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An estimated 37-minute read
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ByNaren Thappeta, India Patent Agent/Advocate

Executive Summary

India policy/law makers are often confronted with questions of whether the Patents Act 1970 improperly denies patents to deserving inventions or grants patents to undeserving inventions. While the denial concerns are heard more with respect to pharmaceuticals, the grant concerns are heard with respect to software. This paper examines these issues by starting with the objectives and the basics of patent laws to establish a framework for analysis of similar questions. The framework is then used to reach a reasoned conclusion that section 3(d) of the India Patents Act is contrary to the foundation of patent law principles due to the possibility of improperly denying legitimate patents, and therefore needs to be diluted (not abolished). The paper also notes that many of the software patents have characteristics akin to and in continuation of innovation approaches to traditional mechanical technologies, and touches on the kind of enquiries that would be appropriate in having a sound approach towards software patents. The paper proposes an approach in which the ‘merit’ of a patent is used in defining appropriate post-grant protections, while having uniform treatment of applicable rules in deciding whether or not to grant a patent.

 

I. Introduction and Overview of the Approach

Design of appropriate patent laws present a quintessential challenge of engineering a sound public/economic policy. A sound design would ensure that innovations are first realized by appropriate human effort, and the fruits thereof are thereafter made available to the public for the greater good of all. An unsound design on the other hand can lead to various distortions such as non-realization of new innovations, or create unneeded impediments/overheads to public in terms of having access to fruits of innovation (which may not need the incentives of patent system).

A sound of implementation of patent law would need to grant patents to only innovations with ‘merit’, while denying patents otherwise. The merit practically is judged by whether or not an innovation meets the criteria of patentability established by various sections of the Patents Act. A sound implementation would in addition ensure appropriate post-grant protections while appropriately balancing the need to incentivize the inventors and avoiding unreasonable burdens on the public in terms of benefitting from the fruits of the innovations.

India policy/law makers are often confronted with dilemmas of whether the Patents Act 1970 improperly denies patents to meritorious inventions or grants patents to undeserving inventions. Similar dilemmas are presented with respect to post-grant protections including questions on whether India’s approach to injunctions in patents cases is apt or whether the law related to compulsory licenses is appropriate in the current context.

The instant paper seeks to answer the above dilemmas by comparison of various provisions of Patents Act 1970 with foundations of patent principles in their essence. The foundations are established as coinciding with what the patent system is (or should be) intended to accomplish at its core. The foundations of patent principles thus established are distinguished from patent laws of specific countries (including India). The paper specifically examines the following questions:

II. Establishing bounds to criteria for patentability under foundations of patent principles;

III. Does the India Patents Act deny patents for any aspects within the established bounds? (“Improper Denial of Patents”);

IV. Does the India Patents Act grant patents for any aspects outside of the established bounds? (“Improper Grant of patents”);

V. Analysis of thresholds with respect to post-grant protections (e.g., injunction, damages, compulsory licensing) provided by India law; and

VI. Conclusion

These questions are addressed from the perspective of pharmaceutical and software patents since these two areas arguably are at two opposite ends of the innovation spectrum requiring different considerations in formulation of patent policy. While software represents a ‘functional’ space, pharmaceutical area represents an unpredictable space of huge public interest. Understanding the relevant issues in the two areas should provide valuable guidance in addressing several other present and future areas such as life sciences, food/consumer space, etc.

The below table brings out some key differences between software and pharmaceutical industries, that are to be borne in mind when formulating a sound patent policy under the national laws:

No. Topic Pharmaceutical Software
1 Number of patents covering a single product used by the end user Counted on fingers, potentially a single patent for each medicine consumed. Many, potentially of the order of a few thousands in devices such as smartphones.
2 Major Function in Society Each medicine potentially absolutely necessary for public health function. Most (99%) patents generally individually optional but collectively cover important portions of a product in a functional space that aids communication and productivity.
3 Motivation vs. ease of solution Pain is evident in many cases and solution is challenging (i.e., as to whether the solution can be arrived at) in this unpredictable space. Key is mental effort to identify the opportunity for improvement (motivation); Solution almost always routine in this functional space.
4 Extent of experimentation required to productionalize the innovation Takes several years to validate each innovation and each variation (many times independently) due to stringent regulatory requirements Software products can be designed in short durations, and changes made in very short cycles (e.g., a day or less in simple cases) with no government approvals being required
5 Ease of defining the boundary of patent protection Possibly simple to express the boundary; whether or not patentable is a separate question that would require a high level of skill. Requires fair amount of mental skill, command over language/ technology (both patent office and applicant), and potentially several iterations with the patent office (and in courts sometimes) to establish the appropriate scope of protection.
6 Value in the product cycle Valuable entire patent term (currently 21 years from filing date in India), probably with higher value towards the end. No value when the patent term overlaps with regulatory cycles (several years of the 21 year term). Products giving rise to the patent may become obsolete soon from market perspective, but the scope of patent can be relevant for entire term of the patent in relation to later designed advanced products as well.

