A Comparative Analysis of Indias Patent Regime and its Impact on Pharmaceuticals

Moshe Y. Admon, LL.B., B.A., B.Sc.

J.D. and LL.M. (International Trade and Business Law) Candidate, 2015
University of Arizona James E. Rogers College of Law
LL.M. Thesis
May 15, 2015

With a population of approximately 1.252 billion, a GDP of roughly $1.877 trillion, and
an estimated annual GDP growth rate of 6.7% for 2015, India is poised to become a global
superpower. Nevertheless, contemporary India is categorized by the World Bank as a lower
income country with a GNI (previously GDP) of $1,570 per capita and a life expectancy of 66
years.1 This enormous economic growth rate compounded with the exponential accumulation of
wealth by the super-rich2, contrasted with the massive number of poor plagued with low life
expectancy raises vast social and economic concerns relating to the availability of vital
pharmaceuticals to the populace. Augmenting these national anxieties are the underlying
cultural and political turmoil of Indias history, becoming drastically acute since imperial rule in
the late 19th century and independence in 1947, both of which play a crucial role in guiding
policy decisions. This paper will discuss the ongoing debate relating to Indias patent law as it
pertains to pharmaceutical development, a comparison of Indian patent law to U.S. law and
TRIPS, and the implications for Indias pharmaceutical industry and social well-being.

A Brief History of Indian Patent Law Up To WTO Membership

Patent law in India originated under the patent regime implanted by Great Britain, which
ruled India for nearly a century.3 The first patent law in India was introduced in 1856, when a
law was passed granting inventors select rights for the time period of fourteen years.4 Since this
1856 law did not receive the Queens consent it was considered by many legal scholars and
commentators to be potentially moot, so as a response in 1859 a new law was introduced that
1

The World Bank, http://data.worldbank.org/country/india (last visited May 24, 2025).

Soutik Biswas, India's billionaires and the wealth of the nation, (May 24, 2015, 2:00 AM),
http://www.bbc.com/news/world-asia-india-19921501.
3
V. K. Unni, Indian Patent Law and TRIPS: Redrawing the Flexibility Framework in the Context of Public Policy
and Health, 25 Pac. McGeorge Global Bus. & Dev. L.J. 323, 323-324 (2012).
4
Id. at 324.
2

granted inventors the exclusive privilege to make, use, and sell their invention in India. The
purpose of this legislation was to help British patent holders gain control over the Indian
markets, and the law contained major restrictions on the importation of technologies and
inventions. As a consequence, importation of technology became highly complex and
prohibitively expensive.5
Due to these restrictions, the Indian Patent Act was once again amended in 1911 and
authorized issuing of both process and product patents. These patents were valid for a period of
sixteen years and could be extended for another period of ten years if the patent holder believed
that he had not been adequately defrayed for his innovation.6 Nevertheless, the act contained
the same restrictions which dampened the development of a local pharmaceutical industry and
caused India to have some of the highest drug prices in the world.7 In fact, the pharmaceutical
industry was by all purposes dominated by transnational companies who used the 1911 Patent
Act to prevent indigenous firms from manufacturing patented drugs invented abroad.8 Further,
[u]nder the system established by the 1911 Act, eighty to ninety percent of India's patents came
to be held by foreigners.9
When India declared independence in 1947 it established itself as a socialist country with
a mixed economy, where the government undertook managing both private and public
enterprises.10 This socialist philosophy was fundamental to the development of Indias patent
law reform. Immediately after Indias independence there was concern by Jawaharlal Nehru, the
5

Id. at 324.
Samira Guennif, Present Stakes Around Patent Political Economy: Legal and Economic Lessons from the
Pharmaceutical Patent Rights in India, 2 Asian J. WTO & Int'l Health L & Pol'y 65, 69 (2007).
7
Swaraj Paul Barooah, India's Pharmaceutical Innovation Policy: Developing Strategies for Developing Country
Needs 5(1) TRADE L. & DEV. 150, 154 (2013).
8
Ryo Shimanami, The Future Of The Patent System, Edward Elgar Publishing, Cheltenham (2013)
9
Susan Fyan, Pharmaceutical Patent Protection and Section 3(D): A Comparative Look at India and the U.S., 15 Va.
J.L. & Tech. 198, 204 (2010).
10
Martin Adelman, Patent Law in India, 1 Int'l Intell. Prop. L. & Pol'y 131, 131 (1996).
6

first Prime Minister of India, that foreign companies would control the Indian economy.11 Due
to this, a Patent Enquiry Committee, named the Tek Chand Committee, was formed to assess the
current state of the Indian Patent regime and to make . . . [the system] more Indian and more in
line with national goals.12 Within three years after independence, [a]s of 1948-1950, the
Patent Enquiry Committee specified that the Indian patent system has failed in its main purpose,
namely to stimulate inventions 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.13
In 1957 a separate national patent review board known as the Ayyangar Committee was
formed. Incorporating the Tek Chand Committees data into its own research it found that
between eighty and ninety percent of the Indian patents were held by foreigners and more than
ninety percent of them were not worked (i.e. used by manufacturers) in India. [It] asserted that
the system was being exploited by foreigners to achieve monopolistic control over the market...
Medicines were arguably unaffordable to the general populace, and the drug-price index was
rising... In the early 1940s and 1950s, ninety percent of the (Indian) drug market was under the
control of foreign companies, and the country was totally dependent on imports for both bulk
drugs (the active ingredients) and formulations (the medicines made from bulk drugs).14
In response to these findings, the Indian government enacted the home grown Indian
Patent Act (IPA) of 1970, which some have referred to as an anti-capitalist, anti-industrial
property statute to be expected from a command economy such as India which was at the time

11

Stephen Barnes, Pharmaceutical Patents and TRIPS: A Comparison of India and South Africa, 91 Ky. L.J. 911,
920 (2002-2003).
12
15 Va. J.L. & Tech. 198, 204 (2010).
13
2 Asian J. WTO & Int'l Health L & Pol'y 65, 69 (2007).
14
91 Ky. L.J. 911, 920 (2002-2003).

closely allied to the Soviet Union.15 This relaxed patent law was in many ways was rooted in
the spirit of patent regimes adopted by other developing countries, with an intent to encourage
national pharmaceutical production and boost medical independence.16 In fact, the stated
purpose of the IPA was "[T]o encourage inventions and to secure that [they] are worked in
India [to ensure that] they are not granted merely to enable patentees to enjoy a monopoly for
the importation of the patented article,... [and to prioritize the] public interest over the private
interest of the inventor."17
Specifically, the act eliminated patentability for food, medicines, drugs, or chemical
substances, broadly defined. They allowed process protections generally but when it came to
food, medicines, or drugs, the term was set at five years from the date of the grant or seven years
from the date of filing, whichever was first.18 Considering the time to process an application
and receive a patent license, this time frame is de minimis. Additionally, a company would
only be able to enjoy one patent for one manufacturing process Besides this, only local
production would validate the effective use of a patent. Contrary to the earlier practice, the
import of pharmaceutical products no longer allowed the patent's effective use to be validated.
As a result, the patent holder was given three years to exercise his right in the form of local
production. The IPA also provided for assignment of rights. If, at the end of the three year
period, a medicine was not available or available at an unreasonable price, the Indian
government could construe that the public need had not been met and could issue a compulsory
license (CL). It could thus allow a local company to manufacture the medicine and market it at a

