[Commons-Law] Economic Times

Fri Oct 8 16:27:17 IST 2004

Sorry-forgot to include the piece that I had recently
written for ET (published in the Sunday edn-26th Sept)

Shamnad

OF GENERICS, PHARMACEUTICAL PATENTS AND THE COUNTDOWN
TO 2005: A NOTE TO POLICY MAKERS

The pharmaceutical industry waits with bated breath
for the year 2005-it is expected that this year will
see the ushering in of a product patent regime for
pharmaceuticals in India. Naturally enough, generic
companies are apprehensive-they fear that their golden
days of cashing in on generic versions of patented
drugs will soon have to end. 

A recent report in the Economic Times (30 July 2004),
titled Pharma Companies agree to pay royalty to
patent-holders echoed these deep seated fears of the
generic companies by reporting that they were willing
to pay a 4% royalty for the use of patented drugs.
This report went on to state that the recent Patents
Bill, 2003 makes infringement provisions applicable to
mailbox applications too.  As most readers are
aware, India amended her patent regime in 1999 to
provide that applications claiming pharmaceutical
inventions would be put away in a mailbox, to be
examined in 2005-these applications are commonly
referred to as mailbox applications. 

The report above hints at a retrospective application
of patent rights i.e. patentees can claim damages,
even though the alleged acts of infringement occur
prior to the grant of patent itself. However, in so
far as this retrospectivity applies to mailbox
applications, there is some uncertainty as to the
precise point in time from which damages can be
claimed.

This uncertainty will most likely result in
litigation, a consequence likely to benefit only one
section of the public - lawyers. The recent change in
government and the consequent lapsing of the 2003 Bill
presents an ideal opportunity to remove this
uncertainty. This note is a plea to policy makers and
legislators to take note of this uncertainty and
rectify it as soon as possible so as to save valuable
resources that would otherwise be lost in endless
litigation.

Like Rights/Privileges:

It is logical to assume that patent rights would
accrue only after a patent has been granted. After
all, any rights accruing prior to the patent grant
would prove  problematic, in the event that a patent
is not ultimately granted. However there is one
exception to this rule enshrined in the Indian Patents
Act. And it is this exception that is likely to pose
some problems for generic manufacturers, post 2005. 

Section 24 of the Patents Act, 1970 provides as
follows: 

On and from the date of advertisement of the
acceptance of a complete specification and until the
date of sealing of a patent in respect thereof, the
applicant shall have like rights and privileges as if
a patent for the invention had been sealed on the date
of advertisement of acceptance of the complete
specification:

Provided that the applicant shall not be entitled to
institute any proceedings for infringement until the
patent has been sealed. 

As made clear from this section, from the time of
advertisement of the acceptance of the complete
specification, the patentee would have like
privileges and rights as if the patent had been
granted. Consequently, a patentee, upon grant of the
patent, could claim damages retrospectively from an
infringer for any infringement that occurred after the
date of advertisement of acceptance of the complete
specification. 

The rationale behind section 24 appears to be that
since the contents of the patent specification come to
the knowledge of the public at the time of
advertisement of acceptance of the complete
specification, the prospective patentee ought to be
given some sort of interim protection till such time
that the patent is granted. Stripped of all its
esotericism, a patent is essentially a bargain between
the inventor and the society: the inventor gains a
temporary monopoly in exchange for revealing his/her
invention to society. It is therefore only fair that
upon revealing such information (through the
advertisement of the complete specification), the
inventor be granted rights akin to those of a patent.

Under the 2002 amendments to the Patents Act, 1970,
section 11A was added to mandate that every patent
application shall be published soon after 18 months
from the date of filing of the patent application.
Consequently, this date of publication now became the
date of first public knowledge of the contents of
patent specifications. One would have thought that the
like rights and privileges principle underlying 
section 24 would be replicated in section 11A i.e.
that any specification published in accordance with
section 11A (within 18 months) gain rights and
privileges akin to those of a patent. However, in
what appears to be a genuine drafting mistake, this
was not done. This oversight was then sought to be
rectified by Clause 10 (b) of the 2003 Bill. In much
the same way as section 24, Clause 10 (b) states that
an applicant shall have like rights and privileges as
if a patent for the invention had been granted on the
date of publication of the application  provided that
the applicant will not be entitled to institute any
proceeding for infringement until the patent has been
granted. 

