TRIPS AND AMENDMENT IN INDIAN PATENT ACT

8/3/2019 TRIPS AND AMENDMENT IN INDIAN PATENT ACT

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TRIPS Agreement and Amendment of Patents Act in IndiaAuthor(s): Sudip ChaudhuriSource: Economic and Political Weekly, Vol. 37, No. 32 (Aug. 10-16, 2002), pp. 3354-3360Published by: Economic and Political WeeklyStable URL: http://www.jstor.org/stable/4412467 .

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TRIPS Agreement n d Amendmento f Patents A c t i n I n d i a

This article examines whetherthe amendment o the Indian Patents Act, 1970 has takenadvantageof the provisions available under the TRIPSagreement,and look at the exemption,exception and compulsorylicensing provisions in pharmaceuticals.SUDIP CHAUDHURI

nder the World Trade Organi-sation's (WTO's) Agreement onTrade-Related Aspects of Intel-lectual Property Rights (TRIPS), membercountries which did not provide productpatent protection, when the TRIPS agree-mentcame into force (onJanuary1, 1995),arerequired ograntsuch protectionwithin10 years, i e, by January 1, 2005. Pendingthe introduction of such a product patentsystem, WTO members are also requiredto start the system of receiving applica-tions for product patents and grantingexclusive marketing rights.India'sPatentsAct, 1970 exempted 'foodor medicine or drug' from product patent-ing(Section 5). To comply withthe TRIPSrequirements, the Patents Act, 1970 wasamendedbythe Patents(Amendment) Act,1999 to introduce the system of ExclusiveMarketingRights EMR).Underthisamend-ment, it is now possible to make an appli-cation for a product patentin pharmaceuti-cals, though the application will not beprocessed for the grant of a patent untiltheendof2004. ButEMRcanbeobtainedforthatapplicationif apatenthas beengrantedin some other WTO member country andthe application has not been rejected inIndiaas notbeingan invention. Anotherbill(The Patents (Second Amendment) Bill,1999) was introduced in the parliamentinDecember 1999tobringaboutotherchangesinthepatentregime in line with theTRIPSagreement.The bill was referredto ajointparliamentary ommittee, whichexaminedtheprovisions and submitted a revised billinDecember2001 [JointCommittee2001].This bill with a few changes has beenapproved by the parliament in May 2002.The amended act will come into force afterreceiving the president's assent and afterit is notified as the new act. The EMRsystem has notyet been abolished. A ThirdAmendmentwillbenecessarybyendof 2004to replace the EMR system and introduceproduct patents in pharmaceuticals.

It is widely believed that productpatents tend to result in the creation ofmonopolies and hencetohigh prices.Someprovisions of the TRIPS agreement can beused to mitigate some of these adverseeffects. Within the scope of the TRIPSagreement, basically three things can bedone to ensure competition and competi-tive prices:(1) Provide exemptions from grant ofpatentsin certaincases; (2) Provideexcep-tions to product patent rights in certaincases; and(3) Providecompulsory licencesto non-patentees to produce and sell theproduct.It is well known that developing coun-tries were put under political and eco-nomic pressure to force them to acceptterms, which went against their interests[Abbott 2001]. It is important for thedeveloping countries to try to amend thenegative features. We will not be con-cerned here with these more fundamentalissues. The limited objective of this paperis to examine whether the amended act hastaken advantage of the provisions, whichare currently available. In Section I, wewill discuss the salient features of theamendments to the Patents Act, 1970.Thereafterwe will critically evaluate thesefeatures in the context of the TRIPS agree-ment. In Section I1,we will deal with the'exemption' and the 'exception' provi-sions. In Section III, we will examine thecompulsory licensing provisions.Thefocuswill be on pharmaceuticals.

TheAmendedPatentsActSome of the salient features of theamendments are as follows:Patent rights and terms of patents: Undersection 48 of the amended act, the patentowners will have the exclusive right toprevent others who do not have theirconsent, not only from making, using or

selling the invented product or process inIndia, but also importingfrom othercoun-tries.Undertheoriginal1970Act, importingwas not mentioned as an exclusive right.This is however subject to the provisioninSection 107A(b), inserted nthe amendedact, which permits parallel imports.Underthis section, "importation of patentedproducts by any person from a person whois duly authorised by the patentee to sellor distribute the product", will not beconsidered to aninfringement of thepatentright.Thus if a patentedproductis offeredfor sale in anothercountry ata lower priceby the patent holder or with the patentholder's consent, the patent holder herecannot legally stop its imports by others.The term of the patent granted will be20 years from the date of filing of theapplication for the patent (Section 53(1)).Under the 1970 act, the term for pharma-ceuticals, was five years from the date ofsealing or seven years from the date of thepatent, whichever is shorter. (For otherproducts the term was 14 years).Inventions not patentable: In line withArticle27 (2 and3)of the TRIPSagreement,the following have been excluded frompatentability inventions: (i) harmful forenvironment, human, animal or plant lifeetc; (ii) diagnostic. therapeuticand surgi-cal methods for the treatmentof humansor humansandanimals and(iii) plantsandanimals other than microorganisms butincluding "seeds, varieties andspecies andessentially biological processes for pro-duction or propagation of plants and ani-mals". One type of invention which hasnot been specifically mentioned in theTRIPS agreement, but which has beenexcluded inthe amended act isthecountry'straditional knowledge (Section 3(p)). Infact grantof patentcan be opposed on thegroundthatthe invention relatesto "knowl-edge, oral or otherwise, available withinanylocal orindigenous community in Indiaor elsewhere" (Section 25(1)(k)).

