People's Democracy

Amendment to India’s Patent Act

Amit Sen Gupta

THE Indian Patents, (Second Amendment) Bill has finally been passed by both houses of parliament. The passage of the Bill brings down the curtain on a long and contentious debate in the country regarding India’s Patent system.  It is a debate that stretches back more than a decade and a half.

HISTORY OF NEGOTIATIONS

 In 1986 a new round of negotiations was initiated under GATT (General Agreement on Tariffs and Trade). Popularly known as the Uruguay Round of negotiations, this new round was sought to be used by the developed countries to orient world trade in a manner that was beneficial to their interests. More importantly, the Uruguay Round of negotiations was used by the developed countries led by the US to introduce a number of issues on the agenda, which were hitherto not considered as trade issues and hence not covered by GATT. Prominent among these were issues related to Patents, Investment, Environment and Labour standards. The ploy was clear - to use the threat of trade embargoes to force developing countries to follow the diktats of developed countries on a whole range of economic and industrial policies on one hand, and on the other to use these new issues to create barriers against developing countries wishing to access the domestic markets of developed countries.

The basis for negotiations was the infamous Dunkel Draft (named after Arthur Dunkel - the key author of the negotiating text). The most contentious portion of the Dunkel Draft was that which related to Patents - termed as Trade Related Intellectual Property Rights (TRIPS) in the Dunkel Draft.  Patent is a form of monopoly that is granted to an inventor for a limited period, during which the inventor has the sole right to use the invention and benefit from its applications. Patents are granted as an incentive for innovation. At the same time Patent laws all over the world have safeguards to prevent the abuse of the monopoly granted to the Patent holder. Thus Patent laws, traditionally, have been a balance between the rights and the obligations of the patent holder.

ATTEMPT TO SANCTIFY

PATENT MONOPOLY

It is important to understand why the US and other developed countries were so keen to introduce the issue of Patents as part of the negotiating agenda in GATT. Faced with competition in the traditional manufacturing sectors, the US and other developed countries wished to secure their dominance over the global economy through the medium of Patents. In other words the US saw Patents as a means to legitimise creation of monopolies. In order to do so the balance between the rights and obligations of Patent holders was skewed in favour of the former. The TRIPS text in the Dunkel Draft sought to sanctify the monopoly power of the Patent holder while reducing its obligations.

India, since 1970, had a Patent law that was seen by many as a model for other developing countries. As would logically be expected, the Indian Law stressed on the obligations of the Patent holder and had strong provisions that prevented the abuse of the Patent holder’s monopoly rights. Of particular importance was the fact that the Indian Patent law did not provide for monopoly rights in the area of drugs and agro-chemicals. The results were clear - the Indian drug industry developed to become the strongest and most self-reliant industry in the developing world. Today the campaign on access to drugs draws strength from Indian companies like Cipla who are offering anti-AIDS drugs at one tenth to one fortieth of the prices being charged by large pharmaceutical companies. This became possible because of India’s liberal Patent law of 1970.

It was, hence, natural that India (along with Brazil, Argentine, Thailand and other developing countries with a strong industrial base) opposed the inclusion of TRIPS in the negotiating agenda. They argued that the issue of Patents was a non-trade issue. They further argued that the history of Patent laws across the globe shows that all countries have evolved their domestic laws in consonance with the stage of economic development and development of science and technology capabilities. Laws that provide strong Patent protection limit the ability of developing countries to enhance their S&T capabilities and retard dissemination of knowledge. Japan, for example, was able to enhance its domestic capabilities through the medium of weak patent protection for decades—well into the second half of the twentieth century. Japan provided very weak Patent protection till well into the seventies. Italy changed to a stronger protection regime only in 1978 and Canada as late as in 1992. It was argued that it would be illogical to thrust a single patent structure on all countries of the globe, irrespective of their stage of development.

Further, notwithstanding the rhetoric, the TRIPS accord was not pushed through just to access markets of developing countries. These markets represent just a fraction of the global market - India, for example, accounts for 0.8 per cent of the market, in contrast to 33 per cent, 24 per cent and 20 per cent for the US, Europe and Japan respectively. Rather the TRIPS agreement became a necessity to protect the markets of large pharmaceutical companies in the developing world against competition from cheaper generic drugs manufactured in countries like India and Brazil. TRIPS, in other words, is not about “free” trade, but has to do with protection of markets in developed countries. In order to safeguard this market giant pharmaceutical companies railroaded all opposition and forced the signing of the TRIPS accord. The draft which formed the basis of the accord was prepared by industry representatives from the US, Europe and Japan.

VOLTE FACE

BY INDIA

Curiously, in 1988-89 India made a complete volte face and agreed to the inclusion of TRIPS in the GATT negotiations. The then Congress(I) government succumbed to pressure from the US and even went to the extent of replacing India’s chief negotiator at GATT, S P Shukla because of the latter’s strong opposition to the inclusion of Patents in the negotiating agenda. The capitulation by India punctured the opposition of other developing countries, and TRIPS entered the negotiations on world trade. Subsequently the TRIPS text in the Dunkel Draft became the WTO agreement that came into force in 1995. At that time virtually all opposition parties, including the BJP and its present partners in the NDA criticised the Congress government for its surrender to the US on this issue.

