Working of Patents In India
At the heart of a successful IP system, according to Indian legislators, lies the argument that patents are granted ‘not merely to enable patentees to enjoy a monopoly on a patented article’, but ‘to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay’. An addendum is a requirement that ‘the protection and enforcement of patent rights contribute to technological innovation, the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge, and in a manner conducive to social and economic welfare, and to a balance of rights and obligations’ (S. 83(a), (b), and (c), Indian Patents (Amendment) Act, 2005). The Act requires every patentee and every licensee (whether exclusive or otherwise) to provide information on the extent to which the ‘patented invention’ has been worked on a commercial scale in India (S. 146(2)).
The two most important tasks for a patentee to undertake after being granted a patent, in any patent regime, would be to submit the renewal fees necessary to keep the patent alive, and provide proof of having worked the patent in the jurisdiction.
Failure to supply such information creates a presumption of non-working, and may assist the process of grant of compulsory licences. It is also a punishable offence and invites a fine which may extend to rupees ten lakh (or, rupees one million, equal to approximately £13,000, at Rs 77 to the £). Additionally, knowingly furnishing false information is an offence punishable with imprisonment for up to six months, a fine or both (S. 122). This penalty is by no means insignificant, especially when one realizes that it was increased by a multiple of 50 from its previous level. Clearly, legislators considered this to be a grave offence to impose such a hefty fine.
The relevant information is to be submitted by patentees and licensees in a Statement Regarding the Working of the Patented Invention, as per Form 27, provided in the Second Schedule to the Patent (Amendment) Rules, 2006. This information includes the following:
1. Whether the invention has been worked;
2. if not worked, the reasons for not working the invention, and the steps being taken to work the invention;
3. If worked, quantum and value (in rupees) of the patented product:
A. manufactured in India,
B. imported from other countries, giving details of the countries concerned;
4. Licenses and sub-licences granted during the year;
5. Whether the public requirement has been met, at a reasonable price either partly, adequately or to the fullest extent.
The Rules (r. 131) require that this information should be filed every calendar year, within three months of the end of each year. Thus, the latest that a patentee or licensee can file such information for a given calendar year is 31 March of the following year.
While the Act speaks of when ‘public requirement’ has not been met (S. 84(7)), which is a criterion to be declared in Form 27, it does not clarify on several other fronts, including what is meant by ‘commercial scale’, ‘adequate extent’, ‘fullest extent that is reasonably practicable’, and so on. This does not, however, deny the parent provision (of proof of working) its fundamental importance to the country’s patent regime.
What would amount to 'Local Working of Patent' in India?
The question might arise what then would constitute ‘working of patent’ in the country. It is generally believed that ‘commercial exploitation’ of patented products in India will mean local ‘working of patent’ in the country.
This is still a controversial issue as some experts claim that ‘local working of patent’ can be established only through local manufacturing and thus importation of such products will not be considered as ‘local working of patent’ in India.
However, other groups of experts opine, as a signatory of article 21 (1) of TRIPS, India is under clear obligation to accept importation of a locally patented product as ‘local working of patent’.
Whether a 'local working' requirement is TRIPs compatible?
At first glance TRIPs seems to provide a straight forward answer, to the question of 'local working', in Article 27.1. Although Article 27 is titled 'Patentable Subject Matter' it concludes by stating that patent rights will be enjoyed without discrimination as to whether a product is imported or produced locally. It would seem that this would obviate the need for a debate on the subject but things are seldom so simple when it comes to real life. An excellent article authored by Paul Champ & Amir Attaran which is published in the Yale Journal of International Law (YJIL) provides an in-depth look into the question of TRIPs compatibility. In the YJIL article the authors go through the entire negotiating history of the TRIPs agreement and point out how the same is inconclusive in establishing whether or not the member states actually wanted the insertion of a 'local working requirement'. The authors then end the paper by examining the local working requirement from the perspective of Articles 30 & 31 of TRIPs and conclude that Articles 30 & 31 of TRIPs permit members states to maintain a 'local working' requirement. Articles 30 & 31 of TRIPs are the same provisions used by developing countries to defend the presence of compulsory licensing provisions in their intellectual property laws.