15

1 Int'l Intell. Prop. L. & Pol'y 131, 132 (1996).

2 Asian J. WTO & Int'l Health L & Pol'y 65, 70 (2007).
17
The Patents Act, No. 39, 83(a) (India) (1970).
18
1 Int'l Intell. Prop. L. & Pol'y 131, 132 (1996).
16

lower price. A fortiori, if two years after the issue of the CL, the medicine was still not available,
the government could simply revoke the patent due to lack of satisfactory usage.19
Because the IPA restricted pharmaceutical patentability to only process patents, Indian
pharmaceutical manufacturers had enormous incentive to reverse engineer patented medication
and produce it at a fraction of the price, considering that they had no research and development
costs. This brought about the creation of a robust domestic generics industry that could quickly
reverse engineer original formulations as well as develop new processes for drug production.20
The Indian generic industry, founded essentially on patent piracy, grew dramatically in the
following years. In 1953, the sector consisted of 1,752 companies as against 5,126 in 1980.
Today, there are 20,000 companies with 250 big timers and about ten public sector
enterprises.21 In fact, India has become a global powerhouse in the manufacturing of generic
pharmaceuticals. Additionally, there were several major ancillary economic benefits that
emanated from the governments lax patent policy. One was the growth of domestic production
of raw material and formulations [whereby] [r]aw material production rose from 180 million
rupees in 1965 to 45 billion in 2001.22 Secondly, the growth of the Indian generics industry
brought about the drop in pharmaceutical prices until they were some of the lowest in the world.
This continued [un]till 1995, when India joined the WTO. 23 The new patent policy led to an
exponential rise in exports, which increased over 300-fold between the enactment of the IPA and
the late 1990s.24 In fact, India is a leading exporter of medicines to developing countries,

19

2 Asian J. WTO & Int'l Health L & Pol'y 65, 70 (2007).

5(1) TRADE L. & DEV. 150, 154 (2013).
21
2 Asian J. WTO & Int'l Health L & Pol'y 65, 71 (2007).
22
Id. at 71.
23
5(1) TRADE L. & DEV. 150, 154 (2013).
24
2 Asian J. WTO & Int'l Health L & Pol'y 65, 71 (2007).
20

including a large percentage of medicines used [to] combat AIDS.25 Nevertheless, there were
also negative repercussions, particularly a significant drop in the number of patents filed in
India.26
An important measurement that shows the impact of the IPA on pharmaceutical prices
post 1970 is the comparative pharmaceutical price index relative to other goods. In the
beginning of the sixties, the drug price index was almost at par with the general price index: 2%
inflation for drugs as against 3% for all other goods [F]rom 1970s onwards, the gap between
the drug price index and the price index of other goods began to widen. In general, between 1961
and 1989, the price index for all products increased by 676.6% as against 386.6% for drugs.27
A comparison of prices on essential medicines in 1986 show the stark differences between
domestic Indian pharmaceuticals as opposed to those in other countries. For example, the price
of an antibiotic in India was 82.5% of the price in Pakistan and 32.2% of the price in Britain. For
the most expensive drug, a hypertensive drug, the Indian price was equivalent to approximately
69% of the British price and 42% of the Pakistani price.28 Likewise, on the prices of largest
selling drugs during the years 1991 and 1992, India enjoyed attractive prices. For an antibiotic
(Ciprofloxacin), the Indian price was 5.66 times lower than the Pakistani price. Even for an ulcer
drug (Ranitidine), the American price was 25 times higher than the Indian price.29

25

25 Pac. McGeorge Global Bus. & Dev. L.J. 323, 328 (2012).
Panel Discussion: Patent Protection in India, 3 Int'l Intell. Prop. L. & Pol'y 45-1, 45-2 (1998).
27
2 Asian J. WTO & Int'l Health L & Pol'y 65, 72 (2007).
28
Id. at 73.
29
Id. at 73.
26

Indian Patent Law after Joining the WTO and TRIPS

In 1995 India became a member of the World Trade Organization (WTO) and signed the
WTO TRIPS (Trade Related Intellectual Property Rights) agreement. TRIPS sets a minimum
standard for the protection of intellectual property rights between WTO nations. Some of the
important guidelines set by TRIPS that directly conflicted with the IPA are as follow: Articles
17 and 34 of this agreement lay down common minimum international regulations. These
regulations specify what is patentable, what is not patentable and the extent to which the rights
are protected under the patent As regards the patent's term, it is fixed at a minimum of 20
years from the date of its application (Article 33) As regards patent validity, Article 27 lays
down that patent rights shall be enjoyable without discrimination, whether products are
imported or locally produced henceforth import would also validate the actual use of the
patent As per article 27.1, the member states are beholden to offer protection granted by a
patent for any invention whether it is a product (medicine) or a process (a method to produce
chemical ingredients for a drug composition).30
Although TRIPS provides patentability standards, there is leeway left to members based
primarily on public need issues. These limitations on patentability are found in Article 27.2,
27.3a, 27.3b, and 8.131. Article 27.2 states that "Members may exclude from patentability
inventions, the prevention within their territory of the commercial exploitation of which is
necessary to protect public order 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

30
31

2 Asian J. WTO & Int'l Health L & Pol'y 65, 75 (2007).

Id. at 75-78.

merely because the exploitation is prohibited by their law." 32 However, public order is not
defined, which creates a widely contested ambiguity.33 Article 27.3a allows signatories to
exclude "diagnostic, therapeutic and surgical methods for the treatment of humans or animals,
an important provision to developing countries considering that such methods can have
important implications on public health.34 Article 27.3b states that patentability can be excluded
for 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.35
Additionally, Article 8.1, one of the Basic Principles of TRIPS, give members the right to
exclude some medicines from patentability for the sake of protect[ing] public health and
nutrition, and to promot[ing] the public interest in sectors of vital importance to their socioeconomic and technological development, provided that such measures are consistent with the
provisions of this Agreement.36 Nevertheless, this exclusion of patentability must be temporary
to conform to the measures consistent with the provisions of this Agreement.
In addition to TRIPS providing limitations on patentability, there are also limitations on
rights emanating from patents already granted. Article 30 states Members may provide limited
exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not
unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice
the legitimate interests of the patent owner, taking account of the legitimate interests of third
parties.37 The general assumption is that unreasonable conflict and prejudice is to create a

