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Controversy of Section 3(D) of The Indian Patent Act

Written by: Raheel Rashad Daureeawo
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Under the Indian Patent Law there are certain inventions which are deemed specifically not patentable. These are defined in Section 3 sub section d of the Indian Patent Act. In this article we shall understand the controversy behind this and we shall understand both the sides of the story as to why there exist a large number f people who state that Section 3d should be amended and why according to some this is probably one of the most important differences made between discovery and invention.

Let us first understand the text of what section 3(d) of the Indian patent act implies.

“3. What are not inventions - the following are not inventions within the meaning of this Act, -
…
(d) the mere discovery of a new form of a known substance which does not result in increased efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such process results in a new product or employs at least one new reactant. Just by reading the text of this section there is a Test which is automatically formulated. For any drug to be patented it must not fall in the ambit of Section 3(d) -a. Test of being a “mere discovery”- Since the word “discovery” has not been defined it can be interpreted by reading the preamble of the Indian patent act and from its legislative history and finally from common knowledge.

The Oxford English Discovery of current English defines discovery as the action or process of discovering or being discovered. According to the Webster’s Third International Dictionary of the English Language, the expression “discovery” refers to “the act, process or an instance of gaining knowledge of or ascertaining the existence of something previously unknown or unrecognized.” And after reading the legislative history of the Patent Act, we conclude that meaning of discovery is finding out the use of a thing which is already known and finding out a new way to do it.

For example a biological sequence which existed in the natural environment would be now considered as a discovery but a protein which is artificially engineered and represent a new product and not normally found in nature would be considered as an invention.

Test of being a new form of a known substance- The explanation to Section 3(d) lays down very exhaustively the breadth of the expression “new form” and sets out classes of entities that would be considered to be the “same substance”. Factually, the expression “other derivatives of known substance” appearing in the explanation is, in my opinion, too broad in its ambit to include almost any possible derivatives of the known substance one can think of.

Test for not increasing efficacy - Section 3(d) makes it clear that a new form of known substances are allowed only when such new forms of the known substances differ significantly in properties with regard to efficacy. So the criterion is not any trivial increment in efficacy but significant improvement in the efficacy of the new; over the known substance. In essence Section 3(d) aims to prevent a phenomenon known as ever-greening by proving that only those derivatives that show enhanced efficacy are patentable.

In conclusion the text of section 3(d) of the Indian patent act states that the subject matter of an invention should not be a mere discovery, it should not be new form of a known substance and it should results in substantial increase in efficacy over the relevant prior art.

India and Trips
It all began in the Uruguay Round of GATT negotiations which paved the way for WTO. Therefore India was put under the contractual obligation to amend its patents act in compliance with the provisions of TRIPS. India had to meet the first set of requirements on 1- 1-1995. In accordance with its TRIPS obligations, one of the most important changes India had to make to its patent laws was making patents available for pharmaceutical products. India became a member of the WTO on 1 Jan 95; only pharmaceutical products invented after this date are patentable. This was to give a pipeline protection until the country started giving patent protection on those products. It came to force on 26th March 1999 retroactively from January 01, 1995. It lays down the procedures for filing of application for patent in the field of drugs or medicines with effect from 01.01.1995 and grant of Exclusive Marketing Rights on those products.”

India amended its Patents Act again in 2002 to meet with the second set of obligations Term of Patent etc. with came in effect from 1-1-2000. This amendment, which provides for 20 years term for the patent, Reversal of burden of proof etc. came into force on 20th May, 2003. The Third Amendment of the Patents Act 1970, by way of the Patents (Amendment) Ordinance 2004 came into force on 1st January, 2005 incorporating the provisions for granting product patent in all fields of Technology including chemicals, food, drugs & agrochemicals and this Ordinance is replaced by the Patents (Amendment) Act 2005 which is in force now having effect from 1-1-2005. It was the cancer drug which put Indian on the world map and this was the case we shall be discussing next.

