PHA-Exchange> Note on Patents Amendment in India

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Dear Friends,

I am appending a note on the recent Patent Amendments Bill that was passed
in India. I guess some of you might find it useful.

In solidarity,

Dr.Amit Sen Gupta
PHM-India

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Amemndment to the Indian Patents Act
The Battle is Joined - The War Remains to be Won

Background

The Agreement on Trade Related Intellectual Rights (TRIPS) was one of the
most controversial and bitterly fought agreements that ultimately formed
part of the World Trade Organisation (WTO) agreement in 1995. We have been
consistently of the view that TRIPS was and continues to be an inequitous
agreement balanced heavily in favour of Multinational Corporations. During
the Uruguay Round of negotiations that led to the WTO Agreement there was a
wide consensus in the country against agreeing to TRIPS, but the Government
of the day had proceeded nonetheless disregarding popular sentiments.

The TRIPS agreement, once signed, placed a number of obligations on
countries like India, specifically related to the Amendment of the Indian
Patents Act 1970. The most important of these was the condition that
required India to change to a product Patent regime in the area of
pharmaceuticals and food, from the earlier system provided in the 1970 Act
which did not provide for Product Patents in these areas. It may be noted
here that it was this simple provision in the Indian Act which had
catapulted India to a position where it is the 4th largest producer of
pharmaceuticals and a large supplier of cheap generic drugs to poor
developing countries. In order to conform to these agreements the BJP led
NDA Government brought in two sets of Amendments to the 1970 Act in 1999 and
2002. It also brought in a Bill in December 2003 which was subsquently
adopted by the UPA Government with some minor changes as the Patents
Ordinance 2004.

In the case of all these pieces of legislation, the Government of the day
disregarded public interest and appeared unwilling to make use of even the
limited safegaurds available in the TRIPS agreement that could mitigate the
ill-effects of TRIPS.

It is in this background that movements opposed to surrendering to the
interests of MNCs had formulated a set of demands of the Government
vis-à-vis the final amendment to India's Patents Act through the Patents
Amendment Ordinance 2004. These demands were designed not only to modify the
2004 Amendment but also to address major deficiencies in the 2002 Amendment
that had been steered by the then BJP-led NDA Government. The amendments
proposed were an attempt to provide for the maximum safegaurds in the new
Act making use of flexibilities available in the TRIPS agreement.

After sustained pressure the Government was forced to rethink on the
Ordinance that it promulgated on December 26th, 2004. As a result the
Government tabled a number of amendments to its own Ordinance on the floor
of the Parliament. The amendments tabled by the Government address some of
the key concerns that had been expressed in opposition to the Ordinance of
2004 and the Amendments in 2002.

The major areas in which the fifteen amendments tabled by the Government
address these concerns include the following:

1)	Restrictions on Patentability: There were serious concerns that after
Product Patents are allowed in all areas we would be deluged by Patents that
could be granted on flimsy and frivolous grounds. There were concerns also
that this would lead to "evergreening" of patents, that is perpetuation of
Patents monoploly beyond the stipulated 20 years by repeated Patent grants
based on small changes made to the original molecule. The amendments to the
Ordinance tabled by the Government has now restricted the scope for the
granting of Patents on frivolous claims. It clarifies that an "inventive
step" means a feature of an invention that "involves technical advances as
compared to the existing knowledge or having economic significance or
both.." The amendments also incorporate a new definition for "new invention"
by stating that it means "any invention or technology which has not been
anticipated by publication in any document or used in the country or
elsewhere in the world before the date of filing of patent applicaion with
complete specification, i.e. the subject matter has not fallen in public
domain or that it does not form part of the state of art." The amendments
also provides a definition for "pharmaceutical substance" as being "a new
entity involving one or more inventive steps".

As part of the exercise to strengthen the possibility to deny Patents on
frivolous claims the amendments clarify that "the mere discovery of a new
form of a know substance which does not result in the enhancement of the
known efficacy" is not patentable. It is further explained that: "Salts,
esters, ethers, polymorphs, metabolites, pure form, particle size, isomers,
mixtures of isopmers, complexes, combinations and other derivatives of known
substances shall be considered to be the same substance, unless they differ
significantly in properties with regard to efficacy". In addition the word
"mere" has been deleted from qualifying "new use" under what is not
patentable to strengthen the provision on denying Patents on the new use of
a known substance.

