PRODUCT v.

PROCESS PATENT UNDER INDIAN PATENT LAW 1

PODUCT v. PROCESS PATENT

UNDER INDIAN PATENT LAW

NAME PAGE NO.

Introduction 3
Research methodology 5

CHAPTER - 1
India and the international patenting system 6

CHAPTER - 2
Distinction between Product and Process protection 7

CHAPTER – 3
Rights of a patentee under the Product and Process patent 10

CHAPTER - 4
Conflicts with Developed Countries 11

CHAPTER – 5
Product patent and Compulsory licensing 12

CHAPTER – 6
Making the Patent Legislation in compliance with TRIPs 13

CHAPTER - 7
Issues against the new regime of Patent Law in India 16

Conclusion 20
Bibliography 22

Electronic copy available at: http://ssrn.com/abstract=1758064

 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 2

INTRODUCTION

“Affluent societies are spending vast sums of money understandably on the search
for new products and processes to alleviate suffering and to prolong life. In the process,
drug manufactures have become a powerful industry. My idea of a better- ordered world
is one in which medical discoveries would be free of patents and there would be no
profiteering from life or death.” – Mrs. Indira Gandhi , ( World Health Conf, 1982)

"If people don’t get a fair return in innovation, they won’t invest in finding new cures for
disease — this will be disastrous for patients” - Ranjit Shahani, Vice-Chairman &
Managing Director, Novartis India Limited1

Following the TRIPs Agreement and amendments in the Indian Patent Act, India is
now part of a global treaty in which technological innovations are encouraged and
protected, not just in few but a very large number of countries. Copying drugs is now no
longer possible because of product patents. The Indian pharmaceutical industry has also
understood the Intellectual Property Rights (IPRs) especially patents have to be
integrated into business strategies – there is no way out. Patents are powerful tools for
enhancing the Research and Development (R&D) quality and also business profits. The
fast changing global scenario and challenges imposed by the new patent regime make
„IPR compliance‟, the need of the hour. Even so, opinion is evenly divided on their
beneficial and adverse effects on developing economies like India‟s. By and large, most
developed countries are for strong IPR protection and highlight its virtues in creating
knowledge wealth, encouraging innovation, providing access to technology, stemming
brain drain and improving of quality of life. For emerging countries like ours, having
good educational institutions, strong manufacturing base and talented manpower, IPRs
offer enormous opportunities. This is especially true in the field of Biotechnology,
Information Technology and Pharmaceuticals.

Under TRIPs agreement, WTO members have to enforce product patents for
agrochemicals and pharmaceutical compounds. About 50 developing countries, including
India had not complied with this requirement during the Uruguay round of GATT
negotiations. The much awaited and debated patents amendment was finally passed in
parliament in March 2005. This third amendment to the Indian Patents Act 1970 brought
India in the line with the TRIPs agreement.

Omission of product patents for agrochemicals and pharmaceuticals was our

strength until now. This had contributed to widespread growth of generic pharmaceutical
industries, also making available medicines to the public at very low cost. The Indian
domestic pharmaceutical industry grew strong, highly competitive and a big supplier of
medicines and drugs within the affordable prices to common man because of a regulatory
system focusing only on process patents along with a rigid price control. India developed
into a world class generics industry. In fact in 2002, India was the world‟s largest

1
http://www.legalserviceindia.com/article/l255-Pharmaceutical-Product-Patents.html

Electronic copy available at: http://ssrn.com/abstract=1758064

 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 3

producer of generic drugs in terms of volume.2 The introduction of product patent along
with the new regulations will cause significant changes in the Indian IPR industry.
Product patent regime will be particularly favorable to the players already developed and
well-equipped in terms of scientific and technical resources. So, naturally, the main
concern was about the fate of our pharmaceutical industry and consequent cost escalation
of medicines when we allowed product patent form 1st January 2005. Hopefully Indian
pharmaceutical industry will not be much impacted by the new Product Patent regime.

In India, 97 per cent of drugs are off patent and are manufactured by a vast number
of companies. The key therapeutic segments include anti-infective, cardio vascular and
central nervous system drugs. The decades of incubation and shielding of IPI by
favorable government policies and absence of foreign competition is over. IPI is in the
cross roads now and staring at a new world full of opportunities and threats.3

More specifically, it has been suggested that all countries should adopt product
patents instead of process patents. Supporters of product patent argue that this regime
actually provides more comprehensive protection to the inventor since the product itself
is protected. Supporters of process patent argue that this regime promotes competition
and may also inspire innovation of new technologies that are more efficient. Many
countries, who up to recently were following process patent systems, have been forced to
change their laws and start pursuing product patent regimes. For example, India moved
from a process patent system to a product patent system in 2005. The patent law is one of
the seven intellectual property laws protected under this agreement. Section 5 of the
Agreement on TRIPs deals with Patents. Article 27 says that “patents shall be available
for any inventions, whether products or processes in all fields of technology provided that
they are new, involve an inventive step and are capable of industrial application”.

