On March 9, 2012, the Indian Patent Office granted its first Compulsory License to Natco Pharma Ltd. for producing generic version of Bayer Corporation’s patented medicine Nexavar (Sorafenib Tosylate), which is used in the treatment of Liver and Kidney cancer. While the multinational giant was selling the drug at INR 2.80 lakh for a month’s course, Natco promised to make available the same at a price of about 3 % (INR 8800) of what was charged by Bayer. Natco was directed to pay 6 percent of the net sales of the drug as royalty to Bayer. Among other important terms and condition of the non assignable, non exclusive license were directions to Natco to manufacture the patented drug only at their own manufacturing facility, selling the drug only within the Indian Territory and supplying the patented drug to at least 600 needy and deserving patients per year free of cost.
Aggrieved by the Controller’s decision, Bayer immediately moved to the Intellectual Property Appellate Board (IPAB) for stay on the orderalleging that the grant of compulsory license was illegal and unsustainable. The Board rejected Bayer’s appeal holding that if stay was granted, it would definitely jeopardize the interest of the public who need the drug at the later stage of the disease. It further held that the right of access to affordable medicine was as much a matter of right to dignity of the patients and to grant stay at this juncture would really affect them.
Bayer then filed an appeal challenging the compulsory licence granted to Natco by the Controller-General. The Board stated that the invention must be available to the public at a reasonably affordable price and if not, compulsory licence can be issued and observed that the Sub-sections (a), (b) and (c) of Section 84(1) are separated by the disjunctive ‘or’ and therefore, even if one conditionis satisfied, the Controller will be well within his rights to order compulsory licence.
The Board further noted that The R&D costs and the prices of other drugs do not assist in deciding what the public can afford reasonably. It stated that the reasonably affordable price necessarily has to be fixed from the view point of the public and the word ‘afford’ itself indicates whether the public can afford to buy the drug.
It also stated that even if it takes the appellant’s own number (i.e. the number of affected patients) it finds that the supply made by it cannot be said to be adequate and the price definitely is the factor that will determine whether the public will reach out for a particular invention.
The Board held that the Controller was right in holding that the sales of the drug by the appellant at the price of about 280,000/- was alone relevant for the determination of public requirement and he was also right in considering the purchasing capacity of the public and the evidence available to conclude that the invention was not reasonably affordable to the public.
On the percentage of royalty that was to be paid by the Respondent to the Appellant (6% that was fixed by the Controller), IPAB increased it by 1 percent but did not change any other terms and conditions of the licence.
The IPAB dismissed the appeal and confirmed the grant of Compulsory license stating that it has dealt with each of the issue indetail in view of the significance of the order of compulsory licence made in India for the first time.

The Patents Act 1970, along with the Patents Rules 1972