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Pharmaceutical Product Patents

Written by: Reshma Abraham - I am a fifth year law student at symbiosis law school. Currently pursuing Patents diploma from Nalsar.
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Introduction of Pharmaceutical Product Patents; Is it an exploitation of the poor?

“Affluent societies are spending vast sums of money understandably on the search for new products and processes to alleviate suffering and to prolong life. In the process, drug manufactures have become a powerful industry. My idea of a better- ordered world is one in which medical discoveries would be free of patents and there would be no profiteering from life or death.” – Mrs. Indira Gandhi , ( World Health Conf, 1982)

"If people don’t get a fair return in innovation, they won’t invest in finding new cures for disease — this will be disastrous for patients” - Ranjit Shahani, Vice-Chairman & Managing Director, Novartis India Limited

1. Origin, meaning and importance of Patents

A Patent is a form of Intellectual Property Right granted and protected under the law. It is an exclusive right granted to a person who has invented a new and useful article or an improvement of an existing article or a new process of making an article. The question as to whether a particular invention is new and useful is extremely difficult to decide and has to be determined based on the prior art in the particular field which includes publications on the subject as well as prior usage.

The term patent originated from the Latin term literae patentes (letters patent) which means ‘open letters’. The origin of patent law in India can be traced back to the law and practice on patents in the United Kingdom. The Indian Patents Act of 1970 was modelled on the British Patents Act of 1949 as amended. However there exists a stark difference between the Indian Patents Act of 1970 and the British Patents Act of 1949 in the sense that the Indian Act granted product patents for food, medicines and chemicals only from January 1st 2005 unlike the British Act which provided such patents under the 1949 Act and continue to do so.

The term Patent has been defined under Section 2(m) of the Indian Patents Act of 1970. A patent confers on the patent owner or the patentee a negative right to exclude others from working or operating the invention for a limited period of time and hence grants the patentee exclusive monopoly rights over his patented invention. The term of a patent under the Indian Patents (amendment) Act, 2005 is for a period of 20 years after which the invention falls into the public domain and anybody can make use of the invention. It is then said to have become a part of prior art in the existing field. A patent right being a creation of a statute is territorial in extent. Hence the patent which has been granted in one country cannot be enforced in another country unless it has been enforced in that country also.

Patents represent one of the most powerful Intellectual property rights and can bring about substantial income through the manufacture and licensing of the invention covered by the patent.

Following are the reasons making a patent system inevitable for promoting innovation, research and development-
a) a patent system is considered necessary to stimulate investments in inventions which are new, non obvious and useful. Patent protection stimulates research and development and is a major factor in helping raise venture capital and in the economic development of the country. They provide increased overall corporate value.
b) secondly the patent system rewards the inventor for the time, money and effort expended by him and for his competitive and creative drive and the cooperation extended by him in teaching the rest of the society how to use his finding and inventions for all time hereinafter.
c) patents provide freedom of movement in the particular field to which it relates to, especially if it pertains to a crowded field with many competitors or one which is dominated by one important player.
d) patents act as bargaining chips and enable the individual inventors to license out their patents in exchange for technical know-how or for financial privileges.
e) patent system encourages the disclosure of information instead of it being kept confidential as a trade secret. Hence it contributes to the prior art in the particular field and enhances scientific knowledge by using the information contained in the published patent documents. They help in identifying the uncovered areas and initiate R&D in such areas.

Hence the patent system helps in ascertaining global technological trends in specific areas of interest. Lastly, the patent system helps in identifying the possible competitors and their strength in particular areas of interest.

2. TRIPS Implications on the Developing Countries with special reference to India-

The conclusion of the Uruguay Round of Multilateral Trade Negotiations in 1994 resulted in the signing of the Trade Related Aspects of Intellectual Property Subjects (TRIPS) and is considered to be a major landmark in the development of international law in the field of intellectual property rights. The TRIPS builds upon the foundations which have been laid down by the international conventions governing IPRs prior to this, namely the Paris and the Berne convention. TRIPS implementation will strengthen the protection given to IPRs worldwide and will bring standards of protection in the developing country members of the WTO closer to that which are offered in the developed countries. Compliance with TRIPS mandates all the WTO member countries to amend their national legislations and bring it in conformity with its provisions.

It is the developing countries and the least developed countries which are required to make the most extensive changes, even though the consequences and the impact of such changes will only be felt over a period of time. All the WTO members were given one year, i.e. upto January 1996 to ensure that their national laws were TRIPS compliant. The developing countries were given another an additional four years i.e. upto January 2000, and the least developed countries ten years i.e. upto 2006, to do so. A further period of five years upto 2005, were given to the developing countries to introduce product patents in fields of technology which had so far been excluded from their national patent laws.

