The authors are advocates of Karanjawala & Co. practicing before the Hon'ble Supreme Court of India and the Hon'ble High Court of Delhi. Mr. Debmalya Banerjee is a Partner at Karanjawala & Co. and Mr. Aman Singh is a Senior Associate.
This article aims to analyze the intellectual property regime in India in the context of the ongoing Novel Coronavirus/Covid-19 pandemic. Intellectual property regimes not only in India but world over have come in focus as both potential and existing apparatus, drugs, medicines and research needs to be made available to the medical community at large without the delay of having to traverse through complex patent utilization procedures. Although, in an ideal world one would expect the private sector to be willing to offer the vast resources at their disposal including critical research to the general pool of the global medical community for collectively addressing this problem, there have been instances to the contrary. This is exactly where a robust intellectual property regime such as prevalent in India should engage and rectify the imbalance between the public and private interest.
Roche one of the pillars of big pharma very recently refused to share the formula and technical specifications for the 'lysis buffer' used in its testing machines in the Netherlands and only did so after much outcry. Gilead, another pharmaceutical company applied and was granted orphan drug exclusivity for its drug 'Remdesivir' in the United States and again after a public outcry the company withdrew from the same. India's since rescinded ban on the export of the drug 'Hydroxychloroquine' is also being shown as an example of the challenges that lie ahead. Faced with the prospect of compulsory licenses being issued another pharma company, AbbVie waived any patent restrictions for supply of 'Lopinavir' and 'Ritonavir' by generic drug manufacturers. The intellectual property regime gains significance in this context and requires that both public and private sector interests are balanced adequately depending on the need of the hour. It has also been widely reported that the World Health Organization is actively coordinating to create a voluntary pool to collect patent rights, regulatory test data and other such relevant information to address the pandemic.
A patent is a right granted to an entity, individual or otherwise by a sovereign country to commercially exploit an invention for a specific period of time. After expiry of said time period the invention comes in the public domain to be utilized for the benefit of the public at large by various entities. This is done to incentivize new inventions being brought in the public domain as without the exclusive right to commercially exploit an invention for a specific period of time, it may remain a trade secret, which may continue in perpetuity. Therefore, it may never come in the public domain. The research and development departments of pharmaceutical companies invest substantial resources in developing new drugs and therefore it is only reasonable that they look to recover their investment along with reasonable overheads. Development of a new drug has stages such as drug approval by regulatory authorities, clinical trials in multiple stages, collecting and analyzing enormous amounts of data, identification and dealing with potential side effects etc. As of 2019, according to a study conducted by Tufts Centre for the Study of Drug Development published in the journal of Health Economics developing a new drug which gains marketing approval costs in the vicinity of 2.6 Billion dollars.
India became a member of World Trade Organisation (hereinafter referred to as "WTO") on 1st January 1995 and concomitantly of Trade Related Aspects of Intellectual Property Rights Agreement (hereinafter referred to as "TRIPS Agreement"). TRIPS is an international agreement between all member nations of the WTO setting the minimum standards for the regulation by national governments of intellectual property laws inter se it's member nations and harmonizing the essential features of intellectual property laws. Aspects such as period of grant, method of granting, essential features are to be harmonized whereas the procedure for granting, for example, who will issue patents, on what parameters patents shall be issued, on what parameters opposition to granting patents shall be allowed can be tailored by member states. India grants patents for a period of twenty years inclusive of the time taken to obtain said patent. Upon expiry of the mandatory twenty-year period for patent protection the invention comes into public domain. Upon such an occurrence anyone can manufacture said drug with reasonable overheads and as such the price of the drugs is reduced exponentially. This is usually the stage where generic drug manufacturers step in bringing volumes and thereby substantially increasing access in case of drugs or medicines.
Access to medicine is an important aspect in a country such as India. De hors the necessity in public health emergencies such as being faced during the current pandemic, India otherwise also needs access to affordable healthcare of which drugs and medicines are an essential aspect. Keeping in mind the aforementioned while negotiating the TRIPS agreement the developing countries outlined situations wherein a particular drug is not released in such countries or the drug in question is not available to the public at large or drug is prohibitively priced then, a system of compulsory licensing as opposed to voluntary licensing be introduced. Article 31 under the TRIPS agreement was enacted to deal with the conditions for grant of a compulsory license.
