The Hindu Business Line : Patent law: Whither the incentive to innovate

There can be no better way of safeguarding national interest than creating an environment in which innovations can happen. The Government would, therefore, do well look at patent law from a national perspective that gives overriding importance to the role of technology in economic growth and maximises the welfare of society.

DESPITE several amendments to accommodate the concerns raised by the Left parties in the amended Patent Bill, the Government is attracting flak for not taking full advantage of the flexibilities under the TRIPS (Trade-Related aspects of Intellectual Property rights) agreement. We need to take an objective and dispassionate view.

At the time of signing the TRIPS agreement in 1994, India opted for a 10-year exemption from the obligation to introduce product patents in all hi-tech areas, such as food, agrochemicals, pharmaceuticals, and bio-technology.

However, to demonstrate its commitment to making its patents law fully compliant with TRIPS on D-day, January 1, the Government came out with the first amendment in 1999 (applicable from January 1, 1995) which inter alia provided for the mail-box facility.

This meant an applicant seeking a product patent could put in an application to the mail-box which would then be opened for processing and grant of patent from January 1, 2005. The Government, thus, promised that the applicant would start enjoying rights from that date on.

These flexibilities led to the introduction of a number of copycats of innovations after 1995, for which applications were lying in the mail-box.

Since the former (the copies) did not bear the expenditure load of research and development, these were available to the public relatively cheap.

Now a view is being taken that these generic versions must remain in the market to safeguard consumers. This approach is tantamount to going back on the commitment.

When the Government started accepting applications in the mail-box and promised applicants product patent from January 1, there was a concurrent commitment that the generic products would automatically be withdrawn from the market from that date.

But that did not happen. Instead, the recent developments only point towards perpetuation of status quo. The Patent Ordinance promulgated on December 26, 2004, allowed rights of mail-box patentees to commence from the date of being granted the patent.

This would have had the effect of delaying withdrawal of generic products by at least three years. Correspondingly, this meant that a 1995 applicant — having already waited 10 years — would have to wait another three years to get his rights.

Of a 20-year patent term, the patentee would thus have an effective protection of only seven years. That by itself was a huge disincentive. The Bill has taken away the exclusive right even for the remaining seven years.

Copycat products can now remain in the market indefinitely subject to payment of a "reasonable" royalty to the patentee. What will be the royalty amount? Who will decide that amount? Will the innovator have a say? All this is uncertain.

What is, however, certain is that all mail-box applicants will be denied their rights of exclusivity. This defeats the very objective of granting a patent. Indeed, it knocks at the very foundation of the concept of having a patent granted.

So if the intention is to deny them their rights, why then grant a patent at all? Why waste time and money in processing these applications? And, what interest will the applicants have in pursuing them?

The Bill restricts the rights of innovators in several other ways too. The Ordinance had provided for filing of request for pre-grant opposition within three months of publication of application. The rules also ensured their disposal within three months by the Patents Controller.

Now, the time for submitting opposition request has been raised to six months. This will delay the grant of patent. The Bill also allows the opposer to become party to the proceedings. In other words, he gets a right to challenge the decision of the Patents Controller.

This would turn the clock back to the days of the Patent Act, 1970, under which endless litigation in courts delayed the grant of patentby several years. The Ordinance sought to correct this anomaly. The Bill has restored the status quo.

The Bill allows provisional rights from the date of publication of the application. This does not, however, apply to the mail-box applicants and covers only applications filed after January 1, 2005. But it is doubtful whether the infringer can be prosecuted from the publication date. He can argue that during the period between publication and grant of the patent, it could not be inferred whether the patent could be granted at all. The court too could disallow infringement for this period.

It is, therefore, absolutely essential that patents are granted expeditiously. The provisions of the Bill on pre-grant opposition raise the possibility of inordinate delays and interfere with this basic objective.

In a recent seminar, a Patent Controller stated that a patent could be granted within just five months of filing. This was after the Patent Ordinance but before the Bill. Now, it is quite unlikely that the Controller would stick to what he said then.

The Ordinance allowed for patenting incremental innovations, that is, new use of an old molecule or new property of a known substance, provided these satisfy the three criteria of novelty, inventive step and industrial application.

The Act has taken away this flexibility. Are we suggesting that innovations for new molecules alone can be patented? Is it the case that there is no novelty or inventive steps involved in other efforts of scientists that result in improving their efficacy?

The discovery and development of a new molecule is an expensive proposition. In developed countries, a new drug costs about $1 billion. For a new pesticide molecule, the cost is about $300 million. In India, all this could be done at a much lower cost.

Still, the cost would be huge, about $300 million (Rs 1,350 crore) for a new drug. Indian companies at their current level of R&D spending (5-7 per cent of their turnover) are not in a position to undertake such a high level of investment.

Besides, the risk is very high. But incremental innovations are well within their reach. Our laws should promote these. This will enable our scientists to put their creativity to best use. When Indian companies can tap these opportunities abroad (where these innovations are patentable), why not on our own turf?

Patenting of incremental innovations should not be confused with the so-called ever greening of a patent. Such a situation could arise only when the patentee, having already enjoyed the 20-year term for his innovation, gets a further extension. The Patent office will simply not allow this.

The patenting of a new dosage form (say, liquid) of an existing medicine is a totally independent step. It does nothing to extend the patent term of the medicine in its original form (solid), which on its expiry becomes open to competitors to come up with generic versions.

Under the Act, the patentee must make arrangements for ensuring supply of the patented product within three years of patent grant (also known as cooling period). If, he cannot ensure this then, on expiry of this period, the government will issue a Compulsory Licence (CL).

In hi-tech areas, such as pesticides, getting market approval is a time consuming process as the applicant has to generate lot of data from studies — spread over several years — to enable the regulator assess the safety and efficacy of the product.

In view of the above, the time taken for commercialising the innovation can exceed three years due to factors entirely beyond the control of the innovator (he cannot bypass the regulatory processes). As a result, he runs the risk of losing his exclusivity!

It would appear that while fixing time limit for working of a patent, the law-makers have glossed over the regulatory requirements under Insecticides Act, 1968, and its unavoidable implications for supply of the product.

The Act also prescribes that the CL could be issued in a situation where the Controller perceives that patentee will not be able to ensure supply of the product at an "affordable price". That makes him vulnerable. The prime objective of TRIPS agreement was to provide incentive to the innovator while safeguarding national interest (public health, access to medicine etc). Members were expected to design their patent laws with in-built flexibilities to achieve this.

But what we have seen is use of flexibilities to a point where rights of a patent holder are compromised.

This appears to be the result of a mindset in which the patent holder is perceived to be exploiting the monopoly conferred upon him by the patent to the detriment of consumer interest.

A law built on suspicion is unviable. Why not view patent from a positive mindset? Why not recognise that an innovation in high-tech areas costs huge sums and that we have to look for some mechanism that would enable innovator to recover these?

If you leave the innovator to fend for himself by denying exclusivity or substantially curtailing his rights, he will have no incentive to innovate.

This holds for everybody, including the MNCs, Indian companies or a research institute, such as the Council for Science and Industrial Research. That will bring technological advances to a halt.

There can be no better way of safeguarding national interest than creating an environment in which innovations can happen. Imagine what our fate would have been fate if there was easy access to solutions/medicines that were innovated before 1985 and are now off-patent.

The Government would, therefore, do well to look at the patent law from a national perspective that gives overriding importance to the role of technology in economic growth and maximises the welfare of society including that of future generations.

(The author is Resident Director, CropLife India, New Delhi. The views are personal.)

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