A critical evaluation of the Patent (Amendment) Act, 2005

A country without good patent laws is just a crab and can't travel any way but sideways and backwards.[1]

I. Introduction

The Patent (Amendment) Act 2005 (hereinafter referred to as the 2005 Amendment) was passed by the Parliament in its budget session of 2005 to amend The Patent Act, 1970 hereinafter referred to as The Act) and meet its obligation under TRIPS Agreement of WTO. The Act was effective from 1st January 2005. Although the Act makes wide ranging changes to India's patent regime, the most controversial provision is the one introducing product patents in the area of pharmaceuticals.

The objective of present work is to find out the necessary implications of 2005 Amendment on the product patent system in India and Indian economy.

II. Meaning of Patent

In simple words, Patent is a document which is generally issued by government conferring a monopoly right on an inventor to exploit his invention for a limited period. The person to whom patent is granted in called as Patentee. It gives the patentee an exclusive right to use, manufacture and sell the invention for a limited period of time. The grant of such a patent to the inventor of any invention is only for a fixed or limited period of time and thus after the expiry of such period, the patented invention passes on to the public domain.

Patents are one of the oldest forms of intellectual property protection and, as with all forms of protection for intellectual property; the aim of a patent system is to encourage economic and technological development by rewarding intellectual creativity. The purpose of a patent is to provide protection for technological advances i.e. inventions. It provides an award for the disclosure of the creation of something new as well as for the further development, or refinement, of existing technologies. In short, through patents, progress in changing technologies finds incentive to improve.[2]

Abraham Lincoln describes the importance of Patent as “Before then [the adoption of the United States Constitution], any man might instantly use what another had invented; so that the inventor had no special advantage from his own invention. The patent system changed this; secured to the inventor, for a limited time, the exclusive use of his invention; and thereby added the fuel of interest to the fire of genius, in the discovery and production of new and useful things”.[3]

III. Some Major Changes Introduced by The 2005 Amendment

The 2005 Amendment amended many provisions of the Act; these amendments were absolutely necessary for India to meet its obligation under TRIPS Agreement. Some of important amendments are discussed below -

1. Extension of product patent protection to all fields of technology

The most prominent and controversial change of the 2005 Amendment has been the deletion of section 5 of the Act, thereby paving the way for product patents in the area of pharmaceutical and other chemical inventions. Section 5 of the Act (as it stood after the 2002 amendments) had provided that, in the case of inventions being claimed relating to food, medicine, drugs or chemical substances, only patents relating to the methods or processes of manufacture of such substances could be obtained[4]. Before this Amendment in the Act, Product Patent was not granted on the inventions related to drugs, foods and chemicals and only process patents were granted on these inventions. It means if a company invented a medicine to cure a disease using a certain process. That company can’t claim a patent on that medicine while the company can claim a patent on the process which it has used to manufacture that medicine. In the other words that company can’t stop other competitors from manufacturing the end product but can stop others from producing the end product using their patented process or method. This resulted in a situation in which reverse engineering mechanism was highly used to develop the same medicine and drugs with slightly or substantially different process. This copycat business helped a few pharmacy companies, to grow into global players and made medications cheaper. The pharmacy MNCs were forced to watch Indian companies eat into their market share as Indian companies developed same medicine at much lower cost because of relatively lower investment in R&D. The Process Patent regime left no scope for absolute monopoly in the market; this resulted in increased competition in market and consequently leads to further drop in medicine prices.  

This deliberate strategy of denying product patent protection to pharmaceutical inventions is traceable to the Ayyangar Committee Report, a report that formed the very basis of the Patents Act, 1970[5]. The Committee found that foreigners held between eighty and ninety percent of Indian patents and that more than ninety percent of these patents were not even worked in India. The Committee concluded that the system was being exploited by multinationals to achieve monopolistic control over the market, especially in relation to vital industries such as food, chemicals and pharmaceuticals. Medicines were arguably unaffordable to the general public and the drug price index was rising rapidly. The Committee therefore recommended that certain inventions such as pharmaceutical inventions, food and other chemical inventions be granted only process patent protection.[6] India’s well-developed generic industry today is testimony to the farsightedness of this report.

