Novartis AG Vs. Union of India & Others
[Civil Appeal Nos. 2706-2716 of 2013 arising out of SLP (C) Nos. 20539-20549 of 2009]
Natco Pharma Ltd. Vs. Union of India & Others
[Civil Appeal No. 2728 of 2013 arising out of SLP (C) No. 32706 of 2009]
M/S Cancer Patientsaid Association Vs. Union of India & Others
[Civil Appeal Nos. 2717-2727 of 2013 arising out of SLP (C) Nos. 12984-12994 of 2013 SLP (C) ../2011 Cc Nos.6667-6677]
Aftab Alam, J.
1. Delay condoned.
2. Leave granted in all the special leave petitions.
3. What is the true import of section 3(d) of the Patents Act, 1970? How does it interplay with clauses (j) and (ja) of section 2(1)? Does the product for which the appellant claims patent qualify as a "new product"which comes by through an invention that has a feature that involves technical advance over the existing knowledge and that makes the invention "not obvious" to a person skilled in the art? In case the appellant's product satisfies the tests and thus qualifies as "invention" within the meaning of clauses (j) and (ja) of section 2(1), can its patentability still be questioned and denied on the ground that section 3(d) puts it out of the category of "invention"? On the answer to these questions depends whether the appellant is entitled to get the patent for the beta crystalline form of a chemical compound called Imatinib Mesylate which is a therapeutic drug for chronic myeloid leukemia and certain kinds of tumours and is marketed under the names "Glivec" or "Gleevec".
4. These questions were debated at the bar intensely and at great length. The debate took place within a very broad framework. The Court was urged to strike a balance between the need to promote research and development in science and technology and to keep private monopoly (called an 'aberration' under our Constitutional scheme) at the minimum. Arguments were made about India's obligation to faithfully comply with its commitments under international treaties and counter arguments were made to protect India's status as "the pharmacy of the world". The Court was reminded of its duty to uphold the rights granted by the statute, and the Court was also reminded that an error of judgment by it will put life-saving drugs beyond the reach of the multitude of ailing humanity not only in this country but in many developing and under-developed countries, dependent on generic drugs from India. We will advert to these and a number of other arguments at their proper place but we must first take note of the facts that give rise to the above questions and provide the context for thedebate.
5. Jürg Zimmermann invented a number of derivatives of N-phenyl-2-pyrimidine-amine, one of which is CGP 57148[1] in free base form (later given the International Nonproprietary Name 'Imatinib' by the World Health Organisation). These derivatives, including Imatinib[2], are capable of inhibiting certain protein kinases, especially protein kinase C and PDGF(platelet-derived growth factor)-receptor tyrosine kinase and thus have valuable anti-tumour properties and can be used in the preparation of pharmaceutical compositions for the treatment of warm-blooded animals, for example, as anti-tumoral drugs and as drugs against atherosclerosis. The N-phenyl-2-pyrimidine-amine derivatives, including Imatinib, were submitted for patent in the US. The application was made on April 28, 1994 and patent was granted on May 28, 1996 under US Patent No. 5,521,184 (hereinafter referred to as 'the Zimmermann Patent'). The Zimmermann compounds (i.e., derivatives of N-phenyl-2-pyrimidine-amine) were also granted a European patent under Patent No. EP-A-0 564 409.
6. The appellant claims that beginning with Imatinib[3] in free base form (as the 'e-duct'), in a two-stage invention they first produced its methanesulfonic acid addition salt, Imatinib Mesylate, and then proceeded to develop the beta crystalline form of the salt of Imatinib. According to the appellant, starting from Imatinib free base they could reach to the beta crystal form of Imatinib Mesy late in two ways: one "by digesting another crystal form, especially the alpha crystal form, or an amorphous starting material of the methane sulfonic acid addition salt of compound of formula I "; and second "by dissolving another crystal form, especially the alpha crystal form, or an amorphous starting material of the methanesulfonic acid addition salt of compound of formula I ". Describing the different processes, step by step, for producing Imatinib Mesylate starting from Imatinib, it is stated that in the first process they would first arrive at Imatinib Mesylate in amorphous form, as the intermediate stage, and thereafter, following further processes, reach the beta crystal form of Imatinib Mesylate. Following the second process, they would reach the beta crystal form of Imatinib Mesylate directly, skipping the intermediate stage in which Imatinib Mesylate first appears in amorphous form. In the third process, they would start with the alpha crystal form of Imatinib Mesylate and arrive at its beta crystal form.
7. It was stated in course of submissions, however, that for practical purposes, the best way to produce the beta form is by proceeding directly from the free base form to the beta form, as in examples 2 and 3 given below, by introducing a specified amount of the beta crystals at the step specified. The three processes are described by the appellant under the following three examples
:EXAMPLE - 1[4]
Step 1 - 98.6 gms of Imatinib free base is added to 1.4 liters of ethanol.
Step 2 - To the above, 19.2 gms of methanesulfonic acid is added drop wise for over 20 minutes.
Step 3 - Solution obtained in Step 2 is heated under reflux (i.e. boiling). It is heated in a manner to preserve the solution from escaping as a gas, so the gas is captured, condensed and obtained as a liquid. This solution is heated for 20 minutes.
Step 4 - Filtering the solution - the filtrate (which is obtained after filtering the resulting liquid) is evaporated down to 50%. In other words, half of the filtrate is allowed to vaporize.
Step 5 - Residue is again filtered at 25 degrees Celsius.
Step 6 - Mother liquor (the liquid filtrate of step 5) is evaporated to dryness.
Step 7 - Residue obtained after Step 6, and residue obtained after Step 5 are suspended in 2.2 l ethanol.
