A tempered patents regime

Print edition : April 22, 2005

The key amendments to the Indian Patents Act, forced by the Left parties, have resulted in a relatively loose patents regime for now, but there will be more battles to be won against multinational pharmaceutical companies if drugs are to remain accessible and affordable to all.

WHEN the weak win a skirmish against the giants, they can be forgiven for feeling so elated as to think that they have won the war. The recent passage of the Bill to amend the Indian Patents Act, under pressure from the Left parties, marks the first step in the attempt to stem the pressure on India to orient its patent laws in favour of giant pharmaceutical companies. Although the Left took care not to sound euphoric, the amendments mark the first setback to multinational pharmaceutical companies' decade-long efforts to establish a strong patents regime that is to their advantage.

The key amendments have resulted in a patents regime that is looser than what was planned. The celebrations are not unjustified. One of the chief benefits of a less stringent patents regime is cheaper drugs and better access to them. Not surprisingly, all eyes were on India in the run-up to the passage of the Bill in Parliament. Apart from the drug multinationals, health activists, non-governmental organisations (NGOs), and even governments of other developing countries were keenly watching what was happening here. After all, the Indian drug industry is acknowledged to be the very best in the developing world. Ironically, that capability, which was made possible by the Indian Patents Act of 1970, has been under sustained attack ever since the World Trade Organisation's Trade-related Intellectual Property Rights (TRIPS) agreement was reached in 1995 at Marrakesh, Morocco, where India, along with many other countries, agreed to grant 20-year patents on pharmaceutical products from January 1, 2005.

The new WTO regime effectively outlawed the generic production of new medicines. However, since 2000, the gathering momentum of the global popular outrage against a tighter patents regime, in the face of an alarming health emergency, became a powerful countervailing force. The crisis caused by Acquired Immune Deficiency Syndrome (AIDS) and the threat of a steep rise in the prices of essential medicines became a major issue at the WTO.

The axis formed by developing countries - particularly India, Brazil and Argentina - at the Doha Ministerial Meeting in 2001 resulted in significant gains for them. The Doha Declaration on TRIPS and Public Health offered breathing space for developing countries because it affirmed that "the TRIPS 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." In doing so, it reiterated the enduring belief that the rights of patent holders (private drug companies) to benefit from the fruits of their effort should be balanced by public interest and access to affordable medicines and health care.

UNDER pressure to meet the onerous TRIPS commitments, India revised its patents regime three times. The first round of amendments, passed by Parliament in 1999 when the National Democratic Alliance (NDA) was in power, brought it in line with "WTO standards" by enabling it to accept product patents. This was in itself a body blow to Indian drug companies. The amendments aimed to make it more difficult for Indian companies to produce drugs similar to those manufactured by multinational drug companies, by using a different manufacturing route or process. It also incorporated the concept of patents in the "mail box", a mechanism that enabled product patent holders of pharmaceuticals and agricultural chemicals to file applications in India. It also had provisions that allowed patent holders exclusive marketing rights (EMR) subject to certain conditions.

The second round of amendments came in 2002, again under NDA rule. This was aimed at bringing the patents regime in compliance with Section 5 of the TRIPS agreement in all areas except one. The singular exclusion pertained to intellectual property rights relating to pharmaceuticals, food, chemicals and agricultural chemicals, which are the subject matter of the recent amendment to the Patents Act. The revised Bill was then enacted in December 2002. It made 64 amendments aimed at making the Patents Act TRIPS-compliant. These included making the term of all patents 20 years, examining the patents in the order in which they are filed, and making provisions for publishing a patent 18 months from the date of filing and for filing a request for examination by an interested party other than the applicant. The NDA government promulgated an Ordinance in 2003, which failed to utilise the "flexibility mechanisms" that international public opinion had extracted at Doha. For instance, the 2003 Ordinance permitted the patenting of micro-organisms and computer programmes with technical applications, even though India had the breathing space to ignore them for the time being.

Although the Congress-led United Progressive Alliance (UPA) was committed to the National Common Minimum Programme (NCMP), which promised drugs to all at "affordable prices", its Patent Ordinance of 2004 was identical to the one promulgated by the NDA government.