The TRIPS resulted in a divide between the developed countries vis-à-vis the developing and the least developed countries. Even though the developing countries did endeavor to obstruct the TRIPS at the initial stages and at the same time engage in constructive negotiations to some extent, they ended up meekly accepting the stance taken by the developed countries on most of the major political issues. However they did manage to make use of the differences that existed amongst the developed countries and formed alliances with them to strike a bargain on issues such as on conditions of compulsory licensing, government use, revocation etc. In retrospect, the TRIPS implementation could have been much smoother had the developing countries been granted a reasonable period to adapt to the changes being demanded of them.

Generalizing the likely implications of the TRIPS on the developing countries is difficult as it depends on a number of factors such as divergence which exists between the existing IPR laws prevailing in a particular country and the standards laid down in the agreement, the development of different sectors, the per capita income, the structure of supply ( i.e. the presence or not of local suppliers) etc. The developing countries did not have legislations in several of the IPR areas which are covered by the agreement such as in the field of geographical indicators and protection of plant varieties. Many IPR fields such as integrated circuits did not even have an existing international instrument prior to the TRIPS to rely on. To achieve TRIPS conformity the developing countries will also have to align their national laws in various fields such as civil and criminal procedures in courts and administrative procedures and for this will need an increased budget which might not be affordable by most of them in the near future. Though the developing countries have been given a transition period to implement the agreement and it is not subject to any declarations, notifications or permissions, many developing countries are being pressurized by the developed countries to quicken their pace of reforms so as to give immediate effect to the TRIPS. A tightened IPR protection will give rise to many socio-economic problems in the developing nations which are being totally ignored by the developed nations.

As far as the Indian scenario is concerned three amendments namely, the amendment of 1999, 2002 and 2005 were enacted to bring the Indian Patents Act 1970 in conformity with the provisions of the TRIPS. The Indian Patents (Amendment) Bill, 2005 was passed by the Rajya Sabha on the 23rd of March, 2005. Though several amendments have been introduced to the bill, many of them still fail to address the serious concerns of issues relating to the access to medicines.

The amendments introduced by the Patents (Amendment) Act, 2005 and the problems relating to it are as follows:
„« The definition of the term “Pharmaceutical substances” as given under the new act is too broad and ambiguous. The amendment describes “Pharmaceutical substances” as “any new entity involving one or more inventive steps”. The term “chemical” should have been added so as to read as “any chemical entity”.

„« The term “inventive step” has been modified under section 2(f) of the Patents (amendment) Act, 2005. This definition broadens the existing provision to the benefit of the paten holders and it provides for two criteria for meeting an inventive step and hence is quite ambiguous. As the new amendment stands now, for meeting the criteria of an inventive step the patentee will have to show that the invention includes a “technical advance” or has economic significance or both. The provision should have required the applicant to comply with both the requirements for meeting the inventive step requirement . Otherwise it leads to the dilution of the inventive step requirement by the fact that a patent could be granted on economic significance alone.

„« Section 3(d) of the Patents Act, 1970 has been amended under the new Act to read as follows - “The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least employs one new reactant”. The phrase “does not result in the enhancement of the known efficacy” is too broad and ambiguous and can lead to ever greening of patents as it may lead to new forms of existing substances to become patented.

3. Introduction of Pharmaceutical product patents-

3.1 Scenario pre-TRIPS

The Indian Pharmaceutical industry is one of the largest in the developing world and is ranked as the fourth largest in terms of production and 13th largest in terms of domestic consumption value. Over the past 30 years Indian drug industry has emerged from almost non-existent to a world leader in the production of generic drugs. With the changes brought about by the patents act of 1970, Indian drug manufactures became experts in the field of reverse engineering and increased its supply of less expensive copies of the worlds best-selling patent protected drugs. This could only be possible because there was no product patents system for drugs and medicines. While the patent act of 1970 in its original form does provide a distinction between product patents and process patents, the exception provided in section 5 of the act of 1970 (which has been omitted by the amendment of 2005) offered only a process patent for food, medicine or drug substances and specifically excluded product patents for the same.

Thus India was able to copy foreign patented drugs without paying a license fee and was able to make it available to the masses at one-tenth of the original price. Moreover the Drug Price control Order, 1970 put a cap on the maximum price that could be charged and ensured that the life saving drugs are available at reasonable prices. The Act of 1970 could be considered to be one of the most progressive statutes which safeguards both the interest of the inventor and the consumer in a balanced manner. The Act has been promulgated keeping Directive Principles of State Policy contained in Article 39 of the Constitution in mind. Hence with a regulatory system focusing on process patents and being in the grip of a rigid price control framework, the Indian pharmaceutical industry has emerged from a import dependent industry to in the 1950’s to having achieved world wide recognition as a low cost producer of high quality pharmaceutical products with an annual export turnover of more than $ 1.5 billion dollars.

The distinction between a product patent and process patent that existed prior to the 1995 TRIPS agreement helped India develop a huge generic drug industry which had its basis on reverse engineering of brand name drugs through slightly modified processes.