Few cases reported by media and newspapers, given below, provide glimpses of how Indian companies have taken legal measures to refute claims of multinational drug majors for extension of their patents.

a. A case that attracted a lot of attention in India is that of the Swiss drug company Novartis. Novartis had challenged Section 3(d) of the Indian Patents Act claiming immunity for their drug Gleevic, a major drug for leukemia on the pleas that the new Gleevic was a major improvement over a older version whose patent was over. This was disputed by Indian companies such as Natco Pharmaceuticals. The plea of Novartis was rejected consequently enabling manufacture by Indian generic companies. Cost estimates of the new generic drug place it at one tenth the price of Gleevic.

b. In a similar case the Delhi Court rejected the petition of Bayer Healthcare, a German drug major from preventing the Drug Controller General of India giving marketing approval to Indian company Cipla for the generic version of the cancer drug Nexavar. The ruling however had a caveat namely, that if the Indian drug company is found guilty of patent infringement damages will have to be compensated by payment to Bayers.

c. Cipla in another case won the right to manufacture and market the generic version of the anti-cancer drug Tarceva originally patented by the Swiss pharma company Hoffman La Roche both in Delhi Court[7]and the Supreme Court.[8]

d. Recently, Aurobindo Pharma an Indian drug pharma received USFDA approval for Risperidone Oral Solution a drug used in the treatment of mental and emotional problems. Indian companies are becoming increasingly active in the US market. In the first quarter of 2009 Indian companies had achieved 50 ANDA approvals.[9]

2. No Swiss Claims and Expansion of Exclusion under Section 3(d)

A ‘Swiss Claim’ is a claim for patent wherein the use of a substance or composition that has already been used for a medical purpose is intended or specified to be used for a new medical purpose. Section 3(d) as amended by the 2005 Amendment clarifies that mere discovery of a new form of a known substance, which does not result in the enhancement of the known efficacy of that substance is not an invention and therefore not patentable. 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 substances are to be considered to be the same substances, unless they differ significantly in properties with regard to efficacy.

In order to fully understand the amended Section 3(d), one need to first address the issue of what exactly the term “efficacy” means. The term has not been defined in the Act, but in Novartis AG v. Union of India[10] , the High Court of Madras , while answering the question, whether section 3(d), as amended by the Third Amendment, is violative of the fundamental rights guaranteed under Article 14 of the Indian Constitution, interpreted the phrase “efficacy” as „the ability of a drug to produce the desired therapeutic effect i.e. how effective the new discovery made would be in healing a disease/having a good effect on the body‟, for which an applicant in order to pass the test of “efficacy" needs to show that the discovery of a new form of a known substance has resulted in the enhancement of the known efficacy of that substance and if the discovery is nothing other than the derivative of a known substance, then, it must be shown that the properties in the derivatives differ significantly with regard to efficacy. Further, the Hon‟ble High Court stated that such enhanced efficacy could be shown by giving necessary comparative details based on the relevant scientific data demonstrating the enhancement in the known efficacy of the original substance and that the derivative so derived will not be the same substance, since the properties of the derivatives differ significantly with regard to efficacy.

In this case a Swiss drug company Novartis had challenged Section 3(d) of the Indian Patents Act claiming immunity for their drug Gleevic , a major drug for leukemia on the pleas that the new Gleevic was a major improvement over a older version whose patent was over. This was disputed by Indian companies such as Natco Pharmaceuticals. The plea of Novartis was rejected consequently enabling manufacture by Indian generic companies. Cost estimates of the new generic drug place it at one tenth the price of Gleevic.

The Hon'ble High Court also noted that though section 3(d) is not only limited to drugs and pharmacological substances, it is clear that certain portions of the section and the attached explanation is only referable to pharmacological substances.

3.Software Patentability

Section 3(k) of the Patents Act, 1970 excluded “a computer programme per se” from the scope of patentability. This exclusion met with conflicting interpretations at the patent office, with some examiners granting patents to software combined with hardware or software with a demonstrable technical application of some sort. The 2004 Ordinance therefore qualified this exclusion by stating that software with a “technical application” to industry or when “combined with hardware” would be patentable. Owing to vigorous opposition from the free software movement[11], this provision was removed from the 2005 Act. The earlier position under the Patents Act, 1970 that a computer programme per se is not patentable now prevails.

