The 2017 Trade Policy Agenda unveiled by Trump administration on March 2 pushes for a stricter regime for intellectual property rights and patents. While, agreeing that India’s reforms on IPR are encouraging, the document says “India’s new National Intellectual Property Rights Policy [NIPRP] should protect US innovations”.
Specifically, US concerns are articulated in recent observations of Patrick Kilbride, Executive Director (International IP) of US Chamber of Commerce’s Global Intellectual Property Centre (GIPC). He has lamented that IP-intensive American firms continue to face severe challenges in the Indian market concerning Section 3[d] of the Indian Patents Act and compulsory licensing [CL].
The GIPC, in its annual IPR report, has ranked India in the bottom three for having a weak IPR and patents regime – among a total of 45 countries – followed only by Pakistan and Venezuela [the ranking is based on 6 parameters including patent, trademark, copyrights, enforcement of international treaties etc].
Why is section 3[d] and CL a bone of contention between US and India? What are the key arguments on either side? Does the NIPRP make any headway in addressing US concerns? Is there a way out?
When, Section 3[d] was incorporated in amendment to Indian Patent Act in 2005, global R&D companies had perceived this as a move to deny patents in India. The office of US Trade Representative [USTR] has been protesting against this section for over a decade [it has even put India under ‘priority watch list’ for 3 years in a row viz. 2014/2015/2016] but, India has refused to budge.
The section bars grant of patents to new forms of known substances, unless the new form results in significant enhancement in efficacy over the known substance. The applicant should demonstrate that the ‘new form’ gives substantially higher ‘efficacy’ over a previously known compound. Indian law makers justified this as a carefully crafted step to rein in tendencies to seek ‘frivolous’ patents on some minor modifications to an existing substance, or “ever-greening” as it is understood in common parlance.
The Supreme Court [SC] in the case of Glivec [2013] – cancer treatment drug for which Swiss major Novartis AG had sought a patent – not only upheld the constitutional validity of Section 3[d], but also showed the way ‘how to read and implement’ it. So, it viewed test of efficacy to mean ‘therapeutic efficacy’ implying that ‘pharmacological/chemical properties’ only need be considered thereby virtually shutting the door to ‘incremental’ innovations such as ‘new dosage form’; ‘new delivery systems’ etc.
The value of such innovations to the patients in terms of quality and speed of treatment could be even more than what is offered by a better compound/new molecule [such innovations are very rare and far in between] per se. Yet, the precedent set by the judgment would almost completely eliminate the possibility of applicant getting a patent on all such innovations. This is what worries global R&D companies and the USTR.
A perception that this will tantamount to ‘ever-greening’ is a myth. Patent protection is confined only to ‘new form’ of ‘known’ substance. The latter on completion of its patent term is already available to ‘generic’ players for manufacture and marketing. Moreover, any company other than inventor of ‘known’ compound [including Indian company], can come up with a ‘new form’ or a ‘new dosage’ or ‘delivery system’ and take patent cover.
As regards compulsory licensing [CL], it authorizes the entity concerned to manufacture and market a patented product even without prior consent from innovator/holder of patent. Such flexibility allowed under TRIPs [trade related intellectual property rights] agreement of WTO was incorporated in Indian Patent Act [2005].
Under Section 84, a license can be issued for “private commercial use” if it is found that patent holder has not taken required steps to make patented product available in sufficient quantities or price charged is not ‘affordable’ to patients. Under Section 92, the patent controller can issue the license only based on Central government notification citing circumstances of “national emergency or circumstances of extreme urgency or in case of public non-commercial use”.
The intent of flexibility provided under the TRIPs agreement was that government would use grant of CL sparingly; in fact, as a last resort. However, actions of the controller and health ministry in recent years show that this is being observed more in breach.
In 2012, using Section 84, CL was granted to Natco Pharma to make cheaper version of Bayer’s kidney and liver cancer drug sorafenib [Nexavar]. This was upheld by SC in 2014. More recently, the health ministry is ever keen to grant CL for Bristol-Myers Squibb’s [BMS] chronic myeloid leukaemia drug dasatinib [Sprycel]. Under Section 92, it is also pursuing grant of licence for Roche’s blockbuster trastuzumab [Herceptin] for treatment of breast cancer.
True, TRIPs agreement allows flexibilities to developing countries to help them make drugs affordable to patients. But, recourse to these cannot be pushed to a point of undermining the rights of innovator. Yet, Section 3[d] and grant of CL seek to do precisely that. The NIPRP does nothing to dilute any of these provisions.
These concerns are compelling and can be addressed if only the government resists the temptation of invoking sections 84/92 at the drop of a hat. But, then how does it deal with a situation of patent holder exploiting his monopoly at the cost of patients?
In this regard, a recent judgment of of Delhi High Court [DHC] in the case of Ericsson vs Micromax states that abuse of patent rights can be dealt with under Competition Act [2002]. It finds no conflict between the Patent Act and Competition Act; that Competition Commission of India [CCI] cannot be ousted from its jurisdiction just because a given case comes under patent regulator. If, a patentee is under probe by CCI, then the Controller of Patent [CoP] can consider it while looking at CL applications against him/her. If, CCI has found a patentee’s conduct to be anti-competitive, CoP would have to compulsorily consider it while giving its own final judgment.
The above approach is ‘fair’ and ‘equitable’ as government’s decision to grant a CL will be predicated upon an independent regulator [read CCI] conclusively establishing that the patentee has exploited his monopoly. MNCs will have no basis to find fault which would happen if a generic firm rushes to CoP for grant of the license and latter yields even before this process is gone through.
Likewise, in regard to section 3[d], the government should shed its rigid stance. It needs to appreciate that grant of patent for an ‘incremental’ innovation does not result in ‘ever-greening’ as the known substance [read original innovation] is already available to ‘generic’ players for manufacture and marketing. Indeed, they can work on it, come up with their own innovation and secure a patent on it.
It should stop viewing patent laws from a prism that ‘only MNCs benefit from these’. Instead, the guiding principle should be ‘incentive for R&D and innovation’ irrespective of who benefits. With this change of mindset, the government should consider making necessary amendments in patent rules. That will address USTR’s concern as well.