Merck Sharp & Dohme Corporation v. Glenmark Pharmaceuticals Ltd., {(2015) 63 PTC 257}

Sep 5, 2016 | Indian Patents Act 1970, IPR & Business

Merck Sharp & Dohme (hereinafter referred as MSD), an American pharmaceutical company and subsidiary of the German company Merck. MSD filed a suit against Glenmark Pharmaceutical Ltd. (hereinafter referred as Glenmark), an Indian Pharmaceutical company for permanent injunction in regards to salts of any form of SITAGLIPTIN, an anti-diabetic drug. Delhi High Court granted the first ever permanent injunction in a patent infringement suit and upheld the validity of the MSD’s patent. This judgement was first-of-its-kind order since the enactment of the Patents Act, 1970.

Brief facts of the case are as follows:

1. MSD’s patent ‘Sitagliptin’ (Patent No. IN 209816) is directed to compounds, which are inhibitors of the dipeptidyl peptidase-IV enzyme (DPP-IV inhibitors) useful in the treatment of diabetes, especially type 2 diabetes.
2. MSD along with its licensee, Sun Pharmaceutical Industries Ltd., (hereinafter referred as Sun Pharma) filed a patent infringement suit against Glenmark in April 2013 for making and marketing generic versions of MSD’s anti-diabetic drug ‘Januvia’(Sitagliptin) and ‘Janumet’ (combination of Sitagliptin and metformin)
3. The molecule ‘Sitagliptin’ was invented by Merck. It claims the base molecule ‘Sitagliptin’ in free base form and also its pharmaceutically accepted salts thereof.
4. On 28^thMarch, 2008 the drug was approved for marketing in India. MSD also granted a license in India to Sun Pharma which sells the drug under the brand name Istavel & Istamet.
5. Glenmark was restrained from manufacturing, selling, or dealing in “Sitagliptin Phosphate Monohydrate” or any salt of ‘Sitalgliptin’. They had launched the generic versions of “Januvia” and “Janumet” under the brand name “Zita” and “Zitamet” respectively.
6. MSD launched “Sitagliptin” in India with a reduced price equivalent to 1/5 price of that was being charged in USA in accordance with the public interest at large.
7. Initially the Single Judge of Delhi High Court disposed of MSD’s application seeking an interim injunction.
8. On appeal, the Division Bench of Delhi High Court reversed this decision and held MSD’s patent to be prima-facie valid and infringed by Glenmark’s products.
9. After that, Glenmark challenged this order before the Supreme Court.

 Issues

The main issues before the Hon’ble Court were:

1. Whether Glenmark’s manufacture and sale of Sitagliptin Phosphate Monohydrate infringe the said patent (Patent No. IN 209816)?
2. Whether MSD’s patent ‘Sitagliptin’ (Patent No. IN 209816) is valid?

Arguments

By Plaintiff i.e., MSD

1. MSD alleged that Glenmark’s products infringe its patent i.e., the Sitagliptin molecule. The sitagliptin phosphate monohydrate salt is sold under the trademarks Januvia, by MSD and Istavel, by its licensee Sun Pharma. Similarly, combination of metformin and Sitagliptin is sold under Janumet and Instamet respectively.
2. Sitagliptin and its pharmaceutically acceptable salts are specifically claimed by Claim No. 19 of the suit. They further stated that ‘Januvia’ was launched at a very low price, roughly 1/5^th of its price in the US paying special regards to public interest.
3. They further contested that Section 48 of the Indian Patents Act, 1970 extends exclusive rights to exclude others from making, using or offering for sale of products which fall within the scope of a suit claim.
4. They stated that Glenmark is selling Sitagliptin Phosphate Monohydrate under the brand name “ZITA” which cannot be prepared without the active ingredient Sitagliptin molecule. Hence, infringes the patent in question. (Patent No. IN 209816).
5. They argued that Sitagliptin was the invention and Sitagliptin Phosphate was merely a derivative of the invention and therefore wasn’t eligible for patent protection under Section 3(d) of the Patents Act, 1970. Hence, MSD abandoned the phosphate salt application.

 By defendant i.e., Glenmark

1. They contended that the products sold by them are not covered by the said patent (Patent No. IN 209816). They claimed Sitagliptin Phosphate Monohydrate is a different chemical entity with different physical and chemical properties.
2. MSD did not pursue the application in respect of Sitagliptin Phosphate Monohydrate in India and voluntarily abandoned the same, thus resulting in Sitagliptin Phosphate Monohydrate being in the public domain.
3. They argued that the invention lacked an inventive step under Section 64(1) (f) of the Patents Act, 1970 and there was insufficient disclosure regarding the preparation of Sitagliptin base within the meaning of Section 64(1) (h).
4. They contended that the drugs “Zita” and “Zitamet” are beneficial to the public at large because of their low price. They alleged MSD for overcharging the customers by charging same for “Janumet” and “Istamet” regardless of potential of tablets.

