The Need for Section 3(D) of the Indian Patents Act

The Indian Patents Act, 1970 which was based on the recommendations of the Ayyangar Committee, was enacted by the Indian government to put in place a patent regime that would encourage development of domestic pharmaceutical industry and make life saving drugs affordable for common people. [1] The Act abolished patents in pharmaceutical products and provided patents on the processes only for a short period of time. This significantly reduced the dependence on the multinational corporations which had gained monopolistic control over the Indian drug market, and gave a rapid boost to the domestic generic drug manufacturing companies which were producing cheaper versions of the patented drugs by using “reverse engineering” [2] and selling them to the Indian population at lower prices. The growth of indigenous pharmaceutical sector also ensured access to essential drugs.

In 1995 when India joined the WTO, she was brought to pressure by the western countries to bring its patent law TRIPS compliant. However, India being a developing country, was given additional time to bring about the necessary changes in her domestic law. Moreover, since she did not have patent protection on pharmaceutical products, TRIPS gave her a 10 year time frame to extend protection to pharmaceuticals. [3] However, during the transitional period India was expected to set up a system for filing patent applications in pharmaceuticals by way of “mailbox” [4] provision. In addition, it was required to grant Exclusive Marketing Rights (EMRs) [5] for certain pharmaceutical products awaiting patent recognition in India. [6] Finally, the Patent (Amendment) Act, 2005 introduced patent protection for pharmaceutical products as required under TRIPS.

Even though the scope of patent protection was expanded, India was unwilling to threaten its highly developed generic industry by making the Indian Patents Act, 1970 too patent- friendly. Section 3 restricts the scope of subject matter eligible for patentability by listing out what are not “inventions” within the ambit of Indian Patents Act. Section 3 (d) specifically disallows patents for the mere discovery of a new form of a known substance unless such form demonstrates significant efficacy over the original substance. In effect, this provision excludes from its purview most kinds of “incremental innovation” [7] . The exclusion is based on the rationale that providing protection to such innovations promotes evergreening [8] and harms long term public interest. However, this provision was challenged as being violative of TRIPS on the ground that it does not provide uniform protection to all categories of invention as envisaged by TRIPS. In this paper, the researcher would examine the specific reasons as to why the government chose to incorporate this unique provision in the Indian Patent Act, 1970. She would also argue that Section 3(d) is of vital importance for India country like India and conform to the minimum standards of patent protection provided under Article 27 of TRIPS. In this regard, the researcher would show that even countries like USA seek to exclude insubstantial innovations from patentability. The paper would conclude by pointing out that although Section 3(d) does not violate the TRIPS mandate, a clearer and more specific wording of Section 3(d) could prevent frivolous patenting without neglecting valuable incremental innovations in pharmaceuticals.

II. THE NEED FOR SECTION 3(D) IN THE INDIAN PATENT SYSTEM

Although the Patents (Amendment) Act, 2005 significantly expanded the scope of patentability by allowing patents for both processes and products, it wanted to provide a mechanism to weed out undeserving patents. It was with this rationale that section 3(d) was amended to its present form. Section 3(d) as amended by the Patent (Amendment) Act, 2005 reads as follows:

“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.”

In essence, Section 3 (d) does not allow patent protection for the discovery of any new form of known substance unless it enhances the efficacy of the original substance. It also acts as a bar on new use patents by stipulating that mere discovery of any new property or new use of a known substance would not be patentable. Further, the explanation to this section expressly states that salts, esters, ethers and other derivates of a known substance would be considered to be the same as the original substance (and thereby non-patentable) unless these derivatives are significantly different in terms of efficacy. Thus, the provision aims to restrict the scope of patent protection in pharmaceuticals by excluding incremental innovation which does not meet the criteria of enhanced efficacy. In other words, the provision can be viewed as heightened non-obviousness standard which must be satisfied by a new form to be eligible for patentability, in addition to the non-obviousness test used for measuring the inventive step criteria. [9]

More specifically, Section 3 (d) aims to prevent evergreening, a process by which a company introduces minor modifications in the patented product and then gets a new patent for its product on the strength of the alterations made. For instance, patents can be obtained for novel uses of a known drug or new methods of administration or production, reduced dosage formulations, etc. [10] By applying for secondary patents over related or derivative technologies, prior to the date of expiry of original patent, these companies seek to extend the life of patent by additional 20 year periods for different attributes of the same drug. [11] The changes made may add little therapeutic or clinical value to the original patented product, but the patents granted for them ensure that the patent holders do not lose out market shares to the generic versions of its patented drug. [12] Thus, company can enjoy lengthy monopoly over the drugs and profit from their R&D investment. [13]

The practice of evergreening has anti-competitive effects as it enables the pharmaceutical MNCs to eliminate competition from the generic manufacturers and charge exorbitant prices for their patented drugs over a prolonged period of time. This in turn is detrimental to public interest since many essential drugs become inaccessible to the general public on account of prohibitive pricing. [14] It was India’s concern for public health issues that compelled her to exclude from patentability ‘incremental innovation” or modifications on existing drug molecules unless they satisfied the enhanced efficacy requirement under Section 3(d). Prior to India’s membership in the WTO, India had developed a highly successful generic pharmaceutical industry producing cheaper versions of patented drugs. This became possible on account of its patent regime which allowed protection only on the process and not the product. After the introduction of patent protection for products, it was feared that such a move would jeopardize the position of Indian generic drug manufacturers in the global pharmaceutical market. [15] Moreover, there was growing apprehension that the sharp rise in the price of life-saving drugs which would take them beyond the reach of common man. [16] By incorporating the enhanced efficacy requirement in Section 3(d), it sought to allay the fear regarding patent evergreening through incremental innovation, and at the same time implemented its obligations under TRIPS.

