February 08, 2015

New Patent Policy: Surrendering to US Industry Pressure

Amitava Guha

AMONG notable hyper activities of Prime Minister Modi is his rush to change most important acts and policies of the country intended to please foreign corporate entities. One such move is to change our intellectual property rights system to make it more suitable to the US multinational giants. Several US agencies, prompted by the corporate giants, have been mounting pressure on India to amend its trade policies and even issuing threats that they would take measures against India very soon.




The United States International Trade Commission (USITC) had launched an investigation into India’s trade policies at the request of the Senate Committee on Finance and the House Committee on Ways and Means in September 2013. Multiple pharmaceutical firm representatives participated in a hearing for the USITC investigation held in February 2014. A report released on 22 December 2014, not surprisingly, concluded that a wide range of restrictive Indian policies has had adverse impact on US firms doing business in India. Among the various key policy barriers, treatment of intellectual property (IP) was reported to have large negative effects on specific US industries. The report went on to suggest that if tariff and investment restrictions were fully eliminated and standards of IP protection were made comparable to the US and Western European levels, US exports to India would rise by two -thirds.

Then, the United State Trade Representative (USTR) released its 2014 Special 301 Report on 30 April 2014, taking up more than 100 submissions on multiple issues and involving several countries. India has been named on the warning (hit) list in this report every year and for the second consecutive year India was in the Priority Watch List. This year’s report specifically raised concerns over Section 3(d) of the Indian Patents Act, and clauses of pre-grant oppositions and compulsory licences. The report also called for an ‘Out-of-Cycle Review’ for India in the last quarter of 2014 to evaluate the ongoing engagement on issues of concerns with respect to India’s environment for IP protection and enforcement as a ‘tool’ to “encourage progress on IP Rights (IPR) issues”.

A request for a second USITC investigation into India’s trade practices was made by the US Congress on 24 September 2014. This investigation is in addition to the USITC investigation into India’s trade and investment policies requested by the same lawmakers in August 2013, the results of which were reported in December 2014.




Interestingly, Prime Minister Narendra Modi was reminded of all the investigations and their reports by USTR during his recent US visit. Modi’s direction to concede to the US threat was clearly visible in the Draft Patent Policy circulated by the Department of Industrial Policy and Promotion (DIPP). The policy reveals that Modi is eager to do away with whatever good scopes remained in the Indian Patents Act. Initially, it started with a show of genuine honesty for developing an ideal patent policy by setting up an expert committee. The selection of experts was justifiable and drawn from top law institutes in the country -- Shamnad Basheer of the National University of Juridical Sciences, Kolkata; Yogesh Pai, assistant professor at the National Law University, Delhi; and Prabuddha Ganguli who holds the IPR chair at Tezpur University in Assam. They were asked by the Commerce Ministry’s Department of Industrial Policy and Promotion (DIPP) to prepare a base document to help formulate a national IPR policy. After a round of meetings, the committee submitted a draft and suggested that it be put out for public comments to facilitate a wider discussion on what the contours of the policy should be. But that did not happen. In early September, Commerce and Industries Minister Nirmala Sitharaman announced that the government would for the “first time” come out with a policy on IPR to make it more robust.




A meeting with so-called stakeholders were called by DIPP on 21 September. The three experts were also invited to the meeting, which Baseer could not attend. There was very little discussion on the content of the policy. The base document of the experts had not been sent to DIPP then. Surprisingly, on 24 October, DIPP announced that it had constituted a six-member think tank, excluding the academics to draft the national IPR policy, to advise DIPP on IPR issue. Who are these academics? The panel is headed by former Intellectual Property Appellate Board chairperson (2011-2013) Prabha Sridevan, who was also a judge of the Madras High Court. Sridevan had upheld the grant of India's first compulsory licence for Bayer's cancer drug Nexavar. But all other members of the think tank have serious conflict of interest and their inclusion in a body meant to draft the national policy on IP is questionable. Other members of the panel include Pratibha Singh, a senior lawyer and wife of additional solicitor general Maninder Singh, one-time junior of Finance Minister Arun Jaitley. They have a law firm Singh & Singh, which, has appeared for various drug companies both multinationals and Indians including Cadila. Incidentally, Dr Unnat Pandit, deputy general manager of Cadila Pharmaceuticals, is also a member of the think tank.

