Novartis Ag. v Venkata Narayana Active Ingredients Pvt. Ltd.- Extent of exemption under the Bolar provision- A case study

Deliberating and dissecting the provision of Section 107- A,  the  Madras High Court has delved much deeper  in explaining the Bolar exemptions in a post-trial  judgement in the case of Novartis Ag. v Venkata Narayana Active Ingredients Pvt. Ltd.

The  Court  decreed patent infringement holding that the defendant Venkata Narayana Active Ingredients Pvt. Ltd's manufacture and export of Vildagliptin API used for treating type-2 diabetes infringed Novartis's Indian Patent No. 212815.  

Novartis  filed the suit in 2018 seeking a permanent injunction restraining the defendant from manufacturing, importing, or selling the Vildagliptin alone or in combination with other APIs. Prayer was also made for a mandatory injunction until the expiry of the suit patent for providing details of any supply of Vildagliptin under Section 107 A ;  a decree for delivery up of all stocks of the infringed product; rendition of accounts; and costs of the proceedings.    

Novartis alleged that Venkata Narayana had manufactured and supplied Vildagliptin API to Egyptian entities during the term of the Patent. While the defendant did not dispute exporting the API, they contended that the export was solely for research and development purposes under Section 107A of the Patents Act, 1970. Section 107A, or the Bolar provision, exempts certain acts from constituting infringement.

Besides seeking exemption under Section 107A, the defendant also challenged the validity of Novartis's patent on several grounds, including  non-disclosure under Section 8 of the Patents Act and Vildagliptin being a metabolite falling under Section 3(d). They also alleged that the Patent Office did not examine the application carefully.

Regarding non-compliance under Section 8, the defendant contended that Novartis had not shared the relevant critical information regarding the status of the cases.  

Novartis countered by inviting Court’s attention to a document issued by USPTO clarifying the status of the corresponding applications. Novartis also contended that Section 8 does not warrant prior art disclosure.

Novartis also alleged that in earlier proceedings, the Defendant had acknowledged the validity of Patent No. 212815 and had undertaken not to manufacture, use, sell, import or export Vildagliptin in a manner that infringed the patent. Novartis also brought to the court's attention that earlier proceedings resulted in a consent decree; therefore, Novartis did not press for the award of damages.

Rejecting the defendant’s contention, the Court held that Section 8 had not been contravened.

Novartis countered the defendant's allegation that Vildagliptin, as a metabolite falls under Section 3(d) by arguing that the defendant had not produced any document establishing Vildagliptin as a metabolite.

The Court held in favour of Novartis and rejected this ground in the absence of any evidence establishing Vildagliptin as metabolite. Court also took into consideration the defendant’s own expert’s acceptance that Vildagliptin was not a metabolite. The Madras High Court held that the defendant is estopped from reopening the validity of the patent in the present proceedings.

Besides validity, the term of the patent was also heavily discussed to establish infringement. Allegation of infringement was made on the basis of exports made by defendants  to importers in Egypt between 2016-2017. Countering the defendant’s allegation that the patent term ended in December 2018, Novartis established that the patent term extends until December 2019. Thus, the defendant's export of Vildagliptin during the patent's life constituted infringement.  Court ruled in Novartis's favour.

The central issue before the Court was whether the defendant's manufacture and export of Vildagliptin qualified for the statutory exception under Section 107A.

Before deciding on this issue, the Court delved deeper and analysed the genesis of the provision, the explanation of the joint parliamentary committee reports, the legislative intent behind incorporating this provision in the Patents Act, the Bolar provision, and global precedents followed by major international jurisdictions.  Court also took into consideration, the findings of the Delhi High  Court on Section 107A in Bayer’s case.  

The Court identified regulatory requirement as the sole purpose and use of the patented product  relating  to the such regulatory requirement as two prerequisites to avail exemption under Section 107A. 

Court also deliberated on who bears the onus to plead and establish these two prerequisites and the nature of evidence required to satisfy Section 107A's requirements.  

While disagreeing with the Delhi High Court’s observation that the exemption under Section 107A is a special provision and not an exception, the Court referred to the 10 non-exhaustive points for deciding matters under Section 107A from Bayer's case. Additionally , the Court identified four additional categories of documents that need to be provided when seeking exemption under Section 107A . This includes evidence that regulatory approval was sought in India or outside India, that regulator asked for product related clinical or preclinical data , that the impugned use is related to the regulatory approval and if the person seeking such approval is not the manufacture of API, evidence of supply from such manufacturer.

The Court also stressed that the Central Government should frame rules listing the documentary and other requirements for relying on Section 107A to ensure that this provision is legitimately used and not abused to circumvent Section 48.

After examining all documents and evidence filed by both parties, the Court held that while the invoices recorded the sale of vildagliptin for research and development purposes , the purchase order contained no indication that the product is exported for research and development purposes or required to satisfy regulatory requirements. Court observed that the products were undoubtedly being offered for commercial sale.

While deciding on the award of damages, Court directed the Taxing officer to determine the same in accordance with Section 35 of the CPC . Novartis claimed that the value of the supplies was approximately INR 34.95 crore (approximately USD 3.66 million) and sought a decree on that basis.

The Court, however, found that the material on record was insufficient to accurately establish the precise quantity supplied, turnover generated or profits earned by the defendant. The Court directed the defendant to provide a rendition of accounts.

Conclusion

The judgment is significant because, besides laying down important prerequisites and a list of required evidence, the Madras High Court clarified that Section 107A cannot be used as a blanket defence for the commercial export of a patented pharmaceutical API. 

Ranjna Mehta-Dutt  

Partner | Attorney at Law | Patent Attorney

ranjnamehtadutt@iprattorneys.com