product v patent [2011]

8/11/2019 Product v Patent [2011]

1/21Electronic copy available at: http://ssrn.com/abstract=1758064

PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 1

PODUCT v. PROCESS PATENT

UNDER INDIAN PATENT LAW

NAME PAGE NO.

Introduction 3Research methodology 5

CHAPTER - 1

India and the international patenting system 6

CHAPTER - 2

Distinction between Product and Process protection 7

CHAPTER3Rights of a patentee under the Product and Process patent 10

CHAPTER - 4Conflicts with Developed Countries 11

CHAPTER5Product patent and Compulsory licensing 12

CHAPTER6

Making the Patent Legislation in compliance with TRIPs 13

CHAPTER - 7Issues against the new regime of Patent Law in India 16

Conclusion 20Bibliography 22


2/21Electronic copy available at: http://ssrn.com/abstract=1758064


INTRODUCTION

Affluent societies are spending vast sums of money understandably on the search

for new products and processes to alleviate suffering and to prolong life. In the process,

drug manufactures have become a powerful industry. My idea of a better- ordered worldis one in which medical discoveries would be free of patents and there would be no

profiteering from life or death. Mrs. Indira Gandhi , ( World Health Conf, 1982)

"If people dont get a fair return in innovation, they wont invest in finding new cures for

diseasethis will be disastrous for patients - Ranjit Shahani, Vice-Chairman &Managing Director, Novartis India Limited1

Following the TRIPs Agreement and amendments in the Indian Patent Act, India isnow part of a global treaty in which technological innovations are encouraged andprotected, not just in few but a very large number of countries. Copying drugs is now no

longer possible because of product patents. The Indian pharmaceutical industry has alsounderstood the Intellectual Property Rights (IPRs) especially patents have to beintegrated into business strategies there is no way out. Patents are powerful tools forenhancing the Research and Development (R&D) quality and also business profits. Thefast changing global scenario and challenges imposed by the new patent regime makeIPR compliance, the need of the hour. Even so, opinion is evenly divided on theirbeneficial and adverse effects on developing economies like Indias. By and large, most

developed countries are for strong IPR protection and highlight its virtues in creatingknowledge wealth, encouraging innovation, providing access to technology, stemmingbrain drain and improving of quality of life. For emerging countries like ours, havinggood educational institutions, strong manufacturing base and talented manpower, IPRs

offer enormous opportunities. This is especially true in the field of Biotechnology,Information Technology and Pharmaceuticals.

Under TRIPs agreement, WTO members have to enforce product patents foragrochemicals and pharmaceutical compounds. About 50 developing countries, includingIndia had not complied with this requirement during the Uruguay round of GATTnegotiations. The much awaited and debated patents amendment was finally passed inparliament in March 2005. This third amendment to the Indian Patents Act 1970 broughtIndia in the line with the TRIPs agreement.

Omission of product patents for agrochemicals and pharmaceuticals was our

strength until now. This had contributed to widespread growth of generic pharmaceuticalindustries, also making available medicines to the public at very low cost. The Indiandomestic pharmaceutical industry grew strong, highly competitive and a big supplier ofmedicines and drugs within the affordable prices to common man because of a regulatorysystem focusing only on process patents along with a rigid price control. India developedinto a world class generics industry. In fact in 2002, India was the worlds largest

1http://www.legalserviceindia.com/article/l255-Pharmaceutical-Product-Patents.html


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producer of generic drugs in terms of volume.2The introduction of product patent alongwith the new regulations will cause significant changes in the Indian IPR industry.Product patent regime will be particularly favorable to the players already developed andwell-equipped in terms of scientific and technical resources. So, naturally, the mainconcern was about the fate of our pharmaceutical industry and consequent cost escalation

of medicines when we allowed product patent form 1

st

January 2005. Hopefully Indianpharmaceutical industry will not be much impacted by the new Product Patent regime.

In India, 97 per cent of drugs are off patent and are manufactured by a vast numberof companies. The key therapeutic segments include anti-infective, cardio vascular andcentral nervous system drugs. The decades of incubation and shielding of IPI byfavorable government policies and absence of foreign competition is over. IPI is in thecross roads now and staring at a new world full of opportunities and threats.3

More specifically, it has been suggested that all countries should adopt productpatents instead of process patents. Supporters of product patent argue that this regime

actually provides more comprehensive protection to the inventor since the product itselfis protected. Supporters of process patent argue that this regime promotes competitionand may also inspire innovation of new technologies that are more efficient. Manycountries, who up to recently were following process patent systems, have been forced tochange their laws and start pursuing product patent regimes. For example, India movedfrom a process patent system to a product patent system in 2005. The patent law is one ofthe seven intellectual property laws protected under this agreement. Section 5 of theAgreement on TRIPs deals with Patents. Article 27 says that patents shall be availablefor any inventions, whether products or processes in all fields of technology provided thatthey are new, involve an inventive step and are capable of industrial application.

2http://www.ideas.rpec.org/p/nbr/nberwo/10159.html3http://www.boloji.com/health/articles/01036.htm


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RESEARCH METHODOLOGY:

AIMS AND OBJECTIVES:

This paper provides a theoretical analysis of product and process patent regimes in the

context of Indian Patent Law particular after the 2005 amendment in Indian Patent Act,1970 in consequence to the TRIPs Agreement. The purpose is to bring forth the currentposition of trade between India as a developing country and the developed countries interms of product and process patent.