2
http://www.ideas.rpec.org/p/nbr/nberwo/10159.html
3
http://www.boloji.com/health/articles/01036.htm
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 4

RESEARCH METHODOLOGY:

AIMS AND OBJECTIVES:

This paper provides a theoretical analysis of product and process patent regimes in the
context of Indian Patent Law particular after the 2005 amendment in Indian Patent Act,
1970 in consequence to the TRIPs Agreement. The purpose is to bring forth the current
position of trade between India as a developing country and the developed countries in
terms of product and process patent.

STYLE OF WRITING:
The researcher has used analytical and descriptive style of writing

SOURCE OF DATA:

The researcher‟s main source of data collection was secondary data as collected
from various books, articles, journal and the various websites.

MODE OF CITATION:
The researcher has followed a uniform mode of citation throughout this project.

SCOPE AND LIMITATIONS:

The researcher has made the best possible efforts to study present legal position related to
the patent system in India, particularly in relation to the TRIPs agreement and the new
amendment made to the Patents Act in 2005. What will be the impact after introducing
product patent system in place of process patent system in India. The researcher also
thinks there is ample scope for further research in this issue.

ISSUES RELATED TO PRODUCT AND PROCESS PATENT IN INDIA:

1. Rise in prices of drugs in India.

2. Traditional system of medicines in India.
3. Foreign direct investment in the pharmaceutical industry of India.

HYPOTHESIS:

The only solution for the proper patent system in India is to have proper implementation
of law. Strict laws for the patent protection are required to ensure the development in
pharmaceutical industry. People will be motivated to do more and more research and
development and come up with new innovations only when their efforts are given proper
protection of law.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 5

CHAPTER – 1

INDIA AND THE INTERNATIONAL PATENT SYSTEM

India‟s approach towards the evolution of the international patent system, as it exists
today, is one of caution. There is an increasing realization in India in the last two
decades, about the role of the international patent system in matters of industrial growth
and economic development. While this is so, it is to be noted that India was not a party to
the Paris Convention on Industrial Property 1883, which embodies the main principles of
the international patent system, till 1998. India joined the Paris convention on 7
December 1998.4From here, the focus of revising the international patent system shifted
to the General Agreement on Tariffs and Trade (GATT) with the launching of its most
ambitious Uruguay Round of Negotiations. India played a crucial role in these
negotiations albeit with little success particularly with regard to the evolution of the
principles of IPR protection in the Agreement of Trade-related Aspects of Intellectual
Property Rights.

India had joined the World Intellectual Property Organization (WIPO) in 1975. WIPO
provided institutional framework to the Paris Convention. India, along with other
developing countries, was not in favour of evolving uniform standards for the protection
of patents in the Uruguay Round of Negotiations. It had taken the view that the
Negotiating Group should not deal with questions of what should be the proper level of
protection of IPRs, but should confine itself to the negative effects on international trade
of the implementation of existing laws and treaties for the protection of IPRs.

Article 27 of the TRIPs Agreement provides for five uniform standards, namely (a)
availability of patents for all kinds of inventions; (f) patent to be granted in all fields of
technology, whether products or processes; (c) inventions to be patentable should fulfill
the criteria of novelty, inventive step and industrial applicability; (d) patents should be
available and patent rights and patent rights enjoyable without discrimination as to the
place of invention, the field of technology; and (e) patents granted irrespective of
products‟ importation or local production.5With the WTO regime on IPRs coming into
force on 1st January 1995, India had a marginal space to accommodate its concerns.
While for India, its concerns on IPRs, particularly on patent protection, were clear, its
WTO obligations required it to modify its existing patents law. Consequently, India
amended its Patents Act 1970.

It should be remembered that amendment to Patent Act in 2005 was taken not particularly
to meet the immediate needs and aspirations of the people of India; it was adopted
because of the compulsion of TRIPs and to be able to discharge the obligations that India
has undertaken under the WTO.

4
BIMAL N. PATEL, India and International Law, (1st Edn.), at p. 93.
5
Ibid, at p. 111.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 6

CHAPTER – 2

DISTINCTION BETWEEN PROCESS AND PRODUCT PROTECTION

What is Patent: According to World Intellectual Property Organization (WIPO),

intellectual property refers to the „product of the mind: inventions, literary and artistic
works, any symbols, names, images, and designs used in commerce.‟ 6 A patent is a
limited monopoly that is granted in return for the disclosure of technical information.7 A
patent is a right to exclude others from making, using, selling or offering for sale the
subject matter defined by the claims. In order to exclude someone from using a patented
invention in a court, the patent owner, or patentee, needs to demonstrate that what the
other person is using falls within the scope of a claim of the patent. Therefore, it is more
valuable to obtain claims that include the minimal set of limitations that differentiate an
invention over what came before, i.e. the so-called prior art. On the other hand, the fewer
the limitations in a claim, the more likely it is that the claim will cover or "read on" what
came before and be rejected during examination or found to be invalid at a later time for
lack of novelty.8

Fundamental Principles underlying the Patent Law in India: The fundamental

principle of the Patent Law is that patent is granted only for an invention which must be
new and useful. That is to say, it must have novelty and utility. 9The mere collocation of
two or more things, however, without some exercise of the inventive faculty in
combining them is not subject-matter for a patent. In case of a combination the inventor
may have taken a great number of principles which are common knowledge and acted on
a number of principles which are well-known. If he had tried to see which of them, when
combined produce a new and useful result, and if he succeeds in ascertaining that such a
result is arrived at by a particular combination, the combination will, generally speaking,
afford subject-matter for a patent.10

The essential feature of a patent must be in respect of an invention and not

discovery. In respect of one single invention there must be one single patent. A patent
may be in respect of a product or in respect of process. But it is not possible to bifurcate a
patent and state that the relates to the substance and the other to the process. In order to
have complete patent, the specifications and the claims must be clearly and distinctly
mentioned.11.