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Special provisionsfor use bygovernment:The central government or anyoneauthorisedby it may use (i e, "make, use,exercise or vend") an invention or acquirean invention for the purpose of the centralgovernment, state governments or a gov-ernment undertaking on payment of ad-equateremuneration rcompensation (Sec-tions 99 to 103). Except in circumstancesof nationalemergencies, extreme urgencyorpublic non-commercial use, thegovern-ment will have to informthepatenteeaboutsuch use. Any dispute relating to the useof the patent or that relating to the termsof such use or compensation payable foracquisition will be referred to the highcourt. Under the act of 1970, the right touse included 'the right to sell the goods'.In the amended act, the right of the gov-ernment is restricted to the "right to sell,on non-commercial basis". Under Section64(4) of the 1970 act, which has not beendeleted in the amended act, on the petitionof the central government, the high courtcan revoke the patent if the patentee has"without reasonable cause failed to com-ply with the requestof the central govern-ment" to use the patent.In this context, a reference may also bemade to theveryimportantprovision undersection 66 of the 1970 act, which has beenretained. Under section 66, "Where thecentral government is of the opinion thatapatentor themode in which it is exercisedis mischievous to the state or generallyprejudicial o thepublic, itmayaftergivingthe patentee an opportunity to be heard,make a declaration to that effect in theofficial Gazette and thereupon the patentshall de deemed to be revoked".Regulatory exception: A new section(107A) has been added to incorporatethe'Bolat' provision, as it is known in the USwhere it was first introduced in 1984[Correa2000]. Use of a patent "relatedtothedevelopment and submission of infor-mation" for the purpose of getting regu-latory approval before the expiry of thepatent will not be considered as an in-fringementof patentrights.Thiswill enablegeneric producers o market heirproductsas soon as the patent expires. Section 47of the Patents Act, 1970, which has notbeen deleted, provides other exceptions.Thepatentedproduct/processmaybe madeor used by any person for the "purposemerely of experiment or research includ-ing the imparting of instructions to pu-pils". Any patented product may be im-ported, made by or used by or on behalfof the government for 'its own use'. The

government can also import patentedmedicines for distribution in dispensariesand hospitals providing public service.Reversal ofburden ofproof. A new section(104A) has been added in the act relatingto the burden of proof in the cases ofinfringement suits. In line with Article 34of the TRIPS agreement, the burden ofproof will be on the alleged infringer.Conmpulsoryicensing: An application fora compulsory licence (CL) can be madcunder two sets of circumstances: Undersection 84, three years after the sealing ofthe patent and under section 92, anytimeafterthe sealing of the patentwith respectto a patent notified by the central govern-ment as eligible for a CL. We first discussthegeneral provisions for aCLapplicationunder section 84 and then the specialprovisions under section 92. The amendedact has elaborate provisions on CL inchapterXVI (sections 82 to94). Itprovidesdetails of:- Generalprinciples applicable to workingof patented inventions;- grounds for grant of CL:- matters to be taken into account by thecontroller of patents while consideringapplications for CL;- the procedure for dealing with CI ap-plications;- general purposes tor granting CL; and- terms and conditions of CL.The 'general principles' sound veryimpressive. In fact these are more elabo-rate than those in the act of 1970. Thegeneral principles note that patents aregranted to encourage inventions and tomake the benefit of patented inventionavailable at "reasonablyaffordable pricesto the public", to secure that these areworked in India, and not to enable paten-tees to enjoy monopoly by importing.Thatthe patent right is not abused by the pat-entee and the patentee does not "resort topracticeswhichunreasonablyrestrain radeor adversely affect the internationaltrans-ferof technology" (Section 83). The entire-Article 7 of TRIPS agreement on Objec-tives and theentire Article 8 on Principlesare listed here. Para 4 of the Doha Dec-larationrelatingto the rightof the govern-ments to take measures to protect publichealth, is also incorporated here. Theamended act also specifies the 'generalpurposes' to be followed while grantingCL, for example that 'the patented inven-tions are worked on a commercial scalein the territory of India without unduedelay and to the fullest extent that is rea-sonably practicable" (Section 89).

An application for a CL can be madeundersection 84 on the following grounds:that the "reasonable requirements of thepublic" have not been satisfied, or that theproduct is not available at a 'reasonablyaffordable price', or that the patentedinvention is "not worked in the territoryof India". If a CL is granted, then thecentral government or any one else aftertwo years of the date of granting of theCL, may apply forrevocation of the patenton similargrounds (Section 85( i)). Appli-cation for revocation shall ordinarily bedecided within one year of its being pre-sented to the controller of patents. Sec-tion 84(7) provides a list of circumstanceswhen "reasonable requirements of thepublic"will beconsidered tohave not beensatisfied, for example. when demand forthe patentedarticle has not been met to anadequate extent of on reasonable terms, amarket for export of the patented articlemanufactured nIndia s notbeing suppliedordeveloped, the patentedinvention is notbeing worked in India "on a commercialscaleto anadequateextent or is notbeing soworked to the fullest extent that is reason-ably practicable", the working of thepatented nvention inIndiaon a commercialscale is being prevented or hindered byimportation from abroad by the patentee.While processing the application, thecontroller will consider notonly theabilityand the capacity of the applicant or thenatureof invention, or the time which haselapsed and the measures which the pat-entee has taken. The controller will alsoconsider whether the applicant has madeany efforts to get the licence from thepatentee on reasonable terms and whethersuch efforts have not been successful"withina reasonable period as thecontrol-ler may deem fit". As under section 87,when the controller is satisfied that theapplication for the grant of a CL or therevocation of the patent after the grant ofCL has a prima facie merit, the applicantwill have to serve copies of theapplicationto the patentee and to advertise the appli-cation in the official gazette. The patenteeor any other person may oppose the grantof the CL within the period specified bythe controller, who can also extend thetime. Thereafter the controller will decideon the case after hearing both sides. Anydecision by the controller to granta patentcan be contested. Under section 117A, anappealcanbe made to theAppellate Board.The applicant will be able to use the CLonly if and afterthe Appellate Boardturnsdown such appeals.