Step 8 - The suspension obtained after Step 7 is dissolved under reflux and it becomes clear upon heating. Thereafter, 30 ml water is added to it.
Step 9 - Substance is cooled overnight to 25 degrees Celsius, filtered and dried at 65 degrees Celsius, until weight is constant. This results in alpha crystalline form.
Step 10 - Alpha form is stirred in methanol for two days at about 25 degrees Celsius. Then the crystals are isolated by filtration and dried overnight at room temperature.
This results in beta crystalline form.
EXAMPLE - 2
Step 1 - 50 gms of Imatinib free base is added to 480 liters (sic milliliters!) of methanol.
Step 2 - To the above, 9.71 gms of methanesulfonic acid and 20 ml methanol is added. This mixture (sic is heated) at 50 degrees Celsius.
Step 3 - To the solution obtained from Step 2, 5 gms of activated carbon is added and the mixture is boiled for 30 minutes under reflux, filtered and evaporated.
Step 4 - The residue obtained from Step 2 (sic 3) is dissolved in 150 ml methanol and inoculated (introduced) with a few mgms (sic mg) of beta form of imatinib mesylate leading to crystallization of the product.
Step 5 - The product is dried at 50 megabars (unit to measure pressure) and at 60 degrees Celsius. This leads to crystallization of beta form of imatinib mesylate.
tep 6 - The retention values (distance traveled by each chemical component in relation to the distance the solution front moves) obtained are as follows; Methylene chloride: ethyl acetate: Methanol: concentrated aqueous ammonium hydroxide solution = 6:10:30:2 (sic 60:10:30:2)
Step 7 - To the above, High Pressure Chromatography (technique for separation of mixtures) is applied for 10.2 minutes
EXAMPLE - 3
Step 1 - 670 gms of alpha form of imatinib mesylate is heated in 1680 ml of methanol.
Step 2 - The solution obtained from Step 1 is then inoculated at 60 degrees Celsius with 55 (sic mg of) beta form of imatinib mesylate. Upon this, the product starts to crystallize.
Step 3 - Thereafter, the crystals are dried at 50 megabars and at 100 degrees Celsius. This leads to crystallization of beta form of imatinib mesylate.
Step 4 - The retention values (distance traveled by each chemical component in relation to the distance the solution front moves) obtained are as follows; Methylene chloride: ethyl acetate: Methanol: concentrated aqueous ammonium hydroxide solution = 6:10:30:2 (sic 60:10:30:2)
Step 5 - To the above, High Pressure Chromatography is applied for 10.2 minutes.[Examples are also given for preparation of 100 mg tablets and 100 mgcapsules of Imatinib Mesylate but there is no need to go into that at this stage.]
8. The appellant filed the application (Application No.1602/MAS/1998)[5]for grant of patent for Imatinib Mesylate in beta crystalline form at the Chennai Patent Office on July 17, 1998. In the application it claimed that the invented product, the beta crystal form of Imatinib Mesylate, has (i)more beneficial flow properties: (ii) better thermodynamic stability; and(iii) lower hygroscopicity than the alpha crystal form of Imatinib Mesylate. It further claimed that the aforesaid properties makes theinvented product "new" (and superior!) as it "stores better and is easierto process"; has "better processability of the methanesulfonic acid addition salt of a compound of formula I", and has a "further advantage for processing and storing".
9. It is significant to note that the comparison of the aforesaid properties of the beta crystal form of Imatinib Mesylate was made with itsalpha crystal form. In the patent application, there is no claim of superiority of the beta crystal form of Imatinib Mesylate in regard to the afore said three properties, or any other property, over the starting material Imatinib, or even over Imatinib Mesylate in amorphous form or any form other than the alpha crystal form. On the contrary, insofar as Imatinib in free base form is concerned, it was unambiguously stated in the patent application as under: "It goes without saying that all the indicated inhibitory and pharmacological effects are also found with the free base,4-4-methylpiperazin-1-ylmethyl)-N-[4-methyl-3-(4-pyridin-3-yl) pyrimidin-2- ylamino)phenyl] benzamide, or other cells thereof. The present invention relates especially to the ß-crystal form of the methanesulfonic acid addition salt of a compound of formula I in the treatment of one of the said diseases or in the preparation of a pharmacological agent for the treatment thereto." (emphasis added)
10. In fairness to the appellant, however, it should be stated that the application was made at the time when there was a different patent regime. After the application was made and before it was taken up for consideration, a number of amendments were introduced in the Indian Patents Act, 1970, which brought about fundamental changes in the patent law of the country. The appellant was, however, fully aware of these changes in the law and, in order to reinforce its claim for patent for the subject product and to bring its claim within the four corners of the changed law, it filed four (4) affidavits of certain experts, two of which stated that the beta crystal form of Imatinib Mesylate has much higher bioavailability as compared to Imatinib in free base form. In due course, we shall examine how far the properties attributed to the subject product in the patent application and the affidavits make it "new" and entitled to grant of patent, but for the moment we may note how the case has come to the presentstage.
11. As noted above the patent application was made on July 17, 1998,giving July 18, 1997, the date on which the appellant had applied for grant of patent for the subject product in Switzerland, as the "priority date". On July 18, 1997, Switzerland was not one of the "Convention Countries" as defined under section 2 (1)(d) read with section 133 of the Act and it was notified as a convention country as per section 133 of the Act on November30, 1998.
12. In 1997, when the appellant filed its application for patent, the law in India with regard to product patent was in a transitional stage and the appellant's application lay dormant under an arrangement called "the mailbox procedure". Before the application for patent was taken up for consideration, the appellant made an application (Application No.EMR/01/2002) on March 27, 2002, for grant of exclusive marketing rights(EMR) for the subject product under section 24A of the Act, which was at that time on the statute book and which now stands deleted. The Patent Office granted EMR to the appellant by order dated November 10, 2003.
