TRIPS and India

TRIPS and India

In 2005, in order to comply with the requirements of TRIPS, the Indian government introduced product patents on pharmaceuticals. For the previous three decades, such patents had been forbidden, allowing India to develop one of the most robust generic pharmaceutical industries in the world.

Pharmaceutical patents were first introduced to India by the British. But in Patent Act 1970 changed the course prohibiting product patents on medicines. At that time  drug prices in India were very high The 1970 Act served as a big boost of growth in the domestic pharmaceutical industry. Although the law permitted process patents related to medicines, they were very limited in scope. The law thus created significant space for the entry of local pharmaceutical firms and they started producing active pharmaceutical ingredients (APIs) in the mid-1970s. Indian companies became skilled in reverse engineering and developing new processes for drug production. And gradually drug prices were amongst the lowest in the world. In 1995, India joined the WTO and  the TRIPS Agreement. TRIPS altered the terrain of international IP law. TRIPS had more teeth than WIPO administered treaties as treaties administered through the World Intellectual Property Organization (WIPO) had no effective enforcement mechanism, but the WTO incorporated a new dispute settlement system, allowing for adjudication of TRIPS disputes and for trade sanctions against countries found to be in violation of the Agreement.

The Doha Ministerial Conference declaration on the TRIPS agreement and public health recognized the gravity of public health problems afflicting many less developed countries.  The declaration stressed the need for the TRIPS agreement to be part of wider international action to address these problems. It acknowledged the concerns about its effects on prices. The Ministerial Conference agreed that the TRIPS agreement should not prevent members from taking measures to protect   public health. WTO members were under obligation to implement TRIPS provision by 2000, 2005, or 2016, depending on their level of development.

India was given an extended period of time to make  its patent regime complaint to TRIPS. Consequently India passed the Patents Amendment Act, 2005 which came into force on 1st January, 2005. Earlier India had allowed for the manufacture of generic versions of many drugs. Through this amendment it has now implemented a product patent regime and product patents in the pharmaceutical sector.

2005 AMENDMENT

A number of changes were introduced by the 2005 amendment, few of the important definitions bought by this amendment are:

“inventive step” means a feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art[1]

 “new invention” 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 application 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 the art[2]

“capable of industrial application”, in relation to an invention, means that the invention “invention” means a new product or process involving an inventive step and capable of industrial application[3]

“pharmaceutical substance” means any new entity involving one or more inventive steps[4]

Section 3(d) has been amended to read:

“the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least employs one new reactant”.

The use of the phrase “mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy” has been bought into the statute book to prevent what is known as ‘ever greening’.

Allowance of ongoing generic production:
The amendment permit generic manufacturers to continue producing generic version of new drugs which are in the mailbox. However, this only applies where the generic producer has made a significant investment provided they were producing and marketing the generic version prior to 1 January 2005.
But the generic companies are required to pay the patent holder a reasonable royalty.

COMPULSORY LICENCE PROVISIONS

Indian Patent Act had been extensively amended in regard to the grant of compulsory licence to conform to the requirements of the TRIPS. Though TRIPS does not expressly use the word ‘compulsory licence’, it uses a similar terminology ‘other use’. Section 31 of TRIPS state that:

Where the law of a Member allows for other use of the subject matter of a patent without the authorization of the right holder, including use by the government or third parties authorized by the government, the following provisions shall be respected:

(a) authorization of such use shall be considered on its individual merits;

(b) such use may only be permitted if, prior to such use, the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time. This requirement may be waived by a Member in the case of a national emergency or other circumstances of extreme urgency or in cases of public noncommercial use. In situations of national emergency or other circumstances of extreme urgency, the right holder shall, nevertheless, be notified as soon as reasonably practicable. In the case of public non-commercial use, where the government or contractor, without making a patent search, knows or has demonstrable grounds to know that a valid patent is or will be used by or for the government, the right holder shall be informed promptly;

(c) the scope and duration of such use shall be limited to the purpose for which it was authorized, and in the case of semi-conductor technology shall only be for public noncommercial use or to remedy a practice determined after judicial or administrative process to be anti-competitive;

(d) such use shall be non-exclusive;

(e) such use shall be non-assignable, except with that part of the enterprise or goodwill which enjoys such use;

(f) any such use shall be authorized predominantly for the supply of the domestic market of the Member authorizing such use;

(g) authorization for such use shall be liable, subject to adequate protection of the legitimate interests of the persons so authorized, to be terminated if and when the circumstances which led to it cease to exist and are unlikely to recur. The competent authority shall have the authority to review, upon motivated request, the continued existence of these circumstances;

(h) the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization;