There is an interesting case on point which is referred as the Novartis decision. Novartis a swish pharmaceutical company took the Indian government to court over its 2005 Patents Act because it wanted a more extensive granting of patent protection for its products than offered by the law. Novartis application was opposed by several generic drug companies and an NGO cancer patient Aid Association CPAA on several grounds including 1.Lack of novelty /anticipation
2. Lack of significantly enhanced efficacy under section 3(d)
3. Obviousness
4. Wrongful priority.
Novartis claimed that India's Patents Act did not meet rules set down by the World Trade Organization and was in violation of the Indian constitution. Apparently all of Novartis's claims were rejected by the Madras High Court.

However there were some very significant questions raised in this case. Did India comply with the WTO rules; was patent protection granted so as to protect the pharmaceutical companies? The answers to this and many of the questions raised in the case was that India did comply with the rules set by WTO but on the other hand it also safeguarded itself from granting patent only for real innovation. What this meant is that minor modification made to the patented drugs in order to maintain monopoly and enjoy extended period of patent protection could no longer be done in India.

Indian Law Compliance With Trips

With respect to Section 3(d) of the Indian Patent Law, Novartis claims 2 things one that it was unconstitutional law and two that it violated trips. The madras High Court affirmed that Section 3(d) of the Indian Patent Act was not unconstitutional. However the question whether Indian Patent law was in violation of TRIPS is a matter to be decided by the Supreme Court and an appeal can be made to the TRIPS forum.

Article 4 and 5 of the Doha Declaration gives us an indication:

DOHA DECLARATION - “The TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. … [W]e affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all. ”

And 5(b) Each Member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted.
5(c) Each Member has the right to determine what constitutes a public emergency … (including HIV/AIDS, TB, malaria, and other epidemics).

5(d) [TRIPS leaves] each member free its own regime for exhaustion [of intellectual property rights] without challenge … (International exhaustion permitting parallel importation permitted).

While the Doha Declaration has contributed to softening the tone of international debates concerning access to medicines in the context of TRIPS, it stops short of addressing the fundamental question of the relevance and need for patents on drugs in developing countries and in particular in least developed countries. However using the guideline above it can be argued that India does comply with TRIPS provision.

Developing country governments and international agencies like UNICEF and the Clinton Foundation rely heavily on importing affordable drugs from India, and 84% of the antiretrovirals that MSF prescribes to its patients worldwide come from Indian generic companies. India must be allowed to remain the 'pharmacy of the developing world. Generic antiretroviral medicines produced in India are used to treat over 80 percent of the 80,000 people that receive treatment today in MSF's HIV/AIDS projects in more than 30 countries.

From the Indian point of view a choice simply had to be made in terms of policy whether to give patent protection to the multimillion dollar companies or to give affordable medicine to poor people not only from India but to the rest of the world. But from the point of view of the Swiss pharmaceutical company which is relying on international patent rules and TRIPS compatibility of section 3(d) of the Indian Patent Act along with the rules set by the WTO; patent protection should be given if India is following the rules of the WTO and it should not circumvent the laws in order to do what it has been doing. If India is to truly change from being an imitator to an innovator this transition is a must. I therefore understand and relate to both the sides as they both have valid arguments.
The matter is likely to be forwarded to the TRIPS forum where this decision will be reviewed upon and how the court reaches its conclusion is a matter of great interest to the world.

The question which comes to mind is whether the Indian Patent Law complies with TRIPS provisions. Article 27 of the TRIPS stipulates that ‘patent shall be available for any inventions …provided that they are new, involve an inventive step and are capable of industrial application’.

However the terms are not defined leaving the member states to define the patentability criteria in a manner that suits their specific national interest. For example US in 2001 revised its utility guidelines to cater specifically to biotechnology inventions” Similarly Section 3(d) of the Indian patent act may be construed as a refinement of patentability criteria to cater to “ever-greening” a specific problem found in pharmaceutical innovation. “The enhanced criteria can be seen as a refinement of non obviousness principles or it could be perceived as refined utility test where only new forms that demonstrate substantially different utility than what existed before are patentable.” . Therefore Section 3(d) of the Indian patent Act does comply with TRIPS provisions.