STYLE OF WRITING:The researcher has used analytical and descriptive style of writing

SOURCE OF DATA:

The researchers main source of data collection was secondary data as collected

from various books, articles, journal and the various websites.

MODE OF CITATION:

The researcher has followed a uniform mode of citation throughout this project.

SCOPE AND LIMITATIONS:

The researcher has made the best possible efforts to study present legal position related tothe patent system in India, particularly in relation to the TRIPs agreement and the newamendment made to the Patents Act in 2005. What will be the impact after introducingproduct patent system in place of process patent system in India. The researcher alsothinks there is ample scope for further research in this issue.

ISSUES RELATED TO PRODUCT AND PROCESS PATENT IN INDIA:

1. Rise in prices of drugs in India.2. Traditional system of medicines in India.3. Foreign direct investment in the pharmaceutical industry of India.

HYPOTHESIS:

The only solution for the proper patent system in India is to have proper implementationof law. Strict laws for the patent protection are required to ensure the development inpharmaceutical industry. People will be motivated to do more and more research anddevelopment and come up with new innovations only when their efforts are given properprotection of law.


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CHAPTER1

INDIA AND THE INTERNATIONAL PATENT SYSTEM

Indias approach towards the evolution of the international patent system, as it exists

today, is one of caution. There is an increasing realization in India in the last twodecades, about the role of the international patent system in matters of industrial growthand economic development. While this is so, it is to be noted that India was not a party tothe Paris Convention on Industrial Property 1883, which embodies the main principles ofthe international patent system, till 1998. India joined the Paris convention on 7December 1998.4From here, the focus of revising the international patent system shiftedto the General Agreement on Tariffs and Trade (GATT) with the launching of its mostambitious Uruguay Round of Negotiations. India played a crucial role in thesenegotiations albeit with little success particularly with regard to the evolution of theprinciples of IPR protection in the Agreement of Trade-related Aspects of IntellectualProperty Rights.

India had joined the World Intellectual Property Organization (WIPO) in 1975. WIPOprovided institutional framework to the Paris Convention. India, along with otherdeveloping countries, was not in favour of evolving uniform standards for the protectionof patents in the Uruguay Round of Negotiations. It had taken the view that theNegotiating Group should not deal with questions of what should be the proper level ofprotection of IPRs, but should confine itself to the negative effects on international tradeof the implementation of existing laws and treaties for the protection of IPRs.

Article 27 of the TRIPs Agreement provides for five uniform standards, namely (a)availability of patents for all kinds of inventions; (f) patent to be granted in all fields of

technology, whether products or processes; (c) inventions to be patentable should fulfillthe criteria of novelty, inventive step and industrial applicability; (d) patents should beavailable and patent rights and patent rights enjoyable without discrimination as to theplace of invention, the field of technology; and (e) patents granted irrespective ofproducts importation or local production.

5With the WTO regime on IPRs coming intoforce on 1st January 1995, India had a marginal space to accommodate its concerns.While for India, its concerns on IPRs, particularly on patent protection, were clear, itsWTO obligations required it to modify its existing patents law. Consequently, Indiaamended its Patents Act 1970.

It should be remembered that amendment to Patent Act in 2005 was taken not particularlyto meet the immediate needs and aspirations of the people of India; it was adoptedbecause of the compulsion of TRIPs and to be able to discharge the obligations that Indiahas undertaken under the WTO.

4BIMAL N. PATEL, India and International Law, (1stEdn.), at p. 93.5Ibid, at p. 111.


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CHAPTER2

DISTINCTION BETWEEN PROCESS AND PRODUCT PROTECTION

What is Patent: According to World Intellectual Property Organization (WIPO),intellectual property refers to the product of the mind: inventions, literary and artisticworks, any symbols, names, images, and designs used in commerce.6 A patent is alimited monopoly that is granted in return for the disclosure of technical information.7Apatent is a right to exclude others from making, using, selling or offering for sale thesubject matter defined by the claims. In order to exclude someone from using a patentedinvention in a court, the patent owner, or patentee, needs to demonstrate that what theother person is using falls within the scope of a claim of the patent. Therefore, it is morevaluable to obtain claims that include the minimal set of limitations that differentiate aninvention over what came before, i.e. the so-calledprior art.On the other hand, the fewer

the limitations in a claim, the more likely it is that the claim will cover or "read on" whatcame before and be rejected during examination or found to be invalid at a later time forlack ofnovelty.8

Fundamental Principles underlying the Patent Law in India: The fundamentalprinciple of the Patent Law is that patent is granted only for an invention which must benew and useful. That is to say, it must have novelty and utility.9The mere collocation oftwo or more things, however, without some exercise of the inventive faculty incombining them is not subject-matter for a patent. In case of a combination the inventormay have taken a great number of principles which are common knowledge and acted ona number of principles which are well-known. If he had tried to see which of them, when

combined produce a new and useful result, and if he succeeds in ascertaining that such aresult is arrived at by a particular combination, the combination will, generally speaking,afford subject-matter for a patent.10

The essential feature of a patent must be in respect of an invention and notdiscovery. In respect of one single invention there must be one single patent. A patentmay be in respect of a product or in respect of process. But it is not possible to bifurcate apatent and state that the relates to the substance and the other to the process. In order tohave complete patent, the specifications and the claims must be clearly and distinctlymentioned.11.

