The Patents (Second) Amendment Bill - An Epilogue

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The Patent (Second) Amendment Bill -

The Patent (Second Amendment) Bill 2000 has been proposed by the Government to bridge the conflict between the TRIPS and the Patent Act, 1970. Thus, it will be wise to deal with the important amendments proposed by Bill of 2000. Further the need for any further amendment will also be discussed herein.  The discussion will be restricted to those amendments, which have relevance to TRIPS.
The proposed amendment provides for changes in the -
1.scope of patentable inventions
2.grant of new rights
3.extension of the term of protection
4.provision for reversal of burden of proof in case of process patent infringement
5.condition for compulsory licenses. 

PROPOSED AMENDMENTS - Amendment of Section 2 of the Patents Act
The Patent (Second) Amendment Bill has proposed changes in Section 2 of the Patents Act by inserting some new provisions as well as deleting some earlier provisions. One of the noteworthy changes proposed is the modification in the definition of the term ‘invention’. Clause 3 (f) of the Patent Amendment Bill has redefined the term ‘Invention’. This clause presently reads -“An invention means a new product or process involving an inventive step and capable of inventive step”.

Here the phrase “product or process” has proposed a radical change in the Patent Act. This proposed change tries to bring in conformity with the Patent Act with the Article 27.1 of TRIPS. Article 27.1 of the TRIPS provides that subject to certain exceptions the product as well as process patents to be inventions. Keeping the subject matter of patent in mind further changes has been incorporated in Chapter II of the Act. 

Amendment of Section 3 of the Patents Act - The Patent (Second) Amendment Bill vide clause (4) seeks to amend provisions of Section 3 of the Act. Of the proposed amendments in Section 3, the most important is that brought about in Section 3 (g) of the Patents Act. Clause (g) of Section 3 excludes from patentability “a method or process of testing applicable during the process of manufacture for rendering the machines, apparatus or other equipment more efficient or for the improvement or control of manufacture”. The above-mentioned provision is proposed to be omitted by Clause 4 (c) of the Amendment Bill. This change has been proposed to bring the Act of 1970 in conformity with Article 27.1 of TRIPS, which makes it obligatory/mandatory for the members to provide for product and process patent.

Amendment of Section 10 of the Patents Act
The Patent (Second) Amendment Bill proposes certain charges in Section 10. These are basically pertaining to contents of specifications. However, the most noteworthy of these is the insertion of a new sub-section 4(A) in Section 10 of the Patents Act. This sub section has been inserted by Clause 8 (b) of the Patent Amendment Bill. This particular section is of interest as it deals with international application designating India. It reads - “In case of an International Application designating India -

1.         The title, description, drawings, abstracts and claims filed with the application shall be taken as the complete specification for the purpose of this Act and

 2.         The filing date of the application processed by the Patent Office as designated office or elected office shall be the international filing date accorded under the “Patent Co-Operation Treaty”. 

Amendment of Section 45of the Patents Act - Clause 21 of The Amendment Bill proposes to amend Section 45 of The Patents Act(which relates to date of patent) to make the date of patent as date of filing of the application, according to Article 33 of TRIPS(which requires that the term of protection should be counted from the date of filing) in stead of date of filing of complete specification (as required by The Patents Act, as it stands now). This clause of The Amendment Bill also proposes to delete the proviso relating to the provisions of `Patents and Designs Act, 1911', which have no relevance now.

Amendment of Section 47 of The Patents Act -
This section is of paramount importance as this section deals with the limited exception clause. However this limited exception is only with regard to the product patent and not process patent. Sections 47(1) and 47(2) of The Patents Act say that the grant of a patent under this Act shall be subject to the condition that- "(1) any machine, apparatus or other article, in respect of which the patent is granted or any article made by using a process in respect of which the patent is granted, may be imported or made by or on behalf of the Government for the purpose merely of its own use; (2) any process in respect of which the patent is granted may be used by or on behalf of the Government for the purpose merely of its own use;"

Although these two sub-sections apparently seem to violate the exclusive rights of making (only for product patent), using, offering for sale, selling or importing conferred on the owner of a patent, either product or process, these (Section 47(1) and 47(2) of The Patents Act) may be permissible under Article30 of TRIPS, which provides for limited exceptions to the rights conferred. Article 30 (of TRIPS) reads as follows:
 "Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of the third parties". 