6
JENNIFER DAVIS, Intellectual Property Law, (2nd Edn.), at p. 2.
7
L.BENTLY AND B. SHERMAN, Intellectual Property Law, (2nd Edn.) at p. 323.
8
http://en.wikipedia.org/wiki/Claim_%28patent%29
9
AIR 1982 SC 1444 (1448)
10
Lallubhai Chakubhai Jaiwala v. Chimanla AIR 1936 Bom 99 at p. 104-105
11
Imperial Chemical Industries Ltd. v. Controller General of Patents, Designs & Trade Marks AIR 1978
Cal 77.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 7

What is the distinction between Product and Process Patent?

Though this question is not relevant now as the Indian Patents Act now provides
protection for the Process and Product provided it satisfies the patentability criteria it
would be appropriate to understand the distinction very clearly.

The issue relating to protection of a product and the protection of a process is very
relevant only in the case of inventions in the chemical field. The basic philosophy behind
the grant of a patent for the process for the preparation of a product is that the said
product can be manufactured by a totally new, different and innovative method.

When one refers to a patent as product patent it means that he has developed a new
product. Similarly, when one refers a patent as process patent, it implies that he has
developed a new and improved process for producing a known product. In the case of a
product patent, one will have claims (defining the area of the legal protection) for the new
product and if he desires can also have claims for the process for preparing the said
product. Of course if he does not claim the process is mandatory that the process for the
preparation of the new product should be disclosed in the text of the document
(specification).

Whereas, in the case of a process patent, one can have only claims for the process and not
for the product, as the product prepared by the said process is already known and
therefore there is no novelty in such a product.

With the coming into force of the product patent regime in India only those products
which are new on the date of filing of the application for patent for that product will be
patentable and not others. The exception to this fact is the WTO applications (meaning
those applications claiming new pharmaceutical/agricultural chemical products) which
have filed since 1-1-1995. In other words, the products which are already known prior to
31-12-2004 (except the above said WTO applications) cannot be patented as their novelty
has been lost.

On the other hand, the rights in the process patent are confined to the use of that
particular process of preparing the product and nothing else. Therefore, anybody else can
develop an alternate process and if it satisfies the criteria of patentability, he can secure a
patent for that alternate process. In this context, it should be noted that in this case the
product obtained by the processes is already known. Therefore, nobody gets the
protection for the said product and hence the commercial production of the said
compound by the alternate process is possible without the fear of any infringement, even
though there is patent for another different process of preparing the same substance is in
force in the same country. The possession of a patent confers on the patentee not merely
certain valuable monopoly rights and privileges, but also certain obligations and duties.12

It is also to be noted that if the alternate process for a product developed is very efficient
and the said product is very useful having good commercial potential the two different
12
P. NARAYANAN, Patent Law, (4th Edn.), at p. 264.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 8

patent holders for the respective inventions (one for the product and another for the
improved process) can come together and have a joint agreement (cross licensing) and
bring the new product to the market and share the profits amongst themselves. Such an
exercise will benefit the society at large, in getting the fruits of the research work and
will, instead of hampering research and development (R&D) in developing alternative
processes for a product, under the product patent regime, will enhance developmental
activities.

As mentioned above, in many countries including India, the patent law excludes certain
specific kinds of inventions from being patentable even though the inventions satisfy all
the three essential criteria for patentability, namely, Novelty, inventive step (non obvious)
& Utility. Examples of such non patentable inventions are: inventions relating nuclear
transformation, treatment of human beings, plants & animals etc. The types of inventions
which are not patentable are stipulated in the patent legislation of the country
concerned.13

In India, the inventions for which patents can be secured is defined in Section 2(1)(j)(ja)
of the Act. The term “process” may be defined as one or more steps or acts performed on
materials / substances to produce a result (product/composition/material/substance). The
process should be regarded as an artificial process or operation of an industrial nature
wherein certain starting materials/substances are subjected to the process or operation to
convert the starting materials/substances in such a manner to produce a new or known
and useful article or substance or substance or product which is tangible. If the starting
materials/substances used in the process remains unaltered and the resulting product also
remains the same as the starting materials/substances, then, the process may not be an
invention for which patent protection can be secured.

