 2017 (Supra). 50.12 Franz Xaver Huemer v. New Yash Engineers; (Supra) relied upon by the defendants related to a special kind of loom which was vital for the textile industry of the country and which would affect the economy of the country, thereby seriously affecting the market and economy. The Court, in the said case, found that if the plea for injunction was accepted then it would seriously affect the market and economy conditions in our country inasmuch as it would enable a mechanical device invented abroad (or in India) to be registered in India and kept unused thereby excluding public of its benefit and at the same time preclude the similar device being produced or used in our market or industry. In that case, the defendants’ products were already out in the market. Moreover, this case is prior to 2005 and there have been significant changes in the compulsory licensing regime under Sections 83 and 84 of the Patents Act, as a result of the amendment to the Patents Act in 2005. 52. The plaintiffs shall suffer irreparably if the injunction is not granted. On the other hand, the defendants obtained manufacturing approval on 22 October 2018 and have not commenced the manufacturing of the infringing product. If the defendants are permitted to market its product pending trial, the loss to the plaintiffs cannot be compensated in terms of the money.
Author’s views
In my view, the Eisai ruling of May 2019 is a very selective reading of the legislative and judicial position and does not give adequate reasons for distinguishing from Franz Huemer. I submit:
As regards the option of Dr Reddy’s seeking a compulsory license (CL) from Eisai being a possible prong in front of present Judge, it must be noted that the option of seeking a CL was available during Franz Huemer time as well as during the Ajanta time. Even with CL provision in statute, Franz Huemer Court had rejected the injunction on basis of non-working. Indian patent law has had CL provisions since the late 1950s. Citing of the post-2005 CL amendments is also an illusory distinction for present purpose since Ajanta decision is also post-2005 amendments. Hence, option of seeking a CL route is not an adequate reason for rejecting application of Franz Huemer to Dr Reddy’s case. The attempt to further distinguish Franz Huemer by seeking to place it as a 'loom patent' case (non-pharmaceutical) and moving away from its the ratio by stating the Eisai patent is a 'pharmaceutical patent' is of no consequence as the Patents Act, 1970 does not make any such differentiation for the rights of patentees
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(S.48). The passing reliance on the 2017 Novartis Division Bench decision
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for moving away from non-working was also not adequate. The Novartis 2017 decision concerned patents where the patented drug was registered in India and was being imported and sold by Patentee—vide its partners. Novartis was not a case of complete non-working, but Eisai (Lorcaserin) and Bayer (Vardenafil) cases were complete non-working. This Eisai Judge also mentioned that in the prior instances, “… the defendants products were already out in the market” thus trying to distinguish Dr Reddys situation where its product was not yet in market. However, it must be noted that Dr Reddy’s had spent a huge amount on developing and testing a generic version of the Eisai drug and was to launch it in less than four months, while Eisai, even after 10 years having passed from the grant of patent (and six years post US FDA approval) had not even registered the drug in India. Selectively looking at only the final manufacturing approval date for Dr Reddy’s but not considering the generic development time and resources put in and non-launch by Eisai for more than 10 years, is not equitable. Additionally, non-registration and consequent non-launch of patented Lorcaserin drug by Eisai also contradicts Eisai’s “irreparable damage” argument as the patentee normally would not suffer irreparable damage for a product that it has not launched even after many years, while having launched it in other countries. The only loss could be that of potential license fee which can be compensated monetarily later based on the defendant’s sales records.
The above reasons—option of a CL, creating a distinction between a loom patent versus pharmaceutical patent and accepting the ‘irreparable harm’ argument even when Patentee has not launched the drug for 6+ years—are not a reasonable basis to move from the strong equitable foundation of the Franz Huemer ratio.
The Author agrees with the Franz Huemer reasoning of refusal of injunction in cases of Patentee’s non-working on equitable grounds.
At the same time, if a patentee is working the invention in India and if the defendant is utilizing the patented product/ process for commercial sale in India or commercial exports (as distinguished from Bolar purposes), then interim injunction should be considered—after the assessment on interim injunction factors is completed, consistent with current case law.
The Indian Supreme Court has elucidated its general views on interim injunctions (i.e. interlocutory injunctions) in intellectual property-related matters. 11 As regards interim injunctions, in pharmaceutical patent matters, particularly those related to life-saving drugs, the author recommends reference to the ruling in F. Hoffmann-La Roche Ltd. v. Cipla. 12 In this ruling, one of the factors considered for refusal of an interim injunction to the patentee was the life-saving nature of the drug. The Patentee went to the Supreme Court of India against this injunction refusal, but could not secure interim relief. 13
Dr Reddys appeal to Division Bench and present status
Dr Reddys filed an appeal against the injunction order of the single Judge; however, the appeal bench has not yet granted a stay on the Order in the interim. 14 The main patent suit is moving at its pace.
Other developments
In a recent litigation, the Delhi High Court recently issued an injunction in a case where an Indian manufacturer was making a generic version of Sitagliptin + Metformin tablets which in turn was being commercially exported from India to Cambodia while Merck’s Indian patent for Sitagliptin is still subsisting. 15 These facts differ from the Bayer cases as Merck had registered and continues to sell the patented Sitagliptin product in India, while Bayer had not registered/ sold the patented product in India.
The defendant argued that the Patents Act required that all actions—i.e. make, use, sell, offer to sell or import—had to happen only in India and that “the application of Section 48(a) to manufacture for exports would render the statute extraterritorial in application”.
While issuing the injunction, the Judge clearly noted
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that: (13) … This is ex facie contrary to the use of the disjunctive “or” in the provision. I am therefore prima facie of the view that the protection enjoyed as a result of grant of a patent cannot be reduced to cover only domestic manufacture and sale. (14) … The manufacture of the product has, admittedly, occurred within the territory of India, and the question of extraterritorial application does not arise in this case.
Impact on stakeholders
The judicial trend to move away from Franz Huemer in clear cases of non-working in India and to then injunct generic companies is disturbing and impacts generic companies negatively. An interim injunction is an equity decision and conduct of both parties for Indian market has to be weighed upon. A patentee, who has not worked the patent in India, should not be given the benefit of interim relief against a generic company that is ready to launch a drug immediately and is ready to face the legal consequences of launching such a drug that is covered by another company’s patent. Imposition of financial damages in favor of the patentee, should the patent be finally held valid, is a fair and appropriate remedy in such cases.
Footnotes
Acknowledgements
The author is deeply indebted to the inputs received from Advocate Guruswamy Nataraj. The author also gratefully acknowledges inputs received from Advocate Pankhuri Agarwal.
Declaration of conflicting interests
The author(s) declared the following potential conflicts of interest with respect to the research, authorship, and/or publication of this article. The author works with an established generic pharmaceutical company.
Disclaimer
The article text is based on information available in public domain as of 30 January 2020. Errors, if any, are the sole responsibility of the author. The observations and submissions contained in this article are entirely personal and should not be attributed or construed to reflect the views of the author’s present or past employer(s).
Funding
The author(s) received no financial support for the research, authorship, and/ or publication of this article.
