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Patents Amendment Bill, 1995 — A Critique
by N. S. Gopalakrishnan*

Cite as : (1996) 3 SCC (Jour) 1

Trade Related Intellectual Property Rights (TRIPs) incorporated in the Final Act of WTO had been a subject of controversy from the very inception of the subject for the Uruguay round of GATT negotiations. The apprehension of the developing countries that TRIPs provisions would be structured to benefit the owners of intellectual property, who are large corporations having capacity to invest huge amounts in R & D for the development of new technology and control the technological and industrial development of less fortunate countries, proved to be true when the negotiations concluded and the agreement was signed finally in Marrakesh on 15-4-1994. Many of the provisions in the TRIPs Agreement are going to have significant impact on the industrial and technological policies of developing countries especially those countries who have made special efforts to build their own technologies to take care of the basic needs of the people.1 The most significant impact of the TRIPs Agreement is the lack of freedom of domestic legislative bodies to enact laws to suit the domestic requirements. The existing intellectual property laws of these countries, structured to suit their domestic needs, would require to be substantially changed to meet the obligations under the TRIPs Agreement.

Considering the special conditions of developing and least-developed countries, the TRIPs Agreement provided a period of 5 to 10 years for the transition from a domestic intellectual property regime to an international one.2 This period is given so as to change their policies and allow their industries to readjust to meet the new demands. A few areas that captured special attention in the entire debate are patenting of life-forms, pharmaceutical and agricultural chemical products etc. They are significant inasmuch as they affect directly the health care system and food security of millions of people around the globe. It is true that transitional provisions in the TRIPs Agreement have provided ten years' time to countries for providing product patent protection to inventions which are not protected through product patents at the time of entering into the Agreement.3 But in the case of pharmaceutical and agricultural chemical products these countries have certain special obligations to fulfil from the date of entry into force of the WTO.4 Since India became a member of the WTO on 1-1-1995, in order to immediately satisfy this requirement, the Government pronounced an Ordinance - the Patents (Amendment) Ordinance, 1994. This was later replaced by the Patents (Amendment) Bill, 1995 which was passed by the Lok Sabha and is still pending before the Rajya Sabha. This paper is an attempt to critically look at the Bill and analyse its legal implications.

If one examines the special provisions in Article 70(8) and (9) in the TRIPs Agreement regarding pharmaceutical and agricultural chemical products India has the following obligations:

(a) to recognise in principle all kinds of inventions in the area of pharmaceutical and agricultural chemical products in accordance with Article 27 of the Agreement,

(b) to provide a mechanism by which applications can be filed for new inventions as understood in Article 27 in these areas from 1-1-1995,

(c) to apply the test of patentability as laid down in the Agreement, irrespective of the law of the country on the date of filing, at the time when patent is granted or rejected,

(d) to provide patent protection for a period of 20 years from the date of filing once the parties decide to grant patent,

(e) in the case of product patent applications in these areas, grant exclusive marketing rights for five years or until patent is granted or rejected whichever period is shorter.

Granting of exclusive marketing rights is subjected to three conditions:

(i) product patent for the invention has been granted by another member country,

(ii) market approval is obtained in such other member country and

(iii) market approval from the country/member granting exclusive marketing right is granted.

This provision has been included to protect new inventions made after 1-1-1995 satisfying the requirements of Article 27 of the TRIPs Agreement. It is also intended to exclude this benefit to inventions made before 1-1-1995. That is the reason why the provisions clearly stated that the inventions must take place after 1-1-1995 and insisted for a patent grant from another member.

If one were to examine the Indian Patents Act, 1970, Section 55 of the Act expressly prohibits product patents protection for inventions relating to medicines or drugs and substances prepared or produced by chemical processes. This in fact excludes product patent for some items of pharmaceutical products and agricultural chemical products as envisaged in the TRIPs Agreement.

From the Preamble of the Bill it is clear that the Bill seeks to achieve three objectives:

(a) to make the Patents Act, 1970 to be in conformity with the obligations under the TRIPs Agreement,

(b) to adopt measures consistent with the TRIPs Agreement, and

(c) to take steps to protect public health and nutrition and to promote public interest in sectors of vital importance to the socio-economic and technological development.

On an analysis of the various provisions of the Bill it would however appear that the above objectives are not going to be achieved to the full extent.

