Country Risk: Illustrated

Last time, we wrote about "country risk"; i.e., the risk a company takes by doing business in a different country, where laws might be different from what you might expect in your home country. Since then, a case has been decided in Mumbai, India before the Controller of Patents that illustrates the need to take country risk into account when selecting offshore locations. In the matter of Natco Pharma Limited (Natco) and Bayer Corporation (Bayer), Natco applied for and was granted a compulsory license under Section 84(i) of the Patents Act, 1970. Under the patent law in India, a compulsory license is an involuntary contract between a willing buyer and an unwilling seller imposed and enforced by the State – essentially the government permits someone else to produce the patented product without the consent of the patent holder. In this case, Bayer, an American company headquartered in Pittsburgh, PA, invented a drug useful in the treatment of cancer. Bayer was importing and selling the drug in India, and presumably expected protection of their patent rights to be the exclusive supplier of the drug. The compulsory license applicant was Natco Pharma Limited, an Indian company headquartered in Hyderabad, and a manufacturer of generic drugs. Natco approached Bayer with a request for a voluntary license to manufacture and sell the drug; however, the parties did not come to terms, so Natco applied for the compulsory license. In India, the applicant for a compulsory license must prove that "reasonable requirements of the public with respect to the patented invention have not been satisfied." Natco argued that Bayer did not take adequate steps to manufacture the product in India; that the drug was priced too high; and, that the drug was only available in hospitals in major cities. Bayer countered, first, that price and...