6JENNIFER DAVIS,Intellectual Property Law, (2ndEdn.), at p. 2.7L.BENTLY AND B. SHERMAN,Intellectual Property Law, (2ndEdn.) at p. 323.8http://en.wikipedia.org/wiki/Claim_%28patent%299AIR 1982 SC 1444 (1448)10Lallubhai Chakubhai Jaiwala v. Chimanla AIR 1936 Bom 99 at p. 104-10511Imperial Chemical Industries Ltd. v. Controller General of Patents, Designs & Trade MarksAIR 1978Cal 77.
http://en.wikipedia.org/wiki/Prior_arthttp://en.wikipedia.org/wiki/Novelty_%28patent%29http://en.wikipedia.org/wiki/Novelty_%28patent%29http://en.wikipedia.org/wiki/Prior_art


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What is the distinction between Product and Process Patent?

Though this question is not relevant now as the Indian Patents Act now providesprotection for the Process and Product provided it satisfies the patentability criteria itwould be appropriate to understand the distinction very clearly.

The issue relating to protection of a product and the protection of a process is veryrelevant only in the case of inventions in the chemical field. The basic philosophy behindthe grant of a patent for the process for the preparation of a product is that the saidproduct can be manufactured by a totally new, different and innovative method.

When one refers to a patent as product patent it means that he has developed a newproduct. Similarly, when one refers a patent as process patent, it implies that he hasdeveloped a new and improved process for producing a known product. In the case of aproduct patent, one will have claims (defining the area of the legal protection) for the newproduct and if he desires can also have claims for the process for preparing the said

product. Of course if he does not claim the process is mandatory that the process for thepreparation of the new product should be disclosed in the text of the document(specification).

Whereas, in the case of a process patent, one can have only claims for the process and notfor the product, as the product prepared by the said process is already known andtherefore there is no novelty in such a product.

With the coming into force of the product patent regime in India only those productswhich are new on the date of filing of the application for patent for that product will bepatentable and not others. The exception to this fact is the WTO applications (meaning

those applications claiming new pharmaceutical/agricultural chemical products) whichhave filed since 1-1-1995. In other words, the products which are already known prior to31-12-2004 (except the above said WTO applications) cannot be patented as their noveltyhas been lost.

On the other hand, the rights in the process patent are confined to the use of thatparticular process of preparing the product and nothing else. Therefore, anybody else candevelop an alternate process and if it satisfies the criteria of patentability, he can secure apatent for that alternate process. In this context, it should be noted that in this case theproduct obtained by the processes is already known. Therefore, nobody gets theprotection for the said product and hence the commercial production of the saidcompound by the alternate process is possible without the fear of any infringement, eventhough there is patent for another different process of preparing the same substance is inforce in the same country. The possession of a patent confers on the patentee not merelycertain valuable monopoly rights and privileges, but also certain obligations and duties.12

It is also to be noted that if the alternate process for a product developed is very efficientand the said product is very useful having good commercial potential the two different

12P. NARAYANAN,Patent Law, (4thEdn.), at p. 264.


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patent holders for the respective inventions (one for the product and another for theimproved process) can come together and have a joint agreement (cross licensing) andbring the new product to the market and share the profits amongst themselves. Such anexercise will benefit the society at large, in getting the fruits of the research work andwill, instead of hampering research and development (R&D) in developing alternative

processes for a product, under the product patent regime, will enhance developmentalactivities.

As mentioned above, in many countries including India, the patent law excludes certainspecific kinds of inventions from being patentable even though the inventions satisfy allthe three essential criteria for patentability, namely, Novelty, inventive step (non obvious)& Utility. Examples of such non patentable inventions are: inventions relating nucleartransformation, treatment of human beings, plants & animals etc. The types of inventionswhich are not patentable are stipulated in the patent legislation of the countryconcerned.13

In India, the inventions for which patents can be secured is defined in Section 2(1)(j)(ja)of the Act. The term process may be defined as one or more steps or acts performed onmaterials / substances to produce a result (product/composition/material/substance). Theprocess should be regarded as an artificial process or operation of an industrial naturewherein certain starting materials/substances are subjected to the process or operation toconvert the starting materials/substances in such a manner to produce a new or knownand useful article or substance or substance or product which is tangible. If the startingmaterials/substances used in the process remains unaltered and the resulting product alsoremains the same as the starting materials/substances, then, the process may not be aninvention for which patent protection can be secured.

13RAMA SARMA, Commentary on Intellectual Property Laws, (1stEdn.), at p. 28.


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CHAPTER3

RIGHTS OF A PATENTEE UNDER PRODUCT AND PROCESS PATENT

A patent is a statutory grant conferring certain exclusive rights on the grantee for a

defined period, subject to certain conditions. In some respect it may be considered as aspecies of property. A patent grant gives the patentee the exclusive right to make or usethe patented article or use the patented process. As a consequence flowing from this hecan prevent all others from making or using the patented article or using patentingprocess. A patent monopoly not only entitles the holder to exploit the invention withoutcompetition during the period of patent protection; it also enables him to enter themarket, on the expiry of the monopoly in strong position.14A patentee has also the powerto assign the patent, grant licenses under, or otherwise deal with it for any consideration.These rights created by statute are circumscribed by various conditions and limitations.These rights created by statute are circumscribed by various conditions andlimitations.15According to section 48 of the Indian Patent Act, 1970, a patent granted

under this Act shall confer upon the patentee:

(a)Where the subject-matter of the patent is product, the exclusive right to preventthird parties, who do not have his consent, from the act of making, using, offeringfor sale, selling or importing for those purposes that product in India.