Economic and Political Weekly August 10, 2002 3355


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So far as the terms and conditions forthegrantof CLareconcerned, theamendedact mentions, forexample thatthe CL willbe for the "predominant purpose of sup-plying in Indian market" and will be forthe "balance term of the patent unless ashorter term is consistent with publicinterest". Unless specifically directed bythe central government in public interestand authorised by the controller, thelicencee cannot import the patentedproduct.Theamended actdoes notspecifyany upper imit for the royalty ratepayableby the licencee to the patentee. The ratewill have to be 'reasonable' taking intoaccount such factors as the nature of theinvention and the expenditure incurred tomake the invention. A CL granted can beterminated"if and when the circumstancethatgave rise to thegrantthereof no longerexist and such circumstances are unlikelyto recur".Compulsory licensing under Section 92:Any time after the sealing of the patent,an application for a CL can also be madeunder section 92 for a patent notified bythe central government in the officialgazette. Such a notification can be madewhen the central government is satisfiedthat in circumstances of national emer-gency, extreme urgency, or public non-commercial use, it is necessary to grant aCL for such a patent. The procedurementioned above for the grant of CL willhave to be followed for these applicationstoo, except that the applicant will not berequired o firstapproachthe patentee andtry to get a voluntary licence. The proce-dure,however, may not be followed if theemergency, or extreme urgency or publicnon-commercial use is due to public healthcrises including those relating to AIDS,tuberculosis, malaria, etc. But any deci-sion by the controller here too can bechallenged and referred to the AppellateBoard. This special provision for exempt-ing the usual procedure in public healthcrises was not there in the bill recom-mended by the Joint Committee (2001).It was incorporated n the amendments inthe last minute. As we will see below thisis a potentially very importantprovision.

IIExemptionsndExceptionsExemptions: Under Article 27(1) of theTRIPS agreement, patents will have to beprovided for inventions, which are "new,involve an inventive step and are capableof industrialapplication". The agreement

however does not define these terms.Thisprovides some flexibility. A developingcountry like India can interpret hese termsso as to restrict the number of patents[Correa 2000: Abbott 2001]. There is anenormous difference between the newdrugs ('new chemical entities') that aredeveloped globally each year and thenumber of drug patentsawarded. The gapis explained by new dosage forms, formu-lation,combinationsof existing molecules,etc. As the WHO (2001) has warned, ifthe patentability standards are too broad,i e, if 'new', 'inventive' are defined toinclude all the new forms of the samemolecule, then effectively the patent lifecanbeextended beyondthe20-year TRIPSminimum. WHO hasadvised governmentsto exercise discretion in this regard.Chap-ter II (sections 3 to 5) of the Patents Act,1970 deals with 'inventions not patent-able'. As we have mentioned above, Indiawill have to carryout a Third Amendmentby end-2004, to replace the EMR systemby a product patent system. While doingso, the law can provide the qualificationthat product patents will be granted onlyfor new drugs which represent significanttherapeutic advances. Patents may not begranted for lower level innovations, suchas new methods of dosage delivery or newcombinations of existing therapeuticcom-pounds [Keayla 2001; Abbott 2001]. Oneof the arguments in favour of productpatents in pharmaceuticals is that thedevelopment of new drugs is a costlybusiness and hence there must be enoughfinancial incentive to continue to do so.But it is well known thatmany of the newdrugs are unnecessary combinations ofexisting drugs or simple modifications ofexisting drugs,whichrepresentpracticallyno therapeutic advance [Correa 2001].There is no reason why the developingcountries should subsidise such wastefulexpenditure.Exceptions: An unfortunate part of theTRIPS agreement is that the spirit ofArticles 7 (on objectives) and 8 (on prin-ciples) is not adequately reflected in thewording of the operative sections of theagreement [Keayla2001]. Article28 speci-fies thatpatentowners will have exclusiverights to prevent others from "making,using, offering for sale, selling or import-ing" the patented product. There is nocorresponding section on the obligationsof the patentees, though Article 7 speaksof balancing the rights and obligations.Article8, speaks aboutprotectionof publichealth. But 'public health' is not men-