(i) the legal validity of any decision relating to the authorization of such use shall be subject to judicial review or other independent review by a distinct higher authority in that Member;

(j) any decision relating to the remuneration provided in respect of such use shall be subject to judicial review or other independent review by a distinct higher authority in that Member;

(k) Members are not obliged to apply the conditions set forth in subparagraphs (b) and (f) where such use is permitted to remedy a practice determined after judicial or administrative process to be anti-competitive. The need to correct anti-competitive practices may be taken into account in determining the amount of remuneration in such cases. Competent authorities shall have the authority to refuse termination of authorization if and when the conditions which led to such authorization are likely to recur;

(l) where such use is authorized to permit the exploitation of a patent (“the second patent”) which cannot be exploited without infringing another patent (“the first patent”), the following additional conditions shall apply:

(i) the invention claimed in the second patent shall involve an important technical advance of considerable economic significance in relation to the invention claimed in the first patent;

(ii) the owner of the first patent shall be entitled to a cross-licence on reasonable terms to use the invention claimed in the second patent; and

(iii) the use authorized in respect of the first patent shall be non-assignable except with the assignment of the second patent.

Though most of the provisions in the Indian Patent Act seem to be TRIPS compliant, Section 84(1)(c)[5]creates difficulty. TRIPS clearly stipulate that patents will not be differentiated on the ground that they are imported.[6] Thus on a plain reading of Article 27.1, it is clear that the ground of compulsory licensing under section 84(1)(c ) is in conflict with TRIPS.

MAIL BOX APPLICATIONS

Pursuant to TRIPS obligation, India amended its Patent Act in 1999 and inserted section 11A to provide that applications claiming pharmaceutical inventions would be accepted  and put away in mailbox which would be examined in 2005. There is a provision of issue of automatic compulsory licence in case of grant of patent of those mail box application, provided the generic companies have made a significant investment and were producing and marketing the drug covered by the mailbox application prior to 2005.[7]

92A PROVISION

A new ground was introduced by the 2005 amendment to enable export to countries with inadequate manufacturing capabilities. Section 92A ‘Compulsory licence for export of patented pharmaceutical products in certain exceptional circumstances’ has been introduced which provides that compulsory licence shall be available for manufacture and export of patented pharmaceutical product to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems, provided compulsory licence has been granted by such country or such country has, by notification or otherwise, allowed importation of the patented pharmaceutical products from India. ‘pharmaceutical products’ has been explained as any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address public health problems and shall be inclusive of ingredients necessary for their manufacture and diagnostic kits required for their use.

As many countries today do not have manufacturing capacities, Indian generic companies can provide those countries in need with the medicinal requirements provided they have not ‘opted out’ of it.

NOVARTIS AG VS UNION OF INDIA [8]

 The main argument of the writ petitioner was that section 3(d)[9] of the Indian Patent Act was unconstitutional as it violated not only Article 14 of the Constitution of India but also on the ground that it was not in compliance to “TRIPS”.

Unamended Section 3(d) read as follows: The mere discovery of any new property or new use of a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

Amendment to Section 3(d) under Ordinance 7/2004: The mere discovery of any new property or mere new use of a known substance or of the mere use of a known process; machine or apparatus unless such known process results in a new product or employs at least one new reactant.

Section 3(d) as amended by the Patents (Amendment) Act, 2005 which came into effect from 01.01.2005 read as: The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

Explanation: For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy.

Following issues were framed by the Hon’ble Madras High Court:

(a) Assuming that the amended section is in clear breach of Article 27 of “TRIPS” and thereby suffers the wise of irrationality and arbitrariness violating Article 14 of the Constitution of India, could the courts in India have jurisdiction to test the validity of the amended section in the back drop of such alleged violation of “TRIPS”? OR

Even if the amended section cannot be struck down by this Court for the reasons stated above, cannot this Court grant a declaratory relief that the amended section is not in compliance of Article 27 of “TRIPS”?.

(b) If it is held that courts in India have jurisdiction to go into the above referred to issue, then, is the amended section compatible or non-compatible to Article 27 of “TRIPS”?

(c) Dehors issues (a) and (b) referred to above, could the amended section be held to be violative of Article 14 of the Constitution of India on the ground of vagueness, arbitrariness and conferring un-canalised powers on the Statutory Authority?