III. SECTION 3(D) AND TRIPS COMPATIBILITY

In India, a patentee seeking patent for his/her invention has to show that the invention is novel, involves an inventive step and is capable of industrial application. [17] An incremental innovation may satisfy all these criteria, ie, it could be truly inventive but still would be unable to cross the threshold set out by Section 3(d) which lays down a category of non-patentable subject matter. Many contend that by reducing the scope of patentability to only those new forms of known substances that increase the efficacy of the original substance and derivatives of known molecules that significantly differ in properties with respect to efficacy, Section 3(d) excludes majority of useful pharmaceutical innovations. [18] They argue that since the language of the Section is open ended and no specific guidelines are provided, the drug manufacturers have no way of knowing what is the standard required for an incremental innovation to be patentable. [19]

Section 3(d) puts a higher requirement for patentability for incremental innovation as compared to invention of new drug molecules [20] . This differential treatment has been often looked upon unfavourably. One of the primary justifications afforded for such a view is that such an enhanced standard was not envisaged by Article 27.1 of the TRIPS which favours granting patent rights without any discrimination with respect to the field of technology. The issue as to whether Section 3(d) is TRIPS compliant came up for the first time in Novartis AG v Union of India. [21] Novartis had challenged Section 3(d) as being violative of TRIPS on the ground that it violates the right to claim patent over an invention (provided it meets the minimum criteria of patentability) as guaranteed under Article 27.1 of TRIPS. [22] Although the Madras High Court did not decide this issue stating that the proper forum in this regard would be the Dispute Settlement Body of the WTO, nonetheless it is important to examine whether Section 3(d) is in consonance with TRIPS requirements of patentability. Critics of Section 3(d) argue that it falls beyond the flexibilities in TRIPS since it limits patentability to only “new chemical entities [23] and excludes “new forms of known substances lacking enhanced efficacy” a category which is not expressly excluded from patentability under Article 27 of TRIPS. [24] They further point out that the TRIPS agreement gives WTO members the option of providing patent rights more generous than the basic criteria mandated by TRIPS but does not allow members to go in the opposite direction by implementing stricter requirements for obtaining a patent. [25] However, in India, in order to acquire a patent on a new form of existing pharmaceutical drug, one has to go beyond demonstrating the usual “novelty, industrial applicability and inventive step (non-obviousness)” test set forth in TRIPS agreement and cross the additional ‘improved efficacy” hurdle enumerated in Section 3(d). [26] . Therefore, they argue that section 3(d) is not compatible with the TRIPS agreement. In order to see whether these arguments are indeed justified, it is imperative to look into the relevant provisions of TRIPS.

Does Section 3(d) fall under the flexibilities under TRIPS?

Article 27.1 of the TRIPS provides that “patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application”. This article enjoins a responsibility on the member states to adopt certain minimum standards to provide patent protection in all fields of technology. However, since the provision uses broad language and none of the terms have been specifically defined in the Agreement, it allows the member countries to design their patent laws according to their own convenience so long as they satisfy the broad patentability requirements. TRIPS also gives due importance to protection of public health. In this regard, Article 8 provides that “Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement”. Article 7 of TRIPS addresses the social and economic concerns of the member nations. It specifically states that “The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to balance of rights and obligations.” Additionally, TRIPS allows the member countries to depart from the ordinary patentability requirements under exceptional circumstances. 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 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 exploitation is prohibited by their law.”

A bare perusal of the relevant provisions in TRIPS clearly shows that the member nations have been given significant flexibilities to frame patent laws which reflect their social and economic needs. As mentioned earlier, terms like “invention”, “inventive step, [27] and “industrial application” [28] used in Article 27. 1 have not been specifically defined giving the member countries freedom to decide the criteria of patentability within the broad parameters of TRIPS. [29] Accordingly each member state can decide for itself what it considers to be an ‘invention” and deserving of twenty years of patent protection. [30] In the absence of a precise definition of patentability, there is nothing to prevent Section 3(d) from using an “efficacy” requirement, i.e, a higher level of inventiveness for determining patentability of new forms of known substances. [31] Therefore, since Section 3(d) essentially amounts to a heightened non-obviousness standard in respect of pharmaceutical substances, it is very much permissible under TRIPS. [32]