tioned anywhere else in the agreementeven once. Article 30 permits membercountries to "provide limited exceptionsto theexclusive rightsconferredbyapatent"subject to the conditions that it does not"unreasonably conflict with a normal ex-ploitation of the patent and do not un-reasonably prejudice the legitimate inter-ests of the patent owner, taking accountof the legitimate interests of thirdparties".But theTRIPS agreement does not containany other explanation about the terms,'limited exceptions', 'unreasonablyconflict', 'legitimate interests'.The fact that the obligations of thepatentees as mentioned in Article 7 or theexceptions to the rights of patentees asmentioned in Article 30 have not beenelaborated, does not mean that these areunimportant. In fact nothing prevents anational law from elaborating on theseobligations and exceptions. The fact thatsome provisions of TRIPS agreement areambiguous, does not mean thatdevelopingcountries will have to interpretit in termsfavourable to patentees from the devel-oped countries. While amending the na-tional law to make it TRIPS consistent, aspara 4 of the Doha Declaration has af-firmed, "theAgreement can and should beinterpretedand implemented in a mannersupportive of WTO Members' right toprotect public health and, in particular,topromote access to medicines for all". Thedeclaration hat"theTRIPSagreementdoesnot and should not prevent members fromtaking measures to protect public health"should be interpretedto mean thatexcep-tions under Article 30 can be used forpublic health reasons.While carrying out the Second Amend-ment in 2002, Indiacould have been takenthe following steps. India still has thechance of doing so during the proposedThird Amendment.Elaboration of the obligations of paten-tees: Abuse of intellectual propertyrightsshould be recognised as a ground forrevoking the patent. If as Article 61 ofTRIPS agreement has provided, criminalprocedures and penalties can be appliedin cases of infringement of intellectualproperty rights, there is no reason why anabuse should not be penalised.-For exam-ining whether the rightshave been abused,a proper procedure may be prescribed.This threat tself may promptthe patenteesto becareful intheirpricing strategiesevenwhen they are the sole producers.Elaboration of rights of non-patentees:Exceptions to exclusive rightsof patentees



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possible under Article 30 have been usedin the Amended Act (Section 107A) in thecontext of the 'Bolar' provision. Again aswe have mentioned above, Section 47 ofthe Patent Act permits the use of thepatentedproduct "for the purpose merelyof experiment or research including theimpartingof instructionsto pupils".Theseare important provisions. To avoid anyambiguity, it should be clearly understoodthatthenon-patenteescanexperiment withthe patented product and develop theirown processes of manufacturing. How-ever they cannot use such processes forcommercial purposes unless they areauthorised to do so. As the Doha Decla-ration has affirmed, "the TRIPS Agree-mentshall be read in the lightof the objectandpurposeof theAgreementasexpressed,in particular, in its objectives and prin-ciples". Such possibilities of experimen-tation will help realise the objectivesmentioned in Article 7, viz, promotion oftechnological innovation and transfer anddissemination of technology. This is alsoimportant or maintaining anddevelopingefficientalternatives oprotectpublichealthand to prevent patentees from abusingpatent rights (Article 8 on Principles).R and D is a continuous process. If theindigenous sector is asked once in a whiletodevelop aprocess, it is possible thattheymaynot be able todo so. Theopportunityofusing the patented product for R and Dpurposes, will enable the indigenous firmstobereadywithefficient processes and usethese whenevertheyarepermitted odo so.As we will discuss in the next section,a country like India, which has the manu-facturing capacity, can use the provisionsof compulsory licensing to produce pat-ented drugs. But the majority of poorcountries cannotuse such licences becausethey lack thecapacity to manufacture.TheTrade Ministers at Doha has recognisedthis criticalproblemandhas instructed theCouncil for TRIPS to find an expeditioussolution to this problem (Para 6 of theDoha Declaration). Some developingcountries and NGOs such as MSF, CPT,HAI andOxfamhave arguedthat a simplesolution to the problem is to interpretArticle 30 exceptions to allow countries toexport generic drugs to countries whichcannot produce these themselves [Mayneand Bailey 2002]. The WTO panel in theCanada- Generics dispute case has inter-preted the Article 30 exceptions in verynarrow terms. Abbott (2002) has arguedthat even within the parameters of thenarrow interpretationof the panel, there

is room for an Article 30 exception formaking and exporting to the least devel-oped countries.While amending the patents act, Indiacould have interpretedArticle 30 to permitsuch exports. This would have helped notonly theimportingcountries but also India.This would have provided a larger spaceof operations to the generic producers forefficient production. It appears that thegovernment did not want to take any risk.Narrowinterpretations f the TRIPS agree-ment favouring the interests of patenteesfrom developed countries and the threatof retaliation have often made the govern-ments of developing countries insecureand have preventedthem frominterpretingthe TRIPS agreement in termsfavourableto their national interests [Abbott 2001].But under the WTO rules, unilateral tradesanctions cannot be imposed based onalleged failures to comply with the TRIPSagreement. WTO provides for a disputesettlement process. India has the freedomto interpretTRIPS and amend her patentlaw accordingly. She is required o changespecific provisions only when the decisionby a dispute settlement panel goes againsther and she loses the appeal in the Appel-late Board [WHO 2001]. Thanks to thepublic campaign launched by NGOs suchas MSF, CPT, Oxfam and the dropping ofcomplaints by pharmaceutical companiesand the US government in South Africaand Brazil respectively, the environmentright now is much more congenial to aflexible interpretationof the TRIPS agree-ment. The question of affordability andaccessibility of medicines is now morewidely acknowledged than ever before. Itwill be unfortunate f thegovernmentcowsdown to actual or perceived threat anddoes not do all that can be done undertheTRIPS agreement to protect public health.