13. The appellant's application for patent was taken out of the "mailbox "for consideration only after amendments were made in the Patents Act, with effect from January 1, 2005. But before it was taken up for consideration, the patent application had attracted five (5) pre-grant oppositions[6] interms of section 25(1) of the Act. And it was in response to the pre-grant oppositions that the appellant had filed the affidavits on the issue of bioavailability of Imatinib Mesylate in beta crystalline form.
14. The Assistant Controller of Patents and Designs heard all the parties on December 15, 2005, as provided under rule 55 of the Patent Rules, 2003,and rejected the appellant's application for grant of patent to the subject product by 5 (five) separate, though similar, orders passed on January 25,2006 on the 5 (five) opposition petitions. The Assistant Controller held that the invention claimed by the appellant was anticipated by prior publication, i.e., the Zimmermann patent; that the invention claimed by the appellant was obvious to a person skilled in the art in view of the disclosure provided in the Zimmermann patent specifications; and further that the patentability of the alleged invention was disallowed by section3(d) of the Act; and also that July 18, 1997, the Swiss priority date, was wrongly claimed as the priority date for the application in India and hence, the alleged invention was also anticipated by the specification made in the application submitted in Switzerland.
15. At that time, the appellate authority under the Act had yet to become functional. The appellant, therefore, challenged the orders passed by the Assistant Controller in writ petitions filed directly before the Madras High Court. Apart from challenging the orders of the Assistant Controller, the appellant also filed two writ petitions (one by the appellant and the other by its Indian power of attorney holder) seeking a declaration that section 3(d) of the Act is unconstitutional because it not only violates Article 14 of the Constitution of India but is also not in compliance with "TRIPS". After the formation of the Intellectual Property Appellate Board, the five writ petitions challenging the five orders of the Assistant Controller were transferred from the High Court to IPAB by order dated April 4, 2007, where these cases were registered as appeals and were numbered as TA/1 to 5/2007/PT/CH. The other two writ petitions assailing section 3(d) of the Act were finally heard by a Division Bench of the High Court and dismissed by the judgment and order dated August 6, 2007. The appellant did not take that matter any further.
16. The appellant's appeals against the orders passed by the Assistant Controller were finally heard and dismissed by the IPAB by a long and detailed judgment dated June 26, 2009.
17. The IPAB reversed the findings of the Assistant Controller on the issues of anticipation and obviousness. It held that the appellant's invention satisfied the tests of novelty and non-obviousness, and further that in view of the amended section 133, the appellant was fully entitled to get July 18, 1997, the date on which the patent application was made in Switzerland, as the priority date for his application in India. The IPAB, however, held that the patentability of the subject product was hit by section 3(d) of the Act. Referring to section 3(d) the IPAB observed: "Since India is having a requirement of higher standard of inventive step by introducing the amended section 3(d) of the Act, what is patentable in other countries will not be patentable in India. As we see, the object of amended section 3(d) of the Act is nothing but a requirement of higher standard of inventive step in the law particularly for the drug/pharmaceutical substances.
"18. The IPAB also referred to the judgment of the Madras High Court, dismissing the appellant's writ petitions challenging the constitutional validity of section 3(d) where the High Court had observed: "We have borne in mind the object which the amending Act wanted to achieve namely, to prevent ever greening; to provide easy access to the citizens of the country to life saving drugs and to discharge their constitutional obligation of providing good health care to its citizens.
"19. In light of the High Court's observation, the IPAB also referred to the pricing of the drug Gleevec by the appellant while it enjoyed EMR over it, and held that the patentability of the subject product would also be barred by section 3(b) of the Act and in this regard observed as follows: "We are fully conscious of the Appellant's benevolent GIPAP program for free distribution of GLEEVEC to certain cancer patients. But as per information furnished in its written counter-argument by R 3 that when the Appellant was holding the right as EMR on GLEEVEC it used to charge Rs.1,20,000/- per month for a required dose of the drug from a cancer patient, not disputed by the Appellant, which in our view is too unaffordable to the poor cancer patients in India. Thus, we also observe that a grant of product patent on this application can create a havoc to the lives of poor people and their families affected with the cancer for which this drug is effective. This will have disastrous effect on the society as well. Considering all the circumstances of the appeals before us, we observe that the Appellant's alleged invention won't be worthy of a reward of any product patent on the basis of its impugned application for not only for not satisfying the requirement of section 3(d) of the Act, but also for its possible disastrous consequences on such grant as stated above, which also is being attracted by the provisions of section 3(b) of the Act which prohibits grant of patent on inventions, exploitation of which could create public disorder among other things (Sic .) We, therefore, uphold the decision of R 8 on section 3(d) of the Act to the extent that product patent cannot be made available to the Appellant
"20. Though agreeing with the Assistant Controller that no product patent for the subject patent could be allowed in favour of the appellant, the IPAB held that the appellant could not be denied the process patent for preparation of Imatinib Mesylate in beta crystal form. The IPAB ordered accordingly.
21. Against the order of the IPAB the appellant came directly to this Court in a petition under Article 136 of the Constitution. When the matter was first taken up before this Bench, we first thought of dismissing the SLPs at the threshold as the appellant had an alternative remedy to challenge the judgment and order of the IPAB before the Madras High Court. However, Mr. Gopal Subramanium, the senior advocate appearing for the appellant, submitted that the SLPs were filed on August 11, 2009, and the Court issued notice to the respondents on September 11, 2009. Further, before coming to this Bench, the matter was listed before another Bench, where it was heard on merits on different dates from August 9, 2011 to September 6, 2011. Mr. Subramanium further submitted that relegating the appellant to the High Court might render the matter infructuous in as much as the period for the patent applied for would come to end after 20 years from the date of the application, i.e. in July 2018. He submitted that the High Court would take at least 2 - 3 years before a final decision would be rendered and then, whatever be the High Court's decision, the matter was bound to come to this Court. In this to and fro whatever remains of the patent period would also lapse. Mr. Subramanium further submitted that the case involved a number of seminal issues and it was in the larger interest that an authoritative pronouncement on those issues be made by this Court.
