The Madras High Court\u2019s decision in Novartis AG v. Venkata Narayana Active Ingredients<\/em> offers the first post-trial examination of the evidence required to invoke Section 107A for exports to get regulatory approval. While the Court\u2019s attempt to bring greater evidentiary clarity to the Bolar exemption is welcome, Arnav Kaman argues that its approach risks placing burdens on manufacturers that may undermine the provision\u2019s underlying purpose. Arnav is a 5th-year law student from Rajiv Gandhi National University of Law, Punjab. He\u2019s interested in Narratives and the Law.<\/p>\n By Arnav Kaman <\/em><\/p>\n In a first of its kind, the Madras High Court has delivered a post-trial judgement in Novartis Ag. v Venkata Narayana Active Ingredients Pvt. Ltd.<\/a><\/em>, expounding on the evidence required for the fulfilment of Section 107A in the case of exporting to a third party. Section 107A (a)<\/a> of the Patents Act, 1970 is India\u2019s Bolar Provision, allowing unauthorized manufacture, use or sale of a patented invention during the patent term, for the purposes of regulatory approval. (Find all of our previous coverage of the Bolar Provision here<\/a>).<\/p>\n Since the provision was first interpreted by the courts in 2014 (here<\/a>), Section 107A has become a minefield for interpretative contests, utilized by generic pharmaceutical companies against patent holders. In the Bayer<\/em> series of cases (here<\/a>, here<\/a>, and here<\/a>), such a contest broke out over whether section 107A covered the export<\/em> of the patented invention or not. Culminating in Bayer v. UOI<\/a><\/em>, the Delhi High Court held that export was covered under the scope of section 107A, considering the provision explicitly made out the case for the regulatory approval \u201cin a country other than India\u201d. The only caveat being that the export must be reasonably related to the development\u00a0and obtainment of regulatory approval.<\/p>\n In a field littered with interim orders and prima facie evidence, it is a breath of fresh air for provisions to be interpreted in light of a full trial and appreciation of evidence. While the Madras High Courts\u2019 attempt at clarifying and expanding the evidentiary standard is appreciable, I argue that the expansions and observations made in the judgement may come at odds with the very purpose of Section 107A.<\/p>\n The suit revolved around the drug Vildagliptin, which is used to treat type-2 diabetes; the Indian patent was held by Novartis from 1999 to 2019. In fact, this particular suit is not the first time these parties have faced each other regarding this particular drug. In 2015, the plaintiff had found the defendant selling Vildagliptin and had filed for an injunction, the suit was ultimately decreed<\/a> on the basis of an undertaking that the defendants would not manufacture, sell, export or import or offer Vildagliptin for sale.<\/p>\n The plaintiffs filed this particular suit in 2018 after discovering the defendants had been exporting Vildagliptin from 2016-2017 to Egyptian importers. The defendants argued the export was covered under Section 107A, as it was used for regulatory approval purposes, while the plaintiffs argued they had been exported for commercial sale in Egypt. Since the case went to trial, a large amount of evidence was collected and appreciated, never before done in any case of Section 107A before.<\/p>\n Bayer<\/em> had laid down ten points that the court must consider when examining evidence for the fulfilment of the provision but did not leave a methodology or a framework. Eashan Ghosh and Afzal B. Khan, in their paper<\/a>, criticized Bayer<\/em> for failing to lay down any protocol when it was well within their scope to do so, calling it \u201ca staggering oversight\u201d. It is this lacuna the Madras High Court attempts to remedy. Relying on the decision of Boehringer Ingelheim v. Sicor<\/a><\/em> from the Italian Supreme Court of Cassation, where exporting was held covered under the Bolar Exemption but with high and strict evidentiary scrutiny, the Madras High Court established the following non-exhaustive checklist of documents that defendants must provide:<\/p>\n (a) Evidence that regulatory approval was sought for in relation to the patented product in India or outside India.<\/p>\n (b) Evidence that the regulator requested for product-related data such as pre-clinical or clinical trial data relating to the patented product in response to the request for approval.<\/p>\n (c) If the person requesting regulatory approval is not the manufacturer of the API or formulation, evidence of request for supply from the person seeking regulatory approval to the manufacturer or seller along with supporting documents as per (a) and (b) above.<\/p>\n (d) Evidence that the impugned use of the patented product is reasonably related to the request for regulatory approval.<\/p>\n This particular case of a domestic manufacturer exporting to a third party applying for regulatory approvals falls under c) and it is due to the defendant\u2019s failure to meet these burdens of evidence that the court held their actions outside the scope of 107A<\/p>\n While considering the evidence examined by the Court, I will be separating it into two separate buckets. The first bucket consists of evidence existing before the sale (ex-ante) and the second consists of the evidence that arose after the sale (ex-post).<\/p>\n Before the Sale<\/em><\/strong>: Only a few of the certificates and purchase orders mention the purpose of the sale being \u201cfor research and developmental purposes\u201d. The authority of the signatories of certain certificates submitted by the importers has also been brought up for scrutiny. Furthermore, none of the documents are corroborated by documents by the Egyptian regulatory authorities themselves. In a cross examination the defendants admit that even though buyers request products for trial purposes, the defendants themselves do not pursue due diligence. The last relevant piece of evidence is the undertaking from 2015 to not manufacture or sell the suit patent.<\/p>\n After the Sale:<\/em><\/strong> In the eyes of the Court, the nail in the coffin is the evidence put forth that the Egyptians importers happened to be selling products containing Vildagliptin for commercial sale in 2018. The Court goes on to make the assumption that this commercial sale implies that the Egyptian importers did not require regulatory approval and must have imported the product from India for immediate sale. It is important to note that there is nothing at all to prove that the Egyptian importers have positively used the same imported quantity for commercial sale or that they had not imported from elsewhere.