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Cipla Ltd. V. Novartis AG & Anr, 2017 (70) PTC 80 (Del)

In this landmark judgement the Division Bench of the Delhi High Court upheld the order of a single judge restricting Indian pharmaceutical company Cipla Ltd (hereinafter referred as Cipla)  from selling pharmaceutical products containing INDACATEROL, a respiratory drug which was patented by Novartis AG (hereinafter referred as Novartis). This drug was used to treat chronic obstructive pulmonary disease (COPD) and was sold in India under the brand name ONBREZ. Novartis manufactured this drug in Switzerland and was sold in India by Lupin. Brief facts of the case are as follows:

  1. Indacaterol’, a bronchodilator drug approved for the treatment of COPD is protected under a patent (Patent No. IN 222346) held by Novartis.
  2. In November 2014, Cipla had launched a cheaper generic version of this drug under the brand name ‘UNIBREZ’.
  3. Cipla had priced its drug at Rs 130 per pack as compared to Rs 677 for Onbrez by Novartis (about 1/5th of the price)
  4. After this, Novartis filed a patent infringement suit before Delhi High Court seeking permanent injunction restraining Cipla from infringing its patent over Indacaterol along with an application of interim injunction.
  5. On 9 Jan 2015, the Single Judge of Delhi High Court granted temporary injunction restraining Cipla from selling its generic version.
  6. However, the said injunction was granted only until a determination of compulsory license application if filed by Cipla.
  7. Further if no application is filed the interim injunction would continue until the final disposal of the patent infringement suit.
  8. After this, on appeal Cipla approached the Division Bench of the Delhi High Court

Issues

The main issues before the Hon’ble Court were:

  1. Whether the interim injunction granted to Cipla was valid?
  2. Whether Novartis’s patent ‘Indacaterol’ (Patent No. IN 222346) is valid?
  3. Whether Cipla’s manufacture and sale of ‘Indacaterol’ (under brand name ‘Unibrez’) infringe the said patent (Patent No. IN 222346)?

Arguments

  1. By Plaintiff i.e., Cipla
  2. They argued that Novartis’s patent must be revoked under Section 92(3) and Section 66 of the Patents Act, 1970 alleging that COPD has reached ‘epidemic’ proportions and Novartis’s product Onbrez has less availability.
  3. They contended that the general principles regarding working of patented inventions stipulated in Section 83 of the Indian Patent Act would govern and sit over the right of patentees provided by Section 48 of the Act.
  4. Cipla contended that the generic version is cheaper and available at 1/5th price of Onbrez. They further alleged that Novartis was importing Onbrez at a lower quantity and a very high price.
  5. They argued that public interest is an important aspect while considering the grant of injunction. Therefore, the patented product must be available at a reasonably affordable price.

 By Defendant i.e., Novartis

  1. They argued that it is not essential that the patent must be worked by manufacturing the patent product in India. They further said that they have fulfilled the requirements of patients in need and have supplied the drug according to the demand.
  2. Right of patentees under Section 48 was in no manner reduced by the provisions of Section 83. This section is not in respect of the rights of the patentees. Therefore, the element of public interest, which is sought to be introduced by Cipla through the route of Section 83 of the said Act, would not, in any way, impinge upon the rights of the patentees.
  3. They contended that there is a huge amount of financial investment in the research and development of the patented drug ‘Indacaterol’.
  4. Further they stated that Cipla was able to sell its drug at a little cheaper price as it has not invested in the research and development of the drug which depletes the efficacy and safety of the drug.

 Judgement

Court relying on various judgements held that:

“On 9 March 2017, the Hon’ble Delhi High Court upheld the decision of Single Judge and rejected Cipla’s appeal and held that Novartis had established the prima facie validity of its patent and Cipla had not been able to make a credible challenge to it. Therefore, the submission of invalidity of patent was set aside and it further held that Novartis is entitled to an injunction as per Section 48 of the Patents Act, 1970. The Court further held that it is not necessary for a patent to manufacture in India. Even imports will fulfill the purpose. It was held that all the considerations under Section 83 are directed towards the authorities, to exercise power under the said Act which also includes the power of compulsory licenses under Section 84. Hence the general principles under Section 83 of the Patents Act, 1970 don’t curtail to the rights of patentee under Section 48 of this Act. Lastly on the question of public interest it was held that Cipla was unable to prove that public interest would be disserved by the grant of an injunction. The Court, therefore, refused to interfere with the Single Judge’s grant of injunction and dismissed Cipla’s appeal.”