The Left mounted sustained pressure on the government to modify the Bill. Basically, there were three sets of reasons why the government succumbed to the pressure from the Left. First, it had run out of time as far as the WTO was concerned, because it was already behind time in terms of complying with the TRIPS agreement. Thus, its room for manoeuvre was limited. Second, the pressure from the Left was strong and unrelenting. The BJP's "flip-flop" on the issue also heightened the pressure on the government. Third, domestic pharmaceutical companies, which stood to lose from a tighter patents regime, also put pressure on the government.

The Doha Declaration on TRIPS Agreement and Public Health (2001) accepted the developing countries' contention that they have the sovereign right to enact laws that safeguard domestic interests. It recognised the growing burden of disease in the developing world and articulated the notion that WTO member-countries had the right to protect public health and to promote access to medicines for all. In effect, it extracted "flexibilities" in the implementation of the TRIPS agreement. The point is that both the NDA and the UPA governments failed to make use of the provisions that were available to them to protect the national interest.

THE legal framework of any patents regime reflects the balance of forces in the society in which it exists. In its essence, it also reflects the social tensions, which determine how strong or weak the regime is. The conferment of patents and other intellectual property rights on entities is essentially a device to provide monopoly rights to draw rents from the use of that right for a certain length of time. From such a perspective, the 1995 TRIPS agreement would appear to reflect a swing in the balance of power in favour of the multinational companies, which demanded - and won - the right to establish a stronger regime for protecting their monopolies.

The social tension in a patents regime is essentially reflected in a set of factors. First, what would constitute a patent? Would patents be given for minor or incremental "innovations", which merely result in safeguarding the rents available to patent holders? How long should the patent last before it can be freely accessed? These issues address the scope of the patent.

Second, how far does the regime allow patent rights to be contested? This will ensure that the matter of granting a patent to a private entity is not confined to how the Patent Office views its application for a patent. In other words, a regime inclined to protect the public interest would allow a more transparent evaluation of the application for a patent.

The third set of issues pertain to how far it facilitates quick redress of public access to a product that is patented. This is crucial because any patents regime is supposed to balance the monopoly rights with the public interest. For instance, governments issue compulsory licences as a device to address market failures that essentially arise out of the excessive use of monopoly rights by the patent holders. In effect, a streamlined system of overriding a patent would essentially enable the government to step in to protect the public interest from monopoly power. The authority to issue a compulsory licence is important, even when the right is not exercised, because it can temper the exercise of market power or the abuse of a patent.

The fourth set of factors relate to protecting the ability to export the products at affordable rates to countries that do not have the manufacturing capability. This is crucial in the wake of the AIDS crisis, because Indian drug companies have played a significant role in making available anti-retroviral (AVR) drugs to patients at a fraction of the cost that multinational companies have charged.

Under pressure from the Left, Union Minister for Commerce and Industry Kamal Nath introduced 15 amendments to the Patents Act in the Lok Sabha on March 22. The Left parties had brought in 12 amendments to the draft. The government accepted most of these amendments. It was decided that expert committees would decide two contentious issues, relating to the granting of patents on micro-organisms and the definition of new chemicals.

Broadly, these changes pertain to the four sets of concerns or tensions that are reflected in the legislation. The amended Act has more stringent restrictions on what can be patented. It provides a tighter definition of what an "inventive step" is. This means that under the amended law, it will be more difficult to entertain frivolous patents or patents for marginal "improvements" . The tighter definition of what constitutes a "pharmaceutical substance" has resulted in the notion that patentability will be governed by whether it results from the use of at least one "inventive step". The amended law also makes it difficult to patent a known substance. This is not without significance. In the U.S., for instance, in recent years commonplace drugs such as aspirin and ibuprofen have been granted patents simply because they have undergone minor modifications or are used in combination with other drugs.

The second significant aspect of the new legislation is that it facilitates the challenging of patents before they are awarded. The earlier versions of the Bill and the Ordinances had a narrower set of grounds on which pre-grant opposition to patents could be filed. Moreover, the time period for filing opposition to the patent has been extended from three to six months.

One of the most significant aspects of the legislation pertains to the provisions relating to patents in the "mailbox". The mailbox was essentially a concession made to the drug multinationals as a "transitional" arrangement. This provision was introduced in 1999 by the NDA government. It enabled drug multinationals to file mailbox applications for product patents in India. The patents in the mailbox were to become operational when the patents became operational from January 1, 2005.