(b)Where the subject-matter of the patent is a process, the exclusive right to preventthird parties, who do not have his consent, from the act of using that process andfrom the act of using, offering for sale, selling, or importing for those purposesthe product obtained directly by that process in India.

Elements of the right:1. The right conferred under this section is an exclusive right, whether product or

process.2.

No third party can exercise the patentees right without the patentees consent.3. The rights conferred, in respect of a product patent, are the act of making, using,

offering for sale, selling or importing for those purposes the patented product inIndia.

4. In respect of a process patent, the act of using the that process, using, offering forsale, selling or importing for those purposes the product obtained directly by theprocess in India.

5. The product obtained by using the patented process is not one in respect of whichno patent shall be granted under this Act.16

14American Cyanamid v. Ethicon (1975) AC 396 at p. 41015P. NARAYANAN,Patent Law, (4thEdn.), at p. 252.16Ibid, at p. 254


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CHAPTER4

CONFLICTS WITH THE DEVELOPED COUNTRIES

Developed countries are the major producers of newer technologies. Developingcountries are almost totally dependent on the developed countries for technologiesneeded for their growth and development. Intellectual property protection can hinder orprevent such access, or price it at unattainable levels. In addition, developing countrieshave complained that large multinational enterprises import products (protected bynational intellectual property rights) rather than producing them locally, hindering anytechnology transfer that would be attained by local production. However, the developingcountry finds itself in an unenviable quandary, for without protection international firmswould not market in the developing country at all. In addition, strong intellectual propertylaws can attract important inward investment from rich multinational enterprises. In

addition, as local technology develops, local entrepreneurs themselves become in need ofsuch protective rights.

This dilemma has led to arguments from developing countries that they shouldreceive special treatment when the international Conventions and Treaties are revised. Inthe past they have suggested compulsory licenses for local working, local translationrights, curbs on royalties and scrutiny of licenses. The Uruguay Round of GATT talkstackled the issue and the resulting TRIPS Agreement 1994 establishes a requiredminimum content of intellectual property law for all WTO Member States. Subsequently,the old controversies have resurfaced, centering around the protection for foreigncompanies profiting from indigenous raw materials and traditional knowledge as well as

the use of folklore in musical and artistic works. Access to vital health care products ataffordable prices has also engendered considerable debate. The Doha Agreement 2001accordingly allows for interpretation of the Trips Agreement by Member States in amanner which allows them to provide for public health and to promote access tomedicines for all. This includes granting compulsory licenses, deciding what amounts toa national emergency and what constitutes exhaustion of aright. Notably,, however, theDoha Agreement also recognizes that intellectual property rights play an important role inthe development of new medicines. WIPO now provides a forum for debate, havingcreated the Intergovernmental Committee on Genetic Resources, Traditional Knowledgeand Folklore in 2000. In the UK the Department for International Development alsocommissioned a report on intellectual property and development which questions theprovision of strong IPR in developing economies.


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CHAPTER5

PRODUCT PATENTS AND COMPULSORY LICENSING

The grant of a patent confers limited monopoly on the patentee to the exclusion of

others. Though the law permits this, it also takes into account the fact that the monopolygranted through a patent may be abused and hence, provides for certain restrictions to itsenjoyment. The grant of compulsory license is one such restriction imposed on theabsolute exploitation of a patent. 17 Compulsory License is regarded as a statutorymechanism to effectively protect public interest from possible abuse of monopoly bythe patentee. Section 84 of the Patents Act provides that after three years have passedfrom the date of sealing of the patent, and application can be made to the Controller ofPatents by and interested person for grant of a compulsory license to work the patentedinvention on the grounds that the reasonable requirements of the public with respect tothe patented invention have not been satisfied or that the patented invention is notavailable to the public at a reasonable price. Article 31 of the TRIPs Agreement provides

for such use without the authorization of the right holder. Though the TRIPs Agreementemphasizes on obtaining authorization from the right holder on reasonable commercialterms, it, nevertheless, does allow this circumstances of extreme emergency or in cases orpublic non-commercial use. Section 92 of the Indian Patents Act, 1970 empowers theCentral Government to grant compulsory licenses in special circumstances. Section 92Aempowers the Controller to grant compulsory license for the manufacture and export ofpatented pharmaceutical products to any needy country if compulsory license has beengranted in that country.

If the Controller is satisfied that reasonable requirements of the public with respectto the patented invention have not been satisfied or that the patented invention is notavailable to public at a reasonable price, he may order the patentee to grant a license onsuch terms as he deems fit. The Patents Act has the following grounds for invocation ofCompulsory Licenses:

The reasonable requirements of the public with respect to the patented inventions

have not been satisfied.

Default of the patentee to manufacture in India the patented article, or not to givea license for the manufacture of patented article the interests of the existing tradeor industry is adversely affected.

