Indian patent law has a unique requirement under which every patentee and licensee of a granted patent must file a statement detailing the commercial working of patented inventions in India. The recent overhaul of the information required to be submitted under patent working statements (contained in Form 27) invites a reconsideration of the law around non-working of patents. In other words, what happens if a patent has not been commercially worked in India at all?

Under Sections 83 and 84 of the Patents Act, 1970 (“the Act”), non-working of patents in India exposes a patent to compulsory licensing. However, Courts in India have not followed any strict line of reasoning in this regard. Each case has been decided based on its facts and circumstances.

One of the earliest important decisions on the implications of non-working of patents can be found in Franz Xaver Huemer v. New Yash Engineers,1 which suggests that if a patent has not been worked in India, a plea to injunct another party from working the patent cannot be granted since it hampers the market and economic conditions. In this case, the non-working of a patent on a special kind of loom, vital for the textile industry, was in question. The Delhi High Court said that a mechanical device that is a useful invention must not be kept unused in Indian industry, because excluding the Indian public of such benefit would be harmful to the economy.

Does non-working mean no interim relief?

The issue of non-working came up again many years later in Bayer Intellectual Property GMBH v. Ajanta Pharma Ltd. & Ors.,2 where the Delhi High Court granted an ex-parte interim injunction against the Defendants in an infringement suit. The Defendants applied to set aside this order on grounds that the Plaintiff was a “non-user” of its Indian patent and thus must not enjoy the equitable relief of injunction since that undermines public interest.

The Delhi High Court said that the Defendants in an infringement suit cannot use the defence that the Plaintiff was a non-user of their patent. However, equity demanded that an unconditional or absolute temporary injunction cannot be granted against the Defendants, since this results in not only a loss of employment, but also a loss in the revenue of the State, with a significant impact on the economy.

However, this decision was overturned very quickly in Bayer Intellectual Property GMBH v. BDR Pharmaceuticals International Pvt. Ltd. & Anr.,3 where the Plaintiff sued the Defendants for the same drug as the previous case, Vardenafil. In this case, the Delhi High Court upheld the Defendant’s argument that their exports also earn foreign exchange for India, thereby encouraging economic activity in India. In other words, it is not merely the working of the patent in India that contributes to the economy, exporting of their patented product contributes to the economy too. The Court’s decision thus rejected the argument made in the previous case and enlarged the scope of economic impact, thereby restoring the position on public interest.

Non-working, infringement and ‘clearing the way’

All of this changed with EISAI Co. Ltd & Anr. v. Satish Reddy & Anr.,4 where the Delhi High Court appears to have adopted a distinguishing position regarding non-working of patents. This case highlighted some key factors that determine the grant of an injunction.

The Plaintiff in this case was a Japanese pharmaceutical company (EISAI) and the inventor of the man-made molecule, Lorcaserin, which helps treating obesity and curbs the urge to eat. This invention, made in 2001, was followed by many years of clinical trials and patient studies. Phase III studies were concluded in 2010, establishing the safety of Lorcaserin. In sum, this man-made molecule was studied and developed for 18 years, and tested on over 20,000 patients, and the approximate costs of developing, conducting trials and commercializing was one billion US dollars.

The Plaintiffs were granted an Indian patent for this man-made molecule, valid for 20 years from 2003 to 2023. This patent, which covered not only the molecule, but also all its pharmaceutically acceptable salts, solvates or hydrates, remained undisturbed for over 10 years.

The Defendants sought manufacturing approval for their own drug, Lorcaserin Hydrochloride (LH) and Lorcaserin Hydrochloride Hemihydrate (LHH), neither of which can be manufactured without Lorcaserin. The Defendants argued that the suit patent had not been worked in India, and the Japanese company was misusing its monopoly by not making it available to patients in India, thus causing harm to the public.

The Defendants also argued that non-working of the patent was detrimental to the Indian public since Lorcaserin is used in the treatment of obesity, which can be a life-threatening illness. However, the Delhi High Court rejected this argument, and said that non-working of the patent does not take away the rights of a patentee under Section 48 of the Act.

In the earlier case of Novartis Ag v. Cipla Ltd,5 a similar question had arisen with respect to the rights of a patentee. The Delhi High Court had then held that merely because a patent is not worked in India, it cannot take away the rights of the patentee, which includes interim relief by an injunction. It was also held that “working” in India can also include importation of the product to India.

The decision in EISAI Co. Ltd & Anr. v. Satish Reddy & Anr.,6 is in contrast with the existing position on non-working of patents as illustrated in the earlier part of this note, and the Court granted an injunction and forbade the Defendants from manufacturing their drugs.

Two factors that the Court relied on in reaching its conclusion are as follows:

(i) The Defendant’s products had not been launched, thereby not causing any economic effect or market hindrance. They had merely obtained marketing approval, but they had not begun to sell their products.

(ii) The Defendants should have “cleared the way” before applying for marketing approval by seeking compulsory licensing in accordance with Sections 83 and 84 of the Act.

Conclusion

The case of EISAI Co. Ltd & Anr. v. Satish Reddy & Anr.7 poses interesting questions about non-working patents in India. Arguably, “clearing the way” may not always be feasible in cases where a suit patent is not worked in the country. If that were required, then it would lead to a situation of acknowledging that there is wilful infringement of the suit invention.

If a defendant in a patent infringement suit is required to clear the way before they manufacture their product, that would amount to an admission on their part to infringing the suit patent. This is because if the defendant is required to seek compulsory licensing before applying for their marketing approval, this indicates that they are aware that the suit patent is being infringed by their product. Therefore, such a requirement for “clearing the way” would be a double-edged sword in the patent world.

Furthermore, this can give the suit patentee excessive rights in terms of misuse of their protection by barring any third party to make their invention available to the public. This can be detrimental to the public because the suit patentee enjoys its monopoly at the cost of benefits to the Indian public.

Future interpretations of this judgement by courts should hopefully help establish more clearly the exact position on the (new) additional requirement of “clearing the way” in the context of non-working and interim injunctions.