Judgement

Court relying on various judgements held that:

“On 7^th Oct, 2015, the Hon’ble Supreme Court upheld the decision of Delhi High Court and also took cognizance of the “commercial” nature of the matter. An expedited trial ordered by Delhi HC resulted in disposal of the law suit within 5 months from the date of order. The whole case was decided within 2 years. The Delhi High Court judgement smothered Glenmark by a decree of permanent injunction from making, selling, distributing or using, etc. and any dealings in Sitagliptin Phosphate Monohydrate, infringing the patent in question. The Court held that since the patent relates to an invention of a chemical molecule/compound in the medical filed it must be analyzed by technical experts as well. The court conceded with MSD’s argument that the conversion of salt to a free base and then to another salt is a very basic chemical transformation and hence the patent claims Sitagliptin and all its pharmaceutically acceptable salts. It also observed that the disclosure in the suit patent is not for a lay person but is addressed to a person of ordinary skill. Further, the provisions under Section 64 of the Patents Act, 1970 make it clear that the court may or may not revoke the patent in the given facts and circumstances of the case. The court gave a lot of weightage to expert testimony in this highly technical matter. On the question of lack of industrial applicability the court holds that Sitagliptin free base is the moiety that possesses the therapeutic effects claimed. The court also stated that in Glenmark’s drug there is no material effect. The Delhi High Court conclusively held that all the three ingredients i.e., prima facie, irreparable injury and balance of convenience for passing the order of injunction were established by MSD and hence injuncted Glenmark from manufacturing and selling of Zita and Zitamet.”

One-of-its-kind order was passed by the Hon’ble Supreme Court, which involved cross-examination of seven witnesses. This decision indicates that the Indian judiciary enacted Commercial courts; Commercial division- is cognizant of the urgent need for a proper, effective and efficient system to safeguard all intellectual property.

By: Runjhun Sharma, School of Law, Mody University

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Patent Landscape or State of the art Search

Apr 20, 2016 | Indian Patents Act 1970, IPR & Business

A patent landscape is an analysis of patent data for a particular technology, product company (ies) in specific countries within a given time frame that reveals valuable business, competitor, scientific and technological trends. Landscape reports generally focusses on a product, industry, competitors, technology, specific time period or geographic region.

Based on the output required, parameters are fixed for Patent Landscape and Patent Landscape Report (PLR) is prepared with pictorial and graphical representation of the data obtained. Patent landscape Report provides a comprehensive snapshot of the patent trends and hence useful for the businesses, especially when new markets are to be explored for the business or research in new areas is to be planned.

State of the art (SOA) or Patent Landscape Search are the terms which are used inter-changeably in the industry, however the main difference is that patent landscape report is more detailed and deeper. State of the art is the broadest among the other types of patent search, wherein a state-of-the-art search is essentially a market survey which is performed to identify the existence of similar technologies in the market. This search also provides findings regarding the competitors and indicates the trend of technology in the domain of interest.

 Patent Landscape is specifically useful at the time of:

• Starting research in new areas of technology and companies need to understand the trends, active research areas and status of patents available.
• Exploring new markets for business, with respect to specific product (s). The patents so obtained to perform prepare patent landscape report may also help to give idea about  potential patent infringement risk.
• Getting to know patent filing activities of the competitors because after filing patent application, it gets published on official website of patent office of given country. Compilation of published patent applications and granted patents helps companies to understand the patent filing trends and active research areas of their competitors.
• Innovations that are happening in a specific area of technology. This can be understood well with respect the a given period of time or based on specific country (ies).
• Assess the research happening in a given area of technology which also sometimes opens up opportunities in terms of IP licensing as well as Merging & Acquisition.

Depending upon findings of technology landscape analysis, an appropriate IP & business strategy which is compliant with the company’s business strategy may be devised and implemented. Technology landscape is performed in following steps:

Step 1: Before starting patent landscape it is important to define scope of landscape and the output expected. There is so much data available that if scope is not defined well, volume of the patents extracted becomes difficult to manage.

The timeline shall be fixed carefully depending upon how old patents are required to be analysed

List out the parameters required, such as, top patent filing companies, country wise trend for a product

Step 2: Formulate appropriate key words and search strategies to extract right and appropriate patents

Step 3: Categorize the extracted patents based on parameters and output expected.

