NOVARTIS vs.

Union of India1
Some Lessons
Sheela Rai*
TRIPS is a reality and India has to rework its patent law to conform to it. But that does not mean that we have a patent law that provides for TRIPS plus rules. Our interest lies in taking full advantage of any flexibility available in the agreement.
*Lecturer, West Bengal National University of Juridical Sciences, Kolkata. Email: sheela_rai@yahoo.com

The Agreement on Trade Related Aspect of Intellectual Property Rights (TRIPS) is in Annex 1 C of the Marrakesh Agreement establishing the WTO. Article 27 of the TRIPS obligates every member to grant patent to any inventions whether products or processes in all fields of technology provided they are new, involve an inventive step and are capable of industrial application. The WTO has its dispute settlement mechanism under the Dispute Settlement Understanding. Article 64 of the TRIPS makes Article XXII and XXIII of the GATT 1994 (which is an Annex 1A agreement) as elaborated and applied by Dispute Settlement Understanding applicable in matters relating to TRIPS. India was obligated to reform its patent law to conform with the TRIPS by 2005. The Patent Act of 1970 was amended in stages. The last amendment in this series was brought first by an Ordinance 7/2004 which among other things also had provision for amendment of section 3(d). Section 3 of the Patent Act, 1970 states what are not inventions. Section 3(d) as it originally stood mentioned,
The mere discovery of any new property or new use of a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs atleast one new reactant .

Section 3(d) as was amended by the Ordinance 7/2004 mentioned,

The mere discovery of any new property or mere new use of a known substance or of the mere use of a known process; machine or apparatus unless such known process results in a new product or employs atleast one new reactant .

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However, the Patents (Amendment) Act, 2005 which came into effect from I st January 2005 mentioned,
The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs atleast one new reactant.

In the present case which was a writ petition filed in the High Court of Madras, the amendment to section 3(d) was challenged on the ground that it was not in compliance with Article 27 of the TRIPS and that it gave unguided discretionary powers to the Patent Controller which might be abused by rejecting the patent application on the ground that there was no invention. As such there was violation of Article 14 of the Indian Constitution because what would amount to enhancement in the known efficacy was not defined in the Act. The Madras High Court did not accept any of the contentions. Regarding the argument of violation of Article 27 of the TRIPS, the Court held that it did not have the jurisdiction to decide the issue. The Court also refused to grant any declaratory relief that would state that there was a violation of the TRIPS Agreement. As for the argument relating to Article 14 of the Constitution, the court did not find any violation of the constitutional provision. The Issues Enforcement of Indias International Obligations The contention of the counsels of the petitioner was that the amended section was not in conformity with Indias obligation under the Agreement on TRIPS. It was argued that the amendment brought by the ordinance was in compliance with the TRIPS but without any reason the proposed amendment sought to be introduced by the Ordinance was completely given up and instead the amended section was brought in. Counsels on the opposite side argued that the amended section was compatible with Article 27.1 of the TRIPS. However, even if it was not compatible, the remedy could not be got from the Indian courts and the Indian Courts did not have jurisdiction. The remedy could be found
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only in the Dispute Settlement Body of the WTO. Court accepted this contention and held that unless an international obligation was domesticated, Indian courts did not have the jurisdiction. WTO provides for dispute settlement mechanism and TRIPS was in the nature of ordinary contract therefore the choice of the forum in that contract has to be respected. Court also refused to grant declaratory relief on the ground that such a relief would not serve any purpose because the court cannot compel the Parliament to enact a law. In other words, the declaratory relief, even if granted, would be only on paper, on the basis of which, the petitioner cannot claim any further relief in the Indian courts. The decision of the Court could not have been otherwise. It is without doubt that Article 51 of the Constitution requires that the State shall endeavour to foster respect for international law and treaty obligations in the dealings of organised peoples with one another. But Article 51 of the Constitution is a directive principle which is not enforceable. With regard to Indias treaty obligation the practice of the courts so far has been that so long the international instruments are not inconsistent with Indian laws, the courts rely upon them for interpreting Indian laws and constitutional obligations. 2 But an international obligation would not be enforced by Indian courts if it would be inconsistent with Indian law.3 With regard to the declaratory relief also it is difficult to understand the relief which the petitioner would have got by it. Based on the principle of separation of powers the Constitution of India does not envisage a role for the court where the courts would order the Parliament to enact a law in a specific manner. Possibly the petitioner a multinational company wanted to get a declaration from the Court which could have been used against India in the WTO dispute settlement proceedings. Section 3(d) vis-a-vis Article 27.1 of TRIPS Although the court did not decide this issue on the ground that it does not have the jurisdiction it would be pertinent to examine this issue here. Article 27.1 of the TRIPs Agreement stipulates that patents shall be available for any inventions, whether products