32

World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited

May 24, 2015).
33
2 Asian J. WTO & Int'l Health L & Pol'y 65, 77 (2007).
34
Id at 77.
35
World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited
May 24, 2015).
36
Id.
37
Id.

competitive environment favourable to a decrease in drug prices and enhancement of people's

access to medicines.38
Another broad exception set out in the TRIPS agreement is compulsory licensing, as
specified in broad stokes by Articles 8, 31, and 40. In practice, public authorities can authorise
a third party to manufacture a patented product or to use the patented process without the patent
owner's consent. Most developed countries and developing countries provide for CL concession
in their legislation. 39 Still, according to Article 31.b member states must make a efforts to
obtain authorization from the right holder on reasonable commercial terms and conditions prior
to enacting compulsory licensing for national emergency or other circumstances of extreme
urgency or in cases of public non-commercial use.40 Nevertheless, developing countries such as
India still take advantage of this broadly worded clause.
The last major exception on rights emanating from granted patents is parallel
importation. To understand parallel importation it is first necessary to understand the doctrine
of patent exhaustion, otherwise referred to as the first sale doctrine. When an inventor is
granted a patent he is entitled to a range of exclusive rights essentially equating to a monopoly.
Nevertheless, this monopoly has exceptions, one of which is the exhaustion doctrine. This
doctrine holds that the first sale of a patented product by the patentee or by a licensee acting
within the scope of a license that does not otherwise restrict the licensee's activities exhausts the
monopoly in that article and the patentee may not thereafter, by virtue of his patent, control the
use or disposition of the article.41 The exhaustion doctrine is a territorial right and is dependent

38

2 Asian J. WTO & Int'l Health L & Pol'y 65, 78 (2007).

Id at 79.
40
World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited
May 24, 2015).
41
5.04 THE PATENT EXHAUSTION DOCTRINE, 2014 WL 839407
39

on national law. In the U.S., the domestic purchase of a patented product exhausts the patentees
rights, but [u]nder current law, a U.S. patent holder may block the importation, use, or sale of
patented goods purchased abroad, even if purchased from a seller licensed under a foreign
patent.42 This type of limitation is referred to as national exhaustion.43 Alternatively, if a
country applies the doctrine of international exhaustion, the IP rights are exhausted once the
product has been sold by the IP owner or with his consent in any part of the world.44 India, in
addition to a large number of other countries including Argentina, South Africa, Egypt, Pakistan,
and the Philippines, apply international exhaustion by statute.45
This legal extermination of patent rights triggered by the international exhaustion
doctrine has created the mechanism of parallel importation. Parallel importation is when an
importer essentially engages in price arbitrage by purchasing a patented product for a low price
in one country and exports it to a country where that same patented product is being sold for a
higher price, thus undercutting the patentees profits and market share.46 To make matters worse
for patentees, TRIPS Article 6 states that nothing in this Agreement shall be used to address the
issue of the exhaustion of intellectual property rights.47 Article 6 was further clarified by
Article 5(d) of the Doha Declaration which states that the effect of the provisions in the TRIPS
agreement that are relevant to the exhaustion of intellectual property rights is to leave each

42

Sarah R. Wasserman Rajec, Free Trade in Patented Goods: International Exhaustion for Patents, 29 Berkeley
Tech. L.J. 317, 319-20 (2014)
43
World Intellectual Property Organization, International Exhaustion and Parallel Imports,
http://www.wipo.int/sme/en/ip_business/export/international_exhaustion.htm (last visited May 26, 2015).
44
Id.
45
Krista Cox, KEI files amicus brief in case on international patent exhaustion, Knowledge Ecology International,
(May 27, 2015, 12:10 AM), http://keionline.org/node/1611
46
Shamnad Basheer, Exhausting Patent Rights in India: Parallel Imports and TRIPS Compliance, Journal of
Intellectual Property Rights Vol 13, 486, 487 (2008).
47
World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited
May 24, 2015).

10

member free to establish its own regime for such exhaustion without challenge48 Thus,
nations such as India that subscribe to the international exhaustion doctrine can take advantage of
parallel licensing to breach patent rights, annulling any potential recourse a patentee may have.
The following chart is an excellent comparison of Indias 1970 Patent Act and its current
patent regime under TRIPS.49

48
49

Journal of Intellectual Property Rights Vol 13, 486, 492 (2008).

2 Asian J. WTO & Int'l Health L & Pol'y 65, 82 (2007).

11

Transition Period to the India Patents (Amendments) Act, 2005

Because these provisions were created by developed countries and emulate western IP
law standards TRIPS provided that developing nations, a list which includes India, would be
extended a 10-year transition period upon signing TRIPS to fully enable compliance. Even
though there was this transition period TRIPS compliance obligated India to immediately
implement a mailbox facility for such product patent applications filed during the TRIPS
transition period and to assign each application a filing date. Another obligation under TRIPS
was the provision dealing with the grant of EMRs [exclusive marketing rights] for mailbox
applications that met specified conditions during the transition period.50 Due to multiple
political reasons the Indian parliament did not pass a law ordering this mailbox rule and in
response the U.S. initiated the WTOs dispute resolution mechanism to order Indias
compliance, which prodded Indias passing of the 1999 Patents Amendment Act decreeing the
mailbox system.51
The next major facelift to the IPA was the Patents Amendment Act 2002. This raised the
term of patentability to twenty years, and brought the IPA into alignment with the Paris
Convention and Patent Co-operation Treaty. The significance of this was that it meant that
India had to make its laws consistent with the Paris Conventions national treatment principle
which prohibits discriminatory treatment of foreign applicantsas well as its right of priority
which permits foreigners who have previously filed a patent application in their home countries a
twelve-month priority period within which they can file an application for the same invention in
India, while still retaining the benefit of their earlier home country filing date.52 There were

50

25 Pac. McGeorge Global Bus. & Dev. L.J. 323, 331 (2012).
Id. at 331.
52
Id. at 333.
51

12

further changes enacted by the 2002 Amendment that aligned the IPA with TRIPS, but
conversely broadened the right of India to issue compulsory licensing. Disconcerting to
developed TRIPS member nations, the 2002 Amendment states that process patents pertaining
to medicines and food were automatically deemed to be endorsed with the words licenses of
right, which would make them available for compulsory licensing by all applicants three years
after the patent grant.53
In 2005 the Indian parliament passed the Patent Amendments Act 2005, the current
patent regime in effect. One of the major changes brought about by this act was that
pharmaceuticals, food, and agro-chemicals were deemed patentable. Nevertheless, the 2005
amendments contain many controversial features that have caused many disputes. They include
elaborate provisions concerning what is and is not considered patentable subject matter, a new
definition of the inventive step criterion of patentability, procedures governing both pre- and
post-grant opposition, and a more liberal framework for compulsory licensing.54

Nonobviousness also referred to as Inventive Step

Patent law in the occidental world and particularly the U.S. evolved within the confines
of a free market economy. This western economic and social environment can be clearly
contrasted with that of India, which was historically a familial based culture overtaken by
western imperialism and still trying to overcome the socialist planned economy under which it
was established in 1949. As a result Indian patent law is still a reflection of its cultural heritage,

53
54

Id. at 334.
Id. at 335.