The Bill did not satisfy the TRIPs Obligation

It is clear from Article 70(8) of the TRIPs Agreement that India has to immediately provide protection, as mandated, in the areas of pharmaceutical and agricultural chemical products. This protection must be in accordance with the obligations under Article 27.6 According to Article 27, patent shall be granted to inventions in all fields of technology both for product and process. This is obligatory if the invention is new, involves an inventive step and is capable of industrial application. It also mandates that the patent rights must be made available irrespective of the place of invention or field of technology, and whether the products are imported or locally produced. A few exceptions to this such as public order, morality, health, plant and animal life, etc., are specified with other conditions.7 This makes it clear that the protection to be afforded to pharmaceutical and agricultural chemical products as per Article 70(8) must be in conformity with the standards of patentability laid down in Article 27. To achieve this obligation the Bill introduced sub-section (2)8 to the existing Section 5 of the Patents Act, 1970. This section makes only provision for some pharmaceutical products and not for all the agricultural chemical products which are prohibited for patents claim under the existing Section 5 of the Act. It is interesting to note that Section 5(1)(a) of the Act speaks about invention of "substances intended for use or capable of being used as medicine or drug" and not pharmaceutical products. There is no definition for "pharmaceutical products" in the TRIPs Agreement. So it has to be inferred that any invention, as defined in Article 27, related to pharmaceuticals must be considered for protection. The 1970 Patents Act defines on the other hand "medicine or drug" in Section 2(b)9 to include medicines and substances for treatment of human beings, animals and plants. So it can be argued that Section 5(2) introduced through the Bill covers not only medicines and drugs but also some agricultural chemical products. It is however clear that only areas of pharmaceutical products that come under the definition of medicine or drug are covered under this amendment. In the light of Section 3 of the Patents Act, 1970 which prohibits patenting of certain inventions, it is not however very clear whether other inventions relating to pharmaceutical products as contemplated by Article 27 of TRIPs Agreement are also covered. This also creates a doubt whether bio-drugs and chemicals are included for protection. One can easily argue that the TRIPs Agreement envisages immediate protection of bio-drugs and bio-chemicals through Article 70(8) and Section 5(2) of the Bill facilitates it. This is going to have far-reaching implications considering the rich genetic diversity we have in herbal medicines.

Section 5 of 1970 Patents Act prohibits product patents for substances prepared or produced by chemical processes. This includes many areas in addition to agricultural chemical products. The amendment has no direct reference to agricultural chemical products in respect of which we are obliged to comply with the requirements of Article 70(8) and (9) of TRIPs Agreement. As per the amendment only those agricultural chemical products that fall within the definition of medicine or drug are protected. In this context it is felt that the Bill has not fully taken care of the TRIPs obligations under Article 70(8).

The Bill is not in conformity with the TRIPs Agreement

Another mandate of TRIPs Agreement under Article 70(9) is to immediately provide exclusive marketing rights to new inventions relating to pharmaceutical and agricultural chemical products subject to the conditions laid down in the provisions. The Bill introduced two sections, viz., Sections 24-A and 24-B, to satisfy this obligation. An analysis of these two sections however makes it clear that the sections are not in conformity with Article 70(8) and (9) of the TRIPs Agreement.

One of the objectives of the TRIPs Agreement is to discard the notion of patent protection as country specific and make it international. In this context even the obligation to give exclusive marketing rights under Article 70(9) is also international in application. According to Article 70(9) a member is obliged to give exclusive marketing rights if the patent application for product is filed and the claimant fulfils these conditions:

(a) has obtained patent for such claim from another member;

(b) has obtained market approval from such other member; and

(c) has obtained market approval from the country in which the applicant asks for exclusive marketing rights.

This makes it very clear that, in case of granting marketing rights a country like India has no right to examine whether the patent claim in an invention is patentable or not under the domestic law. Such an examination is possible only if India is planning to give product patents immediately. Even if India decides to give product patent, then the test of patentability must be in accordance with Article 27 of the TRIPs Agreement and not according to the existing domestic law if it is inconsistent with Article 27 of the TRIPs Agreement. In this context the new Section 24-A(1)(ii) directing to examine whether the patent claim falls under Section 3 or Section 4, and reject the exclusive marketing right in case the claim falls under Section 3 or Section 4 of the 1970 Act seems to be against the provisions of the TRIPs Agreement. In this process what the new section is trying to do is to apply the domestic law for the purpose of giving exclusive marketing rights to a product for which already a patent is obtained from another member in accordance with Article 27 of the TRIPs Agreement. This is against the spirit of the TRIPs Agreement and defeats in some cases, the purpose for which Article 70(9) has been included.