IIICompulsoryLicensing nTRIPSAgreementandAmendedActAs we have mentioned in Section I, thecentral government has wide rangingpowers in the amendedact, to use, acquireor even revoke a patent.Fornon-commer-cial purposes,thegovernmentcan authoriseanyone to produce a patented product,for example medicines for distributionin government hospitals. (Of course, itis a different matter to what extent the

government will be able toor will actuallyuse these powers, which are not to the

liking of the large pharmaceutical com-panies holding thepatents). Butto producea patented product for commercialpurposes, non-patentees will requireeither a voluntary licence from the paten-tee or a compulsory licence from officialauthorities.Article 31 of the TRIPS agreementdealing with CL, does not place any re-striction on the grounds under which a CLcan be given. Incase there were anydoubt,theDoha Declaration hasmade it clear that"Each member has the right to grantcompulsory licence and the freedom todetermine the grounds upon which suchlicences are granted".The problem is thatcertain conditions listed in the article willhave to be satisfied. These include: (i) thatauthorisation of such use will have to beconsidered on itsindividualmerits;(ii) thatbefore permitting such use (except in suchcases as situations of national emergen-cies, extreme urgency, public non-com-mercial use), the proposed user will haveto make efforts over a reasonable periodof time to get a voluntary licence on rea-sonable commercial terms; (iii) that thelegal validity of the CL decision and theremunerationwill be subject tojudicial orother independent review; and (iv) the CLcan be terminatedif and when the circum-stances which led to it cease to exist andare unlikely to recur. However as severalcommentators ncluding, Watal(2001) andLove (2001 ), have argued,thegroundsandthe procedure can be so specified as tomake these conditions less onerous thanwhat these appearto be. Forexample, theground can be as it is in China, that anyqualified entity who fails to get a licencefrom the patentee on reasonable terms andwithin a reasonable period of time canapply for andbe granteda CL. Guidelinescan be issued for 'reasonable terms'. Themaximum time period can also be stipu-lated. In this case, the procedure can bevery simple. If thequalified entity does notget a voluntarylicence within that time andon these terms, it can be given a CL. Tofind this out would be the considerationof 'individual merit'. If this is the way thewordingof thegroundfor CL is done, thenso long as the patentee does not give avoluntary licence on reasonable terms,thenon-patentee will continue to enjoy theCL. And if the patentee does give a vol-untary licence on reasonable terms thenobviously the need for giving a CL,willnot arise. Of course the patentee can askfor a review of the CL decision. The TRIPSagreement allows the review to be non-



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judicial. This can be a simple administra-tive process.General provisions: We first examine thegeneral provisionsforCLapplicationundersection 84 and then the special provisionsunder section 92. The Patents Act, 1970had a clear strategy - to eliminate themonopoly of the transnational corpora-tions (TNCs) and remove the bottlenecksin the previous regime which preventedthe indigenous firms from producingpatenteddrugs. And it was done througha very simple processof abolishing productpatents in drugs. The act of 1970 also hadprovisions for CL for pharmaceuticalprocesses. In fact under section 87 of the1970 act, any process patent related topharmaceuticalswere to be endorsed withthe words 'Licences of right' within threeyears of the sealing of the patent. In suchcases, anyone could ask for a licence fromthe patent owner to use the patented pro-cess on mutually agreed terms. But a CLwas redundant in the previous regime.Being free to produce the patented drugs,the indigenous firms could develop theirown processes andthey indeed did so. Butin the product patent regime being intro-duced in India, the indigenous firms willnot be able toproduceapatenteddrugevenif they develop the processes of manufac-turing, unless they get a CL. Hence it isof fundamental mportance ohaveasimpleandeasy to administer and implement CLsystem. The TRIPS agreement does notprohibit this. But this has not been done.The special CL provisions for pharmaceu-ticals in the 1970 act was abolished. Forother products, the 1970 act had an elabo-rate and cumbersome provisions for thegrant of CL, which was not effective[Bagchi et al 1984]. The amended act hasbasically adopted the same structure forpharmaceuticals too. This procedure willhave to be followed for all patents exceptthose notified by the government undersection 92 fortackling public health crises.The basic problem with the amended actis that it lacks any positive strategy. Itappears that no attempt have been madeto takeadvantageof the flexibilities whichtheTRIPSagreementprovides. The entireamendment has been carried out very me-chanically. It starts with the relevant textof the Patents act, 1970 and then makessome changes to make itTRIPScompliant.This has been done by deleting someclauses of the 1970 act and lifting someclauses from the TRIPS agreement andinserting these in the amended act. In theprocess many negativeaspects,which could