22. Initially some of the respondents strongly opposed the maintainability of the petitions made directly to this Court by-passing the High Court, but in the end all agreed that given the importance of the matter, this Court may itself decide the appeals instead of directing the appellant to move the High Court. It is in such circumstances that we agreed to hear the parties and decide the appeals on merits. However, we, wish to make it clear that any attempt to challenge the IPAB order directly before this Court, side-stepping the High Court, needs to be strongly discouraged and this case is certainly not to be treated as a precedent in that regard.
23. As this Court now proceeds to decide the case on merits, it needs to be noted that after notice was issued in the SLPs filed by Novartis AG, all the five parties who had filed pre-grant oppositions before the Controller(hereinafter referred to as the Objectors) filed their respective counter-affidavits. Two of the Objectors, namely NATCO Pharma Ltd. and M/s Cancer Patients Aid Association, additionally filed Special Leave Petition, challenging the findings recorded by the IPAB in favour of Novartis AG. Leave to appeal has also been granted in all those SLPs, and hence, all the issues are open before this Court and this Court is deciding the case unbound by any findings of the authority or the tribunal below.
24. In connection with the case of the appellant, the first and foremost thing that needs to be kept in mind is that it falls in the transitional period between two fundamentally different patent regimes. In 1998, when the application was made on behalf of the appellant, the Patents Act, 1970, had a provision in section 5 with the marginal heading, "Inventions where only methods or processes of manufacture patentable" that barred grant of patent to substances intended for use, or capable of being used, as food or medicine or drug, or prepared or produced by chemical processes. The application was then put in the "mailbox" and was taken out for consideration when many changes had been made in the Patents Act, 1970, with effect from January 1, 2005, to make the patent law in the country compliant with the terms of an international agreement entered into by the Government of India. Following the international agreement, the Patents Act, 1970, was subjected to large scale changes in three stages; and finally, by the Patents (Amendment) Act, 2005, section 5 was altogether deleted from the Parent Act (Patents Act, 1970). Between January 1, 1995and January 1, 2005, the Patents Act, 1970, underwent wide ranging changes, but if we are asked to identify the single most important change brought about in the law of patent in India as a result of the country's obligations under the international agreement, we would unhesitatingly say the deletion of section 5 from the Patents Act, which opened the doors to product patents in the country. It is, however, important to note that the removal of section 5 from the statute book was accompanied by amendments in clauses (j) and (ja) of section 2(1), apart from some other ancillary clauses of section 2(1), as well as amendments in section 3, which redefined the concepts of invention and patentability.
25. Some important provisions of the Patents Act, 1970, as they stand after the amendment of the Act in 2005, and with which we are especially concerned in this case, indeed present a problem of interpretation. Why was section 5, which, in one sense, was the distinctive feature of the patent law in India, taken off the statute book? What does the legislature wish to say through clauses (j) and (ja) of section 2(1), section 3 and several other sections? How is it that some of the provisions of the Act apparently seem to be of no use or purpose, e.g., sections 2(1)(l) and 2(1)(ta)? Why is it that some of the crucial provisions in the Act appear to be wanting in precision and clarity?
26. It is easy to know why section 5 was deleted but to understand the import of the amendments in clauses (j) and (ja) of section 2(1) and the amendments in section 3 it is necessary to find out the concerns of Parliament, based on the history of the patent law in the country, when it made such basic changes in the Patents Act. What were the issues the legislature was trying to address? What was the mischief Parliament wanted to check and what were the objects it intended to achieve through theseamendments?
27. The best way to understand a law is to know the reason for it. In Utkal Contractors and Joinery Pvt. Ltd. and others v. State of Orissa and others[7], Justice Chinnappa Reddy, speaking for the Court, said: "9. A statute is best understood if we know the reason for it. The reason for a statute is the safest guide to its interpretation. The words of a statute take their colour from the reason for it. How do we discover the reason for a statute? There are external and internal aids. The external aids are statement of Objects and Reasons when the Bill is presented to Parliament, the reports of committees which preceded the Bill and the reports of Parliamentary Committees. Occasional excursions into the debates of Parliament are permitted. Internal aids are the preamble, the scheme and the provisions of the Act. Having discovered the reason for the statute and so having set the sail to the wind, the interpreter may proceed ahead " (emphasis added)
28. Again in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. and others[8] Justice Reddy said: "33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the Court construed the expression 'Prize Chit' in Srinivasa and we find no reason to depart from the Court's construction." (emphasis added)
29. In order to understand what the law really is, it is essential to know the "why" and "how" of the law. Why the law is what it is and how it came to its present form? The adage is more true in case of the law of patents in India than perhaps any other law.
30. Therefore, in order to correctly understand the present law it would be necessary to briefly delve into the legislative history of the law of patents in the country.
31. At the time of Independence, India's patent regime was governed by the Patents and Designs Act, 1911, which had provisions both for product and process patents[9]. It was, however, generally felt that the patent law had done little good to the people of the country. The way the Act was designed benefited foreigners far more than Indians. It did not help at all in the promotion of scientific research and industrialization in the country, and it curbed the innovativeness and inventiveness of Indians.