This judgement is well reasoned and reflects a balanced approach in cases of patent infringement and compulsory licensing. It was pointed out by the Court that the ground of compulsory license is no defense in patent infringement suits where the patent is prime facie valid. Hence, such patents must be protected at all costs. 

By: Runjhun Sharma, School of Law, Mody University

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Technology Transfer: Meaning, Types and Steps

Innovation and growth have always been synonymous to each other, ultimately leading to development. Business ecosystems are largely dependent on these innovations and diffusion of technology plays a crucial role in shaping the future of these organizations. The term ‘technology transfer’ indicates the movement of knowledge, skills, know-hows and other valuable assets of the organization which is driven by profit. The concept of technology transfer is age old and has been rightly referred by Mansfield as, “One of the fundamental processes that influence the economic performance of nations and firms is technology transfer”.

Economists have long recognized that transfer of technology is at the heart of process of economic growth, and that the progress of both developed and developing countries depends on the extent and efficiency of such transfers. In recent years, economists have also come to realize (or rediscover) the important effects of international technology transfer on the size and patterns of world trade.

Meaning of Technology Transfer

The process of disseminating knowledge, skills and other know-how that manifests in the form of technology from its owner (individual or an organization) to another person or organization is known as technology transfer. It is also popularly known as Transfer of Technology. Various stakeholders amongst whom technology transfer takes place includes universities, business organizations, research and innovation societies and others. Such transfer takes place with the motive to share skills, knowledge, technologies, methods of manufacturing and other related profit motives. The transfer is further done with an intention to provide improved accessibility to a wide range of users who can then further develop and exploit the technology to develop new products, processes, applications, materials or services.

Types of Technology Transfer

Technology transfer can be broadly classified into vertical and horizontal technology transfer.

  1. Vertical Technology Transfer- This chain of transfer includes basic research to applied research, applied research to development and from development to production. It is also known as internal technology transfer. This type of transfer is mostly carried out between research associations, universities, and governments, among others.
  2. Horizontal Technology Transfer- When technology which has already been put in place or use within one organization is further transferred and used in another place, the transfer is known as horizontal technology transfer. It is also known as external technology transfer. This type of transfer takes place between private companies, small and large business organizations, among others.

Methods of Technology Transfer

Technology transfer can take place using the following instruments.

  1. Licensing- An agreement between the owner of the technology (Licensor) and the receiver (Licensee) which gives the right to use the technology developed or owned by the transferring individual or company for a specified time period is known as licensing. The two broad categories of licensing include the one which grants exclusive rights to use the technology and another which grants non-exclusive rights wherein the owner reserves the right to further transfer the technology to other company apart from the receiver. It may also include the right to sub-license, permitting the licensee to grant someone else the right to use the technology.
  2. Joint Venture Agreement- The company executes a joint venture agreement with respect to technology transfer for a particular business with a vision to incorporate long-term cooperation between the parties, motivation of all participants in the successful transfer and to incur lower costs as compared to working independently.
  3. Franchising- It is one of the most preferred methods of transferring technology. The companies generally transfer technical know-how or skill involved under this type of agreement.
  4. Original Equipment Manufacturer- It is a kind of sub-contracting agreement wherein a foreign company transfers a relevant portion of its technologies and a local company manufactures according to the specifications in the agreement. Such agreement enables local companies and firms to absorb technologies and restructure their production mechanism. 
  1. Buy-Back Contracts- It is a form of agreement between stakeholders from developing countries and large foreign companies, wherein a foreign company supplies industrial equipment in exchange for profits derived from the sale of raw materials or goods produced. This kind of technology transfer is often used in the construction of new plants and other related business.