Table A

 

This paper examines how well the India’s Patents Act 1970 (as amended) accommodates or is adverse to the various attributes of pharmaceutical and software environments, noted above in Table A.

 

II. Establishing boundaries to criteria for patentability under foundations of patent principles

One needs to start with the elementary question of what is the objective of patent system. At some point a few centuries back, patent system was justified based on the objective of sharing of information for the greater good. Clearly, in this information age, that objective is no longer valid, both with respect to pharmaceutical space and software space, since reverse engineering is relatively easy in most circumstances.

Rather, the justification for patent system in the modern age is to ensure that ideas do germinate and reach markets as soon as possible. From the explanation below, it will be clear that the boundaries under foundations of patent principles operate to do precisely that, for both software and pharmaceuticals.

In analyzing the boundaries, it should be borne in mind that higher barriers for patentability would normally favor those lagging in the innovation curve, while lower barriers would favor those ahead in the innovation curve. However, higher barriers would operate to diminish/preclude incentives for innovation, while lower barriers would operate to create unneeded monopolies, thereby increasing overheads on the public and also reducing competition.

Therefore ideal implementation of national laws need to have appropriate threshold barriers such that there is neither the disincentive to invent useful products that otherwise would not reach public, nor the unneeded additional burden for public due to state intervention in the name of grant of patent rights. With that in mind, we now examine how foundations of patent principles seek to establish those boundaries.

A. Obviousness: The heart of criteria for patentability

Obviousness may be thought of as ‘deemed possession’ by public, given the state of the sciences, general skill of relevant scientists, and ordinary industry cycles, etc., and is undoubtedly the sine qua non of patent laws since a simple way of understanding patent laws is that the inventors are given a reward in the form of limited time ‘monopoly’ if they have brought in unobvious subject matter to this world. There is fairness when understood at that level, since the inventors by their efforts are bringing into this world something that did not previously exist, and everyone benefits from the innovation in the long run.

Patent laws have generally evolved to respect any ‘usefulness’ these inventions may bring (subject to policy exclusions defined below) and thus are also termed as ‘utility patents’. On the other hand, grant of patents to obvious improvements is improper since it offends the free flow of information and creates unneeded barriers.

There is a fair amount of case law enunciated by various courts within and outside of India on how that term ‘obviousness’ is to be interpreted. The principles are generally consistent with the operation of mind as the products are designed/developed, and show the subject matter has not reached the world before the filing date of the patent application. Fundamental to analysis of obviousness is that ‘hindsight’ should not be used in judging obviousness.

When these principles are properly understood, it would be fair to say a lower level for obviousness analysis is that the facts on record simply do not show that the collective public knowledge (often termed as ‘prior art’) has arrived at the invention (sought to be protected by the patent) based merely on what all is found in searches, their equivalences, known motivations and reasonable enquiries skilled practitioners would make from the information at hand and general principles. On the other hand, a higher level of obviousness would be that the facts on record demonstrate that the inventor has invented something that others have been incapable for inventing and the public would not have the benefit of that technology but for the efforts of the inventor. In the discussion below, it would be pertinent to remember this lower level of obviousness is often found on functional/software area, while the higher level is more likely to be found in pharmaceutical area.

With respect to India, The Patents Act 1970 looked to only actual possession by public (anticipation related provisions) in denying patent grants. However, the India Supreme Court extended the criteria to obviousness analysis as an enhanced standard that is required to be satisfied prior to grant of patents. The 2002 amendments to the Patents Act expressly thereafter included obviousness as a criteria for patentability. Recent lower court decisions have provided further guidance on obviousness analysis, which in effect looks to deemed possession (by public) as the basis for grant of patent under obviousness analysis. In other words, under obviousness standard, if the public cannot be shown to be deemed to be in possession of the claimed invention, the invention would be eligible for a patent under the obviousness analysis (subject to other statutory requirements of India).

B. Policy based exclusions

Policy based exclusions have evolved differently in different jurisdictions and each policy operates to exclude a patent for subject matter, irrespective of conclusion of (non)obviousness. Each policy based exclusion is based on a ‘higher principle’ (than rewarding someone for bringing to the world what did not previously exist), or some other clearly articulable basis on why the covered subject matter does not deserve patent protection. TRIPS does not set a higher bar for exclusions (other than requiring patent protection for all areas of technology), but permits exclusion of subject matter which is necessary to protect ordre public or morality, and several other subject matter under article 27.