Just to provide a brief context, voluntary licensing regime broadly encompasses Entity A inventing a new drug. Thereafter, Applying and being granted the requisite patent for the same in compliance with the applicable statutory requirements. Lastly, Entity A negotiating with Entity B to give the latter a right to manufacture and sell the new drug. In return Entity B shall remunerate Entity A with royalty or licensing fees which are to be negotiated inter se parties. A three-year statutory time period is provided upon successful grant of patent for setting up manufacturing of a drug in India. This time period, however, will not apply in cases of national emergencies such as pandemics. Compulsory license regime entails multiple parties being awarded a license to manufacture using patent protected inventions for public purpose. The patentee is reasonably remunerated by the compulsory license holder however he has to establish that he reasonably tried to obtain a license directly from the patentee. Compulsory licenses are non- exclusive in nature i.e. available to all who are interested subject to the statutory framework. These licenses are non-assignable i.e. to say that the license holder themselves have to necessarily manufacture the drug in question and cannot in turn assign the license granted to a third party. Furthermore, a compulsory license by its very nature is to cater to the needs of the domestic market. If the conditions for grant of compulsory license no longer exist, the license can be terminated upon application. An exception to the domestic market requirement has been carved by virtue of the 'The Declaration on the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and Public Health' (hereinafter referred to as "the Doha Declaration") discussed hereinbelow.
If an entity is both able to invent and manufacture the potential vaccine in adequate quantity and at a reasonable price-point then the need for grant of compulsory licenses may not arise. However, in a practical sense this may be unlikely given the immediate demand which shall arise once a viable vaccine becomes available. Compulsory licenses are not just relevant for a potential vaccine but also for re-purposing existing drugs or medicines to address the pandemic.
The Doha Declaration
The members of the WTO on 14th November, 2001 adopted a Special Ministerial Declaration at the World Trade Organisation Ministerial Conference in Doha, Qatar which is known as 'the Doha Declaration'. The object was to adopt a declaration by the WTO members to recognize the gravity of the public health problems like HIV/AIDS, tuberculosis, malaria and other epidemics affecting many developing and least-developed countries. The declaration also recognizes the importance of protection to intellectual property for development of new medicines and the concerns about its effects on prices. However, the TRIPS Agreement does not prevent members from taking measures to protect public health which includes the right to grant compulsory licences and to determine the grounds upon which such licences can be granted. Further, subject to the law of the land, Article 31 of the TRIPS Agreement enables the Members to permit others to use the patent without the authorization of the right holder with just exceptions.
Article 31(f) of the TRIPS Agreement stipulates that any manufacture under a compulsory license should predominantly be for the supply of domestic market. An apprehension was raised regarding those countries who have non-existent or insufficient manufacturing facilities in the pharmaceutical sectors and the inability of the compulsory license provisions being beneficial to these countries. To address this incongruity a waiver was adopted to Article 31(f) vide resolution dated 30th August, 2003 whereby manufacturers were allowed to export to such countries. The importing countries are required to demonstrate lack of manufacturing except for least developed countries.
The Paris Convention, 1883
The Paris Convention for the Protection of Industrial Property is one of the first treaties to be signed in the field of intellectual property in Paris, France on 20th March, 1883, which has been regularly revised ever since. Initially, only 11 countries were signatories to the said convention, but as of now approximately 177 countries have signed it. India became a signatory on 7th December, 1998. The object of the Paris Convention was to eliminate unequal treatment by any nation's domestic laws towards foreign patent holders and thereby creating the provision of national treatment. Article 5 of the Convention provides that each contracting country shall take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent. Further, it provides that a compulsory license based on failure to work or insufficient working may only be granted after the expiration of a period of four years from the date of filing of the patent application or three years from the date of the grant of the patent, whichever period expires last. However, if the patentee justifies his inaction by legitimate reasons, the compulsory license shall be refused. It is also pertinent to state that once a compulsory license is granted, it shall be non-exclusive, non-transferable. The Convention also provides that in cases where the grant of compulsory licenses have not been sufficient to prevent the said abuse, the proceedings for the forfeiture or revocation of a patent may be instituted after the expiration of two years from the grant of first compulsory license.
Inter-play between Compulsory Licensing and Anti-trust laws
Wherever the dominant players in a market abuse their position to manipulate the market ensuring that fair competition is eliminated or reduced in any manner, anti-trust law regime gets attracted to remedy the imbalance between commercial and public-purpose considerations. The intellectual property laws in a sense recognize and protect monopoly and in that context is a derogation of anti-trust laws. However, this would be a very myopic understanding of these fields of law. There is usually an exception carved out in competition law towards patent law in so far as the monopoly created is "used" and not "abused" by the recipient of the patent. Therefore, anti-trust laws and intellectual property laws are complimentary to each other with an aim to ensure innovation and at the same time protect the rights of the public. There are provisions for granting compulsory licenses under anti-trust laws also however, while compulsory licenses are granted under the intellectual property laws on public purpose considerations the same are granted to restore competition under anti-trust laws.
