A Comparative Analysis of India’s Patent Regime and its Impact on Pharmaceuticals

Moshe Y. Admon, LL.B., B.A., B.Sc.

J.D. and LL.M. (International Trade and Business Law) Candidate, 2015

University of Arizona James E. Rogers College of Law

LL.M. Thesis

May 15, 2015

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With a population of approximately 1.252 billion, a GDP of roughly $1.877 trillion, and

an estimated annual GDP growth rate of 6.7% for 2015, India is poised to become a global

superpower. Nevertheless, contemporary India is categorized by the World Bank as a lower

income country with a GNI (previously GDP) of $1,570 per capita and a life expectancy of 66

years.1 This enormous economic growth rate compounded with the exponential accumulation of

wealth by the super-rich2, contrasted with the massive number of poor plagued with low life

expectancy raises vast social and economic concerns relating to the availability of vital

pharmaceuticals to the populace. Augmenting these national anxieties are the underlying

cultural and political turmoil of India’s history, becoming drastically acute since imperial rule in

the late 19th century and independence in 1947, both of which play a crucial role in guiding

policy decisions. This paper will discuss the ongoing debate relating to India’s patent law as it

pertains to pharmaceutical development, a comparison of Indian patent law to U.S. law and

TRIPS, and the implications for India’s pharmaceutical industry and social well-being.

A Brief History of Indian Patent Law Up To WTO Membership

Patent law in India originated under the patent regime implanted by Great Britain, which

ruled India for nearly a century.3 The first patent law in India was introduced in 1856, when a

law was passed granting inventors select rights for the time period of fourteen years.4 Since this

1856 law did not receive the Queen’s consent it was considered by many legal scholars and

commentators to be potentially moot, so as a response in 1859 a “new law was introduced that

1 The World Bank, http://data.worldbank.org/country/india (last visited May 24, 2025). 2 Soutik Biswas, India's billionaires and the wealth of the nation, (May 24, 2015, 2:00 AM),

http://www.bbc.com/news/world-asia-india-19921501. 3 V. K. Unni, Indian Patent Law and TRIPS: Redrawing the Flexibility Framework in the Context of Public Policy

and Health, 25 Pac. McGeorge Global Bus. & Dev. L.J. 323, 323-324 (2012). 4 Id. at 324.

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granted inventors the exclusive privilege to make, use, and sell their invention in India. The

purpose of this legislation was to help British patent holders gain control over the Indian

markets, and the law contained major restrictions on the importation of technologies and

inventions. As a consequence, importation of technology became highly complex and

prohibitively expensive.”5

Due to these restrictions, the Indian Patent Act was once again amended in 1911 and

“authorized issuing of both process and product patents. These patents were valid for a period of

sixteen years and could be extended for another period of ten years if the patent holder believed

that he had not been adequately defrayed for his innovation.”6 Nevertheless, the act contained

the same restrictions which dampened the development of a local pharmaceutical industry and

caused India to have “some of the highest drug prices in the world.”7 In fact, the pharmaceutical

industry was by all purposes dominated by transnational companies who used the 1911 Patent

Act to “prevent indigenous firms from manufacturing patented drugs invented abroad.”8 Further,

“[u]nder the system established by the 1911 Act, eighty to ninety percent of India's patents came

to be held by foreigners.”9

When India declared independence in 1947 it established itself as a socialist country with

a mixed economy, where the government undertook managing both private and public

enterprises.10 This socialist philosophy was fundamental to the development of India’s patent

law reform. Immediately after India’s independence there was concern by Jawaharlal Nehru, the

5 Id. at 324. 6 Samira Guennif, Present Stakes Around Patent Political Economy: Legal and Economic Lessons from the

Pharmaceutical Patent Rights in India, 2 Asian J. WTO & Int'l Health L & Pol'y 65, 69 (2007). 7 Swaraj Paul Barooah, India's Pharmaceutical Innovation Policy: Developing Strategies for Developing Country

Needs 5(1) TRADE L. & DEV. 150, 154 (2013). 8 Ryo Shimanami, The Future Of The Patent System, Edward Elgar Publishing, Cheltenham (2013) 9 Susan Fyan, Pharmaceutical Patent Protection and Section 3(D): A Comparative Look at India and the U.S., 15 Va.

J.L. & Tech. 198, 204 (2010). 10 Martin Adelman, Patent Law in India, 1 Int'l Intell. Prop. L. & Pol'y 131, 131 (1996).

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first Prime Minister of India, that “foreign companies would control the Indian economy.”11 Due

to this, a Patent Enquiry Committee, named the Tek Chand Committee, was formed to assess the

current state of the Indian Patent regime and to ‘make . . . [the system] more Indian and more in

line with national goals.’”12 Within three years after independence, “[a]s of 1948-1950, the

Patent Enquiry Committee specified that ‘the Indian patent system has failed in its main purpose,

namely to stimulate inventions among Indians and to encourage the development and

exploitation of new inventions for industrial purposes in the country so as to secure the benefits

thereof to the largest section of the public.”13

In 1957 a separate national patent review board known as the Ayyangar Committee was

formed. Incorporating the Tek Chand Committee’s data into its own research it “found that

between eighty and ninety percent of the Indian patents were held by foreigners and more than

ninety percent of them were not worked (i.e. used by manufacturers) in India. [It] asserted that

the system was being exploited by foreigners to achieve monopolistic control over the market...

Medicines were arguably unaffordable to the general populace, and the drug-price index was

rising... In the early 1940s and 1950s, ninety percent of the (Indian) drug market was under the

control of foreign companies, and the country was totally dependent on imports for both bulk

drugs (the active ingredients) and formulations (the medicines made from bulk drugs).”14

In response to these findings, the Indian government enacted the home grown Indian

Patent Act (IPA) of 1970, which some have referred to as an “anti-capitalist, anti-industrial

property statute” to be expected from a command economy such as India which was at the time

11 Stephen Barnes, Pharmaceutical Patents and TRIPS: A Comparison of India and South Africa, 91 Ky. L.J. 911,

920 (2002-2003). 12 15 Va. J.L. & Tech. 198, 204 (2010). 13 2 Asian J. WTO & Int'l Health L & Pol'y 65, 69 (2007). 14 91 Ky. L.J. 911, 920 (2002-2003).