Since Article30 does not clearly mention what can be regarded as "limited exception” and what cannot, the scope of this provision is not well defined. It seems to depend on how one interprets this. However, this provision is not unique of TRIPS. Because almost all patent laws make some allowance for some limited exceptions for some purposes such as use for research, experimental or teaching purposes, use for private non-commercial purposes, preparation of medicinal mixtures individually or by pharmacies according to prescription development activities relating to the obtaining of marketing approvals for generic drugs, protection of prior user's rights, use on ships, aircraft or other vehicles temporarily in foreign jurisdiction, etc. Given that Section 47(1) and 47(2) of The Patents Act allow use of patented product/process for the purpose of Government use only, it seems that such exceptions will be permissible under Article 30 of TRIPS.
Section 47(3) of The Patents Act says that- "any machine, apparatus or other article in respect of which the patent is granted may be made or used, by any person, for the purpose merely of experiment or research including the importing of instructions to pupils."  This provision is consistent with Article 28 of TRIPS only if it is regarded as a part of the "limited exceptions” permitted under Article 30 of TRIPS.

 Section47 (4) of The Patents Act says that-  "in the case of a patent in respect of any medicine or drug, the medicine or drug may be imported by the Government for the purpose merely of its own use or for distribution in any dispensary, hospital or other medical institution maintained by or on behalf of the Government or any other dispensary, hospital or other medical institution which the Central Government may, having regard to the public service that such dispensary, hospital or medical institution renders, specify in this behalf by notification in the Official Gazette".

Such Government use and use for distribution in health centers can be regarded as "limited exceptions" permitted under Article 30 of TRIPS and/or seem to be permissible under Article 8 of TRIPS which says that Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition. To the extent that medicines and drugs are distributed on a non-profit basis, such distribution does not seem to be incompatible with TRIPS, given the allowances put forward in Article 30 and Article 8 of TRIPS. 

Amendment to Section 48 of the Patents Act - The Patents Act, 1970 confers on the patentee of a product patent, the exclusive right to “make, use, exercise, sell or distribute” the patented products.  Article 28.1 of TRIPS empowers the patentee of a product patent to prevent third parties, not having the owner’s consent, not only from the acts of making, using, offering for sale, and selling but also from importing the products for these purposes.  This gap has been bridged by the proposed sub-section 48 (a). As far as a process patent is concerned, the 1970 Act confers on the patentee the exclusive right only to use or exercise the process in India.

Amendment to Section 53 of the Patents Act - Clause 24 of the Patent Amendment Bill seeks to bridge the gap between Section 53 of the Act of 1970 and Article 70.2 of TRIPS, which requires a flat pattern term of 20 years.

Amendment to Section 64 of the Patent Act
Section 64 of the Patents Act deals with the revocation of patents. Clause 28 of the Bill proposes to delete certain provisions while it incorporates two new grounds for revocation of patents -

 i) “that the complete specification does not disclose or wrongly mention the source of geographical origin of biological material used for invention”.

 ii) “that the invention so far as claimed in any claim of the complete specification was anticipated having regard to the knowledge, oral or otherwise, available within any local or indigenous community in any country.

Amendment of Section 84 of The Patents Act - Clause 35 of The Amendment Bill proposes to amend Section 84 of The Patents Act, which relates to grant of compulsory license on patents. By this clause, additional ground for non-working of patented invention in India has been included in the grounds for grant of compulsory license. Incorporating the proposed amendment, Section 84(1) of The Patents Act reads as follows:

 "At any time after the expiration of three years from the date of the sealing of a patent, any person interested may make an application to the controller alleging that the patented invention has not been worked in India or that the reasonable requirements of the public with respect to the patented invention have not been satisfied or that the patented invention is not available to the public at a reasonable price and praying for the grant of a compulsory license to work the patented invention".

Here it should be mentioned that Article31 of TRIPS, which deals with compulsory license, does not provide, any ground on which such license can be granted. It only provides a roadmap to be followed while granting compulsory license. Since the TRIPS Agreement is silent regarding grounds for compulsory license, Members, in drafting their law or in applying provisions on compulsory license, are free to use any ground for invoking compulsory license, provided that is in conformity with other provisions of the TRIPS Agreement. Article 78and Article 89of TRIPS do illustrate some of the grounds, which a Member country may legitimately adopt for providing compulsory license.

