Section 3(d) of the Indian Patent Act – Taking a blow at the WTO?

Amritha Sathyajith

Section 3(d) of the Indian Patent Act, 1970 has been under the gun ever since it was introduced to the Act through an amendment in 2005. Foreign pharmaceutical companies have time and again failed to establish that the letter of this provision violates the TRIPS, and have, recently, in an aggressive move, tried to attack its validity by stating that the spirit of the section is not in compliance with the TRIPS. This move, which could hamper India’s pharmaceutical Industry, was effected by the US and Switzerland by challenging Section 3(d) in the WTO arena by reviving the principle of ‘Non-violation complaints’ which allows a Country to question the policy of another member country even if there is no actual violation of an agreement.

Impact of Section 3(d) –

In 2005, India started granting product patents for pharmaceutical products among others to meet the specified standards laid down by WTO. However, our country being a developing one, has always given more importance to public needs over an individual’s. This is the reason why Section 3(d) is worded in a manner so as to comply with WTO terms but at the same keeping in mind the humanitarian aspect.

The Section states that a mere discovery of a new form or a mere new use of a known substance which does not enhance the efficacy of the substance cannot be patented. The Indian Patent Office has, in line with this section, adopted a strict approach in reviewing patent applications and denied patents to several high profile drugs for failing to meet the requirement of inventiveness provided under this Section.

One such case is that of Novartis AG, a Swiss pharmaceutical company that fought a seven year long patent litigation battle, to end up on the losing side. The case began with the rejection of a patent application filed in the Chennai Patent Office for a drug named Glivec, which was considered to be [By the Patent Office and Intellectual Property Appellate Board] a slight modification of a known drug.  The Supreme Court interpreted Section 3(d) and stated that in the absence of any evidence of efficacy of the product, patent could not be granted. It also dismissed Novartis’ claim that Section 3(d) was violative of the TRIPS Agreement.

In the light of such a situation, many foreign pharmaceutical companies have expressed their concern with respect to India’s patent standards. As mentioned earlier in one of our previous blog articles [A Lowdown on the Indo-US Tensions due to India’s Patent Regime], the Indian Patent regime has caused strain on its relationship with other countries. With the growing demand for drugs, many developed Countries are starting to find new and unfathomed angles to strike down Section 3(d).

Non-violation Complaints: A new hurdle –

Generally, a dispute arises when one Country breaches an agreement or a commitment. A non-violation complaint is a remedy that has existed since the inception of GATT and permits a WTO member to challenge another’s policy, not because it contravened agreed obligations but on the basis that a benefit arising under a WTO agreement has been nullified or impaired by an otherwise WTO-consistent measure. This means that though a simple reading of Section 3(d) will not per say render it violative of the TRIPS, however, its strict interpretation will affect the IP rights of pharmaceutical companies in foreign countries, thereby defeating the objective of TRIPS agreement. Therefore, such a measure can be questioned using non-violation complaints.

The non-violation complaint provision stands suspended even since it was included under the TRIPS agreement. In the upcoming 10th WTO Ministerial Conference which is scheduled to take place in December, US and Switzerland propose to recommend the termination of the suspension on non-violation complaints. Whereas, India and Brazil submitted a joint proposal, co-sponsored by 17 other countries, calling for continuing the suspension on non-violating complaints under the TRIPS agreement.

Procedure for filing a NV Complaint –

Article 64 of the TRIPS Agreement makes reference to Article XXIII of the GATT with respect to the procedure to file a non-violation complaint. The Article imposes three legal requirements for filing a complaint –

  1. An application of a measure(s) by a WTO member;
  2. benefit accruing under a relevant agreement; and that
  3. nullification or impairment of that benefit or an objective of the agreement in question has been impeded as a result of the application of the measure(s).

Weighing the Pros and Cons –

The argument in favour of lifting the suspension is that, overuse of legal creativity such as in the case of Section 3(d) of the Indian Patent Act, can only be stopped by raising non-violation complaints at the WTO. US and Switzerland, being two countries that have broad and liberal patent laws, find it difficult to enforce their IP rights in a country like India with stringent interpretation of patent provisions. They feel non-violation cases must be allowed in order to discourage members from engaging in creative legislative activity that would allow them to get around their TRIPS commitments.

However, if such a provision is not used with caution, it will turn into a matter of controversy because most countries will enforce such a provision to challenge the patent regime under developed or developing countries even in the absence of any breach of an agreement. Its rampant use will affect the pharmaceutical industry of poor countries and will also heavily increase the revenue spent on litigation. Moreover, some countries believe that non-violation complaints in TRIPS could potentially affect their ability to use TRIPS flexibilities.

Such a remedy will give power to a few giants to restrict the ability of a Government to address its socio-economic problems. Therefore, it is suitable to maintain the suspension on non-violation complaints. However, since the decision is not ours to make, we will have to wait until the 15th of December, 2015 for the WTO members to jointly decide.

This article has been authored by Amritha Sathyajith who is pursuing law at the School of Excellence, Chennai. Being a civil service aspirant, she seeks happiness through empowerment. She is currently a member of the The InfoMission Project and The Debunk project, both initiatives that aim to make lives better.

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