Mint Reported Irresponsibly

Indian newspaper Mint has recently covered a lose story related to section 107A (b) of the Patents Act, 1970 and to utter surprise was a major irresponsible reporting seen in recent times. Mint reported that section 107A (b) allows local Indian companies to import patented drugs in India by manufacturing in least developing countries such as Bangladesh without any authorization of patent holder. Shocking interpretation! Mint also pointed out that Indian drug makers have rushed to take advantage of this, and several of them have even started working on building manufacturing plants in these countries and further adding that this provision may not be in complete compliance with the international trade rules of WTO and even may violate Indian patent law. But surprisingly what Mint completely missed pointing out is what this section (provision) is all about. It is always important that while reporting on critical issue such as section 107A (b) complete background research should be made. So let’s scrutinize what section 107A (b) really stands for and how wild is the interpretation made by Mint.

Rights & Exemptions

Section 48 of the Patents Act, 1970 gives patentee an exclusive right to prevent third parties, who do not have his consent, from the act of making, using, offering for sale, selling or importing patented product in India. If third party indulges in any of these act, that will amount to infringement of patent right under the Indian patent law. But there are certain instances which though infringing are not considered infringement under the Act. Such instances are often termed as exemptions, which are derived from judiciary-created doctrines (usually US and European judiciary) and section 107A covers two of such exemptions. Both these exemptions are result of flexibilities provided under TRIPS agreement (Article 6 and Article 30). Clause (a) of section 107A relates to regulatory exemption famously known as Bolar-type exemption whereas clause (b) relates to parallel importation. Now before discussing section 107A (b) in detailed, let’s discuss two important aspects: (1) Exhaustion of Rights, and (2) Parallel importation.

Exhaustion of Rights

As referred earlier that Patentee has exclusive right to prevent third party from making, selling, offering for sale, selling or importing patented product. According of doctrine of exhaustion, once a patented product has been marketed by the patentee or with his consent, the patentee will exhaust certain rights on the product. Particularly, patentee will exhaust right to prevent the resale, importation or exportation of the patented product that have been placed on the market. In simple words, once a patented product has been marketed by the patentee or with his consent, the patentee cannot prevent third party from resale, importation or exportation of the product. Importantly, exhaustion can further be attributed as international and national exhaustion.

National exhaustion does not allow the patentee to prevent third party from resale and importation of patented products put on the domestic market by the patentee or with his consent. In case of international exhaustion, the patentee rights are exhausted once the product has been sold by the patentee or with his consent in any part of the world. Article 6 of TRIPS Agreement leaves countries free to incorporate the principle of exhaustion of rights. Different countries regulate the applicability of the doctrine of exhaustion in different ways. The concept of exhaustion is critical in the context of parallel importation.

Parallel Importation

Parallel importation is a practice where patented products are imported from another country without the permission of the patentee (or his authorized licensee). The practice of parallel importing occurs because companies often set differential pricing for their products in different markets. Parallel importers usually purchase products in one country at a price which is cheaper than the price at which they are sold in a second country, import the product into the second country, and sell the product in that country at a lower price. This practice of parallel importation is legal if the country in which patented products is imported agree to international exhaustion. However, if the country in which patented products is imported do not agree to international exhaustion and instead follow national exhaustion then such importation of patented products by third party will constitute infringement of patent.

Section 107A (b)

Clause (b) of section 107A allows parallel importation of patented products from other country. According to the provision a person can import patented product from a person who is duly authorized under the law to produce and sell or distribute the product. Person who is duly authorized under the law to produce and sell or distribute include patentee or his authorized licensees and licensed pharmacists/licensed drug retailers. But what is important to remember is that the patented drugs which are imported in India should be manufactured by the patentee or by a person duly authorized by the patentee, not by any generic company manufacturing without the consent of patentee. If patented drug is imported from a generic company, who do not have consent of patentee, then that will constitute infringement under the Indian patent law. However, patentee may still prevent parallel importation by using contractual restriction in distribution channel (often referred as implied license).

Check list of countries having international exhaustion.