32. Shortly after Independence, therefore, in 1949, a committee was constituted under the chairmanship of Justice (Dr.) Bakshi Tek Chand, a retired judge of the Lahore High Court, to undertake a comprehensive review of the working of the 1911 Act.
33. The Committee submitted its interim report on August 4, 1949 and the final report in 1950 making recommendations for prevention of misuse or abuse of patent rights in India. It also observed that the Patent Act should contain a clear indication that food and medicine and surgical and curative devices were to be made available to the public at the cheapest price commensurate with giving reasonable compensation to the patentee. Based on the committee's recommendations, the 1911 Act was amended in 1950(by Act XXXII of 1950) in relation to working of inventions, including compulsory licensing and revocation of patents. In 1952, a further amendment was made (by Act LXX of 1952) to provide for compulsory license in respect of food and medicines, insecticide, germicide or fungicide, and a process for producing substance or any invention relating to surgical or curative devices. The committee's recommendation prompted the Government to introduce a bill (Bill no. 59 of 1953) in Parliament, but the bill was not pressed and it was allowed to lapse.
34. In 1957, another committee came to be appointed under the chairmanship of Justice N. Rajagopala Ayyangar to take a fresh look at the law of patent and to completely revamp and recast it to best sub-serve the(contemporary) needs of the country[10].
35. Justice Ayyangar painstakingly collected valuable data (taking the figures for the years 1930 to 1939 from the Bakshi Tek Chand report) and, compiling them into a number of tables,[11] showed the share of Indians in the field of patents. He analyzed the figures in the tables and pointed out that during the period 1930-37, the grant of patents to Indians and foreigners was roughly in the ratio of 1:9. Even after Independence, though a number of institutions for post-graduate training were set up and several national laboratories were established to encourage a rapid growth of scientific education, the proportion of Indian and the foreign patents remained substantially the same, at roughly 1:9. Justice Ayyangar further pointed out that this ratio does not take into account the economic or industrial or scientific importance of the inventions. If these factors are taken into account, Indians would appear to be lagging even further behind. Further, taking into reckoning the number of inventions for which renewal fees were paid beyond the 6th year, which would give a rough idea of the value attached to the invention by the patentee, the patents taken by Indians would appear to be of little worth as compared with patents held by foreign nationals.
36. Justice Ayyangar examined the nature of the patent right and considered the arguments advanced as justifications/rationalizations for grant of patents. He described the patent law, in his report, as an instrument for managing the political economy of the country. He observed: "It would not be an exaggeration to say that the industrial progress of a country is considerably stimulated or retarded by its patent system according as to whether the system is suited to it or not." (p. 9, para 16)He also quoted from Michel[12] with approval as under: "* * * Patent systems are not created in the interest of the inventor but in the interest of national economy. The rules and regulations of the patent systems are not governed by civil or common law but by political economy.
"37. Observing that industrial countries and under-developed countries had different demands and requirements, Justice Ayyangar pointed out that the same patent law would operate differently in two countries at two different levels of technological and economic development, and hence the need to regulate the patent law in accordance with the need of the country. Commenting upon the Patents and Designs Act, 1911, (even after its post-Independence amendments) Justice Ayyangar said: "It is further obvious however that the system would not yield the same results when applied to under-developed countries. I entirely agree with the views of the Patents Enquiry Committee that "the Indian Patent system has failed in its main purpose, namely, to stimulate invention among Indians and to encourage the development and exploitation of new inventions for industrial purposes in the country so as to secure the benefits thereof to the largest section of the public." (Interim Report, p. 165).
38. Justice Ayyangar observed that the provisions of the Patent law have to be designed, with special reference to the economic conditions of the country, the state of its scientific and technological advancement, its future needs and other relevant factors, and so as to minimize, if not to eliminate, the abuses to which a system of patent monopoly is capable of being put. Bearing in view the matters set above, he recommended retaining the patent system, but with a number of improvements.
39. One of the improvements suggested was to define, with precision, those inventions which should be patentable and equally clearly identify certain inventions, the grant of patents to which would retard research, or industrial progress, or be detrimental to the national health or well-being, and to make those inventions non-patentable.
40. Justice Ayyangar's report specially discussed (a) patents for chemical inventions; and (b) patents for inventions relating to food andmedicine.
41. In regard to patents for chemical substances, he examined the history of the law in other countries and pointed out that Germany was the first to adopt the system of confining the patentability of inventions relating to chemical products or substances to process claims. The law was then followed in many other countries in the world, for instance Austria, Brazil, Czechoslovakia, Holland, Hungary, Japan, Mexico, Norway, Poland and the U.S.S.R. Products produced by chemical process were not patentable though processes for making such products were patentable, if, of course, they satisfied the other tests of patentability, e.g. novelty, subject matter, etc. In light of the experience of the other countries, Justice Ayyangar recommended: "I have considered the matter with the utmost care and have reached the conclusion that the chemical and pharmaceutical industry of this country would be advanced and the tempo of research in that field would be promoted if the German system of permitting only process claims were adopted.
"42. Coming next to the patents for inventions relating to food and medicine, Justice Ayyangar pointed out that barring the US, there was hardly any country that allowed unrestricted grant of patents in respect of articles of food and medicines, or as to the licensing and working of patents in this class. In none of the countries of Europe were patents granted for product claims for articles of food or medicine, and in a few(Denmark for articles of food; and Italy, under the law of 1957, for medicinal products) even claims for processes for producing them were non-patentable. He explained that the reason for this state of law is stated to be that the denial of product claims is necessary in order that important articles of daily use such as medicine or food, which are vital to the health of the community, should be made available to everyone at reasonable prices and that no monopoly should be granted in respect of such articles. It is considered that the refusal of product patents would enlarge the area of competition and thus result in the production of these articles insufficient quantity and at the lowest possible cost to the public.