Step 4: Compile the data obtained into graphical representation for easy understanding

Step 5: Write description of each parameter taken into consideration and prepare the final report

Origiin, with a skilled team of patent agents is one of the best patent companies in India offering patent services like, patent searching and patent filing in India and foreign countries.

Deliverables: Patent Landscape report in PDF along with all prior art search data in excel sheet

Timeline: 3 business days

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Patent Valuation Techniques

Apr 20, 2016 | Indian Patents Act 1970, IPR & Business

Patent valuation can be defined as a method to determine the real market value of patents. It is important as it plays a crucial role during many transactions such as negotiating deals, procuring investments, identifying strengths and weaknesses of the enterprise, technology transfers etc.

Important elements used to determine the value of a patent are –

1. NPV (Net Present Value);
2. Forecast of future value (growth options);
3. Financial model to estimate cash flows from the patent.

The market today provides for three main approaches to value patents as provided in the table above. However, it has been acknowledged that factors such as the nature of the transaction (whether by assignment or licensing), desired result, realistic growth opportunities and the expenditure on research and development of the patent must be kept in mind while selecting which approach is most suitable.

The two broad classifications of valuing patents are through the quantitative and qualitative approach where one uses numeric and economic data. The other analyses the opportunities and the risks associated with the patent. A mixture of the two, or popularly known as the hybrid model of patent valuation, is in much demand. It provides for a holistic approach to understand all the aspects of income generation from a patent. The same will be discussed towards the end of this article.

The popular methods to assess value of the patent are as below:

1. Market Approach Method

As the name suggests, this approach takes into consideration the amount of money that a buyer is willing to pay for a similar patent in an already existing market. This method is also known as the comparable transaction approach. The assumption that this approach is based upon which the value of the patent is equal to the amount that a buyer is willing pay to a seller of a similar patented product. The shortcomings of this approach are finding a comparable patent in the market and the ability of such a comparable patent in income generation would not be the same as the patent being valued.

The following components are required to use this approach of patent valuation –

1. An active marketplace with available price information;
2. An identical or a group of identical patents in the market;
3. A method to control the variables or differences.

2. Income Approach Method

The income approach is also known as the Discounted Cash Flow (DCF) approach. It estimates the overall profit that a patent can generate. Most commonly, the value of the patent is based on company-specific profit projections and the use of a risk premium. The projected revenue inflow of the patented technology is discounted by variables such as the risk premium to ascertain the present value of the patent. The value attainted is considered to be the market value of the patent. The drawback of this approach is that the values used in the first place to derive at final market value can be clouded by subjective bias and manipulation.

The following components are essential to this approach:

1. An estimate of the revenue inflows generated by the patent during its useful life;
2. Measuring direct costs relating to the patent which are to be deducted against the revenue inflows;
3. The amount of risk associated with the patent must be discounted or deducted from the present-day value of the patent.

3. Cost Approach Method

In this approach a patent is valued based on the amount of cost incurred to develop a similar patent either internally or externally. The historical rates trending in the market or the estimate of the cost of creation (based on current market conditions) serve as a basis to come up with the required cost estimate. It seeks to determine the value of a patent at a particular point in time by summing up the direct expenditures and opportunity costs involved in the development of the patent and considering its obsolescence. The most obvious shortcoming of this approach is that it does not consider the income-generating nature of a patent, which can and in most cases, is the primary reason to create a patent.

The following are the components required to carry out this approach:

1. An estimate valuation of the cost of development of a patent;
2. Value of expenditures, opportunity costs, inflation etc. at a particular point of time;
3. Costs related to obsolescence of patent over a period of time.

4. Hybrid Model

A hybrid model would consist of factors envisaged in all of the above approaches. It included features of both qualitative and quantitative nature. This model aims to customize the patent valuation to the exact nature of the transaction that it aims to participate in. This approach has also been known to have the most practical use and has become an upcoming in the current market.

The following elements are essential to this model:

1. The size of the market and the share of the technology concerned;
2. The annual turnover that is generated by the patented technology;
3. The profit derived after applying tax and other duties;
4. The risk value that should be discounted;
5. If the patent is a part of a product, then the value of how essential it is to the product.

Conclusion

No method of valuation can predict the value of a patent with 100% accuracy but valuing patents have become crucial to companies due to their ability to generate capital, attract profitable partners, enabling licensing and franchising business models and their relevance in solving disputes. Thus whichever mode of valuation that a company uses should have a nexus with the ultimate objective that the company has for the patent. Many companies often use two approaches together such as the income approach and the cost approach to obtain a more holistic view; further customization is possible and should be incorporated for such valuations in the future.

By: Aryashree Kunhambu, Shri Dharmasthala Manjunatheshwara Law College, Mangalore.

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