ISSUE XXIX : A glimpse of recent developments in patent arena

Introduction

The US Trade Representative 301 Report found that Indian IP regime favors the native and therefore, the chances of US downgrading India in this report was most likely.1 However, the Indian government refused to participate in US unilateral investigation while defending its IP regime. Essentially, India is compliant with its commitments under TRIPS and has used flexibilities which are available to WTO members and that is entirely within the limit and commitments made by India under TRIPS and WTO agreements. India is also gradually aligning its IP regime to the global regime. In the domain of patents, India became a contracting state to the Patent Cooperation Treaty (“PCT”) on December 7, 1998 and this heralded an era of regulatory and procedural changes. Now, the Indian Patent Office (“IPO”) enjoys the privileges enjoyed by the patent offices of other developed nations. The recent unprecedented decision of granting compulsory license for manufacturing patented drugs by Indian patent authorities have also evoked mixed responses and, turned the attention of other countries to the patent law developments in India.

The present bulletin will discuss the various changes carried out to the IPO by WIPO followed by the streamlining of the procedural aspects of patent registrations in view of the newly acquired status by IPO and, also, the concept and recent grant of compulsory license.

1. Upgradation of IPO

From October 15, 2013, the IPO has started functioning as an International Searching Authority (“ISA”) and International Preliminary Examining Authority (“IPEA”) under the PCT.2 This was the outcome of the agreement3 entered into between IPO and the International Bureau of WIPO on September 25, 2013,4 which, in turn, was the postscript to IPO’s recognition as ISA & IPEA in 2007. As a result of this recognition as ISA/IPEA by WIPO, IPO will now be entitled to conduct international searches and international preliminary examinations and issue preliminary examination reports. These international search reports and preliminary examination reports issued by IPO will aid the applicants in ascertaining the most relevant prior art (all information that is publically available) in the field of the applicant’s patent as well as in formulating a preliminary opinion as to whether their inventions appear to be novel, involve an inventive step and capable of industrial

application, the three criteria recognized for valid patent registrations.5 Availing these search services of IPO will cost INR 10,000 (around USD 167)6 for companies and INR 2500 (around USD 42) for individuals.

2. Amendments to the Patent rules

The Patent Rules, 2003 that regulate the procedural aspects of patent registrations and other allied matters with respect to patents in India has undergone two significant amendments in the recent past.

2.1. The Patent (Amendment) Rules, 2013

The Patent (Amendment) Rules, 20137, first among the two recent amendments, came into force on October 15, 2013. These amended rules are primarily aimed at streamlining the various procedures in line with IPO’s agreement with the International Bureau of WIPO. As per the amended rules, the IPO, Delhi office will be the designated office for ISA and IPEA. In variance with the old rule where the applications were bound to be processed by the patent office of initial filing, the amended rules empowers the Controller to transfer patent applications between the various patent offices in India. The rules prescribe a period of three months or incase of priority, nine months from the date of priority, whichever expires first for the preparation of international search report (“ISR”). Similarly, rules set period of twenty eight months from the priority date or six months from the start of International Preliminary Examination or six months from the date of receipt of the translation by the examination authority for establishing the IPER by the examining authority. Copies of ISR, written opinion and IPER shall be transmitted to International Bureau as well as to the applicant. A tabulated fee structure for international applications for various requirements under the treaty also forms part as fifth schedule of the new rule.

2.2. The Patent (Amendment) Rules, 2014

The changes brought in by the subsequent amendment to the Patent Rules with effect from February 28, 20148 are as summed up below:

  1. Fee structure has been revised for patent application filing and other processes before the IPOs. The Rules also provide for a deduction of 10% for e-filing of application with IPO as opposed to physical filing.
  1. The amendment rules brought into picture a third category of applicant, “small entity”, as defined under Section 7(1)(a) & 7(1)(b) of the Micro, Small and Medium Enterprises Development Act, 2006 i.e. enterprises engaged in manufacture or production of

goods whose investments in plant and machinery are within INR 100,000,000 (approximately USD 16,66,666) or which are into providing/rendering of services with an investment cap of INR 50,000,000 (approximately USD 8,33,333) in equipments. A fee structure falling between that for a natural persons and larger entities is stipulated for these small entity applicants. In the eventuality of full/part conversion of the applicant entity from small to larger one, the rules mandate the payment of additional fee calculated as the difference between the fee structure for small entities and the larger entities. It is further clarified that the highest fee category as applicable among the joint owners will be considered for fee calculation in the case of joint applications.

