In my last
post on the IPAB’s decision in the Bayer -NATCO Compulsory licensing case,
I had written that the IPAB’s analysis of working requirements under the
Patents Act, 1970 was far from satisfactory. In several earlier posts on this
blog and elsewhere, I have written on the issue of local working. Extracted
below is the post I wrote after the CL order was delivered last March by the
Controller:
“In 2 earlier posts elsewhere,
I had wondered if a patentee may cite un-workable circumstances to express his
inability to domestically manufacture a patented invention. Also, what would
happen if the Controller of patents has to choose between access to a
life-saving drug by turning a blind eye to large scale importation of the drug
to make it both affordable and available to people in India,
and fulfillment of domestic working requirements under the Act? This
issue too was broached briefly by several speakers in the Roundtable
at NLU Jodhpur.
On the issue of “local
manufacture” to satisfy working requirements under the Act, I am inclined to
state that, TRIPS-compliance aside, the Patents Act exhorts domestic
manufacture to prevent reliance on imports and to promote transfer of technical
skills to the local population. After all, the idea is reduce the yawning
technological deficit between India and the developed world.
The celebrated Ayyangar Committee report, which is the travaux
preparatoires to the
1970 legislation, sheds great light on the wording of Section 83 of the Act
with respect to working of a patented invention.
In particular, under Part II of the report titled “The
Patent System in India”, Paragraphs 37 and 38 are of importance to the issue of
working and compulsory licensing. A few lines from these paragraphs are
educative and go a long way in understanding and clarifying the Act’s position
on local manufacture:
“37. In the present
decade under the impact of the national plans that have been formulated for the
economic uplift of the country and the raising of the standard of living of its
people, the conservation of foreign exchange is a matter of prime importance.
In the context of this need, it would be seen that any increase in the price of
the patented products imported into the country must, to that extent, be a
disadvantage to the country’s economy..........
38. I have already
set out the considerations which are said to constitute the quid pro quo for
the grant of the patent monopoly, namely (1) the working of the invention
within the country so as to result in the establishment in the country of a new
industry or an improvement of an existing industry which would profitably
employ the labour and capital of the country and thus increase national wealth,
and (2) disclosure to the public of the invention and the manner of its working
so that on the expiry of the life of the patent, the public are enabled to work
the invention themselves and in competition with each other.
Where the patentee
has no intention of working the invention in this country either because he
considers this is not profitable or because he prefers to expand the production
in his home country so as to achieve there greater efficiency or more production,
or is otherwise not interested in working the invention in India, the grant of
the patent might tend to improve the patentee’s home country, but offers little
advantage to us. Unless therefore the law provides for measures to compel the
patentees to work the invention within the country, and these measures are
effective to achieve their purpose, the social cost involved in the grant of
the patent is not offset by any benefit to the community....”
Considering the unequivocal crystallisation of
objectives sought to be achieved by and using the Patents Act, it could be said
that local manufacture is an essential and mandatory requirement under the Act.
However, should we make an exception when it comes to life-saving drugs? If
yes, does the Act in its current form allow for such an exception?”
Given that in Bayer CL Order, the
IPAB categorically states that the Ayyangar Committee report remains relevant
and immensely educative on the objectives sought to be achieved by the
Patents Act, one is surprised that the Committee’s observations with respect to
local working and the reasons for its mandatory requirement under the Act have
not been given their due in the IPAB’s decision.
The Committee’s position,
in fact, leaves very little room for the following unrestrained view of the
IPAB:
“In any event, we are not furnished with any evidence
regarding this aspect viz., whether the appellant in its facility in India,
which admittedly the appellant does not deny, could not have manufactured this
drug. So, with regard to Section 84(1)(c), we find that the word
‘worked’ must be decided on a case to case basis and it may be proved in
a given case, that ‘working’ can be done only by way of import, but that cannot
apply to all other cases. The patentee must show why it could not be
locally manufactured. A mere statement to that effect is not sufficient there
must be evidence. Therefore, while we are of the opinion
that the word ‘worked’ has a flexible meaning, and to that extent we differ
from The Controller. The appellant has not proved working and so his conclusion
is right. Working cannot mean that the requirement of working would be
satisfied by having import monopoly for all patented inventions. We also
look at Section 84(7)(iii) which says that the reasonable requirements of
public shall be deemed not to have been satisfied if a market for export of the
patented article manufactured in India is not being supplied or
developed. Therefore, ‘working’ could mean local manufacture entirely and
‘working’ in some cases could mean only importation. It would depend on the
facts and evidence of each case.”
