Product Patenting: Promises and Perils

Introduction:

Worldwide patent movement, built around Multinational Corporations (MNC’s) and some governments of the developed world, with the assistance of international treaties such as Trade Related Aspects of Intellectual Property Rights (TRIPs), the Patent Co-operation Treaty, the Substantive Patent Law Treaty and the like, seems to establish an inflexible patent system where patents of 20 years runtime have to be given for any invention in any field of technology. This development being part of on going process of globalisation has produced certain undesired results, at least, in some states or regions of the world.  It has created difficulties in promoting health and safety of products moving across boarders such as food stuffs, pharmaceuticals, machinery and appliances, and also increased the power of non-governmental organisations and their capacity to operate on a global economy while ignoring particularly of national governmental regulatory protection. [1]

 

The degree to which treaties and international law intrude on national decision making seems to support attempts made by some states to even prevent others from taking actions to protect their legitimate interest.[2] In this connection World Trade Organisations (WTO) provisions, perhaps, those in the intellectual property agreement which requires governments to fulfil certain standards regarding domestic law and court system are particularly important.[3]  It is often said that full implantation of the TRIPs agreement would impede growth and economic development in the third world countries.[4]  Often such international rule constraining the governments to act in certain ways are justified on the ground of influence of global market forces and in matters of intellectual property was to stop piracy.[5]

However, some industrialised countries would take undue advantage of international rules such as TRIPs because those rules facilitate, even with the aid of trade sanctions, “what is in the main a payment by the poor countries (which consume intellectual property) to the rich countries (which produce it in the form of royalties.[6]  The TRIPs also allowed the private enterprises, especially MNCs to extract royalty payment through WTO.  In the light of the above an attempt is made to analyse in brief, some important implications of product patenting introduced in India through the 2005 Amendments to the Patent Act 1970 with a brief introduction of evolution and general principles of patent law.

I. Evolution of Patent Law

Much of the Indian patent law is derived from English law.  In sixteenth century England, the Crown issued numerous “letters patents” giving individual monopoly over production, importation and/or sales of particular products within the Kingdom regardless of their novelty or their previous availability.  The resulting shortage and price increase eventually led the Parliament to enact the Statute of Monopolies 1623 declaring all monopolies illegal.  However, section 6 of the Act excepted patents of 14 years to “true and first inventor” and “inventors of new manufacture” that were not contrary to law, nor mischievous to the state.[7]  Lack of effective procedures for patent protection paved the way for statutory protection.  The parliamentary enactments were modified form time to time to suit the changing needs of the society and industry.  The developments in international trade and increasing economic importance of intellectual property rights resulted in extention of patent protection to a wide range of subject matters for which patents were not granted earlier on the ground of public interest.  The present English law fully recognises product patents except for those subject matters that are specifically included.[8]

Now the trend in the west is to accord patent protection to all technological processes and products.  Advances in microbiology and biotechnology extended patent protection to micro-organisms and living beings including seeds, plant and animals[9] which were earlier excluded form patent protection on the ground that living being are not patentable.[10]  It is now claimed that the decision of the U.S. Supreme Court in Diamond v. Chakraborthy,[11] made the sweeping generalisation that “anything under the sun apart from a human being should be regarded as patentable”.  However, unlimited extention of patent protection raises issues of public interest and policy.

Unlike U.K., where the concept of patent originated from the exercise of royal prerogatives to the grant of monopoly, in India, patent for an invention has always been statutory.  The first Act relating to patent was passed in the year 1856 where “exclusive privileges” to inventors were granted for 14 years. [12]  The Indian Patent and Designs Act, 1911 introduced a system of patent administration.  In 1957, a Committee headed by Justice N.Rajagopal Ayyangar was constituted to review the law relating to patens in India.  The 1911 Act provided for product patents and it was believed that the Act was partly responsible for exorbitant prices of certain product particularly food and drugs.  In this connection the Committee observed that the monopoly created by the patent under the Act has adversely affected the interests of the developing countries like India and for the purpose of encouraging native industry product patenting must be done away with.  Accordingly, certain drastic changes were introduced under the Patent Act 1970. The Indian Patent Act, 1970 follows the U.K. Patent Act 1949 in many respects but differs substantially from it, particularly in respect of the term of patents relating to food, drugs and medicines, product patents and licencing of patents. [13]

II. Justification of Patents

The Idea of conferring market monopoly as an incentive to innovate has old roots.  In the course of time both individual and public justifications have played a prominent role in the arguments in favour of patent protection for invention.