43. Justice Ayyangar submitted a comprehensive Report on Patent Law Revision in September 1959 and the new law of patent, namely, the Patents Act, 1970, came to be enacted mainly based on the recommendations of the report, and came into force on April 20, 1972, replacing the Patents and Designs Act, 1911.
44. Section 1 of the new Act gave it its name and territorial extent and provided that it would come into effect on such date as the Central Government may appoint, by notification in the official gazette. Section 2contained the definition and interpretation clauses; it defined the terms "invention" and "medicine" in clauses (j) and (l) respectively asunder[13]:
"Section 2(1)(j) "invention" means any new and useful -
i) art, process, method or manner of manufacture;
ii) machine, apparatus or other article;
iii) substance produced by manufacture, and includes any new and useful improvement of any of them, and an alleged invention.
Section 2(1)(l) "medicine or drug" includes -
i) all medicines for internal or external use of human beings or animals,
ii) all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of diseases in human beings or animals,
iii) all substances intended to be used for or in the maintenance of public health, or the prevention or control of any epidemic disease among human beings or animals,
iv) insecticides, germicides, fungicides, weedicides and all other substances intended to be used for the protection or preservation of plants;
v) all chemical substances which are ordinarily used as intermediates in the preparation or manufacture of any of the medicines or substances above referred to.
"45. Sections 1 and 2 comprised Chapter I, following which Chapter II was headed "Inventions not patentable". Chapter II had three sections which, as originally framed, are as under:
"Section 3. What are not inventions.-
The following are not inventions within the meaning of this Act,-
a) an invention which is frivolous or which claims anything obviously contrary to well established natural laws;
b) an invention the primary or intended use of which would be contrary to law or morality or injurious to public health;
c) the mere discovery of a scientific principle or the formulation of an abstract theory;
d) 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;
e) a substance obtained by a mere admixture resulting only in the aggregation of the properties of the components thereof or a process for producing such substance;
f) the mere arrangement or re-arrangement or duplication of known devices each functioning independently of one another in a known way;
g) a method or process of testing applicable during the process of manufacture for rendering the machine, apparatus or other equipment more efficient or for the improvement or restoration of the existing machine, apparatus or other equipment or for the improvement or control of manufacture;
h) a method of agriculture or horticulture;
i) any process for the medicinal, surgical, curative, prophylactic or other treatment of human beings or any process for a similar treatment of animals or plants to render them free of disease or to increase their economic value or that of their products. Section 4. Inventions relating to atomic energy not patentable.- No patent shall be granted in respect of an invention relating to atomic energy falling within sub-section (1) of section 20 of the Atomic Energy Act, 1962 (33 of 1962).
Section 5. Inventions where only methods or processes of manufacture patentable.-
In the case of inventions-
a) claiming substances intended for the use, or capable of being used, as food or as medicine or drug, or
b) relating to substances prepared or produced by chemical processes (including alloys, optical glass, semi-conductors and inter- metallic compounds), no patent shall be granted in respect of claims for the substances themselves, but claims for the methods of processes of manufacture shall be patentable.
"46. It is significant to note that section 5 in chapter II of the Act expressly excluded product patents for substances intended for use and capable of being used as food or as medicine or drug, and substances prepared or produced by chemical process, and made these substances non-patentable. Section 4 similarly prohibited grant of patent in respect of an invention relating to atomic energy. The Act thus clearly recognized and maintained the distinction between invention and patentability.
47. We have briefly examined some aspects of the legislative history of the patent law in India. We may now take a look at how the Patent and Designs Act, 1911, and the Patents Act, 1970, impacted the pharmaceutical industry and the availability of drugs in the country.
48. Sudip Chaudhuri in his book titled, The WTO and India's Pharmaceuticals Industry[14] describes the market shares of multi-national companies and Indian companies in India by means of a table as under: Market Shares of MNCs & Indian Companies in the Pharmaceutical
Industry in India
Year
MNCs (%)
Indian Companies
1952
38
62
1970
68
32
1978
60
40
1980
50
50
1991
40
60
1998
32
68
2004
23
77
Sources: For 1952, Pharmaceutical Enquiry Committee 1954, pp. 20 - 1, 61 - 6; For 1970, Ministry of Petroleum & Chemicals 1971, p. 1; For 1978, Chaudhuri 1984, p. 176 (based on ORG 1978); For 1980, 1991, and 1998, Kalsekar 2003;
49. The fall and rise of the Indian pharmaceutical industry is explained as the result of certain factors, not the least important of which was the change in the patent law in the country, which made medicines and drugs and chemical substances non-patentable. Chaudhuri explains that before the introduction of sulfa drugs (1930s) and penicillin (1940) that brought about the therapeutic revolution, drugs of natural origin were more important than synthetic ones. Also, medicinal plants (that is, raw materials) for about three-fourths of the drugs mentioned in British and other pharmacopoeias actually grew in India.
50. By the time the Second World War started (1939), several indigenous firms were engaged in manufacturing drugs, and indigenous producers met 13per cent of the medicinal requirements of the country. They still had along way to go to attain self-sufficiency but in terms of the range of operations they were already manufacturing all types of drugs. By the early1950s, because of the spread of manufacturing activities, the indigenous sector dominated the pharmaceutical industry in India. It accounted for about 62 per cent of the market in 1952 (the table above). However, the rise and growth of multinational corporations (MNCs) worldwide in the post-Second World War period, as well as the therapeutic revolution changed these dynamics. The MNCs started research for developing new drugs in the1930s-40s. As a result, in the late 1940s and during the 1950s and even after that at a slower rate, new drugs discovered by the MNCs began to be available for medical use. The indigenous sector was not equipped for research for developing new drugs, that is, for developing a new chemical entity. With the introduction of new drug at a rapid rate by the MNCs, the role of patents became important. Because of the patent regime under the1911 Act and the unsupportive industrial policy, the indigenous sector lost its status in the 1950s and the 1960s. In contrast to 62 per cent of the market in the early 1950s, the market share of the indigenous sector declined to 32 per cent by 1970. In contrast, the market share of the MNCs increased from 38 per cent in 1952 to 68 per cent in 1970 (the table above).