It is important that we recall the above history, because it is only then that we shall be able to understand the implication of the recent amendment that has been passed in Parliament. Any amendment to the 1970 Act is a retrograde step, if we have in mind the interests of the Indian people and the Indian industry. Today the same parties and individuals who had castigated the Congress in 1989 have taken the lead in getting the new Amendment Bill passed. They now use the argument that after India became a signatory to the TRIPS Agreement as part of the WTO Agreement in 1995, the obligations need to be fulfilled. What they however do not say is that the new amendments do not fully reflect even the safeguards provided for in the TRIPS agreement. We have adopted a national legislation that is more stringent than what is required of us to satisfy our international obligations. Both the Congress and the NDA have combined to push this legislation through, and it is only the left parties led by the CPI (M) and some other parties like the Samajwadi Party which put forward a principled opposition to the passage of the Bill.

INADEQUATE

SAFEGUARDS

Let us look at the safeguards that could have been incorporated in the new Act. Many of these pertain to the provision of Compulsory Licensing. This is a provision that allows the government to curb the monopoly power of the Patent holder by issuing a license to other interested parties to use the patented invention. This is a provision that the TRIPS agreement provides for. While the new amendments do provide for compulsory licensing, many areas have been left vague. The terms on which a compulsory licence can be issued, i.e. the royalty required to be paid to the patent holder (as compensation) has not been defined.  Moreover the time frame for settling a dispute between the patent holder and an applicant for a licence has not been specified. Knowing the way courts function, these ambiguities would allow for delaying tactics to be employed by Patent holders to frustrate applicants. This is particularly important as applicants would not risk pledging resources to set up manufacturing facilities if there a great deal of uncertainty built into the whole process.

The new amendments make the law open to interpretations, and rely on the judicial system to interpret it. It may be mentioned here that while the TRIPS agreement allows for compulsory licensing, not a single Compulsory Licence has been granted anywhere in the world since the TRIPS agreement came into force in 1995. This is a tremendous psychological barrier today, and it will require a brave system to be the first one to break the barrier. Developing country governments and their institutions, including the judiciary, are under tremendous pressure from Multinational Corporations  - through the US and other developed countries - not to curb their monopoly powers by issuing compulsory licenses. A chronically genuflexing government seems ill equipped to interpret its laws in a manner that favours its citizens over the interests of foreign multinational corporations.  Especially if the government appears to be so hesitant to even incorporate provisions that are allowed by the TRIPS agreement.

A LOST

OPPORTUNITY

It should be understood that the global climate regarding drug MNCs has changed drastically since 1995. In large measure this is because of the outcry regarding the AIDS epidemic. Since the nineties almost the whole continent of Africa has come under the grip of this epidemic and in some countries an estimated third of the adult population is infected by AIDS.  The tragedy was compounded when drugs to contain AIDS started being developed. These drugs allowed AIDS patients the opportunity to live normal lives even if they were infected. But there was a catch. Because of Patent protection these drugs were priced beyond the reach of patients in developing countries. The ridiculous effect of Patent protection was evident when one found that the cost of treating AIDS patients in some African countries was many times their total GNP! Even more ridiculous, and tragic, when we know that these drugs can be produced at one fortieth of prices being charged by MNCs.

AIDS has become a rallying point for activists from all parts of the world and developing country governments alike. The coalition that was built around the AIDS issue then pressed for clarifications from the WTO that the TRIPS accord did not prevent country governments from legislating in favour of protection of public health. In this they were supported by almost the entire community of developing nations. The global drug MNCs fought to the last to prevent this. But the momentum of the global movement was able to force the adoption of a declaration at the WTO Ministerial Conference in Doha that clarified that countries could legislate to curb the monopoly powers provided by patent protection to drug MNCs, in order to safeguard public health.

Thus, the present time was possibly the most opportune to put through a more liberal legislation, that went beyond the TRIPS agreement. Post-Doha and post the momentum created by the campaign for access to drugs, there exists the possibility to force the renegotiation of the TRIPS agreement. This is a window that may not remain for long, and it was important to capture the moment, because the manner in which international treaties are interpreted is as much political as legal. Unfortunately India’s new Patent Act has been constrained within the straitjacket of the TRIPS Agreement.

IMPLICATIONS OF

THE NEW ACT

What are the implications of the new Act? The implications will not be evident overnight. The new amendments still do not provide for Patent protection to drugs. India is required to provide such protection only by 2005, and the minister for commerce has indicated that a subsequent amendment shall provide for this. When this happens Indian companies will lose the opportunity to develop processes for patent protected drugs in the country. India will become dependant on MNCs for technology to produce new drugs. Votaries of the new Patents Act argue that old drugs will not be affected by this Act. While this is true, it must be understood that the rate of obsolescence of old drugs is extremely fast today. Further, technological dependence on MNCs is the proverbial “thin edge” which will be used by the MNCs to establish their dominance over the Indian drug market once again (a position they had lost after the mid seventies). They will then again start charging exorbitant prices for drugs in the Indian market.  Since the early eighties, the categories of drugs which show the maximum rise in sales are categories which include overwhelming majority of drugs still under Product Patent or whose Product patents have expired recently.  In other words if we had a product patent regime today, the drugs showing fastest growth would have been priced way beyond the capacity of the average consumer.

Many may feel that with the adoption of the new Amendment Bill the fight on Patents is over. Nothing could be far from the truth. Across the globe developing country governments and activists groups are fighting for a more liberal interpretation of the TRIPS agreement and even its renegotiation.  India could be the crucial player in this fight given its pre-eminent position as the developing world’s largest supplier of drugs. We can only hope that the government of the day will discover some day that it is in possession of a spine!