1. Patents as an incentive to invent and innovate:  The traditional view is that, as knowledge is an intangible easy to replicate at low cost, if an inventor is not given legal protection he will imitated by competitors who have not invested their intellectual labour.   Legal protection is necessary for the inventor to appropriate returns from inventions.[14]  However, there are opposite views, which claim that there are other ways than legal IPRs to protect inventions since every inventor cannot benefit from market monopoly.  Socialised economies find title reasons for offering market power as a reward[15] to inventors but within planned economy it was logical to encourage innovation by systems of state reward the very notion which is most often posed as the alternative to a patent system even for capitalist countries.[16]

2. Patents as an information system: In the west, the policy of making the patent system a source of technical information has been deliberately pursued since the early days of industrial revolution.  The standard view is that patenting has positive effect on diffusion of knowledge, as an invention must be disclosed for being patented.[17]

3. Other Justifications: Apart from the above, impact of internet and communication technology, software and business methods, and inability of the most governments to fund public research organisations and to promote basic sciences have further strengthened the need for effective protection of patents.[18]  It is always emphasised that market based patent system can generate more wealth and healthy competition.

 

III. Internationalisation of Patents

The protection of patent rights in various countries against infringement and piracy was found to be too difficult since laws are different and patent applications have to be filed at the same time in all countries in order to avoid a publication in one country destroying the novelty of the invention in other countries.  Ever increasing demand for patented products, expansion in international trade and international flow of technology increased the need for international harmonisation of patent laws.  Attempts have been made to introduce uniformity it amongst national patent system and the result was various international conventions since 1883 Paris Convention.[19]

The increasing economic importance of patents and globalisation paved the way for better international recognition and protection of patents.   The result was the TRIPs Agreement.  The Agreement requires all state parties to comply with its provisions before 1.1.2005 barring the least developed countries.[20]

Salient Features of TRIPs Relating to Patents

The following aspects of TRIPs agreement are particularly important since they insist state parties to suitably modify/their laws and institutions. Firstly, TRIPs incorporates Most Favoured Nation (MFN) principle and National Treatment in respect of intellectual property rights.  Secondly, it lays down standards concerning the availability, scope and use of intellectual property rights.  Article 27 of the agreement provides that patents shall be available for products and process in all fields of technology.  It also provides for certain exceptions on the ground of public order, morality and health.   Thirdly, it provides for exclusive rights for products, which includes right preventing third parties from making, offering for sale, selling or imparting patented products.  Fourthly, it insists that any use of patent by third parties except by way of compulsory licences must be prohibited.   Lastly, it tries to harmonise patent law of different countries with the effect provides for competition between unequal.

  

IV. Features of Indian Patent Law

It is a fundamental principle of patent law that a patent monopoly is granted only for inventions which are new and useful and which have industrial application.  Therefore, law statutorily determined the range of subject matters over which patents can be granted.  An invention to be patentable, (a) must be novel, (b) it must involve an inventive step, (c) it must be capable of industrial application, and (d) it must not fall ‘as such’ within any of the categories of subject matter specifically excluded.  Over a period of time the types of subject matters that are patentable varied considerably and it ultimately culminated in recognition of product patents resulting in several controversies.

1. Basic features of Indian Patent Law prior to 2002 Amendment:  Prior to 2002, the Indian Patent Act, 1970, based on the N.Rajgopal Ayyangar Committee Report excluded certain subject matters from being patented and the following features of the Act were noteworthy.  First, an invention in order to be patentable must relate to a new and useful ‘manner of manufacture’.  The phrase ‘manner of manufacture’ has been interpreted to include not only a process of manufacture, but also a manufactured product.[21] Second, the grant of monopoly in respect of discovery of a scientific principle, or an invention injurious to public health, or a method of agriculture or horticulture or a process of treatment of human beings, animal or plants was prohibited in public interest.[22]   Third, patent monopoly being purely a creation of the statute, the state can impose any condition for the grant.[23]  Last, the object of a patent grant was not only to encourage innovation, but also inventions are worked to the advantage of the society.[24]

Thus there was departure from U.K. and western patent law in the following aspects.  Firstly in respect of food, medicine and drugs patent can be granted only for the process of manufacture of the substance and not of the substance itself.   Secondly, in U.K. and in EPC medical treatment exception was confined to human beings where as under Indian law it extends to animals and plants.  Thirdly, under the 1970 Act the term of patent for an invention relating to food, medicine and drugs, has been reduced[25] substantially with a view to mitigate the evil effects of monopoly.