In the year 2000 the Dispute Settlement Body (DSB) of the WTO had a chance to clarify this question when the U.S.A filed a complaint against Brazil for having a local working requirement in its patent law. At that time India had joined the dispute as an interested party. Unfortunately for the U.S.A. it turned out that one of their legislation had a similar provision for local working of all federally funded innovations. As a result the U.S.A. beat a hasty retreat and withdrew from the dispute, reserving its right to re-start the litigation
Confidentiality of Information
There has been some concern over whether the information submitted will remain confidential, particularly in view of the sensitive nature of the details required (eg quantum and value of manufactured product). Unfortunately, neither the Act nor the Rules provide any clue as to the extent to which this information shall be available to the public. The Act simply says ‘The Controller may publish the information in such manner as may be prescribed’ (S. 146(3) read with r. 131(3)). More generally, S. 145 says the Controller (of Patents) shall publish periodically an official journal containing such information as may be required to be published under the Act. In this context, it may be safe to presume that information submitted under Form 27 may be published at the discretion of the Controller. Older issues of the Gazette of India do contain some information relating to the Commercial Working of Patented Information, viz., the patent number, the date of patent, the name and address of the patentee and the title of the invention. This practice appears to have been discontinued in recent years, but the possibility of a revival of publishing such information cannot be discounted.
Non-working Patents, Compulsory Licensing and Revocation
At any time after three years after the grant of a patent, any person may apply to the Controller for a compulsory license on the patent on grounds that, inter alia, the patented invention is not worked in India (S. 84). While considering such an application, the Controller shall take into account several factors, including the nature of the invention, the measures taken by the patentee/licensee to use the invention, and whether or not the applicant for a compulsory licence tried to obtain a voluntary licence from the patentee (S. 84(6)). Occasionally, the Controller may also adjourn the application for a compulsory licence, specifically to allow sufficient time for working in certain conditions (S. 86). This includes deciding upon whether the patentee has taken adequate steps to at least begin working the invention on a commercial scale in India. Of concern to foreign companies is also the status of importing a patented article into India, and the implications it may have for a decision about the working of a patent. A non-working invention will be assessed by reference to the facility available in India for working, or otherwise. It is, therefore, permissible to import the patented invention. However, mere importation without exploring the possibility of manufacturing in India will be a factor in assessing the status of the patented invention.
Two years after the grant of the first compulsory licence, anyone may apply to the Controller to revoke the patent, if, inter alia; the patented invention has not been worked in India. The onus lies on the applicant to furnish the facts upon which such revocation is sought and the nature of the applicant’s interest. Such an application must ordinarily be decided within one year of its presentation to the Controller.
The local working requirements of the Indian Patent Act are therefore malleable to meet the conditions of the day. The suitability of using such a requirement to facilitate the transfer of technology to India is questionable. Ultimately transfer of technology depends on a whole range of factors and not simply a statutory requirement. While a great deal of importance is placed on the act of obtaining a patent itself, sometimes the necessity of reporting the working of a patent in relevant jurisdictions gets tossed by the wayside. In India too, in the preceding decade, patent practice has focused extensively on the grant of patents rather than anything else. The changes brought about in the country’s IP laws in the recent past mean that the requirement of proving the working of a patent has now taken centre-stage in the post-grant stage, tied as it is with the dual-pronged threat of compulsory licensing and revocation. Although no significant precedent is yet to emerge in India, there is little doubt that IT and ITES companies, a majority being foreign in origin, will need to meet this legislative demand, failing which harsh penalties await. Striking a right balance in this matter by the Indian Patent Office between rewarding fruits of expensive, risky and time consuming innovation, on the one hand, and help improving access to affordable modern medicines to a vast majority of the population of the country, on the other, will indeed be a daunting task.
The author can be reached at: firstname.lastname@example.org