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Section 3(d): Overview and Analysis


Patent Law
Joachim V. R. Saldanha 210080

Submitted To: Prof. Anirban Mazumdar Date of Submission: 10/3/2014 Word Count: 1240

Indias ratification of the TRIPs agreement in the year 1996 obligated it to bring its patent system into conformity with the standards set out in the agreement. Many felt that this would have a significant negative impact on innovation in India, especially with respect to the pharmaceutical industry. The prevailing fear was that the TRIPs agreement, having been drafted by leading MNCs in the developed countries, would favour those companies at the cost of Indias domestic pharmaceutical industry. This fear has been allayed to a large extent by the rulings of the Madras High Court and the Supreme Court of India, the former upholding the constitutionality of Section 3(d), and the latter by denying patent to Swiss pharmaceutical company Novartis, thereby ensuring that Section 3(d) remains an efficacious tool against evergreening. In this project, the author seeks to examine the historical development of Section 3(d), it structure and interpretation by the courts in India, the controversy surrounding its presence in the Patent Act, 1970, , and its application in the future.

TABLE OF CONTENTS

I.

INTRODUCTION: A BRIEF HISTORY OF THE DEVELOPMENT OF PATENT LAW IN INDIA

II.

SECTION 3(D): STRUCTURE AND INTERPRETATION

III.

THE CONTROVERSY SURROUNDING SECTION 3(D)

A. THE IMPORTANCE OF INCREMENTAL INNOVATION

B. TRIPS COMPLIANCE

IV.

RAMIFICATIONS FOR THE INDIAN PHARMACEUTICAL INDUSTRY

I.

INTRODUCTION: A BRIEF HISTORY OF THE DEVELOPMENT OF PATENT LAW IN INDIA

In the year 1911, the Patents and Designs Act was promulgated in India by the erstwhile colonial rulers of the country. Unsurprisingly, it favoured those companies headquartered in or owned by nationals of the developed countries, and did very little to foster an atmosphere of innovation and disclosure in India itself. As a result, even as late as 1957, when the Government of India constituted the Ayyangar Committee to report on the question of revision of the patent law, India still imported most of its medicinal requirement at exorbitant prices and domestic production was at an all time low. The Ayyangar Committee Report recommended the retention of the patent system but suggested a blanket prohibition on the granting of product patents for substances intended for use as food, drugs and medicines, including the products of chemical processes.1 Thus the Patent Act of 1970 came into being. Almost a quarter century later, in 1994, the multilateral trade negotiations at the Uruguay Round came to an end, culminating in the creation of the World Trade Organization. As a member of the WTO, India was required to adopt the TRIPs Agreement into domestic law, but was given a grace period of ten year, being a developing country. In 2005, India amended its patent law to provide for product patents. At the same time, it amended Section 3(d).2 II. SECTION 3(D): STRUCTURE AND INTERPRETATION

Section 3(d) falls under Chapter II of the Patents Act, which deals with what are not inventions. A bare reading of the section shows that it is divided into three limbs. The first and the third limbs deal with a new form of a known substance, and the use of a known process, machine or apparatus respectively. The second limb imposes a blanket prohibition on the grant of patent to the discovery of any new use or new property of a known substance. It is the first limb that is the most problematic. Read with the explanation to Section 3(d), any new form of a known substance shall be considered as the same substance and regarded as not patentable unless it demonstrates a significant enhancement in efficacy. Although not
1

Report on the Revision of the Patents Law, Justice N. Rajagopala Ayyangar, September 1959, pp. 39 Section 3. What Are Not Inventions. The following are not inventions within the meaning of this Act, (a) (b) (c) (d) The mere discovery of a new form of known substance which does not result in the enhancement of known efficacy of that substance, or 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 process results in a new product or employs at least one new reactant. Explanation. For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations, and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy;

mentioned expressly in the section, the Supreme Court has nonetheless stated that in light of legislative history and parliamentary debate, the section is primarily intended to apply in respect of medicines and drugs, and to some extent, agricultural chemical substances.3 Further, efficacy has been defined as the ability to produce a desired or intended result. 4 It has been held5 that the test of efficacy would depend on the function, utility or the purpose of the product in question and that in the case a pharmaceutical product that claims to cure a disease, efficacy would be therapeutic efficacy. The court further held that the therapeutic efficacy of a medicine must be judged strictly and narrowly.6 The Indian approach to pharmaceutical patents is both novel and effective. The premise Section 3(d) is based on is that the granting of patents on pharmaceutical products hampers the ability of a State to ensure its citizens access to health. Therefore, unlike patent offices abroad, which determine whether a patent is to be granted for a new form of a known substance on the basis of the prior art and the test of obviousness, in India the patent office will place more emphasis on the demonstrated therapeutic efficacy of the new substance.7 It appears therefore that while in some foreign jurisdictions, a pharmaceutical product that is shown to be non-obvious and possessing advantageous or beneficial properties, may be granted a patent, in India, until and unless a significant enhancement in the therapeutic efficacy can be shown, patent will not be granted. This serves to encourage pharmaceutical companies interested in patenting an invention in India to focus on improving the actual efficacy of the product on the patient, rather than on patenting as many different forms of the same substance as possible to ensure monopoly.