  1. Two forms, Form 7(A) towards filing of “Representation Opposing Grant of Patent” (without any accompanying fee) and Form-28 which should be part of every new application, are newly introduced by the amendment.

3. Compulsory Licensing and Patent law

Compulsory licenses are generally defined as “authorizations permitting a third party to make, use, or sell a patented invention without the patent owner’s consent.”9 The compulsory licenses are generally granted with a view to help the needy people to buy the life saving drugs at an affordable price. Since compulsory licenses limits the monopoly rights conferred to the patent holders there have always been controversies associated with its implementation. As per the Indian Patent Act, 1970 (“Act”), the applicant should first make an attempt to get voluntary license from the patentee itself to manufacture the patented drug. Only if the applicant is not able to procure the same within the prescribed period of 6 months, the applicant can file an application before the Controller General of Patents for providing compulsory license to manufacture the said patented drug. As per section 84 of the Act, for the compulsory license of patented invention, the interested party can apply to the controller after the expiry of three years from the date of grant of such patent based on the following reasons: (i) reasonable requirements of public have not been satisfied; or (ii) patented invention is not available with the public; or (iii) patented invention is not worked in the territory of India.

3.1 Cases of recent Compulsory License Grants

India’s first compulsory license was granted to Natco Pharma Ltd (“Natco”) for manufacturing Bayer Corporation’s (“Bayer”) patented drug Nexaver used in the treatment of liver and kidney cancer. Nexavar is a life-enhancing drug as it would extend the life span of the patients suffering from kidney or liver cancer. Bayer launched Nexavar in the year 2006 and obtained patent protection on March 3, 2008. Bayer sold the drug at an approximate cost of INR 280,000 (approximately USD 4,666) per month. Natco, an Indian pharmaceutical company, applied to Bayer for a voluntary license to manufacture and sell the drug but since then Bayer had continued to reject Natco’s proposal. Aggrieved by this rejection, Natco filed an application for the grant of a compulsory license with the IPO and

9 F.M. SCHERER & JAYASHREE WATAL, POST-TRIPS options for access to patented medicines in developing countries 13 (Common on Macroeconomics & Health, Working Paper No. WG4:1, 2001, available at http://www.cmhealth.org/docs/-wg4_paper1.pdf (as visited on May 29, 2014).

the Controller General of Patents (“CGP”) after considering all the three aforementioned grounds for grant of compulsory licenses, decided in favor of Natco. CGP has permitted Natco to manufacture the patented drug based on its assurance to sell the drug at a price of INR 8,800, which is only 3% of the Bayer’s cost. Further, a lot of conditions have been imposed on Natco including payment of a royalty of 6% of net sales to Bayer, manufacturing of the drug at its own manufacturing facility, selling the drug within Indian Territory and supply of the same to at least 600 patients per year free of cost. Aggrieved by the decision, Bayer appealed before the Intellectual Property Appellate Board (“IPAB”) against the CGP’s decision alleging that the grant of compulsory license was illegal and untenable under law. However, IPAB dismissed the appeal stating that granting compulsory license to Natco is valid under law and revoking the same would jeopardize the interest of the public who are in need of the drug.10 Thus, eventually the CGP’s order granting compulsory license to Natco was upheld.

