As Pankhuri noted in a recent post, the Government of India published the Patents (Amendment) Rules, 2020 last month, inter alia, amending the format/contents of the working statements or Form 27 to be filed by every patentee and licensee. The contents of the new Form 27 have already been discussed in her post here.
Removal of requirement to make statement on meeting public requirement
The new Form 27 removes the requirement of having to make a vague statement on whether the public requirement has been met partly/adequately/to the fullest extent at a reasonable price. This is certainly a welcome move because, elsewhere, in my book on patent law, I had argued that this requirement is potentially unconstitutional for vagueness. The other change, in terms of a common form for multiple patents, also makes logical sense to me.
Removal of requirement to disclose the quantum and the focus on value/revenue
But I wish to now focus on something else – the new Form 27 completely bypasses the necessity to declare any quantum, but instead focuses only on ‘value’. Specifically, the requirement now is to disclose the approximate ‘revenue/value’ that has accrued to the patentee/licensee ‘in India’. The new Form 27 appears to consider the term ‘value’ to be synonymous with ‘revenue’. Elsewhere, in my book on patent law, I have argued that this focus on ‘value’ in the Form 27 is potentially ultra vires. The logic is as follows:
- The requirement to file annual working statements arises under Section 146(2) of the Patents Act;
- Under this statutory provision, what is required to be filed are “statements as to the extent to which the patented invention has been worked on a commercial scale in India”;
- The direct question to be answered is whether the phrase “worked on a commercial scale” covers value or not. If it does, asking for “value” in Form-27 is intra vires; if not, it is ultra vires.
- A proper contextual reading of this term (“worked”), especially in the light of the Ayyangar Committee report, suggests that the phrase is intended to cover quantum rather than pricing; the focus on whether the product is available and not at the price at which it is available;
- Similarly, a proper contextual reading of this term (“…on a commercial scale”), also suggests that the intent was to gauge whether the product is made available in sufficiently large scale for it to be commercial in nature, rather than just samples or experiments. Again, this denotes quantum and not pricing or value.
The difficulties can also be practical. For instance, in cases where the patented invention/product is a component/subsystem of the final product sold in the market, while the patentee can determine the ‘revenue’ for the final product (multiply quantum by retail price), there is no direct mechanism to determine the so-called ‘revenue’ from the patented invention within the final product. Entering into some sort of an attribution exercise would become a subjective analysis and prone to dispute, especially when one considers real-world commercial transactions involving subcontract manufacturing and so on. In short, determining ‘value’, even if it is assumed to be equal to ‘revenue’, could become a painful affair in real-world commercial transactions. Elsewhere, in my book on patent law, I have traced the history behind this provision to conclude that the purpose was to provide readily available data, which was otherwise to be made publicly available by entities under other legislation; the requirement to file working statements was not envisaged to make patentees engage in a disproportionately complicated value calculation exercise or disclose potentially business confidential information.
Accordingly, in my view, by focusing on the so-called ‘value’ (even if it is assumed to be equal to “revenue”), the new Form 27 is heading in the wrong direction. Instead, a simple focus on quantum will truly suffice to fulfil the object and purpose of being able to gauge whether the patented invention is being ‘worked’ and to what extent.
Note: I represent/have represented clients on related and unrelated issues. Views expressed here are personal.
The ‘Value’ determination for multi-patent products and for products that are not directly sold in the market (the “intermediates” or the “component-parts”) was the very point of pain for the patent holders and the representations were also made to ‘simplify’ of ‘do away with’ reporting the ‘value’ determinations, but as noted by Ms. Pankhuri in her post, what consultations have been made between the ‘selected stakeholders’ and the Government and why widely ‘criticized’ troublesome provision is retained is known to the attendees of that meeting only.