Amendment of Section 85 of The Patents Act - Clause 36 of The Amendment Bill proposes to amend Section 85 of The Patents Act, which relates to matters to be taken into account in granting compulsory licenses. According to Article 31 of TRIPS, this clause makes it a point that in determining whether or not to grant compulsory license, the Controller shall take into account whether the applicant has made efforts to obtain a license from the patentee on reasonable commercial terms and conditions and whether such efforts have not been successful within a reasonable period as the Controller may deem fit (Article 31(b) of TRIPS), except in case of a national emergency or other circumstances of extreme urgency or in case of public non-commercial use ( Article31(b) of TRIPS ) or on establishment of a ground of anti-competitive practices adopted by the patentee (Article 31(k) of TRIPS ).

Deletion of Sections 86,87 and 88 of The Patents Act - Clause 37 proposes to delete sections 86, 87 and 88 of The Patents Act which relate to license of right as these provisions are not in conformity with provisions under Article 31(a) of TRIPS Agreement which lays down that use of patent without authorization of the patentee to be considered only on individual merit.

Amendment of Section 93 of The Patents Act - Clause 42 of The Amendment Bill proposes amendment of Section 93 of The Patents Act, which relates to the power of Controller in granting compulsory license. Section 93(3) (of The Patents Act) empowers the Controller to grant compulsory license of exclusive nature is proposed to be deleted as it contravenes provisions under Article 31(d) of TRIPS. 

 Amendment of Section 95 of The Patents Act - Clause 43 of The Amendment Bill proposes to amend Section 95 of The Patents Act, which relates to terms and conditions of compulsory license, with the aim of including certain provisions, which are part of India's obligations under Article 31 of the TRIPS Agreement but are not part of The Patents Act, 1970, as it stands now. It proposes to include some more clauses after clause (iii) in subsection 1 which require that while settling the terms and conditions of a compulsory license under Section 84 of The Patents Act, the Controller (apart from the provisions already existing under Section 95(1)) should also endeavor to secure” that the license granted is a non-exclusive license"(according to Article 31(d) of TRIPS),"that the right of the licensee is non-assignable"(according to Article 31(e) of TRIPS), "that the license is granted for the balance term of the patent unless a shorter term is consistent with public interest"(according to Article 31of TRIPS), that the license is granted with a predominant purpose of supplying in the Indian market (according to Article 31(f) of TRIPS). It further mentions that license granted for semi-conductor technologies is for public non-commercial use (according to Article 31(c) of TRIPS) and in the case of establishment of anti-competitive practices adopted by the patentee, license granted could be for exporting the goods manufactured (according to Article 31(k) of TRIPS).

Insertion of new Section 95A to The Patents Act - In accordance with Article 31(g) of TRIPS, Clause 44 of The Amendment Bill proposes to incorporate (by inserting a new section (95A)) in The Patents Act a new provision for termination of compulsory license when the circumstances on which compulsory license is granted does not exist and also unlikely to recur. However, it is clearly stated that the holder of compulsory license will have every right to object to such termination. This condition is legislative measures providing for the grant of compulsory licenses to prevent the abuses which allows members to ensure adequate protection of the legitimate interests of the holders of compulsory licenses.

Amendment of Section 96 of The Patents Act - Clause 45 of The Amendment Bill proposes amendment of Section 96 of The Patents Act, which relates to licensing of related patents. It imposes a restriction on the license granted by the Controller as to be non-assignable. This provision is proposed in accordance with Article31 (l) of TRIPS.

Amendment of Section 97 of The Patents Act  - Clause 46 of The Amendment Bill proposes amendment of Section 97 of The Patents Act, which relates to special provision for compulsory license on notification by Central Government. It is proposed to retain the applicability of the provision only for particular patents and not for "class of patents"(which can currently be done) as Article 31(a) of TRIPS requires that grant of each compulsory license should be considered on its individual merit. This Clause further proposes that the Central Government should be allowed to issue such notifications for the grant of compulsory license not for the sake of "public interest" as can currently be done) but only under "circumstances of national emergency or circumstances of extreme urgency" or for "public non-commercial use”. This is because Article 31(b) of TRIPS states that only under the latter three circumstances a compulsory license can be granted irrespective of whether a prior approach to the patentee has been made by the applicant (for compulsory license) for grant of license on reasonable terms and conditions.