On the issue of whether Indian courts have jurisdiction to decide the issue under consideration distinguishing the case of Equal Opportunities Commission and Anr. v. Secretary of State for Employment[10], it agreed with the respondents that “TRIPS” do not become Law in India on its own force without any domestic Law legislated by the Indian Government. It further observed that International Covenant, International Treaty, International Agreement and such documents are essentially in the nature of a contract. Agreeing with the respondents that the right forum to raise the issue was WTO Dispute Settlement Body (DSB), it held that when participating nations, having regard to the terms of the agreement and the complex problems that may arise out of the agreement between nation to nation, decide that every participating nation shall have a Common Dispute Settlement Mechanism, it has to be followed. Every International Agreement possesses the basic nature of an ordinary contract and courts should  respect the choice of jurisdiction fixed under such ordinary contract. It thus held that the Court had no jurisdiction to decide the validity of the amended section, being in violation of Article 27 of “TRIPS”, it also refused to delve into the question whether any individual was conferred with an enforceable right under “TRIPS” or not.

It also rejected the argument of the petitioner that there was excess discretionary power vested with the authorities which was violative of Article 14 of Indian Constitution.

INDIA – US & INDIA – EC WTO DISPUTE

DISPUTE DS50 and DISPUTE DS79

India — Patent Protection for Pharmaceutical and Agricultural Chemical Products

DS50 was on a complaint by the United States and DS79 was on complaint by the European Community. Violations of the TRIPS Agreement Articles 27, 65 and 70 were claimed.

Issues were the following :

 India’s “mailbox rule” – under which patent applications for pharmaceutical and agricultural chemical products could be filed; and (ii) the mechanism for granting exclusive marketing rights to such products.

 Patent protection for pharmaceutical and agricultural chemical products, as provided under TRIPS Art. 27.

Findings

 TRIPS Art. 70.8: The Appellate Body upheld the Panel’s finding that India’s filing system based on “administrative practice” for patent applications for pharmaceutical and agricultural chemical products was inconsistent with Art. 70.8. The Appellate Body found that the system did not provide the “means” by which applications for patents for such inventions could be securely filed within the meaning of Art. 70.8(a), because, in theory, a patent application filed under the administrative instructions could be rejected by the court under the contradictory mandatory provisions of the existing Indian laws: the Patents Act of 1970.

TRIPS Art. 70.9: The Appellate Body agreed with the Panel that there was no mechanism in place in India for the grant of exclusive marketing rights for the products covered by Art. 70.8(a) and thus Art. 70.9 was violated.

India complied with the recommendations of the DSB within the implementation period by amending its Patent Act.

  1. HOFFMANN-LA ROCHE LTD. and ANR v CIPLA LIMITED [11]

Plaintiff were patent holders of the drug  molecule, medically termed as a Human Epidermal Growth Factor Type-1/Epidermal Growth Factor Receptor (HER/EGFR) inhibitor, popularly known as Erlotinib. This drug is administered in the form of a tablet. The tablet formulation of Erlotinib is sold by the plaintiff under the trademark and name of Tarceva, which is registered in the name of the plaintiff. It is averred that the drug Erlotinib and its formulation Tarceva has been approved by the U.S. Food and Drug Administration in the year 2004 and thereafter by the European Union in the year 2005.

The first Plaintiff is actively engaged in the manufacture, marketing and sale of the innovative drug Tarceva in various countries including India and it introduced Tarceva in India sometime in April 2006.

The Defendant, CIPLA, is the second biggest pharmaceutical company in India. In December 2007 and January 2008, various news reports appeared in the print as well as the electronic media about the defendants plans to launch a generic version of Erlotinib in India and also for exporting it to various countries.  The Plaintiffs claim their knowledge of the Defendants plans to infringe their rights in the patent, from such reports. They have filed the present action seeking permanent injunction and damages. It was averred by the Plaintiffs that Erlotinib was developed after long, sustained and substantial research, and after incurring enormous expenditure for the tests, mandatorily conducted to establish its efficacy and safety. It was submitted that this innovation was duly protected under the provisions of law and no person except those authorized to exercise the legal rights associated with the patented drug can be allowed or permitted to copy/simulate and/or recreate it in any manner or in any other name. They alleged that the Defendant was following an illegal course to offer a generic version of the patented drug; firstly, in an unlawful manner by infringing the legal rights of the plaintiffs, and secondly, in a manner that may pose a serious hazard to the lives of the patients. They submitted that they would suffer serious and irretrievable prejudice in case the Defendant was not restrained as prayed for. They further claimed that the actions of the Defendant may cause a serious and grave hazard to the lives of the cancer patients.

