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  Seminars & Workshops > On Trips  > SECOND AMENDMENT OF PATENT ACT  


Prof. Sudip Chaudhuri
Professor of Economics
Indian Institute of Management

Second Amendment to the Indian Patent Act, 1970 brought about lot of changes. These changes are analysed within the purview of  TRIPS. While carrying out the Second Amendment in 2002, India could have been taken the following steps. India still has the chance of doing so during the proposed Third Amendment and some of the changes are suggested below:

  • Abuse of intellectual property rights should be recognised as a ground for revoking the patent. If as Article 61 of TRIPS agreement has provided, criminal procedures and penalties can be applied in cases of infringement of intellectual property rights, there is no reason why an abuse should not be penalised. Threat of penal consequences through proper procedure, would alert the patentees to be careful in their pricing strategies even when they are the sole producers.
  • Section 107A of the Amended Act brings in ‘Bolar’ provisions. Also, Section 47 of the Patent Act permits the use of the patented product “for the purpose merely of experiment or research including the imparting of instructions to pupils”.  To avoid any ambiguity, it should be clearly understood that the non-patentees can experiment with the patented product and develop their own processes of manufacturing. However they cannot use such processes for commercial purposes unless they are authorised to do so. Such possibilities of experimentation will help realise the objectives mentioned in Article 7, viz, promotion of technological innovation and transfer and dissemination of technology. This is also important for maintaining and developing efficient alternatives to protect public health and to prevent patentees from abusing patent rights
  • While amending the patents act, India could have interpreted Article 30 of TRIPS agreement to permit  exports to countries without manufacturing facilities. This would have helped not only the importing countries but also India. This would have provided a larger space of operations to the generic producers for efficient production.
  • Article 31 of the TRIPS agreement dealing with compulsory licensing (CL), does not place any restriction on the grounds under which a CL can be given. We first examine the general provisions for CL application under section 84 and then the special provisions under section 92. The Patents Act, 1970 had a clear strategy – to eliminate the monopoly of the transnational corporations (TNCs) and remove the bottlenecks in the previous regime which prevented the indigenous firms from producing patented drugs. And it was done through a very simple process of abolishing product patents in drugs.  But in the product patent regime being introduced in India, the indigenous firms will not be able to produce a patented drug even if they develop the processes of manufacturing, unless they get a CL. Hence it is of fundamental importance to have a simple and easy to administer and implement CL system. The TRIPS agreement does not prohibit this. But this has not been done. The special CL provisions for pharmaceuticals in the 1970 act was abolished. For other products, the 1970 act had an elaborate and cumbersome provisions for the grant of CL, which was not effective. The amended act has basically adopted the same structure for pharmaceuticals too. This procedure will have to be followed for all patents except those notified by the government under section 92 for tackling public health crises.
  • The basic problem with the amended act is that it lacks any positive strategy. It appears that no attempt have been made to take advantage of the flexibilities which the TRIPS agreement provides. The entire amendment has been carried out very mechanically. It starts with the relevant text of the Patents act, 1970 and then makes some changes to make it TRIPS compliant. This has been done by deleting some clauses of the 1970 act and lifting some clauses from the TRIPS agreement and inserting these in the amended act. In the process many negative aspects, which could have been tackled without violating the TRIPS agreement, have remained in the amended act.
  • As Article 1 of the TRIPS agreement has made it clear, member countries are “not obliged to implement in their laws more extensive protection than is required by this Agreement ...”. But the government has preferred to adopt a stricter CL regime than what is required under the TRIPS agreement. As we have mentioned above, the amended act has elaborate provisions on CL and the text is impressive. But what matters most in actual practice are the grounds for the grant of CL and the procedure. The wording of the grounds for granting CL in section 84 is not amenable to easy interpretation and is not operationally useful and the procedure specified is cumbrous. The procedure is open-ended without any time limit imposed at any stage. The copy of the CL application will have to be advertised in the official gazette, though this is not required under the TRIPS agreement. The patentee or any other person may oppose the application and will have to be given adequate time for doing so. The controller will decide only after giving both the parties an opportunity to be heard. A CL granted by the controller can be opposed. Such appeals will be considered by an Appellate Board before a CL is ultimately permitted. Whether a patent is worked in India or not, can perhaps be objectively assessed. But the grounds of “reasonable requirements of the public” or “reasonably affordable price” can easily be challenged by the patentees. Then arguments and counter-arguments will follow. After all these are heard by the controller and then by the Appellate Board, in case of an appeal, it may be years before a CL is granted, if at all. The entire process is excessively legalistic and provides the patentees the opportunity to manipulate by litigation. The huge expenses involved in fighting the large pharmaceutical companies holding the patents may dissuade the non-patentees from applying for licences in the first place. These are not mere theoretical possibilities. This is precisely what happened in India under the Patent and Designs Act of 1911, which was in force till the Patents Act, 1970 replaced it.  The Panel on Fine Chemicals, Drugs and Pharmaceuticals (1947), appointed by the government also reported earlier that not a single CL could be obtained because of the wording of the relevant provisions Taking advantage of the cumbrous procedure, the foreign patentees could continue to effectively prevent or delay the use of CL. To cite an example, a government research institute (Haffkine Institute) applied for a compulsory licence. In response to the notice served on the patentee, the firm suggested that they were willing to give the licence voluntarily on the basis of royalties to be fixed through negotiations. They demanded an absurdly high rate of 25 per cent. As in the amended act, there was no limit on the time that can be taken. It took more than four years to reduce it to 10 per cent, which was however still higher than the limit of 5 per cent stipulated by the Reserve Bank of India at that time. By that time, the institute decided to abandon the project