have been tackled without violating theTRIPS agreement, have remained in theamended act.As Article 1 of theTRIPSagreementhasmade it clear, member countries are "notobliged to implement in their laws moreextensive protection than is required bythis Agreement ...". But the governmenthas preferred o adopta stricterCL regimethan what is required under the TRIPSagreement. As we have mentioned above,the amended act has elaborate provisionson CL and the text is impressive. But whatmatters most in actual practice are thegrounds for the grant of CL and the pro-cedure. The wording of the grounds forgranting Cl. in section 84 is not amenableto easy interpretationandis notoperation-ally useful and the procedure specified iscumbrous. The procedure is open-endedwithout any time limit imposed at anystage. The copy of the CL application willhave to be advertised in the official ga-zette, though this is not requiredunder theTRIPS agreement. The patentee or anyother person may oppose the applicationand will have to be given adequate timefor doing so. The controller will decideonly after giving both the parties an op-portunityto be heard.A CL granted by thecontroller can be opposed. Such appealswill be considered by an Appellate Boardbefore a CL is ultimately permitted.Whether a patentis worked in India ornot,can perhaps be objectively assessed. Butthe grounds of "reasonable requirementsof the public" or "reasonably affordableprice" can easily be challenged by thepatentees. Then arguments and counter-arguments will follow. After all these archeard by the controller-and then by theAppellate Board, in case of an appeal, itmay be years before a CL is granted, if atall. The entire process is excessively le-galistic and provides the patentees theopportunity to manipulate by litigation.The huge expenses involved infighting thelarge pharmaceutical companies holdingthe patents may dissuade the non-paten-tees from applying for licences in the firstplace. These are not mere theoreticalpossibilities. This is precisely what hap-pened in India under the Patent and De-signs Act of 1911, which was in force tillthe Patents Act, 1970 replaced it[Chaudhuri1984]. Itmay notbe irrelevanthere to refer to the experience under theAct of 1911.The Act of 1911, which recognisedproduct patents, also had elaborate provi-sions for CL as in the amended act. The

act of 1911 provided for the grant of CLin the case of misuse or abuse of patentrights. The Patents Enquiry Committee(1950) found that the foreign patenteesdidmisuse or abuse their rights, for exampleby importing the patented product ratherthanmanufacturing there,fixing thepricesathigh levels, notallowing othersto manu-facture the product even when it was notengaged in manufacturing. But, as theCommittee observed, the provisions re-garding CL were "wholly inadequate toprevent misuse or abuse of patent rights,particularly by foreigners" (p 172). ThePanel on Fine Chemicals, Drugs andPharmaceuticals (1947), appointed by thegovernment also reportedearlier that nota single CL could be obtained because ofthe wording of the relevant provisions(p 15). The provisions regardingCL (Sec-tions 22 and 23) were amended in 1950,following the recommendations made bythe Patents Enquiry Committee in its in-terim report submitted in 1949. InJ952,an entirely new section (23CC) dealingspecifically with drugs (and food, insec-ticide, germicide, fungicide, surgical orcurative device) was added. But the pro-cedure specified in section 23D of the1911 act was cumbrous. In fact it is thissame procedure which the 1970 act andthe amended act have inherited.Hence theexperience under the Act of 1911 wouldbe a rough guide to what is expected to

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happen in future in India unless somecorrective actions are taken.Taking advantage of the cumbrousprocedure, the foreign patentees couldcontinue to effectively prevent or delaythe use of CL. Let us give some ex-amples: A government research institute(Haffkine Institute) applied for a compul-sory licence. In response to the notice

served on the patentee, the firm suggestedthat they were willing to give the licencevoluntarily on the basis of royalties to befixedthroughnegotiations.Theydemandedan absurdly high rate of 25 per cent. Asin the amended act, there was no limit onthe time that can be taken. It took morethanfour years to reduce it to 10 percent,which was however still higher than thelimit of 5 percent stipulatedbytheReserveBank of India at that time. By that time,theinstitutedecided toabandontheproject[Joint Committee on the Patents Bill,1967:452]. An indigenous firm (Neo-PharmaIndustries) sought a licence fromParke Davis to manufacture a drug. Butwhereas the subsidiary company in Indiapointed out thatthe matter was beyond itsjurisdiction, theparentcompany in the USinsisted that the indigenous firm shouldfirstdiscuss the matterwith the local sub-sidiary. It took more than two years todecide as to who would negotiate. At lastwhen the negotiations started with theparent company, they did not formallyrefuse to grant the licence but simply satover theproposal.Finally when a compul-sory licence was soughtandgranted,ParkeDavis went to the courtandobtained a stayorder[JointCommittee on thePatentsBill,1965:493]. The hazards of obtaining a CLwhich include legal battles, perhaps ex-plainwhy so few applications for CL havebeen made undersection 23 CC. Till 1972,i e, when the 1970 Act came into force,only five applications were made for CL.It was grarted in only two cases and re-fused in one case. The applications wereultimatelywithdrawn ntheremainingtwocases [Chaudhuri 1984].

One change introduced in the amendedact is that the appeals will be referred toan Appellate Board rather than to highcourts as was done under the Acts of 1970and 1911.TheAppellateBoard o beknownas the Intellectual Property AppellateBoard,will be the same as thatestablishedundersection 83 of the Trade Marks Act,1999. But the structure is basically judi-cial. The board will operate throughbenches with at leastonejudicial member.Any proceeding before the board will be