Retrospectivity of the 2003 Bill:

It is expected that the 2003 bill (either in its
present form or as amended) would come into force
sometime in 2005. An interesting question would
therefore arise: Would Clause 10 (b) apply
retrospectively i.e. from the date of publication of a
mail-box application? It must be noted that in
accordance with section 11A, some mailbox applications
were published in July 2003. In the event of Clause 10
(b) applying retrospectively to such publications,
generic companies would be adversely impacted. Let us
assume for the sake of argument that the 2003 bill
comes into force on 1.1. 2005. If a retrospective
operation is given to clause 10 (b), generic companies
would be made liable for all infringements between
July 2003 (the date of publishing of some mail box
applications) and 1.1. 2005-when during this interval,
they had absolutely no clue that they could be made so
liable. There are several other arguments that would
support a prospective and not retrospective reading of
Clause 10 (b).  

One could argue that a statutory provision cannot be
given retrospective effect, without the legislature
expressly stating so or by necessary implication. In
Jose De Costa v. Bascora Sadasiva Sinai Narcornim AIR
1975 SC 1843, the court endorsed the principle by
Lopes LJ in Pulborough Parish School Board Election,
Bourke v Nutt (1894) 1QB 725 that provisions which
touch a right in existence at the passing of a statute
are not be applied retrospectively in the absence of
express enactment or necessary intendment. 

Thus for example, section 1(2) of the Patents
(Amendment) Act, 1999 stated that the entire Act would
come into effect retrospectively from 1st January
1995. Since there is no such similar provision
accompanying the introduction of Clause 10(b) of the
2003 Bill, it would be reasonable to infer that the
said Clause cannot be given a retrospective operation.
Providing protection to mailbox applications published
in July 2003 under a Bill that finally becomes law
only in 2005 (or thereafter) would amount to granting
retrospective operation.

It would also appear that in view of the fact that
TRIPS mandates product patents to pharmaceutical
products only from 1.1.2005, the legislature could not
have intended Clause 10 (b) to operate
retrospectively. Of course, the Indian government is
free to implement TRIPS even prior to this date.
However, considering the fact that our obligation to
put in place a mail box facility was finally
effectuated only in 1999 (despite TRIPS mandating that
this be done by 1995), it seems unlikely that the
Indian government would intend a premature application
of the product patent regime for pharmaceuticals. A
retrospective reading of Clause 10 (b) would in an
indirect way amount to granting protection  to
pharmaceutical products prior to 2005. 

As all of the above arguments indicate, logic dictates
against retrospectivity. Unfortunately, logic does not
always inform judicial reasoning. It is quite possible
that a judge read Clause 10 (b) retrospectively,
making generics accountable for damages from the date
of publication of the mailbox applications. 

To provide against such a potentially inequitable
result, it is important to provide explicitly in the
2003 Bill that Clause 10 (b) operates only
prospectively and not retrospectively.

Needless to say, none of this uncertainty would have
crept in, had the publication mandate within section
11(A) excluded mail box applications. Given the fact
that these applications were not to be examined till
31 December 2004 (see section 24A of the Patents Act),
there was no need to have them published at such an
early date. However as section 11 (A) did not
expressly exclude mailbox applications, they were
published as early as July 2003. As to whether these
publications made the position of innovative
pharmaceutical companies worse off is debatable.
Generics would contend, and forcefully so, that they
did not need to see such published specifications to
arrive at their generic versions-rather they could
very well have done so through reviewing applications
filed abroad or even by procuring the drug from abroad
and reverse engineering it.

Even assuming that the publication of mailbox
applications did detrimentally impact innovative
pharmaceutical companies, such acts of publication
would not impose any liability on India under TRIPS.
Article 70.1 of the TRIPS Agreement states that TRIPS 
does not give rise to obligations in respect of
acts, which occurred before the date of application
of the Agreement for the Member in question.  The
date of application of the agreement, as used in the
provision above varies according to the stage of
development of the WTO members. In the context of
India and its obligation to provide patent protection
to pharmaceuticals, the relevant date of application
is 1 January 2005 (Article 65.4).

The next question, and perhaps, the most relevant one
to ask would be: At what stage would mail box
applications that have already been published merit
protection? A prospective reading of Clause 10 (b)
would ensure that any such applications published
after the coming into force of the 2003 Bill would
gain like rights and privileges. However, in so far
as applications published in July 2003 are concerned,
the position remains unclear. Ideally speaking, such
applications should merit a like rights and
privileges protection upon the entry into force of
the 2003 Bill. This again ought to be expressly
provided for in the Bill so as to prevent any sort of
uncertainty and ensuing litigation.

The year 2005 will prove a good one for patent
lawyers-the innovative vs. generic courtroom battles
will soon find their way to India. Let not
uncertainties in our patent regime provide fodder for
such battles. Uncertainty in the law does no one any
good-and it is important that we plug any loopholes in
our regime as quickly as possible.  

Shamnad Basheer
Associate
Oxford Intellectual Property Research Centre (OIPRC)
University of Oxford
Oxford OX1 2DL
Email: shamnad.basheer at law.ox.ac.uk
Phone: +44 7765407707

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