Patented invention is not available to the public at reasonable prices.

National emergency or extreme urgency or public non-commercial use.The amended provisions have broadened up the grounds for seeking Compulsory

Licenses. Difficulties may arise in the interpretation of the meaning and extent of thegrounds on which Compulsory Licenses can be sought. The expressions nationalemergency and extreme urgency are nowhere defined though it can be safely inferredthat these terms refer to situations of grave magnitude.

17FEROZ ALI KHADER, The Law of Patents, (1stEdn.), at p. 705.


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CHAPTER6

MAKING THE PATENT LEGISLATION IN COMPLIANCE WITH TRIPS

The TRIPS agreement is one of the most contentious agreements of the WTO

which has been debated worldwide both in the developed and developing countries andalso in important International Institutions. With the enactment of the Patents(Amendment) Act 2005, the process of amending the Indian Patents Act 1970 to bring itin line with the TRIPS has been completed by the government. The earlier twoamendments were enacted by Parliament in 1999 and 2002. In the amending processsome safeguard provisions have been incorporated. The developing countries are nowapprehending difficulties in importing pharmaceuticals from India because of the tightprovisions in regard to compulsory licenses for an effective role of the domesticenterprises in the patented products. The main features of the un-amended Patents act1970 were as follows:

(i)

There was no product patent system for pharmaceuticals, food and chemical-based products. These industrial sectors were covered by only process patent.(Section 5).

(ii)The term of the process patent was 7 years from the date of application or 5 yearsfrom the date of sealing of patent whichever period was shorter. (Section 53).

(iii)In order to ensure effective role of the domestic enterprises in the patentedproduct, a system of licensing of right was also provided for the sectorscovered by the process patent. (Section 87 &88).

(iv)There was no constraint on exports of pharmaceuticals and other products.(Section 90(a)(iii)).

(v)

The patent holder was under obligation to work the patent in country. There wasalso provision for revocation of patent for non-working. (Section 83).

(vi)

For licenses of right, the royalty ceiling was stipulated at 4 per cent of the net

ex-factory sale price in bulk of the patented article. (Section 88(5)).

The TRIPS Patents System is based upon a Joint Statement presented by theMultinational Associations of USA, Europe and Japan to the GATT Secretariat in June1988 during the Uruguay Round Negotiations. There were hardly any negotiations tosafeguard the interest and concerns of the developing and least developed countries. Theonly concession available to them was longer transitional period for implementation. Thesame high standard of TRIPs Patent system is applicable to all member countries.18Themain features of the TRIPs patent system are as follows:

(i)

TRIPs provides for patent protection for any inventions whether products orprocesses in all fields of technology provided that they are new, involve aninventive step and are capable of industrial application. (Article 27)19

(ii)

The foreign patent holders have been absolved from working of their patents. Theimports by them are to enjoy the same patent rights without discrimination as

18AJIT PARULEKAR,Indian Patents Law, at p. 30.19http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5


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to the place of invention, field of technology and whether the products areimported or locally produced. (Article 27)

(iii) The term of all product or process patents will be 20 years from the date ofapplication. (Article 33)

(iv)There is no licensing of right provision. The compulsory licence provisions are

having tight conditions for meeting domestic demands. (Article 31)(v) Exports will also have practical difficulties, as only those enterprises that arealready producing the concerned patented product will be able to meet theexport demands. (Article 31)

(vi)There is no royalty ceiling for compulsory licenses. The royalty payment willhave to be based taking into account the economic value of the authorization.(Section 31).20

The above features of the TRIPs have been implemented in the amending processof our Patents Act, 1970. On the other side, there is also evidence that the patent systemhas a detrimental impact on pharmaceutical prices, particularly if the product itself is

protectable.

It lays down minimum standards for protection and enforcement of intellectualproperty rights in member countries which are required to promote effective and adequateprotection of intellectual property rights with a view to reducing distortions andimpediments to international trade. For the least-developed countries (LDCs) thetransition period will remain in force for pharmaceutical patents and data protection atleast until 2016 under Article 66.1 of TRIPS under paragraph 7 of the DohaDeclaration.21

Further, Article 27 of the TRIPS Agreement harmonizes the subject matter of

patent in a broad manner which clearly states that the patents shall be available for anyinventions, whether products or processes, in all fields of technology, provided that theyare new, involve an inventive step and are capable of industrial application and patentrights enjoyable without discrimination as to the place of invention, the field oftechnology and whether products are imported or locally produced.

Under article 28 (1) (a) of TRIPS, there are exclusive rights for product patents toprevent third parties not having the owners consent from the acts of: making, using,offering for sale, selling, or importing for these purposes that product.

Making the patent legislation in compliance with the TRIPS would put India inthe row of nations having strong patent legislation. Salient features of the Patents(Amendment) Act 2005 related to product patents:

a) Extension of product patent protection to products in sectors of drugs, foods andchemical.