4. Deletion of the provisions relating to Exclusive Marketing Rights (EMRs)

Section 21 of 2005 Amendment deleted the Chapter IVA of the Act. The 1999 Amendment inserted this chapter in the Act to provide that applications claiming pharmaceutical inventions would be accepted and put away in a mailbox, to be examined in 2005. These applications are commonly referred to as ‘mailbox applications’. This amendment was in pursuance of a TRIPS obligation aimed at preserving the novelty of pharmaceutical inventions in those developing and least developed country (LDC) members that did not grant product patents for pharmaceutical inventions in 1995[12]. By virtue of this ‘mailbox facility’, applications would be judged for ‘novelty’ on the basis of the filing date and not with reference to 2005, the year in which product patents were first incorporated into the patent regime.

To obtain an EMR, the following conditions must be fulfilled:

a) The product must be patentable, that is, it must be an invention as per Section 2 of the Patents Act 1970, and must not fall under the non-patentable products listed in Sections 3 and 4, such as products derived from traditional knowledge or atomic energy-related products.

b) The invention must have been made in India or in a WTO Convention country. If made in a convention country, the invention must have been:

(i)  Filed on or after January 1, 1995, and

(ii) Before getting a patent in India, the applicant must have obtained such a patent in the Convention country.

c) If the invention has been made in India,

(i) The application for patent for the method or process of production of such a substance should have been filed on or after January 1, 1995, and

(ii) The patent must have been granted on or after the date of filing of such EMR.[13]

5. Compulsory Licensing Regime

Section 84 of The Act provides for the grounds on and procedures by which, a compulsory license will be granted. The 1999 Amendment adds an entire chapter to the Patents Act on the working of patents, compulsory licenses, and revocation of licenses. After this amendment, the grounds on which a compulsory license will be granted are:

a. Reasonable requirements of the public with respect to the patented invention have not been satisfied; or,

b.The patented invention is not available to the public at a reasonably affordable price; or,

c. The patented invention is not worked (i.e. not used or performed) in the territory of India.

In respect to the 2005 Amendment following amendments have been made in respect of compulsory licencening regime -

a) Automatic Compulsory Licences for Mailbox Applications

The 2005 Amendemt provides that in the case of those mailbox applications that result in the grant of a patent, an automatic compulsory licence would issue to those generic companies that made a ‘significant investment’ and were ‘producing and marketing’ a drug covered by the mailbox application prior to 2005.[14] Such licence is subject to a payment of a ‘reasonable royalty’. However, no specific yardstick is provided to determine ‘reasonableness’ and this term is likely to lead to disputes in coming years.[15]

b) Compulsory Licences for Exports

In order to incorporate what is commonly referred to as the Paragraph 6 Decision[16], the Ordinance introduced section 92A, which provides for compulsory licences to enable exports of pharmaceutical products to those countries with no manufacturing capacity of their own. Unfortunately, this suffered from a handicap - the provision required that the exporter obtain a compulsory licence from the importing country as well. In the process, the provision failed to cater to those situations where there was no patent in such importing country and no requirement for obtaining a compulsory licence there. The 2005 Amenment therefore seeks to rectify this by adding that an exporter can resort to section 92A where the importing country “has by notification or otherwise allowed importation of the patented pharmaceutical products from India”.

c) Procedural Changes

The general compulsory licensing procedure under Chapter XVI states that in most cases, a compulsory licensing application can be entertained only if negotiations towards a voluntary licence have not borne fruit within a reasonable time period. In order to prevent patentees from dragging on voluntary negotiations to the detriment of applicants, the Act caps a ‘reasonable’ period of negotiations at six months.[17]

6. Other Amendments

There are many changes brought by the 2005 Amendment in the provisions of the Act, that can be summarized as follows - 

a) The 2005 Amendment amend the definition of “New Invention”,“Inventive Step” and insert a new entry of “Pharmaceutical Substances” in the definition clause.

b) Provision of 'acceptance of specification' and its advertisement have been deleted.

c) Modification in the provisions relating to opposition procedures with a view to streamlining the system by having both Pre-grant and Post-grant opposition in the Patent Office.

d) Application for patent will be published in Official Journal. At that time opposition can be made on limited grounds but hearing is not mandatory.

e) After grant of patent, opposition can be made within 12 months.

f) Suit for infringement of patent cannot commence before date of publication of publication of the application.

g) Penalties enhanced substantially.

h) Strengthening the provisions relating to national security to guard against patenting abroad of dual use technologies.

i) Rationalisation of provisions relating to time-lines with a view to introducing flexibility and reducing the processing time for patent applications, and simplifying and rationalising procedures.