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closely allied to the Soviet Union.15 This “relaxed” patent law was in many ways was rooted in

the spirit of patent regimes adopted by other developing countries, with an intent to encourage

national pharmaceutical production and boost medical independence.16 In fact, the stated

purpose of the IPA was “"[T]o encourage inventions and to secure that [they] are worked in

India… [to ensure that] they are not granted merely to enable patentees to enjoy a monopoly for

the importation of the patented article,... [and to prioritize the] public interest over the private

interest of the inventor."17

Specifically, the act “eliminated patentability for food, medicines, drugs, or chemical

substances, broadly defined. They allowed process protections generally but when it came to

food, medicines, or drugs, the term was set at five years from the date of the grant or seven years

from the date of filing, whichever was first.”18 Considering the time to process an application

and receive a patent license, this time frame is de minimis. Additionally, “a company would

only be able to enjoy one patent for one manufacturing process… Besides this, only local

production would validate the effective use of a patent. Contrary to the earlier practice, the

import of pharmaceutical products no longer allowed the patent's effective use to be validated.

As a result, the patent holder was given three years to exercise his right in the form of local

production. The IPA also provided for assignment of rights. If, at the end of the three year

period, a medicine was not available or available at an unreasonable price, the Indian

government could construe that the public need had not been met and could issue a compulsory

license (CL). It could thus allow a local company to manufacture the medicine and market it at a

15 1 Int'l Intell. Prop. L. & Pol'y 131, 132 (1996). 16 2 Asian J. WTO & Int'l Health L & Pol'y 65, 70 (2007). 17 The Patents Act, No. 39, § 83(a) (India) (1970). 18 1 Int'l Intell. Prop. L. & Pol'y 131, 132 (1996).

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lower price. A fortiori, if two years after the issue of the CL, the medicine was still not available,

the government could simply revoke the patent due to lack of satisfactory usage.”19

Because the IPA restricted pharmaceutical patentability to only process patents, Indian

pharmaceutical manufacturers had enormous incentive to reverse engineer patented medication

and produce it at a fraction of the price, considering that they had no research and development

costs. This brought about “the creation of a robust domestic generics industry that could quickly

reverse engineer original formulations as well as develop new processes for drug production.”20

The Indian generic industry, founded essentially on patent piracy, grew dramatically in the

following years. “In 1953, the sector consisted of 1,752 companies as against 5,126 in 1980.

Today, there are 20,000 companies with 250 big timers and about ten public sector

enterprises.”21 In fact, India has become a global powerhouse in the manufacturing of generic

pharmaceuticals. Additionally, there were several major ancillary economic benefits that

emanated from the governments lax patent policy. One was the growth of “domestic production

of raw material and formulations [whereby] [r]aw material production rose from 180 million

rupees in 1965 to… 45 billion in 2001.”22 Secondly, the growth of the Indian generics industry

brought about the drop in pharmaceutical prices “until they were some of the lowest in the world.

This continued [un]till 1995, when India joined the WTO.” 23 The new patent policy led to an

exponential rise in exports, which increased over 300-fold between the enactment of the IPA and

the late 1990’s.24 In fact, India “is a leading exporter of medicines to developing countries,

19 2 Asian J. WTO & Int'l Health L & Pol'y 65, 70 (2007). 20 5(1) TRADE L. & DEV. 150, 154 (2013). 21 2 Asian J. WTO & Int'l Health L & Pol'y 65, 71 (2007). 22 Id. at 71. 23 5(1) TRADE L. & DEV. 150, 154 (2013). 24 2 Asian J. WTO & Int'l Health L & Pol'y 65, 71 (2007).

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including a large percentage of medicines used [to] combat AIDS.”25 Nevertheless, there were

also negative repercussions, particularly a significant drop in the number of patents filed in

India.26

An important measurement that shows the impact of the IPA on pharmaceutical prices

post 1970 is the comparative pharmaceutical price index relative to other goods. “In the

beginning of the sixties, the drug price index was almost at par with the general price index: 2%

inflation for drugs as against 3% for all other goods… [F]rom 1970s onwards, the gap between

the drug price index and the price index of other goods began to widen. In general, between 1961

and 1989, the price index for all products increased by 676.6% as against 386.6% for drugs.”27

A comparison of prices on essential medicines in 1986 show the stark differences between

domestic Indian pharmaceuticals as opposed to those in other countries. “For example, the price

of an antibiotic in India was 82.5% of the price in Pakistan and 32.2% of the price in Britain. For

the most expensive drug, a hypertensive drug, the Indian price was equivalent to approximately

69% of the British price and 42% of the Pakistani price.”28 Likewise, “on the prices of largest

selling drugs during the years 1991 and 1992, India enjoyed attractive prices. For an antibiotic

(Ciprofloxacin), the Indian price was 5.66 times lower than the Pakistani price. Even for an ulcer

drug (Ranitidine), the American price was 25 times higher than the Indian price.”29

25 25 Pac. McGeorge Global Bus. & Dev. L.J. 323, 328 (2012). 26 Panel Discussion: Patent Protection in India, 3 Int'l Intell. Prop. L. & Pol'y 45-1, 45-2 (1998). 27 2 Asian J. WTO & Int'l Health L & Pol'y 65, 72 (2007). 28 Id. at 73. 29 Id. at 73.

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Indian Patent Law after Joining the WTO and TRIPS

In 1995 India became a member of the World Trade Organization (WTO) and signed the

WTO TRIPS (Trade Related Intellectual Property Rights) agreement. TRIPS sets a minimum

standard for the protection of intellectual property rights between WTO nations. Some of the

important guidelines set by TRIPS that directly conflicted with the IPA are as follow: “Articles

17 and 34 of this agreement lay down common minimum international regulations. These

regulations specify what is patentable, what is not patentable and the extent to which the rights

are protected under the patent… As regards the patent's term, it is fixed at a minimum of 20

years from the date of its application (Article 33)… As regards patent validity, Article 27 lays

down that ‘patent rights shall be enjoyable without discrimination,… whether products are

imported or locally produced’… henceforth import would also validate the actual use of the

patent… As per article 27.1, the member states are beholden to offer protection granted by a

patent for any invention whether it is a product (medicine) or a process (a method to produce

chemical ingredients for a drug composition).”30

Although TRIPS provides patentability standards, there is leeway left to members based

primarily on public need issues. These limitations on patentability are found in Article 27.2,

27.3a, 27.3b, and 8.131. 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 public order 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

30 2 Asian J. WTO & Int'l Health L & Pol'y 65, 75 (2007). 31 Id. at 75-78.

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merely because the exploitation is prohibited by their law." 32 However, “public order” is not

defined, which creates a widely contested ambiguity.33 Article 27.3a allows signatories to

exclude “"diagnostic, therapeutic and surgical methods for the treatment of humans or animals,”

an important provision to developing countries considering that such methods can have

important implications on public health.34 Article 27.3b states that patentability can be excluded

for “plants and animals other than micro-organisms, and essentially biological processes for the

production of plants or animals other than non-biological and microbiological processes.”35

Additionally, Article 8.1, one of the Basic Principles of TRIPS, give members the right to

exclude some medicines from patentability for the sake of “ protect[ing] public health and

nutrition, and to promot[ing] 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.”36 Nevertheless, this exclusion of patentability must be temporary

to conform to the “measures… consistent with the provisions of this Agreement.”

