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Business News/ Home-page / Cos rush to exploit patent law loophole

Cos rush to exploit patent law loophole

Cos rush to exploit patent law loophole


Mumbai: Indian pharma companies have discovered a loophole in the country’s patent laws that could allow them to sell copycat versions of patented drugs here and are quietly firming up plans for this, although some experts are of the view that this approach violates World Trade Organization, or WTO, norms and even one Indian patent law.

The loophole is actually a provision—Section 107A(b) of the Indian patent law amended in 2005—that allows local companies to import copycat or generic drugs manufactured in least developed countries such as Bangladesh, Nepal and several African nations, without the authorization of the patent holder.


This means companies here can import drugs from a country where pharma patents are not in effect if the local law in that country authorizes the manufacture of those medicines. In the earlier version of the law, an authorization by the patent holder was a compulsory requirement.

Indian drug makers have rushed to take advantage of this, and several of them have even started working on building manufacturing plants in these countries.

The new provision may not be in complete compliance with the international trade rules of WTO. However, a smart judiciary interpretation could make it possible for generic drug companies such as Cipla Ltd, Ranbaxy, Sun Pharmaceutical Industries Ltd, Dr Reddy’s Laboratories Ltd and Natco Pharma Ltd to set up manufacturing facilities in least developed countries, according to patent law experts.

“A literal reading of Section 107A(b) would seem to suggest that Cipla or Ranbaxy, for instance, could set up shop in a country with no pharma patents such as Bangladesh and then export (say) Roche’s (F Hoffman La Roche Ltd) patented drugs to India," said Shamnad Basheer, an international patent law expert and a research associate at Oxford IP Research Centre.

“Section 107A(b) earlier insisted that a company could import such drugs only if it purchased them from a person ‘who was duly authorised by the patentee’ to sell those drugs in Bangladesh," he said.

According to Basheer, the provision was amended in 2005 to say that it was not necessary for the exporter in Bangladesh to be authorized by the patentee. As a result, if the exporter is authorized by the law in Bangladesh to produce and sell the product, a drug maker such as Cipla can import that product legally under Section 107A(b).

Thus, Cipla’s recent decision to set up joint venture companies in African countries such as Uganda and Morocco with local partners will help the company do this. And Mumbai-based Sun Pharma, which has a manufacturing plant in Bangladesh, can explore this option. Ranbaxy Laboratories Ltd, the country’s largest drug maker, already has manufacturing facilities in least developed countries including in Africa.

Still, Indian drug makers are being discreet about their plans.

“Our plans are not yet ready in this regard as issues such as (laws on) importation of drugs from a least developed country and exporting patented drugs to countries where pharma patents are not applicable are still not clear," said Cipla chairman and managing director Y.K. Hamied.

A spokesperson for Sun Pharma said: “We are still studying the relevant section and would take some time to interpret it."

According to Basheer, the only hurdle is with the interpretation of certain sections of the law as companies that choose to import patented drugs from least developed countries might run a serious risk of violating the exclusive right to import guaranteed under Trade Related Aspects of Intellectual Property Rights, or TRIPS.

It remains to be seen if approached, whether an Indian court will interpret Section 107A(b) in accordance with what it believes to be the correct TRIPS interpretation, he said.

“The import restriction notified in the country’s customs regulations for patented products also matters a lot to conclude whether such imports will be easy," said Gopakumar Nair, a Mumbai-based patent consultant.

There is also a direct threat from patent holders, who could persuade their respective home governments to drag India to WTO for violating TRIPS agreement, because it is still not clear if the provision (Section 107A(b)) is in compliance with it, according to another patent law expert who did not wish to be identified.

An email query sent to the president of the Organisation of Pharmaceutical Producers of India, or OPPI, the industry body representing multinational drug makers present in India, remained unanswered as he was travelling.

According to a recent post in an international patent blog SpicyIP, selling copycat drugs in India manufactured in least developed countries violates TRIPS norms as there is no first sale of the patented drug by the patentee as required in TRIPS.

“In short, the very essence of an exclusive right to ‘import’ mandated under Article 28 of TRIPS is affected. Consequently, the parallel import provision in India—Section 107A(b) —will be seen to violate Article 28 of TRIPS," the blog says.

A senior lawyer from New Delhi who specializes in intellectual property, points to another rule in the Indian Patent Act that protects the right of the patent holder. “Section 48 of the Indian Patent Act requires that a patentee’s exclusive right to ‘import’ be protected. Section 107A(b) hits at the very essence of this right," he said.

Taking this into account, an Indian judge could render the amendment to Section 107A redundant, and revert to the earlier provision, which said it is not an infringement to import a patented product only if the import was from an exporter ‘duly authorised by the patentee’, the lawyer, who did not wish to be identified, added.

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Published: 25 Apr 2008, 12:11 AM IST
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