India Case Law – Natco v. Bayer; 2014 SCC OnLine SC 1709
It was in 2011 that Natco, a generic drug manufacturer filed a compulsory license application for the anti-cancer drug, Nexavar produced by Bayer, a pharmaceutical company under Section 84(1) of the Patents Act, 1970 (hereinafter referred to as "the Act"). Vide final Order and Judgment dated 09.03.2012, the Ld. Controller of Patents, Mumbai granted the first ever compulsory license in India to Natco. Bayer's appeals before the Intellectual Property Appellate Board, the Hon'ble Bombay High Court and lastly Hon'ble Supreme Court of India stood dismissed while the questions of law were kept open by the Apex Court.
The Controller of Patents held that on the basis of the information provided by the Patentee under Form-27, for the years 2009 & 2010, the Patentee has made available the drug to only 2% of the eligible patients. Therefore, the case is covered by Section 84(7)(a)(ii) of the Act i.e. the demand for the patented article has not been met to an adequate extent or on reasonable terms. It was further held that in so far as the price of the drug is concerned, the patentee has been selling the drug for Rs. 2,80,000/- (for a therapy of one month) which certainly does not make the drug affordable. The Controller of Patents held that Section 84 (7) (e) of the Act i.e. if the working of the patented invention in the territory of India on a commercial scale is being prevented or hindered by importing, relates to, Section 84 (1)(a) of the Act i.e. reasonable requirements of the public not having been satisfied and not Section 84 (1)(c) of the Act i.e. the patented invention is not worked in the territory of India and that upon a reading of Section 83(b) i.e. that patents are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article, it is evident that mere importation cannot amount to working of a patented invention. It was also held that Section 83(f) of the Act categorically states that the patent right should not be abused by the patentee and the patentee should not resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology. Lastly, it was noted that the patentee must balance its rights with its obligations. A patentee can achieve this by either manufacturing the product in India or by granting a license to any other person for manufacturing in India.
Subsequently, only two applications have been filed under Section 84 of the Patents Act,1970. The first application was filed by BDR Pharmaceuticals for Bristol-Myers Squibb's cancer drug called 'Dasatinib',. BDR's application was rejected at the outset since BDR pharmaceuticals failed to establish a prima facie case as mandated under Section 87 of The Patents Act, 1970.
The second application was filed by Lee Pharma Ltd. to obtain a compulsory licence over a diabetes drug 'Saxagliptin', produced by Astrazeneca. The application was however, rejected on the ground that Lee Pharma Ltd. wasn't able to provide satisfactory evidence to invoke any of the grounds stipulated under Section 84.
The Patents Act, 1970
Section 47 of the Act gains significance as it states that grant of patents under it are subject to certain conditions. Broadly speaking the basic condition is any machine/apparatus/other article/any process for which patent is granted may be imported/made by or on behalf of the Government for "merely of its own use". This is significant as it empowers the Government to pierce the patent protection to utilize the subject matter of the patent for its own use. It is concomitant that the Government's own use means public purpose. Therefore, this empowers the Government to take steps to utilize the knowledge present in private domain (patent protected) to address public health emergencies such as the current pandemic. S. 47 (4) of the Act also empowers the Government to import a medicine or drug for distribution by itself or on its behalf having regard to public purpose. Essentially, this exempts the Government from payment of royalties or license fees subject to the provisions of Section 100 of the Act better described herein below. Chapter XVII stipulates use by Government of patents upon payment of adequate remuneration, however, the operation of Section 47 of the Act has been left free from the consequences of Chapter XVII.
Section 47 of the Act should necessarily be read with Section 100 of the Act which deals with powers of the Central Government to use inventions for the purposes of the Government. Therefore, Section 100 of the Act expands the scope of Section 47 of the Act in so far as it also includes within its ambit patents which have been applied but not granted. In simple terms if an invention has been recorded, tested or tried by Government or any authority on its behalf in isolation of a subsequent patent claim then the Government is not required to pay any royalty. If the use of the invention is, as a consequence of said patent claim or prior communication of the knowledge by the potential patentee then the Government is required to pay adequate remuneration before or after the use of the invention. The determination of remuneration is mutually negotiable is subject to judicial review.
Chapter XVI titled Working of Patents, Compulsory Licenses and Revocation is the most significant in terms of administering intellectual property law in India in the context of a national health emergency such as the ongoing pandemic. Section 83 (e) of the Act empowers the Central Government to take steps to protect the public health de hors the patent protection system. Section 84 of the Act provides for granting of a compulsory license, on application by an interested third party, after expiry of a three-year period from the date of the grant of the patent. The compulsory license may be granted if the reasonable requirements of the public have not been met, the patented invention is not available at a reasonable price to the public or the patented invention is not being worked in the territory of India. Various conditions enumerated in Section 84(6) of the Act for ensuring that the purpose of granting the patent has been met, shall be waived off for grant of compulsory license in case of a national emergency, other circumstances of extreme urgency, public non-commercial use or on ground of anti-competitive practices by the patentee. All of which, barring the last one would squarely cover the current situation. In terms of Section 85 of the Act after the expiry of two years from the grant of the compulsory license any interested person or the Central Government may apply for revocation of the same to the controller on the same grounds it was sought to be granted to begin with. An application under Section 85 of the Act is to be decided within a period of one year from the date of said application by the Controller.