Another landmark case on this subject was decided by the Delhi high court. The dispute started in January, 2006 after Cipla announced its intention to sell its generic version of Erlotinib under the name Erlocip. Roche sued Cipla for patent infringement in 2008 and sought an interlocutory injunction. Cipla counter-claimed that the Patent was invalid and should be revoked. Cipla also argued that the balance of convenience was in its favor, linking it to the price difference between the two drugs and the public interest in making life-saving drugs available at an affordable price.

The decision of the Judge was-
I) That Erlotinib is not a derivative of Gefatinib.
II) Even assuming it is a derivative, it crosses the section 3(d) hurdle, as it demonstrates increased “efficacy”.

Section 3(d) states that any "derivative" of a known pharma substance has to demonstrate increased efficacy in order to be patentable. If Erlotinib is not a derivative of Gefatinib at all, then section 3(d) does not apply. Apparently, this point was argued in Natco’s pre-grant opposition proceeding as well and the patent office found that Erlotinib is not a "derivative". Unfortunately, owing to the lack of a robust patent database in India, we don’t have access to any of NATCO’s arguments and the final decision by the patent office.

If the alleged indication was an altogether new one, then, even assuming that Erlotinib is considered to be a derivative of Gefatinib, Roche crosses the section 3(d) hurdle.

It is helpful to lay out the structure of section 3(d) again:
"the mere discovery of a new form of a known substance which does not result in increased efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such process results in a new product or employs at least one new reactant.”

Explanation: For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy.

The Business Standard summarized thoughts; Section 3(d) forces firms to focus efforts on innovation and hardcore research instead of tinkering with known substances and included Shah's text:”Likewise, the threat of depriving Indians of new research products seems hollow. If they do not register their patents in India, the domestic industry has the proven capability to “reverse-engineer” the same and provides them at much lower prices. If they register the patent and do not work it, India's patent law has adequate mechanism to deal with such situations and ensure that the product is available to the needy.”

In essence, section 3(d) states that:
1. No "new form" of an existing substance may be patented, unless it demonstrates increased efficacy. If it does demonstrate increased efficacy, then it is treated as an altogether "new substance".

2. The "mere new use" of a known compound cannot be patented.

If Erlotinib is found to have an additional indication (pancreatic cancer) not possessed by Gefatinib, then, as one of the anonymous commentators to our last post argues, it may be hit by the "new use" bar under point (2) above. However, this is not true, since if a new form of a known substance (or a derivative) is found to have a "new use", then it will be considered to be a "new substance" altogether.

To explain further:
If there is a new indication for Erlotinib, then under the explanation to section 3(d), such new use would easily qualify as "differing significantly in properties with regard to efficacy". In other words, if a new use is found for Erlotinib, then Erlotinib qualifies as "new substance" altogether under the Explanation to section 3(d)--to this extent, it cannot be construed as a "known compound".

CHAPTER 2

Indian Intellectual Property Laws

We shall now look into the current legal system of India and try and understand its problems when it comes to enforcing of their intellectual property laws. India is a common law country and its legal system is based on the British legal system. “If it is not written, it is not law”. The judges are there to implement the law as enacted in the Parliament. However cases are won on the statute alone and cases are often cited as a way to strengthen the case. This is very unlike the judge made law ever changing and up to date.