As examples or excluded subject matter, US denies patents for ‘abstract ideas’ and Europe denies patents for business methods, among other aspects. Neither of these is considered technological, even if technology is used for their purpose. In support of these laws there, one can say the policy underpinning of such exclusions is that the business methods do exist in some form and/or incentives for innovation are not required for such subject matter.

Section 3 of the India Patents Act lists several areas which are not considered inventions, and the first three (among several others) exclusions read: (a) an invention which is frivolous or which claims anything obviously contrary to well established natural laws; (b) an invention the primary or intended use or commercial exploitation of which would be contrary to public order or morality or which causes serious prejudice to human, animal or plant life or health or to the environment; and (c) the mere discovery of a scientific principle or the formulation of an abstract theory or discovery of any living thing or non-living substance occurring in nature.

The above two principles (obviousness and policy based exclusions) define the bounds to criteria for patentability under foundations of patent principles. While the bounds themselves are not specific, they nevertheless provide insight into the type of exclusions that can be justified under the foundations of patent law. The limits need to be examined in continuation with history and sovereignty, which are examined briefly below.

C. Sovereignty/History

Sovereignty and historical context play an important (sometimes overriding) role in defining patentability criteria. India’s continued ambivalence towards patent laws needs to be understood in the context of history and in particular the formulation of Patents Act 1970 based on a report prepared over several years by Justice Ayyangar. The report runs into several hundreds of pages and carefully analyzes every section of the eventual law passed, in terms of policy underpinnings, how other countries have approached it, the options that do and do not suit India, and the specific choice.

With respect to Pharmaceutical area, Justice Ayyangar rightly understood India needs as of then, India’s position in world then, the market dynamics, etc., and concluded that product patents need not be (and were eventually not) recognized under India Patents Act, 1970. As a consequence, several drugs/medicines would be protected under national laws of many countries, but not India. The effect of absence of patent protection in India has meant that the industrialists in India were free to copy pharmaceutical innovations made by anyone (mostly outside of India) and bring the medicines to both India and export markets.

The absence of patent protection for product patents spurred the pharmaceutical industry in India then because the industry had unfettered access to newly discovered medicines, in addition to old medicines that would not be covered by patents anyway. The argument of the companies that make huge investments in discovering these new drugs is that the India laws have in essence created ‘free riders’ (of the India generic drug makers) in the classical economics theory.

For whatever reasons, Prime Minister of India Sh. Narendra Modi has signaled openness to embrace stronger patent regime in India, especially as related to pharmaceutical industry. Some of the factors (compared with those in 1970s) that support such a shift are:

1. Many medicines that treat traditional common problems are already in public domain and not subject to patent laws anywhere globally (i.e., only recent/new ones falling in the ambit of patent laws);

2. India-origin industries having more maturity and access to capital/knowledge/skilled labor, and being positioned to innovate in all areas of knowledge economy;

3. Global businesses increasingly driven more by profit motive and compliance with laws of individual nations, as opposed to being driven/controlled by state power or national interests;

4. Enhanced understanding of alternative approaches (e.g., requiring manufacturing in India, taxation) to ensuring India gets a ‘fairer/better’ share of benefits of the knowledge based industries; and

5. Increasing globalization with cross border investments (FDI) being permitted in India, and Indians playing roles at all levels in many knowledge driven businesses.

More significantly, India became a signatory to TRIPS in 1994, which requires each member country to meet certain minimum standards in terms of protections for Intellectual property. As relevant here, it is worthwhile to note that TRIPs requires India to grant patents to all fields of ‘technology’, which are ‘unobvious’. The words technology and unobvious have not been given any specific meaning in TRIPs, which has given rise to disagreements. In this context, the rest of the paper examines some of the related controversies in more detail.

III. Improper Denial of Patents Under India’s Patents Act 1970 (As amended)

Section 3(d) of the India Patents Act arguably violates both of the above noted principles. First Section 3(d) is examined as against obviousness doctrine and then as a policy based exclusion. For the present purpose, we start with a part of Section 3(d) which excludes patent protection for discovery of a new form of a known substance unless the new form results in the enhancement of the ‘known efficacy of that known substance’.

A. Section 3(d) vs. Obviousness

Under classical ‘obviousness’ analysis, there would only be a good presumption that new forms of any known substances are obvious if the new forms are something that can be discovered with ordinary skill using all the tools available. If the discovery of new form is not obvious (for example, due to very large number of possibilities), limiting patentability based merely on known efficacy could violate even the higher level of obviousness established above. For example, what if the form is less efficacious in terms of cure, but simply has an infinite shelf life which is useful in some other context. There could be numerous other advantages possible with new forms, and limiting patent eligibility based on a single variable would offend the obviousness doctrine.