An application for either grant of compulsory license or revocation of the same can be contested, upon notice being served, by filing a notice of opposition in terms of Section 87 (2) of the Act. Section 90 of the Act ensures that reasonable royalty or other remuneration is provided to the patentee inclusive of factors such as nature of invention, investment in the same including developing or making it, obtaining a patent, keeping the patent in force and other relevant factors.
Section 92 of the Act has been enacted keeping in mind the exact situation being faced in the form of the ongoing pandemic. The Central Government on being satisfied that conditions, namely national emergency, extreme urgency or public non-commercial use having been met, by notification may indicate that compulsory license with regard to a granted patent after sealing shall be issued. This section in effect waives the three-year requirement in terms of Section 84 as well as procedural requirements pertaining to grant of compulsory license in terms of Section 87 of the Act. Only an endeavor as soon as possible of informing the patentee of non-application of Section 87 of the Act shall be made by the Controller. However, it may be noted that operation of Sections 83 (General principles applicable to working of patented inventions.), Section 87 (Procedure for dealing with applications under sections 84 and 85.), Section 88 (Powers of Controller in granting compulsory licences.), Section 89 (General purposes for granting compulsory licences.) and Section 90 (Terms and conditions of compulsory licences) shall still apply in case of a situation envisaged under Section 92 of the Act.
Section 92A also envisages granting of a compulsory license for manufacture and export of patented pharmaceutical products to any country subject to conditions. Section 94 of the Act provides for termination of compulsory licenses on an application by the patentee or any other person deriving title or interest in the patent if and when the circumstances which led to the granting of the compulsory license no longer exist.
Therefore, what becomes clear is that any patent already granted or applied for can be used by the Government for its own use. This essentially means that the Government shall use the patent to either manufacture itself or cause to be manufactured on its behalf for example, through a public sector undertaking or even a private entity any product, drug, medicine etc. which it deems necessary in public interest. This course of action specified under Section 47 of the Act posits a situation where the patentee receives no remuneration for such usage Subject to Section 100 of the Act discussed hereinabove. However, the compulsory license regime under the Act envisages a situation wherein the Government itself cannot scale the operations in cases of emergency situations with regard to potential drugs beneficial in the current pandemic. Therefore, to scale its operations in order to make available any machine, apparatus, other article, medicine or drug the Government shall open the door for compulsory licenses to be granted under Section 84 of the Act. In this situation the license holders shall be liable for payment of reasonable license fees to be decided by the Controller and subject to judicial review.
Another, extreme possibility available is the revocation of an already granted patent in terms of Section 66 of the Act in public interest. The government is authorized to do so after giving a hearing to the patentee. However, this course of action is not recommended as there exist more effective ways the pierce the patent protection in case of public health emergencies such as the current pandemic as enumerated herein above. Another, example of a possible but potentially defective course of action is under Section 66 of the Act i.e. acquisition of inventions and patents by the Government under Section 102 of the Act. This can only be done by the Central Government for public purpose and after giving notice to the applicant/patentee wherein the payment for the same is to be mutually determined and is subject to judicial review. Both revocation and acquisition eliminate patent protection while other methods merely suspend the same while keeping the patent alive qua the original patentee.
India is a World Trade Organization member along with being a signatory of the TRIPS Agreement as modified by the Doha Declaration along with being a signatory of the Paris Convention, 1883 and has enacted suitable provisions in the Patent Act, 1970 as a consequence of the same. This in effect has ensured that India along with World Trade Organization member states have a robust and mutually beneficial framework to fall back on in case of health crisis such as the one being currently faced. While recognizing the importance for patent protection certain safeguards have been built in to ensure that such protection can be pierced in exceptional circumstances. These provisions not only ensure that a member state can for public purpose exploit the knowledge within their own territorial domain but also within the territorial domain of member nations. Furthermore, interests of the private sector have not been completely discarded as a comprehensive framework exists for remunerating them for such use and the same is subject to judicial review to insulate private players from abusive state action. What actually remains a big cause of concern is, if and when a successful vaccine is invented for the Novel Coronavirus/Covid-19, how will we ensure production and availability at affordable prices across the world. Although, mechanisms exist to address this situation in terms of the TRIPS Agreement, however, there remains a big question mark on their effectiveness. In a situation where powerful nations such as the United States have already been accused of trying to monopolize potential vaccine doses when the same become available, how far the existing mechanism addresses the need of the hour remains to be seen.
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