considered to be ajudicial proceeding andindischarging its functions such as exami-nation of witnesses, receiving evidence,the Appellate Board will have the samepowers as enjoyed by a civil court.It s possible thatcompared ohighcourts,the specialised Appellate Board may takeless me in the disposal of appeals. Butconsidering the procedureprescribed, it isdoubtful to what extent it will be able totake quick decisions. As we have men-tioned above, Indiahad theoption to adopta simple administrative process. But thathas not been done.Not only is the process of granting CLin the amended act lengthy. It is besiegedwith uncertainty. As we have mentionedabove, the TRIPS condition regardingter-mination of CL could have been tackledby suitably framingthegroundforCL. Butthis has not been done. With no certaintyabout whether they will get a CL, and ifso for how long, it is likely that the indig-enous firms may be hesitant to undertakeinvestments togenerateefficient processes.Special provisions. The amended actcontains the provision that for a patentnotified by the central government asnecessary fortackling public healthcrises,the controller may granta licence withoutfollowing the cumbrous procedure men-tioned above. This is a positive provision.But the benefit of this provision will verymuch depend on how this is implemented.The 'Rules' foradministering heamendedact should be so framed that it is possibleto use these provisions without any hassle.We have suggested below some simpleadministrative steps.Whatcan still be done: If CL is to be usedto stimulate competition andcheck prices,then we require efficient non-patenteeswho can put to the market products atreasonableprices.IntheSouthAfricaAIDScase, the question of CL acquired impor-tance because there were efficient non-patentees such as Cipla and Ranbaxy inIndia. The space which the Patents Act,1970 provided to them, was one of theimportant factors behind the success ofthese indigenous firms. Before the intro-duction of the Patents Act, 1970 in 1972,the TNCs dominated the industry n India.They legally prevented indigenous firmsfrom producing patenteddrugseven whenthe processes were developed indepen-dently. The Act of 1970 by de-recognisingproduct patents in pharmaceuticals andthereby eliminating the monopoly statusof theTNCs, providedtheindigenous firmsthe opportunity to realise their potential

and in the process further enhance theircapabilities. The technical skills devel-oped indigenously were used to generateprocesses for manufacturing the latestdrugs. With expansion, first in the domes-tic market and then in the internationalmarkets, many of these indigenous firmstransformed into dynamic and efficiententities [Chaudhuri 2002a]. If the intro-duction of product patents in India resultsin a drastic reduction in the space ofoperations of these firms, then they arelikely to lose their dynamism. If once ina while they get a licence, it is likely thatthey will not be able to develop efficientprocesses andproduceatreasonableprices.If their prospects are bleak then they maybe tempted togo forcollaboration with theTNCs rather hancompeting against them.Such a trendhas already started. To makeeffective use of CL, it is important o haveindependent and efficient non-patenteeswith adequate space of operations. And todo so in a product patent regime, it isimportantto ensure thatCL is grantednotonce in a while but on a regularbasis. TheTRIPS agreement does not prohibit thisand hence there is no reason why forpreventing monopolies this should not beattempted.There is enoughjustification tocarryoutfurther amendments to simplify the gen-eral provisions of CL in the act to enlargeits use. As we have mentioned above, itis possible to frame the grounds for CLin such a way that licences can be grantedwithout delay within a specified time.Consideration of the appeals also can bemade simpler and faster by constructingsuitable grounds and formulating properguidelines. The judicial review can bereplacedbyasimple administrativereviewto make it a less time consuming affair.In the more immediate context, theeffectiveness of CL can also be improvedby framing proper rules. The rules for-administering the amended act have notyet been issued. While framingtheserules,some of the administrative steps that canbe takenareas follows [Chaudhuri2002b]:- Rather than adopting a case by caseapproach, the central government maynotify the list of medicines eligible for CLin public health crises. The list should beprepared in consultation with health ex-pertsandmaybe revised fromtime to time.Any relevant new drug should be addedto the list. Both Para 5(c) of the DohaDeclaration and section 92 (3) of theamended act have only given examples ofpublic health crises, for example AIDS,



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tuberculosis, malaria. Public health crisesshould be interpreted n broad terms. Thelist may be prepared bearing in mind thespecific situation in the country, such asthe disease pattern,the need for drugs andthe present availability. It is well knownthat majority of the Indian people livingin rural areas and in urban slums have noor little access tomoderndrugs. Medicinesnecessary to take care of the health needsof these people should be included inthe list.- The inclusion of any drug in the listcannot be a ground for opposition andappeal. There is nothing in the TRIPSagreement or the amended act to suggestthat it should be so. If a CL is granted forany of these drug, the in other words,- As, for example in Japanand Germany.guidelines may be issued for the royaltyto be paid to the patent holders in caseof CL.- For any drug in the public health list,the controller may immediately after re-ceiving anapplication, grant heCL, fixinga royaltyrateusing the royalty guidelines.Any opposition orappeal against thegrantof a CL in this case can only relate to theroyalty rate fixed. (As we have arguedabove, the patentees'should not have therightto object to the inclusion of any druginthe list.) The opposition to the rate fixedshould not hold up the use of CL. Whilethis is being adjudicated,the non-patenteecould begin to use the patent on the basisof an undertaking that the royalty ratefinally decided will be paid in full. Thecase by case consideration of the royaltyrates payable and the opportunity to op-pose and appeal against the royalty ratefixed will satisfy the Article 31 clauses (a),(i) and (j) relating to consideration ofindividual merits and review of the CLdecision.- For otherdrugs too, a simple time boundproceduremay be formulated for consid-ering and deciding on CL applications.The maximum time permissible at eachstage maybe specified. The royalty guide-lines may be used to reduce uncertaintyand speed up decisions.