The Ayyangar Report makes it
evident that the kind of flexibility the IPAB has read into the Act with
respect to local manufacturing requirements is simply not based on the statute
or the history of the legislation. Importation may, at best,
supplement a patentee’s efforts in fulfilling his working requirements under
the Act, but under no circumstances can import alone constitute working.
Comments and corrections are
welcome!
Sai, working requirement has to be seen from multiple sides. The Act, after the 2005 amendment has moved away from the Ayyangar report on this instant. The word "merely" in Sec 83 is important. Inclusion of the word "importation" in Sec.48 is also important. These amendments only show that "importation" is not excluded out of the definition of "working". It is also borne out by the entry(3(b)(ii)) in Form 27. If "working" is equated with "local manufacture" then it will have multiple repercussions on the patent system in this country in general. Let me give one example, say a major company invents a drug for certain tropical disease present in India and certain other African countries. It patents it in all these countries.Based on economies of scale it decides to set up a factory in Africa, now since it is not manufactured in India a CL will be granted on it, even if the requirement of the public is met and reasonably priced as well.This is a catch-22 situation: if doesn't patent it in India it cannot stop people from copying, if it patents then a CL will be granted if "working" is interpreted strictly to mean "local manufacture". Why to invent it in the first place. This is not the intention of the legislature.
ReplyDeleteRegards
abr
Dear Raj,
DeleteThanks for the comment. Let me reproduce the last line from my post to reiterate my position- "Importation may, at best, supplement a patentee’s efforts in fulfilling his working requirements under the Act, but under no circumstances can import alone constitute working."
From the above extracted line, it is clear that I do not believe importation does not contribute towards working. My sole contention is that importation alone cannot amount to working in the absence of domestic manufacture. In other words, if X is the total number of patented goods made available in India on a commercial scale by the patentee, X=A+B, where A is the number of goods locally manufactured and B is the number of goods imported. Under no circumstances can X be equal to B alone is my point. B may be used by the patentee to shore up his numbers towards fulfilling the adequacy of his working requirements under the Act, but the patentee cannot use B alone or "merely" B to claim that he has worked the patent in India to the fullest extent possible.
I completely understand the logic of your African example and I had too considered this aspect in an earlier post. However, the question that is sought to be addressed is what does the Act posit, not its reasonableness or fairness. To this extent, the Ayyangar Committee Report remains relevant for good reason: The Ayyangar committee report has specific regard to the issue you raise, namely economics of manufacturing. Further, no amendment to the Act thus far has undermined/altered/eroded the clause (b) of Section 83 of the Act, which forbids "mere" importation. Section 83, under the 1970 version, had only the first two clauses. The subsequent 5 clauses were added in the 2002 amendment. What is even more clinching is that clause (c) of Section 83, which was added in 2002, captures the exact sentiment echoed in Para 38 of the Committee's report, which I reproduce again:
"38. I have already set out the considerations which are said to constitute the quid pro quo for the grant of the patent monopoly, namely (1) the working of the invention within the country so as to result in the establishment in the country of a new industry or an improvement of an existing industry which would profitably employ the labour and capital of the country and thus increase national wealth"
In other words, local manufacture of the patented invention was seen as a means of ensuring technology transfer providing employment to Indians. Therefore, as the law stands today, the legislative history and the language of the relevant provisions of the Act primarily mandate domestic manufacture, with importation being permitted to supplement the domestic manufacture in order to fulfill working requirements. What is surprising is that the IPAB repeatedly highlights the relevance of the Committee Report, and yet comes out with an unclear stand on the issue of working.
Best Regards,
Sai.