In addition to TRIPS providing limitations on patentability, there are also limitations on

rights emanating from patents already granted. Article 30 states “Members may provide limited

exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not

unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice

the legitimate interests of the patent owner, taking account of the legitimate interests of third

parties.”37 The general assumption is that “unreasonable” conflict and prejudice is “to create a

32 World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited

May 24, 2015). 33 2 Asian J. WTO & Int'l Health L & Pol'y 65, 77 (2007). 34 Id at 77. 35 World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited

May 24, 2015). 36 Id. 37 Id.

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competitive environment favourable to a decrease in drug prices and enhancement of people's

access to medicines.”38

Another broad exception set out in the TRIPS agreement is compulsory licensing, as

specified in broad stokes by Articles 8, 31, and 40. In practice, “public authorities can authorise

a third party to manufacture a patented product or to use the patented process without the patent

owner's consent. Most developed countries and developing countries provide for CL concession

in their legislation.” 39 Still, according to Article 31.b member states must make a “efforts to

obtain authorization from the right holder on reasonable commercial terms and conditions” prior

to enacting compulsory licensing for “national emergency or other circumstances of extreme

urgency or in cases of public non-commercial use.”40 Nevertheless, developing countries such as

India still take advantage of this broadly worded clause.

The last major exception on rights emanating from granted patents is “parallel

importation.” To understand parallel importation it is first necessary to understand the doctrine

of patent exhaustion, otherwise referred to as the “first sale doctrine.” When an inventor is

granted a patent he is entitled to a range of exclusive rights essentially equating to a monopoly.

Nevertheless, this monopoly has exceptions, one of which is the exhaustion doctrine. This

doctrine “holds that the first sale of a patented product by the patentee or by a licensee acting

within the scope of a license that does not otherwise restrict the licensee's activities exhausts the

monopoly in that article and the patentee may not thereafter, by virtue of his patent, control the

use or disposition of the article.”41 The exhaustion doctrine is a territorial right and is dependent

38 2 Asian J. WTO & Int'l Health L & Pol'y 65, 78 (2007). 39 Id at 79. 40 World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited

May 24, 2015). 41 § 5.04 THE “PATENT EXHAUSTION” DOCTRINE, 2014 WL 839407

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on national law. In the U.S., the domestic purchase of a patented product exhausts the patentee’s

rights, but “[u]nder current law, a U.S. patent holder may block the importation, use, or sale of

patented goods purchased abroad, even if purchased from a seller licensed under a foreign

patent.”42 This type of limitation is referred to as “national exhaustion.”43 Alternatively, if a

country applies the doctrine of “international exhaustion, the IP rights are exhausted once the

product has been sold by the IP owner or with his consent in any part of the world.”44 India, in

addition to a large number of other countries including Argentina, South Africa, Egypt, Pakistan,

and the Philippines, apply international exhaustion by statute.45

This legal extermination of patent rights triggered by the international exhaustion

doctrine has created the mechanism of parallel importation. Parallel importation is when an

importer “essentially engages in price arbitrage” by purchasing a patented product for a low price

in one country and exports it to a country where that same patented product is being sold for a

higher price, thus undercutting the patentee’s profits and market share.46 To make matters worse

for patentees, TRIPS Article 6 states that “nothing in this Agreement shall be used to address the

issue of the exhaustion of intellectual property rights.”47 Article 6 was further clarified by

“Article 5(d) of the Doha Declaration which states that ‘the effect of the provisions in the TRIPS

agreement that are relevant to the exhaustion of intellectual property rights is to leave each

42 Sarah R. Wasserman Rajec, Free Trade in Patented Goods: International Exhaustion for Patents, 29 Berkeley

Tech. L.J. 317, 319-20 (2014) 43 World Intellectual Property Organization, International Exhaustion and Parallel Imports,

http://www.wipo.int/sme/en/ip_business/export/international_exhaustion.htm (last visited May 26, 2015). 44 Id. 45 Krista Cox, KEI files amicus brief in case on international patent exhaustion, Knowledge Ecology International,

(May 27, 2015, 12:10 AM), http://keionline.org/node/1611 46 Shamnad Basheer, “Exhausting” Patent Rights in India: Parallel Imports and TRIPS Compliance, Journal of

Intellectual Property Rights Vol 13, 486, 487 (2008). 47 World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited

May 24, 2015).

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member free to establish its own regime for such exhaustion without challenge…’”48 Thus,

nations such as India that subscribe to the international exhaustion doctrine can take advantage of

parallel licensing to breach patent rights, annulling any potential recourse a patentee may have.

The following chart is an excellent comparison of India’s 1970 Patent Act and its current

patent regime under TRIPS.49

48 Journal of Intellectual Property Rights Vol 13, 486, 492 (2008). 49 2 Asian J. WTO & Int'l Health L & Pol'y 65, 82 (2007).

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Transition Period to the India Patents (Amendments) Act, 2005

Because these provisions were created by developed countries and emulate western IP

law standards TRIPS provided that developing nations, a list which includes India, would be

extended a 10-year “transition” period upon signing TRIPS to fully enable compliance. Even

though there was this transition period TRIPS compliance obligated India to immediately

implement a “mailbox facility for such product patent applications filed during the TRIPS

transition period and to assign each application a filing date. Another obligation under TRIPS

was the provision dealing with the grant of EMRs [exclusive marketing rights] for mailbox

applications that met specified conditions during the transition period.”50 Due to multiple

political reasons the Indian parliament did not pass a law ordering this mailbox rule and in

response the U.S. initiated the WTO’s “dispute resolution mechanism” to order India’s

compliance, which prodded India’s passing of the 1999 Patents Amendment Act decreeing the

mailbox system.51

The next major facelift to the IPA was the Patents Amendment Act 2002. This raised the

term of patentability to twenty years, and brought the IPA into alignment with the Paris

Convention and Patent Co-operation Treaty. The significance of this was that it “meant that

India had to make its laws consistent with the Paris Convention’s national treatment principle—

which prohibits discriminatory treatment of foreign applicants—as well as its right of priority—

which permits foreigners who have previously filed a patent application in their home countries a

twelve-month priority period within which they can file an application for the same invention in

India, while still retaining the benefit of their earlier home country filing date.”52 There were

50 25 Pac. McGeorge Global Bus. & Dev. L.J. 323, 331 (2012). 51 Id. at 331. 52 Id. at 333.