It is interesting to note that a considerable amount of knowledge and technology exists today that enables the development of approaches and can effectively plan and implement business processes. What needs to see the light of day is a well-funded and potent mechanism for executing technology transfer between the stakeholders in order to ensure uninterrupted economic advancement.

By Shreya Pandey

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Mylan Laboratories v. Union of India, {2019 (80) PTC 374 (Del)}

Delhi High Court in its recent judgement opined that the “doctrine of necessity” can be invoked to hear urgent matters under IP laws. This case deals with the writ petition filed by Mylan Laboratories (hereinafter referred as Mylan) asking for a stay on the order passed by Deputy Controller of Patents and Design against them. Mylan has to approach the Delhi HC due to the vacant seats of appropriate officers at the Intellectual Property Appellate Board (IPAB) and hence Mylan challenged that the previous order passed against it cannot be heard. Brief facts of the case are as follows:

  1. Mylan challenged the order passed by the Deputy Controller of Patents and Designs, dismissing the pre-grant opposition filed by Mylan and granting the patent in respect of ‘Methods of Evaluating Peptide Mixtures’ to the respondent.
  2. On 17th May 2019 Mylan filed an appeal with the IPAB along with stay application.
  3. Mylan approached the single judge of Delhi High Court for urgent hearing of his stay application as the IPAB was not functioning due to non-availability of Technical Member (Patents) since May 4, 2016.
  4. After this, on 21st May 2019 the Court directed the Deputy Registrar to file a status report regarding the vacancies at IPAB.
  5. On 24th May, 2019, Deputy Registrar submitted a report according to which a total of 3,935 cases are pending before the IPAB across all its benches due to vacancies.
  6. Further as per this report the post of technical member for patents and trademarks have been vacant since May 4, 2016 and December 5, 2018, respectively. Moreover, no technical member for copyright has been appointed till date.

Issues

The core issue involved in this case was whether the Chairman of IPAB can hear matters in the absence of a technical member.

Arguments

  1. By Plaintiff i.e., Mylan
  2. Mylan contended that the available technical member i.e., of plant varieties protection should hear pending patent matters along with the Chairman of IPAB.
  3. They argued that as per Section 115 of the Patents Act, 1970 a scientific advisor should be appointed to adjudicate pending disputes.
  4. They contended that presence of a technical member is necessary to dispose of matters as per Section 116 of the Patents Act, 1970 which deals with the requirement and appointment of a technical member.
  5. They also contended that the Chairman should hold the office till his successor is appointed by the government.
  6. They further argued that the doctrine of necessity must be invoked to hear urgent matters and the orders passed should not suffer invalidity due to lack of quoram.

 

  1. By Union of India
  2. The Chairman isn’t empowered to hear appeals alone, with technical member who is qualified under Section 116(2) of Patents Act.
  3. They contended that appointment of technical member has been initiated hence; there is no need for interim measures.

In this case the court had appointed amicus curiae to put forth its submissions as to the status of the cases pending before the IPAB and provide its suggestions.

      Submission by Amicus Curiae

  1. It suggests that for filling up of vacancies on a fast track basis, the Trade Marks Act should be amended to allow single-member benches along with division benches.
  2. It also suggested the appointment of Ad-hoc members to fill in vacancies to avoid pendency, which is a suitable solution to resolve the pending cases.

Judgement

Court relying on various judgements held that:

“On 8th July 2019 the Hon’ble Delhi High Court ordered the Chairman, IPAB and the technical member of the plant varieties protection to hear the stay application filed by Mylan and to dispose it off within six weeks. The court further clarified that the Chairman, IPAB and Technical Member are at the liberty to hear urgent matters under the IP Laws i.e., Trade Marks, Patents and Copyright. The single judge of Delhi High Court invoked the doctrine of necessity. It held that the legislative intent is of the continuity of the IPAB and not its cessation because of a vacancy in its technical membership. It further said that the orders passed would not suffer invalidity on the ground of lack of quorum. The Chairman, IPAB is at liberty to proceed with hearing an urgent matter, even in the absence of a Technical Member or he can take the opinion of a scientific expert as has been notified under section 115 of the Patents Act.”

