The Indian Patent Office's decision to cancel the patent for Novartis's major heart drug, Vymada, has added a new chapter to contentious relationship between multinational drug companies and India's stringent patent laws. While the immediate effect in India's stringent patent laws is not clear, but generic drug makers can now enter the market, likely causing prices to be fall by more than 70%, the situation creates a much murkier puzzle when viewed through the lens of international investment law, which will require careful legal navigation.
The order, passed on September 12, 2025, by Deputy Controller of Patent and Designs D. Usha Rao, invalidated Patent No. 414518, which covered Novartis's combination of sacubitril and valsartan. The patent was struck down on familiar grounds of Indian patent law, it was found to lack novelty and an inventive step, and the detailed provided were deemed insufficient under Section 25(2) of Patent Act 1970. Significantly, the decision also invoked section 3(d), India's well known “anti evergreening” rule designated to prevent minor drug modifications from extending patent life, marking a rare and high-profile application of this controversial clause.
The International Investment Law Dimension
The prospects of Investor State Dispute Settlement (ISDS) proceedings under Bilateral Investment Treaties (BITs) set this patent revocation apart from other common intellectual property disputes. The case present important issues about the relationship between national patent laws and international investment protection, as Prof. Prabhash Ranjan wisely noted.
As a Swiss multinational, Novartis has long been protected by the India-Switzerland BITs. However, the jurisdictional complications created by India's systematic termination of BITs with 58 countries in 2017, including its deal with Switzerland, set this case apart from simple investment disputes. A significant “sunset clause” in the terminated BIT extends protection for 15 years after termination, until 2032, but only for investment placed before 2017.
This mundane limitation creates the central legal question, does Novartis's 2022 Patent grant incorporate a post 2017 investment falling outside treaty protection, or should it be viewed as an integral bit of Novartis's pre 2017 investment in India, particularly given that the underlying patent application was filed in 2007?
The Jurisdictional Analysis: The CSOB Precedent
The jurisdictional determination hinges on how an ISDS tribunal would interpret the scope of “investment” under the sunset clause. The CSOB v. Slovakia precedent as a potentially decisive. In that landmark ICSID case, the tribunal adopted a broad interpretation of investment, holding that even if a specific transaction standing alone might not qualify as an investment, it would fall within tribunal jurisdiction if it forms “an integral part of an overall operation that qualifies as an investment”.
Applying this precedent to Novartis presents compelling arguments on both sides. The narrow interpretation would treat each patent as a discrete investment, making the 2022 Vymada patent temporarily excludes from treaty protection. However, the broader CSOB approach could encompass the patent within the Novartis's comprehensive Indian operations, which include manufacturing facilities, research centers, and a diverse pharmaceutical portfolio established well before 2017.
The pharmaceuticals industry reliance on patent portfolios as integrated business assets strengthens the argument for broad interpretation. Unlike standalone financial transactions, pharmaceuticals patents represent culminations of multi-year research and development programme that typically commence years before patent applications are filed, let alone granted.
Substantive Treaty Obligations: The Merit Analysis
Assuming jurisdictional hurdles are overcome, Novartis would need to demonstrate breach of substantive BIT obligations, primarily Fair and Equitable Treatment (FET) and protection against indirect expropriation. The FET analysis centers on whether Novartis possessed legitimate expectation that its patent would remain inviolate from post grant opposition proceedings.
Patent Act 1970 explicitly provides for post grant opposition under Section 25(1) and 25(2). The availability of these procedures has been well established since the 2005 amendments implementing TRIPS compliances. Consequently, no foreign investor can reasonably claim legitimate expectations against the lawful application of clearly articulated domestic legal procedures.
The Eli Lilly v. Canda Tribunal's analysis is instructive here. Despite Eli Lilly's claim that Canadian Court's invalidation of patent violated NAFTA obligation, the tribunal unanimously dismissed all claims, emphasizing the judicial applications of established domestic patent law can not constitute a breach of international investment obligations. The tribunal specifically rejected arguments that promise utility doctrine applications constituted arbitrary or discriminatory treatment.
The Section 3(d) Framework and Evergreening Prevention
The substantive patent law analysis reveals the strength of India's positions. Section 3(d) of the Patent Act, 1970 represents a deliberate legislative choice to prevent pharmaceuticals evergreening by requiring that new forms of known substances demonstrate “enhancement of known efficacy”. The provisions constitutional validity was definitively established by Supreme Court's 2013 decision in Novartis AG v. Union of India, which upheld the section 3(d) as a legitimate exercise of power consistent with TRIPS Agreement flexibility.
The Patent's Office's Vymada decision established Section 3(d) jurisprudence by requiring Novartis to demonstrate therapeutic advantages of its supramolecular complex over existing sacubitril valsartan combinations. The deputy Controller finding's that “no experimental data, comparative studies or technical rationale have been provided to substantiate any enhanced efficacy” reflects orthodox applications of the Supreme Courts's Novartis precedent requiring demonstrated therapeutic superiority.
Recent reasearch confirms that Section 3(d) has successfully prevented evergreening while encouraging genuine innovations in the pharmaceutical sector. The provisions, applications to combinations patents, crystalline forms, and supramolecular complexes follows well established precedential patterns, making the Vymada decision legally predictable rather than arbitrary.
Comparative ISDS Precedents: Regulatory Sovereignty Upheld
International arbitral jurisprudence increasingly supports states regulatory autonomy in intellectual property matters, particularly regarding public health measures. The Philip Morris v. Australia case, though decided on jurisdictional grounds, demonstrate that even controversial regulatory measures affecting intellectual property rights can withstand ISDS challenge.
Australia's plain packaging legislation, which eliminated trademark rights on tobacco products, faced a US$ 4.1 billion ISDS claim under the Australia- Hong Kong BIT. While the Tribunal dismissed the case due to Phillip Morris's abusive corporate restructuring, the proceedings highlighted the substantial costs A$24 million in legal fees that states must bear even when defending successful regulatory measures.
The Eli Lilly precedent is more directly applicable, as it involved pharmaceutical patent rather than a trademarks. The tribunal's comprehensive rejections of Eli Lilly's claims, combined with its order requiring the company to pay 75% of Canada legal costs, signals arbitral willingness to sanctions frivolous challenges to legitimate patent regulations.
Policy Implications and Strategic Considerations
The Vymada case represent the tension between intellectual property protection and access to medicines that characterizes contemporary pharmaceuticals regulations. India' approach utilizing both substantive and procedural patent law provides a model for other developing countries seeking to prevent evergreening while maintaining TRIPS compliances.
The Indian Pharmaceuticals Alliance's successful post grant opposition, a rare intervention by an industry association or body, demonstrate the efficacy of collective action in contesting questionable patents. These precedents may promote similar industry coordination in further evergreening instances.
Regulatory Sovereign in the Balance
In conclusion, the revocation of the Vymada patent is a seminal triumph for India's regulatory sovereignty, indicating its ability to integrate public health with international investment law. By enforcing its existing patent laws, particularly Section 3(d), in a non-discriminatory and unbiased, India has effectively prevented pharmaceutical “evergreening” and strengthened its defense against any prospective Investor State Dispute Settlement (ISDS) challenge from Novartis. While India's legal and procedural footing appears to be usually strong, the possibility of a challenge remains, raising the critical question, if Novartis advances to the arbitration what will the ultimate outcome of the ISDS proceeding?
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