(i)Is the patent being worked in India?
(ii)If not then in that what are the reasons for not working it in India?
(iii)The quantum and value of sales of the patented article and most importantly whether the patentees are manufacturing the article in India or whether they are importing the product from foreign countries.
(iv) The licences and sub-licences granted for the manufacture of the patented article.
(v)A statement on whether public requirement has been adequately met to the fullest extent possible at a reasonable price.
While there have been pertinent questions raised in a guest post by Mr. Feroz Ali, on the need for the patent office to request for such information the greater apprehension amongst the pharmaceutical industry should be the fact that the first ever granted pharmaceutical patents are crossing the three-years limit, under Section 84 of the Indian Patents Act, thereby allowing for compulsory licensing provisions to be invoked by the domestic generic pharmaceutical industry. The information collected by the Patent Office will go a long way in helping generic pharmaceutical companies determining which patents are ‘ripe’ for compulsory licensing. Some leading generic pharmaceutical companies like Cipla have stated in no uncertain terms in their annual reports that all life-saving pharmaceutical patents should be automatically compulsory licensed for a suitable royalty. It can therefore be expected that they will file CL applications by the end of the year.
The relevance of ‘local working requirements’ in the compulsory licensing debate: The relevance of this debate on the local working requirements, is that most of big PhRMA’s manufacturing happens in its home countries, with very few of them having any local manufacturing capacity in India. Therefore if the Patents Act, 1970 is interpreted to require local working, all most all pharmaceutical patents granted to foreign manufacturers are liable for compulsory licensing. The main issues which need to be examined in this context are threefold and are as follows:
(i)Whether a ‘local working’ requirement is TRIPs compatible?
(ii)Whether the Indian Patent Act requires patents to be ‘locally worked’?
(iii)The economics of the international trade in pharmaceutical products and whether a ‘local working’ requirement would result in the lowest possible prices for the consumers?
(i) Whether a ‘local working’ requirement is TRIPs compatible?
At first glance TRIPs seems to provide a straight forward answer, to the question of ‘local working’, in Article 27.1. Although Article 27 is titled ‘Patentable Subject Matter’ it concludes by stating that patent rights will be enjoyed without discrimination as to whether a product is imported or produced locally. It would seem that this would obviate the need for a debate on the subject but things are seldom so simple when it comes to real life. An excellent article authored by Paul Champ & Amir Attaran which is published in the Yale Journal of International Law (YJIL) provides an in-depth look into the question of TRIPs compatibility. In the YJIL article the authors go through the entire negotiating history of the TRIPs agreement and point out how the same is inconclusive in establishing whether or not the member states actually wanted the insertion of a ‘local working requirement’. The authors then end the paper by examining the local working requirement from the perspective of Articles 30 & 31 of TRIPs and conclude that Articles 30 & 31 of TRIPs permit members states to maintain a ‘local working’ requirement. Articles 30 & 31 of TRIPs are the same provisions used by developing countries to defend the presence of compulsory licensing provisions in their intellectual property laws.
In the year 2000 the Dispute Settlement Body (DSB) of the WTO had a chance to clarify this question when the U.S.A filed a complaint against Brazil for having a local working requirement in its patent law. At that time India had joined the dispute as an interested party. Unfortunately for the U.S.A. it turned out that one of their legislation had a similar provision for local working of all federally funded innovations. As a result the U.S.A. beat a hasty retreat and withdrew from the dispute, reserving its right to re-start the litigation. The relevant WTO documents can be accessed here.
(ii) Whether the Indian Patent Act requires patents to be ‘locally worked’?
Section 84 (c) of the Patent Act states a compulsory license may be granted if the applicant can prove that the patentee has worked the patent invention in the territory of India. Although the Act is silent on the definition of ‘working’ it does lay down certain other provisions from which it can be determined as to whether or not local working is required:
The two provisions that touch on the topic of local working/importation are:
(i)Section 83 (b) [General principles applicable to working of patented inventions] that they [patents] are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article;
The second provision i.e. S. 84 (7)(e) is a sub-clause to the Section which defines the circumstances in which the law deems the reasonable requirements of the public to have not been met. According to this Section the reasonable requirement of the public are deemed to have not been met when the working of the patented invention in the territory of India on a commercial scale is being prevented or hindered by the importation from abroad of the patented article. My reading of this provision suggests that this provision will kick in only those circumstances when a CL applicant can establish that the sole reason for the inadequate availability of the patented invention within India is the fact that it is being imported i.e. to say the process of importation is in itself leading to the shortage of the patented invention in India. The process of importation could be impeded by a variety of reasons such as natural disasters, socio-economic reasons in the exporting country, political reasons such as sanctions imposed by a foreign country wherein the manufacturing plants of the patentee are situated. To very briefly summarize this point – Section 84(7)(e) will not kick in, in those cases where importation is not hindering the working of the patented invention in India either in terms of cost or availability. Instead S. 84(7)(e) will kick in only in those circumstances when the process of importation is preventing or hindering the working of the product within India in terms of cost or availability. The test therefore lies in whether or not, there lies a direct co-relation, between the cost/availability of the product and the fact that the same is imported. Therefore a pharmaceutical company which imports the patented product into India from Europe or the U.S.A. and sells the same in India cannot be held to have not met the reasonable requirements of the Indian public unless a CL applicant can prove that the process of importation is adversely affecting the working of the product in terms of either cost or availability.
(iii) The economics of the international trade in pharmaceutical products and whether a ‘local working’ requirement would result in the lowest possible prices for the consumers?
Economies of scale applies in particular to the pharmaceutical industry. Take for example Cipla, which is one of India’s largest pharmaceutical companies. With a mere 8 manufacturing plants, located in India, Cipla is able to sell products worth Rs. 5000 crores (including exports of Rs.2743 crores to over 180 countries worldwide). It is presumable that foreign pharmaceutical companies which have already established their manufacturing plants in their home countries will be able to achieve similar economies of scale with their existing plants. To establish new plants in India just to meet local working requirement will disrupt the economies of scale that they are able to achieve through their present manufacturing plants. If in case these economies of scale were to be disrupted the cost per unit would escalate. In short a ‘local working requirement’ under the Patent Act would in fact lead to an increase in the cost of patent pharmaceutical products in India.
Conclusion: The local working requirements of the Indian Patent Act are therefore malleable to meet the conditions of the day. The suitability of using such a requirement to facilitate the transfer of technology to India is questionable. Ultimately transfer of technology depends on a whole range of factors and not simply a statutory requirement.