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further changes enacted by the 2002 Amendment that aligned the IPA with TRIPS, but

conversely broadened the right of India to issue compulsory licensing. Disconcerting to

developed TRIPS member nations, the 2002 Amendment states that “process patents pertaining

to medicines and food “were automatically deemed to be endorsed with the words ‘licenses of

right,’” which would make them available for compulsory licensing by all applicants three years

after the patent grant.”53

In 2005 the Indian parliament passed the Patent Amendments Act 2005, the current

patent regime in effect. One of the major changes brought about by this act was that

pharmaceuticals, food, and agro-chemicals were deemed patentable. Nevertheless, “the 2005

amendments contain many controversial features that have caused many disputes. They include

elaborate provisions concerning what is and is not considered patentable subject matter, a new

definition of the “inventive step” criterion of patentability, procedures governing both pre- and

post-grant opposition, and a more liberal framework for compulsory licensing.”54

“Nonobviousness” also referred to as “Inventive Step”

Patent law in the occidental world and particularly the U.S. evolved within the confines

of a free market economy. This western economic and social environment can be clearly

contrasted with that of India, which was historically a familial based culture overtaken by

western imperialism and still trying to overcome the socialist planned economy under which it

was established in 1949. As a result Indian patent law is still a reflection of its cultural heritage,

53 Id. at 334. 54 Id. at 335.

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as much as occidental patent laws - including the TRIPS agreement - is a reflection of modern

western socio-economic influence.

The reason nonobviousness is such a pivotal issue is because of its potential flux. This

determination can be adduced from looking at the basic elements of patentability, which “screens

innovations with four basic tests: subject matter, nonobviousness, novelty, and utility.”55 Subject

matter is the primary test, because it determines “whether an innovation is even eligible for the

patent monopoly or, alternatively, is merely an unpatentable concept… Of the three remaining

tests (novelty, utility, and nonobviousness), only nonobviousness (the classical test of

"invention") presents the kind of serious dispute also inherent to the subject matter inquiry. The

other two tests of invention-novelty and utility-are either purely factual inquiries or present

virtually no serious disputed issues' and seem so obviously factual as to not raise the question of

industrial policy. Thus, only the subject matter and nonobviousness inquiries are decisive, in a

political and socioeconomic sense, to the grant of patent rights.”56

Nonobviousness in the U.S.

In the U.S., nonobviousness is a condition for patentability, as expressed under 35 U.S.C.

103 which reads:

“A patent for a claimed invention may not be obtained, notwithstanding that the

claimed invention is not identically disclosed as set forth in section 102, if the

differences between the claimed invention and the prior art are such that the

claimed invention as a whole would have been obvious before the effective filing

date of the claimed invention to a person having ordinary skill in the art to which

the claimed invention pertains. Patentability shall not be negated by the manner in

which the invention was made.”57

55 Michael H. Davis, Patent Politics, 56 S. C. L. Rev. 337, 365 (2004-2005). 56 Id. at 367. 57 Cornell University School of Law Legal Information Institute, https://www.law.cornell.edu/uscode/text/35/103

(last visited May 24, 2015).

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Nonobviousness is determined from the point of view of a fictional “Person Having

Ordinary Skill In The Art,” commonly referred to as the “PHOSITA.” The PHOSITA is an

individual with the same level of education as the inventor, with a perfect memory, but no

creativity. This means he is aware of every technology currently present within the realm of art

being patented, but does not have the creativity to undertake an “inventive” step. Thus, the

PHOSITA will only combine previous technologies if they are obvious, which according to the

Supreme Court in the case of KSR International Co. v. Teleflex, Inc. discussed below is a

question “of law based on findings of fact.”58 Essentially, this is a requirement of

“inventiveness” so that individuals cannot simply patent a combination of technologies that are

readily obvious. Additionally, nonobviousness is determined from the time of filing and not

retrospectively from when the patent examiner is making a determination as to patentability.

The foundational test for modern U.S. nonobviousness was set out in the 1966 Supreme

Court case of Graham v. John Deere Co.59 In 1950 William Graham obtained the ‘811 patent for

a “device designed to absorb shock from plow shanks as they plow through rocky soil and thus

to prevent damage to the plow.” Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 4

(1966). In 1953, he obtained a similar patent, the ‘798 patent, which differed from the first “in

that (1) the ’798 invention featured a stirrup and bolted connection of the shank to the hinge plate

and (2) the ’798 invention placed the shank below the hinge plate. This distinction shifted the

point of wear from the bottom of the upper plate to the top of the stirrup of the hinge plate, a

more easily replaced part.”60 Graham sued John Deere Co. for infringed his ‘798 patent, a claim

58 Adam Powell, KSR Fallout: Questions of Law Based on Findings of Fact and the Continuing Problem of

Hindsight Bias, 1 Hastings Sci. & Tech. L.J. 241, 260 (2009). 59 383 U.S. 1, 17, 86 S. Ct. 684, 693 (1966). 60 Roger E. Schechter, Principles of Patent Law, 155, (Thompson West Publishing, 2004).

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which was eventually heard at the Supreme Court, and was the subject of their non-obviousness

analysis.61 The “Graham factors” as they are commonly referred to can be summarized as a

factual determination of “(1) The scope and content of the prior art, (2) The differences between

the prior art and the claims at issue, (3) The level of ordinary skill in the pertinent art, and (4)

Secondary considerations (e.g., commercial success).”62 The Court found that the ‘798 was

obvious due to Graham’s own prior ‘811 patent and another similar non-patented device being

sold in the market.63

After this ruling, the United States Court of Appeals for the Federal Circuit developed a

sub-test for the “secondary considerations” test provided in Graham. This test, commonly

referred to as the “teaching-suggestion-motivation” (TSM) test, “requires evidence of some

reason to combine various references that each teach part of an invention… Thus, if there is no

evidenced reason to combine the references, then the invention will be deemed nonobvious.”64

The Federal Circuit continually put greater emphasis on the TSM test and following it rigidly

until the matter came to a head once again in the 2007 case of KSR International Co. v. Teleflex,

Inc.65 Here, Teleflex sued KSR for infringing their patented automobile electronic throttle

control pedal. KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398, 406 (2007). The Teleflex patent

was “a mechanism for combining an electronic sensor with an adjustable automobile pedal so the

pedal's position can be transmitted to a computer that controls the throttle in the vehicle's

engine.” Id. at 406. Teleflex accused KSR of infringing their patent by “adding an electronic

sensor to one of KSR's previously designed pedals… [and] KSR countered that [the patent] was

61 Id. at 155. 62 Id. at 154. 63 Id. at 155. 64 Patentlyo, Supreme Court: Current Test of Obviousness is “Gobbledygook”, (May 24, 2015, 2:14 AM),

http://patentlyo.com/patent/graham-factors. 65 550 U.S. 398, 426, 127 S. Ct. 1727, 1745 (2007).

17

invalid under the Patent Act, 35 U.S.C. § 103… because its subject matter was obvious.” Id. at

406.