13

as much as occidental patent laws - including the TRIPS agreement - is a reflection of modern
western socio-economic influence.
The reason nonobviousness is such a pivotal issue is because of its potential flux. This
determination can be adduced from looking at the basic elements of patentability, which screens
innovations with four basic tests: subject matter, nonobviousness, novelty, and utility.55 Subject
matter is the primary test, because it determines whether an innovation is even eligible for the
patent monopoly or, alternatively, is merely an unpatentable concept Of the three remaining
tests (novelty, utility, and nonobviousness), only nonobviousness (the classical test of
"invention") presents the kind of serious dispute also inherent to the subject matter inquiry. The
other two tests of invention-novelty and utility-are either purely factual inquiries or present
virtually no serious disputed issues' and seem so obviously factual as to not raise the question of
industrial policy. Thus, only the subject matter and nonobviousness inquiries are decisive, in a
political and socioeconomic sense, to the grant of patent rights.56
Nonobviousness in the U.S.
In the U.S., nonobviousness is a condition for patentability, as expressed under 35 U.S.C.
103 which reads:
A patent for a claimed invention may not be obtained, notwithstanding that the
claimed invention is not identically disclosed as set forth in section 102, if the
differences between the claimed invention and the prior art are such that the
claimed invention as a whole would have been obvious before the effective filing
date of the claimed invention to a person having ordinary skill in the art to which
the claimed invention pertains. Patentability shall not be negated by the manner in
which the invention was made.57

55

Michael H. Davis, Patent Politics, 56 S. C. L. Rev. 337, 365 (2004-2005).

Id. at 367.
57
Cornell University School of Law Legal Information Institute, https://www.law.cornell.edu/uscode/text/35/103
(last visited May 24, 2015).
56

14

Nonobviousness is determined from the point of view of a fictional Person Having

Ordinary Skill In The Art, commonly referred to as the PHOSITA. The PHOSITA is an
individual with the same level of education as the inventor, with a perfect memory, but no
creativity. This means he is aware of every technology currently present within the realm of art
being patented, but does not have the creativity to undertake an inventive step. Thus, the
PHOSITA will only combine previous technologies if they are obvious, which according to the
Supreme Court in the case of KSR International Co. v. Teleflex, Inc. discussed below is a
question of law based on findings of fact.58 Essentially, this is a requirement of
inventiveness so that individuals cannot simply patent a combination of technologies that are
readily obvious. Additionally, nonobviousness is determined from the time of filing and not
retrospectively from when the patent examiner is making a determination as to patentability.
The foundational test for modern U.S. nonobviousness was set out in the 1966 Supreme
Court case of Graham v. John Deere Co.59 In 1950 William Graham obtained the 811 patent for
a device designed to absorb shock from plow shanks as they plow through rocky soil and thus
to prevent damage to the plow. Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 4
(1966). In 1953, he obtained a similar patent, the 798 patent, which differed from the first in
that (1) the 798 invention featured a stirrup and bolted connection of the shank to the hinge plate
and (2) the 798 invention placed the shank below the hinge plate. This distinction shifted the
point of wear from the bottom of the upper plate to the top of the stirrup of the hinge plate, a
more easily replaced part.60 Graham sued John Deere Co. for infringed his 798 patent, a claim

58

Adam Powell, KSR Fallout: Questions of Law Based on Findings of Fact and the Continuing Problem of
Hindsight Bias, 1 Hastings Sci. & Tech. L.J. 241, 260 (2009).
59
383 U.S. 1, 17, 86 S. Ct. 684, 693 (1966).
60
Roger E. Schechter, Principles of Patent Law, 155, (Thompson West Publishing, 2004).

15

which was eventually heard at the Supreme Court, and was the subject of their non-obviousness
analysis.61 The Graham factors as they are commonly referred to can be summarized as a
factual determination of (1) The scope and content of the prior art, (2) The differences between
the prior art and the claims at issue, (3) The level of ordinary skill in the pertinent art, and (4)
Secondary considerations (e.g., commercial success).62 The Court found that the 798 was
obvious due to Grahams own prior 811 patent and another similar non-patented device being
sold in the market.63
After this ruling, the United States Court of Appeals for the Federal Circuit developed a
sub-test for the secondary considerations test provided in Graham. This test, commonly
referred to as the teaching-suggestion-motivation (TSM) test, requires evidence of some
reason to combine various references that each teach part of an invention Thus, if there is no
evidenced reason to combine the references, then the invention will be deemed nonobvious.64
The Federal Circuit continually put greater emphasis on the TSM test and following it rigidly
until the matter came to a head once again in the 2007 case of KSR International Co. v. Teleflex,
Inc.65 Here, Teleflex sued KSR for infringing their patented automobile electronic throttle
control pedal. KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398, 406 (2007). The Teleflex patent
was a mechanism for combining an electronic sensor with an adjustable automobile pedal so the
pedal's position can be transmitted to a computer that controls the throttle in the vehicle's
engine. Id. at 406. Teleflex accused KSR of infringing their patent by adding an electronic
sensor to one of KSR's previously designed pedals [and] KSR countered that [the patent] was

61

Id. at 155.
Id. at 154.
63
Id. at 155.
64
Patentlyo, Supreme Court: Current Test of Obviousness is Gobbledygook, (May 24, 2015, 2:14 AM),
http://patentlyo.com/patent/graham-factors.
65
550 U.S. 398, 426, 127 S. Ct. 1727, 1745 (2007).
62

16

invalid under the Patent Act, 35 U.S.C. 103 because its subject matter was obvious. Id. at
406.
Because it would have seemed obvious to add an electronic sensor to an existing
automobile accelerator pedal, the District Court granted KSRs motion for summary judgment
of invalidity based on obviousness.66 But, the Federal Circuit vacated and remanded, holding
that the district court had applied an incomplete TSM test because the district court failed to
make specific findings that would have motivated one skilled in the art to combine the
references in the particular manner claimed, such that a genuine issue of material fact
precluded summary judgment.67 After granting certiorari, the Supreme Court reversed the
Federal Circuits ruling, and rejected the rigid approach in the way the Court of Appeals
applied its TSM test stating that the analysis need not seek out precise teachings in the prior
art.68 The Court emphasized that the Graham factors continue to define the inquiry that
controls the nonobviousness analysis, but their application should be broad and flexible.69 Due
to this broad and flexible approach, the test requires a case-by-case analysis with room for
leeway that can lead to many disputes, which as some scholars propose, can be used as a way to
forward a particular industrial policy in a capitalist society.70
Inventive Step in TRIPS
TRIPS does not define inventive step, commonly referred to as nonobviousness in the
U.S. It also does not define novelty nor industrial application. Leaving these vital

