Under siege

Why the US and pharmaceutical giants want a provision in India’s patent law revoked

Section 146 of the Patents Act seeks to know how companies are using patents in order to ensure access to medicines.

India’s patent laws are under attack again. This time, too, the target is a provision not commonly found in patent laws elsewhere. This rule requires patent holders to disclose whether they are working their patents commercially in India and to what extent. Violation of this statutory requirement is punishable with a fine and jail term of up to six months, but over the years, defaulters have gone scot-free because the authorities themselves have turned a blind eye to violations.

In January, the Delhi High Court took up a long-pending writ petition about how patentees, particularly pharmaceutical giants, have been ignoring Section 146 of the Patents Act, 1970. Under this section, details on patent working are to be filed in Form 27. The global pharmaceutical industry has banded together to seek an overhaul of Form 27 while some have even sought a repeal of Section 146 itself.

The United States government has also put its weight behind such demands. Last month, the United States Patent and Trademark Office made a submission to India’s Controller-General of Patents, urging it to do away with Form 27 and “refrain from applying such onerous penalties to violations of this type”. While health activists and academics have called this blatant American interference in India’s domestic policy consultations, they cannot claim to be surprised. The demand is consistent with the pressure tactics Washington has used to get New Delhi to drop troublesome parts of the patent law.

For well over a decade, it was Section 3(d) of the law that was subject to the full might of the United States administration, acting on behalf of the many American business lobbies that had campaigned to get it scrapped. This section states that inventions that are a mere discovery of a “new form” of a “known substance” and do not result in increased efficacy of that substance are not patentable.

In the case of Section 146 and Form 27, the Pharmaceutical Research and Manufacturers of America and the Biotechnology Innovation Organisation, which is also a trade association, have consistently challenged these requirements in their annual submissions to the United States Trade Representative. The United States Trade Representative has, in turn, always made a note of this grievance while continuing to place India on the Special 301 Priority Watch List – a list of countries that it deems as having “serious intellectual property rights deficiencies”.

The grouse of the Pharmaceutical Research and Manufacturers of America is that Form 27 hampers “ease of doing business” and the United States Patent and Trademark Office has made this a primary argument in its submission to the Controller-General of Patents.

Action against violators

The case that triggered this onslaught by pharmaceutical giants and the United States is a 2015 writ petition filed by legal academic Shamnad Basheer, who sought a direction from the Delhi High Court to the Patent Office to compel patentees and licencees to comply with the law and to take action against those who fail to submit the required information. Basheer, who was with the National University of Juridical Sciences in Kolkata at the time, filed the case after he and his research associates found in a sample survey that around 35% of patentees had not filed Form 27 at all between 2009 and 2012. The survey also found that the disclosures made by those who had filed the form were either incomplete or incomprehensible, he said.

When Basheer’s petition was finally heard in January this year, the Delhi High Court asked the government to file an affidavit listing the corrective steps it would take. It also sought a robust framework for prosecuting patentees who ignore the statutory disclosure requirement. The court said it was “astonishing that the matter has proceeded in this manner” and called for expeditious steps to enforce proper working of the statutory provision.

In response to industry’s complaint of a lack of clarity in what Form 27 required and the need for confidentiality to “protect commercial interests”, the court, in a subsequent order, asked the government to place before it a timeline on the manner in which the modification of Form 27 would be undertaken.

Petition to enforce Form 27 provision

The Patent Office then sought comments from interested parties. In the 60-odd submissions that have been made to the Controller-General of Patents, there has been a sharp division. While a large number of corporate entities, patent law experts and academics concede that there needs to be a streamlining of the information sought in the form, it has also sparked a fresh debate on the true objective of granting a patent: is it just a tool for bestowing monopoly rights on innovators or should the enforcement of patent rights also contribute to the dissemination of technology for the wellbeing of society, as India’s Patents Act, 1970, mandates?

Basheer, now honorary research chair professor of IP law at Nirma University in Ahmedabad, contends that patent working norms are the core of India’s patent system. According to him, if the Patents Act grants a 20-year monopoly for inventions that are novel and useful, it also comes with a corresponding obligation on patentees to work their invention “as far as practicable, for the public benefit, by ensuring inter alia that patented products are available in adequate quantities and a reasonable price”.

Global pharmaceutical companies say such notions are outdated. The lobby groups of the world’s largest drug manufacturers say the rationale underpinning Section 146 is outdated, vague, and creates significant uncertainty for patent owners in India. They hold that the majority of disclosures required under this law are either unnecessary to determining if a patented invention has been worked in India or are so vague as to be nearly meaningless. This is the common position taken by the Pharmaceutical Research and Manufacturers of America, International Federation of Pharmaceutical Manufacturers and Associations, Japan Pharmaceutical Manufacturers Association, and, of course, the Organisation of Pharmaceutical Producers of India, which is a body of multinational drug companies operating in india. Adding its weight to this position is INTERPAT, a non-profit association of research-based pharmaceutical companies represented by senior executives who are responsible for intellectual property matters.

At the same time, it is an Indian organisation – the Federation of Indian Chambers of Commerce and Industry – that has faithfully echoed the American stand and sought the scrapping of Section 146. Online pharma news service Pharmabiz quoted Dipankar Barkakati, additional director and head of intellectual property at the Federation of Indian Chambers of Commerce and Industry, as saying, “Existing Form 27 requirement has become redundant, burdensome, hampers ease of doing business, makes commercialisation of patented invention more difficult and is not aligned to international best practices. There is thus an urgent need to remove Section 146 from statute book.”

Since that would take time, it has urged the amendment of Form 27 in the meantime.

Open door for generics makers

There are larger concerns at play than just the restructuring of Form 27. The worry for multinational drug companies is that under India’s patent regime, failure to commercially work the patent locally could trigger the grant of a compulsory licence. This means the Patent Office can override the rights of the patent holder and allow another company to manufacture a drug that it deems is essential for protecting public health.

This is what happened in 2012 when the Patent Office gave a compulsory licence – the first to be issued in India – to Natco Pharma of Hyderabad to manufacture the generic version of Bayer’s Nexavar, a high-cost patented drug for kidney and liver cancer. Natco had used Bayer’s Form 27 filings to show the German pharmaceutical major was meeting just 2% of the requirements of the drug. It is complete irony that Natco has filed an intervention in Basheer’s petition, which had incidentally accused the generics maker of not filing Form 27 on the working of the compulsory licence.

What should weigh the most with the Patent Office, however, is the strong support for Form 27 and Section 146 from the Indian pharmaceutical industry. The Indian Pharmaceutical Alliance, which brings together 20 companies that account for 46% of the domestic market, says these are “necessary and justified” and should continue. It “believes that information pertaining to working of a patent is crucial to assessing whether the balance that is sought to be achieved by the Act, between incentivising innovation and promoting public health by ensuring adequate availability of medicines at reasonable prices, is achieved”, said its secretary general Dilip G Shah.

The Indian Pharmaceutical Alliance also wants the filings to be in the public domain. And it dismisses the claim made by several industry bodies that Form 27 imposes a burden on patentees. According to Shah, once the system is fully digitised, the burden would be on the Controller-General of Patents. He also pointed out that the majority of patents would be in fields or for articles where their working or non-working would be of no consequence to public health or public interest. As such, the controller and the government should examine the possibility of reducing the administrative burden on themselves, without in any way compromising public health and public interest.

The controversy over Form 27 is the second time a unique aspect of India’s patent laws has come under intense American assault. How this pans out will depend on the government’s ability to stand up to the pressure.

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