Because it would have seemed obvious to add an electronic sensor to an existing

automobile accelerator pedal, the District Court “granted KSR’s motion for summary judgment

of invalidity based on obviousness.”66 But, the Federal Circuit vacated and remanded, holding

that “the district court had applied an “incomplete” TSM test because the district court failed to

make “specific findings” that would have motivated one skilled in the art to combine the

references “in the particular manner claimed,” such that a genuine issue of material fact

precluded summary judgment.”67 After granting certiorari, the Supreme Court reversed the

Federal Circuit’s ruling, and rejected the “rigid approach… in the way the Court of Appeals

applied its TSM test” stating that “the analysis need not seek out precise teachings” in the prior

art.68 The Court emphasized that the Graham factors “continue to define the inquiry that

controls” the nonobviousness analysis, but their application should be broad and flexible.69 Due

to this broad and flexible approach, the test requires a case-by-case analysis with room for

leeway that can lead to many disputes, which as some scholars propose, can be used as a way to

forward a particular “industrial policy” in a capitalist society.70

Inventive Step in TRIPS

TRIPS does not define “inventive step,” commonly referred to as nonobviousness in the

U.S. It also does not define “novelty” nor “industrial application.” Leaving these vital

66 Wilson Sonsini Goodrich & Rosati, IT’S OBVIOUS: SUPREME COURT REJECTS RIGID APPLICATION OF

“TEACHING-SUGGESTION-MOTIVATION” TEST IN PATENT CASES, (May 24, 2015, 2:15 AM),

https://www.wsgr.com/publications/pdfsearch/clientalert_ksr.pdf. 67 Id. 68 Id. 69 Id. 70 56 S. C. L. Rev. 337, 367 (2004-2005).

18

ingredients of patentability undefined is problematic, since “it was almost certain that member

countries of the WTO would take liberties in defining them.”71

Inventive Step in India

The most important case construing inventive step in Indian law is Bishwanath

Prasad Radhey Shyam v. Hindustan Metal Industries, even though it was decided in 1978. The

Indian Supreme Court determined that “obviousness has to be strictly and objectively judged…

[and] further recognized that obviousness is something that is a natural suggestion of what was

previously known.”72 The Indian Court provided a test by asking "was it for practical purposes

obvious to a skilled worker, in the field concerned, in the state of knowledge existing at the date

of the patent to be found in the literature then available to him, that he would or should make the

invention the subject of the claim concerned?”73

In 2005 the Indian Patent Act was amended whereby Section 2(1)(ja) of the Act defines

“inventive step” as “a feature of an invention that involves technical advance as compared to the

existing knowledge or having economic significance or both and that makes the invention not

obvious to the person skilled in the art.”74 The conspicuous language of “technical advance” and

“economic significance” give the Indian patent regime a much broader regime than that of the

U.S. In fact, “Scholars opine that the new broadened definition of inventive step will give ‘the

71 Feroz Ali, Silences in the TRIPS Agreement, PHARMA PATENTS, (May 25, 2015, 2:19 AM),

http://pharmapatents.blogspot.com/2007_08_01_archive.html. 72 Invintree, http://www.invntree.com/blogs/determination-obviousnessinventive-step-indian-

approach?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original (last visited May 24,

2015). 73 Id. 74 Ministry of Law and Justice, The Patents (Amendment) Act 2005,

http://www.ipindia.nic.in/ipr/patent/patent_2005.pdf (last visited May 24, 2015).

19

Patent Office and courts an explicit mandate to consider a claimed invention's economic

significance.’”75

In 2010, the Indian case of Hoffmann-La Roche v. Cipla clarified the test for inventive

step (nonobviousness), whereby the court held “whether in light of prior art, it was possible for a

normal but unimaginative person skilled in the art to discern the inventive step of the invention

on the basis of general common knowledge of the art at the priority date; [and] [w]here the

differences between the prior art would, without knowledge of the alleged invention, constitute

steps which could have been obvious to the skilled man or whether they require any degree of

invention.”76

A comparison

A comparison of the U.S. and Indian “nonobviousness” / “inventive step” regimes show

some palpable differences. The U.S. definition of nonobviousness as provided by the courts is

very individualistic and puts a prima facie emphasis on patents as property rights, although

temporary. The free market justification for creating this property right, which in fact creates a

temporary monopoly, is to incentivize innovation and its publication. Yet, some scholars opine

that this government granted monopoly right serves as a regulatory function which can stymie

innovation to the benefit of large corporations. An example of this is standing in patent claims,

whereby “only two kinds of parties have standing to bring an infringement suit, or, conversely,

an action for a declaratory judgment of invalidity: a patent proprietor (or one standing in her

shoes) or a potential infringer. Thus, unless a proprietor, or a proprietor's assignee, only parties

facing threats of infringement lawsuits may bring claims themselves.”77 Consequently, for the

75 25 Pac. McGeorge Global Bus. & Dev. L.J. 323, 338 (2012). 76 Dr. Kalyan C. Kankanala, Pharma Patent Law & Recent Trends – India, (May 24, 2015, 2:28 AM)

http://www.slideshare.net/Brainleague/pharma-patent-law-and-recent-trends-india. 77 56 S. C. L. Rev. 337, 374 (2004-2005).

20

most part, competitors are the parties with standing, but some studies suggest that competitors

are reluctant to take action due to the existence of a “’good old boys’ network [which]

encourages patent holders to respect each other's turf,”78 thus eroding the validity of the patent

regime. Nevertheless, as is readily apparent, the U.S. nonobviousness regime emphasizes private

property for incentivizing profit, and even as some would propose, corporate profit over the

public benefit.

In contrast, the Indian inventive step regime uses the enigmatic terminology

“technological advance” and “economic significance,” both of which seem to signify a greater

concern for public benefit and less emphasis on private property. For example, the means of

establishing “economic significance” could “be how well has the developments carried out in the

product been received by the consumers. In addressing this question the commercial success of

the product could be of relevance. In effect the product selling itself is the best indicator.”79

Thus, if the product generates public demand it will be patentable, whereas if a product does not

generate public demand, it may not be patentable, preventing an inventor from holding an

unjustifiable monopoly on the market.

Disregarding any personal opinions of the author regarding which regime is superior, the

text of the both rules point to the effect of cultural entrenchment and societal norms. Where the

free market and individualistic U.S. focuses on private property and profitability interests,

socialist and familial India tends to have a greater leaning towards the public good.

78 Id. at 375. 79 Manisha Singh Nair, India: Economic Significance Whether Inventive Step?, (May 24, 2015, 2:30 AM)

http://www.mondaq.com/india/x/56996/Patent/Economic+Significance+Whether+Inventive+Step.

21

Subject Matter

Patent-eligible subject matter refers to the types of inventions that are deemed patentable.

These definitions of subject matter vary greatly when comparing U.S. and Indian patent law.

