The Hindu Business Line : Needed, legal strategy to protect innovations

Given the unique development of patent law in India and the opening up of the markets to new players, companies involved in innovations need strategies to defend or challenge patents.FEROZ ALI K explains how.

In the dispute between Hoffmann-La Roche (the patent-holder of the lung cancer drug Erlotinib) and Cipla (the manufacturer of the generic version of Erlotinib), the Delhi High Court recently refused to grant interim injunction restraining Cipla from the sale of the generic.

The decision offers many interesting possibilities for both patent-holders and generics. Patent litigation, which is the only way by which a patent-holder can enforce its rights, also happens to be the most-effective mode for challenging the patent-holder. Given this paradox, it is surprising that companies do not show sufficient care and attention in pursuing or defending patent infringement actions.

Many companies that have a strategy for developing radical and incremental innovations often do not have strategies to protect them from competitors. Regrettably, the most important part of protecting innovation — be it the legal action taken to defend one’s patent or to challenge a competitor’s patent — is outsourced.

While companies cannot possibly make legal battles a part of their core business, it certainly does not harm to have a legal strategy concerning innovations that directly affect their business.

Strategies for patents

Viewed in this context, the Delhi High Court decision offers many insights into developing in-house legal strategies for pharmaceutical companies. To proclaim the court’s interim decision a victory for the generics or an injustice to patent-holders, would trivialise the decision which was passed taking critical issues such as public health and access to medicines into account.

The court’s decision is the first judicial pronouncement that considers the rights of a patentee vis-À-vis the rights of the public’s access to life-saving medicines.

It is also the first decision which systematically applied the correct approach in deciding interim injunctions laid down by the House of Lords in American Cyanamid Co. vs Ethicon Ltd (1975 A.C. 396), of which we had commented in these columns (‘Patent infringement and the law’, Business Line, February 28, 2008). Saying this does not mean one expects or hopes all patent infringement cases involving a generic entry of a patented drug would go this way at the interim stage. No doubt, the interim decision of the Delhi High Court is an exceptional order passed under exceptional circumstances. But there is certainly a pattern in the decision which companies, both patent-holders and generics, would like to study and analyse as an indicator of the things to come.

Pre-litigation moves

From a generic company’s standpoint, it may appear that not challenging the patent by way of a pre-grant opposition is a good option to follow. But this need not be true in every case. While the effectiveness of the pre-grant opposition launched by another generic company was discussed elaborately in the court’s order, it does not turn out, from the facts of the case, that it would be desirable for a generic company not to pursue pre-grant opposition if it is confident of posing a good challenge to the patent.

As a procedure that can be conducted by the competitor’s in-house personnel before the patent office, pre-grant opposition offers a fair chance for technical and scientific arguments to be heard and is extremely cost-effective.

In the recent patent case involving Bajaj and TVS, the court drew an adverse inference with regard to the conduct of the competitor on the ground that it did not challenge the patent before the patent office. Where the injunction order can curb the sales of the competitor resulting in loss of revenue and market share, pre-grant opposition is a viable option that should be put to good use.

From a patent-holder’s viewpoint, it may be beneficial to rely on the provision of the Patents Act which ought to have been exhausted before launching a generic version. For instance, the Patents Act provides for proceedings that a generic company can undertake if it anticipates an injunction suit.

The generic company could institute opposition proceedings before the patent office or revocation proceedings before the Appellate board. The generic company could also launch an action under Section 105 of the Patents Act for a declaration of non-infringement.

In cases where litigation is bound to ensue if the competitor introduces its product, the law provides for the above options to avoid all the problems of an interlocutory injunction. If the competitor has not exhausted these options, the patent-holder can show the court that the competitor has not employed the options to avoid litigation and has purposefully infringed the product.

Price difference

The price difference between the generic drug and the patented drug will be a critical factor in the grant or refusal of injunction depending upon how the court views the issue of pricing. The case before the Delhi High Court involved a significant price difference: the patented drug was reportedly sold at Rs 4,800 per tablet whereas the generic version was sold at Rs 1,600.

But the difference in price could be the reason for the court to grant an injunction in favour of the patent-holder as it happened in SmithKline Beecham Plc v Apotex Europe Ltd (2003 EWCA Civ 137) where the Court of Appeal upheld the injunction granted by the lower court against the sales of a generic version of a patented drug.

In that case, the court observed that there was evidence of the difficulty of raising a price once it has been lowered and that there would be formidable difficulties in SmithKline’s way if it tried to get back to its present position after a major collapse of prices. The court granted injunction in favour of SmithKline and ordered the parties to preserve status quo as by such a move, Apotex would only temporarily be prevented from doing that which they have not yet done.

Drug donation programmes

Any company that seeks to import, sell and distribute patented life-saving drugs in India cannot afford to ignore public health needs. Often injunctions are refused because the patent-holder does not manufacture the drug in India or it is not accessible to large parts of society.

One way to tilt the balance of convenience in favour of a patent-holder in the interim stage would be to have an effective drug distribution programme in place which can take care of public needs. Novartis was successful before the Madras High Court in restraining generic companies largely due to its novel, yet controversial, GIPAP programme.

While most companies have a policy on identification and development of innovative products and processes, managing innovation does not get the necessary attention. Patents are essential for the management of innovation and its long-term protection. Given the unique development of patent law in India and the opening up of markets to new players, it becomes imperative for any innovator company operating in India to integrate its legal strategies to larger strategies on innovation.

This can be achieved only by understanding the market in which one operates and the legal framework that regulates it.

(The author, a Chennai-based advocate, is the author of the recent book “The Law of Patents: With a Special Focus on Pharmaceuticals in India”, LexisNexis Butterworths India, 2007.)

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