As far as Intellectual property laws are concerned India has 4 different statutes to deal with intellectual property. The Patents Act, 1970, The Trade Marks Act, 1999, The Copyright Act, 1957 and the The Designs Act, 2001. There are Rules which are used in conjunction with these Statutes for administrative purposes for daily function of the administrative bodies set up in every state. Intellectual property has always enjoyed Federal exclusivity or as you would refer to it in India as a Union subject matter. But as one would presume the working to be centralized and therefore efficient it is but a different picture there. If in the state of Maharashtra a product like “Crocin” (paracetamol) is patented and sold throughout India, we will find that a similar product with similar packaging is sold in Haryana and it is patented in the Name of “Croecin”. Let’s take an example of Design which needs to be protected, it is protected for 10 years from the date of filing and it’s renewable but the process itself takes 1-2 years to complete. And in the case of patents its validity lasts up to 20 years from date of filing but the process again takes up to 3-4 years. Therefore the time it takes to protect an intellectual property right in India and the costs involved, is what hinders entrepreneurs from filing. The cost for trademark copyright or patents range from 10000 Rupees to 100000 rupees not including the bribes which are involved. That is a different story altogether and is beyond the scope of this article. These are but few of the many reasons why intellectual property is taking a backseat and so is innovation.

On paper the system will be completely centralized but the loopholes are so many that the system is often abused. Innovation has never been strength as the “system” never encourages the inventor and most of the time it is the middle man which reaps its benefit. But the scenario and its awareness is increasing since the past 10 years. With all the foreign investment in all industries Indian legal system has taken a jolt and had to pick up the pace in order to be competent and people are more aware of intellectual property laws now.

However the international scene is very different as far as foreign investment is concerned the laws have been “pushed” , India is catching up with the rest of the world ;in the sense that although they are not being prepared but in order to receive foreign investments laws have been tailor made laws to suit the particular industries and processes, but there is another faction of companies who don’t receive foreign investment nor any government grants who infringe the intellectual property laws of the US and any developed nation in order to sell those products for maximum profits. Companies like these which give India a bad name. At first people weren’t aware of IP then due to foreign investment adapted and changed laws and now not only the Government but also the people want change and don’t want to be seen as infringers of Intellectual property. But they suffer from their own norms which they themselves have built and although they want to grow to the next level it’s the system which pulls them back in. I often refer to this as the Indian system by that I mean that policies along norms will need to be changed before India can compete with the rest of the world.

Post WTO laws are The Geographical Indications Act, 1999, The Semi Conductors Integrated Circuits Layout – Design Act, 2000 although the design Act 2000 rules are still to be implemented to support administrative functions. India is again adapting and changing its laws to conform to international laws but what is important is that we need to understand the time line and at what stage is India in. I believe that just by enacting IP laws to conform to international laws, is not a complete solution but it is a step in the right direction. The system needs to be changed if we are to see any significant change; otherwise the new laws in the country are nothing but toothless legislation with no enforcing power and thereby not effective.

For India to enforce patent laws corruption and weak infrastructure play an important role. As per the Transparency International's Corruption Perception Index, in 2005, India ranked 92nd out of 159 countries in a study measuring perceptions about corruption . Foreign investors also face the challenge of dealing with rampant bureaucracy at various levels of federal, state and local governments. From delay in courts to having a weak infrastructure to corruption is what weakens India to enforce intellectual property laws.

India will need to change its norms from corruption to its norms of practicing business if we are to go into a new era and compete with advanced countries. This affects simply all laws that are made. But that is easier said than done, as change need to be brought about by not only the policy makers but by the general people and this is the biggest hindrance and if this obstacle can be passed than India can get out the developing nations category and move into the future.

India is a member of the Berne convention and TRIPS and we see the divide between the developed nations who, in the prospective of a timeline are much advanced in years and between the developing nations who are just struggling to keep up.

On one hand we have the nations asking for heightened levels of IP protection and on the other we have countries like India Brazil China among many who want to be given time in order to change their systems and then comply. But the golden question is that is additional time enough, for these economies to pick up pace. The answer is in the negative as it is not time which is a primary factor but it is the policy makers and the system which needs to be changed in order to see change in these countries. The plea which I am making here is for the developing nations is to understand the timeline and that every country, although they exist in the same time frame are existing in separate time or growth stage of the nation and therefore should be assisted rather than resisted. This is in no way a plea for extension of time which the developing countries have asked but this can be considered as a plea in change in attitude towards those nations.

As in the international scene and the world is a global community where inter dependence is the key. Therefore the developed nation should consider the timeline and assist these nations which will beneficial to all.