20http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#521http://ideas.rpec.org/p/nbr/nberwo/10159.html
http://ideas.rpec.org/p/nbr/nberwo/10159.htmlhttp://ideas.rpec.org/p/nbr/nberwo/10159.htmlhttp://ideas.rpec.org/p/nbr/nberwo/10159.htmlhttp://ideas.rpec.org/p/nbr/nberwo/10159.html


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b) Term for protection of product patent shall be for 20 years.

c) Introduction of a provision for enabling grant of compulsory license for exportof medicines to countries which have insufficient or no manufacturing capacity;provided such importing country has either granted a compulsory license for

import or by notification or otherwise allowed importation of the patentedpharmaceutical products from India (in accordance with the Doha Declaration onTRIPS and Public Health)

d) A new provision has been introduced that provides that the mere discovery of anew form of a known substance which does not result in the enhancement of theknown efficacy of that substance or the mere discovery of any new property ornew use for a known substance or of the mere use of a known process, machine orapparatus unless such known process results in a new product or employs at leastone new reactant, shall not be patentable.

These amendments have been made with the intention to make India drug andpharmaceutical industries competitive at par with multinational companies. In 1999, Indiabrought in the mailbox facility for product patent application and the grant of ExclusiveMarketing Rights in the interim period. With the Second Amendment in 2002, Indiabrought in the provision relating to rights of patentee, term of patent, compulsorylicensing and reversal of the onus of proving the violation from the affected party to theaccused party. And finally in 2005, the product patents were extended in all fields otechnology, particularly food, drugs and pharmaceuticals. There is no doubt of thepossible conflict of private rights and public interests when it comes to patenting of food,drugs and pharmaceuticals as it concerns the basic necessities of life of a large number ofpeople living below the poverty line. However, with the third amendment, Parliament has

not only complied with TRIPs obligations but has attempted to do the balancing oprivate monopoly and public interest by using flexibilities under TRIPs Agreement22suchas compulsory Licensing in case of emergency situations (section 92) compulsoryLicensing for export to countries with no manufacturing capacity (Section 92 A), use oinvention for the purpose of the government (section 102) or the research andexperimentation exception which is provided in section 47, revocation of patent in publicinterest (section 66). These are significant measures if used imaginatively for balancingprivate rights with public interests, the object being to make drugs accessible andaffordable.

22http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5


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CHAPTER - 7

ISSUES IN THE NEW REGIME OF PATENT LAW IN INDIA

At general level, these policy reforms were driven by two related forces. First, theemergence of new technologies has demanded continuous adaptation of IPR instruments.Key examples of areas in which technological developments have raised new intellectualproperty questions include integrated circuits, computer software, and biotechnologyinventions. The advent of the internet has posed special challenges to the printing andpublishing and entertainment industries, because content in digital form can be perfectlyreproduced at minimal cost. Secondly, the process of economic globalization has enabledintellectual property to cross international boundaries more easily. Indeed, for many richcountries, IPR-intensive goods and services constitute a rising share of the income theyderive from their presence in foreign markets. It is not therefore surprising to see political

economy forces at work in these countries, leading governments to raise IPR protectionas a key negotiating issue in international trade agreements.23Indias full-scale TRIPScompliance raises several critical issues from an access to medicines perspective. We candiscuss these issues point by point:

1. The issue of price increases: The Indian public is concerned that massive priceincreases of the pharmaceutical products following patent reform to comply withTRIPs will pre-empt widespread access to valuable pharmaceuticals. In a clearlyunequal world, it is important to ensure that economic interdependence does notlead to the codification of intergovernmental agreements that are biased againstdeveloping countries in general, and the poor within these countries in particular.

The process patent system greatly facilitated domestic manufacturers to specializeand often excel in producing inexpensive, generic versions of on-patent drugs.The product patent regime would disallow such production and trade. It isapprehended that the prices of newly patented drugs would increase substantially,thereby imposing tremendous social and economic costs on the poor on thesecountries.

The argument the higher prices would induce greater innovative activity by thepatent protected developed nations is highly flawed. Even if a large part of theexpenditure by multinational firms on R&D is geared towards the many so-calledpoor country diseases, (viz., tuberculosis, malaria, cholerea, HIV/AIDS, etc.),

the developing country consumers would still find the cost of medicinesprohibitive; consequently, through low sales, R&D investment would be reduced.In fact, a recent UNDP report estimates that once TRIPs comes into force, it couldinduce a price hike ranging between 12% and 68%. To except developingcountries to accept such price spirals without adequately addressing their concerns

23CARSTEN FINK,Intellectual Property and Development, at p. 1.


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of access to cheaper medicines to fight life threatening diseases, particularly in apublic health emergency, seems unfair.24

However, some analysts and experts suggest otherwise. The off-patent market isstill huge and can be explored further. Indian companies will gain strength in the

coming years as partners in marketing and research-based outsourcing, ensuringcheap availability of drugs. As far as the anti-AIDS drug prices go, the government will always have the

power to intervene and come up with a desirable pricing policy, if prices move up. The Indian government has gone on record to say that the fears of spiraling of

drug prices is unfounded as 97 per cent of the drugs sold in India are off-patent.There are alternatives available to the government to ensure availability ofpatented products at affordable prices.

The important fact is that drugs which are already being manufactured as genericswill not be eligible for patents. Hence fears that in the future all drug prices will

be higher appear unfounded. The new drugs are supposed to be introduced in the Indian market making the

share of patented drugs to rise. But it should be remembered that after some timethe patent expiries which contributes to the generics market.