It was often said that the Indian patent law unduly restricts the rights of patentees and therefore, it cannot attract foreign technology.  The process of globalisation and obligations imposed by TRIPs influenced the policy makers to introduce certain Amendments to 1970 Act in spite of opposition for certain quarters.

2. The Patent Amendment Act 2002: The patent law has undergone drastic changes in 2002, especially, to incorporate TRIPs provisions.  There was some resistance to the Amendment both inside and outside the Parliament on the ground that TRIPs agreement is an attempt by the industrialised countries to strengthen their monopoly over technology regardless of the fact that such an approach is protectionist, anti-competitive and anti-liberalisation.[26]   The provisions of the Amendment may be summarised as follows.  Firstly, the Amendment introduced fully product patenting by defining invention as a product or process involving inventive step and capable of industrial application.[27]  Secondly, provision of process patenting was retained in respect of substances intended to be sued as food, medicine or drug but such substances can be patented indirectly through the grant of “exclusive marketing rights”.[28]  Thirdly, the Amendment excludes from patenting inventions the primary and intended use or commercial exploitation of which could be contrary to public order morality or which causes serious prejudice to the human, animal and plant life or to the environment.[29]  Fourthly, any process of medicinal, surgical, curative, prophylactic, diagnostic, therapeutic or other treatment of human begins, or any process of treatment of animals to render them free of diseases or  to increase their economic value or that their products, cannot be patented.[30]  Fifthly, the Act further excludes from patenting living organisms, plants and animals including seeds, plants and animal varieties except micro-organisms.[31]  Sixthly, the Act provides that an invention which in effect, is a traditional knowledge or which is aggregation or duplication of known properties of traditionally known component or components is not patentable. [32]  This provision was enacted to consumer rich biological diversity against Bio prospecting and bio-piracy.  Seventhly, a uniform term of 20 years from the date of application has been incorporated repealing earlier provision providing for a shorter term for inventions relating to food, medicine and drugs.[33]  Lastly, for the purpose of regulating excessive monopoly associated  with patenting and inconsonance with TRIPs provisions relating to anti-competitive measures, section 83 incorporates certain general principles such as (a) the patents are granted to encourage inventions and they should be worked on a commercial scale,  (b) the patents granted do not impede protection of public health and nutrition, (c) patents granted do not in any ways prohibit the Central Government from taking measures to protect public health, (d) patent rights are not normally abused by  patentees and  Lastly patents are granted to make the benefit of patented invention available to the public.

3. The Patent Amendment Act 2005:  It has been asserted that even after 2002 Amendments, Indian Patent Law was not in conformity with the provisions of the TRIPs.  Owing to international pressures and to meet the TRIPs deadline an Ordinance was promulgated and the same was enacted with some modifications into the Patent Amendment Act 2005.     The most important features of the Amendment may be surmised as under.  Firstly, the Act while retaining the old definition of invention adds a definition of  “new invention” which means any invention or technology, which has not been anticipated by publication in any document or used in the country or elsewhere in the world before the date of filing of application. [34] Secondly, the Amendment makes it possible to claim patents for new use of knows substances i.e. “Swiss-type new sue” claims.[35]  Thirdly, it redefined inventive step to mean “a feature of an invention that involves technical advances as compared to the existing knowledge or having economic significance of both and that makes the invention not obvious to a person skilled in the art”.[36]  Fourthly, the most important and controversial provision of the Act was the repeal of section 5 of the Patent Act 1970, to introduce product patenting in respect of food, medicine and drugs. [37]  Lastly, to protect local pharmaceutical industry manufacturing certain generic drugs the Amendment extended the scope of compulsory licences for manufacture and export of patented pharmaceutical products to countries having insufficient manufacturing capacity.[38]  Despite the above amendments, it was still argued that the Indian Patent Law has not been fully complied with TRIPs but we have to wait and watch how the international community will react to the Amendments.[39]  However, since the introduction TRIPs it has been claimed that product patenting will adversely affect the interests of developing countries and in the next section some of its implications are considered.

