Spicy IP Fellowship 2016-17: India’s ‘Private’ Assurance to USIBC on Compulsory Licensing

In this post Inika Charles, our Spicy IP Fellowship applicant discusses whether India’s private assurance to USIBC that it would not invoke compulsory licensing for commercial purposes  indicates a shift in government policy . Inika is a third year law student at the National Law University, Jodhpur. This is her first submission for the fellowship.


Last month, the Indian government privately assured the US-India Business Council (“USIBC“) that it would not invoke compulsory licensing for commercial purposes, as reported in their submissions (available here) to the United States Trade Representative (“USTR“) for the 2016 Special 301 Review. The USIBIC stated that it would be “further encouraged” if the government of India were to make a public commitment, or a written declaration to only issue compulsory licenses in the event of public health emergencies, and not for commercial purposes. This, in their eyes, would “greatly enhance legal certainty for innovative industries”. While such a private assurance doesn’t give rise to any legal commitments, it may well be indicative of a policy shift.

An aspect that needs to be read into is the ‘commercial’ purpose for which compulsory licenses will not be issued. To make such a commitment would effectively nullify Section 84 of the Patents Act 1970 (“Patents Act“), and limit commercial licenses to be issued under Section 92- in circumstances of national emergency, extreme urgency or for public non-commercial use. Such dilution of Indian Patent laws is reflective of the agitation on the standards of patentability that Section 3(d) upholds, contrasted with the TRIPs plus regime that the US is keen to enforce, of which the Trans-Pacific Partnership (“TPP“) is perhaps the most troubling example.

India’s patent law and its judiciary have been under pressure for years, and the US has not been silent of their desire for India to adhere to their TRIPs plus regime, and to specifically join the TPP. With the majority of the flak coming from the famed Natco v. Bayer order, the Novartis decision, coupled with this controversy have brought about accusations of India moving in the wrong direction with its patent law. In a bid to up the political pressure on India, Special 301 Reviews have, since its inception, listed India on their ‘Priority Watch List’. Special 301 Reviews, as have been explained in earlier posts, are unilateral, annual reviews taken by the USTR to rank countries on how compliant their IP regimes are with the TRIPS-plus measures that the US tries to promote.

In 2014, the US was surprisingly appreciative of India’s approach to IP, but that didn’t preclude them from proposing an Out-of-Cycle Review  for India, which was immediately shot down. Fearing trade sanctions if US labelled India a ‘Priority Foreign Country’, government officials made it clear that they would challenge such an act at the WTO.

There were, however, a few positives to 2014: Following Prime Minister Modi’s visit to the US late that year, a joint statement was released which committed to establish an annual IP Working Group as part of the US-India Trade Policy Forum. Moreover, the forum met for the first time in four years, where IPR concerns were extensively highlighted. The US pressure on India has not gone unnoticed by those who rely on India for their medicines, with Africa urging India not to dilute their IP laws (read here, and here).

With the 2016 Special 301 Review imminent, not only the USIBC, but other interested parties as detailed below, have made submissions on India’s IP development in the past year. They all mark 2015 as a year with important developments, however still conclude that India should remain on the Priority Watch List. While Pharmaceutical Research and Manufacturers of America (“PhRMA“) reiterates their displeasure with Section 3(d) and the “narrow patentability standards” applied in pre grant and post grant opposition proceedings, and criticises the Draft National IP Policy as falling short of meaningful improvements to medical patent protection and enforcement; they recognise a measured and cautious approach in responding to compulsory licenses. This sentiment has been echoed by most interested parties, causing satisfaction to US and Pharma Representatives, and distress to pro-health activists such as Medecins Sans Frontieres.

The Indian Pharmaceutical Alliance  (“IPA“) highlighted increased collaboration between American and Indian companies, the redressal of procedural irregularities previously specified in USTR Reports, and strengthened judicial enforcement as seen in Roche v. Cipla and Merck v. Glenmark ,before addressing the substantive grievances of compulsory licensing and Section 3(d). The report capitalised on Bayer’s Nexavar being the only compulsory license granted thus far as well as reporting on the rejection of Lee Pharma’s application. It also comprehensively reviewed the Novartis judgement.The most comprehensive of these submissions however, remains USIBCs’. The Report remarks on the “open and collaborative” nature of the Government of India in 2015, with Prime Minister Modi’s several public statements committing to a “strong and robust” IP regime. Notably, USIBC states that it took notice of compulsory licenses being denied, which provide “investor certainty and predictability” that their patents will be upheld in India.

There is of course speculation on the changing scenario in the IP regime in India. Real worry has been expressed on whether India will continue to implement a strict interpretation of patent law. For the US industry, the signals are clear with the US Chamber of Commerce commenting that “…the previous bias toward the use of compulsory licenses as a commercial tool appears to have diminished”, and the submissions made by the Industry representatives. While the standards of patentability laid down in the Patents Act are reasonably strong, the protectionist standards as provided for in the TPP, as well as the enforcement of this ‘private’ assurance, would result in dilution of the TRIPs compliant standards that the legislators sought to retain.

It cannot be denied that there has always been pressure on India to toe the line of western governments and the industry lobbyists, but to draw the conclusion that India is finally ‘complying’ with their agenda seems preliminary. To base the possibility of a policy shift on the above named cases where patents were upheld, or applications for compulsory licenses were rejected seems to be arbitrary as they were decided in their own right. This private assurance, if made public could, perhaps, be the strongest argument in favor of there being such a shift in policy. In a surprising statement, D.G. Shah, the Secretary General of the IPA chided the USIBC for breaching confidence by making this communication public. The mere fact that he chose to remark upon the breach, and did not express concern on the assurance itself, is evidence enough that generic companies are now seeing eye to eye with the innovators.

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