Two Sides To The Same Coin
There are however two major issues to be faced when we refer to the controversy of section 3 (d) of the Indian patent Act. If we disallow patents on incremental innovation will this discourage firms from doing fresh research? This statement as a whole can only be felt when we describe the chain of events that follow through.

The second point is more of a policy decision than a debate. On one hand India as stated earlier is like a pharmacy to most of the developing nations and the priority is to make sure people have access to medicine, and on the other hand pharmaceutical companies who have spent millions of dollars on research and are unable to receive full period of patent protection factors like Stockpiling, Compulsory licensing etc. Therefore pharmaceutical companies try to maintain the monopoly to maximize profits. If we look at this from a business aspect this is encouraged under TRIPS and national patent laws but if we look at the same from a humanitarian aspect this is completely wrong as access to medicine should be of prime importance. But what we cannot ignore is that it is because of the innovative research of these pharmaceutical companies who spend million to find the next cure they too should be compensated, because if all medicine are made generic under the pretext that access to medicine is the most important than there will be no innovation and in the end it is the people who will suffer. The question then comes how we make a solution which can keep the pharmaceutical industry motivated without having to deny poor people medicines. It is no longer a case between the advanced nation who adhere to intellectual property laws and India Brazil and China; this is a bigger than that.

Business Impact of Section 3(D) on Global Pharmaceutical Companies

The cost of doing research and development escalates and MNC’s are looking for different ways to cut costs and as of the present scenario India is a welcoming destination. Many MNC’s are now collaborating with Indian companies which offer a cost-effective drug discovery and development solution. “In 2005 contract research in India was valued at $US100-120m and growing at a rate of 20-25% each year, according to a report by the Chemical Pharmaceutical Generic Association.” In a survey taken of 179 global pharmaceutical executives 62% expect India to be an integral part of their business in the next 5 years.{2008 survey}

More than simple outsourcing arrangements, MNCs are increasingly involving Indian companies in drug development and the right to share in the profits. For example, contract research lab Advinus Therapeutics partnered with Merck in a drug discovery and development collaboration to jointly develop drugs for metabolic disorders. If a drug is commercialized, Advinus could get as much as US$150m in milestone payments as well as royalties under the agreement.

We are seeing significant changes to developing countries from the Indian Patent law amendment to Thailand Compulsory Licensing campaign on both AIDS and heart disease medicines. This reflects a “new wave of patent withdrawals and a growing wave of compulsory licenses”. Due to the pre-grant opposition procedures which allows consumer groups generic companies and IP specialist to intervene and challenge weak patent application. “There are already fifteen pre-grant oppositions in India concerning AIDS medicines and the number is likely to grow as public interest groups begin to appreciate the importance of stopping 90-95% of the patent applications on pharmaceutical patents that can be rejected under the Indian standard even though they sail through the U.S. patent office.”

Solution
Reading through the provision above we conclude that Indian Patent Act does not violate TRIPS as stated earlier but there is pressure from the pharmaceutical industry as this is cutting into their profit margins. There are however 2 issues here – Compulsory Licensing of drugs for AIDS Cancer etc is understood but in the same ambit all other medicine are being included it in. As a policy decision pharmaceutical companies are losing millions in terms of research and development costs and are now forced to look overseas if they are to reduce the cost. Indian trials cost about a tenth of those in the US, and there is a good supply of trained personnel as well as a pool of volunteers that make it quicker and easier to launch trials than in the US. However the Indian government is proposing new regulations to control drug trials in its country. India seeks to create a Central Drug Authority to monitor the activities of U.S. and European drug giants who have outsourced much of their clinical testing to India, China and Africa.

Earlier US administration did apply pressure through trade sanctions etc with the pretext that IP laws in those country we not at par even if they complied with TRIPS and they pressurized developing countries into conforming to TRIPS plus provision which they were in no position to accept . What the current administration does is yet to be seen.