Similarly, the conditions laid down in Section 24-B are also against the provisions of the TRIPs Agreement. In the first place Section 24-B distinguishes inventions made in India and outside India and separate conditions are stipulated for granting exclusive marketing rights. In case of foreign inventions, the inventor has to get a patent from another member country and market approval from that country and India.

As far as Indian inventions are concerned, the claimant can get an exclusive marketing right on his obtaining a process patent for the patent claim in India and market approval from India. This, it appears, would create more problems. On the face of it, it appears that an Indian inventor can claim this benefit only for an invention where both product and method or process are patentable. In another sense, it also gives an impression that the law gives a beneficial position to Indian inventors compared to foreigners. Since India is not granting at present product patents, on a strict interpretation of the TRIPs Agreement, an Indian inventor has to obtain a patent and market approval from some other country before obtaining market approval and exclusive marketing rights in India. The new section avoids these two conditions and substitutes them with a process patent from India. The purpose of introducing Article 70(8) and (9) is to prevent the industries in a country like India from taking undue advantage of foreign inventions in view of lack of product patent protection in these areas even during the transitional period. The provision in the amendment gives a false impression that it is trying to protect the Indian industry and existing process patent R & D to enable the industry to move towards product patent R & D. The provision only insists upon a process patent and the Patent Office is not going to examine whether the product claimed is patentable as per the conditions laid down in Article 27 of the TRIPs Agreement. This may enable an Indian inventor to apply for the exclusive marketing right for an invention that took place before 1-1-1995 with a new process invented by him for the product. Based on the provisions he may enjoy the exclusive marketing rights for the product for which the Patent Office may not grant patent after 10 years for lack of novelty. It appears that the idea behind Article 70(9) of the TRIPs Agreement insisting for a product patent as a condition precedent to enjoy exclusive marketing rights is to avoid such manipulations and to ensure that the right is made available only to new inventions that took place after 1-1-1995 and satisfy the test of patentability as laid down in Article 27. It appears that the amendment is against the spirit of the TRIPs Agreement especially the Most Favoured Nations or National Treatment provisions.

The Bill against Public Interest

For the purpose of protecting the interest of the public, both in terms of availability of new pharmaceutical products at reasonable prices and to develop the technological capabilities of our industry, the Bill introduced special provisions - Section 24-C and Section 24-D - providing for compulsory licensing and price control. On an analysis it appears that these provisions can produce very little impact in this regard.

According to the existing Section 84 of the 1970 Act, compulsory licence can be granted on two grounds. One is on the ground that reasonable requirements of the public as understood in Section 90 of the Act have not been satisfied and the other is that the patented invention is not available to the public at a reasonable price. If one examines Section 90 of the Act, sub-clauses (a) to (c) are concerned with the working of patented inventions in India and its impact on consumers and the Indian industry. Sub-clause (d) and (e) of Section 90 are concerned with importation of the patented product and its impact on the consumer and the industry in India. As per Section 24-C(a) of the Bill, for the purpose of compulsory licensing of exclusive marketing rights, working of the invention shall be deemed to be selling or distributing the article or substance. Thus, it is not mandatory on the part of the inventor to manufacture the products in India. The Bill through Section 24-C(d) omitted the application of Section 90(d) and (e) for the purpose of granting compulsory licence. By virtue of these provisions the protection of public interest on the ground of reasonable requirements of the public not being satisfied under Section 84 read with Section 90 becomes impossible. The only ground on which a compulsory licence can be granted is non-availability of products at reasonable price under Section 84. This is also beneficial only if the product is manufactured in India. If the product is made available through importation such granting of licence may not serve the purpose inasmuch as the licence-holder is at the mercy of a foreign producer of the products for the technology to produce the new product in India. It is doubtful, in this context, whether anyone will apply for compulsory licence of exclusive marketing rights. The possibility is there only when an industry finds out a cheaper process to produce the new product enjoying the exclusive marketing rights.