This is a surprising decision given by the Delhi High Court on several grounds. The doctrine of necessity, which the Court applied in this case, is an exception to the rule of “Official Bias”. The legislative intent is not only that of adjudication, but that of correct adjudication supported by the necessary expertise. The provisions of all the intellectual property laws very clearly mandate the requirement of a Technical Member for the IPAB. The legislative intent here is that of the need for technical expertise and efficient adjudication. Ideally, the Court should have directed the executive machinery to appoint the requisite technical members immediately, instead of directly stepping into the shoes of the executive.

By: Runjhun Sharma, School of Law, Mody University

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Bristol-Myers Squibb Holdings & Ors. V. Natco Pharma, (2020) 266 DLT 724

In the present case, Delhi High Court passed an order holding that the discretionary reliefs provided under Section 34 and Section 38 of the Specific Relief Act 1963 are not applicable in patent disputes. Bristol-Myers Squibb Holdings Ireland Unlimited Company (hereinafter referred as BMS) instituted a suit for patent infringement and sought permanent injunction against Natco Pharma (hereinafter referred as Natco). Brief facts of the case are:

  1. Two Indian patents bearing numbers IN 243917 and IN 247381 containing the Markush structure and the specific compound APIXABAN respectively were the basis of conflict in this case.
  2. Natco Pharma was planning to launch a generic version of Apixaban under the probable brand name “Apigat”.
  3. BMS sought for permanent injunction against Natco for APIXABAN (Patent No. IN 247381), valid till Sep, 2022, before the Delhi High Court. “Apixaban” used in the prevention and treatment of thromboembolic diseases.
  4. In June 2019, Natco on the other hand had filed a suit under Section 34 of Specific Relief Act, 1963, in the District Civil Court, Hyderabad against BMS seeking a declaration that APIXABAN is covered by a senior patent (Patent No. IN 243917) but not claimed therein, and hence open for public use.
  5. Before Delhi High Court BMS disclosed that they were also the owner of the senior patent which was permitted with a Markush claim encompassing trillions of compounds inter alia also generically covering APIXABAN. They also believed that the manufacture of APIXABAN by Natco also infringed the senior patent.
  6. Natco filed an application under Section 10 of CPC, 1908 seeking a stay on the ground of pendency of the prior instituted Hyderabad suit. They also wanted to seek a proclamation of non-violence under Section 105 and groundless threats under Section 106 of the Patents Act, 1970.

Issues

The main issues before the Hon’ble Court were:

  1. Whether the proceedings in an infringement suit are liable to be stayed under Section 10 of the Code of Civil Procedure (CPC) owing to a declaratory suit previously filed by the other party in a different civil court?
  2. Whether the reliefs provided under Sections 34 and 38 of the Specific Relief Act 1963 are applicable in a patent infringement?

Arguments

  1. By Plaintiff i.e., BMS
  2. BMS contended that the senior patent (Patent No. IN 243917) contains a Markush structure which could result in millions of compounds. It has a wide coverage but doesn’t specifically disclose Apixaban. Therefore, Apixaban is not the subject matter of protection in Patent IN 243917.
  3. They argued that this infringement suit and the declaration suit in Hyderabad are not of the same subject matter and hence, Section 10 of CPC is not valid. This patent infringement is about IN 243381 and not the senior patent IN 243917.
  4. Further they contended that Hyderabad suit has been filed under Section 105 of the Patents Act, 1970 but the requirement under the said provision have not been fulfilled by Natco.

By Defendant i.e., Natco

  1. They argued that the patent held by BMS (Patent No. IN 243917) covers ‘Apixaban’ but doesn’t specifically disclose it in the claims and thereby surrenders to the public.
  2. They further argued that BMS is trying to secure monopoly by ever greening their patent. They contended that the senior patent claims ‘Apixaban’.
  3. They contended that the Hyderabad suit was instituted under Section 34 of the Specific Relief Act, 1963.
  4. They contended that since the Hyderabad suit was instituted prior to the suit by BMS, the suit before the Delhi High Court was liable to be stayed until the proceedings in the Hyderabad suit were concluded.