 

V. Implications of Product Patenting

It has been claimed that the reason behind introduction of product patenting was an attempt by the industrialised countries to stop piracy and counterfeiting of intellectual property goods, which were alleged to be taking place at a large scale in developing and newly industrialised countries. [40]  Time and again it has been asserted that, the presence of large-scale generic drug industry in the developing countries has adversely affected the interests of drugs and pharmaceutical manufacturers investing huge amount money for research and development.  It is always easy to pirate a process unless the product is protected it is not possible to protect the invented processes.[41]   Further, proponents of product patenting have always insisted that for the purpose economic development, to improve technology and to recoup the investment made on R & D product patenting is as a must.

 However, those concerned with welfare of the poor and the oppressed have vehemently argued against product patents taking in to account the possible impact of product patenting on health, safety and welfare of the people.

Firstly, for centuries, indigenous peoples in many countries have developed herbs, seeds and plants for use as food and medicine.  TRIPs gives foreign MNCs the right to take traditional indigenous seed varieties developed by small farmers, improve them with slight generic alterations, and patent them. In order to use them, the people who originally developed them must buy them back at exorbitant rates.  It is some times described as bio piracy.[42]  There has been an epidemic of farmer suicides in some parts of India that used to be prosperous agricultural regions before “the ecological and social disaster” caused by bio-piracy.[43]

Secondly, the product patenting, conferring property rights would allow a few MNCs of technologically rich states to control access to food, medicine and drugs.  When Thai companies made AIDS drugs available at a cost well below that of United States drug companies, the Untied States – on behalf of the drug companies- threatened WTO TRIPs challenge for patent infringement.  Thailand, which depends on United States for 25% of its exports, was effectively black mailed into stopping the manufacture of cheaper AIDS drugs.[44]

Thirdly, it has been claimed that intellectual property rights are well protected by WTO at the expense of human beings.  The U.N. Sub-commission for protection and promotion of Human Rights asserted that there are apparent conflict between the IPRs on the one hand and international human rights on the other.[45]  Thus many developing countries may not be able to discharge their obligation towards public health.

 

Drug prices: Comparison of Drug prices Indian and International  (A Sample)

Drugs Dosage & Package details

India

Pakistan

Indonesia

U.K.

U.S.A.

Ciprofloxacin

500 mg. 10 tablets

29.00

428.00

393.00

1,185.70

2,352.35

Diclofenac Sodium

50 mg. 10 tablets

3.50

84.71

59.75

60.96

674.77

Atenolol

50 mg. 10 tablets

7.50

71.85

119.70

NA

753.94

  

Fourthly, product patenting through TRIPs necessarily commercialise certain aspects of social life that should belong to non-commercial sectors.  For the purpose of preventing over commercialisation of food supply and health care Indian law contain certain general principles of working of patents.  But there are doubts as to their efficacy to regulate monopolistic behaviour of economically powerful patent holder. [46]

Fifthly, some critics have asserted that product patenting would strengthen western monopoly over technology and 20 years term would discourage research and development in third world even though there is an assumption that the patent system would assist technology transfer.[47]

Lastly, enforcement of TRIPs provisions through trade, sanctions may lead to economic imperialism of the west and there are enumerable instances where U.S.A. used WTO provisions to protect its MNCs.[48]

 

Conclusions:

International trading system and its IPR regime built on principles of market economy ignores certain social casts associated with economic development.   Modern states have an obligation to protect more basic individual interests, at least, of those who are or may be victims of injustices associated with modern socio-economic, political and cultural life.[49]

An economic system based on market principles may be partly responsible for violations of fundamental human rights.  Therefore, a treaty like TRIPs should not have been part of the global trading system. To mitigate the evil effects of economic forces product patient should not be extended to certain classes of products such as food, medicine and drugs produced by using natural resources with some minor alterations through technology.