Proper implementation of obviousness doctrine would require the patentee to be presented a chance to explain why the new form is unobvious over the known substance (whether or not the new form has enhanced known efficacy, so long as there is a use consistent with the purpose of ‘utility’ patents). Unless it is very clear on record why the new form is unobvious, patent must be denied for that subject matter. In other words, proper implementation of obviousness would probably permit all new forms of known substances to be presumed to be obvious, but the patent applicant should be permitted to explain why the invention is unobvious. The difference would be material from patentee’s perspective. Thus, section 3(d) is contrary to the notion of obviousness, and thus arguably against the obligations under TRIPs.

However, policy based exclusions are not necessarily measured against the scale of obviousness. We therefore now examine whether section 3(d) can be justified as a policy based exclusion. In particular, it is often said section 3(d) is justified on the basis of “evergreening of patents”. The below section examines whether evergreening can be a basis for section 3(d).

B. Section 3(d) as countering “Evergreening” of patents

Evergreening connotes some improper extension of monopoly, and is unfortunately a common misconception about the fundamental operation of the patent system. As a threshold matter, it should be understood that evergreening is the antithesis of the limited term prescribed by patent foundations. The patent simply expires at the end of the limited term. After the lapse of the term, the subject matter is deemed to be in free/public domain and anyone can practice the same. Nothing in patent law can extend the monopoly beyond that patent term, contrary to the impression “evergreening” is often found to give to the legally uninitiated. Therefore, any newly discovered medicine loses patent protection after the limited term.

The other common misconception is filing patents for improvements can somehow improperly extend the monopoly (of something). A simple hypothetical is used to explain the related concepts as relevant to both functional space and pharmaceuticals, since section 3(d) covers both pharmaceuticals and functional space (though controversies are highlighted with respect to pharmaceuticals).

Starting with an example in functional space, assume that a patent is granted for a bare-pencil related application filed in 2010. The bare-pencil would be free for anyone to make and sell from 2031. Now assume an improved-pencil (e.g., with erasure attached) is filed in 2015. As a threshold matter, it should be understood that bare-pencil patent application is published by 2012 (19 months from the filing date), making the bare-pencil information applicable for obviousness purposes against all future applications thereafter.

Thus the patentee of improved-pencil would be denied if the bare-pencil, in combination with rest of prevailing knowledge as of 2015, renders the improved-pencil obvious. If the patent is granted for the improved-pencil, that patent expires in 2036 while the patent for bare-pencil expires in 2031. The bare-pencil is in public domain from 2031 (for anyone to make and sell). The improved-pencil is in public domain from 2036 even if there is a patent grant for the improved pencil.

When closely examined the patent terms (even in the absence of section 3D) here do not have any unfairness suggested by ‘evergreening’.

The above illustrated principle would be true of any improvement, including new forms of known substances, newly discovered uses, etc., sought to be addressed by section 3(d). The foundations of patent law, without section 3(d), would check for unobviousness (compared to all public knowledge at the time of filing, including prior patent applications that would be published around 19 months from filing date) any time a patent is granted for any improvement.

Therefore, the pencil/eraser combination may not qualify for a patent if the public knowledge including the base pencil and other developments together would render the combination obvious. In that sense, obviousness naturally operates to avoid the concerns ‘incremental innovation’ (patent protection for undeserving improvements), assuming that obviousness is defined and implemented appropriately.

We now turn to analysis of pharmaceutical example under section 3(d), which has been the source of controversy. Key to understanding the controversy is point 4 in Table A noted above. To elaborate on that point, in functional arts it is reasonably clear upfront most times whether or not the mental innovation can in fact be realized as a product (productionalized). Even in complex electronic circuits and mechanical innovations, well developed simulation tools provide reasonable clarity upfront of possible issues. In theory, the product can be realized in a predictable duration with utmost a limited number of iterations.

The drug development cycles have substantially different characteristics. Often it can take several years to verify whether an invented base compound indeed has the intended efficacy (curative power over the disease/ailment) while meeting the safety standards. However, the inventor may need to apply for a patent in a fairly early stage lest a competitor could apply for a patent sooner and have exclusive rights over the medicine. Assuming the inventor applies for a patent on their early innovation, each country (normally) publishes the patent application within 19 months (“19 month publication”) of the earliest filing/priority date, thereby making the described compound a publicly known compound.