  • If CL is to be used to stimulate competition and check prices, then we require efficient non-patentees who can put to the market products at reasonable prices. In the South Africa AIDS case, the question of CL acquired importance because there were efficient non-patentees such as CIPLA and Ranbaxy in India. The space which the Patents Act, 1970 provided to them, was one of the important factors behind the success of these indigenous firms.  If the introduction of product patents in India results in a drastic reduction in the space of operations of these firms, then they are likely to lose their dynamism. If once in a while they get a licence, it is likely that they will not be able to develop efficient processes and produce at reasonable prices. To make effective use of CL, it is important to have independent and efficient non-patentees with adequate space of operations. And to do so in a product patent regime, it is important to ensure that CL is granted not once in a while but on a regular basis. The TRIPS agreement does not prohibit this and hence there is no reason why for preventing monopolies this should not be attempted.
  • There is enough justification to carry out further amendments to simplify the general provisions of CL in the act to enlarge its use. As we have mentioned above, it is possible to frame the grounds for CL in such a way that licences can be granted without delay within a specified time. Consideration of the appeals also can be made simpler and faster by constructing suitable grounds and formulating proper guidelines. The judicial review can be replaced by a simple administrative review to make it a less time consuming affair.
  • In the more immediate context, the effectiveness of CL can also be improved by framing proper rules. The rules for administering the amended act have not yet been issued. While framing these rules, some of the administrative steps that can be taken are as follows:
  • Rather than adopting a case by case approach, the central government may notify the list of medicines eligible for CL in public health crises. The list should be prepared in consultation with health experts and may be revised from time to time. Any relevant new drug should be added to the list. The list may be prepared bearing in mind the specific situation in the country, such as the disease pattern, the need for drugs and the present availability. It is well known that majority of the Indian people living in rural areas and in urban slums have no or little access to modern drugs. Medicines necessary to take care of the health needs of these people should be included in the list.
  • The inclusion of any drug in the list cannot be a ground for opposition and appeal. There is nothing in the TRIPS agreement or the amended act to suggest that it should be so. If a CL is granted for any of these drug, the in other words, – As, for example in Japan and Germany, guidelines may be issued for the royalty to be paid to the patent holders in case of CL.– For any drug in the public health list, the controller may immediately after receiving an application, grant the CL, fixing a royalty rate using the royalty guidelines. Any opposition or appeal against the grant of a CL in this case can only relate to the royalty rate fixed. The opposition to the rate fixed should not hold up the use of CL. While this is being adjudicated, the non-patentee could begin to use the patent on the basis of an undertaking that the royalty rate finally decided will be paid in full. The case by case consideration of the royalty rates payable and the opportunity to oppose and appeal against the royalty rate fixed will satisfy the Article 31 clauses (a), (i) and (j) relating to consideration of individual merits and review of the CL decision. For other drugs too, a simple time bound procedure may be formulated for considering and deciding on CL applications. The maximum time permissible at each stage may be specified. The royalty guidelines may be used to reduce uncertainty and speed up decisions.
  • While amending the Patents Act, 1970, India has not taken full advantage of the flexibilities, which the TRIPS agreement provide. While deciding on the inventions eligible for patents, the terms ‘new’, ‘inventive’ could have been defined to exclude lower level innovations such as new dosage forms or new formulations from the grant of patents. This would have restricted the number of patents. Article 30 of the agreement provides for limited exceptions to patent rights. This could have been used to permit non-patentees in India to produce and export patented medicines to least developed countries, which cannot produce these themselves. This would have been beneficial to both India and these countries. But the most glaring failure relates to compulsory licensing. In a product patent regime, a proper compulsory licensing system is of fundamental importance to ensure competition and competitive prices. But the wording of the general grounds for compulsory licences is not amenable to easy interpretation and is not operationally useful. The procedure is cumbrous and time consuming. The process is much more legalistic than what the TRIPS agreement requires. It provides opportunities to the powerful patentees to manipulate the process by litigation to prevent others from getting such licences. If the bias in the Patents Act, 1970, which did not grant product patents in pharmaceuticals, was in favour of the non-patentees, the bias in the amended act is clearly in favour of the patentees. The aim appears to have been to be fair to the patentees and not to deprive them of the exclusive patent rights except under very special cases. The objective of the amendments was to comply with the TRIPS agreement. But India has provided a more extensive protection to patentees than what is required by the agreement.
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