2)	No Software Patenting: The Ordinance had opened the door for software
Patents by providing that computer programmes with technical applications
and those that are combined with hardware could be patented. This has now
been taken back in the amendments and the option for software patenting has
been denied.

3)	Restoration of Pre-grant Opposition to Patents: There have been
widespread apprehensions that the Ordinance restricted the ability of any
entity to oppose the grant of a Patent. The Ordinance had reduced the number
of grounds under which the grant of a Patent could be opposed from 9 to 2
and had also deleted the clause which provided for a hearing in person to
the person making the opposition. The new amendments have now restored all
the original grounds in the previous Act for opposing grant of a Patent and
has also provided that: "the Controller shall if requested by such person
for being heard, hear him 
" The time for filing such opposition has also
been extended from 3 months to six months.

4)	Export to Countries Without Manufacturing Ability: The Ordinance had
provided for allowing exports of Patented drugs produced through compulsory
license in the country, to developing countries with no manufacturing
capacity. This was in line with the Doha declaration of 2001 and the
subsequent declaration by the TRIPS council. However this clause had been
circumscribed by a provision that said that the importing country would have
to obtain a comulsory license. Globally this clause had attracted widespread
criticism including in two editorials of the New York Times as many
developing countries would have been unable to import from india if this
clause was retained. The amendments now clarify that the country can import
from India if "by notification or otherwise allowed importation of the
patented pharmaceutical product from India".

5)	Continued Manufacture of Drugs with applications in mailbox - no
spiralling price rise: Possibly the biggest concern expressed by many was
that after the passing of the Ordinance, drugs which are being produced by
Indian companies and for which patent applications are pending in the
mailbox, would go off the market once the Patents are granted. Also it was
felt that this would lead to a quantum jump in drug prices for these drugs
as MNCs would use their Patent monopoly to hike up the prices for these
drugs. This had been seen to happen in the case of an anti-cancer drug
called Glivec which was granted an Exclusive Marketing Right (EMR) by the
NDA Government in 2003 to the Swiss MNC Novartis, leading to a ten-fold hike
in prices and misery to tens of thousands of patients. The new amendments
have now clarified that such Indian companies who are already producing
these drugs can continue to produce them after payment of a royalty even if
the drug is placed under a Patent. Specifically, it is now provided: "
the
patent holder shall only be entitled to receive reasonable royalty from such
enterprises which have made significant investment and were producing and
marketing the concerned product prior to 1.1.2005 and which comtinue to
manufacture the product covered by the patent on the date of grant of the
patent, and no infringement proceedings shall be instituted against such
enterprises."

6)	Time period for considering Compulsory license application: There have
been widespread concerns that the process of grant of compulsory licenses to
counter the monopoly of patents may take too long and thus defeat the whole
purpose for the same. This has been adressed by the amendments by specifying
that the "reasonable" time period before the Patents Controller considers
issuance of a compulsory license when such a license is denied by the patent
holder "shall not ordinarily exceed six months."

7)	Export by Indian Companies of Patented Drugs: The Indian Patent Act and
its amendment has attracted international attention because today Indian
drugs are the principal source for cheap drugs for poor developing
countries. For example, about 50% of all drugs used to treat HIV-AIDS
patients globally come from India. This concern (that the source of cheap
Indian drugs would dry up) had been expressed in the past few months by a
large number of international agencies such as the UNAIDS and WHO. The
amendments have now provided that when patented drugs are produced under
compulsory license in India by Indian companies: "the license is granted
with a predominat purpose of supply in the domestic market and that the
licensee may also export the patented product, if need be in accordance with
Section 84(7) (a) (iii)" (i.e. where an export market exists).

8)	The 2002 Amendment to the Indian Patents Act had provided for Patenting
of microrganisms and microbiological processes - thus opening the door for
patent protection to biotechnological inventions both in the agricultural
sector (genetically modified seeds, etc) and in the case of pharmaceuticals
produced through biotechnology. This provision which follows the TRIPS
provisions of the same kind, was one of the most controversial in the TRIPS
agreement. As a result, at the time of signing of the agreement it had been
agreed upon that this clause would be reviewed within 4 years. The clause is
under review in the TRIPS council, but because no consensus has been arrived
at, it continues to be a part of the TRIPS agreement. While this clause has
not been deleted from the Indian Act, the Govt. has given a commitment that
the matter would be referred to a committee, and if felt necessary by the
committee, the Act would be modified at a later stage.

