Section 107A (b): As Clear as Mirror

Under Indian patent law, a patentee has exclusive right to prevent third parties, who do not have his consent, from the act of making, using, selling, offering to sale or importing patented product in India till patent is valid and enforceable. If third party indulges in any of these act that will constitute an act of infringement and the patentee (or its authorized licensee) has a right to trigger an infringement suit against the third party. But there are certain instances which though constitute infringement but will not be considered as infringement under the Patents Act, 1970 and referred as exemptions. Such instances can also be used as defences in suits for infringement. Section 47 and 107A relates to exemptions provided under the Indian patent law. Section 47 particularly covers (a) research (experimental use) exemption and (b) government use exemption whereas section 107A relates to (a) regulatory (bolar-type) exemption and (b) importation exemption. The exemptions provided in section 107A are result of flexibilities provided under TRIPS Agreement (Article 6 and Article 30). However, herein we are only going to discuss about importation exemption.

Possession to Market

Technically, patent is a legal document (certificate) issued by the government to an applicant for an invention that gives the applicant: (1) a right to prevent unauthorized third party from making the patented invention, (2) a right to prevent unauthorized third party from using the patented invention, (3) a right to prevent unauthorized third party from selling the patented invention, (4) a right to prevent unauthorized third party from offering to sale the patented invention, (5) a right to prevent unauthorized third party from importing the patented invention, and (6) importantly a right to file an infringement suit against the unauthorized third party infringing any of the above right (1) to (5).

In other words, a patent gives an applicant bundle of exclusive rights to control the commercial activity of patented invention. Till the patentee is having patented products in his possession (not placed on the market) all of these rights are intact with the patentee, that is, patentee has sole discretion to commercialize the patented products whenever he want, whosoever he want, wherever he want and whatever price he want. However, when the patented product is first sold or marketed by the patentee (or with his consent) it ceases patentee’s certain exclusive rights on the patented product. In other words, once the patentee has been able to obtain a commercial return from the first sale or placing on the market, the purchaser of patented product is free to use and resell it without further restriction from patentee.

As illustration, consider an anticancer drug Tarceva protected by an Indian patent. Because Roche holds patent rights on that drug, it may prevent others from first-selling the anticancer Tarceva without his consent. If you buy 25 strips of Tarceva tablets from an authorized first-seller, Roche’s right in its patent is ceased, and it cannot prevent you from using the sold tablets, or from giving or re-selling to others. The patentee has lost its right to control further movement of the sold tablets. Your purchase of the Tarceva tablets does not authorize you to begin making your own generic version of Tarceva, or licensing the patent to others. In other words, the first sale does not grant you rights in the patent, but rather extinguishes Roche’s exclusive right to prevent further movement of those particular sold tablets. This phenomenon is referred as doctrine of exhaustion which can further be attributed as international and national exhaustion.

If a country recognizes doctrine of national exhaustion, a patentee’s right to prevent movement of a patented product is only extinguished by the first sale or marketing of a patented product within the territory of that country. In other words, national exhaustion does not allow the patentee to prevent third party from using and reselling patented products already sold or put on the domestic market by the patentee or with his consent. If a country recognizes a doctrine of international exhaustion, a patentee’s right to prevent movement of patented product is extinguished when a patented product is first sold or marketed anywhere in the world. Notably, the WTO member countries are free to incorporate doctrine of exhaustion under Article 6 of the TRIPS Agreement. The policy of exhaustion significantly affects the flow of patented products across borders. Under doctrine of international exhaustion, patented products flow across borders after have been first sold or placed on the market by the patentee or with his consent anywhere in the world. Under doctrine of national exhaustion, the movement of patented products across borders may be blocked by patentees.

As illustration, United States adopted doctrine of national exhaustion whereas Canada and India adopted international exhaustion. Consider an antiretroviral drug Selzentry protected by patent in US, Canada as well as India. Because Pfizer holds patent rights on that drug, it may prevent others from first-selling and importing the antiretroviral Selzentry without his consent. Pfizer sells Selzentry tablets to an Indian pharmacy and this exhausts Pfizer’s right to prevent use or resell of sold tablets. Under international exhaustion, a Canadian company Apotex may import Selzentry tablets from that Indian pharmacy without the consent of Pfizer having Canadian patent and resell in Canada at lower price. But under national exhaustion, a US company Barr cannot import Selzentry tablets from Indian pharmacy and resell in US at lower price because Pfizer’s patent rights within the US are not exhausted by virtue of sales outside the US. This phenomenon of importing patented drugs from across the borders after have been first sold or placed on the market by the patentee is referred as parallel importation.

If an importing country agrees to international exhaustion, a third party may import a product patented in importing country from anywhere in the world where the product is first sold or marketed by a patentee or with his consent. Thus, the concept of exhaustion is critical in the context of parallel importation and possibility of importation can only be there when a (importing) country agrees to doctrine of international exhaustion.

Section 107A (b): In Compliance with Principle of Importation

To be continued …