More importantly, Article 8 gives considerable leeway to the developing countries to design a patent system which is conducive to the protection of environment and public health. Article 27.2 enhances the scope of this flexibility by permitting member nations to exclude certain inventions from patentability for protecting public interest. As discussed earlier in the article, high drug pricing, which is a natural consequence of evergreening, restricts access to essential medicine, especially in developing countries like India. Section 3(d) lays down a check on the patentability of new forms by allowing them patent protection only if they enhance the efficacy of the existing substances. In the absence of such a check, even insubstantial modifications innovations on existing drugs would elicit patent protection which in turn would result in non-availability of essential medicine. This would adversely affect the right to health of the citizens of India, given the fact that a significant number of people cannot even afford basic medical care. Since Section 3(d) specifically aims to prevent this phenomenon, it clearly qualifies as a “measure necessary to protect public health” within the meaning of Article 8. Virtually none of the member nations have utilized the flexibilities in the TRIPS provisions for promoting public interest. [33] Section 3(d) is one of the few instances where a country has actually utilized the exceptions under TRIPS to draft provisions to promote the welfare of its citizens. Additionally, the Para 4 of the Doha Declaration also states that “We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and, in particular, to promote access to medicines for all.” [34] It further provides that “In this connection, we reaffirm the right of WTO Members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose. [35] Thus, even the Doha Declaration envisages considerable flexibility for the developing countries and gives them freedom to deviate from the ordinary standards of patentability if it is for the prevention of public health problems.

U S position with regard to new forms.

India is often considered to be the only country to have adopted a restrictive approach towards patentability of new forms or new uses of known substances. This notion is not wholly accurate since most countries have myriad ways to exclude minor alterations of known active ingredients from patentability. Even in countries like US, the courts very often use double patenting doctrine and the patent misuse doctrine to prevent patenting of new forms of already known substances and curb evergreening. Double patenting doctrine like Section 3(d) prevents an inventor from claiming more than one patent on the same invention or obvious modifications or alterations of the same. [36] Thus, in a way double patenting is similar to evergreening. The purpose of the double patenting doctrine is to allow public to get free access to the original patented product and all the obvious modifications of the same after the expiration of the period. [37] Further, as with Section 3(d), double patenting also compares a claim for modification over an existing patent with the original invention to determine if the variation satisfies non-obviousness standards. Likewise, the patent misuse doctrine prevents pharmaceutical companies from extending patent protection over their drugs by acquiring a multitude of patents covering essentially the same invention. [38] In such cases also the courts invoke the non-obviousness principle to invalidate patents. For instance, in Pfizer, Inc v. Apotex, Inc [39] , Pfizer’s patent on a hypertension drug was invalidated as its active ingredient was a salt form of a known substance.

Thus, it is evident that if Section 3(d) does not satisfy TRIPS requirements, then the laws of other WTO countries like USA which seek to limit patentability to new forms are also equally suspect. It is unacceptable that only the developing countries would have to abide by a strict interpretation of TRIPS provisions while the developed countries having greater influence in the WTO would be able put in place laws which suit their interests.

IV. CONCLUSION

Although Section 3(d) falls well within the TRIPS mandate, the broad language of Section 3(d) requires clarification. There is a lot of confusion regarding the scope of “enhanced efficacy” standard used in the section. The kind of efficacy which this provision is looking for is not specified in the Act nor is there any guidelines provided to that effect. In Novartis AG v Union of India [40] , the court had held the term efficacy refers only to “therapeutic [41] efficacy”. This in effect meant that only those new forms which show increased efficacy over the original substance in terms of healing effect on the body would be eligible for patent protection. Such narrow interpretation would exclude most of the inventions which are tremendously useful in non-therapeutic ways such as innovative drug delivery mechanisms [42] , heat resistant anti-biotic formulations [43] , and also harm innovation prospects in the pharmaceutical sector. Thus, it is important to amend the ambiguous wording of the section 3(d) and clarify the meaning of the “enhanced efficacy”. This would ensure that this requirement targets only frivolous patent applications and does not weed out valuable modifications of existing drugs which deserve patent protection.

Section 3(d) is vital for the protecting public health since it is the only provision which can stop pharmaceutical giants from extracting prohibitive prices for life saving drugs by lengthening patent protection through evergreening. Therefore, even if Section 3(d) is challenged by a member country before a WTO panel, it is highly unlikely that it would strike down a provision which seeks to provide low cost medicines to the general public by creating an “efficacy” barrier.

India’s patent process remains slow as the country attempts to navigate its way through conflicting WTO guidance provided in the TRIPS Agreement, as well as international pressure to amend its patent laws. However, despite these major hurdles, India has found a method through the inclusion of Section 3(d), to preserve its role as a powerful generic drug manufacturer and provide cheaper life saving medicine to its citizens. Although section 3(d) of India’s Patents Act may seem particularly ambiguous, it is not much different in wording and purpose when compared to similar laws of other WTO nations. Thus, before other countries criticize this provision, they should re-evaluate the reasoning behind their own equivalent laws. Section 3(d) provides an example to other developing countries to put in place a patent system which is beneficial to its citizens rather than blindly following the dictate of developed countries.

V. BIBLIOGRAPHY

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