The third member is lawyer Punita Bhargava, niece of Finance Minister Arun Jaitley. She is a founding partner of the firm Inventure whose clients include major national and international corporations and government organisations. The think tank also includes Narendra K Sabarwal who is listed as retired deputy director general of World Intellectual Property Organization (WIPO). But his current position is the chair of the IPR Committee of FICCI. 
The think tank also includes Rajeev Srinivasan, director of Asian School of Business in Kerala, a private business school. It is surprising that DIPP did not choose any of the seasoned IP academicians. The HRD ministry has set up 20 IPR chairs for development and growth of IPR education, research and training -- six IPR Chairs in universities, six in IITs, five IPR chairs in National Law Universities and three IPR chairs in IIMs (Kolkata, Bangalore and Ahmadabad). Yet, none of these academicians working on IP issues has been included.




The draft policy circulated by the Department of Industrial Policy and Promotion is the home work of this think tank, which is resting on the interests of national and international corporate. The policy primarily aims to develop a strong intellectual property (IP) regime. There have been many studies on IPR showing that this does not contribute to development. The UK Commission on Intellectual Property Rights -- an independent body set up in May 2001 by the British government -- concluded that the IPR system is not as beneficial for developing countries as for the industrialised ones as it increases the cost of accessing many products and technologies that are of interest to poorer regions. The report, furthermore, points out that stronger IPR protection is not necessarily better for developing countries. “Developing countries should not be coerced into adopting stronger IP rights without regard to the impact this has on their development and poor people,” said John Barton, Chair of the Commission. Instead, the IP systems should be tailored to the country's state of development and its particular circumstances, the Commission concluded.

This system has fundamental objective for monopoly creation and unbound profit enjoyment for a large amount of time by protecting from challenges by competition. In the developed countries, this has not helped much for real innovations. In the past 10 years, no major medicines have been invented in the developed countries. In a country like India, vast majority of medicines are patented by foreign companies. Business Standard reported on 28 December last that over 77 percent of total 4,614 patents in the pharmaceuticals sector were granted to foreign companies in the past 10 years.

Similarly in 18 other sectors including agriculture engineering, bio-chemistry, bio-technology, chemical and mechanical engineering, India has accorded over 70 per cent of legal protection to foreign companies. In fact, in sectors such as communication technology, computer science and electronics, the country granted over 90 per cent of patents to global firms during that period. To global firms, India has granted 10,398 patents in mechanical engineering sector; 9,506 in chemicals; 4,937 in electronics; 2,896 in communications technology; 2,236 in bio-technology; and 1,709 in computer sciences.

Therefore, strong patent regime helps the monopoly and is harmful for developing countries. This established fact has not become any factor for consideration in the draft. It goes further to impose more new acts and safeguard measures for foreign monopoly. Therefore, this policy does not address development need of the country though in the preamble of the draft policy many paragraphs state that this policy targets “robust development” agenda. Its statement in clear terms says its main objective is to “stimulate large corporations both Indian and foreign to create, protect and utilise intellectual property.” Yet the policy draft advocates for a very strong patent regime “since it is difficult to predict the reach of existing laws in a changing and dynamic knowledge field, it becomes necessary to carry out legislative changes, as may be required from time to time.” It is thus a misnomer for legislative changes for unpredictable consequence.

The policy discussed much about the need for introduction of ‘Utility Model’ through comprehensive new legislation, though this is nowhere a condition for Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement of WTO. Utility Model is provided for incremental innovations in the industry which provided seven to 10 years of exclusive use by the inventor or a kind of patent for frivolous invention. It was stated that this will contribute to growth by simulating small-scale enterprises (SMEs) for more production through innovative technology. This is predominantly visible in the US but many developed countries including the UK had not travelled through the Utility Model path.

The three-member expert committee, in its 68-page report, had advised that introduction of Utility Model will not be helpful for our country. They argued that there are a number of countries who tried this model and the analysis of the experience of some of these countries indicates that the results are not encouraging particularly in the post-globalisation period. They also asked that there must be strong empirical evidence to show that SMEs are involved in aggressive innovation and that there is imitation of these innovations by competitors resulting in market failure due to lack of any IP protection (patent, trade secret or unfair competition). The draft policy yet proposes to “enact laws to address national needs, to fill gaps in the protective regime of IPR such as utility models and trade secrets.”

While amending the Indian Patents Act, 1970, Left parties pushed then NDA government to use maximum flexibilities available in WTO agreements, outcome of which was that the amended Act had provided lot of scopes in the areas of patentability, compulsory licensing and safeguarding of plant varieties and seeds. US-based industries had opposed such move strongly and in recent occasion, the US Trade Representative has expressed clearly that they will take measures so that India do not use such flexibility. Instead of complaining before the dispute settlement body of WTO, they again put India in the hit list of the Special 301 US Omnibus Trade and Competitiveness Act. Now that a very obedient Indian government wagging tails to please the US, they put mandates for a very strong patent protection measure. They expressed strong objection to Sec 3(d) of the Indian Patents Act which forbade granting of patent to any medicines with insignificant claims. Based on this clause, the Intellectual Property Appellate Board had rejected patent claim of a foreign company for their medicine being sold in India in very highly inflated price.

