Pharmaceutical Research and Manufacturers of America - Policy Views - Issues Around The World

Pharmaceutical Research and Manufacturers of America - Policy Views - Issues Around The World - Special 301 Report

PRIORITY FOREIGN COUNTRIES

India

India is among a very small number of developing countries availing itself of the full transition period for product patent protection until January 1, 2005, provided in the WTO TRIPS Agreement. Nonetheless, most of the TRIPS obligations applied to India as of January 1, 2000. India has missed this deadline. The Indian Government is fully aware of its obligations under the WTO TRIPS Agreement, but is unprepared to meet its current obligations. Accordingly, PhRMA urges the U.S. Trade Representative to initiate a dispute settlement action in the WTO against the Government of India.

The Status Quo: The Indian industrial property system, particularly the patent law, has been designed to punish importers of patented technology into India, and to coerce local production and distribution of products. The current Indian patent regime contains many inconsistencies with the TRIPS Agreement, many of which were described in PhRMA's submission on December 3, 1999 in connection with the preparation of the National Trade Estimate Report:

We are particularly frustrated with the way the Indian Government has implemented the exclusive marketing rights regime required by TRIPS Article 70.9. Despite India's obligation to provide exclusive marketing rights to the right holder, local products are being are registered within a very short time of the product of a MNC (sometimes within a day), with discriminatory differential pricing that favors the local product. While the World Trade Organization (WTO) has made clear in three separate rulings that India should meet its requirements under the TRIPS principles of the WTO, India has failed to date to implement appropriate, conforming mailbox and EMR procedures (current obligations required under Articles 70.8 and 70.9 of the TRIPS Agreement). In particular, India permits third parties to obtain "compulsory licenses" of the exclusive marketing right, and permits the Government to essentially ignore those rights if it deems doing so expedient. Other provisions make the concept of exclusivity in marketing a proprietary pharmaceutical an illusion in India.

Generally speaking, the Indian patent system curtails or eliminates rights for foreign-originated technology or importers of patented products in a wide variety of ways including through disqualification to obtain patents, special compulsory licensing conditions for foreign-manufactured patented technology, exclusion of certain technology areas that are not presently exploited in India. The Indian patent system also denies eligibility to a wide range of technologies that are within the core of the U.S. industrial base, including not only pharmaceutical and agricultural chemicals, but also other types of chemical products, glass products, and semiconductors.

The term of protection for pharmaceutical process patents in India is only seven years under the existing Patent Act of 1970. This is far shorter than the minimum term of at least twenty years from the filing date of the patent application as required by TRIPS Article 33.

The Indian compulsory licensing system, with its infamous practice of "licenses of right" and unbridled Government use authority, does not contain the safeguards required by TRIPS Article 31 and targets and penalizes U.S. inventors, particularly those that do not manufacture their inventions within India.

The numerous deficiencies of the Indian patent system have resulted in a very weak and ineffective form of patent protection in India. The experience of PhRMA member companies has been so negative with regard to the Indian system that most companies have abandoned efforts to obtain or enforce patents in India.

The New Draft Patent Legislation: The Government of India is currently considering patent legislation. We are discouraged that India waited until mid-November, less than two months before the deadline for TRIPS implementation, to start the legislative process to amend its patent law. At the time of this submission, a Parliamentary Select Committee was considering another delaying tactic, a three month "road-show" for regional discussion of the patent law before its formal consideration in the Parliament. The newly introduced legislation represents a step forward on many fronts, but on a number of issues is a step backward. Based on our initial reviews of the legislation, it introduces several troubling provisions, and fails to remove most of the inconsistencies noted above.

The draft Indian law, if enacted would continue to discriminate against foreign patent owners who manufacture products outside of India. The new law retains sanction, including compulsory licenses, for patent owners that do not "work" their patented inventions within India. Local working as a requirement for full enjoyment of patent rights is prohibited under Article 27.1 of the TRIPS Agreement.

Some improvements would be made to the existing compulsory licensing regime in Indian law. However, extensive authority would continue to be available to the Indian Government to use patented technology without the consent of the patent owner and in a manner inconsistent with Articles 27 and 31 of the TRIPS Agreement.

Competitors would continue to have the right to harass and challenge patent applicants and patent owners. Numerous grounds would be provided to oppose, cancel and revoke patents on grounds not permitted under the TRIPS Agreement. The Indian system of pre-grant opposition would be altered to provide two new grounds for opposing patent grants. Combined with the backlog of more than 30,000 applications pending in India and the dearth of qualified examiners, the opposition proceedings would easily allow competitors of patent applicants to delay the issuance of a patent until the term would expire. This would effectively eliminate patent protection for important inventions.

The draft law would exclude product-by-process protection in contravention to Article 28.1 of the TRIPS Agreement for certain types of products that are now denied full product patent protection under Indian law. This exclusion also violates Article 27.1 of the TRIPS Agreement, which forbids discrimination as to the field of technology of the invention. In addition, the product-by-process protection would only be available to patents issued on applications filed after January 1, 2000, in contravention of the transition provisions contained in Article 70.2.

As noted above, the Indian regime continues to fall far short of the obligations of the TRIPS Agreement. More troubling is the apparent lack of political will and commitment to establishing a modern patent system that delivers the patent exclusivity that is a necessary precondition to significant investments in India by our technology sector. We are also disappointed that India's greatest efforts have been reserved for Geneva and Seattle, where it has attempted to gain support from other WTO Members for weakening industrial property standards now found in the TRIPS Agreement, rather than sincerely attempting to meet its own obligations. From this, we can only conclude that the Indian Government is fully aware of its obligations under the TRIPS Agreement, but is unprepared to meet its current obligations. Accordingly, PhRMA urges the U.S. Trade Representative to initiate another dispute settlement action in the WTO against the Government of India.

Furthermore, India's Patents Office is essentially non-functional. In anticipation of the improvements required by the TRIPS Agreement, there has been a surge in the filing of patent applications and many more are expected. The Indian Patents Office, based on its size, degree of modernization and past practices, is and will be unable to cope with these filings. Recent statistics indicate a backlog of over 30,000 unprocessed applications, which, measured against the average output of the collective Indian Patents Office, will not be examined or granted well into the latter part of the next decade.

While we appreciate India's current efforts to invest approximately $20 million in new and improved facilities, underlying problems in India's patent law render effective patent administration impossible. The Government of India needs to follow-up its modernization efforts at the administrative and legislative level to make it possible to operate a modern patent office in India.

Damage Estimate

PhRMA is currently studying methodology for estimating damages caused by absence of intellectual property protection in India (see Appendix B). It is clear, however, that the damage caused by the inadequate protection of intellectual property rights in India reaches beyond direct losses caused by displaced sales in India. Indian bulk pharmaceutical companies aggressively export their products to third countries where intellectual property laws are similarly lax. The damage caused to U.S. pharmaceutical manufacturers due to the deficiencies of the Indian patent regime thus goes beyond displaced sales in the Indian market, and reaches to the ability of U.S. companies to compete in other significant markets, especially in the Asia-Pacific and Middle East regions.