PATENTS ORDINANCE

Signing Away Sectors Of Our Economy

 Amit Sen Gupta

ON December 26, last year, one of the worst natural disasters in recent history struck the coastal regions in south India. It would have been natural to expect that the Indian government would be seized with the huge problem of grappling with the trail of devastation left in the wake of the tsunami. But one department of the Indian government was diligently at work, trying to put the finishing touches to its ongoing work even as the nation reeled under the impact of the tsunami devastation. Within 24 hours of the tragedy the Indian government promulgated an ordinance amending India’s Patent Act.

This act of the Indian government, typifies the haste with which the patents ordinance was promulgated, bypassing parliament and avoiding an informed discussion in the country. In the name of “fulfilling international obligations” the government appears to have forgotten that their first obligation should be to the people of this country who have given them a mandate to rule the country on their behalf.

The December, 2004 patents ordinance is the final piece of legislation designed to make the Indian Patent Act compliant with India’s obligations to put in place an Act that is compliant with the Trade Related Intellectual Property Rights (TRIPS) by 2005. The ordinance will now have to be ratified by parliament within the next six months. The amended Patents Act has critical implications for three crucial sectors –– pharmaceuticals, software and agriculture.

PHARMACEUTICAL SECTOR IN JEOPARDY

The pharmaceutical industry in India can claim the distinction of being one of the few “success stories” in Indian industry. It is today the fourth largest pharmaceutical industry in the world in terms of volumes and Indian exports reach more than 100 countries across the globe. It is a truly amazing turnaround for an industry, that till the sixties was dominated by foreign companies, and domestic manufacture was largely limited to two public sector companies. The 1970 Patents Act, by not allowing patenting of pharmaceutical products, has made a signal contribution to this phenomenal growth. This allowed Indian companies, in partnership with CSIR laboratories, to innovate new processes of drugs that were patented in the global market. The result was dramatic – typically, Indian companies were able to market drugs within 3-4 years of their introduction in the global market (instead of having to wait for 10-15 years or more) at costs that were one-tenth to one-fortieth of the costs of the patented drugs. For example, the “cocktail” of drugs used to treat HIV-AIDS is being offered by Indian companies at 140 dollar (treatment cost per annum), as compared to 8-10,000 dollar that was being charged by Multinational Companies (MNCs). It is this ability that will be in jeopardy after the amendment of the Indian Patents Act.

This in turn has meant that Indian drugs service the needs of not just Indian patients, but patients in poor countries across the globe. That is why we see today the rare phenomenon of protest demonstrations about an Indian domestic legislation being organised in front of Indian embassies in places like Washington and Paris. Petitions have been issued by hundreds of organisations working with poor patients in Africa and Asia, asking the Indian parliament not to ratify the ordinance. In a rare gesture the director general of WHO has written to the health minister of India requesting that amendments to the Indian law should take into account the concerns of millions of poor patients in developing countries.

MISPLACED ARGUMENTS

It is but natural that the government has been actively propagating its arguments in support of the ordinance. One oft-repeated argument is that 97 per cent of drugs are off-patent and will not be affected by the change. This is, at best, a half-truth. While it is true that a majority of drugs will not be affected, nobody has really explained how the figure of 97 per cent was arrived at. Independent estimates show that drugs affected in the short-term have a present turnover of around Rs 3000 crore. These are drugs that are being produced by Indian companies, who will have to discontinue production when these drugs are provided patent protection as a result of the new law.

This is, however, just the tip of the iceberg. In the past decades the rate at which old drugs become obsolete has increased tremendously. This is especially true in the case of drugs to treat infections –– killer diseases like  TB, Malaria, Pneumonia and now HIV-AIDS. So the issue is not just which drugs are off-patent today, the more important concern is that new drugs required to replace old ineffective drugs will be patented and shall not be available at affordable prices.

We have a living example of how monopoly situations can make life saving medicines virtually inaccessible. Last year an Exclusive Marketing Right was granted to Novartis for a drug called Glivec, which is used to treat patients of a form of blood cancer (leukemia). The drug was already being marketed in India by five Indian companies and was being produced by an Indian company Natco. Almost overnight, after Novartis got its exclusive right, the cost of treatment per month with Glivec went up from about Rs 12,000 to over Rs 1,20,000. Interestingly, Novartis’ case to exercise its monopoly was forcefully argued by P Chidambaram, in the Chennai High Court. It must be remembered that Exclusive Marketing Rights were issued to just 3 drugs as per the 1999 amendment of the Indian law, while it is being projected that there are over 7000 patent applications pending for clearance which will now be examined.

