Teva Pharmaceutical Industries Ltd. & Ors. v. Natcopharma Limited

High Court of Delhi | 28 February 2014 CS (OS) 3193 of 2012 & CC No. 49 of 2013, IA Nos. 10389-90 of 2013, 10638 of 2013, 20025 of 2013, 18788 of 2013 Hon’ble Mr. Justice S. Muralidhar

BACKGROUND

The plaintiffs in the present matter are Teva Pharmaceutical Industries Ltd. (“Teva”), Yeda Research and Development Co. Ltd. (“Yeda”) and Teva API India Limited (“Teva India”). The defendant is Natco Pharma Limited (“Natco”). Indian Patent No. 190759, dated 23rd May 1995, in respect of “a method for manufacturing Copolymer-I”, was registered in favour of Yeda. Teva is the exclusive licensee of Yeda pursuant to a licence agreement between the parties. Teva India was stated to be a subsidiary of Teva Pharmaceuticals Finance Netherlands B.V. of Netherlands, which was ultimately owned by Teva.

To understand the present proceedings, it is necessary to set out the background of an earlier suit. Teva, Yeda and Regent Drugs Ltd. (“RDL”) had previously filed CS (OS) No. 1708 of 2007 in the High Court of Delhi against Natco. That suit sought a permanent injunction restraining infringement of Indian Patent No. 190759, a permanent injunction restraining Natco and its agents from directly or indirectly managing, selling, offering for sale, exporting, marketing, commercialising or registering glatiramer acetate under the mark “Glatimer” or any other mark which infringed the rights of Teva and Yeda in the said patent, an order restraining Natco from exporting the infringing drugs and formulations outside India, rendition of accounts of profits and a decree for damages in the sum of Rs. 25 lakhs.

At the hearing of the 2007 suit on 17th September 2007, the Court directed summons and notice in IA No. 10579 of 2007 under Order XXXIX Rules 1 and 2 CPC. Natco’s counsel, appearing on caveat, stated that the process employed by Natco for producing glatiramer acetate marketed under the name “Glatimer” was entirely different from the process patented by the plaintiffs under Indian Patent No. 190759. The Court directed Natco to file an affidavit disclosing its process within one week. On 21st September 2007, Natco filed a counter-claim for revocation of Indian Patent No. 190759, contending that the patent related to a process for manufacture of a Copolymer-1 fraction and that the suit was based on an invalid patent. The grounds for invalidation included want of patentability, lack of novelty in view of prior art including Teiltelbaum et al., 1971 and US Patent 3,849,550, lack of inventive step, insufficiency of the complete specification and that the patent was obtained by false representation and misleading statements. Natco also filed its written statement on 20th October 2007 raising a preliminary objection as to the validity of the patent.

An affidavit dated 21st September 2007 was filed by Dr. A.K.S. Bhujanga Rao, Executive Vice President (R&D) of Natco, disclosing that Natco had been working on glatiramer acetate for approximately four years, that the project was initiated around 2003 with the objective of producing a cost-effective product for the treatment of multiple sclerosis for Indian patients and that after about two to three years of intensive research Natco had developed a novel route for producing the product and had applied for patents to protect its proprietary steps. Issues in the 2007 suit were framed on 14th May 2012 and the application for interim relief was disposed of as not pressed on that date.

The present suit, CS (OS) No. 3193 of 2012, was filed on 3rd November 2012 by Teva, Yeda and Teva India against Natco. The plaint referred to Natco’s reported tie-up with Mylan Pharmaceuticals Inc. (“Mylan”) of the USA for the manufacture and supply of glatiramer acetate, as reported in an article dated 17th January 2012 in the newspaper “Business Line”. The plaint also referred to Natco’s Annual Report for 2010-2011 which indicated the Mylan-Natco tie-up and to an agreement signed in and around 7th June 2008 between Natco and Mylan relating to the development and marketing of glatiramer acetate in the US. On 29th June 2009, Mylan submitted an abbreviated new drug application (“ANDA”) to the US Food and Drug Administration (“USFDA”) seeking approval to manufacture and sell Mylan’s proposed glatiramer acetate product before the expiration of the orange book patents. In view of this ANDA, Teva and Yeda sued Mylan and Natco in the US District Court, Southern District of New York, for infringement of several US Patents, including Claims 2 and 3 of US Patent No. 6,054,430 (“US ‘430”) and Claims 2 and 3 of US Patent No. 6,048,898 (“US ‘898”). After trial, the US Court found that the glatiramer acetate product that Mylan and Natco sought to sell in the US infringed the claims of US ‘430 and US ‘898.