However India and the US have very different patentability standards. While US is faced with a proliferation of patents on new uses, combinations and new forms of known medicines which is instrumental in keeping generics out of the market and lowering of patentability standards of novelty, non-obviousness and industrial application; India on the other hand strictly limits the patenting of known medicines and has rejected a number of such applications related to several antiretrovirals, cancer medications.

How U.S. and India reconcile their differences is a matter of speculation. Although both these countries exist in the same time frame, but they actually belong to different time zones. Which country belongs to the advanced time period one does not need to mention but the fact is that since US pharmaceutical companies enjoy heightened IP protection, there is a strong notion among developing nations that it not necessarily mean that the entire world must conform to their ideals so that they can maximize profits. All developing countries have conformed to comply with TRIPS but there is a struggle within those nations.

Intellectual property is no longer simply about giving the right to the inventor but in the coming years it will be looked at from a bigger picture and by giving right to someone who are we denying access medicine from and on a humanitarian level it that what we want to achieve. If India was in the same financial strength and quality of living I for one would have entirely sided with US as every country should have stronger IP protection and then only can innovation progress. I side with US when it comes to mere imitation of drugs which they have researched and Indian companies sell it for huge amount of profits.
What should happen and what will end up happening are two different things.

What should happen is that only drugs which are “lifesaving drugs” should be allowed to be made in India and rest of the drugs should enjoy heightened patent protection. But what will happen in that India will continue to have higher patent standards and will continue to be the pharmacy of the developing world and US companies will end up collaborating with Indian companies in order to reduce the costs. However things can be completely different if in the Novartis case the international court decides that Indian Law did not comply with TRIPS minimum standards in which case everything would need to be relooked. But Indian law does comply with TRIPS and even has enacted separate laws to counter effect in order to grant access to medicines to the poor.

Conclusion
On one hand we have the AIDS campaign and NGO’s backing India for having laws which do not allow companies to enjoy extended period of protection so that those medicine can be easily distributed to most of the developing world. On the other hand we have the Intellectual property advocates making the argument that companies should be given extended period of protection so that this will increase profits which in turn will be spent on research and development, for many other life saving drugs and will cure many illnesses. Arguably both of these are correct in their own way and each perspective in understandable.

I personally feel that Novartis should be granted the drug patent as then the prices will go down and will benefit all. Normal price 5000 and Novartis sells it for 1 lakh
Price will go down
Vaguely drafted expression soli sorabji former attorney general
As no guidelines significane in property
Mashelkar committee – said Section 3 d to be removed as beyond the scope of
Modify older olecules and commercialise them
Incremental innovation should be not granted

Overpricing
From the aspect of pharmaceutical industries in the US, we understand that cost of innovation is related to profits earned. And if we separate life saving drug to other drugs and suggest a solution, that only those drugs which are life saving, will not enjoy extended protection and other drugs will. That statement in itself is a flawed because then there is no incentive to research life saving drugs, if there is no return on those investments.

But the current situation demands that access to medicines are a must and of prime importance and therefore there is so much lobbying behind this as India should remain the “pharmacy of the developing nations” And the present situation at least from the developing world prospective and AIDS campaign activists and NGO etc Indian is being commended for having a “A patent law that puts public health first” This problem does not have a quick fix and therefore we need countries to come together with compassion and solve this situation. The solution will be a middle ground between Access to medicine and heightened Intellectual property provisions.

These are exciting times for India because we will see better intellectual property law enforcement and on the other hand international investment will increase in the upcoming years. With all the lobbying and all the politics involved it can be hoped that the suffering of individuals due to lack of access to medicines is reduced and a solution is reached wherein people have access to medicines and yet in the future India will be able to comply TRIPS plus provisions.

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

Also Read:
Patenting of Micro-Organisms in India
Patentability: What Is Patent?
Patent & Its Effect In India
Challenges to India Patent Regime
Whether Patent Law Protects Biotechnological Inventions
Software Patenting
Pharmaceutical Product Patents
Patenting Recent Biotechnological Inventions
Patent Regime And Right To Health
Patent Amendment Act, 2005
Patents and Geographical Indication
Geographical Indication And Basmati

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