51. However, according to Chaudhuri, the situation changed in the 1970s.Several official initiatives were taken in the 1970s, of which the most important one was the enactment of the Patents Act, 1970, which changed the environment in favour of the indigenous sector.
52. In regard to the Patents Act, 1970, Chaudhuri maintains that Patent "reforms" contributed directly to the transformation of the pharmaceutical industry. He points out that under the Patents Act, 1970, articles of food, medicines and drugs and chemical substances could be patented only for anew method or process of manufacture, not for the products as such (section5 of the 1970 Act). Further, unlike in the previous patent regime, for each particular drug only one method or process - the best known to the applicant - could be patented (sections 5 and 10 of the 1970 Act). Also, even in case of a process patent for an article of food, medicine or drug, the term of the patent was brought down from fourteen (14) years to five(5) years from the date of sealing of the patent, or seven (7) years from the date of patent whichever was earlier.
53. He then examines the growth of the Indian pharmaceutical industry driven by the new patent regime in three phases:
Till the early 1970s; The late 1970s and the 1980s; and Since the 1990s54. Till the early 1970s the industry was dominated by MNCs who commanded68% of the market share. India was dependent on imports for many essential bulk drugs. This import dependence constricted consumption in a country deficient in foreign exchange, and inhibited the growth of the industry. Drug prices in India were very high.
55. In the late 1970s and 1980s, Indian companies started large-scale production of bulk drugs. The development of the bulk drugs sector is actually the most important achievement of the pharmaceutical industry in India. This led to the transformation of the industry.
56. The most rapid growth of the Indian pharmaceutical industry took place from the 1990s onwards. Both production and exports grew remarkably fast. The production of both bulk drugs and formulations started increasing sharply and steadily. From Rs.6,400 million in 1989-90, bulk drugs production increased to Rs.77,790 million in 2003-04; and from Rs.34,200million in 1989-90, formulation productions increased to Rs.276,920 million in 2003-04. The growth was most remarkable from 2000 to 2005, when production increased much more than it had in the last two decades. Indian companies further consolidated their domination in the domestic market. Their market share increased from 60 per cent in 1991 to 68 per cent in1998 and 77 per cent in 2003.
57. The growth was also very fast in the export markets. India became anet exporter by 1988-89, and since then there has only been an increase in the Indian exports. As a result, net exports as a percentage of exports have increased from 4.4 per cent in 1988-9 to about 50 per cent in the early 1990s and more than 75 per cent in the early 2000s. More than three-fourths of bulk drug production and almost one-fourth of the formulations production are exported. The USA, which has the toughest regulatory requirements, has emerged as India's largest export partner inpharmaceuticals.
58. Dealing with the growth of the Indian pharmaceutical industry after the change in the patent law, Chaudhuri writes: "Because of the rapid growth and structural transformation in the last three decades or so, India now occupies an important position in the international pharmaceutical industry India has received worldwide recognition as a low cost producer of high quality bulk drugs and formulations. India produces about 350 bulk drugs ranging from simple pain killers to sophisticated antibiotics and complex cardiac products. Most of the bulk drugs are produced from basic stages, involving complex multi-stage synthesis, fermentation and extractions. For more than 25 bulk drugs, India accounts for more than 50 per cent of the international trade. India is a major force to reckon with in the western markets for such drugs as ibuprofen, sulphamethoxasole
"59. Even as the country's pharmaceutical industry, helped by the basic changes made in the patent system by the Patent Act, 1970, was going from strength to strength, certain developments were taking place at the international level that would deeply impact the Patent system in the country. Following the Uruguay round of multilateral negotiations under the General Agreement on Tariffs and Trade (GATT), the Agreement on Trade-Related Aspects of Intellectual Property Rights (The TRIPS) was arrived at and it came into force on January I, 1995. The TRIPS Agreement is the most comprehensive multilateral agreement to set detailed minimum standards for the protection and enforcement of intellectual property rights, and aims at harmonizing national intellectual property systems. All members of the World Trade Organisation (WTO) are bound by the obligations under the TRIPS Agreement. India is one of the founding members of the GATT and thus a member of the WTO from its inception from January 1, 1995, and is bound by the obligations under TRIPS Agreement like all other members of the WTO. Some of the Articles of the Agreement, which have a bearing on our discussion, are reproduced below.
"Article 1 Nature and Scope of Obligations
1. Members shall give effect to the provisions of this Agreement. Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement. Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.
2. For the purposes of this Agreement, the term "intellectual property" refers to all categories of intellectual property that are the subject of Sections 1 through 7 of Part II. 3. xxx
Article 3 National Treatment
1. Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection [15] of intellectual property, subject to the exceptions already provided in, respectively, the Paris Convention (1967), the Berne Convention (1971), the Rome Convention or the Treaty on Intellectual Property in Respect of Integrated Circuits. In respect of performers, producers of phonograms and broadcasting organizations, this obligation only applies in respect of the rights provided under this Agreement. Any Member availing itself of the possibilities provided in Article 6 of the Berne Convention (1971) or paragraph 1(b) of Article 16 of the Rome Convention shall make a notification as foreseen in those provisions to the Council for TRIPS.