III.

THE CONTROVERSY SURROUNDING SECTION 3(D)

A. The Importance of Incremental Innovation The logic behind a system of patents is simple. By providing exclusive monopoly to a patent holder to manufacture and market his invention, he is incentivised to innovate and, and any

Novartis v. Union of India, AIR 2013 SC 1311, 98 Ibid, 180 Id 179 Id 180

See: Draft Guideline for Examination of Patent Applications in the Field of Pharmaceuticals, Office of the Controller General of Patents, Designs and Trademarks, available at: http://www.ipindia.nic.in/iponew/Guidelines_Pharma_PatentApplication_28February2014.pdf , last accessed on 10/3/2014

resulting inventions are disclosed to the public. Such disclosures help create a corpus upon which further inventions may draw from. Incremental innovation refers to the creation of slightly enhanced versions of already existing inventions, differing only to a slight extent in some aspects. Patent philosophy accepts that successive incremental innovations may ultimately result in an invention of great worth, significantly improved over the original invention. However, whether each stage of incremental invention is deserving of patent protection for the TRIPs mandated period of 20 years is questionable. Allowing such patents could result in evergreening, a wholly undesirable phenomenon. Evergreening may be defined as a process of extending the term of patent protection on a drug while making minor changes which do not affect the efficacy of the drug.8 The Supreme Court has held9 that Section 3(d) is not a blanket bar to the patentability of incremental innovations, but rather sets up a second tier of qualifying standards for chemical substance/pharmaceutical products in order to leave the door open for tyre and genuine inventions but, at the same time, to check any attempt at repetitive patenting or extension of the patent term on spurious grounds.

B. TRIPS Compliance The issue of compatibility of section 3(d) with the TRIPSs agreement was raised before the Madras High Court10 but the court declined to answer the question on the ground that it was not the appropriate forum. However, there has been serious criticism of the section and allegations that it is violative of the TRIPS agreement.11 The truth is that Section 3(d) serves only to establish a patentability test,. In order to show that a pharmaceutical product meets the criteria of significantly enhanced efficacy, it is necessary for the patent applicant to demonstrate that the product differs from its previous form such that it can be said that the new form exhibits significant enhancement in therapeutic efficacy. The requirement of Section 3(d) would not be met if the applicant showed that the new form possessed beneficial or advantageous properties, unless he also demonstrates the nexus between these new properties and the therapeutic efficacy of the new form.12
8

Swaraj P. Baruah , A Purposive Patent Policy : Reigniting The Section 3(d) Debate in the light of India's international Obligations, Nalsar Student Law Review , Vol. 6 , 143 (2011)
9

Supra, n.2, 103, 190 Novartis v. Union of India, (2007) 4 MLJ 1153

10

11

Shamnad Basheer & T. Prashant Reddy, The Efficacy of Indian Patent Law: Ironing out the creases in Sectio n 3(d), 2008 5:2 SCRIPTed
12

Novartis, 208

One way of interpreting Section 3(d) therefore is to treat the requirement of significant enhancement as the inventive step, the new form of the known substance as the novelty, and efficacy as the utility. Section 27 does not mandate a rigid interpretation of these requirements, and it is wholly in compliance with the agreement to specify the purport of the requirement in relation to pharmaceutical products.

IV.

RAMIFICATIONS FOR THE INDIAN PHARMACEUTICAL INDUSTRY

Thanks in large part to the now repealed Section 5 of the Patent Act and government encouraged entrepreneurship, the pharmaceutical industry in India today is one of the most developed in the world. India is the third largest exporter of bulk drugs and more than half of the countries in the world are reliant on India for pharmaceutical imports. However, as Indian pharmaceutical companies look to the future, they can only be too aware of the challenges ahead. The real profits in the industry will be acquired through the invention and subsequent sale of block buster drugs which require huge expenditure for R&D. As Indian companies mature, they must focus their business towards R&D while still maintaining a healthy generics business.

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