EMRs enable the patent holder to have the exclusive right to produce, market, sell and distribute the drug from the date of approval of the EMR for a period of five years or till the date of grant of the patent or rejection of grant of the patent, whichever is earlier. This means that generic manufacturers have to stop producing and marketing the drug once a patent is granted to the applicant. Effectively, this meant that cheaper generic varieties or alternatives to those drugs marketed by global drug majors would have to go off the market after the drugs are patented in India. The Ordinances and the draft Bill did not address the issue, which some Indian drug companies referred to as the "pernicious" effects of the Indian legal regime. The latest amendments provide for Indian companies continuing production of these drugs after paying royalties to the patent holder.

The procedure of issuing compulsory licences was also a crucial issue, which the Left pushed for. Patent holders would prefer a more cumbersome procedure in order to protect their monopolies. The amendments appear to have made only cosmetic changes to shorten the process of dealing with an application for a compulsory licence. Earlier, the patent-granting authority was only required to examine whether the entity seeking the grant of a compulsory licence had made efforts to obtain a licence from the patentee on reasonable terms. The authority could grant a compulsory licence if the application was not disposed of within a reasonable time. After the latest amendment, the authority can interpret "reasonable period" to mean "a period not ordinarily exceeding six months". Moreover, the amendment has not removed the existing requirement that only after three years after the grant of a patent (unless there is a national emergency) can a person make an application to the Controller for the grant of a compulsory licence.

MOST reactions to the Left's intervention were congratulatory. The Indian Pharmaceutical Alliance (IPA), an organisation representing research-based drug companies, expressed "relief". It also observed that the amended Act balanced "consumers' and innovators' interests". D.G. Shah of the IPA told Frontline that although the PhRMA, the alliance of drug multinationals, had welcomed the product patents regime in India, it had "expressed its displeasure" at India's failure to put in place legislation that was TRIPS-compliant. He observed that this was in line with its objective of "pushing its own agenda".

Some international NGOs expressed concern about the new patents regime. In a statement issued on March 23, Medecins Sans Frontieres said it was "deeply concerned that the new law will result in people in the developing world being cut off from the vital source of affordable generic versions of essential medicines produced in India". It said that that the amended law would make it easier for multinational drug companies to get patents granted, while generic producers would find it more difficult to acquire compulsory licences for such drugs by using compulsory licensing provisions. It said that the "law is deeply worrying" because all new drugs would be patentable in India. Oxfam also made similar expressions of outrage.

Dr. B. Ekbal, former Vice-Chancellor of the University of Kerala and a leading people's science movement activist, has observed that although the Act allows Indian generic producers to manufacture drugs that are already in the mailbox, the vague prescriptions relating to "reasonable" royalties could prevent Indian companies from making available the patented drugs at a reasonable price.

The Communist Party of India (Marxist) has noted that the compulsory licensing provisions are still a matter of concern. It has remarked that the procedures for making patent holders issue compulsory licences are still loaded in favour of them. "Unfortunately," it observed, "the procedure for granting licences has been left ambiguous." It said that "sustained pressure" was needed to ensure that "such licences are actually granted within a reasonable time frame and on reasonable terms."

D. Raja, national secretary, Communist Party of India, told Frontline that the CPI "reserves the right" to protect national interests if the implementation of the Act was found detrimental.

James Love, director, Consumer Project on Technology, which has monitored the progress of the TRIPS agreement, remarked that the amendments "were not trivial". He said: "I do not see how it is helpful to present things in a worse light than they actually are. This can only make developing countries to be even more cautious with respect to issuing compulsory licences."

Irked by the criticism targeted at the Left for `failing' to protect the national interest, Amit Sengupta, member of the National Working Group on Patents, observed: "I am a bit concerned about the shrill tone of opposition to the Act that is emanating today from some global NGOs and their Indian counterparts, and the Western media. We need to understand that India has held out the longest before amending its patent law - all other countries mandated to do so have already amended their laws." He pointed out that the TRIPS agreement was flawed. Anything done under the TRIPS framework "will be worse than the 1970 Patents Act," he argued. "NGOs in the North and in the South", he said, "need to ask themselves what they have done in their own countries to change the positions of their own governments and stand up to `WTO dictatorship'."

Obviously, getting out of the TRIPS agreement was not an option available to the government. But the adage that nothing is won or lost in a single day is true now as it was when TRIPS was forced on developing nations in 1995. Events in the past 10 years have shown that all was not lost then. But, neither can it be claimed that all has been won now.

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