The plaintiffs asserted in the plaint that the US Court decision led to an incontrovertible conclusion of infringement of the plaintiffs’ rights in Indian Patent No. 190759, based on the manufacture of glatiramer acetate by Natco for export and sale in the United States and that Natco’s act of manufacturing the glatiramer acetate product for sale in the US and elsewhere amounted to infringement of Indian Patent No. 190759. The cause of action was stated to have arisen in and around 2010-2011 when the plaintiffs came to know of Natco’s tie-up with Mylan.

To establish the territorial jurisdiction of the High Court of Delhi, the plaint averred that Natco was involved in a large number of activities in Delhi, including selling products through M/s Belsons Pharmaceutical Distributors in Darya Ganj, New Delhi, described as the sole authorised distributor and agent of Natco in New Delhi; that Natco had admitted in other infringement proceedings to supplying products to hospitals all over India with a distribution network across the country; that Natco carried on business through a liaison agent in Pitampura, Delhi; and that Natco was also carrying on business from D-70, Okhla Phase-I, New Delhi.

The important distinction between the two suits was explained by the plaintiffs themselves in their reply to Natco’s application: the 2007 suit pertained to a product (described as the “GA-first product”) sold by Natco in India using its own process, while the 2012 suit pertained to a separate and distinct product (described as the “GA-second product”) being manufactured by Natco in India on behalf of Mylan for export to the US and other countries using what the plaintiffs termed the “Mylan process.”

Natco filed three applications in the present suit: IA No. 10390 of 2013 under Order VII Rule 10 CPC for return of the plaint for want of jurisdiction; IA No. 10389 of 2013 under Order VII Rule 11 CPC for rejection of the plaint; and IA No. 10638 of 2013 under Sections 10 and 11 CPC praying for a stay of the present suit in view of the pendency of the 2007 suit. The Court proceeded to decide IA No. 10390 of 2013 first.

ISSUES FOR DETERMINATION

• Whether the High Court of Delhi had territorial jurisdiction to entertain CS (OS) No. 3193 of 2012, which was admittedly a quia timet action in respect of an alleged infringement of Indian Patent No. 190759, a process patent, principally for the purpose of export of the product to the US and elsewhere. Three subsidiary questions arose within this enquiry.
• Whether the averments in the plaint made out a specific case that the process patent, Indian Patent No. 190759, was being practised or infringed within the territorial jurisdiction of the Delhi High Court, having regard to the fact that Natco’s manufacturing units were admittedly located in Hyderabad and not in Delhi.
• Whether in the context of a process patent suit framed as a quia timet action, the presence of Natco’s distributor in Delhi, its office listing in the MTNL directory, its liaison agent in Pitampura and its sale of an entirely different product (the GA-first product) in Delhi were sufficient to establish the cause of action or to confer jurisdiction under Section 20 of the Code of Civil Procedure.
• Whether the plaintiffs’ invocation of Section 48(b) of the Patents Act, 1970 which extends the patentee’s exclusive rights to the product obtained directly by the patented process was well-founded in the circumstances of the present case, where the manufacture of the GA-second product and its export were not averred to be occurring within Delhi.

KEY HOLDINGS OF THE COURT

The Court allowed IA No. 10390 of 2013 and directed the plaint to be returned to the plaintiffs for presentation before the appropriate court. The following are the holdings arrived at by the Court.