Therefore when the inventor is forced to enquire variations of the earlier invented compound, section 3(d), by examining the new variation for enhanced “known efficacy” as against the earlier base compound (which potentially had no efficacy, which fact could be known after the 19 month duration), would preclude a patent for the variation. Having understood how section 3(d) operates in that scenario, we now examine how the same facts would be addressed by classical notion of obviousness under the foundations of patent principles.

Under the foundations of patent principles, obviousness would merely look for whether skilled practitioners would arrive at the variations without ‘undue’ experimentation based on everything in public domain (including any published patent applications related to the base compounds) as of filing date of each patent. If such arrival would require excessive experimentation to the point there is uncertainty of the variation (new form of a known substance now sought to be patented) reaching the public, the foundations of patent principles would clearly award patent rights over the variation to the inventor.

More significantly, section 3(d) is problematic as discouraging innovations in natural cycles of pharmaceutical industry since the innovators may be dissuaded in putting in sufficient resources to enquire for new improvements (new forms, etc. of prior compounds). In this context, it is pertinent to remember that the 19 month publication puts in public domain information on corresponding base compounds (in general, any earlier innovation sought to be patented), and thus everyone (including inventors of prior invention and others) has a chance to readily invent the new forms of prior known compounds. Therefore, compared to rest of the industry, the inventor’s advantage is only the first 19 months in terms of attempting later discoveries.

Thus, if the ‘new forms’ (of section 3D) are obvious, by plain meaning of ‘obviousness’ many skilled practitioners should be able to invent such new forms which address the specific disease/pain confronting life on this planet. However, if such new forms do not get discovered for several years in spite of continuing detriment to life, that needs to be properly weighed in determining whether the new form merits patent protection and section 3(d) per se denies patents to such inventions of merit.

It may therefore be readily observed that the foundations of patent principles seek to avoid narrow patents by appropriate definition of obviousness and also force various competing inventors to disclose their inventions soon enough (consistent with the objective of general patent systems). To the contrary, section 3(d) by operating as an absolute bar to patentability on seeming improvements, operates to avoid patenting of “incremental innovations” (a function of obviousness principles also), but can go much farther in denying patents to deserving patents covering ‘hidden gems’ which may not otherwise reach the public in due course (contrary to the very objective of the Patent System). This overreach (in denial) would offend the foundations of patent laws (established based on what the patents system is intended to achieve).

Thus, it is logical to conclude that section 3(d) overlaps in function with obviousness, but could improperly go farther to block patents for deserving inventions under proper foundations. Therefore, what is required is an appropriate understanding/ development of application of obvious doctrine (which already exists as section 2(j) in India’s Patent Act). Nevertheless the foundations of patent principles may require that the patent office be extra cautious when granting patents to “new forms”, “new uses”, etc., referred to in section 3(d).

It would be incorrect to prematurely conclude that obviousness cannot be defined with the requisite level of predictability, objectivity and precision. Rather, India will probably require specialized courts/Judges, shrewd examination corps (controllers and examiners under the Patents Act 1970), and patent/legal practitioners to properly understand and develop implementation of obviousness. It would probably make sense for India to start these investments for benefits in the long run.

In conclusion, section 3(d) may merely need to be diluted to permit patents in appropriate situations when the facts call for it, though a strong presumption could attach to the contrary. Section 3(d) is merely provided as an example and also to illustrate an appropriate approach to analyzing arguably improper denial of patents under the Patent Laws. Any accusation of such denial simply needs to be appropriately reasoned (unless India wishes to invoke sovereignty) to ensure that there are no disincentives (by absence of patent protection) in bringing anything new/unobvious that can be of use in this increasingly complex world.

IV. Improper Grant of Patents Under India’s Patents Act 1970 (As amended)

This section examines whether there are any aspects of India Patents Act that could be granting patents improperly. Improper grants under national laws should be examined from the perspective of both obviousness and subject matter exclusions. This paper examines both aspects from the perspective of software patents, which have been confusing and contentious. Before dwelling into improper grant, it is helpful to understand some general background in relation to common concerns.

 

A. Background of Software Patents

In countries such as US and Europe, software related patent practice has evolved in line with those that had existed in the traditional mechanical type spaces, since both are functional areas. While the level of requisite skill is much higher for patent practitioners in software practice space (in view of the fluid nature of the technology), the practice of defining the boundaries of patent protection is fairly similar to that in mechanical space, where one deals with tangible nuts and bolts.