IV. Implications of 2005 Amendment on Indian Economy

Some possible implications of product patent regime in the field of food, medicine, drugs or chemical substances can summarised as below –

1. Price rise and access to medicine -

It is feared that the 2005 Amendment would spur a steep rise in drug prices and an adverse impact on “ access”  to important and life saving drugs. From a completely objective point of view two categories of drugs will be affected—first, medicines that will be invented after January 1, 2005. If a medicine is patentable, the patent holder will be granted a 20-year monopoly from the date of filing as a result of the new rules. Without a compulsory license, generic versions will not be permitted on the market for the life of the patent. In other developing countries that have begun protecting patents on medicines in accordance with WTO rules, the vast majority of medicines patent filers in developing countries are multinational drug companies based in industrialized countries.

The second category of medicines that will be affected by the 2005 Amendment are those that have been patent protected outside of India since January 1, 1995. According to WTO rules (TRIPS Art. 70.8), India was required to establish a “mailbox” where patent applications could be filed between 1995 and 2005. After January 1, 2005, the mailbox will be opened, and requests for patents considered by the Indian Patent Office.[18]

In a nutshell, there is no doubt that, after 2005 Amendment, the prices of above mentioned drug will rise but the question which really needs to be answered is to what extent this price rise will eventually affect the access and affordability of life saving or very essential drugs to most of the Indian population. In statement issued by Shri Kamal Nath, Union Minister of Commerce & Industry, on 04 Apr 2005 said that 97% drugs in the market, and 100% of all essential drugs are not covered by patents”[19]. On the other hand fear of substantial price rise, in life saving drugs patented after 2005 can be addressed to a certain extent by safeguards built in the 2005 Amendment and other related laws for the time being in force, such as –

a. Compulsory licensing,

b. Parallel import of products,

c. Acquisition of patent rights by the government,

d. Revocation of patents in the public interest

e. Provisions to deal with emergency situations

f. Patentability threshold,

g. Opposition mechanism, and

h. Price control regime like Essential Commodities Act, 1955, etc


Now the real issue is whether these provisions would in fact be interpreted and implemented in a manner conducive to public health needs of Indian society at large and would largely depends upon the efforts of the government towards the same. The Indian Policy makers have to keep in mind, the ground realities of India while implementing these provisions. Ground realities of India is substantially different from developed nations, under pressure of whom we have adopted product patent regime in pharmaceuticals. In India there is no sound healthcare insurance system and per capita income is also relatively very low.

According to Health GAP (Global Access Project), a US-based NGO that advocates the cause of AIDS patients, human rights and fair trade, the 2005 Act fails “to utilise fully the public health safeguards available to WTO member states under TRIPS, which were reaffirmed by the Doha Declaration on the TRIPS Agreement and Public Health. [20]” Going by this history, one is prone to be a little skeptical of the role of price control in India. For e.g. when India passed its Patent Act in 1970, it also instituted a Drug Price Control Order (DPCO) under the Essential Commodities Act of 1955 to control the price of drugs and ensure access to the general public. Under this order, prices of bulk drugs and their formulations were fixed by the government as per a specified formula that allowed a 100% margin on ex factory cost. Price changes of the remaining drugs were also to be monitored. However, over a period of time, as a result of sustained lobbying by the Indian pharmaceutical industry, the number of drugs listed in the DPCO fell from 347 in 1979 to 76 in 1995.[21] A new pharmaceutical policy in 2002 that sought to relax controls even further was challenged on the ground that, under the policy, certain life saving drugs had the potential of being excluded from the DPCO. The challenge made its way to the Supreme Court and is yet to be resolved.[22]

In August 2005 there were indications that, the government is considering strengthening the price control regime to increase competition and ensure affordable medicines to the general public. To this end, a new Drug Pricing (Regulation & Management) Act was being considered[23], but still after almost six years it is yet to be implemented.

