ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Decoding Local Working Requirement

Natco-Bayer Verdict

Bayer has lost its case challenging the grant of India's first-ever compulsory licence to Natco Pharma to manufacture an affordable generic version of an anti-cancer drug, but the celebratory air has to be tempered. The issue of what constitutes "local working" of a patent in India remains, in general, unsettled. This article looks at the legality of local working requirements under the Agreement on Trade-related Aspects of Intellectual Property Rights. It also analyses the interpretations of "working" by the Controller General of Patents, Designs and Trademarks, the Intellectual Property Appellate Board, and the Bombay High Court, and considers their broader implications.

In a significant order, the Supreme Court of India in December 2014 dismissed the Special Leave Petition (SLP) by Bayer Corporation against the Bombay High Court decision upholding the grant of a compulsory licence to Natco Pharma for manufacturing an affordable generic version of the anti-cancer drug, sorafenib tosylate. Bayer has an Indian patent for this drug and sells it under the trade name Nexavar (Bayer Corporation v Union of India and Others 2014a). The order wound up a significant legal dispute, which was subject to remarkable political and trade pressure from the developed countries, particularly the United States (US) and the European Union (EU).

Bayer fought a hard legal battle before the Controller General of Patents, Designs and Trademarks, the Intellectual Property Appellate Board (IPAB), the Bombay High Court, and the Supreme Court against the first-ever compulsory licence issued in India after the introduction of the World Trade Organization (WTO) Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) in 1995. The Natco–Bayer dispute over the compulsory licence has wide-ranging implications for many interest groups around the world—patients, pharmaceutical companies, health activists, and even governments. While the IPAB and the Bombay High Court upheld the decision of the controller on two basic issues, they adopted different interpretations of the core issue in the dispute—the local working requirement. The local working requirement is linked to the transfer and dissemination of technology in the host country, resulting in reducing the dependence on other countries, as well as enabling it to compete with other countries in globalised trade, which is mainly technology-driven. In this article, we analyse this contentious issue and its implications for the transfer and dissemination of technology to India in the future.

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