The initial ambivalence or confusion in US/Europe during early stage of evolution of software industry has given way to a thinking that software is patent eligible when it is technological in nature. A simplified view of the result is that ‘systems software’ (which enhances the quality of the machine) would be patentable, while ‘application software’ (which merely uses machine as a tool) would lack the technical character to be patentable. The courts in US/Europe have meandered to this position, while trying to develop general frameworks to cover scenarios that do not fall clearly within these buckets.

India has employed statutory language fairly similar to that in Europe and is likely to head Europe’s way as able disassociated Judges well versed in law, take time to examine and bring clarity to the related issues.

In this context, it would be a relevant question to examine how the industry operates from a patent perspective when several thousands of patents can cover a device like a smart-phone, since each patent provides exclusive right. The answer in terms of dynamics practically in the industry is that the markets as well as patents field generally require the businesses to address a new area ahead of the curve, and each player addresses the same market slightly differently and thus the patents are distributed among the many leaders. Typically each leader enters into a cross-license with the other to be able to use other’s inventions. The markets and the patent laws are disadvantageous to those who merely wish to copy, without any innovations to contribute to the evolution of the market.

However, practically very few patents are actually ‘blocking’ or generally considered important. These are the patents that have come under increasing scrutiny as the development of understanding of patent laws has evolved. In addition, the manner in which the teeth of these patents can be diluted with appropriate post-grant protection is explained in sections below.

B. Revisiting Foundations to Avoid Broad/blocking patents

If one examines the US cases in the recent few years, two facts are evident with respect to software patents: (1) the US Supreme Court there has made it more easy to reject patents based on obviousness doctrine when combining disclosure from multiples sources; and (2) defined subject matter exclusion in continuation of the jurisprudence there to reject patents which are too broad in scope. In essence, the effect of these two points is to reduce the teeth of software patents.

India will similarly need to examine the various foundational doctrines more carefully to see if the barriers can be appropriately defined while being within the foundations of patent law principles. One perhaps will need to examine fairly fundamental questions such as (A) when does ‘motivation’ and natural progression inherent in design/evolution of functional products (as a mental process) undercut (non)obviousness analysis, without departing from the basic principle that hindsight cannot be the basis for reaching a conclusion of obviousness; (B) do ‘critical’ patents granted in the industry violate any of the foundational aspects that have come to be recognized in the India Patent Law.

When these questions are examined against critical software patents that have been ‘important’ to the industry dynamics (which should be possibly only of the order or few hundreds utmost), it could undoubtedly help in further defining the appropriate barriers under the foundations of patent laws. More importantly, it will help formally answer the often lingering question (in several quarters) of whether patents make sense in software space. All of the above is clearly data driven and can be articulated at the same level of clarity as Justice Ayyangar did so in the report of 1960s.

The relevant investigation would require one to understand the innovation process/ efforts in various segments of cutting edge of the software industry (infra-structure software and user interfaces being at the opposite ends since the former may require forward looking design/definitions while the later may entail anticipated convenient use by end users), the commonality/difference of innovation in software segment compared to other functional areas (e.g., traditional mechanical, circuits and nano-technology, etc.), the role of software patents (vis a vis other segments) in the industry, etc. The investigation will require, in addition to science/patent experts, the leadership of an able Judge with thorough grip of jurisprudence/public policy, and also the confidence that science/ technology is nothing more than another ‘set of facts’ s/he is trained to examine when working with able technologists/ practitioners.

While the above discussion brings forth the approaches in defining criteria for patentability, the impact of such definitions on people and markets necessarily gets examined. One needs to keep in mind the flexibilities that are available under the foundations of patent law principles and also international agreements in formulating the post-grant protections (injunctions, compulsory licenses and damages). It is specifically proposed that the ‘merits’ of patentability (beyond meeting the thresholds explained above) should be factored into post-grant protections, instead of whether or not to grant a patent.

V. Post-Grant Protections

Examination of global trends will confirm move towards fact specific grant of injunctions (defined below) and damages in patent law related matters. Denial of automatic injunction in case of patent infringement brings the law closer to compulsory licenses, in a sense. The patent policy of India could be examined in continuity with the history/foundations of India law, lessons from global experience, specific nature of each technology/industry, public policy, and principles of fairness in a global context. The below are some of author’s thoughts in terms of the kind of options India could consider while embracing patents.

Broadly, it would appear fairer to have strong post-grant protections when (a) the patentee brings to this world something others have been unable to bring for a long time (either due to difficulty of the task or plainly everyone else ‘missing the boat’); (b) the patentees patents cover all or substantial material part of a product sought to be sold in market; (c) when the innovation is funded by private effort/funds, and not government funds directly; and (d) public interest appropriately weighing importance of encouraging inventors to bring new innovations which may not otherwise timely reach this world (by providing strong protection) versus ensuring ‘access’ at affordable costs of such innovations once they have reached this world (even in the duration of patent protection).