Judgement

Court relying on various judgements held that:

“On 23rd Jan 2020, the Hon’ble Delhi High Court observed that the patent related affairs were subject to Patents Act, Thus the defendant could not seek declaration of non-infringement under Specific Relief Act, 1983. The court considered the non-obstante clause in Section 105 of the Patents Act which specifically excludes Section 34 of SRA, 1983. The Court also observed that the Defendant in the Hyderabad Suit was effectually questioning the validity of the senior patent which cannot be adjudicated by a Civil Court under the scheme of the Patents Act. Furthermore, the Hyderabad Civil Court was not a competent court to grant reliefs sought in the Delhi Suit as well as the Hyderabad Suit, which is one of the compulsory pre-requisites for entertaining an application for stay of a subsequent suit under Section 10 of The Code of Civil Procedure (CPC) Therefore, in the light of the following observation the Court dismissed the application of Natco under Section 10 of CPC for a stay of the Delhi suit, and relegated the matter to trial.”

This judgement simplifies the legal position that any issue with regard to patents is to be agitated within the contours of the Patent Act and not beyond. By the way of clever drafting one cannot defeat or delay the valuable rights of patent owners.

By: Runjhun Sharma, School of Law, Mody University

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Technology Licensing: Pros and Cons

Technology Licensing is a contractual arrangement in which the licensor’s Intellectual Property (IP) such as, patents, trademarks, service marks, copyrights, trade secrets, or other intellectual property may be transferred to a licensee for a specified period of time. A Licensing Agreement involves two main parties, namely the licensor (party that owns concerned IP) and a licensee (party that enters into contract to use IP). The consideration in the form of royalty is one of the important clauses to be finalised before executing the license agreement between the parties involved.

Technology Licensing is an essential tool for companies that are smaller in size, or do not have the R&D resources that their competitors possess, to stay relevant in a particular industry. In such cases, licensing helps them to close the gap with their competitors by allowing them to gain access to the resources and innovations that they need[1].

Difference between License and Assignment

Licensing and Assignment are different modes of technology transfer. Assignment is when the assets or IP is permanently transferred by the owner (i.e. assignor) to the buyer of the IP (i.e. assignee), by way of sale or transfer. This results in a one-time payment of consideration or a lump sum payment of royalty for the IP, by the assignee. The assignor transfers all rights, including title over the asset, to the assignee.

Licensing on the other hand involves the owner of the intellectual property (i.e. licensor) permitting the a third party including company or an organisation (i.e. licensee) to use the IP as per the terms of a licensing agreement, while maintaining ownership, resulting in continued earnings in the form of a licensing fee.

Technology Licensing can be done in the following different ways:

  1. Licensing
  2. Assignment
  3. Joint venture (JV)

As mentioned earlier, licensing is an act of providing authorization by the licensor to a third party to use the licensed asset, as per the terms and conditions of the licensing agreement. A License Agreement is important as it enables the patent holder to provide the required permissions for an entity with the resources to bring his ideas to fruition.

An assignment is when the licensor transfers wholly, or in part, their right, title and interest in their technology.

In a JV, a new JV Company is formed and the requisite assets such as the patented technology are either licensed or transferred to this JV. Both companies contribute assets to such a venture, and the company giving the technology is both licensor and licensee in this case.

The licensor agrees to transfer his rights of the patented intellectual property that they developed, for a duration determined by the license agreement. During this time, the licensee is entitled to benefits and has rights to the patent’s interest. A patent license must be in writing to be legitimate, according to Section 68 of the Patent Act[2] .  It was in the case of PVR Pictures Ltd. v. Studio 18[3], that the Delhi HC held that term sheet agreement shall not amount to a license agreement. A licence agreement can aid in the development of a mutually beneficial commercial partnership. Unlike, when a patent is sold or transferred to another party, the licensor retains ownership of the patented innovation.

Technology Licensing enables an organisation or any other party to utilise some technology that may otherwise be protected by intellectual property safeguards, such as a patent, copyright, etc.