IVRecapitulationndConclusionWhile amending the Patents Act, 1970,India has not taken full advantage of theflexibilities, which the TRIPS agreementprovide. While deciding on the inventionseligible for patents, the terms 'new','inventive' could have been defined to

exclude lower level innovations such asnew dosage forms or new formulationsfrom thegrantof patents.This would haverestricted hepumberof patents.Article 30of the agreement provides for limitedexceptions to patent rights. This couldhave been used to permit non-patentees inIndia to produce and export patentedmedicines to least developed countries,which cannot produce these themselves.This would have been beneficial to bothIndia and these countries. But the mostglaring failure relates to compulsory li-censing. In a product patent regime, aproper compulsory licensing system is offundamental importanceto ensurecompe-tition and competitive prices.' But thewording of the general grounds for com-pulsory licences is not amenable to easyinterpretation and is not operationallyuseful. The procedure is cumbrous andtimeconsuming. The process is muchmorelegalistic than what the TRIPS agreementrequires. It provides opportunities to thepowerful patentees to manipulate the pro-cess by litigation to prevent others fromgetting such licences. If the bias in thePatents Act, 1970, which did not grantproduct patentsin pharmaceuticals,was infavour of the non-patentees, the bias in theamended act is clearly in favour of thepatentees. The aim appears to have beento be fair to the patentees and not todeprive them of the exclusive patentrightsexcept under very special cases. Theobjective of the amendments was to com-ply with the TRIPS agreement. But Indiahas provided a more extensive protectionto patentees than what is required by theagreement. 5n[An earlier version of this paper (completed inmid-June2002), was presentedat a conferenceon 'MedicalPatents:GlobalEthicaland EconomicPerspectives orDevelopingCountries',organisedby the North-SouthPriorityResearchAreaof theUniversityof Copenhagenat Copenhagen, May6, 2002. It was also used for a presentation t theNationalConsultationMeetingon RationalDrugUse andPolicy, organisedbytheVoluntaryHealthAssociationof India at New Delhi. May 27-28,2002. The author benefited immensely fromdiscussionswith B KKeayla,JayashreeWatalandJames Love and comments from Carlos Correa,JorgeKatz,FrederickAbbottandAmiyaKBagchi.Helpreceived fromanddiscussions withIA Alva,G Wakankarand Amitava Guha, and financialassistance rom heIndian nstitute f ManagementCalcuttaare also gratefullyacknowledged.Theauthorcan be contacted at [email protected], Frederick M (2001): 'The TRIPS

Agreement,AccesstoMedicinesand he WTO

Doha Ministerial Conference', OccasionalPaper 7, Quaker United Nations Office,Geneva.- (2002):'CompulsoryLicensing orPublicHealthNeeds:The TRIPSAgendaat the WTO afterthe Doha Declaration on Public Health',Occasional Paper9, QuakerUnited NationsOffice, Geneva.

Bagchi, Amiya Kumar, ParthasarathiBanerjeeandUttamKumarBhattacharya1984): 'IndianPatentsAct and Its Relationto TechnologicalDevelopmentin India:A Preliminarynvesti-gation', Economic and Political Weekly,February18.Chaudhuri,Sudip (1984): 'IndigenousFirms inRelation to the TransnationalCorporationsnthe Drug Industry n India'.unpublishedPhDthesis, Jawaharlal Nehru University, NewDelhi.- (2002a): 'The Pharmaceutical Industry' inSubirGokarn. Anindya Sen and RajendraVaidya eds),TheStructure f IldianIndustry,Oxford University Press. New Delhi,(forthcoming).- (2002b): 'CompulsoryLicensing under India'sAmended Patent Act' in TechnologyPolicyBriefs, Volume I, Issue 3, United NationsUniversity Institute for New Technologies,Maastricht,(forthcoming).Correa.Carlos(2000): IntegratingPublicHealthConcerns into Pateit Legislation inDevelopingCountries,SouthCentre,Geneva.- (2001): 'Patent Law, TRIPS and R and DIncentives: A Southern Perspective', CMHWorkingPaperNo WG2:12,CommissiononMacroeconomics and Health, WHO.Joint Committee (2001): The Patents (SecondAmenderent)Bill, 1999 -- Reportof the JointCommittee, ajyaSabhaSecretariat, ew Delhi.Joint Committee on the Patents Bill (1965):Evidence, VolumeII, Lok SabhaSecretariat,New Delhi, (Published in 1966).- (1967): Evidence, Volume 1. Lok SabhaSecretariat,New Delhi, (Publishedin 1969).

Keayla,B K(2001): 'Issues of ImplementationfTRIPS in India', paper presented at theInternationalymposiumonTRIPSandAccessto Medicines, June 4.Love, James (2001): 'Compulsory Licensing:Models for State Practice in DevelopingCountries,Access to MedicineandCompliancewith the WTO TRIPS Accord', Prepared orUNDP (www.cptech.org).Mayne,Ruth and Michael Bailey (2002): TRIPSand Public Health: The Next Battle, OxfamBriefing PaperNo 15.Panel on Fine Chemicals, Drugs and Pharma-ceuticals (1947): Report, Delhi, GovernmentofIndia,Departmentf ndustries ndSupplies.PatentsEnquiryCommittee(1950): Reportof thePatents Enquiry Commilittee (1948-50),Government f India,Ministryof Industry ndSupply, Delhi.Watal, Jayashree(2001): Intellectual PropertyRights n the WTO ndDevelopilngCountries,Oxford UniversityPress, New Delhi.WHO (2001): 'WHO Policy Perspectives onMedicines:Globalisation,TRIPSandAccessto Pharmaceuticals', World HealthOrganisation,Geneva.


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TRIPS AND AMENDMENT IN INDIAN PATENT ACT

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