When the first three factors (a)-(c) are met, it is worth noting that the policy compulsion to grant stronger property rights could be compared to those granted traditionally with real property. While real property is limited physically and the rights often devolve based on inheritance (lesser qualification), the innovation in this case arguably merits more/similar protections since the innovation is something that does not exist before and the world would have had no way to benefit from it other than by the inventor’s contribution. Thus, strong post-grant protection may be justified to the patentee in such cases.

On the other hand, weaker protections appear proper when any of these three factors are not met. Thus, for example when a nation funds directly innovation to cure an epidemic in their jurisdiction, it may be more appropriate (from a humanitarian grounds perspective) for all in other nations also (given the globalization from an economics perspective) to have benefit of the resulting innovation at affordable price, compared to a situation when a private enterprise innovates something that would otherwise not have reached the world.

There are often references to violation of constitutional protections with too strong protections for pharmaceutical patents. The focus is on ‘access’ in the sense of distribution. The policymakers may need to appropriately weigh the ‘rights’ of those in pain to have appropriate medicines, and their rights are arguably compromised if absence of sufficiently strong patent protection could cut off sufficient efforts in bringing in new medicines as appropriate for the times. More importantly, as India continues to strengthen as a knowledge economy, India cannot afford to retain policies that discourage addressing of India specific problems (e.g., some disease in a remote part of India) that foreign companies may not be too keen to solve. Thus when the ‘production’ side compulsions are weighed against ‘distribution’ side concerns, one may need to design appropriate post-grant protections using factors such as those noted above.

With respect to pharmaceutical patents, it should be borne clearly in mind that the effective patent term due to operation of Patents Act 1970 is in the range of 9-11 years, since the remaining duration of the 21 year term would be consumed by regulatory approval. Therefore, the appropriate narrow question to frame for policy makers is whether the 9-11 monopoly granted to innovators enhance or reduce access to medicines. Though sounding insensitive, a poor man’s view would be that he has less at stake with the limited time blocking (except in case of a narrow class of medicines, which can be addressed in post-grant protections instead of defining obviousness inconsistent with plain meaning of that term), since the medicines at issue are only those that he otherwise may not have access to any way! Instead, if the incorrect notions of ‘evergreening’ are (improperly) weighed, then it creates more of a monster of the patent system, instead of a beneficial system it is intended to be!

Thus, using the above factors (a)-(d) as a framework, the various types of post-grant protections are examined.

A. Injunction: An injunction is a court order which would restrain an accused infringer from selling, making or using the patented technology, and is a very powerful remedy for patentees. An injunction would be an important remedy for any business to operate in India, and that shall be retained as an option in appropriate cases.

A strong case for injunction would be made in case of medicines type products in which the medicine is covered by a single (or very few) patents, especially if it is clear that the inventors solved a long-felt need that others have been unable to solve and that the effort was substantially private funded. When the innovation is shown funded by state for the general health of public, a stronger case can be made for compulsory licensing.

A weak case for injunction would be made in case of a software patent being asserted, especially given the possibility that the end product sought to be restrained could cover numerous other patents, subject matter not protected by any patents in force, etc. The case can be made stronger when other fairness factors such as whether the infringer is merely copying and trying to catchup (as opposed to being set of on a course without knowledge or benefit of the inventor’s invention), the patentee having many patents covering the same product vis a vis the accused infringer, and actually being a producer of that product. Such an approach clearly avoids the problems of ‘patent trolls’, encountered in US type jurisdictions.

India could optionally consider avoidance of injunction in case the accused inventor has substantially improvements in the product being sold (along the lines suggested in TRIPs). This provides additional protections for producers of innovation against ‘fundamental patents’.

The absence of injunction would mean that the patentee’s only resort is damages, which is addressed below. Similarly, even if the subject matter of patent makes a strong case of injunction, the patent may be subject to compulsory licensing. In either case, one needs to examine whether India can define a fair way of compensating the patentees since ‘money’ is typically what drives the businesses. The monetary aspect appears to be by far the most complex question.

B. Compulsory Licenses: A compulsory license is a government grant, which overrides the exclusive patent owners rights otherwise, and permits a licensee to make and sell the patented product at terms set by the government. Under current India laws, compulsory licensing of patents related to semi-conductor technology (unclear whether the term covers software which is clearly based on semi-conductor technology) is permitted only to work for public non-commercial use.