Wilson Sonsini Goodrich & Rosati, ITS OBVIOUS: SUPREME COURT REJECTS RIGID APPLICATION OF
TEACHING-SUGGESTION-MOTIVATION TEST IN PATENT CASES, (May 24, 2015, 2:15 AM),
https://www.wsgr.com/publications/pdfsearch/clientalert_ksr.pdf.
67
Id.
68
Id.
69
Id.
70
56 S. C. L. Rev. 337, 367 (2004-2005).
66

17

ingredients of patentability undefined is problematic, since it was almost certain that member
countries of the WTO would take liberties in defining them.71
Inventive Step in India
The most important case construing inventive step in Indian law is Bishwanath
Prasad Radhey Shyam v. Hindustan Metal Industries, even though it was decided in 1978. The
Indian Supreme Court determined that obviousness has to be strictly and objectively judged
[and] further recognized that obviousness is something that is a natural suggestion of what was
previously known.72 The Indian Court provided a test by asking "was it for practical purposes
obvious to a skilled worker, in the field concerned, in the state of knowledge existing at the date
of the patent to be found in the literature then available to him, that he would or should make the
invention the subject of the claim concerned?73
In 2005 the Indian Patent Act was amended whereby Section 2(1)(ja) of the Act defines
inventive step as a feature of an invention that involves technical advance as compared to the
existing knowledge or having economic significance or both and that makes the invention not
obvious to the person skilled in the art.74 The conspicuous language of technical advance and
economic significance give the Indian patent regime a much broader regime than that of the
U.S. In fact, Scholars opine that the new broadened definition of inventive step will give the

71

Feroz Ali, Silences in the TRIPS Agreement, PHARMA PATENTS, (May 25, 2015, 2:19 AM),
http://pharmapatents.blogspot.com/2007_08_01_archive.html.
72
Invintree, http://www.invntree.com/blogs/determination-obviousnessinventive-step-indianapproach?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original (last visited May 24,
2015).
73
Id.
74
Ministry of Law and Justice, The Patents (Amendment) Act 2005,
http://www.ipindia.nic.in/ipr/patent/patent_2005.pdf (last visited May 24, 2015).

18

Patent Office and courts an explicit mandate to consider a claimed invention's economic
significance.75
In 2010, the Indian case of Hoffmann-La Roche v. Cipla clarified the test for inventive
step (nonobviousness), whereby the court held whether in light of prior art, it was possible for a
normal but unimaginative person skilled in the art to discern the inventive step of the invention
on the basis of general common knowledge of the art at the priority date; [and] [w]here the
differences between the prior art would, without knowledge of the alleged invention, constitute
steps which could have been obvious to the skilled man or whether they require any degree of
invention.76
A comparison
A comparison of the U.S. and Indian nonobviousness / inventive step regimes show
some palpable differences. The U.S. definition of nonobviousness as provided by the courts is
very individualistic and puts a prima facie emphasis on patents as property rights, although
temporary. The free market justification for creating this property right, which in fact creates a
temporary monopoly, is to incentivize innovation and its publication. Yet, some scholars opine
that this government granted monopoly right serves as a regulatory function which can stymie
innovation to the benefit of large corporations. An example of this is standing in patent claims,
whereby only two kinds of parties have standing to bring an infringement suit, or, conversely,
an action for a declaratory judgment of invalidity: a patent proprietor (or one standing in her
shoes) or a potential infringer. Thus, unless a proprietor, or a proprietor's assignee, only parties
facing threats of infringement lawsuits may bring claims themselves.77 Consequently, for the
75

25 Pac. McGeorge Global Bus. & Dev. L.J. 323, 338 (2012).
Dr. Kalyan C. Kankanala, Pharma Patent Law & Recent Trends India, (May 24, 2015, 2:28 AM)
http://www.slideshare.net/Brainleague/pharma-patent-law-and-recent-trends-india.
77
56 S. C. L. Rev. 337, 374 (2004-2005).
76

19

most part, competitors are the parties with standing, but some studies suggest that competitors
are reluctant to take action due to the existence of a good old boys network [which]
encourages patent holders to respect each other's turf,78 thus eroding the validity of the patent
regime. Nevertheless, as is readily apparent, the U.S. nonobviousness regime emphasizes private
property for incentivizing profit, and even as some would propose, corporate profit over the
public benefit.
In contrast, the Indian inventive step regime uses the enigmatic terminology
technological advance and economic significance, both of which seem to signify a greater
concern for public benefit and less emphasis on private property. For example, the means of
establishing economic significance could be how well has the developments carried out in the
product been received by the consumers. In addressing this question the commercial success of
the product could be of relevance. In effect the product selling itself is the best indicator.79
Thus, if the product generates public demand it will be patentable, whereas if a product does not
generate public demand, it may not be patentable, preventing an inventor from holding an
unjustifiable monopoly on the market.
Disregarding any personal opinions of the author regarding which regime is superior, the
text of the both rules point to the effect of cultural entrenchment and societal norms. Where the
free market and individualistic U.S. focuses on private property and profitability interests,
socialist and familial India tends to have a greater leaning towards the public good.

78

Id. at 375.
Manisha Singh Nair, India: Economic Significance Whether Inventive Step?, (May 24, 2015, 2:30 AM)
http://www.mondaq.com/india/x/56996/Patent/Economic+Significance+Whether+Inventive+Step.
79

20

Subject Matter
Patent-eligible subject matter refers to the types of inventions that are deemed patentable.
These definitions of subject matter vary greatly when comparing U.S. and Indian patent law.
Subject Matter in the US
Subject matter is defined in U.S.C. 35 S. 101, whereby eligibility is determined by two
criteria, both of which must be satisfied. The claimed invention (1) must be directed to one of
the four statutory categories, and (2) must not be wholly directed to subject matter encompassing
a judicially recognized exception.80 The four categories include a process, machine,
manufacture, or composition of matter.81 Step twos judicially recognized exceptions include
laws of nature, physical phenomena, and abstract ideas, or is it a particular practical application
of a judicial exception.82
There is no explicit rejection of patenting peripheral inventions, as long as those
inventions fall within eligible subject matter. As we will see, this method, referred to as
evergreening is used regularly in the pharmaceutical industry, specifically when a
pharmaceutical company that lost both FDA exclusivity and patent protection on the active
ingredient of its drug seeks to extend its monopoly by protecting the drug with a series of
peripheral patents that allow for additional FDA exclusivity and further patent protection. In
particular, this practice allows a brand name company to list additional patents in the FDA's

80

The United States Patent and Trademark Office, http://www.uspto.gov/web/offices/pac/mpep/s2106.html (last

visited May 24, 2015).
81
Id.
82
Id.

