Amendments to Patents Act - options under TRIPS

WHILE INDIA is on the threshold of legislating a new Patents Act consistent with the TRIPS agreement, it is important to assess the implications of the consequent revisions to the Indian Patents Act 1970 on Indian industry in general and the pharmaceutical industry in particular. Even within the ambit of the provisions under TRIPS, there is considerable leeway to interpret most of its clauses in a manner which more or less will meet the specific needs of developing countries and arrive at equitable national legislations that will benefit them.

A patent system and practice, largely modelled on the British law, prevailed in India until the 1970 Patent Act came into force in April 1972. In the earlier Act, product patents for all inventions were allowed, the term of the patent was uniformly set at 14 years and other provisions for compulsory licensing, imports and burden of proof clause, all strictly followed the British system.

However, even though patents were considered to be the most important component that led to the industrial revolution in the western world, the first two decades of post-Independent India witnessed very little impact of patents on the industrial scene, particularly in the innovation-dependent industrial segments. Doubts were then expressed from many quarters whether in a developing country such as India, the patent system was a stimulus to industrial growth or a deterrent for investments in innovation and the resultant industrialisation. In other words, in the opinion of many, the system provided for market dominance and monopoly by the patentees, who by and large were large multinational corporations, with very few patents arising out of Indian R & D efforts.

It was against this background that committees headed by Mr. Justice Rajagopala Iyengar and Mr. Jai Sukhlal Hathi deliberated extensively on the issues involved, the latter concentrating on the pharmaceutical industry.

Patents Act 1970

The Indian Patents Act 1970 was a landmark legislation, which in many ways far exceeded the restrictions put on the patent system by other like-minded countries such as Brazil, Argentina, Chile and China to enable local production and marketing of patented drugs at prices much lower than their counterparts in the patent- strong developed countries. The achievements of the Indian pharmaceutical industry during 1970-95, that is, until the World Trade Organisation was set up, is part of history, and they have been rightly and well accepted as one of the success stories of post-independent India.

Even though, in value terms, the Indian industry has only one per cent of the world's market, in volume terms, Indian production of bulk drugs is 7-8 per cent of global pharmaceutical output in view of low prices commanded by the Indian industry. By that token, and in terms of technological capabilities, particularly in chemical process technology, India today occupies a pre- eminent position in the production of bulk drugs, even for the global generic markets. And yet, it is clear that the Indian industry has not realised its full potential to become a global player.

One of the important reasons, often quoted, is the perception of the leading MNCs that India will be a safe investment site only when an internationally harmonised patent system, which respects intellectual property in all its forms is operative. The establishment of WTO, which now is the administrative and dispute resolving agency for all matters related to TRIPS, has made it obligatory for India to honour all its commitments to safeguard the intellectual property rights of the owners.

Impact of TRIPS

According to the dictates of TRIPS and WTO, India had to amend its patent laws in two phases. The first phase included the provisions for filing product patents and the grant of exclusive marketing rights (EMR) for five years from the date of such grant for product patents filed after January 1, 1995, if and when all the necessary conditions for the grant of EMR are satisfied. In the second phase, the full amendment of the 1970 Patents Act that will meet the country's obligations under TRIPS had to be completed by 2000. The full implementation of an internationally compatible Act needs to be done only by January 1, 2005.

The first phase is already over and enactment of the final Act in the second phase, which is overdue, is likely to come through during the course of the current year. The debates on the issues involved, which may have several implications on the overall growth of the pharmaceutical industry, including, foreign and domestic investments in this sector, R&D and international trade are ongoing in India and other developing countries. It is therefore important that all these aspects are carefully considered from all angles, while finalising the new Indian Patents Act.

What needs to be done?

It is clear that as a founder member of the WTO, India has to work within the confines of the provisions and articles enunciated and approved by the world body. What therefore needs to be done is to ensure that within those provisions, the new national legislative measures will enable the industry, trade and the country's economy derive maximum benefits to become a globally competitive industrial power. What then are these issues where there is scope for wider and more advantageous interpretations of some of the key elements incorporated in TRIPS?

Unlike the general perception of many, the TRIPS Agreement provides, both in letter and spirit, for considerable manouvering to make it developing countries-friendly.

For example, under Article 8.1, it states that "Members may, in formulating or amending their national laws and regulations, adopt measures necessary to protect public health and nutrition, and promote the public interest in technological development, provided that such measures are consistent with the provisions under this agreement." It is important, however, to realise that under the Most Favoured Nation Treatment (MFN) clause, the legislative provisions and their implementation should be uniformly applicable to inventors and applicants from all member countries. Some important Articles where wider interpretations and country-wise independent legislations are possible within the ambit of TRIPS are:

Article 27.3(a)

This Article provides the latitude to nation states to incorporate in their national laws, their own exclusion criteria for patentability, example of microorganisms (which are not defined under TRIPS), genes, DNA sequences, natural product derived products, methods of treatment and surgery, and pharmaceutical products that are identical to human proteins. A concurrent Article, 27.2 provides for prevention of patenting of inventions which will cause disruption of public order or morality and environmental damage. Some countries in the South American region have made use of these provisions to bring in restrictions on patentability in their national patent laws. As far as India is concerned, in view of the need to protect some indigenous systems, it may be even important to have a wider rather than a restrictive interpretation of Article 27.3 (a) to include indigenous products and knowledge bases.