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or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Invention is not defined in the Agreement.
The ordinary meaning of invention suggests the output of an intellectual activity in the form of new knowledge of a technical nature. To invent is to create by though, originate (new method, instrument, etc.). It also suggest a distinction between creations and mere discoveries and, more generally, between inventions and other subject matter that does not qualify as such. 4

Members can adopt more expansive concept of invention at the national level but they are not obliged under Article 27.1 of the TRIPS to grant patents to what is not ordinarily understood as invention. Article 2(1)(j) of the Indian Patent Act defines invention as a new product or process involving an inventive step and capable of industrial application.Thus the Indian Patent law, after amendment, grants patents to products and processes.
Products include machines and other devices, chemical compounds etc. process is a course of action, proceeding, especially series of operations manufacture, printing, photography, etc. Process are generally deemed encompass in patent law the sequence of step required to manufacture otherwise obtain a product.5 A in to or

In some countries (e.g. the US and the European Union) methods of use are also patentable. Method of use patent allows patent protection for inventions consisting of the use of the product not suggested by prior art.6 Writers doubt whether a literal interpretation of Article 27.1 obligates a member to grant such patents. 7 Another closely related issue is that of second indication of a pharmaceutical products, that is its use for a treatment different from that previously known for the same compound. 8 For the second indication patents claims are framed under the so-called Swiss formula (use of x for the manufacture of a product y to treat disease z).But there is lack of novelty in such claims. Section 3(d) of the Indian Patent Act, 1970 does not consider such inventions as patentable.9 It states,
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The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant. ---------is not invention within the meaning of the Act.

The claim is allowable only if the compounds are new. However, if the compounds are known and their use in pharmaceutical compositions is known, such claims are not allowable even if the particular pharmaceutical use is new. This is because the pharmaceutical composition prepared is not novel unless it is materially different from previous compositions; the fact that it is intended to be used to treat a medical condition different from that for which it has previously been used is irrelevant.10 S. 3(d) of the Indian Patent Act as amended in 2005, has been approved by international authorities. Referring to S. 3(d) of the Indian Patent Act, Carlos M. Correa states,
This is an important issue for the design of a patent policy sensitive to public health concerns. Admitting such patentability expands the scope of protection where no new product has been developed. It is in the interest of consumers to keep patent protection limited to products and processes that make real contributions to the state of art, and to avoid the granting of patents that may otherwise affect legitimate competition and better access to medicines.

Therefore, the provision in its present form can not be considered as violating the TRIPS Agreement. Section 3(d) vis-a-vis Article 14 of the Constitution The amended section 3(d) was challenged on the ground that it was inconsistent with Article 14 of the Indian Constitution. 11 The challenge was based on the argument that the section was vague, arbitrary and conferred uncanalised powers on the statutory authority, the patent controller. The substance of the argument of the petitioners was that the statute did not define and give any guideline as to what would be considered as enhancement of known efficacy. In this situation the statutory authority may misuse the discretion given to it by rejecting the application as not being inventions because they do
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not result in the enhancement of known efficacy. The Court came to the following main conclusions: 1. The patent applicant in his application would provide the grounds for his claim for the grant of patent and how the discovery has resulted in the enhancement of known efficacy. The patent controller would be guided by various relevant details given by the patent applicant for arriving at a decision. The patent applicant would definitely be aware of the therapeutic effect of the drug for which he had already got a patent and what is the difference between the therapeutic effect of the patented drug and the drug in respect of which patent is asked for. According to the Court it was a simple exercise preceded by research for any patent applicant to place on record the therapeutic effect/efficacy of a known substance and what is the enhancement in that known efficacy. 2. In view of the technological advances already made and likely to be made in future it would be difficult for the legislature to enumerate all the possible instances of efficacy to guide the Statutory Authority. The legislation uses general terms and it is left to the court to iron out the creases. The statutory authority and later the court understand the general expressions in the context in which they are used in a case to case basis depending upon the facts available in each case. 3. India is a country with vast number of people below the poverty line. It is necessary to provide access to life saving drugs to the people of India. Parliamentary debates show that the welfare of the people of India was in the minds of the lawmakers without being oblivious to the obligations of India in the WTO. They only wanted to prevent evergreening. 4. Once parliamentary intention is ascertained and the object and purpose of the legislation is known, it then becomes the duty of the court to give the statute a purposeful or a functional interpretation. This is what is meant when, for example, it is said that measures aimed at social amelioration should receive liberal or beneficent construction.