13
RAMA SARMA, Commentary on Intellectual Property Laws, (1st Edn.), at p. 28.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 9

CHAPTER – 3

RIGHTS OF A PATENTEE UNDER PRODUCT AND PROCESS PATENT

A patent is a statutory grant conferring certain exclusive rights on the grantee for a
defined period, subject to certain conditions. In some respect it may be considered as a
species of property. A patent grant gives the patentee the exclusive right to make or use
the patented article or use the patented process. As a consequence flowing from this he
can prevent all others from making or using the patented article or using patenting
process. A patent monopoly not only entitles the holder to exploit the invention without
competition during the period of patent protection; it also enables him to enter the
market, on the expiry of the monopoly in strong position.14A patentee has also the power
to assign the patent, grant licenses under, or otherwise deal with it for any consideration.
These rights created by statute are circumscribed by various conditions and limitations.
These rights created by statute are circumscribed by various conditions and
limitations.15According to section 48 of the Indian Patent Act, 1970, a patent granted
under this Act shall confer upon the patentee:

(a) Where the subject-matter of the patent is product, the exclusive right to prevent
third parties, who do not have his consent, from the act of making, using, offering
for sale, selling or importing for those purposes that product in India.
(b) Where the subject-matter of the patent is a process, the exclusive right to prevent
third parties, who do not have his consent, from the act of using that process and
from the act of using, offering for sale, selling, or importing for those purposes
the product obtained directly by that process in India.
Elements of the right:
1. The right conferred under this section is an exclusive right, whether product or
process.
2. No third party can exercise the patentee‟s right without the patentees consent.
3. The rights conferred, in respect of a product patent, are the act of making, using,
offering for sale, selling or importing for those purposes the patented product in
India.
4. In respect of a process patent, the act of using the that process, using, offering for
sale, selling or importing for those purposes the product obtained directly by the
process in India.
5. The product obtained by using the patented process is not one in respect of which
no patent shall be granted under this Act.16

14
American Cyanamid v. Ethicon (1975) AC 396 at p. 410
15
P. NARAYANAN, Patent Law, (4th Edn.), at p. 252.
16
Ibid, at p. 254
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 10

CHAPTER – 4

CONFLICTS WITH THE DEVELOPED COUNTRIES

Developed countries are the major producers of newer technologies. Developing

countries are almost totally dependent on the developed countries for technologies
needed for their growth and development. Intellectual property protection can hinder or
prevent such access, or price it at unattainable levels. In addition, developing countries
have complained that large multinational enterprises import products (protected by
national intellectual property rights) rather than producing them locally, hindering any
technology transfer that would be attained by local production. However, the developing
country finds itself in an unenviable quandary, for without protection international firms
would not market in the developing country at all. In addition, strong intellectual property
laws can attract important inward investment from rich multinational enterprises. In
addition, as local technology develops, local entrepreneurs themselves become in need of
such protective rights.

This dilemma has led to arguments from developing countries that they should
receive special treatment when the international Conventions and Treaties are revised. In
the past they have suggested compulsory licenses for local working, local translation
rights, curbs on royalties and scrutiny of licenses. The Uruguay Round of GATT talks
tackled the issue and the resulting TRIPS Agreement 1994 establishes a required
minimum content of intellectual property law for all WTO Member States. Subsequently,
the old controversies have resurfaced, centering around the protection for foreign
companies profiting from indigenous raw materials and traditional knowledge as well as
the use of folklore in musical and artistic works. Access to vital health care products at
affordable prices has also engendered considerable debate. The Doha Agreement 2001
accordingly allows for interpretation of the Trips Agreement by Member States in a
manner which allows them to provide for public health and to promote access to
medicines for all. This includes granting compulsory licenses, deciding what amounts to
a national emergency and what constitutes exhaustion of aright. Notably,, however, the
Doha Agreement also recognizes that intellectual property rights play an important role in
the development of new medicines. WIPO now provides a forum for debate, having
created the Intergovernmental Committee on Genetic Resources, Traditional Knowledge
and Folklore in 2000. In the UK the Department for International Development also
commissioned a report on intellectual property and development which questions the
provision of strong IPR in developing economies.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 11

CHAPTER – 5

PRODUCT PATENTS AND COMPULSORY LICENSING

The grant of a patent confers limited monopoly on the patentee to the exclusion of
others. Though the law permits this, it also takes into account the fact that the monopoly
granted through a patent may be abused and hence, provides for certain restrictions to its
enjoyment. The grant of compulsory license is one such restriction imposed on the
absolute exploitation of a patent. 17 Compulsory License is regarded as a statutory
mechanism to effectively protect „public interest‟ from possible abuse of monopoly by
the patentee. Section 84 of the Patents Act provides that after three years have passed
from the date of sealing of the patent, and application can be made to the Controller of
Patents by and interested person for grant of a compulsory license to work the patented
invention on the grounds that the reasonable requirements of the public with respect to
the patented invention have not been satisfied or that the patented invention is not
available to the public at a reasonable price. Article 31 of the TRIPs Agreement provides
for such use without the authorization of the right holder. Though the TRIPs Agreement
emphasizes on obtaining authorization from the right holder on reasonable commercial
terms, it, nevertheless, does allow this circumstances of extreme emergency or in cases or
public non-commercial use. Section 92 of the Indian Patents Act, 1970 empowers the
Central Government to grant compulsory licenses in special circumstances. Section 92A
empowers the Controller to grant compulsory license for the manufacture and export of
patented pharmaceutical products to any needy country if compulsory license has been
granted in that country.