21

Orange Book, which in turn allows the patentee to sue manufacturers of generic versions of their
product for infringement and obtain thirty-month stays on the generic product's market entry.83
Evergreening has major negative repercussions which affect the general populace.
Mainly, by using loopholes in the law to extend patent life, pharmaceutical companies can
effectively delay the market entry of generic drugs which could be sold at a fraction of the
price.84 Nevertheless, there are positive consequences to evergreening. With respect to ex ante
incentives, Scott Hemphill points out that a defense to pharmaceutical companies' strategic
behavior is that such behavior increases the reward for innovation and thus incentivizes
development of new drugs. With respect to ex post incentives, to commercialize a product,
pharmaceutical companies must discover how to synthesize the drug; how to purify it; how to
stabilize it to ensure a shelf life long enough for the drug to be shipped and used; how to create
packaging that does not react with the product and is safe for consumer use; and how to mix the
active ingredient with inactive ingredients to create an injection, cream, or pill that is safe and
effective.85
Subject Matter in TRIPS
TRIPS gives member states flexibility in denying patentability when it is necessary to
protect ordre 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 [commercial] exploitation is prohibited by their law.86 Hence, TRIPS gives
member states the right to limit patent rights under certain situations such as public health
83

Janet Freilich, The Paradox of Legal Equivalents and Scientific Equivalence: Reconciling Patent Law's Doctrine
of Equivalents with the Fda's Bioequivalence Requirement, 66 SMU L. Rev. 59, 104 (2013).
84
Id. at 105.
85
Id. at 106.
86
World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited
May 24, 2015).

22

emergencies, but does not permit governments to establish blanket laws declaring the
commercial exploitation of an entire class of invention impermissible.87 The ambiguity in this
definition also leaves member states room for significant interpretation.
Subject Matter in India
Section 3 of the 2005 amended Indian Patent Act controls unpatentable subject matter.
The most contentious segment is Section 3(d), which reads:
The following are not. inventions within the meaning of this Act, (d) the mere
discovery of a new form of a known substance which does not result in the
enhancement of the 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 known 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;88
Amplifying the general ambiguity of this 3(d) is the enigmatic term efficacy, and what
establishes an adequate improvement of efficacy to meet the requirement.89 Therefore, the
amended section leaves substantial questions about what constitutes sufficient improvements in
a drug to qualify as a substantial increase in efficacy. Are enhanced pharmacological effects
through increased bioavailability enough? Would submission of data to show a substantial
improvement in physicochemical properties constitute a sufficient improvement in efficacy to
warrant patent protection? Nothing in the body of the statute clarifies what is meant by "efficacy"

87

15 Va. J.L. & Tech. 198, 202 (2010).

Ministry of Law and Justice, The Patents (Amendment) Act 2005,
http://www.ipindia.nic.in/ipr/patent/patent_2005.pdf (last visited May 24, 2015).
89
15 Va. J.L. & Tech. 198, 202 (2010).
88

23

or what the threshold for a sufficient increase in efficacy is for purposes of establishing
patentability.
The rationale for Section 3(d) was to prevent evergreening in the pharmaceutical
industry, but its strict enforcement has led some scholars and interest groups to allege that [it]
is designed to disallow patenting of all incremental innovations.90 The prevention of
evergreening in the medical and pharmaceutical industry has been a national concern of India for
generations. This sentiment is partially driven by economics concerns, particularly considering
the massive population and immense poverty of the country. This sentiment is equally driven by
cultural traditions, as contrasted with the West.91 In fact, the Indian outlook regarding medical
development borders on being anti-patent, as illustrated by a comment made by Prime Minister
Indira Gandhi during a speech before the World Health Assembly in 1982: [t]he idea of a betterordered world is one in which medical discoveries will be free of patents and there will be no
profiteering for life and death.92
Nevertheless, many Indian scholars envision 3(d) not as a negative prohibition on
evergreening, but rather as a patentability hurdle to incentivize demanding research and real
innovation which provides actual inventive step, as opposed to the minimal changes which only
benefit the extension of a patents market monopoly. Thus, by making it mandatory for
derivatives of known substances to exhibit added efficacy, 3(d) encourages sequential
development of improved products to address significant public health needs.93

Aditya Kant, An Attempt at Qualification of Efficacy Factors under Section 3(d) of the Indian Patent Act,
Journal of IP Rights Vol 18, 303, 304 (2013).
91
15 Va. J.L. & Tech. 198, 208-209 (2010).
92
Id. at 203.
93
Saby Ghoshray, 3(d) View of Indias Patent Law: Social Justice Aspiration meets Property Rights in Novartis v.
Union of India & Others, 13 J. Marshall Rev. Intell. Prop. L. 719, 734 (2013-2014).
90

24

The dispute regarding Section 3(d) in regards to TRIPS came to a head in the landmark
Indian patent case of Novartis v. Union of India & Others, commonly referred to as the Novartis
Case.
The Novartis Case
In the early 1990s the Swiss pharmaceutical company Novartis, building on previous
research, developed a drug named imatinib, which had promise in fighting a form of cancer
called chronic myelogenous leukemia.94 In 1993 Novartis filed a U.S. patent application for both
imatinib as a free base (the pure basic form of an amine) and its salts.95 After further research on
this drug, Novartis identified the beta crystalline form of the mesylate salt of imatinib as an
improved and more pharmaceutically stable form of the molecule. Imatinib mesylate was
approved by the Food and Drug Administration in 2001 and launched in the United States as
Gleevec.96 Around the same time (prior to 2005 when India did not permit pharmaceutical
patents) Novartis filed for an Indian patent application for the mesyalate salt of imatinib under
the mailbox mechanism discussed above, and also received an exclusive marketing right (EMR)
under the brand-name Glivec while the patent application was pending.97
While Novartis was selling Glivec in the Indian market, several Indian generic companies
who reverse engineered the drug were manufacturing and selling it under a different brandnames at lower prices than Glivec, causing Novartis to file suit in both the High Courts of
Madras and Bombay.98 The Madras High Court upheld the EMR and issued a restraining order
against the generic manufacturers as requested. In reaching its decision, the Madras High Court
94

15 Va. J.L. & Tech. 198, 209 (2010).

Id. at 209.
96
Id. at 209.
97
Id. at 209.
98
Id. at 209.
95

25

acknowledged that Novartis had overcome any public interest barrier to the granting of an
injunction with the patient assistance program it had in place (Glivec International Patient
Assistance Program or "GIPAP").99 However, the Bombay High Court rejected the claim based
on grounds that Glivec was more expensive in addition to being imported, both of which risked
supplies to people whose lives depended on the drug.100
Additionally, a pre-grant patent opposition claim was filed by multiple generic
manufacturers and Indian NGOs, claiming that the patent was invalid due to a) lack of
novelty/anticipation; b) lack of significantly enhanced efficacy under Section 3(d); c)
obviousness, and; d) wrongful priority.101 In response, Novartis provided expert opinion to the
Patent Office that its crystalline form of the mesylate salt of imatinib was 30% more efficient
than its free base form, and additionally claimed that imatinib mesylate is a new product
because the crystal form is not an inherent property of imatinib acid addition salt exhibiting
polymorphism and human intervention was necessary in order to produce the subject
compound.102 Nevertheless, the Indian Patent Office rejected the Norvartis patent due to the
reasons above and specifically because the patent application offered a new form of a known
substance and did not demonstrate any improvement in efficacy. 103
In response, Novartis filed two appeals with the Madras High Court, one claiming that
Section 3(d) was unconstitutional and/or in violation of Indias TRIPS obligation, and the other