9)	Similarly, the Government has given a commitment that the issue of
further defining what a pharmaceutical substance is to restrict the scope of
patenting frivolous claims would be referred to a committee and further
amendments can be considered based on the committee's findings.

Compulsory License - the major area of concern

The one major area that remains a matter of concern is that amendments to
streamline the compulsory licensing system were not incorporated by the
government. The compulsory licensing system is really the lifeline for
domestic companies, now that we have moved to a Product patents system. It
is a system that allows manufacture of Patented drugs by domestic companies
through a license that is granted by the Government. Earlier, the ability of
domestic companies to manufacture patented drugs was not circumscribed by
the need to apply for a system. For the compulsory licensing system to be
effective, procedures for granting such licenses need to be simple and
effective. The Indian law provides for a number of grounds for the granting
of such licenses on grounds of high prices, non availability, to promote
commercial activity, etc. Unfortunately the procedure for granting has been
left ambiguous. This is an area where sustained pressure will have to be
exerted to ensure that such licenses are actually granted within a
reasonable time frame and on reasonable terms.

Effect on Drug Prices and Availability

What are the effects that we would be likely to see on drug prices and
availability? We of course understand that drugs brought into the market
till 1995 would not be affected. By the recent changes it has been ensured
that drugs introduced in Indian between 1995-2005, for which Patent
applications are pending, can now continue to be produced by Indian
companies. They would have to pay royalty to the Patent if a Patent is
granted and we can expect a rise in prices - in the order of 10% or more.
The main catch would be for drugs which will now be Patented, those that do
not already exist in the market. The ability of Indian companies to quickly
produce these drugs has been taken away and they would have to go through
the compulsory licensing process to produce these drugs. Linked to this is
the ability of Indian companies to export these new drugs. There are two
options available - both with their own sets of problems. One route would be
to export a portion of the drugs being produced through compulsory license -
evidently this is entirely dependant on the ability of Indian companies to
receive compulsory licenses to produce newly Patented drugs. The second
option is to export drugs through the process that was arrived at after the
Doha declaration - it is a process that is reserved for export to countries
without manufacturing ability. The process is tied to very onerous and tardy
conditions, and companeies might have major problems in meeting these.

The Way Forward

The incorporation of the new amendments in the Patents Act is an advance for
those who have been campaigning for the safegaurding of national interests
on the issue. At the same time it should be emphasized that this is only a
small battle that has been joined, and the ultimate aim should be to
overturn the TRIPS agreement and bring IPRs out of the WTO. The
non-provision of Product Patents for pharaceuticals and food in the Indian
Patents Act of 1970 was its strongest feature, and no amount of safegaurds
and "felxibilities"  can restore this feature unless the TRIPS agreement is
rejected. Unless this is done, our national interests cannot be taken care
of in full measure as the TRIPS agreement itself places severe limitations
on our ability to enact national legislations that address public interest.

Notwithstanding some gains made through the changes in the original
ordinance, we continue to have differences with the Government on the
approach to Intellectual Property Rights and we should continue to apply
pressure on the Governmemt through mass mobilisation to balance its position
on IPRs in favour of the Indian people. Vigilance is required to ensure that
the gains achieved in amending the Patents Act are not frittered away in its
implementation.

BJP-led NDA's flip flop

Finally, a small comment on the BJP led opposition's walkout on this issue
in the Indian Parliament. After mantaining a defeaning silence the BJP
announced its opposition to the Ordinance less than a week ago. The BJP,
meanwhile, had refused to be a part of the countrywide struggle against the
Patents Ordinance in the last few months. The BJP wants us to forget that it
was its own Government that had passed the 1999 and 2002 amendments and had
also prepared the draft for the present ordinance. Now by saying that it
wants the Bill referred to a Parliamentary committee, the BJP wants us to
forget its past record.  Let us not forget that the 2002 amendment that had
introduced a large number of imbalances in favour of MNCs had been steered
by the BJP led government in a Joint Parliamentary committee (JPC). In the
JPC in 2002, in spite of protestations from the Left, the Indian Patents Act
had been amended disregarding serious concerns - some of which have now been
able to get remedied. So it should be understood that there is no gaurantee
that the mere referring of the Ordinance would have achieved substantial
gains. In fact it is quite possible that the two major parties who have
been, in the first place responsible for getting us into this mess, would
have away from public gaze arrived at a compromise with disastarous
consequences.
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