Introduction
India’s patent regime walks a tightrope between incentivizing innovation and ensuring access to essential products, particularly medicines. Nowhere is this balancing act more evident than in Bayer Corporation v. Natco Pharma Ltd., a landmark decision that tested the boundaries of Section 84 of the Indian Patents Act, 1970. This case, revolving around the cancer drug Sorafenib Tosylate, raised fundamental questions: Who truly benefits from patent protection? Can public interest override exclusive rights? And how does Indian law approach the grant of compulsory licenses?
Background of the Dispute
Bayer held the patent for Sorafenib Tosylate, marketed as Nexavar, used in the treatment of advanced kidney and liver cancer. The drug was prohibitively expensive — around ₹2.8 lakh per patient per month. For many in India, it was simply unaffordable. In 2012, Natco Pharma, an Indian generic manufacturer, applied to the Controller General of Patents for a compulsory license under Section 84 of the Patents Act. This provision allows a third party to use a patented invention without the consent of the patent holder, provided certain conditions are met.
Section 84: The Legal Anchor
Section 84(1) of the Patents Act, 1970 lays down that any person interested may apply for a compulsory license after three years from the grant of a patent on the following grounds:
- The reasonable requirements of the public with respect to the patented invention have not been satisfied.
- The patented invention is not available to the public at a reasonably affordable price.
- The patented invention is not worked in the territory of India.
Natco’s application argued that Bayer’s pricing made Nexavar inaccessible to 97% of potential patients in India, and that Bayer was neither manufacturing the drug in India nor ensuring its adequate availability.
Arguments and Findings
The Controller of Patents granted the compulsory license to Natco, citing all three grounds under Section 84. This decision marked the first time India allowed a generic company to manufacture a patented drug under a compulsory license.
Bayer challenged this decision, leading to a protracted legal battle through the Intellectual Property Appellate Board (IPAB), the Bombay High Court, and eventually the Supreme Court.
Let’s walk through the legal issues as they unfolded.
Public Interest vs. Patent Monopoly
At the heart of the judgment was the question of access. Bayer contended that compulsory licensing discourages innovation and violates the spirit of the TRIPS Agreement. But the Indian authorities emphasized Section 83 of the Patents Act, which sets out guiding principles, notably:
- Patents are granted to encourage inventions but not to enable monopolistic abuse.
- Patents should be worked in India, not just imported.
- The invention should be available at reasonably affordable prices.
The IPAB echoed this, holding that the right of the patent holder is not absolute. If a company does not cater to the needs of the Indian public, it cannot enjoy blanket protection. Bayer’s sales data revealed that only 200 patients out of 8,800 who needed the drug received it. Natco, in contrast, priced its version at ₹8,800 per month.
Working the Patent in India
Bayer’s limited import and non-manufacture of Nexavar in India became central to the discussion of “working” the patent. The Indian law is strict in this regard. Merely importing a small volume doesn’t satisfy the condition of working the invention in the territory.
Natco demonstrated that it could manufacture the drug locally, in compliance with Indian standards, and meet the demand more effectively and affordably. The Controller and IPAB held that Bayer’s failure on this front justified intervention under Section 84(1)(c).
Royalty and Safeguards
The compulsory license wasn’t without strings. Natco was directed to pay a 6% royalty to Bayer on net sales. Additionally, it was required to supply the drug only through certain distribution channels and maintain quality control. This demonstrated that while the law permits overriding patents, it also respects the original inventor’s contribution.
Appeals and Final Outcome
Bayer’s appeal before the Bombay High Court was dismissed in 2014. The court reaffirmed the Controller’s reasoning and emphasized that intellectual property law in India is designed to serve both inventors and the public. Bayer’s further appeal to the Supreme Court was also dismissed in 2014, cementing Natco’s right to manufacture and sell the generic drug.
TRIPS Compatibility and Global Reactions
Critics from Western pharmaceutical companies argued that India was violating its obligations under the WTO’s TRIPS Agreement. However, Article 31 of TRIPS does allow member states to issue compulsory licenses under certain conditions, including for public health reasons. India, as part of the Doha Declaration on TRIPS and Public Health (2001), reaffirmed its right to prioritize access to medicines.
Moreover, India’s decision was in line with global practices. Countries like Brazil, Thailand, and Indonesia have also issued compulsory licenses for life-saving drugs, balancing patent rights with public health needs.
Aftermath and Implications
The Bayer v. Natco decision had ripple effects. It sent a clear signal to multinational pharmaceutical companies: India will enforce patents, but not at the cost of public health. It also encouraged other generic manufacturers to pursue similar licenses for expensive patented drugs.
However, contrary to fears, India did not become a haven for compulsory licenses. In fact, subsequent applications — such as BDR Pharma’s request for a license on Dasatinib (another cancer drug) — were rejected due to procedural failures or lack of evidence. The government maintained that compulsory licenses are an exception, not the rule.
Conclusion
The Bayer v. Natco case stands at the intersection of law, morality, economics, and public health. It highlights the unique nature of India’s patent system — one that borrows from global frameworks but adapts them to its socio-economic realities. By granting a compulsory license, Indian authorities didn’t attack the patent system; they reinforced its purpose — to serve people.
Sections 83 and 84 of the Indian Patents Act ensure that patents do not become tools of exploitation. Instead, they must contribute to national development and human welfare. This case is not just about a drug. It’s about how a legal framework can empower nations to balance rights with responsibilities, profits with people, and innovation with inclusion.
Contributed By: Saksham Tongar (intern)