Subject Matter in the US

Subject matter is defined in U.S.C. 35 S. 101, whereby eligibility is determined by two

criteria, both of which must be satisfied. “The claimed invention (1) must be directed to one of

the four statutory categories, and (2) must not be wholly directed to subject matter encompassing

a judicially recognized exception.”80 The four categories include a “process, machine,

manufacture, or composition of matter.”81 Step two’s judicially recognized exceptions include

“laws of nature, physical phenomena, and abstract ideas, or is it a particular practical application

of a judicial exception.”82

There is no explicit rejection of patenting peripheral inventions, as long as those

inventions fall within eligible subject matter. As we will see, this method, referred to as

“evergreening” is used regularly in the pharmaceutical industry, specifically when a

pharmaceutical company that lost “both FDA exclusivity and patent protection on the active

ingredient of its drug seeks to extend its monopoly by protecting the drug with a series of

peripheral patents that allow for additional FDA exclusivity and further patent protection. In

particular, this practice allows a brand name company to list additional patents in the FDA's

80 The United States Patent and Trademark Office, http://www.uspto.gov/web/offices/pac/mpep/s2106.html (last

visited May 24, 2015). 81 Id. 82 Id.

22

Orange Book, which in turn allows the patentee to sue manufacturers of generic versions of their

product for infringement and obtain thirty-month stays on the generic product's market entry.”83

Evergreening has major negative repercussions which affect the general populace.

Mainly, by using loopholes in the law to extend patent life, pharmaceutical companies can

effectively delay the market entry of generic drugs which could be sold at a fraction of the

price.84 Nevertheless, there are positive consequences to evergreening. “With respect to ex ante

incentives, Scott Hemphill points out that a defense to pharmaceutical companies' strategic

behavior is that such behavior increases the reward for innovation and thus incentivizes

development of new drugs. With respect to ex post incentives, to commercialize a product,

pharmaceutical companies must discover how to synthesize the drug; how to purify it; how to

stabilize it to ensure a shelf life long enough for the drug to be shipped and used; how to create

packaging that does not react with the product and is safe for consumer use; and how to mix the

active ingredient with inactive ingredients to create an injection, cream, or pill that is safe and

effective.”85

Subject Matter in TRIPS

TRIPS gives member states flexibility in denying patentability when it 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 [commercial] exploitation is prohibited by their law.”86 Hence, TRIPS gives

member states the right to limit patent rights under certain situations such as public health

83 Janet Freilich, The Paradox of Legal Equivalents and Scientific Equivalence: Reconciling Patent Law's Doctrine

of Equivalents with the Fda's Bioequivalence Requirement, 66 SMU L. Rev. 59, 104 (2013). 84 Id. at 105. 85 Id. at 106. 86 World Trade Organization TRIPS, https://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 (last visited

May 24, 2015).

23

emergencies, but does not permit governments to “establish blanket laws declaring the

commercial exploitation of an entire class of invention impermissible.”87 The ambiguity in this

definition also leaves member states room for significant interpretation.

Subject Matter in India

Section 3 of the 2005 amended Indian Patent Act controls unpatentable subject matter.

The most contentious segment is Section 3(d), which reads:

“The following are not. inventions within the meaning of this Act, — (d) 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;”88

Amplifying the general ambiguity of this 3(d) is the enigmatic term “efficacy,” and what

establishes an adequate improvement of efficacy to meet the requirement.89 Therefore, the

amended section “leaves substantial questions about what constitutes sufficient improvements in

a drug to qualify as a substantial increase in efficacy. Are enhanced pharmacological effects

through increased bioavailability enough? Would submission of data to show a substantial

improvement in physicochemical properties constitute a sufficient improvement in efficacy to

warrant patent protection? Nothing in the body of the statute clarifies what is meant by "efficacy"

87 15 Va. J.L. & Tech. 198, 202 (2010). 88 Ministry of Law and Justice, The Patents (Amendment) Act 2005,

http://www.ipindia.nic.in/ipr/patent/patent_2005.pdf (last visited May 24, 2015). 89 15 Va. J.L. & Tech. 198, 202 (2010).

24

or what the threshold for a sufficient increase in efficacy is for purposes of establishing

patentability.”

The rationale for Section 3(d) was to prevent evergreening in the pharmaceutical

industry, but its strict enforcement has led some scholars and interest groups to “allege that… [it]

is designed to disallow patenting of all incremental innovations.”90 The prevention of

evergreening in the medical and pharmaceutical industry has been a national concern of India for

generations. This sentiment is partially driven by economics concerns, particularly considering

the massive population and immense poverty of the country. This sentiment is equally driven by

cultural traditions, as contrasted with the West.91 In fact, the Indian outlook regarding medical

development borders on being anti-patent, as “illustrated by a comment made by Prime Minister

Indira Gandhi during a speech before the World Health Assembly in 1982: ‘[t]he idea of a better-

ordered world is one in which medical discoveries will be free of patents and there will be no

profiteering for life and death.’”92

Nevertheless, many Indian scholars envision 3(d) not as a negative prohibition on

evergreening, but rather as a patentability hurdle to incentivize demanding research and real

innovation which provides actual inventive step, as opposed to the minimal changes which only

benefit the extension of a patent’s market monopoly. Thus, “by making it mandatory for

derivatives of known substances to exhibit added efficacy, 3(d) encourages sequential

development of improved products to address significant public health needs.”93

90 Aditya Kant, An Attempt at Qualification of ‘Efficacy’ Factors under Section 3(d) of the Indian Patent Act,

Journal of IP Rights Vol 18, 303, 304 (2013). 91 15 Va. J.L. & Tech. 198, 208-209 (2010). 92 Id. at 203. 93 Saby Ghoshray, 3(d) View of India’s Patent Law: Social Justice Aspiration meets Property Rights in Novartis v.

Union of India & Others, 13 J. Marshall Rev. Intell. Prop. L. 719, 734 (2013-2014).

25

The dispute regarding Section 3(d) in regards to TRIPS came to a head in the landmark

Indian patent case of Novartis v. Union of India & Others, commonly referred to as the Novartis

Case.