99

Id. at 209.
Id. at 210.
101
Id. at 210.
102
Id. at 211.
103
Johanna Sheehe, Indian Patent Law: Walking the Line?, 29 Nw. J. INT'L L. & Bus. 577, 580 (2009).
100

26

appealing the patent rejection, which was eventually transferred for hearing at the Intellectual
Property Appellate Board (IPAB).104
In its constitutional 3(d) claim Novartis argued that the requirement for an improvement
in efficacy was not specifically defined and provided no standards, enabling the Patent Office to
reject applications arbitrarily, thus violating the Indian Constitutions Equal Protection
provision.105 The Indian government retorted that what constitutes a sufficient improvement in
efficacy could be scientifically established by the experts in the field, implying that there is
already a common understanding of the meaning of the terms in the industry and in the Indian
Patent Office.106
After much deliberation regarding the 3(d) claim, the High Court determined that the
legislative intent in using the ambiguous term efficacy was to grant the Patent Office a great
amount of discretion and flexibility in deciding patent applications on a factual case-by-case
analysis for the sake of limiting the evergreening of patents for vital life-saving medications.107
Additionally, they held that although the Patent Office had discretion on a case-by-case basis,
this did not imply that their decisions were arbitrary.108 Thus, the High Court held that Section
3(d) did not violate the Indian Constitution.
In addition to its constitutional claim, Novartis also claimed that Section 3(d) violated
Indias obligation under Article 27 of the TRIPS agreement since the inclusion of the enhanced
efficacy requirement in 3(d) was a deprivation of inventors guaranteed right to have an

104

15 Va. J.L. & Tech. 198 (2010) at 210.

Id. at 211.
106
Id. at 211.
107
Id. at 212.
108
Id. at 212.
105

27

invention patented as required by Article 27 of TRIPS.109 In response, the Indian government

argued that TRIPS granted member states great latitude in legislating patent laws that meet the
welfare requirements of its citizens, and that Indias first obligation under the Constitution is to
provide good health care to its citizens. (Novartis, 2007 A.I.R. 24759, at 4). The High Court
sided with the Indian governments position, in addition to using English persuasive precedent to
hold that when a domestic law is challenged on the ground of it being in violation of an
International Treaty, domestic courts would have no jurisdiction. ((Novartis, 2007 A.I.R. 24759,
at 7).
The second appeal of Glivecs patent denial, which was transferred to the IPAB, was
rejected based on two grounds, first that it did not establish enough enhanced efficacy in its
crystalline form, and second that Novartis' monopoly price of 120,000 rupees per patient per
month would be against the interests of public order.110
In response to both the High Courts 3(d) rejection and the IPAB rejection, Novartis
appealed to the Indian Supreme Court, which heard the case de novo. In regards to the 3(d)
claim regarding efficacy, the Court held that [e]fficacy means the ability to produce a desired
or intended result. Hence, the test of efficacy in the context of section 3(d) would be different,
depending upon the result the product under consideration is desired or intended to produce. In
other words, the test of efficacy would depend upon the function, utility or the purpose of the
product under consideration. Therefore, in the case of a medicine that claims to cure a disease,
the test of efficacy can only be therapeutic efficacy. (Novartis, Civil Appeal Nos. 2706-2716

109
110

Id. at 213.
Id. at 214.

28

of 2013, 180).111 In defining therapeutic efficacy the court provided a circular argument by
referring back to Section 3(d), and also held that there must be a significant variance in
efficacy, creating further ambiguity and not providing any set standard. (Id. at 180).
In regards to inventive step, the Court reject the patentability of Glivec because it fell
under the rubric of evergreening, stating that [i]n the face of the materials referred to above, we
are completely unable to see how Imatinib Mesylate can be said to be a new product, having
come into being through an invention that has a feature that involves technical advance over
the existing knowledge and that would make the invention not obvious to a person skilled in the
art. Imatinib Mesylate is all there in the Zimmermann [Novartis] patent. It is a known substance
from the Zimmermann [Novartis] patent. (Id. at 131). Nevertheless, the Court emphasized that
by rejecting the Glivec patent, they were not rejecting evergreening and incremental
development patents outright, emphasizing so by stating that We have held that the subject
product, the beta crystalline form of Imatinib Mesylate, does not qualify the test of Section 3(d)
of the Act but that is not to say that Section 3(d) bars patent protection for all incremental
inventions of chemical and pharmaceutical substances. It will be a grave mistake to read this
judgment to mean that section 3(d) was amended with the intent to undo the fundamental change
brought in the patent regime by deletion of section 5 from the Parent Act. That is not said in this
judgment. (Id. at 191) (emphasis added).

Ramifications of the Novartis Case Decision

In 2008 the case of Roche v. Cipla was heard in the High Court of Delhi, with a similar
set of facts. Hoffman-La Roche (hereafter Roche) had developed a cancer treating drug which it
111

The Supreme Court of India, Novartis AG v. Union of India and Others,

http://judis.nic.in/supremecourt/imgs1.aspx?filename=40212 (last visited May 24, 2015).

29

began to import and sell in India under the brand-name Tarceva, and applied for an Indian
patent.112 Cipla, an Indian generic manufacturer, reverse engineered Tarceva and started selling it
for a much lower price under the brand-name Erlocip.113 Roche filed suit, and Cipla contested
that the Tarceva patent should be denied because it was considered to be a derivative of a
compound known as quinazoline, which had been previously disclosed by at least three
European patents dating back to 1993.114 Roche provided expert evidence that the new
formulation was more stable, providing improved oral dosage in solid form.115 After
deliberating, the High Court found that the increased formulation stability of the polymorph B
form found in Tarceva did not meet the Section 3(d) threshold for a substantial improvement in
efficacy required to sustain Roche's patent.116
The outcome of Novartis and subsequent cases that further fortify its holding leaves
pharmaceutical companies in limbo, whereby there overhangs an ever present apprehension that
highly cost-intensive research can be reverse engineered and produced by generic manufacturers
in India without license but under the legal protection of unpatentability per Section 3(d).
Nevertheless, the outcome of this case and subsequent cases were upheld as a victory for
inexpensive medicine by many Indian citizens, multiple media outlets, and NGOs.117 Factoring
the Indian legislatures ambiguous wording of Section 3(d) in conjunction with the Indian
Supreme Courts interpretation of legislative intent in Novartis, it is quite apparent that Indias
patent regime was written to ensure that its relatively impoverished population can have access
to inexpensive medicines at the expense of the pharmaceutical industry, in clear contention with
112