2. Cultivating Innovation Culture in India

In the fear substantial price rise pepole are ignoring one of the biggest advantages of  the 2005 Amendment. The Indian Pharmaceutical Industry today consist of about 8174 bulk drug manufacturing units and 2389 formulations units spread across the country. Pharmaceutical Companies Operating in India is a pool representing about 250 large Pharmaceuticals manufacturers and suppliers and about 8000 Small Scale Pharmaceutical & Drug Units including 5 Central Public Sector Units. The 2005 Amendment by giving an extra incentive to new and innovative drugs will also cultivalte an innovation culture in Indian pharma industries. It needs to be noted however that basic reverse engineering skills (organic chemistry skills) are different from the skills required to arrive at new drugs (medicinal chemistry skills).[24] Besides, the costs of researching upon and introducing a new drug into the market are colossal.[25] It therefore remains to be seen whether incentives through a patent regime will achieve the desired results and whether Indian companies will be able to compete with global multinational companies on this turf. A commentator rightly notes that till recently, the emphasis has been “mainly on building a system of production and not on a system of innovation”.[26]

V. Conclusion

In all possibility, it can be said that Indian Pharma Industry will not end up where it started in pre 1970 era but it is safe to assume that Indian drug companies might become dependent on MNCs for technology to produce new drugs. According to reputed magazine “it is likely that the existing drugs say about 10 per cent of the marketed drugs are likely to become expensive due to amendments made in new Patents Act.” [27] It must be noted that the remaining 90 percent of drugs will be unaffected by this amendment.

The safeguards provided under the Act and other laws, if implemented in a manner conducive to Indian consumers can prove a boon for them. The Indian consumers in that case can enjoy the benefits of both innovative as well as affordable drugs. To conclude it can be clearly said that, this amendment will definitely have a varied implication on Indian economy. On one side it may compromise with the interest of certain Indian companies and consumers but on the other side it will act as decisive step in internationalization of Indian Patent System and cultivating an innovation culture in Indian Pharmaceutical Industry.

[1] Mark Twain, A Connecticut Yankee in King Arthur's Court (1889)

[2] See Module 3: Electronic Business and Patents available on 

http://www.internationalprivatelaw.com/files/003BP202.pdf (Last visited on 25th Dec 2010)

[3] Abraham Lincoln, Second lecture on discoveries and inventions, February 11, 1859



[6] Martin J. Adelman & Sonia Baldia, Prospects and Limits of the Patent Provision in the TRIPS Agreement: The Case of India, 29 VAND. J. TRANSNAT’L L. 507, 518 (1996).

[7] F. Hoffmann-La Roche Limited and Another v Cipla Limited 148(2008)DLT598

[8] Reported in Financial Express., 5th September,2009 and Economic Times.,19th August, 2009. The price difference for example, in the case of Cipla v/s Roche, Roche sells Tarceva for Rs.4500 per tablet while Cipla’s generic is sold at Rs.1500 per tablet.

[9] See report on “The Indian Pharmaceutical Industry 2009”., Espicom Business Intelligence, May 2009

[10] (2007) 4 MLJ 1153.

[11] See Free Software Foundation, Representation Made by the Free Software Foundation of India to the Government of India to Immediately Withdraw the Patents (Amendment) Ordinance, 2004, at http://fsf.org.in/representation/representation.html (last visited Oct. 18, 2005).

[12] Agreement on Trade-Related Aspects of Intellectual Property Rights, Including Trade in Counterfeit Goods, Dec. 15, 1993, 33 I.L.M. 81 [hereinafter TRIPS Agreement]. In the WTO dispute filed by the United States against India for a failure to comply with this provision, the WTO appellate body held that India was obliged to provide a sound legal mechanism for an interim mailbox arrangement. See WTO Appellate Body, India: Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R (Dec. 19, 1997), available at


The Patents (Amendment) Act, 1999 was introduced as a response to this ruling, and was in fact given retrospective effect from 1995, the date on which India was supposed to have instituted the mailbox facility under TRIPS.

[13] www.thehindubusinessline.com/2003/10/04/04hdline.htm

[14] Patents Act, 1970, § 11A, proviso, amended by Patents (Amendment) Act, 2005.

