On Monday the board dismissed the petition, although it did order Natco Pharma to pay a royalty of 7 percent on sales of generic Nexavar to Bayer, an increase from the 6 percent royalty that had earlier been set.
Also, the board fined Natco Pharma 50,000 rupees for presenting incorrect facts during the legal proceedings. The amount would be donated to a cancer treatment hospital, the board ordered.
Announcing the decision, Justice Prabha Sridevan said the kidney and liver cancer drug should be available at an affordable price to everybody.
Bayer said in a statement it "strongly disagreed" with the conclusions of the board, adding that it would seek to challenge it at the High Court in Mumbai.
"The challenges faced by the Indian healthcare system have little or nothing to do with patents on pharmaceutical products as all products on India's essential drug list are not patented," the company said.
Natco Pharma Company Secretary M. Adinarayana told reporters the board had delivered a "reasoned, detailed" decision that could be "sustained in any court of law".
In a separate case, Bayer has accused another Indian drugmaker, Cipla , of infringing its patent on Nexavar. Cipla had launched its generic version of Nexavar before Natco won the compulsory licence.
Cipla undercut Natco's price in May last year and now sells the drug at 6,840 rupees for a month's dose.
Among other setbacks for Western drug companies, India has revoked patents granted to Pfizer Inc's cancer drug Sutent, Roche Holding AG's hepatitis C drug Pegasys and Merck & Co's asthma treatment aerosol suspension formulation.
Another case involving drug patents is currently in front of the Supreme Court, with Novartis battling against an earlier decision refusing it a patent on cancer drug Glivec. New Delhi has also taken other measures, such as controlling the prices of generic medicines and providing free medicines at government-run hospitals that cater to the country's poor.
Last week a government panel recommended a formula to curb prices of patented drugs to make them affordable for the world's second-most populous country.
($1 = 54.90 rupees)
(Additional reporting and writing by Kaustubh Kulkarni in MUMBAI; Editing by Alex Richardson)
The Govt.of India has to be praised for rejection of patents on life-saving drugs. In fact patents, proprietary rights, copyrights, intellectual property rights and any similar protection must be abolished in respect of food, medicines, knowledge, software, education, essential commodities, any form of plant and animal life and products containing plant and animal sourced ingredients. Monopolist companies are known to employ professional criminal syndicates to quell competition, and bribe to keep up their profiteering. Therefore the Government and the judiciary have to deal with them in a very harsh manner.