Utility patents

A matter of great concern to India is the one related to the provisions for granting patents for discovering new uses for known molecules or products. While India wants to protect its bio-assets from exploitation through second use patents by third parties, it should also consider the possibility of taking patents on new uses for existing products out of its own R&D efforts. TRIPS is silent on this issue, implying that countries are free to decide for themselves whether it is advantageous for them to allow filing and grant of utility patents, like in the U.S.

It has been debated whether discovery of a new therapeutic use of a known substance would fall under the category for a new method of treatment and therefore will be non-patentable under Article 27.3(a). However, the U.S. has maintained that the discovery of a new use for a known molecule would meet the standards of novelty and inventiveness and therefore would be patentable. In spite of the U.S. position on this issue, the stand of the European Patent Office has been less clear and several litigations have arisen because of this ambiguity. The "Swiss type of Claims" which allows new medical use, if it is entirely new and not predictable from the first use, has now been accepted by many European countries.

What is the Indian position on " Utility Patents"? The 1970 Patents Act had no provisions for utility patents. In view of the vast potential for discovering new uses of existing drugs, both from the traditional and modern systems of medicine, is it not beneficial for India to introduce "Utility Patents"? This is a matter of concern and importance and hence should be taken up for debate before the amendments to the 1970 Patents Act are legislated.

Use of patented products for experiments

India needs to ensure that patented products can be used for experimental purposes by scientists without licence from the patentees. It has been conceded by almost all countries that such uses are permissable, if they are not part of the commercial development of the same product for marketing, once the patent has expired. On the other hand, the Bolar provision even permits potential generic competitors to produce and stock the patented product to enable generic introduction as soon as the patent expires. The positions adopted by different countries vary a great deal on this matter and this has been the subject of animated debates and litigations. What is India's stand on these issues?

Compulsory licences

The 1970 Indian Act had a discriminatory provision for granting automatic licences of right for certain segments of inventions, notably in the pharmaceutical sector, in addition to the provision for granting compulsory licences when applied for, based on certain conditions. The TRIPS Agreement, under Article 31, authorises the grant of compulsory licences, under a variety of situations, such as, in the interest of public health, in national emergencies, nil or inadequate exploitation of the patent in the country, anti-competitive practices by the patentees or their assignees, and overall in national interests. It is obvious that these conditions offer a wide range of possibilities for countries while finalising the terms for granting compulsory licences under the new Act. It is of course not certain whether the Brazilian and Argentinian laws providing for grant of compulsory licences in cases where patents are not worked, even when production is economically viable, are acceptable under TRIPS, since imports are considered in the Agreement as equivalent to local working of the patent.

Imports

The stipulation under TRIPS that imports for marketing of patented goods will be considered equivalent to working of the patent in the country has often been mentioned by critics, as one of the most draconian measures under TRIPS, since it is a disincentive to investments in local production of the patented products. As long as the market demand is met through imports, the question of compulsory licences for local manufacture does not arise under this clause. The Andean Group of countries (South America) are of the opinion that imports should be allowed only when local production is not economically viable. Many countries in the region have brought in legislation to allow local companies to manufacture such items, in case the patentee does not want to produce the item in the host country. Indian stand on this issue is still not absolutely clear.

Burden of proof

Reversal of burden of proof in case of an alleged infringement of a process patent is yet another change sought by TRIPS vis-a-vis the Indian Patents Act 1970. The rationale for this is that the patentee will be unable to unequivocally establish infringement of his process if he has no access to the records or facilities of the defendant. It will be advantageous to limit this provision only to new products and not for new processes for existing products. Under Article 34, it would appear that such an interpretation is consistent with its provisions.

There are various other issues under TRIPS such as provisions for parallel imports in national interest, dispute settlement and arbitration procedures under WTO, transitional period extension for developing countries, assistance in framing the rules and implementation of the new regime in developing countries and the like. All these issues have a bearing on the final outcome of the present attempts at globalisation of the new patent system.

The fundamental issue that needs to be carefully studied and analysed is whether, before finalising the new Indian Patents Act, the country has taken into account and exploited all the leeways and loopholes that have deliberately or by chance crept into the TRIPS Agreement and are beneficial to India. A study of the practices adopted by other countries in similar socio- economic and technological levels of development in the area, while revising their intellectual property legislation, would be extremely useful.

M. D. Nair

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