[15] It is pertinent to note that during the Parliamentary debates, a number of members suggested that a specific royalty rate or a ceiling on the royalty rate be fixed (see specifically comments by Mrs. Maneka Gandhi and Mr. Suresh Kurup). However, at the time of voting, the clause was adopted with the words ‘reasonable royalty’ and no specific percentage was fixed. See Lok Sabha Debate, Mar. 22, 2005, at

[16] Patents Act, 1970, § 87, omitted by Patents (Amendment) Act, 2002. Since the 1970 regime provided only ‘process patents’ in the case of pharmaceutical inventions, it was not too surprising that this compulsory licensing provision was hardly ever invoked by generic manufacturers.

[17] See Supra note 4

[18] See Health Global Access Project Fact Sheet: Changes to India's Patents Act and Access to Affordable Generic Medicines after January 1, 2005, available at http://www.healthgap.org/press_releases/04/121404_HGAP_FS_INDIA_patent.pdf (Last visited 20 Jan 2011)


at http://commerce.nic.in/pressrelease/pressrelease_detail.asp?id=1610 (Last visited 20 Jan 2011)

[20] Health Global Access Project, The Impact of India's Amended Patents Act to Access to Affordable HIV Treatment, at http://www.healthgap.org/press_releases/05/020105_hgap_fs_india_ipr.pdf (Last visited 20 Jan 2011)

[21] Siddarth Narrain, A Life Saving Order, FRONTLINE, Jul. 17-30, 2004,

http:// www.frontlineonnet.com/fl2115/stories/20040730004110300.htm (Last visited 15 Jan 2011).

[22] Union of India v. K.S. Gopinath, S.L.P.(C) No. 3668 of 2003. This is an appeal from a lower court ruling that had stayed the operation of the new policy. Although the Supreme Court granted leave in the matter, it is still to render any decision or pass any orders. The net result is that the stay on the policy granted by the lower courts continues to be operational. See SC Concern Over Non-Inclusion of Essential Drugs, HINDU, Aug. 2, 2003,

http://www.hinduonnet.com/thehindu/2003/08/02/stories/2003080204201300.htm(Last visited14 Jan, 2011).

[23] K.G. Narendranath, DPCO May be Retained in New Drug Pricing Act, FIN. EXPRESS, Aug, 1, 2005,

http://www.financialexpress.com/fe_full_story.php?content_id=98022 (Last visited 15 Dec. 2010).

[24]  See S. Subramaniam, Pharmaceutical R&D in India: Addressing the Emerging Model of Drug Innovation, Address at Chatham House Conference, London, UK (Feb. 1, 2005), available

at http://www.chathamhouse.org.uk/pdf/conferences/proceedings/subr0105.ppt (Last visited 29 Dec. 2010).

84 The current average capitalised cost of developing a new drug is estimated to be US$ 870 million. See generally J.A. DiMasi et al., The Price of Innovation: New Estimates of Drug Development Costs, 22 J. HEALTH ECON. 151 (2003). This estimate has been criticised as not representing “…what companies actually spend to discover and develop new molecular entities. It includes the expense of using money for drug research rather than other investments (known as the ‘opportunity cost of capital’).” Public Citizen, Critique of the DiMasi/Tufts Methodology and Other Key Prescription Drug R&D Issues,

at http://www.citizen.org/congress/reform/drug_industry/articles.cfm?ID=6532 (last visited 12 Dec. 2010).

[25] The current average capitalised cost of developing a new drug is estimated to be US$ 870 million. See generally J.A. DiMasi et al., The Price of Innovation: New Estimates of Drug Development Costs, 22 J. HEALTH ECON. 151 (2003). This estimate has been criticised as not representing “…what companies actually spend to discover and develop new molecular entities. It includes the expense of using money for drug research rather than other investments (known as the ‘opportunity cost of capital’).” Public Citizen, Critique of the DiMasi/Tufts Methodology and Other Key Prescription Drug R&D Issues,

at http://www.citizen.org/congress/reform/drug_industry/articles.cfm?ID=6532 (last visited 12 Dec. 2010).


at http://www.who.int/intellectualproperty/studies/PadmashreeGehlSampath Final.pdf (Last visited 10 dec. 2010).

[27] www.pharmabiz.com/article/SectionWiseArchiveNews.asp?id=46


Tilotma Singh 
on 06 August 2013
Published in Intellectual Property Rights
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