2. Members may avail themselves of the exceptions permitted under paragraph 1 in relation to judicial and administrative procedures, including the designation of an address for service or the appointment of an agent within the jurisdiction of a Member, only where such exceptions are necessary to secure compliance with laws and regulations which are not inconsistent with the provisions of this Agreement and where such practices are not applied in a manner which would constitute a disguised restriction on trade.
Article 7 Objectives The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.
Article 8 Principles
1. Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.
2. Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology. PART II Section 5: Patents
Article 27 Patentable Subject Matter
1. Subject to the provisions of paragraphs 2 and 3, 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.[16] Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.
2. Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect order public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.
3. Members may also exclude from patentability: (a) diagnostic, therapeutic and surgical methods for the treatment of humans or animals; (b) plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, Members shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof. The provisions of this subparagraph shall be reviewed four years after the date of entry into force of the WTO Agreement. Article 28 Rights Conferred 1. A patent shall confer on its owner the following exclusive rights:
(a) where the subject matter of a patent is a product, to prevent third parties not having the owner's consent from the acts of: making, using, offering for sale, selling, or importing[17] for these purposes that product;
(b) where the subject matter of a patent is a process, to prevent third parties not having the owner's consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by that process.
2. Patent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts. PART V Dispute Prevention and Settlement
Article 63 Transparency
1. Laws and regulations, and final judicial decisions and administrative rulings of general application, made effective by a Member pertaining to the subject matter of this Agreement (the availability, scope, acquisition, enforcement and prevention of the abuse of intellectual property rights) shall be published, or where such publication is not practicable made publicly available, in a national language, in such a manner as to enable governments and right holders to become acquainted with them. Agreements concerning the subject matter of this Agreement which are in force between the government or a governmental agency of a Member and the government or a governmental agency of another Member shall also be published.
2. Members shall notify the laws and regulations referred to in paragraph 1 to the Council for TRIPS in order to assist that Council in its review of the operation of this Agreement. The Council shall attempt to minimize the burden on Members in carrying out this obligation and may decide to waive the obligation to notify such laws and regulations directly to the Council if consultations with WIPO on the establishment of a common register containing these laws and regulations are successful. The Council shall also consider in this connection any action required regarding notifications pursuant to the obligations under this Agreement stemming from the provisions of Article 6ter of the Paris Convention (1967).
3. Each Member shall be prepared to supply, in response to a written request from another Member, information of the sort referred to in paragraph 1. A Member, having reason to believe that a specific judicial decision or administrative ruling or bilateral agreement in the area of intellectual property rights affects its rights under this Agreement, may also request in writing to be given access to or be informed in sufficient detail of such specific judicial decisions or administrative rulings or bilateral agreements.
4. Nothing in paragraphs 1, 2 and 3 shall require Members to disclose confidential information which would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of particular enterprises, public or private.
Article 64 Dispute Settlement
1. The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply to consultations and the settlement of disputes under this Agreement except as otherwise specifically provided herein.
2. Subparagraphs 1(b) and 1(c) of Article XXIII of GATT 1994 shall not apply to the settlement of disputes under this Agreement for a period of five years from the date of entry into force of the WTO Agreement. 3. During the time period referred to in paragraph 2, the Council for TRIPS shall examine the scope and modalities for complaints of the type provided for under subparagraphs 1(b) and 1(c) of Article XXIII of GATT 1994 made pursuant to this Agreement, and submit its recommendations to the Ministerial Conference for approval. Any decision of the Ministerial Conference to approve such recommendations or to extend the period in paragraph 2 shall be made only by consensus, and approved recommendations shall be effective for all Members without further formal acceptance process.
Article 65 Transitional Arrangements
1. Subject to the provisions of paragraphs 2, 3 and 4, no Member shall be obliged to apply the provisions of this Agreement before the expiry of a general period of one year following the date of entry into force of the WTO Agreement.
2. A developing country Member is entitled to delay for a further period of four years the date of application, as defined in paragraph 1, of the provisions of this Agreement other than Articles 3, 4 and 5. 3. Any other Member which is in the process of transformation from a centrally-planned into a market, free-enterprise economy and which is undertaking structural reform of its intellectual property system and facing special problems in the preparation and implementation of intellectual property laws and regulations, may also benefit from a period of delay as foreseen in paragraph 2.
4. To the extent that a developing country Member is obliged by this Agreement to extend product patent protection to areas of technology not so protectable in its territory on the general date of application of this Agreement for that Member, as defined in paragraph 2, it may delay the application of the provisions on product patents of Section 5 of Part II to such areas of technology for an additional period of five years.
5. A Member availing itself of a transitional period under paragraphs 1, 2, 3 or 4 shall ensure that any changes in its laws, regulations and practice made during that period do not result in a lesser degree of consistency with the provisions of this Agreement.
Article 70 Protection of Existing Subject Matter 1 to 6 xxx 7. In the case of intellectual property rights for which protection is conditional upon registration, applications for protection which are pending on the date of application of this Agreement for the Member in question shall be permitted to be amended to claim any enhanced protection provided under the provisions of this Agreement. Such amendments shall not include new matter. 8. Where a Member does not make available as of the date of entry into force of the WTO Agreement patent protection for pharmaceutical and agricultural chemical products commensurate with its obligations under Article 27 that Member shall:
(a) notwithstanding the provisions of Part VI, provide as from the date of entry into force of the WTO Agreement a means by which applications for patents for such inventions can be filed; (b) apply to these applications, as of the date of application of this Agreement, the criteria for patentability as laid down in this Agreement as if those criteria were being applied on the date of filing in that Member or, where priority is available and claimed, the priority date of the application; and (c) provide patent protection in accordance with this Agreement as from the grant of the patent and for the remainder of the