If the Controller is satisfied that „reasonable requirements‟ of the public with respect
to the patented invention have not been satisfied or that the patented invention is not
available to public at a reasonable price, he may order the patentee to grant a license on
such terms as he deems fit. The Patents Act has the following grounds for invocation of
Compulsory Licenses:
 The reasonable requirements of the public with respect to the patented inventions
have not been satisfied.
 Default of the patentee to manufacture in India the patented article, or not to give
a license for the manufacture of patented article the interests of the existing trade
or industry is adversely affected.
 Patented invention is not available to the public at reasonable prices.
 „National emergency‟ or „extreme urgency‟ or „public non-commercial use‟.
The amended provisions have broadened up the grounds for seeking Compulsory
Licenses. Difficulties may arise in the interpretation of the meaning and extent of the
grounds on which Compulsory Licenses can be sought. The expressions „national
emergency‟ and „extreme urgency‟ are nowhere defined though it can be safely inferred
that these terms refer to situations of grave magnitude.

17
FEROZ ALI KHADER, The Law of Patents, (1st Edn.), at p. 705.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 12

CHAPTER – 6

MAKING THE PATENT LEGISLATION IN COMPLIANCE WITH TRIPS

The TRIPS agreement is one of the most contentious agreements of the WTO
which has been debated worldwide both in the developed and developing countries and
also in important International Institutions. With the enactment of the Patents
(Amendment) Act 2005, the process of amending the Indian Patents Act 1970 to bring it
in line with the TRIPS has been completed by the government. The earlier two
amendments were enacted by Parliament in 1999 and 2002. In the amending process
some safeguard provisions have been incorporated. The developing countries are now
apprehending difficulties in importing pharmaceuticals from India because of the tight
provisions in regard to compulsory licenses for an effective role of the domestic
enterprises in the patented products. The main features of the un-amended Patents act
1970 were as follows:

(i) There was no product patent system for pharmaceuticals, food and chemical-
based products. These industrial sectors were covered by only process patent.
(Section 5).
(ii) The term of the process patent was 7 years from the date of application or 5 years
from the date of sealing of patent whichever period was shorter. (Section 53).
(iii)In order to ensure effective role of the domestic enterprises in the patented
product, a system of „licensing of right‟ was also provided for the sectors
covered by the process patent. (Section 87 &88).
(iv) There was no constraint on exports of pharmaceuticals and other products.
(Section 90(a)(iii)).
(v) The patent holder was under obligation to work the patent in country. There was
also provision for revocation of patent for non-working. (Section 83).
(vi) For „licenses of right‟, the royalty ceiling was stipulated at 4 per cent of the net
ex-factory sale price in bulk of the patented article. (Section 88(5)).

The TRIPS Patents System is based upon a Joint Statement presented by the
Multinational Associations of USA, Europe and Japan to the GATT Secretariat in June
1988 during the Uruguay Round Negotiations. There were hardly any negotiations to
safeguard the interest and concerns of the developing and least developed countries. The
only concession available to them was longer transitional period for implementation. The
same high standard of TRIPs Patent system is applicable to all member countries.18The
main features of the TRIPs patent system are as follows:

(i) TRIPs provides for patent protection for any inventions whether products or
processes in all fields of technology provided that they are new, involve an
inventive step and are capable of industrial application. (Article 27)19
(ii) The foreign patent holders have been absolved from working of their patents. The
imports by them are to enjoy the same patent rights without discrimination as

18
AJIT PARULEKAR, Indian Patents Law, at p. 30.
19
http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 13

to the place of invention, field of technology and whether the products are
imported or locally produced. (Article 27)
(iii) The term of all product or process patents will be 20 years from the date of
application. (Article 33)
(iv) There is no „licensing of right‟ provision. The compulsory licence provisions are
having tight conditions for meeting domestic demands. (Article 31)
(v) Exports will also have practical difficulties, as only those enterprises that are
already producing the concerned patented product will be able to meet the
export demands. (Article 31)
(vi) There is no royalty ceiling for compulsory licenses. The royalty payment will
have to be based taking into account the economic value of the authorization.
(Section 31).20

The above features of the TRIPs have been implemented in the amending process
of our Patents Act, 1970. On the other side, there is also evidence that the patent system
has a detrimental impact on pharmaceutical prices, particularly if the product itself is
protectable.

It lays down minimum standards for protection and enforcement of intellectual

property rights in member countries which are required to promote effective and adequate
protection of intellectual property rights with a view to reducing distortions and
impediments to international trade. For the least-developed countries (LDCs) the
transition period will remain in force for pharmaceutical patents and data protection at
least until 2016 under Article 66.1 of TRIPS under paragraph 7 of the Doha
Declaration.21

Further, Article 27 of the TRIPS Agreement harmonizes the subject matter of

patent in a broad manner which clearly states that the patents shall be available for any
inventions, whether products or processes, in all fields of technology, provided that they
are new, involve an inventive step and are capable of industrial application and patent
rights enjoyable without discrimination as to the place of invention, the field of
technology and whether products are imported or locally produced.

Under article 28 (1) (a) of TRIPS, there are exclusive rights for product patents to
prevent third parties not having the owner‟s consent from the acts of: making, using,
offering for sale, selling, or importing for these purposes that product.