Along with other defences, Cipla contended that the plaintiffs patent claim lack an inventive  step. They alleged that the patent was liable to be revoked as Erlotinib, being a Quinazolin derivative, only sought to improve from the existing prior art. It would be obvious for a person skilled in the art that quinazolin compounds are known to inhibit growth and proliferation of mammalian cells and have been used in cancer treatment. Various quinazolin derivatives are available in the market for treatment of different types of cancer. The patented compound of the Plaintiffs was a quinazolin derivative used for the treatment of cancer therefore, a derivative of a known compound and hence not patentable under Section 3 (d) of the Act. It was next contended that the patent did not reveal any obvious inventive step. In support, the Defendant averred about existence of at least three European patents, which date back to 1993 that disclose quinazolin derivatives. One such patent discloses the exact chemical structure contained in the Plaintiffs patent except for one substitution, which was obvious to any  person skilled in the art. Apart from this, the defendant alleged that the plaintiff has miserably failed in proving that there was any improved efficacy of the said drug and that no tables or comparative data were provided in support of such claim. Drawing from the summary of the invention in the patent specifications of the plaintiff, the Defendant submitted that the Plaintiffs had admitted that the Erlotinib was a quinazolin derivate. It was alleged that in the absence of proven enhancement in efficacy in terms of Section 3(d) no patent can even be considered, let alone granted. The defendant alleged that Erlotinib was just a derivative from Gefitinib of Astra Zeneca for which patent was refused in India, on the ground that the said product was already in prior use and was in the public domain. Under such circumstances, the Defendant submitted,  the patent office ought not to have granted a patent for Erlotinib. It alleged that the Plaintiffs attempt to protect Erlotinib (which was nothing but a derivative of Gefitinib), established that the plaintiff was indulging in  evergreening.  Evergreening, it was submitted is contrary to public policy, against the statutory language employed in Section 3(d) of the Act and in the context of the pharmaceutical industry against national interests. The defendant placed reliance in this regard on the ruling of the Madras High Court in Novartis v. Union of India, 2007 (4) MLJ 1153, where the Court extensively relied on legislative debates in this regard.

The learned single judge after noticing the Novartis judgment observed that even if non-obviousness of an invention in the pharmaceutical or chemical industry were established, the applicant should also prove that if the invention claimed is the derivative of a known substance, it does not fall within the excepted category, in the Explanation to Section 3(d) as it comprehend a discovery of significant enhancement in known efficacy of such known substance.

On  the issue of interlocutory injunctions it held that : (i) In patent infringement actions, the courts should follow the approach indicated in American Cyanamid, by applying all factors; (ii) The courts should follow a rule of caution, and not always presume that patents are valid, especially if the defendant challenges it; (iii) The standard applicable for a defendant challenging the patent is whether it is a genuine one, as opposed to a vexatious defense. Only in the case of the former will the court hold that the defendant has an arguable case.

After going through the facts, it came to the conclusion that plaintiff was not entitled to claim an ad interim injunction. In the judgment the learned judge did observe that though India entered into the TRIPS regime, and amended her laws to fulfill her international obligations, yet the court has to proceed and apply the laws of this country, which oblige it to weigh all relevant factors.

In this background the Court cannot be unmindful of the right of the general public to access life saving drugs which are available and for which such access would be denied if the injunction were granted. The degree of harm in such eventuality is absolute; the chances of improvement of life expectancy; even chances of recovery in some cases would be snuffed out altogether, if injunction were granted. Such injuries to third parties are un-compensatable.

Roche’s appeal before Division Bench of the High Court was also unsuccessful.

Till now the effects of the TRIPS compliance of the developed countries have been primarily theoretical. The developing countries need to use the TRIPS flexibilities to tackle any difficult situation. India has significantly changed the Patent Act to bring it in conformity with the TRIPS agreement, but a lurking fear remains that such overhaul of the patents Act may make the prices of drugs outside the reach of the general public. But it has to be kept in mind that there are various provisions already engrafted in the Patents Act like the detailed provisions of compulsory licencing which can check misuse of patents. It is also to be noticed that Indian courts till now have not felt bound by the TRIPS in particular cases and have held that domestic laws will take precedence over TRIPS in case of any conflict.

[1] Section 2(ja)

[2] Section 2(l)

[3] Section 2(j)

[4] Section 2(ta)

[5] 84. Compulsory licences

(1) At any time after the expiration of three years from the date of the 1[grant] of a patent, any person interested may make an application to the Controller for grant of compulsory licence on patent on any of the following grounds, namely:—  …. (c) that the patented invention is not worked in the territory of India.

[6] Article 27.1 Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.5 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 the place of invention, the field of technology and whether products are imported or locally produced.(emphasis added)

[7] PROVIDED ALSO that after a patent is granted in respect of applications made under sub-section (2) of section 5, 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 continue 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.

[8] (2007) 4 MLJ 1153, Madras High Court, India

[9] 3. What are not inventions

The following are not inventions within the meaning of this Act,—… (d) the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

Explanation : For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they

differ significantly in properties with regard to efficacy;

[10] (1994) 1 AII ER Pg.910

[11] FAO (OS) 188/2008, decided by Delhi High Court