Why should one license? There are notable benefits of doing so. Firstly, in the case of licensing, there is very little requirement of coordination between the two parties, and is similar to a commercial transaction involving a buyer and a seller. Secondly, the licensees can determine what technologies they want to license before paying for it, saving them money that would have otherwise gone into R&D. Thirdly, the transaction is instantaneous, which gives the company control over the technology much faster than if they were to develop it in-house.

In a Technology Transfer, the assets that get transferred include know how, methods, techniques, products etc, along with registered IP, such as, patent, copyright, design, trademark etc. Payment may be in the form of a lump-sum royalty, a running royalty (depending on volume of production), or a combination of both.

A Technology Transfer (TT) agreement may be:

  • Exclusive
  • Non-exclusive

 Exclusive Licensing: The licensee has an exclusive right to use the IP, as per the terms of the licensing agreement. This agreement is such that even the licensor is not allowed to use the licensed asset for the duration as specified by the license agreement. Exclusive license may be issued on either a territorial basis (for instance, India only) or on a global basis (for the entire world).

Non-Exclusive Licensing: In non-exclusive licensing, the licensor may license out their assets to multiple licensees at the same time. Unlike an exclusive license, all licensees are permitted to use the license as per the terms of the license agreement. The licensors are also free to use the assets that they licensed to others.

There are different kinds of technology licenses. Licenses may be availed to get all the IP rights that are necessary to reproduce, make, use, market, and sell products based on a type of technology (e.g., a license to develop a new software product that is protected copyright or any other form of IP protection). A license may be procured to get the IP rights necessary in order to create and market a product that complies with a certain technical standard or specification.

For example, a group of enterprises have agreed on a technical standard to ensure interoperability of devices and owners of IP essential to practice the standard, pool their IP rights and license it to anyone who wishes to use the standard on reasonable and non-discriminatory terms.

Ericsson and Oppo are two companies who entered into a Global Patent license agreement. This agreement covers a cross licensing agreement covering 2G, 3G and 4G patent portfolios from both the companies. Besides, cross-license, the agreement also includes business cooperation on a number of projects related to 5G such as device testing, customer engagements.

The case of Dunlop India Ltd. v. Forech India Ltd[4] involved a license for making conveyor belts, based on a license agreement between the two parties. In GE Plastics v. Commissioner of Customs, Mumbai[5], a JV with Indian Petrochemicals Corporation Ltd. (IPCL), a technology licensing agreement was in question.

 The following are the pros and cons of Technology Licensing:

Pros:

  • It enables a company to enter a new market very quickly. Additionally, financial and legal risks are minimised when technology licensing is used.
  • Licensing also enables companies to overcome any stringent tax barriers or any other hindrances that would otherwise increase the costs if they opted to develop their own technologies.
  • Licensing can also be used for the acquisition of technology from outside the region through arrangements such as cross-licensing agreements/ grant back clauses.
  • Licensing also is a major tool for enterprises in developing nations, to make use of comparatively lower licensing rates and to make profits without spending significantly on R&D.

Cons:

  • Licensing a technology  to an external company results in the weakening of the licensor’s hold over the technology itself.
  • Licensing a technology also results in lesser profits as compared to directly leveraging the technology oneself.

 Conclusion

Licensing is a useful tool for companies to compete in an effective manner. However, they must be well aware of the pros and cons mentioned above. They must also take special care to use licensing only when they need it, as it may create a recurring dependence on external organisations to develop technologies for them. It may not be an effective strategy, if companies are attempting to differentiate themselves from their competitors in the market space.

In conclusion, if a firm wants to take their rivals head on, and do not have the time or resources to develop their own technology, licensing is the most practical and cost-effective tool they can use to remain competitive.

By: Aditya Datha

Symbiosis Law School, Hyderabad

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[1] Solomon Moreira, When Licensing New Tech Is Better Than Building It In-House, Harvard Business Review- https://hbr.org/2020/06/when-licensing-new-tech-is-better-than-building-it-in-house

[2] Patent Act, 1970

[3] [2009 SCC OnLine Del 1878: (2009) 41 PTC 70]

[4] CS (OS) No. 382/2012, Delhi HC

[5] Final Order No. 388/2004- NB(A)