• The Court held that CS (OS) No. 3193 of 2012 was, by the plaintiffs’ own repeated assertion, a quia timet action. The suit expressed only an apprehension that Natco, having tied up with Mylan, was likely to export the infringing Copolymer-I to the US and other countries. The Court noted that in such an action the pleadings must be precise, material and cogent and must allege a deliberate expressed intention to engage in activity that would raise a strong possibility of infringement, that such activity must be alleged to be imminent and that the resulting damage must be alleged to be very substantial if not irreparable. Relying on Astrazeneca Canada Inc. v. Novopharm Limited, 2009 FC 1209 and Connaught Laboratories Limited v. Smithkline Beecham Pharma Inc., (1998) 86 CDR (3d) 36, the Court held that an action cannot be brought on speculation and that indefinite pleadings or mere speculation are insufficient.
• The Court held that Indian Patent No. 190759 is a process patent and this distinction was critical to the jurisdictional analysis. The plaintiffs’ application No. 93/Del/2003 for a product patent in respect of glatiramer acetate had been rejected after a pre-grant opposition by Natco vide order of the Controller of Patents dated 3rd March 2009 and the plaintiffs did not dispute this. The plaintiffs appeared to have filed an appeal before the Intellectual Property Appellate Board. Since the suit concerned a process patent and not a product patent, the pleadings as regards the product being sold in Delhi or the possibility of it being sold in Delhi could not justify the jurisdiction of the Court. Only if the process itself was being practised or infringed within the territorial jurisdiction of this Court could jurisdiction be established.
• The Court found that there was no specific averment in the plaint that the process patent, Indian Patent No. 190759 or the “Mylan process”, was being practised or infringed by Natco within the jurisdiction of the Delhi High Court. The plaintiffs did not deny that Natco had its manufacturing facilities only in Hyderabad and that there was no manufacture of the GA-second product in Delhi. In para 40 of the plaint it was averred that the manufacture of glatiramer acetate was “for export and sale in the United States” and in para 41 the act of manufacturing was described as “for sale in the US and elsewhere.” There was no averment that such manufacturing was happening or apprehended to happen within Delhi.
• The Court held that the plaintiffs’ invocation of Section 48(b) of the Patents Act, 1970, to urge that the product obtained as a result of infringement of the process was sold or apprehended to be sold in Delhi, was misconceived in the circumstances. The fact that Natco may have had an office in Delhi or a distributor in Delhi was not relevant since the subject matter of the suit was a process patent and the action was for alleged infringement of that process for the purposes of export to the US and elsewhere.
• The Court held that the statements made by the plaintiffs in written submissions or the list of dates, which did not form part of and were not contained in the plaint or in the pleadings in the application under Order VII Rule 10 CPC, could not be taken into account by the Court in deciding that application. Accordingly, facts such as Natco having obtained an import licence from the Central Drug and Standard Control Organisation or having marketing approval to sell glatiramer acetate in India or already selling the GA-first product in Delhi, were not relevant to the question of jurisdiction in a suit for alleged infringement of a process patent for the purposes of export.
• The Court distinguished the present case from Bristol Myers Squibb v. V.C. Bhutada, 2013 (56) PTC 268 (Del), where the issue concerned the apprehension of infringement of a product patent and where the defendant had already obtained approval from the Drug Controller for marketing the product without restriction as to territory. Those facts were materially different from the present case.
• The Court held that the plaint in CS (OS) No. 3193 of 2012 failed to make out a case for the Court to entertain the suit within its jurisdiction. The plaint was accordingly directed to be returned to the plaintiffs for presentation before the appropriate court. IA No. 10390 of 2013 was allowed with no order as to costs. In view of this conclusion, the Court declined to deal with IA Nos. 10389 of 2013, 10638 of 2013, 20025 of 2013 and 18788 of 2013, leaving all questions and contentions raised by the parties open to be decided in appropriate proceedings. The suit and all pending applications were disposed of.

STATUTORY PROVISIONS INVOLVED

Order VII Rule 10 of the Code of Civil Procedure, 1908 provides for the return of a plaint to the plaintiff by the court if it finds that it has no jurisdiction to try the suit. The Court applied this provision to hold that since the Delhi High Court lacked territorial jurisdiction to entertain the suit relating to a process patent where neither the process was being practised nor apprehended to be practised within Delhi, the plaint was liable to be returned. The Court’s exercise of this power was the operative conclusion of the judgment.

Order VII Rule 11 of the Code of Civil Procedure, 1908 provides for the rejection of a plaint on specified grounds. IA No. 10389 of 2013 was filed by Natco under this provision seeking rejection of the plaint. However, in view of the Court’s conclusion on IA No. 10390 of 2013, this application was not dealt with and all contentions were left open.

Sections 10 and 11 of the Code of Civil Procedure, 1908 relate to the stay of suits and res judicata respectively. IA No. 10638 of 2013 was filed by Natco under these provisions seeking a stay of the present suit in view of the pendency of the 2007 suit. This application was also not dealt with in view of the Court’s conclusion on jurisdiction.

Section 20 of the Code of Civil Procedure, 1908 provides that a suit may be instituted in the court within whose local limits of jurisdiction the defendant carries on business or the cause of action arises. The plaintiffs invoked this provision to assert the territorial jurisdiction of the Delhi High Court based on Natco’s alleged business activities in Delhi. The Court held that in a process patent suit, the mere presence of a distributor or an office in Delhi was insufficient to confer jurisdiction where the process itself was not being practised within Delhi.

Section 48(b) of the Patents Act, 1970 confers on the patentee of a process patent the exclusive right to prevent third parties from using the process and also from selling or offering for sale any product obtained directly by the patented process. The plaintiffs relied on this provision to argue that since the product manufactured by the allegedly infringing process was sold or likely to be sold in Delhi, the Court had jurisdiction. The Court held that this invocation of Section 48(b) was misconceived in the facts of the present case, where neither the process nor its exercise was averred to be occurring within Delhi.

REASONING OF THE COURT

The Court’s reasoning proceeded from first principles of territorial jurisdiction as applicable to process patent suits filed as quia timet actions.The Court identified three factors that framed its analysis.