 

Notes and References

 

1.  John H.Jackson, The Jurisprudence of GATT and WTO (Cambridge: Cambridge University Pres 200), p.3.

2. Jagadish Bhagwati and Roger E Hudec (ed.), Fair Trade and Harmonisation; Pre-Requisites for Free Trade, (Oxford: Oxford University Press, 1906), p.2.

3.  Supra note 1, at p.3.

4.  Rajeev Dhavan, “GATT- The Final Solution; A Fraud Twice Confounded”, Lawyers Collective, May 1994, pp 4-6.

5.  Article 41 part I of GATT- “Member shall ensure that enforcement procedures as specified in this part are available under their national laws…”.

6.   Jagadish Bhagawati, “Afterward; The question of linkages” (2002) 96 AJIL 121.

7.  W.R.Cornish, Intellectual Property Law (Delhi: Universal 1996), p.12.

8.   Id., at p.147.

9.   Id., at p.151.

10.  The Patents and Designs Act 1911 U.K.

11. (1980) 497 U.S. 303, 306.

12. P.Narayanan, Patent Law, (Calcutta: Eastern Law House, 1998), pp 4-5.

13. Section 5 of the Patents Act 1970 and Siddarth Narain, “A costly Prescription” Frontline, 25.2.2005,  at p.97.

14. Cornish, supra, n.7 at p.131.

15. Soltysinki, “Patent for Inventions” (1969) 32 MLR 408.

16. Cornish supra, n.7, at p.116.

17. R.W.Jones and A.O. Kruger (eds.) The Political Economy of International Trade, (New York; Basil Blackwell, 1990), p.92.

18.  Ibid.

19.  WIPO; Intellectual Property Rights (Geneva: 1995), pp 273-74.

20.  Article 46 of TRIPs agreement.

21.  Section 2 (1) (f) of the Indian Patent act, 1970 (Prior to the 2002 Amendment).

22.  Section 3.

23.  Narayanan, supra,  n.12, at pl7.

24.  Ibid.

25.  Section 43.

26.  Dhavan, supra, n.4, at p.4.

27.  Section 2(1)(e)  of the Patent Act 1970 as amended in 2002.

28.  Ibid.

29.  Section 3 (b) of the Amend Act.

30.  Section 3 (e).

31.  Section 3 (j).

32.  Section 3 (p).

33.  Section 43.

34.  Section 2 (g) of the Patent Amendment Act 2005.

35.  Section 3.

36.  Section 2(la).

37.  Section 4.

38.  Section 55.

39.  Manoj Pillai, “The Patent (Amendment) Act, 2005 and TRIPs compliance- A critique”, 10 Journal of Intellectual Property Rights 2005, p.235

40.  S.K.Verma, “Enforcement of intellectual Property Rights: TRIPs Procedure and India  (2004) 50 J.I.L.I., p.1.

41.  Philip W.Grubb, Patents for Chemical, Pharmaceuticals and Biotechnology, (Oxford: oxford University Press, 2000), p.219.

42.  Vandana Shiva and Radha Holla –Bhar “Intellectual Piracy and the neem free”, (1993) 23 Ecologist pp 223-27.

43.  Stenton G, “Bio piracy within the pharmaceutical industry; A stark illustration of how abusive, manipulative and perverse the patenting prices can be towards countries of the south, 26 European Intellectual Property Review (2004), pp 17-26.

44.  Marjorie Cohn, “The World Trade Organisation: Elevating Property Interests above Human Rights” (2001) 29 Geo. J. of Intl. and comp. Law, pp 427-440.

45.   Ibid.

46.  Stenton, supra, n.44, at p.25.

47.  Dhavan, supra, n.4,  at p.6.

48.  Cohn, supra n.44, at 427-440.

49.   Cass R. Sustain, Free Markets and Social Justice (New York: Oxford University Press,  1997), pp. 151.166.

* A paper presented at Seminar on “Intellectual Property Rights”, organized by M.E.S. Law College, Sirsi, on 6th August 2005.

Regards,

Varun Desai,

Bangalore

 

Varun Desai 
on 25 October 2012
Published in Intellectual Property Rights
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