Because India is one of the world's biggest producers of generic drugs25, this loanwill have a severe knock-on effect on many developing countries which dependon imported generic drugs from India. In most cases, generic products areavailable once the patent protections afforded to the original developer haveexpired. When generic products become available, the market competition oftenleads to substantially lower prices for both the original brand name product andthe generic forms. The time it takes a generic drug to appear on the market varies.

2. The government under the new regime can declare an emergency and canel itspatent, if a drug is desperately needed.

3. New regime of product patent will attract more and more FDI in India: Tillnow there has been low level of presence of pharmaceutical multinationals inIndian market because of the rigid price controls and absence of product patents.There has not been significant foreign direct investment (FDI) in thePharmaceutical industry in India. The position is expected to change with theintroduction of product patents.

4. The main concern about TRIPs provisions of WTO agreement is in respect ofPatents. There is a feeling that the Multi National Companies (MNCs) will have

upper hand in maximizing the benefits of IP in developing countries like India.This is because of the fact that MNCs have not only financial powers but alsoadequate expertise in managing efficiently the portfolio of IP.

24POLYCAP CLIFFORD,Down to Earth, (Vol. 12, 2003), at p.37.25A generic drug(generic drugs, short: generics) is adrug which is produced and distributed withoutpatentprotection. The generic drug may still have apatent on the formulation but not on the active

ingredient. A generic must contain the same active ingredients as the original formulation.
http://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Medicationhttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Medicationhttp://en.wikipedia.org/wiki/Patent


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5. Another area which is causing concern is the fear of appropriation of communityknowledge available in such countries. Such an appropriation results in hugecommercial profit to the MNCs without any adequate benefits to the communitywho provided the knowledge. There is therefore an urgent need to safeguard suchcommunity knowledge by appropriate legislations and policies. In this direction

new IP legislations such as a sui generics system would not only to protect thecommunity knowledge but also help appropriate sharing of the revenue earnedthrough such IPRs. Therefore such a system should be formulated and broughtinto force on a priority basis. Further time bound actions are to be initiated andcompleted to establish appropriate infrastructure (like patent office with modernfacilities and officials, patent information systems) creation of knowledgeable IPprofessionals and efficient legal systems to quickly provide justice in the case ofIP disputes.

6. A change in the market dynamics: Over the past decade, several drugs (withfeatures similar to patent protected drugs overseas) have been launched in theIndian markets but very few path breaking new molecules have been developed.

In India most patients pay for medicines through their own funding and is notbacked by medical insurance schemes.267. Amendment to Section 3(d): The new addition to section 3(d), says: The mere

discovery of a new form of a known substance which does not result in the

enhancement of the known efficacy of that substance or the mere discovery of anew property or new use for a known substance or of the mere use of a known

process, machine or apparatus-unless such process results in a new product or

employs at least on new reactant. The Act further clarifies that salts, esters,ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures ofisomers, complexes, combinations and other derivatives of the known ofsubstance shall be considered to be the same substance, unless they differsignificantly in properties with regard to efficacy. Evidently, this clause willrestrict the usual practice of developing portfolio of patents around drugmolecules and ever greening (process by which the length of patent validityperiod is extended by filing new patent applications) of major pharmaceuticalcompanies. Also, it will be difficult henceforth to get patent protection for nano-particles - todays hot topics as many of them are clusters of active moleculesand already known.

8. New added Section 11(A):This section ensures that a patent obtained throughthe mailbox route cannot be used to initiate infringement proceedings against a

generic manufacturer.9. Traditional System of Medicines:Being a tropical country, India is indeed very

rich in biodiversity. India is well known for its traditional systems of medicinelike Ayurveda, Unani and various local folk and tribal medicine. Companies likeHimalaya, Zandu, Sandu, Baidyanath, Dabur and Hamdard have beenmanufacturing and marketing these traditional medicines and also have developedtheir own formulations based on these systems of medicines. India has a clearadvantage in these systems in terms of the knowledge that has passed down

26http://www.legalserviceindia.com/article/l255-Pharmaceutical-Product-Patents.html
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through generations. TRIPs will be a golden opportunity for getting protection forthese products in India. Recent unsuccessful attempts made in the West to obtainpatents for medicinal products being used in India over centuries like turmeric,Basmati rice, karela and neem have alerted the government and industry totake steps to seek patent protection for innovations made in Indian systems of

medicine. Attempts are being made by CSIR to prepare a Traditional KnowledgeDigital Library (TKDL) and Traditional Knowledge Resource Classification(TKRC) so that such bio-piracies can be checked effectively in future.

10.The issue of Patent length:There are two welfare effects of extending the patentlength. One is the growth enhancing effects: extending the patent length reduceseconomic growth by raising the rate of return of R&D. The other is the staticinefficiency effect: extending the patent length reduces the amount of output byincreasing the proportion of monopolistic sector, and thus the amount ofconsumption. The length of the patent granted should not be of a fixed durationfor all inventions. It should be linked to the actual expenditure on R&D and thedegree of innovativeness. As long as the companies refuse to give information

about their R&D costs, the incentive argument for patents only represents andideology for supporting the monopoly power of the companies. If they really needextra profit to be willing to take the risk of R&D, the public has the right todemand to know how much they need, and how they calculate their neededprofit. In fact, the exclusivity of a patent right needs to be supported byconvincing arguments and by transparency in the calculations of the R&D costs tomake it more than an ideology used to justify extra profit for some already veryprofitable companies.

