The Nitto Denko case, addressing reforms in the patent examination process, has taken on a ‘Make in India’ flavour – The second committee appointed on the instructions of the High Court has suggested that the Patent Act be amended to allow for expedited patent examination if the applicant has started manufacturing the invention in India or undertakes to start manufacturing in India within two years from requesting expedited examination.
In October 2014, Delhi High Court delivered a pathbreaking decision suggesting reforms to address the issue of patent application pendency in the Patent Office, in Nitto Denko v. Union of India. Based on the suggestions of a Government appointed Committee, Justice Vibhu Bakhru laid down instructions to increase manpower in the office, increase funding, explore alternative means of recruiting Patent Officers, etc. The High Court had also instructed the government to constitute a second committee to examine the following issues:
- Whether waiver of maintenance fee for the delayed period or other measures could be considered to compensate patentees for the time consumed in the process?
- Whether examination of patents could be done out of turn under existing provisions of the Patent Act, 1970 and if so, under what circumstances?
The second Committee consisted of eight members in total, including Joint Secretary of the DIPP, a member of the CGPDTM and senior advocates Anand Grover and Pratibha Singh. Over two meetings, the committee arrived at the following conclusions:
With respect to waiver of maintenance fee for delayed examination, the Committee concluded that it is not feasible as such a practice is non-existent everywhere in the world except the US. Besides, such a measure is unnecessary as the inventor is not precluded from marketing and seeking other regulatory approvals when the patent application is still pending.
As for out of turn examination, the Committee noted that it should normally not be allowed unless it is in the public interest, as the Patent Act, 1970 and Rules thereunder do not have provisions allowing it. However, the Committee suggests that an amendment be made to the Patent Rules to allow for out of turn examination if the applicant sets up local manufacturing capabilities utilizing the invention.
This brings up the age-old debate of the ‘local working’ requirement in Indian patent law- whether importation alone qualifies as local working. With respect to pharmaceuticals, one of the factors considered by the Bombay High Court inBayer v. Natco for granting a compulsory license to Natco was the fact that Bayer was importing the drug into India and not manufacturing it here.
On TRIPS
One of the obvious issues in a law regarding requiring (or even providing special incentives for) local manufacturing is its TRIPS compatibility. Art. 27(1) states that patent rights shall be enjoyable without discrimination as to the place of invention and whether products are imported or locally produced. The word discrimination was interpreted to mean (at the risk of over-simplification) discrimination without bona fide reason by the WTO Panel in the Canada-Pharmaceutical Patents Case. On the one hand, such an amendment in Patent Law appears to be TRIPS-compliant because expedited review is a procedural matter that does not affect the enjoyment of substantive rights granted to the patentee. On the other hand, expedited review will affect the length of the life of the patent in case of locally manufactured inventions. Will this amount to discrimination? (Note: ‘Patent Prosecution Highways’ are common in the US, Japan, etc where countries enter into an agreement that if a claim is allowed by the Patent Office in one of the countries, the application will be fast-tracked in other participating countries. Although the issue is similar, I could not find any mention of TRIPS incompatibility on the internet; so my argument is possibly on thin ice). The Report states that the Committee considered the question of TRIPS-compliance in their deliberations and concluded that it is compliant. I am curious to know how they arrived at the conclusion.
On Incentives
Surely, the intention behind the amendment is noble- especially in the case of pharmaceutical patents, where local working would help reduce the prohibitively high costs of certain drugs, as well as bring know-how to the Indian industry. However, from the point of view of the patent holder- will such a move actually incentivise them to Make in India? The benefit they get is a slightly longer patent-life; they will potentially be able to file infringement suits against infringers a bit earlier. However, given the time required by a potential infringer to actually manufacture infringing drugs on a scale enough to affect profits of the inventor, will this time difference matter? The incentive seems even weaker once we add the costs (money as well as effort) of setting up shop in India.
Other Concerns
In this Livemint article reporting the development, some other concerns with respect to the Committee’s recommendation have been raised- A campaigner with Doctors Without Borders raised the issue of possible compromise on quality of examination when it is expedited, and Professor Shamnad Basheer points out how a layer of expedited examinations may further burden the patent office and cause more delays in the other pending applications.
Therefore, my take on the Committee’s suggestion is that it may possibly not be TRIPS compliant, and the amendment is not worth the trouble as it is unlikely to incentivise inventors to manufacture in India. It will be interesting to see the Delhi High Court’s take on this Report. The full text of the Report is available here.
Justice Vibhu Bakhru’s suggestions have been totally ignored till now. There is no indication of any attempt to increase manpower at the Examiner level. In fact the attrition rate keeps on increasing due to discriminatory transfers related to the lack of a written transfer policy. The remaining officers are demotivated as there are no promotional avenues due to the lack of a assured promotion policy. The disposal rate is almost nil due to frequent transfers and lack of incentives to dispose off applications.
I don’t think I can appreciate the motivation and strategy behind this. If this becomes a piece of law and if it WORKS, it can be seen as just one of the many incentives to boost the manufacturing sector. It doesn’t come across as reforming the policies and procedures of the patent office, which is really the need of the hour. The government, I think, does not realize that quickening the pace of granting of patents and improving the quality of work in the patent office can provide benefits far more than just boosting the manufacturing sector alone. Even if there is a boost in the manufacturing sector with a lot of firms setting up shop, the manufacturing industries are still going to incur expenses by licensing in technologies. Improving the body of scientific and technical knowledge and producing new technologies is very much required to keep the Indian engine running into the future. Strengthening the patent regime in the country is definitely going to work towards this by incentivizing innovation, automatically leading to boosting of the manufacturing sector. Improvements in the IP regime should not come just as an aid to the manufacturing sector.