HEALTH SECTOR - The Patent (Second) Amendment Bill has raised a lot of hue and cry particularly in the health sector. Proceeding further and examining the pros and cons of the proposed amendment would not be justifiable without mentioning the health crisis that India is facing today. According to the statistics available, there are -

i)          60 million diabetics
ii)          40 million asthmatics
iii)         80 million cardiac patients
iv)         1/3 of all Indians having latent TB
v)          35 million HIV/AIDS (expected by 2005)

After examining the above statistics, it would be wrong to pass the remark that health in India is a problem. Rather it is a permanent crisis. In reality, health issue in India is a national emergency and we should have no reservations in conceding it. The significant changes required by TRIPS, which have been vehemently opposed, are -
i)          availability of product patent in all fields of technology ;
ii)          uniform flat term pattern of 20 years for patent rights,
iii)         compulsory licensing has been allowed within specific limits.

However, the Bill does not yet provide for product patent but it does provide for the 20 years flat pattern patent rights. Further the Bill also provides for a much narrower framework for compulsory licensing and it has deleted provisions seeking to oblige patentees to manufacture the inventions in India and licenses of right. 

The Issue of Commercial Licensing - The Indian Pharmacy Sector has raised this present issue regarding commercial manufacturing of certain patented life saving medicines. These companies have made a plea to the government to incorporate a clause in the Patent (Second) Amendment Bill to incorporate a “Commercial Licensing” clause. It needs mention that such clause has not been incorporated in the Amendment Bill. This move is aimed at rescuing the poor consumers who might become victims of highly priced drugs after the onset of product patent from the year 2005.

The clause will be in terms of a ‘commercial licensing provision for local production’; in the Patent Bill to allow domestic production of life saving drugs. Further, at this stage it would be apt to remark that India should frame a national health policy to list critical diseases for which the “domestic production” should be allowed.

However, to incorporate such a provision the government has to make an appeal before the TRIPS Council. In light of the Brazil - U.S.A. dispute in which the U.S.A. had to withdraw after a long legal battle, one may be optimistic that the inclusion of such a provision would not face much opposition from the world community. Further the time example of such pattern is South Africa and Kenya. Thus, stating that the plea has some merit may sum it up. 

COMPULSORY LICENSING
Another issue pertaining to the health sector is that of compulsory licensing. Under compulsory licensing provision, a country,  for example India, can ask the patent-holder exporting company to start domestic manufacturing of a drug to treat critical disease (after three years of patent period).  If the patent holder company does not agree to do so, then discussions will continue for a year. After that the government could ask a domestic company to manufacture a generic version of  the drug with a different process . Or the exporting company can also agree to manufacture the drug in India. In both these cases, consumers will be able to get a life saving medicine at a cheaper rate. After onset of the product patent, it will not be possible for Indian companies to manufacture a generic version without compulsory licensing provision.

The Patent (Amendment) Bill, under the present format, allows domestic production of a patented drug only under the “natural calamities” and that can be only sold to the government and not in the market. However, as mentioned earlier, a lot depends upon the formulation of a national health policy.

CRITIQUE - The Patent (Second) Amendment Bill has been a welcome step for the developed countries. However this Bill has failed to keep up with the sentiment of the Indian masses. The situation ob TRIPS post Doha has been quite fluids. (Here reference needs to be made to the exclusion of India and Brazil from the status of least developed countries .The Government should launch a massive diplomatic offence  - pathetic was a silent spectator.) There is much under TRIPS of which India could gain advantage. But the intent of the legislator seems to be inclined more towards the interests and rights of the patent holders .The following lacunas may be pointed out in the Bill- 

1.   the flexibility within TRIPS has not been availed of;

2.   the Bill fails to address the issues of patentability for pharmaceuticals in a clear and firm way;

3.   ambiguity on the definition of ‘ patentable invention’ (particularly in the case of pharmaceutical sector) and leading to confusion on ‘ever-greening of patents ‘;

4.   the Bill provides for highly restrictive and rigid provisions for compulsory licensing. Further then Bill has failed to incorporate provisions of Art32 (b) in toto which deals with compulsory licensing;

5.   the Bill does not provide adequate provisions on a number of issues such as right to manufacture for export, adequate protection for indigenous R&D, control of term of patents, revocation of patent to protect the public interest in the condition of blockade etc.; In the present scenario one may hope that the Patent Act need a further overhaul. 

References-
1.The Indian Economic Journal   vol.48
2. www.indiatogether.org
3.www.hindustantimes.com
4.www.healthlibrary.com
5.www.ielrc.org
6.www.legalserviceindia.com