The Novartis Case

In the early 1990s the Swiss pharmaceutical company Novartis, building on previous

research, developed a drug named imatinib, which had promise in fighting a form of cancer

called chronic myelogenous leukemia.94 In 1993 Novartis filed a U.S. patent application for both

imatinib as a free base (the pure basic form of an amine) and its salts.95 After further research on

this drug, “Novartis identified the beta crystalline form of the mesylate salt of imatinib as an

improved and more pharmaceutically stable form of the molecule. Imatinib mesylate was

approved by the Food and Drug Administration in 2001 and launched in the United States as

Gleevec.”96 Around the same time (prior to 2005 when India did not permit pharmaceutical

patents) Novartis filed for an Indian patent application for the mesyalate salt of imatinib under

the mailbox mechanism discussed above, and also received an exclusive marketing right (EMR)

under the brand-name Glivec while the patent application was pending.97

While Novartis was selling Glivec in the Indian market, several Indian generic companies

who reverse engineered the drug were manufacturing and selling it under a different brand-

names at lower prices than Glivec, causing Novartis to file suit in both the High Courts of

Madras and Bombay.98 The Madras High Court “upheld the EMR and issued a restraining order

against the generic manufacturers as requested. In reaching its decision, the Madras High Court

94 15 Va. J.L. & Tech. 198, 209 (2010). 95 Id. at 209. 96 Id. at 209. 97 Id. at 209. 98 Id. at 209.

26

acknowledged that Novartis had overcome any public interest barrier to the granting of an

injunction with the patient assistance program it had in place (Glivec International Patient

Assistance Program or "GIPAP").”99 However, the Bombay High Court rejected the claim based

on grounds that Glivec was more expensive in addition to being imported, both of which risked

supplies to people whose lives depended on the drug.100

Additionally, a pre-grant patent opposition claim was filed by multiple generic

manufacturers and Indian NGOs, claiming that the patent was invalid due to “a) lack of

novelty/anticipation; b) lack of significantly enhanced efficacy under Section 3(d); c)

obviousness, and; d) wrongful priority.”101 In response, Novartis provided expert opinion to the

Patent Office that its “crystalline form of the mesylate salt of imatinib” was 30% more efficient

than its free base form, and additionally claimed that “imatinib mesylate is a new product

because the crystal form is not an inherent property of imatinib acid addition salt exhibiting

polymorphism and human intervention was necessary in order to produce the subject

compound.”102 Nevertheless, the Indian Patent Office rejected the Norvartis patent due to the

reasons above and specifically because “the patent application offered a new form of a known

substance and did not demonstrate any improvement in efficacy.” 103

In response, Novartis filed two appeals with the Madras High Court, one claiming that

Section 3(d) was unconstitutional and/or in violation of India’s TRIPS obligation, and the other

99 Id. at 209. 100 Id. at 210. 101 Id. at 210. 102 Id. at 211. 103 Johanna Sheehe, Indian Patent Law: Walking the Line?, 29 Nw. J. INT'L L. & Bus. 577, 580 (2009).

27

appealing the patent rejection, which was eventually transferred for hearing at the Intellectual

Property Appellate Board (IPAB).104

In its constitutional 3(d) claim Novartis argued that the requirement for an improvement

in efficacy was not specifically defined and provided no standards, enabling the Patent Office to

reject applications arbitrarily, thus violating the Indian Constitution’s Equal Protection

provision.105 The Indian government retorted that “what constitutes a sufficient improvement in

efficacy could be scientifically established by the experts in the field, implying that there is

already a common understanding of the meaning of the terms in the industry and in the Indian

Patent Office.”106

After much deliberation regarding the 3(d) claim, the High Court determined that the

legislative intent in using the ambiguous term “efficacy” was to grant the Patent Office a great

amount of discretion and flexibility in deciding patent applications on a factual case-by-case

analysis for the sake of limiting the evergreening of patents for vital life-saving medications.107

Additionally, they held that although the Patent Office had discretion on a case-by-case basis,

this did not imply that their decisions were arbitrary.108 Thus, the High Court held that Section

3(d) did not violate the Indian Constitution.

In addition to its constitutional claim, Novartis also claimed that Section 3(d) violated

India’s obligation under Article 27 of the TRIPS agreement since the inclusion of the enhanced

efficacy requirement in 3(d) was a deprivation of inventors’ guaranteed right “to have an

104 15 Va. J.L. & Tech. 198 (2010) at 210. 105 Id. at 211. 106 Id. at 211. 107 Id. at 212. 108 Id. at 212.

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invention patented as required by Article 27 of TRIPS.”109 In response, the Indian government

argued that TRIPS granted member states great latitude in legislating patent laws that meet the

welfare requirements of its citizens, and that India’s “first obligation under the Constitution is to

provide good health care to its citizens.” (Novartis, 2007 A.I.R. 24759, at 4). The High Court

sided with the Indian government’s position, in addition to using English persuasive precedent to

hold that “when a domestic law is challenged on the ground of it being in violation of an

International Treaty, domestic courts would have no jurisdiction.” ((Novartis, 2007 A.I.R. 24759,

at 7).

The second appeal of Glivec’s patent denial, which was transferred to the IPAB, was

rejected based on two grounds, first that it did not establish enough enhanced efficacy in its

crystalline form, and second that “Novartis' monopoly price of 120,000 rupees per patient per

month would be against the interests of public order.”110

In response to both the High Court’s 3(d) rejection and the IPAB rejection, Novartis

appealed to the Indian Supreme Court, which heard the case de novo. In regards to the 3(d)

claim regarding “efficacy”, the Court held that “[e]fficacy means ‘the ability to produce a desired

or intended result.’ Hence, the test of efficacy in the context of section 3(d) would be different,

depending upon the result the product under consideration is desired or intended to produce. In

other words, the test of efficacy would depend upon the function, utility or the purpose of the

product under consideration. Therefore, in the case of a medicine that claims to cure a disease,

the test of efficacy can only be ‘therapeutic efficacy.’” (Novartis, Civil Appeal Nos. 2706-2716

109 Id. at 213. 110 Id. at 214.

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of 2013, 180).111 In defining “therapeutic efficacy” the court provided a circular argument by

referring back to Section 3(d), and also held that there must be a “significant” variance in

efficacy, creating further ambiguity and not providing any set standard. (Id. at 180).

In regards to inventive step, the Court reject the patentability of Glivec because it fell

under the rubric of evergreening, stating that “[i]n the face of the materials referred to above, we

are completely unable to see how Imatinib Mesylate can be said to be a new product, having

come into being through an ‘invention’ that has a feature that involves technical advance over

the existing knowledge and that would make the invention not obvious to a person skilled in the

art. Imatinib Mesylate is all there in the Zimmermann [Novartis] patent. It is a known substance

from the Zimmermann [Novartis] patent.” (Id. at 131). Nevertheless, the Court emphasized that

by rejecting the Glivec patent, they were not rejecting evergreening and incremental

development patents outright, emphasizing so by stating that “We have held that the subject

product, the beta crystalline form of Imatinib Mesylate, does not qualify the test of Section 3(d)

of the Act but that is not to say that Section 3(d) bars patent protection for all incremental

inventions of chemical and pharmaceutical substances. It will be a grave mistake to read this

judgment to mean that section 3(d) was amended with the intent to undo the fundamental change

brought in the patent regime by deletion of section 5 from the Parent Act. That is not said in this

judgment.” (Id. at 191) (emphasis added).