<\/p>\n In my humble opinion, the Court has erred in even considering the second bucket of ex-post evidence while making their final decision. Setting aside the massive conjecture made by the Court that commercial sale proves approval was never needed, the actual end-use<\/em> in the context of Section 107A is only of secondary importance. Section 107A is concerned with the manufacturing, use, and sale of the product, in the context of the patent\u2019s territorial rights here, rather than the application in Egypt. Plaintiffs may argue that this evidence is relevant insofar as it proves the mala fides<\/em> intent, but one cannot imagine that the court wishes to impose the duty of pursuing due diligence for the downstream use of their products onto the shoulders of the defendants. Even if the third party initially claimed regulatory purposes, they may ultimately use the exported stock for commercial sale either fully or partly, which is completely outside of the defendant\u2019s control.<\/p>\n In fact, the decision of Boehringer<\/em> from the Italian Court is instructive, insofar as it explicitly states that the inquiry for the Bolar Provision must be ab origine (from the start) and ex ante (before the event): \u201chowever, this broad interpretation of the exception presupposes, in order for it to be affirmed that the Bolar purpose connotes the activity of the producer of the active ingredient ab origine and ex ante,<\/strong>\u201d.<\/em> The US Supreme Court in Merck KGaA v. Integra Lifesciences I Ltd.<\/a><\/em> has held that the Bolar Exemption covers the use of patented compounds even when they are not used for the ultimate submission to the regulatory authority. The Bolar provision protects manufacturers as long as they had a reasonable basis to believe that the sale of their product would be used for obtaining approval. The Bolar characterization must be assessed ex-ante, based on the product\u2019s proposed use<\/em> and not the eventual end use.<\/em><\/p>\n If Novartis holds concern for the infringement of their patent rights in Egypt, then they are free to pursue such remedies in the Egyptian courts rather than India. For future section 107A inquiries, courts must be careful to not give weight to ex-post<\/em> evidence, and only pursue a limited ex-ante<\/em> inquiry into whether the defendants had a reasonable basis to believe that the exported product would be used solely for research and regulatory purposes.<\/p>\n As for the first bucket of evidence, ex-ante<\/em> the sale, past decisions of 107A first characterized by Bayer<\/em>, mere assertion that the purpose of export was for regulatory approval, accompanied by a communication from the buyer, was enough to avail 107A. This can be seen in Merck Sharp v. SMS Pharmaceuticals<\/a><\/em> and Chugai Seiyaku v. Hetero Labs<\/a><\/em>.<\/p>\n The Madras High Court chooses to go above and beyond, relying heavily on Boehringer<\/em> to establish their checklist and finds that it is the absence of three pieces of documentary evidence that dooms the defendants: First,<\/em> the Egyptian importer\u2019s application for regulatory approval, Second<\/em>, the regulator\u2019s request for clinical trial data and Third<\/em>, the request for supply of the product by the Egyptian importer to the (Indian) Exporter. Only when all of these documents are submitted along with any other evidence to prove the purpose can Section 107A be fulfilled.<\/p>\n One might argue these documents are necessary to reduce the abuse of the section, but they patently do not account for some practical scenarios. \u00a0It is possible, in fact more probable, that a third party might approach the regulator only after collecting pre-clinical trial data of their product<\/em>. The collecting of this data would require the API before they ever even apply for regulatory authority, but this checklist would restrict that ability. This would not only be a problem for exports but also for domestic users of section 107A. Such a narrow interpretation would mean that a provision meant to reduce delay in launching the product would only extend the regulatory process.<\/em><\/p>\n I do not argue that the court should willingly ignore the lack of bona fides, but the due diligence imparted onto defendants must be reasonably within their ability. Boehringer<\/em> is instructive here, once more, as it recommends that the limited use of sale must be made clear in negotiations, and also be contractually designated<\/em> that the product be used solely for regulatory activities. Penalty clauses may also be added into the contract in case of a violation. These steps would demonstrate the defendant\u2019s due diligence in fulfilling section 107A. The Madras High Court has urged\u00a0the Central Government to take steps to establish an exhaustive list of documentary evidence and requirements for reliance on the provision. For the sake of preserving Section 107A\u2019s purpose, the government should keep such practical scenarios in mind and not let the burdens of evidence for the Bolar Provision crush the provision itself into smithereens.<\/p>\n \u00a0(I would like to thank Sarthak Sahoo for his insights along with Swaraj and Praharsh for their comments and review of the post)<\/em><\/strong><\/p>\n<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":" The Madras High Court\u2019s decision in Novartis AG v. Venkata Narayana Active Ingredients offers the first post-trial examination of the evidence required to invoke Section 107A for exports to get regulatory approval. While the Court\u2019s attempt to bring greater evidentiary clarity to the Bolar exemption is welcome, Arnav Kaman argues that its approach risks placing […]<\/p>\n","protected":false},"author":1,"featured_media":7028178,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[192059,192060,192061,101517,192062],"tags":[2953,192063,72558,152778],"dealstore":[],"offerexpiration":[],"class_list":["post-7028177","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bolar-provision","category-burden-of-proof","category-madras-high-court","category-patent","category-patents-act","tag-bearing","tag-bolar","tag-burdens","tag-spicyip"],"yoast_head":"\nBearing the Burdens of Bolar<\/strong><\/h3>\n
The Checklists for Section 107A<\/strong><\/h3>\n
The Unbearable Weight of Evidence<\/strong><\/h3>\n
A Limited Inquiry<\/strong><\/h3>\n
A Reasonable Due Diligence<\/strong><\/h3>\n
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