15 Va. J.L. & Tech. 198 (2010) at 215.

Id. at 215.
114
Id. at 216.
115
Id. at 216.
116
Id. at 216.
117
BBC News, Novartis Case: Media hail key victory for India, (May 24, 2015, 2:55 AM),
http://www.bbc.com/news/world-asia-india-21998950.
113

30

occidental patent regimes. This raises two important questions, 1) which patent regime should
prevail, and 2) if TRIPS cannot inforce the patent protection the pharmaceutical industry needs
to protect innovation, what mechanism can be put in place to ensure that pharmaceutical
companies have financial incentive to continue their life-saving research and development?
Regarding the first question it is vital to take into account cultural and economic
considerations when comparing patent regimes. Wealthy First World nations must be sensitive
to the social demands of poorer, Third World countries in this regard, considering that the level
of protection accorded to intellectual property by any country represents a balance between a
number of conflicting national considerations; thus, protection is a function of a country's
domestic situation and the various national policy objectives-social, developmental, and
technological-that intellectual property laws are designed to serve.118 Thus, the imposition of
First World paten law on India has been rejected, primarily because the economic and social
conditions of the India are so different. More specifically, given an understanding of the true
nature of patent law - the test of nonobviousness or its international equivalent, the inventive
step, conscientiously or rationally demanding the imposition of First World patents upon Third
World countries becomes very difficult.119 Even with the ratification of TRIPS many Third
World nations have refused to recognize patents for life-saving pharmaceuticals. 120
Additionally, a large number of these countries, including India, Egypt, Portugal, and Venezuela,
have refused to grant patent monopolies in life-saving pharmaceuticals to both citizens and
foreigners.121

118

Davi Hartridge,, Intellectual Property Rights: The Issues in GATT, 22 VAND. J. TRANSNAT'L L. 893, 904
(1989).
119
56 S. C. L. Rev. 337, 377 (2004-2005).
120
Id. at 380.
121
Id. at 380.

31

Yet, although some scholars claim that the First World is trying to impose its patent
regimes on the Third World, the actual wording of TRIPS appears to consider cultural,
economic, and social sensitivities by leaving a great deal of discretion to member states
regarding patentability, and also carves out a large exception for compulsory licensing.
However, Indias evergreening protection measure found in Section 3(d) causes grave distress to
the First World pharmaceutical industry and particularly big pharm, since this patent regime
for all intents and purposes gives Indian generic manufactures cart-blanche to pirate patents and
undercut the profits of drug developing pharmaceutical companies, the consequences of which
can be disastrous.
A poignant example of how lack of incentive in the pharmaceutical industry can be
catastrophic is the current global antibiotic crisis, whereby microbial pathogens have become
ever more resistant to current drugs. In fact, [e]pidemic antibiotic resistance has been described
in numerous pathogens in varying contexts, includingbut not limited toa global pandemic of
methicillin-resistant Staphylococcus aureus (MRSA) infection; the global spread of drug
resistance among common respiratory pathogens, including Streptococcus pneumoniae and
Mycobacterium tuberculosis; and epidemic increases in multidrug-resistant (and, increasingly,
truly pan-resistant) gram-negative bacilli... Given their breadth of effect and significant impact
on morbidity and mortality, multidrug-resistant microbes are considered a substantial threat to
US public health and national security by the National Academy of Science's Institute of
Medicine, the federal Interagency Task Force on Antimicrobial Resistance and the Infectious
Diseases Society of America.122

122

Brad Spellberg, The Epidemic of Antibiotic-Resistant Infections: A Call to Action for the Medical Community
from the Infectious Diseases Society of America, Clin Infect Dis. 46 (2): 155-164, 155 (2008).

32

The primary reason there are so few new antibiotic developments is lack of profitability.
The cost of drug developing, testing, and approval of antibiotics is increasing, with the current
cost ranging from $400 $800 million per approved agent.123 Because antibiotics are shortcourse therapies that cure the target disease, antibiotics have a lower relative rate of return on
investment than do other drugs.124 Because of this, several major pharmaceutical companies
have stopped research on antibiotics altogether. In fact, Pfizer closed its Connecticut antibiotic
research facility in 2011 due to waning profits, and three other major pharmaceutical companies
Avetis (now Sanofi), Eli Lilly, and Bristol-Myers Squibb havent researched and developed
antibiotics since 1990s.125 Even more disconcerting is that the FDA has approved only two
systemic antibiotics in the past five years, an 88 percent drop from the mid-1980s.126
Thus, if vast markets such as India enforce a legal regime that permits the pilfering of
patented drugs that cost pharmaceutical companies an average of $5 billion to develop (the
estimated cost for research and testing of non-antibiotic development127), shareholders may exit
the pharmaceutical market altogether and invest in higher returning companies, which could
realistically lead to a global health crisis. This point segues into the second question stated
above, asking what mechanism can be put in place to ensure that pharmaceutical companies have
financial incentive to continue their life-saving research and development? Considering that
Indias patent regime is not likely to change, this author proposes three alternative solutions.
The first is to incentivize the Indian governments investment in First World pharmaceutical
research, particularly in big pharm firms, in exchange for the importation of newly patented

123

Id. at 158.
Id. at 158.
125
Brian Kraus, Few New Drugs: Why the Antibiotic Pipeline is Running Dry, (May 24, 2015, 3:02 AM)
http://www.healthline.com/health/antibiotics/why-pipeline-running-dry.
126
Id.
127
Id.
124

33

drugs at a low price. This can be achieved through favorable equity positions, training programs
and job offerings to Indian scientists in big pharm research centers, and selling non-patented
foreign-manufactured drugs and even medical equipment to India at lower prices. The second
solution is for First World pharmaceutical companies to guarantee low priced exports of patented
drugs in exchange for low cost yet fully regulated human drug testing in India, one of the most
prohibitive costs in the First World. The third solution is for India to guarantee a patent term for
longer than the standard 20 year time limit in exchange for pharmaceutical companies
guaranteeing to sell their products at a fixed, low price. Nevertheless, Indias current patent
regime in many ways permits the outright pirating of pharmaceutical patents at no cost to the
government, a condition that reduces any incentive for change. Hence, these proposed solutions
may have to be accompanied by the intervention of foreign governments who have the means to
apply economic pressure to enact change.
The government of India is in an undoubtedly challenging position. On one hand they
want to be a member-in-good-standing in the international community and the WTO, while on
the other hand a familial culture drives their social obligation to ensure the accessibility of
inexpensive medicine to their predominantly poverty stricken population of 1.252 billion people.
This obligation is entrenched their patent regime, but its lofty goals may have long term negative
effects both on Indias own population and globally. Therefore, creative and timely solutions
must be found that address both the pharmaceutical industrys profit incentives and Indias
pressing socio-economic needs.

34