Making the patent legislation in compliance with the TRIPS would put India in
the row of nations having strong patent legislation. Salient features of the Patents
(Amendment) Act 2005 related to product patents:

a) Extension of product patent protection to products in sectors of drugs, foods and

chemical.

20
http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5
21
http://ideas.rpec.org/p/nbr/nberwo/10159.html
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 14

b) Term for protection of product patent shall be for 20 years.

c) Introduction of a provision for enabling grant of compulsory license for export

of medicines to countries which have insufficient or no manufacturing capacity;
provided such importing country has either granted a compulsory license for
import or by notification or otherwise allowed importation of the patented
pharmaceutical products from India (in accordance with the Doha Declaration on
TRIPS and Public Health)

d) A new provision has been introduced that provides that 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, shall not be patentable.

These amendments have been made with the intention to make India drug and
pharmaceutical industries competitive at par with multinational companies. In 1999, India
brought in the mailbox facility for product patent application and the grant of Exclusive
Marketing Rights in the interim period. With the Second Amendment in 2002, India
brought in the provision relating to rights of patentee, term of patent, compulsory
licensing and reversal of the onus of proving the violation from the affected party to the
accused party. And finally in 2005, the product patents were extended in all fields of
technology, particularly food, drugs and pharmaceuticals. There is no doubt of the
possible conflict of private rights and public interests when it comes to patenting of food,
drugs and pharmaceuticals as it concerns the basic necessities of life of a large number of
people living below the poverty line. However, with the third amendment, Parliament has
not only complied with TRIPs obligations but has attempted to do the balancing of
private monopoly and public interest by using flexibilities under TRIPs Agreement 22 such
as compulsory Licensing in case of emergency situations (section 92) compulsory
Licensing for export to countries with no manufacturing capacity (Section 92 A), use of
invention for the purpose of the government (section 102) or the research and
experimentation exception which is provided in section 47, revocation of patent in public
interest (section 66). These are significant measures if used imaginatively for balancing
private rights with public interests, the object being to make drugs accessible and
affordable.

22
http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 15

CHAPTER - 7

ISSUES IN THE NEW REGIME OF PATENT LAW IN INDIA

At general level, these policy reforms were driven by two related forces. First, the
emergence of new technologies has demanded continuous adaptation of IPR instruments.
Key examples of areas in which technological developments have raised new intellectual
property questions include integrated circuits, computer software, and biotechnology
inventions. The advent of the internet has posed special challenges to the printing and
publishing and entertainment industries, because content in digital form can be perfectly
reproduced at minimal cost. Secondly, the process of economic globalization has enabled
intellectual property to cross international boundaries more easily. Indeed, for many rich
countries, IPR-intensive goods and services constitute a rising share of the income they
derive from their presence in foreign markets. It is not therefore surprising to see political
economy forces at work in these countries, leading governments to raise IPR protection
as a key negotiating issue in international trade agreements.23 India‟s full-scale TRIPS
compliance raises several critical issues from an access to medicines perspective. We can
discuss these issues point by point:

1. The issue of price increases: The Indian public is concerned that massive price
increases of the pharmaceutical products following patent reform to comply with
TRIPs will pre-empt widespread access to valuable pharmaceuticals. In a clearly
unequal world, it is important to ensure that economic interdependence does not
lead to the codification of intergovernmental agreements that are biased against
developing countries in general, and the poor within these countries in particular.
The process patent system greatly facilitated domestic manufacturers to specialize
and often excel in producing inexpensive, generic versions of on-patent drugs.
The product patent regime would disallow such production and trade. It is
apprehended that the prices of newly patented drugs would increase substantially,
thereby imposing tremendous social and economic costs on the poor on these
countries.

The argument the higher prices would induce greater innovative activity by the
patent protected developed nations is highly flawed. Even if a large part of the
expenditure by multinational firms on R&D is geared towards the many so-called
„poor‟ country diseases, (viz., tuberculosis, malaria, cholerea, HIV/AIDS, etc.),
the developing country consumers would still find the cost of medicines
prohibitive; consequently, through low sales, R&D investment would be reduced.
In fact, a recent UNDP report estimates that once TRIPs comes into force, it could
induce a price hike ranging between 12% and 68%. To except developing
countries to accept such price spirals without adequately addressing their concerns

23
CARSTEN FINK, Intellectual Property and Development, at p. 1.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 16

of access to cheaper medicines to fight life threatening diseases, particularly in a

public health emergency, seems unfair.24

 However, some analysts and experts suggest otherwise. The off-patent market is
still huge and can be explored further. Indian companies will gain strength in the
coming years as partners in marketing and research-based outsourcing, ensuring
cheap availability of drugs.
 As far as the anti-AIDS drug prices go, the government will always have the
power to intervene and come up with a desirable pricing policy, if prices move up.
 The Indian government has gone on record to say that the fears of spiraling of
drug prices is unfounded as 97 per cent of the drugs sold in India are off-patent.
There are alternatives available to the government to ensure availability of
patented products at affordable prices.

