Why the recently proposed Patents (Amendment) Rules, 2019 is a step back

[dropcap]I[/dropcap]N May 2019, the Ministry of Commerce and Industry published proposed amendments to the Patent Rules for public feedback. While on the face of it the suggested proposals appear to be minor tweaks, a closer look discloses a gradual disintegration of the tenets of transparency and public interest advanced under India's Patents Act, 1970.

The proposed amendment of concern is a statement to be filed by the patent holder which indicates the extent to which a patent has been worked at commercial scale in India.

What is working of a patent?

Traditionally, the exclusive right granted to a person in the form of a patent is based on the principle of quid pro quo. In return for the exclusive right of patent, the patent holder is expected to disclose the information about the invention patent to the public so that it could be used or reproduced after the patent term has expired.

The Patents Act, 1970 in India provides an additional safeguard – the requirement of the patent holder to disclose that the patent is being 'worked', i.e. is being made available commercially. This ensures that patent holder is not indulging in the mere practice of restricting others from making or selling the patented subject matter but also making the patented product/ process available in the market.

The matter of non-working of a patent of particular concern when the patent is for an essential drug. Not working a patent related to an essential drug would mean a block to access to treatment to several affected persons and denying them the benefit of scientific advancement. In fact, the Patents Act lays down the protection of public health and promotion of public interest as one of the principles to be kept in mind while looking at the question of working of patent vis-à-vis grant of compulsory license.

The Patents Act mandates the patent holder and any licensee of the patent to periodically submit details of whether the patent has been worked to the Patent Office. Such information is to be submitted by filing Form-27.

The importance of working of a patent was noted in the Justice N. Rajagopalan Ayyangar Committee Report, 1959 which examined the patent law in India. In the context of patented medicines and food products the Report noted, "…I would add in regard to these patents (for food and medicine etc.) is a provision for enabling them to be revoked if they are not adequately worked after a reasonable interval after they are sealed." That is, if the patent holder is not making any efforts to make patented product available in the market, the exclusive patent right can be revoked.

The matter of non-working of a patent of particular concern when the patent is for an essential drug. Not working a patent related to an essential drug would mean a block to access to treatment to several affected persons and denying them the benefit of scientific advancement. In fact, the Patents Act lays down the protection of public health and promotion of public interest as one of the principles to be kept in mind while looking at the question of working of patent vis-à-vis grant of compulsory license.

Compulsory license is a license granted under certain circumstances to a third party by the patent office without the patentee's consent, to use, make or sell the patented product or process. It may be issued by the patent office to a third party if reasonable requirements of the public with respect to the patented invention have not been satisfied, or the patented invention is not available to the public at a reasonably affordable price or the patented invention is not worked in India.

Even though Form-27 in its current form requires that reasons for non-working be disclosed, the submission of such information is often done in a very lax manner with no satisfactory answers provided. Forget any indication of any tentative timeline by which the patent could be expected to be worked, some Form-27 submitted do not even indicate a reason for the non-working of the patent.

In the past, applications for compulsory license have seen a reliance on the statement of working filed by the patentee to indicate whether a reasonable requirement of the public vis-à-vis the patented subject matter has been fulfilled or not.

Current requirement of disclosure on patent working

Presently, the patent holder in its statement of working the patent is required to disclose:

1. Whether the patent is worked in India or not;
2. If the patent is not worked, what are the reasons for the same and what are the steps being taken to work the patent;
3. Quantum of the product manufactured in India and imported from other countries (country-wise details);
4. Value of the patented product manufactured in India and the patented product imported from other countries (country-wise details);
5. Licenses and sub-licenses granted during the year;
6. Whether public requirement has been met partly/adequately to the fullest extent at reasonable price.

Interestingly the Annual Report of 2016-17 published by the Office of the Controller General Of Patents, Designs, Trademarks and Geographical Indications reported that of the 48,765 patents in force, Form-27 of only 42,870 were filed. Of these only 11,318 were reported as being worked.

Value accrued of a patented product does not assist in informing about the fulfilment of a reasonable requirement of the public with respect to the patented invention or the price of the patented product. Instead, if the patentee were asked to report the sale value of the product, it would have given an indication of the price at which the patented subject matter is available to the public. This would assist not only interested third parties but also the Patent Office while determining the issue of grant of compulsory license.