The price control mechanism contemplated in Section 24-D(2) also will have the same fate. If the product is not manufactured in India, imposition of price control may cause its withdrawal from the market since the Government has no control on the manufacture. The only option for the Government is to purchase it at international price and distribute it to the public at a subsidised rate. Since working of the invention is not mandatory the possibility of technology development will also become difficult if not impossible. Only through the licensing process the Indian industries can develop the product. The industries will have to pay a high royalty for such products and it may not be possible for them to produce such products at reasonable prices fixed by the Government. The net result is that the experiment of the Indian industries to produce the same product through an alternate process and sell it at a relatively cheaper price will come to a standstill with reference to these new drugs, many of which are going to be life-saving. Industry will face a major setback, and the consumer will have to face increase in the prices of drugs. Since the industry is not in a position to make profit on these new drugs it will have a long term negative impact on the R & D activities in our country.

The provisions in the TRIPs Agreement and the Bill are intended to protect those new products which are in the pipeline in the R & D labs of the industries. It is needless to say that these new products are in the labs of MNCs. According to reports Indian industries will take a minimum of 10 years to produce a new product, and even this will be possible only if we could fully utilise our R & D investment in this area. In other words, our domestic industries are not in a position to take much advantage of these provisions and it will help only foreign inventors to get protection of their new products in our market and to prevent our industries from producing the same product through an alternate process. Because of the strong process patent R & D built by our industries we are now in a position to produce the new product within 3 to 4 years of its release in the international market. This has enabled us to regulate, to a large extent, the ill effects of the monopoly of the product in the market. The possibility of continuing this experiment during the period of transition to restructure our industrial R & D is blocked by the TRIPs Agreement. The Bill will force the Indian industry to go for licensing and technology transfer, rather than building indigenous technology. This process will enable the MNCs slowly and steadily to destroy our process patent R & D base during the transitional period and control the market after that.

The study of the TRIPs provisions and the Bill clearly indicate the limitations of a country like India in formulating laws for the country. Any attempt to twist the TRIPs provisions which are going to affect the holders of technology can take us to WTO. If the attempt of the Bill is to prevent or regulate the MNCs from capturing the Indian pharmaceutical and agricultural chemical market they can surely take us to WTO. If the two sub-sections of the TRIPs Agreement demonstrate this amount of legislative limitation, one can imagine the legal implications of the other provisions of the Agreement. It is not yet late for the Indian Parliament to have a review of the Bill.

* Asst. Prof. (Sr), National Law School, Bangalore, India. Return to Text

  1. Deepak Nayyar, "Intellectual Property Rights and LDC's - Some Strategic Issues", 27 EPW, Feb. 8, p. 271, (1992). Return to Text
  2. See Articles 65 & 66 of the TRIPs Agreement. Return to Text
  3. See Article 65(4). Return to Text
  4. See Article 70(8)(a). Return to Text
  5. Section 5 reads:
      "In the case of inventions -
      a.      claiming substances intended for use, or capable of being used, as food or as medicine or drug, or
      b.      relating to substances prepared or produced by chemical process (including alloys, optical glass, semi-conductors and inter-metallic compounds), no patent shall be granted in respect of claims for the substances themselves, but claims for the methods or processes of manufacture shall be patentable. Return to Text
  6. Article 27(1) reads:
          "27. (1) Subject to the provisions of paragraphs 2 and 3 below, patents shall be available for any inventions, whether product or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to place of invention, the field of technology and whether products are imported or locally produced." Return to Text
  7. Article 27(2) reads:
          "27. (2) Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect order among public or morality, including to protect human, animal, or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not merely because the exploitation is prohibited by domestic law." Return to Text
  8. Section 5(2) reads:
          "5. (2) Notwithstanding anything contained in sub-section (1), a claim for patent of an invention for a substance itself intended for use, or capable of being used, as medicine or drug may be made and shall be dealt, without prejudice to the other provisions of this Act, in the manner provided in Chapter IV-A." Return to Text
  9. Section 2(b) reads:
      "2. (b) Medicine or drug includes -
            (i) all medicines for internal or external use of human beings or animals,
            (ii) all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of diseases in human beings or animals,
            (iii) all substances intended to be used for or in the maintenance of public health, or the prevention or control of any epidemic disease among human beings or animals,
            (iv) insecticides, germicides, fungicides, weedicides and all other substances intended to be used for the protection or preservation of plants;
            (v) all chemical substances which are ordinarily used as intermediaries in the preparation or manufacture of any of the medicines or substances above referred to;"
      Return to Text
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