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Dilution of Patent working disclosures and compulsory licensing India

April 18, 2022

By Vikrant Rana and Swaraj Singh Raghuvanshi

The term patent as defined under the Indian Patents Act, 1970 means a patent for any new invention, granted to a new product or a process that generally provides a new way of doing something, or offers a new technical solution to a problem, involves an inventive step and capable of industrial application. Patents can be understood as exclusive statutory rights for an invention granted for a limited period of time to the patentee by the Government, in exchange for full disclosure of the patentee’s invention. In order to obtain a patent, technical information about the invention must therefore be made available to the public in a patent application. In a wider context, the patent’s public disclosure of technological information, as well as the exclusive right given by the grant of a patent, encourage rivals to seek out new ideas and “invent” the first invention. These incentives and the dissemination of knowledge about new inventions encourage further innovation and ensure that the quality of human life and the well-being of society are continuously improved.[1]

Pursuant to Section 146(2) of the Indian Patents Act in conjunction with Rule 131(2) of the Indian Patents Rules 2003, all patent owners and licensees are required to provide detailed information about the commercial “operation” of their patent under Form 27 of the Indian Patents Act on an annual basis. It is considered a disclosure which ensures that public requirements are consistently met along with the availability of the adequate quantity. Failure to this may lead to compulsory licensing as defined in Chapter XVI of the Indian Patents Act, 1970.

Form 27 and Compulsory Licensing[2]

Compulsory Licensing are authorization granted by Controller General’s permission to a third party to manufacture or sell a specific product using patented technology without the owner’s permission.[3]

The concept of compulsory license can be explicitly mentioned in both the Indian Patents Act and the TRIPS Agreement. In order for the compulsory license to be issued, the requirements set out in Sections 84-92 of the Indian Patents Act 1970 must be met.

As per Section 84, any person interested can file a request to the Controller for a compulsory licence after the expiration of three years from the date of grant of a patent, if any of the following requirements are fulfilled:

  1. Reasonable public requirements with respect to the patented invention are not met; or
  2. Patented invention is not available to the public at a reasonable affordable price; or
  3. Patented invention is not worked within the territory of India.

The Controller takes certain aspects into consideration while granting Compulsory Licensing like:

  • The nature of invention;
  • the amount of time that has passed since the patent was granted;
  • the steps taken by patentees or licensees to fully exploit the invention;
  • the applicant’s ability to use the invention for the benefit of the public;
  • the capacity of applicant to undertake the risk in providing capital and working the invention, if application was granted;
  • the applicant has made all appropriate efforts to obtain a licence from the patentee on reasonable terms and conditions, but has been unsuccessful within a reasonable time (defined as a period of not more than six months).

In India, The Patents Act, 1970, require patentees and licensees to file a statement disclosing the information of the granted patent to the general public under Form 27. Form 27 is the form prescribed for patentees and licensees to provide statements regarding working of their patent in India. The Patents Act, 1970 mandates every patentee and every licensee to file a statement stating the scope of commercial working of a granted patent in India. This working statement is encapsulated in Form 27 of the Patents Rules, 2003 and non-compliance with the requirement of filing the working statement within the prescribed timelines as per the Rules may result into penalty of imprisonment which may extend to six months or with fine or with both, as provided under section 122(1) (b) of the Patents Act.[4]

In 2015, a public interest litigation (PIL) was filed in the High Court of Delhi to bring the lack of compliance with the working statement requirement, as required under the Act, to the attention of the court. During the course of the hearing of the petition, the parties to the petition informed the Court that the wording and requirements of Form 27 present in the 2003 Rules was unclear and confusing, which made compliance difficult. One of such requirement was to state whether the patentee had met the public requirement with respect to the patented invention “partly/adequately/to the fullest extent” without any guidance on how to determine the same. Taking note of the issues pointed out by the parties, the Court had directed the government to take action for carrying out necessary amendments to Form- 27.

Further, pursuant to the directions of the Delhi High Court, Form 27 have recently been amended by the government under The Patents (Amendment) Rules, 2020. The government’s proposed changes to Form 27 which eliminate the requirement to provide the following information:

  1. The quantity of the patented product produced or imported into India;
  2. Country wise details of the value and quantity of the patented product imported into India;
  3. Details of licences and sub-licenses granted over the course of the year;
  4. Statement whether public needs has been met (partly, adequately/to the fullest extent) at a reasonable price.

It’s worth noting that companies asking for compulsory licensing rely heavily on the submissions made on Form 27 to demonstrate that the public’s reasonable needs were not met and that the patented technology was not used in India. As the first compulsory licensing granted to Natco Pharma in the case of Natco-Bayer dispute, the Form 27 filings revealed the information that Bayer sold the drug Nexavar at an exorbitant price (Rs 2,80,000 – a month’s dosage) and could barely cover the needs of 2% of the patient population.[5]

A Public Interest Litigation (PIL) was filed at the Delhi High Court and the same was accepted on August 21, 2015 under Article 226 of Indian Constitution as a writ of mandamus in Shamnad Basheer vs Union of India & Others seeking directions for the Union of India (UOI) to:[6]

  1. Perform their statutory duty to enforce norms relating to disclosure of “commercial working” of patents under Section 146 read with Rule 131 of the Patents Act, 1970 and Rules by every patentee and licensee;
  2. Create an advisory committee to improve the current format for patent “working” disclosure, as the current format is irrational and woefully inadequate to achieve the Patents Act’s goals.

The case was based on a survey done by the petitioner in April 2011 that looked at various working statements produced by Indian patentees. According to the report, over 35% of patentees failed to disclose their patent working status between the period of 2009 and 2012, and the information provided was severely flawed, inadequate, careless, or unclear.

In addition, the 2015 Patent Working PIL made some key points on the relationship between patent working disclosures and compulsory licensing:

“…working data for patents is essential for invoking compulsory license and revocation provisions. If this trigger is made more difficult by keeping data private and opaque, it will eventually damage consumers by denying them potentially more economical technology and goods, a problem that is most acutely felt in the realm of life-saving/extension drugs like Bayer’s Nexavar.”

If the patent working disclosures had been provided under the recently proposed Form 27, Natco’s compulsory licence claim would have been difficult to establish since it removes the statement on whether the public requirement was met at a reasonable price. Furthermore, removing the requirement of disclosing the quantum of patent product and replacing the phrase “value of the patented product” with “approximate revenue / value accrued in India from the patented product” will be insufficient to assess the extent to which the patented innovation or product is capable of meeting the reasonable requirements of the public. When it comes to patented pharmaceuticals, for instance, knowing the appropriate dosage per patient is crucial in order to accurately determine how many patients are treated through the supply of the patented product. Hence, it would have been more challenging for Natco to demonstrate that the conditions of only 2% of the population were met, and their compulsory licensing application might have been denied.

[1] https://www.wipo.int/patents/en/faq_patents.html

[2] https://ssrana.in/ip-laws/patents/compulsory-licensing-patents-in-india/

[3] https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm

[4] https://www.natlawreview.com/article/india-patent-amendment-rules-2020-streamlining-form-27-filings

[5] https://spicyip.com/2019/07/governments-dilution-of-patent-working-disclosure-requirements-and-compulsory-licensing.html#:~:text=Section%20146%20(2)%20of%20the,Act%20on%20an%20annual%20basis.

[6] https://patentsrewind.wordpress.com/2015/09/23/pil-on-working-disclosure-requirements/

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