In an another interesting case between BDR Pharmaceuticals Ltd (“BDR Pharma”) and Bristol Myers Squibb Pharmaceuticals Ltd (“BMS Pharma”), CGP rejected the application filed by BDR Pharma for compulsory license of anti cancer drug Dasatinib, a patented drug of BMS Pharma citing that the applicant has failed to make out a prima facie case for an order under section 87 of the Act. BMS Pharma was selling the drug at a price of INR 2761 (USD 6) per tablet whereas BDR Pharma proposed to the sell the generic version of the drug for INR 135 (USD 2.25) per tablet. As mentioned earlier, an applicant in order to obtain a compulsory license must have made the necessary efforts to procure a voluntary license from the patent holder and only in the event of the failure of such attempts that the applicant can file an application for compulsory license within 6 months of the initial request. Likewise, BDR Pharma had sent a request to BMS Pharma to issue voluntary license for the manufacture of its anticancer patented drug Dasatinib, but BMS Pharma responded by raising numerous questions to BDR Pharma such as whether BDR Pharma posses necessary wherewithal for the manufacture of good quality patented drugs. BDR Pharma did not reply to the queries raised by BMS Pharma, but chosen to file an application for compulsory license with the CGP. CGP in his order held that BDR Pharma by failing to reply to the queries raised by BMS Pharma had not fulfilled the conditional steps required for obtaining compulsory license and, thus rejected the application. It was also pointed out that the BDR Pharma must have negotiated with BMS Pharma for at least 6 months for obtaining voluntary license and, therefore BDR Pharma failed to prove the existence of a prima facie case for the grant of compulsory license.

Though the grant of compulsory license was welcomed by a section of the society, the pharmaceutical companies were not happy by the decision as they are of the opinion that it would undermine the innovative steps undertaken by them and further discourages the investment in the research and development of new medicines. As a result, the invention of new drugs and related business opportunity would be adversely affected and, therefore, the foreign multinational companies wanted US Trade Representative to classify India as Priority Foreign Country in its Special 301 report in order to pressurize India into change its stand in grant of compulsory licenses as per section 84 of the Act. However, US has elected to place

India in Priority Watch List Country instead of Priority Country hoping that the recently constituted government will provide a more conducive IP environment to US traders.

Conclusion

The promotion of IPO into ISA and IPEA is a milestone in the history of IPO but there are several concerns such as the sufficiency and competency of the IPO workforce, existence of some procedural grey areas etc. still bother the stakeholders. Further, the intention of the lawmakers in the promulgation of the above amended rules is to disseminate and systemize the procedural aspects with regard to IPO’s functioning as ISA and IPEA. The discounted fee for e-filing, a step in the direction of paperless patent office, is laudable. But this noble intent of the policy makers can face hitches unless the e-filing platform of the IPO is efficiently maintained without any technical glitch. These developments in Patent arena have placed India in an advantageous position to compete with the developed countries. Though the grant of compulsory license is criticized by the developed countries and its traders, India should not succumb to their pressure as it is imperative for a developing country like India, where a substantial population is below the poverty line, to grant compulsory license as it would make the expensive life saving drugs available to the needy patients. So, there is a need to bridge the gap between business profits and providing access to medicines to the poor.

Authored by: Sindhu Varma
Krishnakanth Balasubramani

1 Annual report prepared by the office of United States Trade Representative as per United States Trade Act, 1974 consisting list of countries whose IPR regime is adverse to United States and its traders.

2 PCT is an international patent law treaty, concluded in 1970 which presently has 148 member countries in its fold and facilitates a unified procedure for filing patent applications to the states which are parties to this treaty. 3 This agreement of IPO with the International Bureau of WIPO will be prevailing until 2017.

4  Full text of the agreement can be accessed at http://ipindiaservices.gov.in/isaweb/agreement.pdf (as visited on May 29, 2014).

5 Article 33(1) of PCT accessible at http://www.wipo.int/pct/en/texts/articles/a33.htm (as visited on May 29, 2014).

6 Approximately 1USD = INR 60.

7   Accessible  at  http://ipindia.nic.in/ipr/patent/patent_Amendment_Rules_2013.pdf  (as  visited  on  May  29, 2014).

8  Available  at  http://www.ipindia.nic.in/iponew/patent_Amendment_Rules_2014.pdf  (as  visited  on  May  29, 2014).

10 OA 35/2012 – Intellectual Property Appellate Board.

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