 The important fact is that drugs which are already being manufactured as generics
will not be eligible for patents. Hence fears that in the future all drug prices will
be higher appear unfounded.
 The new drugs are supposed to be introduced in the Indian market making the
share of patented drugs to rise. But it should be remembered that after some time
the patent expiries which contributes to the generics market.
 Because India is one of the world's biggest producers of generic drugs25, this loan
will have a severe knock-on effect on many developing countries which depend
on imported generic drugs from India. In most cases, generic products are
available once the patent protections afforded to the original developer have
expired. When generic products become available, the market competition often
leads to substantially lower prices for both the original brand name product and
the generic forms. The time it takes a generic drug to appear on the market varies.

2. The government under the new regime can declare an emergency and canel its
patent, if a drug is desperately needed.
3. New regime of product patent will attract more and more FDI in India: Till
now there has been low level of presence of pharmaceutical multinationals in
Indian market because of the rigid price controls and absence of product patents.
There has not been significant foreign direct investment (FDI) in the
Pharmaceutical industry in India. The position is expected to change with the
introduction of product patents.
4. The main concern about TRIPs provisions of WTO agreement is in respect of
Patents. There is a feeling that the Multi National Companies (MNCs) will have
upper hand in maximizing the benefits of IP in developing countries like India.
This is because of the fact that MNCs have not only financial powers but also
adequate expertise in managing efficiently the portfolio of IP.

24
POLYCAP CLIFFORD, Down to Earth, (Vol. 12, 2003), at p.37.
25
A generic drug (generic drugs, short: generics) is a drug which is produced and distributed without
patent protection. The generic drug may still have a patent on the formulation but not on the active
ingredient. A generic must contain the same active ingredients as the original formulation.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 17

5. Another area which is causing concern is the fear of appropriation of community

knowledge available in such countries. Such an appropriation results in huge
commercial profit to the MNCs without any adequate benefits to the community
who provided the knowledge. There is therefore an urgent need to safeguard such
“community knowledge” by appropriate legislations and policies. In this direction
new IP legislations such as a sui generics system would not only to protect the
community knowledge but also help appropriate sharing of the revenue earned
through such IPRs. Therefore such a system should be formulated and brought
into force on a priority basis. Further time bound actions are to be initiated and
completed to establish appropriate infrastructure (like patent office with modern
facilities and officials, patent information systems) creation of knowledgeable IP
professionals and efficient legal systems to quickly provide justice in the case of
IP disputes.
6. A change in the market dynamics: Over the past decade, several drugs (with
features similar to patent protected drugs overseas) have been launched in the
Indian markets but very few path breaking new molecules have been developed.
In India most patients pay for medicines through their own funding and is not
backed by medical insurance schemes.26
7. Amendment to Section 3(d): The new addition to section 3(d), says: 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 a
new property or new use for a known substance or of the mere use of a known
process, machine or apparatus-unless such process results in a new product or
employs at least on new reactant. The Act further clarifies that „salts, esters,
ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of
isomers, complexes, combinations and other derivatives of the known of
substance shall be considered to be the same substance, unless they differ
significantly in properties with regard to efficacy‟. Evidently, this clause will
restrict the usual practice of developing portfolio of patents around drug
molecules and ever greening (process by which the length of patent validity
period is extended by filing new patent applications) of major pharmaceutical
companies. Also, it will be difficult henceforth to get patent protection for nano-
particles - today‟s hot topics – as many of them are clusters of active molecules
and already known.
8. New added Section 11(A): This section ensures that a patent obtained through
the „mailbox‟ route cannot be used to initiate infringement proceedings against a
generic manufacturer.
9. Traditional System of Medicines: Being a tropical country, India is indeed very
rich in biodiversity. India is well known for its traditional systems of medicine
like Ayurveda, Unani and various local folk and tribal medicine. Companies like
Himalaya, Zandu, Sandu, Baidyanath, Dabur and Hamdard have been
manufacturing and marketing these traditional medicines and also have developed
their own formulations based on these systems of medicines. India has a clear
advantage in these systems in terms of the knowledge that has passed down

26
http://www.legalserviceindia.com/article/l255-Pharmaceutical-Product-Patents.html
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 18

through generations. TRIPs will be a golden opportunity for getting protection for
these products in India. Recent unsuccessful attempts made in the West to obtain
patents for medicinal products being used in India over centuries like turmeric,
Basmati rice, „karela‟ and „neem‟ have alerted the government and industry to
take steps to seek patent protection for innovations made in Indian systems of
medicine. Attempts are being made by CSIR to prepare a Traditional Knowledge
Digital Library (TKDL) and Traditional Knowledge Resource Classification
(TKRC) so that such bio-piracies can be checked effectively in future.
10. The issue of Patent length: There are two welfare effects of extending the patent
length. One is the growth enhancing effects: extending the patent length reduces
economic growth by raising the rate of return of R&D. The other is the static
inefficiency effect: extending the patent length reduces the amount of output by
increasing the proportion of monopolistic sector, and thus the amount of
consumption. The length of the patent granted should not be of a fixed duration
for all inventions. It should be linked to the actual expenditure on R&D and the
degree of innovativeness. As long as the companies refuse to give information
about their R&D costs, the incentive argument for patents only represents and
ideology for supporting the monopoly power of the companies. If they really need
extra profit to be willing to take the risk of R&D, the public has the right to
demand to know how much they need, and how they calculate their „needed‟
profit. In fact, the exclusivity of a patent right needs to be supported by
convincing arguments and by transparency in the calculations of the R&D costs to
make it more than an ideology used to justify extra profit for some already very
profitable companies.