• The nature of the suit as a quia timet action, which by definition rests on apprehension of future harm rather than present infringement. The Court held that such actions carry a higher burden of specificity in pleadings  the apprehended activity must be alleged to be imminent, deliberate and capable of causing very substantial harm and the facts pleaded must be cogent, precise and material. General or speculative allegations will not suffice.
• The nature of the patent involved. Since Indian Patent No. 190759 is a process patent and since the plaintiffs’ application for a product patent in respect of glatiramer acetate had already been rejected, the plaintiffs had no enforceable product patent rights. In a process patent suit, territorial jurisdiction under Section 20 CPC is established only if the process is being practised or is apprehended to be practised within the territorial limits of the court’s jurisdiction. The presence of the product in Delhi or the sale of an entirely different product made by a different process in Delhi, cannot substitute for the essential jurisdictional averment that the infringing process is being carried out within Delhi.
• The Court’s approach to the material it could examine at the Order VII Rule 10 stage. The Court could look only at the plaint, the documents filed with it and the pleadings in the application under Order VII Rule 10 CPC. The written statement, replication and written submissions were outside the scope of this enquiry.

Applying these three factors, the Court found that the plaint failed at the threshold. The plaintiffs’ own pleadings made clear that the suit concerned the GA-second product manufactured in India for export to the US and elsewhere using the “Mylan process.” There was no averment that this process was being practised in Delhi. Natco’s manufacturing facilities were admittedly only in Hyderabad. The Court found no basis for reading the invocation of Section 48(b) as creating jurisdiction based on the possibility that the product obtained by the infringing process might eventually be sold in Delhi, particularly when the pleadings specifically associated the GA-second product with the export market and not with the Indian market.

The Court drew a clear distinction between the present case and Bristol Myers Squibb v. V.C. Bhutada, where the apprehension of infringement concerned a product patent and the defendant had already obtained drug controller approval for sale of the product across India without territorial restriction. In Bristol Myers Squibb the apprehension of infringement within Delhi was well-founded and supported by the defendant’s existing approvals. No comparable factual foundation existed in the present case.

Having concluded that the plaint disclosed no basis for the territorial jurisdiction of the Delhi High Court, the Court directed return of the plaint without proceeding to examine the other applications, leaving all substantive questions of validity, infringement and the relationship between the two suits entirely open.

DOCTRINAL SIGNIFICANCE

This judgment makes a significant and practically important contribution to the law governing territorial jurisdiction in process patent suits in India, particularly where the suit is framed as a quia timet action.

The judgment firmly establishes that in a suit for infringement of a process patent, jurisdiction under Section 20 CPC cannot be founded on the presence of the product (obtained by the allegedly infringing process) in the jurisdiction or on the defendant’s general business activities such as maintaining a distributor or a listed office address within the jurisdiction. What is required is a specific, material and cogent pleading that the process itself is being practised or is imminently apprehended to be practised within the court’s territorial limits. This is a demanding standard that practitioners must carefully satisfy when drafting pleadings in process patent suits.

The judgment also clarifies the standards applicable to quia timet actions in Indian patent law by drawing upon Canadian precedent from Astrazeneca Canada Inc. v. Novopharm Limited and Connaught Laboratories Limited v. Smithkline Beecham Pharma Inc. The Court endorses the position that such actions require allegations of deliberate and imminent infringing activity, substantial or irreparable damage and pleadings that are cogent, precise and material not indefinite or speculative.

The distinction drawn between a product patent suit and a process patent suit for the purposes of establishing territorial jurisdiction is particularly significant. In a product patent suit, as in Bristol Myers Squibb v. V.C. Bhutada, the presence of the infringing product within the court’s jurisdiction or the apprehension of it being sold there, may provide a sufficient jurisdictional foundation. In a process patent suit, no such shortcut is available. The Court’s reasoning underlines the importance of the nature of the patent right claimed as a threshold factor in the jurisdictional analysis.

Finally, the judgment is notable for its procedural discipline at the Order VII Rule 10 stage. The Court declined to look at the written statement, replication or written submissions, confining itself strictly to the plaint and the pleadings in the jurisdictional application. This adherence to the correct procedural scope of the Order VII Rule 10 enquiry is a useful reminder for courts and practitioners alike.

The judgment must be read as a procedural ruling on jurisdiction at a preliminary stage. The Court expressly left open all substantive questions, including the validity of Indian Patent No. 190759, the merits of the infringement claim and the relationship between the 2007 and 2012 suits, to be decided in appropriate proceedings. Its doctrinal value lies in the jurisdictional and pleading principles it articulates, not in any final determination of the underlying patent dispute.

Articles Case Laws Copyright Article Copyright case laws Patent Article patent case laws Trademark Article Trademark case laws