The government has also argued that the new patent regime will spur R&D activities in the country. This is premised on the misplaced notion that drug development is fuelled purely by private enterprise. To the contrary, global experience shows that a bulk of the basic research is done in public funded institutions. This is true even in the US where the National Institute of Health (NIH) plays a crucial role in drug development. What we will see is an enhanced interest in sub-contracting research activities to India in order to make use of cheap Indian expertise and pliant regimes which allow clinical trials to be conducted on population. This is not the same as doing basic research and the patents, as well as profits, will be creamed off by MNCs.

SOFTWARE PATENTING: CRITICAL IMPLICATIONS

While there has been some debate in the country as regards the ordinance’s impact on pharmaceuticals, what has gone virtually unnoticed is its impact on the software industry. Few seem to realise that for the first time in India, computer programmes (software) can now be patented. The new ordinance has supposedly been brought in to make the Indian Patents Act TRIPS compliant. The old Act (modified in 2002) has exactly the language given in TRIPS on this count, so it was fully TRIPS compliant. Therefore, the attempt to bring in software patenting through the new ordinance, under the guise of meeting the TRIPS deadline, is completely mala fide.

The recent ordinance allows patenting of software for: “its technical application to industry or a combination with hardware”. Since any commercial software has some industry application and all applications can be construed as technical applications, obviously it opens all software to patenting. That the government would even contemplate bringing an entire industry under patenting without any semblance of a debate is extremely surprising. Software patents do not patent programs –– what they do is to patent the idea on which the software is developed. And if ideas can be patented, then a range of applications can be claimed to have infringed some idea or the other.

Software patents are so controversial even in the developed world, that in Europe there is a huge opposition to software patenting, with small business organisations, leading scientists, economists opposing this measure. As a result the European parliament has been forced to defer software patenting several times.

AGRICULTURE SECTOR

The TRIPS agreement requires national laws to provide for protection to Plant Varieties. This has been dealt with separately through the “Protection of Plant Varieties and Farmers’ Rights Act, 2001”. However the Patents Act too has provisions which would have a bearing on the agriculture sector. The TRIPS agreement allowed for patenting of micro-organisms and of what it called “non-biological and microbiological processes”. This has been one of the most contentious parts of the agreement and virtually all developing countries have opposed this in some form. It has been argued that as all biotechnolgical processes are biological, they should be excluded from patenting, and this applies also to microbiological processes. There is no sound reason to regard microbiological as anything but biological. Also, micro-organisms are organisms, so there is no reason to treat them as patentable when plants and animals are excluded. Given this opposition the original agreement had stipulated that this clause would be reviewed with in four years, i.e. in 1999. This review is yet to be concluded, and it is difficult to understand why the Indian government has provided for such patenting while a review of the provisions is pending with the TRIPS Council.

The provisions referred to above would have major consequences for research in Biotechnology. The ability to identify, isolate and move genetic materials across the cells of different plants, animals and micro-organisms has aroused great commercial interest and investment in biotechnology. Genetically engineered crops and foods are being produced with the global market as their target. The provisions allow patent protection for such “new” products, and constitute a grave threat to our agriculture. Such products are controlled by MNCs, and would compete with what our farmers produce. This should be seen along with the fact that the new law also allows for patenting of agrochemicals (earlier kept out of the purview of product patents) like fertilisers and pesticides. Giant agribusiness MNCs today straddle the fields of biotechnology, fertilsers and pesticides, and patent monoplies would raise the possibility of their gaining control over our agriculture.

Finally, it must be underlined that the odinance has not been able to substantively provide for the safeguards that the TRIPS agreement allowed –– such as clear provisions for allowing expeditious use of compulsory licenses, ability to challenge patents grants and exceptions to patenting of frivolous claims. So unlike what the government claims, the issue is not about sticking to a deadline to meet an international obligation, but about voluntarily signing away major sectors of our economy to Multinational Corporations. This is what the Indian parliament needs to really debate upon in the coming session.