Even though Form-27 in its current form requires that reasons for non-working be disclosed, the submission of such information is often done in a very lax manner with no satisfactory answers provided. The reason supplied for the non-working of a patent would depend on the ingenuity of the patentee – it could be the market for the product under survey, pending regulatory approval. Forget any indication of any tentative timeline by which the patent could be expected to be worked, some Form-27s submitted do not even indicate a reason for the non-working of the patent.

What is proposed under the Patents (Amendment) Rules, 2019?

The proposed amendments require the patentee to disclose the "value accrued" as against the requirement of disclosing simpliciter valueof the patented product through manufacture or import in India. They also do away with the requirement to indicate whether the public requirement is being met at a reasonable price

Value accrued of a patented product does not assist in informing about the fulfilment of a reasonable requirement of the public with respect to the patented invention or the price of the patented product. Instead, if the patentee were asked to report the sale value of the product, it would have given an indication of the price at which the patented subject matter is available to the public. This would assist not only interested third parties but also the Patent Office while determining the issue of grant of compulsory license.

The proposed amendments even do away with the need to indicate the quantity of the patented product manufactured and imported in India. Unavailability of such information only would make it difficult for the Patent Office to determine the question of whether reasonable requirement of the public for the patented invention has been fulfilled.

Unlike the existing stipulation for a patent that is not being worked, the proposed amendments do not require the patent holder to indicate the steps being taken to work the patent. The lack of such information renders the question of the possible availability of the patented subject matter unclear.

The concern around filing multiple statements of working for product comprising several patents appear to have been redressed. The proposed amendments allow including the details of related patents while indicating the value accrued.

Unlike the existing stipulation for a patent that is not being worked, the proposed amendments do not require the patent holder to indicate the steps being taken to work the patent. The lack of such information renders the question of the possible availability of the patented subject matter unclear. Third parties would not even know whether the unavailability of the patented subject-matter is due to any regulatory non-approval or because the patent holder has no intention to commercialise the patent. Indicating the steps taken to work the patent would facilitate better engagement with patent holders for licenses and business decisions for third parties.

Doing away with these basic requirements leaves it up to third parties to find ways to collect information related to price or availability of the patented invention. Need to invest additional effort to secure such information may delay market entry of patented invention (through compulsory license).

A step back from India's international commitments?

In March 2018, subsequent to the directions of the High Court of Delhi in a PIL filed by Prof. Shamnad Basheer, the Patents Office had called for comments on Form-27 and subsequently held a meeting. The submissions included those not only from patentees, law firms, civil society organisations, MNCs but also the US Patent and Trademark Office (USPTO). The USPTO giving the "U.S. Government views on…working of patents under the Patents Act, 1970" noted that the information required under Form-27 was burdensome for a patentee. Such comment should not be surprising given India's continued presence on the priority watch list of United State Trade Representative's Special301Report for concerns over the threat of compulsory licensing provisions.

If the proposed amendments to Form-27 are enforced, India would be stepping away as a role model of progressive patent law and would be seriously jeopardising transparency and the effective utilisation of compulsory license provisions.

While the pressure of the big MNCs and the West is seemingly making the Indian patent system opaque, India recently committed itself to improving the transparency of markets for medicines, vaccines, and other health products. At the World Health Assembly, held in June 2019, India co-sponsored a resolution titled "Improving the transparency of markets for medicines, vaccines, and other health products". The Resolution calls on member states to "Facilitate improved public reporting of patent status information and marketing approval status of health products". With such an international commitment, the proposed amendments to the Patent Rules fall foul of the spirit of transparency that India seeks to uphold.

Where do we go from here?

The requirement to file a statement of working, was one of the safeguards to ensure that third parties can effectively keep track of and if need be seek a compulsory license based on submitted information. The proposed amendments water down the requirement, when in fact this was an opportunity to further improve on the nature of disclosure. Further information such as International Non-proprietary Name (INN), marketing name, price at which the patented product/process is available,  quantum sold (in kgs/units), status of regulatory approval, extent of manufacturing by the licensee, would have facilitated the access to information and better ability to determine cases of compulsory licenses.

If the proposed amendments to Form-27 are enforced, India would be stepping away as a role model of progressive patent law and would be seriously jeopardising transparency and the effective utilisation of compulsory license provisions.