3.2 Scenario Post-TRIPS-

The most important amendment which had to be introduced by the amendment of 2005 in order to make the existing patent regime in India TRIPS compliant was the introduction of pharmaceutical product patents. The amendment of 2005 extends full TRIPS coverage to food, drugs and medicines. It requires patents to be provided to products as well, while the patent regime provided by the act of 1970 required patents only to be granted for chemical processes which resulted in the production of a particular drug. The other implications for the pharmaceutical sector under the new act are as follows

„« The term of a patent protection has been extended to twenty years compared to the seven years which was provided by the act of 1970. This was made applicable to all the member countries and hence rules out all the differences with respect to patent protection which prevailed in different countries.

„« If the law of the country provides so, then the use of the subject matter of the patent shall be permitted without the authorization of the patent holder, including use by the government or any other third party authorized by the government. However such use shall be permitted only if prior to such use, the user has made efforts to obtain the authorization of the patent holder and such efforts have not been successful within a reasonable period of time. This requirement can be waived in case of a national emergency after notifying the patent holder.

„« The burden of proof with respect to infringement matters have been reversed under the new act. The onus of proving on a legal complaint that the process used by one enterprise is totally different from that which has been used by another would lie on the defendant. Prior to the amendment the responsibility was on the patent holder to establish patent infringement.

The new amendment was not to affect the drugs which were in the market prior to 1995. As far as those drugs which were produced between 1995 and 2005, they will have the right to continue to produce them in return for the payment of a fixed royalty to the patent holder. The main problem arises for those drugs which are now being manufactured and patented. The only way by which such drugs can be manufactured in India is by way of compulsory licenses. Such compulsory licenses are granted by the government on grounds such as non availability, high prices, public interest etc. The process ought to be simple and easy but the problem lies in the fact that the procedure has been left very ambiguous by the new Act.

The immediate and the most drastic effect that TRIPS compliance and introduction of the new Act of 2005 will have will be with respect to the health sector in India. The patients are the ultimate beneficiaries of the pharmaceutical research and development. By denying product patents India will be able to encourage bulk generic drug production at cheap prices. However generics are not the only solution to counter the problem of access to medicines. Generic production of drugs will not necessarily result in the innovation of new and more effective drugs and by not acknowledging innovation India will run the risk of not having access to future medicines which will in turn affect public health. Denying patents and allowing the generic companies to freely copy the new drugs cannot be the solution to deliver medication to the patients too poor to buy them, be it rural or urban India.

The actual problem lies in the fact that the product patents not only increase the cost of the drugs and medicines, but that most of them fail to introduce research and development in the neglected diseases. Lack of access to affordable medicines was a reason for the vast majority of deaths that took place due to HIV/AIDS in the developing countries. Hence while on one side the introduction of product patents will help in development of new and more effective drugs, the problem still remains that the research and development undertaken by the drug manufactures evade the neglected diseases and the diseases which are region specific such as medicines for malaria and tuberculosis which are found prevailing in developing countries like India.

Unlike in the developed countries, the lack of the penetration of medical insurance makes the people directly affected by the increase in the prices and hence decreases the affordability. The patent system makes the lives of the people outside the sphere of social security, which forms majority in the developing countries, impossible.

A product patent system will make India dependent on the multinational companies for technology and for permission to produce the patented drug. Exorbitant prices will be charged and the Indian pharmaceutical industry will become subservient to the MNC’s. They will lose the position that they had gained in the wake of the Act of 1970.

4. Solution to the Product patent issue

The most practicable solution to the problem which at the same time allows for TRIPs compliance would be granting of dual licenses. This would mean that the patent would be partly product patent and after a reasonable time being given to the inventor to make a reasonably large profit it would be converted to a process patent whereby the patented drug can be manufactured by competing manufacturers using an alternative process. This would solve the problem of excessive hike in prices and would render the drugs more accessible to the millions suffering. Collaboration with the MNC’s on various fronts such as research and development, manufacturing and marketing will help Indian Pharma companies make profitable breakthroughs.

5. Conclusion
The non-provision of product patents has been one of the strongest aspects of our Patents Act. Complete compliance with all aspects of the TRIPs agreement is prejudicial to our national interest and the TRIPs agreement itself places limitations on our ability to enact out national legislations in public interest. To prevent public interest from being prejudicially effected it is imminent to mobilize public opinion against complete compliance of the obligation under TRIPS. It must always be remembered that pharmaceutical industry owes a moral responsibility to the society. The monopoly granted by patents to the Drug companies should not be exercised without responsibility. Hence it can be safely said that India having rushed through with the third amendment of 2005 to the patents act without proper parliamentary scrutiny and without having tactfully dealt with issues relating to food, health and technology was not in public interest.

The author can be reached at: reshma.abraham07@legalserviceindia.com / Print This Article

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