Controversies however exist in relation to pharma medicines, which appears to present challenging questions. One compulsory license that has been issued in India illustrates the magnitude of the problem. In the seminal Naxavar (Sorafenib) case, the Patentee Bayer had sought to sell the medicine at 2.8 Lakhs a month, which was clearly not affordable to the public of India. The Controller General then granted a compulsory licence permitting Natco to manufacture and sell the same medicine at Rs. 8800 (monthly dose) while granting at 6% royalty. The 2.8Lakhs per month price is that at which Bayer has sold the medicine globally. It is interesting to note that the price in global countries is supported by ‘insurance’ schemes (since most cannot afford any medicine at that price level from their own pockets), while the insurance schemes in India were noted not to offer coverage anywhere close to that monthly amount sought by Bayer.

Therefore one needs to examine the issue from the perspective of (A) when does the India Patents Act permit compulsory licenses; (B) the (monetary) terms on which the licenses can be granted.

India law provides for grant of compulsory licensing when any of three conditions are satisfied- (1) when reasonable requirements of the public with respect to the patented invention have not been satisfied, or (2) that the patented invention is not available to the public at a reasonably affordable price, or (3) that the patented invention is not worked in the territory of India. With respect to terms of compulsory license, India law requires the terms to be “reasonable, having regard to the nature of the invention, the expenditure incurred by the patentee in making the invention or in developing it and obtaining a patent and keeping it in force and other relevant factors;”.

From a patentee’s perspective, the above is too broad a discretion and there is no objectivity to what is ‘reasonable’ compensation to the patentee when a compulsory license is granted to various types of medicines.

Sound practices (especially given the openness suggested by Prime Minister Sh. Modi on a stronger patent regime) therefore appear to require clear articulation (e.g., by formal legislation) of both upper and lower boundaries for compensation/terms under the applicable circumstances, such as the ones noted above in this article. Such clarity would greatly help the businesses, both foreign and domestic, who wish to invest in innovation of medicines that can treat new (including now unknown) problems which can occur in India in future. It must be remembered that some of the harmful viruses/ diseases, etc., often are local, and India may need investments specific to its problems as well.

In summary, India may need to ensure sufficient effort to clarify the boundaries on various aspects (when/not the patents will be subject of compulsory license, upper/lower bounds to pricing if any) of compulsory licensing in view of the changes in global scenario since the 1970s.

C. Damages: Damages refer to monetary compensation to the patentee in case of finding of infringement. Damages is among the most complex topics dealt with by courts in other countries during the past couple of decades. The policy document could have examined whether or not the rules that have evolved in important jurisdictions are in variance with those under India laws, and to what extent India needs to adapt, ignore or take a different approach. These issues are likely to resurface in India courts and India interests may be best served by a considered and consultative approach spanning a reasonable duration, instead of the issues being resolved in courts.

VI. Conclusion

Unquestionably patent law is one area no nation part of global and knowledge economy (such as India) can ignore. Both granting of too strong property rights or non-recognition of legitimate IP rights for innovations will undoubtedly be harmful to societies globally in the long run. The key is clearly to understand the underlying principles, impact of choice of laws/rules, and design the laws to balance the need to incentivize innovations and yet ensure access of the fruits of innovation soon to all.

It is shown that national laws can be designed more suited to the local conditions while being within the foundations of patent law principles and international agreements. It may therefore be necessary to have different rules applicable to areas of public health/interest (e.g., medicines) versus purely functional areas (e.g., software) where there are suitable alternatives for enjoyment.

Furthermore, it can be seen that class of innovations that stand on less-firm justifications for patents are appropriately dealt with in differentiated post-grant protections, while being harmonious with global understanding of obviousness, and also its position as sine qua non of patents. The analysis also points to the kind of investigations that can be undertaken and divergent positions that ought to be considered during formulation of patent policy for a jurisdiction.

VI. Acknowledgements

I acknowledge the valuable inputs offered by my able friends who are closer than me to pharmaceutical industry.

Tagged in: Patents Act 1970
Naren Thappeta is a Bangalore based patent practitioner registered as an Advocate in India, as an Attorney with the bar of Washington DC, and as a patent agent with both India and US. He has a BTech degree in Computer Science from Andhra University (1985), and a JD/law degree from Santa Clara University, California.
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Like +0 Object -0 Guest 21 Jul 16, 13:27
A very detailed and thorough analysis. Thanks !!
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Like +0 Object -0 1SS 27 Jul 16, 14:06
Naren:

Where does the patent term in India get mentioned as 21 years?
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Like +0 Object -0 naren-thappeta 27 Jul 16, 14:37
Dear 1SS, The patent term is only 20 years (not 21 years, my mistake). Please see section 53 of the India Patents Act 1970 (as amended).

Best Regards
Naren
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