Foreign companies will look to bring their innovative products through existing
subsidiaries or set up 100 per cent owned firms in the country. The industry will see
further change in the form of foreign companies joining hands with Indian firms which
have a strong distribution network. This again would aid both foreign and Indian firms.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 19

CONCLUSION

In practice, several issues remain open. Law cannot be static. It has to be modified
to meet the requirements of the fast changing environment. Similarly, science is also not
static and changes are taking place at a very fast pace. Since patent is related to science &
technology, the patent legislations cannot also be static. This is based on the fact that our
country possesses the highly capable intellectuals and natural wealth, and that too in
plenty. Combining these two valuable strengths/assets, we could have become a country
holding valuable IPRs which would have helped economical and industrial development
of the country even faster. India should have been proactive instead of reactive. Time is
still not lost. India can still initiate appropriate action in this direction in the coming years
and achieve benefits from the Intellectual Property System, especially Patent system.

While many countries need to change their patent system from process patent to
product patent, there is not much formal analysis about the regulations that should be
contemplated while making the switch. If there is compulsory licensing, it can help to
eliminate the welfare reducing effect of product patents, as compared to process patents.
With the WTO regime on IPRs coming into force on 1st January 1995, India had a
marginal space to accommodate its concerns. While for India, its concerns on IPRs,
particularly on patent protection were clear; its WTO obligations required it to modify its
existing patents law. Implications of these modifications are slowly sinking down into the
Indian economic and industrial development process. While it appears that India has
managed to withstand some of these changes, the precise legal and economic
implications of these changes, particularly in the area of the pharmaceutical and chemical
sector, needs long-term review. Currently, India is moving forward with the changes as
envisaged under the WTO regime. Some of these changes, it may be noted, may become
new battlegrounds for a new interpretative matrix within the WTO dispute settlement
system.

The profit-driven model of the TRIPs is not suited to the health needs of the
developing and poor countries. The amended Patents Act 1970 as in the present form is a
super profit-driven Act. A judicious and careful implementation of TRIPs Agreement in
needed for patent holders in a manner conducive to social and economic welfare as
stipulated in Article 7 of TRIPs Agreement. If the damage to the amending process of the
Patents Act is not undone, the public sufferings will soar to an unimaginable extent.

Now that the die is cast, we have to rise to the occasion and convert this challenge
into an opportunity. In fact, China had realized this many years ago and, having carried
out necessary changes in their patents law is now reaping benefits of enhanced trade and
investment. Given the large pool of trained manpower, world class educational
institutions/universities/publicly funded research institutions and dedicated domestic
private R&D centers; India is well prepared to face the new challenges and convert it into
an opportunity. In US, it costs around $700-800 million and 10-12 years of R&D efforts
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 20

to bring a new drug molecule into the market.27 Perhaps with our innovative mind and
cheaper labor costs, India can achieve similar feat for a fraction of the above cost. The
fact that more than 75% of our required medicines are manufactured indigenously is
proof of the capabilities of domestic pharmaceutical industries.

These routes can be used supplement the strategy of expanding the domestic
market, but to mainly depend on these for further growth would take the domestic firms
away from real need-based innovation. Policy makers need to get the private sector to
coordinate with the public sector in the creation of a programme for upgrading innovation
capacities to play a positive role in drug development for diseases of the poor in India.
It may be pointed here that strong Intellectual Property law is imperative to convert the
rich human capital, which India possesses into economic wealth. India has millions of
talented youth many of whom are well trained in technical skills which compares well
with many industrialized nations with an aging population. We certainly need a strong
legal framework to facilitate this transition.

This would mean that the patent would be partly product patent and after a
reasonable time being given to the inventor to make a reasonably large profit it would be
converted to a process patent whereby the patented drug can be manufactured by
competing manufacturers using an alternative process. This would solve the problem of
excessive hike in prices and would render the drugs more accessible to the millions
suffering. Collaboration with the MNC‟s on various fronts such as research and
development, manufacturing and marketing will help Indian Pharmaceutical companies
make profitable breakthroughs.

The non-provision of product patents has been one of the strongest aspects of our
Patents Act. Complete compliance with all aspects of the TRIPs agreement is prejudicial
to our national interest and the TRIPs agreement itself places limitations on our ability to
enact out national legislations in public interest. To prevent public interest from being
prejudicially effected it is imminent to mobilize public opinion against complete
compliance of the obligation under TRIPS. It must always be remembered that
pharmaceutical industry owes a moral responsibility to the society. The monopoly
granted by patents to the Drug companies should not be exercised without responsibility.

27
AJIT PARULEKAR AND SARITA D‟SOUZA, Indian Patents Law, at p. 121.
 PRODUCT v. PROCESS PATENT UNDER INDIAN PATENT LAW 21

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