Displeasure was also expressed by multinational companies while, for the first time, compulsory licence was granted to a medicine following the provisions in the Indian Patents Act. Reacting to this, the United States Trade Representative declared that it would take measure to discourage the Indian government to apply compulsory licences. It is obvious that the government is now hurrying to shred all kind of flexibilities of the Indian Patents Act in two ways -- to amend the Indian Patents Act and by creating several other Acts for a strong and binding patent regime.

The new element which the policy draft proposes, utility model will thus give way to overcome Sec. 3(d) grant patent under any pretext. Though this model is aimed at SMEs but several instances show that the large multinational companies use SMEs for marketing their product which can also used such utility model. The new development in India is use of patent pool system by the multinational companies to pre-empt compulsory licences. This method has been used by Gilead and Roche in the recent time when they formed a strategic alliance with some Indian companies thus disallowing any other to apply for compulsory licence.

Similarly another discord was spelled out by the global seed giants on Sec. 3(j) of the Indian Patents Act which restricts patenting of life forms and agricultural materials. In fact, pressure has been mounted for removal of the entire Sec.3 along with its sub-clauses which has carefully defined non-patentable materials in view of public interest. The policy has repeatedly mentioned for review of the Patents Act and introduction of trade secret act as a part of the Patents Act. This would become prelude to many other changes. Though the policy draft says it is aimed at “protection of undisclosed information not extending to data exclusivity” but there is apprehension that in given opportunity data exclusivity would also be engulfed. So far data exclusivity has not been included in our patent act as this would kill the generic introduction of medicines particularly by SMEs.

The policy draft also included issues of copy right in case of software, design and trade mark regulations. These are separate treaties included in WTO Agreement but not mingled with TRIPs. Such linking would provide opportunities to prolong patent period much beyond 20 years. It also promotes involvement in ‘international treaties and agreements’ which in the patents areas had put developing countries in the losing end. Relevant recommendation is – “Engage actively in the negotiation of international treaties and agreements in consultation with stakeholders; examine accession to some multi-lateral treaties which are in India’s interest; and, become signatory to those treaties which India has de facto implemented to enable it to participate in their decision making process.” This part is dangerous since it not only encourages de facto implementation of dictates of the global corporate but also attempts to regularise them. This enhances policy making process by executive decisions ignoring the democratic and parliamentary approval.

In fact experience of Canada’s suffering from NAFTA signed decades ago shows such loosing syndrome. Both bilateral industrial treaties and free trade agreements with the developed countries imposes conditions beyond WTO Agreement on TRIPs.

The policy draft also proposes standard setting in various areas of technology. Setting standards in national level may not cause problem but compulsion for international standards will not allow indigenous industries to grow but would cause hike in prices of commodities. Similar afford in WHO for International Harmonisation of medicine standards was put to so high level that even developed countries opposed it which was finally abandoned due to possible enormous rise in prices of medicines. Recent move to teach judges of Indian Courts by US lawyers was abandoned in face of strong opposition. In future these corporate sponsored lawyers will teach and train our judges.

The policy draft mentioned that “recommending designation of a specialised patent bench in the High Courts of Bombay, Calcutta, Delhi and Madras for speedy disposal of patent cases and providing infrastructural support such as video-conferencing.” This may not be of much help. Most of the patent disputes are found to land in the Supreme Court. There are recommendations for training of judiciary and creation of patent chairs in several universities but these would take a long time.

The most sensitive area is creation of a high power body: “It has become necessary to establish or designate a high level body in the government to coordinate, guide and oversee implementation and future development of IP in India in accordance with the National IP Policy.” The power and responsibility described in the draft policy is primarily is to coordinate among the ministries and monitor policy implementation. This high level body will definitely be constituted with big industry people who are proponent to the US policy dictate. This body will work independently and recommend for policy changes and framing of laws. It will not function in any way democratically and certainly ignore national need. In the meantime, a high power committee has been formed jointly with the US for framing the strategy on IPR for inclusion in the Bilateral Investment Treaty. No one so far knows what kind of negotiation is being worked out by this high power committee.

It is evident that a scheme is under convert operations in the name of new patent policy to change the Indian Patents Act quickly and in collaboration with the US business entities. The patent policy is very clear that the government would make the patent regime very strict and no national interest would find any place in future.