Foreign companies will look to bring their innovative products through existingsubsidiaries or set up 100 per cent owned firms in the country. The industry will seefurther change in the form of foreign companies joining hands with Indian firms whichhave a strong distribution network. This again would aid both foreign and Indian firms.


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CONCLUSION

In practice, several issues remain open. Law cannot be static. It has to be modifiedto meet the requirements of the fast changing environment. Similarly, science is also not

static and changes are taking place at a very fast pace. Since patent is related to science &technology, the patent legislations cannot also be static. This is based on the fact that ourcountry possesses the highly capable intellectuals and natural wealth, and that too inplenty. Combining these two valuable strengths/assets, we could have become a countryholding valuable IPRs which would have helped economical and industrial developmentof the country even faster. India should have been proactive instead of reactive. Time isstill not lost. India can still initiate appropriate action in this direction in the coming yearsand achieve benefits from the Intellectual Property System, especially Patent system.

While many countries need to change their patent system from process patent toproduct patent, there is not much formal analysis about the regulations that should be

contemplated while making the switch. If there is compulsory licensing, it can help toeliminate the welfare reducing effect of product patents, as compared to process patents.With the WTO regime on IPRs coming into force on 1st January 1995, India had amarginal space to accommodate its concerns. While for India, its concerns on IPRs,particularly on patent protection were clear; its WTO obligations required it to modify itsexisting patents law. Implications of these modifications are slowly sinking down into theIndian economic and industrial development process. While it appears that India hasmanaged to withstand some of these changes, the precise legal and economicimplications of these changes, particularly in the area of the pharmaceutical and chemicalsector, needs long-term review. Currently, India is moving forward with the changes asenvisaged under the WTO regime. Some of these changes, it may be noted, may become

new battlegrounds for a new interpretative matrix within the WTO dispute settlementsystem.

The profit-driven model of the TRIPs is not suited to the health needs of thedeveloping and poor countries. The amended Patents Act 1970 as in the present form is asuper profit-driven Act. A judicious and careful implementation of TRIPs Agreement inneeded for patent holders in a manner conducive to social and economic welfare asstipulated in Article 7 of TRIPs Agreement. If the damage to the amending process of thePatents Act is not undone, the public sufferings will soar to an unimaginable extent.

Now that the die is cast, we have to rise to the occasion and convert this challenge

into an opportunity. In fact, China had realized this many years ago and, having carriedout necessary changes in their patents law is now reaping benefits of enhanced trade andinvestment. Given the large pool of trained manpower, world class educationalinstitutions/universities/publicly funded research institutions and dedicated domesticprivate R&D centers; India is well prepared to face the new challenges and convert it intoan opportunity. In US, it costs around $700-800 million and 10-12 years of R&D efforts


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to bring a new drug molecule into the market.27Perhaps with our innovative mind andcheaper labor costs, India can achieve similar feat for a fraction of the above cost. Thefact that more than 75% of our required medicines are manufactured indigenously isproof of the capabilities of domestic pharmaceutical industries.

These routes can be used supplement the strategy of expanding the domesticmarket, but to mainly depend on these for further growth would take the domestic firmsaway from real need-based innovation. Policy makers need to get the private sector tocoordinate with the public sector in the creation of a programme for upgrading innovationcapacities to play a positive role in drug development for diseases of the poor in India.It may be pointed here that strong Intellectual Property law is imperative to convert therich human capital, which India possesses into economic wealth. India has millions oftalented youth many of whom are well trained in technical skills which compares wellwith many industrialized nations with an aging population. We certainly need a stronglegal framework to facilitate this transition.

This would mean that the patent would be partly product patent and after areasonable time being given to the inventor to make a reasonably large profit it would beconverted to a process patent whereby the patented drug can be manufactured bycompeting manufacturers using an alternative process. This would solve the problem ofexcessive hike in prices and would render the drugs more accessible to the millionssuffering. Collaboration with the MNCs on various fronts such as research and

development, manufacturing and marketing will help Indian Pharmaceutical companiesmake profitable breakthroughs.

The non-provision of product patents has been one of the strongest aspects of ourPatents Act. Complete compliance with all aspects of the TRIPs agreement is prejudicialto our national interest and the TRIPs agreement itself places limitations on our ability toenact out national legislations in public interest. To prevent public interest from beingprejudicially effected it is imminent to mobilize public opinion against completecompliance of the obligation under TRIPS. It must always be remembered thatpharmaceutical industry owes a moral responsibility to the society. The monopolygranted by patents to the Drug companies should not be exercised without responsibility.

27AJIT PARULEKAR AND SARITA DSOUZA,Indian Patents Law, at p. 121.


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Bentley L. and Sherman B., Intellectual Property Law, (2

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Edn. 2004)Oxford University Press, New York.2. Catherine & Kirsty Colston, Modern Intellectual Property Law, (2nd Edn.

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Narayana P.,Patent Law, (4thEdn. 2006) Eastern Law House, New Delhi.11.Parulekar Ajit and DSouza Sarita, Indian Patent Law, (1st Edn. 2006)

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Nijhoff Publishers, Leiden/Boston.13.Sarma Rama, Commentary on Intellectual Property Laws,(1st Edn. 2007)

Wadhwa and Co., Nagpur.
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