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5. The argument that Statutory Authority was likely to misuse the discretion by rejecting the application as not an invention did not find favour with the court. The Court felt that there was inbuilt protection in the amended section allowing each patent applicant to establish that his discovery had resulted in the enhancement of the known efficacy of that substance and that the derivatives were significantly differing in properties with regard to efficacy. If the Statutory Authority, abuses its power in an arbitrary manner and passes an order, then, the same could be corrected by the hierarchy of forums provided in the Act itself in addition to the further relieves available before the Courts of Law. 6. Article 14 can be invoked only when it shown that in the exercise of a discretionary power there is possibility of a real and substantial discrimination and such exercise interferes with the fundamental right guaranteed by the Constitution. 7. Every discretionary power is not necessarily discriminatory. Equality is not violated merely by conferment of discretionary power. It is violated by arbitrary exercise by those on whom it is conferred. This is the theory of "guided power". This theory is based on the assumption that in the event of arbitrary exercise by those on whom the power is conferred, would be corrected by the courts. 12 It cannot be presumed that the authorities would administer the law with an evil eye and an unequal hand. 8. The law relating to economic activities must be viewed with greater latitude than laws touching civil rights. The legislature which is the representative of the people should be allowed some play in joints in this regard. The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. The statement of objects and reasons of the Patents Act, 1970 showed that there were economic and political changes since the 1911 enactment therefore there was need for a patent law which would neither jeopardize the interests of the consumers nor that of the trade and industry. Therefore there cannot be any doubt at all that the Patents Act as it stood then and as it stands today, is designed to safeguard the economic interests of this country and if that is so, the amended section must be viewed with greater latitude.

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The judgment of the Madras High Court should be given all the applause it deserves. TRIPS was brought on the Uruguay Round agenda at the insistence of the United States which was working under the influence of the strong pharmaceutical lobby. The pharmaceutical giants preferred the WTO to WIPO because of its more effective dispute settlement mechanism. WTO being a single undertaking, developing countries had no option but to accede to the TRIPS and bring their measures in conformity to it even though that was against the interest of the vast majority of their population. Much has been said regarding the good and bad effects of a strong patent regime. We are not going to restart that debate again. TRIPS is a reality and India has to bring its patent law in conformity with it. But that does not mean that we have a patent law which provides for TRIPS plus rules. Our interest lies in taking full advantage of any flexibility available in the agreement. Every country including the developed countries have been taking advantage of these flexibilities in the trade and other international rules to safeguard the interests of their population. There does not seem to be any reason why India should not do the same and grant patent to a discovery which is usually not considered as invention by the experts.

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Novartis AG represented by it's Power of Attorney Ranjna Mehta Dutt vs. Union of India (UOI) through the Secretary, Department of Industry, Ministry of Industry and Commerce and Ors . (MANU/TN/2007/1407)
2

Prem Shankar Shukla vs. Delhi Administration, (1980) 3SCC 526; Vishaka vs. State of Rajasthan (1997) 6SCC 241; Peoples Union for Civil Liberties vs. Union of India (1997) 3SCC 433. 3 Jolly George Varghese vs. Bank of Cochin AIR 1980 SC 470 4 Carlos, M. Correa, Trade Related Aspects of Intellectual Property Rights: A Commentary on the TRIPS Agreement, (Oxford University Press2007), 272. 5 Ibid. 273. 6 Ibid. 7 ibid. 8 ibid. 274. 9 Section 3 to 4 of the Patent Act set out a list of items which are not patentable inventions. 10 Narayan, Patent Law, (Eastern Law House, 4ed. 2006) 112 11 Article 14 guarantees equality before law and equal protection of laws within the territory of India. Under the present interpretation of Article 14, arbitrariness is considered antithetical to the concept of equality before law and equal protection of laws. 12 Quoting Seervai, Constitution of India 4th Edn, p. 546.