Ramifications of the Novartis Case Decision

In 2008 the case of Roche v. Cipla was heard in the High Court of Delhi, with a similar

set of facts. Hoffman-La Roche (hereafter Roche) had developed a cancer treating drug which it 111 The Supreme Court of India, Novartis AG v. Union of India and Others,

http://judis.nic.in/supremecourt/imgs1.aspx?filename=40212 (last visited May 24, 2015).

30

began to import and sell in India under the brand-name Tarceva, and applied for an Indian

patent.112 Cipla, an Indian generic manufacturer, reverse engineered Tarceva and started selling it

for a much lower price under the brand-name Erlocip.113 Roche filed suit, and Cipla contested

that the Tarceva patent should be denied because it “was considered to be a derivative of a

compound known as quinazoline, which had been previously disclosed by at least three

European patents dating back to 1993.”114 Roche provided expert evidence that the new

formulation was more stable, “providing improved oral dosage in solid form.”115 After

deliberating, the High Court found that the “increased formulation stability of the polymorph B

form found in Tarceva did not meet the Section 3(d) threshold for a substantial improvement in

efficacy required to sustain Roche's patent.”116

The outcome of Novartis and subsequent cases that further fortify its holding leaves

pharmaceutical companies in limbo, whereby there overhangs an ever present apprehension that

highly cost-intensive research can be reverse engineered and produced by generic manufacturers

in India without license but under the legal protection of unpatentability per Section 3(d).

Nevertheless, the outcome of this case and subsequent cases were upheld as a victory for

inexpensive medicine by many Indian citizens, multiple media outlets, and NGO’s.117 Factoring

the Indian legislature’s ambiguous wording of Section 3(d) in conjunction with the Indian

Supreme Court’s interpretation of legislative intent in Novartis, it is quite apparent that India’s

patent regime was written to ensure that its relatively impoverished population can have access

to inexpensive medicines at the expense of the pharmaceutical industry, in clear contention with

112 15 Va. J.L. & Tech. 198 (2010) at 215. 113 Id. at 215. 114 Id. at 216. 115 Id. at 216. 116 Id. at 216. 117 BBC News, Novartis Case: Media hail ‘key victory’ for India, (May 24, 2015, 2:55 AM),

http://www.bbc.com/news/world-asia-india-21998950.

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occidental patent regimes. This raises two important questions, 1) which patent regime should

prevail, and 2) if TRIPS cannot inforce the patent protection the pharmaceutical industry needs

to protect innovation, what mechanism can be put in place to ensure that pharmaceutical

companies have financial incentive to continue their life-saving research and development?

Regarding the first question it is vital to take into account cultural and economic

considerations when comparing patent regimes. Wealthy First World nations must be sensitive

to the social demands of poorer, Third World countries in this regard, considering that the “level

of protection accorded to intellectual property by any country represents a balance between a

number of conflicting national considerations; thus, protection is a function of a country's

domestic situation and the various national policy objectives-social, developmental, and

technological-that intellectual property laws are designed to serve.”118 Thus, the imposition of

First World paten law on India has been rejected, primarily because the economic and social

conditions of the India are so different. More specifically, “given an understanding of the true

nature of patent law - the test of nonobviousness or its international equivalent, the ‘inventive

step,’ conscientiously or rationally demanding the imposition of First World patents upon Third

World countries becomes very difficult.”119 Even with the ratification of TRIPS many Third

World nations have refused to “recognize patents for life-saving pharmaceuticals.” 120

Additionally, a large number of these countries, including India, Egypt, Portugal, and Venezuela,

have refused to grant patent monopolies in life-saving pharmaceuticals to both citizens and

foreigners.121

118 Davi Hartridge,, Intellectual Property Rights: The Issues in GATT, 22 VAND. J. TRANSNAT'L L. 893, 904

(1989). 119 56 S. C. L. Rev. 337, 377 (2004-2005). 120 Id. at 380. 121 Id. at 380.

32

Yet, although some scholars claim that the First World is trying to impose its patent

regimes on the Third World, the actual wording of TRIPS appears to consider cultural,

economic, and social sensitivities by leaving a great deal of discretion to member states

regarding patentability, and also carves out a large exception for compulsory licensing.

However, India’s evergreening protection measure found in Section 3(d) causes grave distress to

the First World pharmaceutical industry and particularly “big pharm”, since this patent regime

for all intents and purposes gives Indian generic manufactures cart-blanche to pirate patents and

undercut the profits of drug developing pharmaceutical companies, the consequences of which

can be disastrous.

A poignant example of how lack of incentive in the pharmaceutical industry can be

catastrophic is the current global antibiotic crisis, whereby microbial pathogens have become

ever more resistant to current drugs. In fact, “[e]pidemic antibiotic resistance has been described

in numerous pathogens in varying contexts, including—but not limited to—a global pandemic of

methicillin-resistant Staphylococcus aureus (MRSA) infection; the global spread of drug

resistance among common respiratory pathogens, including Streptococcus pneumoniae and

Mycobacterium tuberculosis; and epidemic increases in multidrug-resistant (and, increasingly,

truly pan-resistant) gram-negative bacilli... Given their breadth of effect and significant impact

on morbidity and mortality, multidrug-resistant microbes are considered a substantial threat to

US public health and national security by the National Academy of Science's Institute of

Medicine, the federal Interagency Task Force on Antimicrobial Resistance… and the Infectious

Diseases Society of America.”122

122 Brad Spellberg, The Epidemic of Antibiotic-Resistant Infections: A Call to Action for the Medical Community

from the Infectious Diseases Society of America, Clin Infect Dis. 46 (2): 155-164, 155 (2008).

33

The primary reason there are so few new antibiotic developments is lack of profitability.

The cost of drug developing, testing, and approval of antibiotics is increasing, with the current

cost ranging from “$400 – $800 million per approved agent.”123 Because antibiotics are short-

course therapies that cure the target disease, antibiotics “have a lower relative rate of return on

investment than do other drugs.”124 Because of this, several major pharmaceutical companies

have stopped research on antibiotics altogether. In fact, Pfizer closed its Connecticut antibiotic

research facility in 2011 due to waning profits, and three other “major pharmaceutical companies

– Avetis (now Sanofi), Eli Lilly, and Bristol-Myers Squibb – haven’t researched and developed

antibiotics since 1990s.”125 Even more disconcerting is that the “FDA has approved only two

systemic antibiotics in the past five years, an 88 percent drop from the mid-1980’s.”126

Thus, if vast markets such as India enforce a legal regime that permits the pilfering of

patented drugs that cost pharmaceutical companies an average of $5 billion to develop (the

estimated cost for research and testing of non-antibiotic development127), shareholders may exit

the pharmaceutical market altogether and invest in higher returning companies, which could

realistically lead to a global health crisis. This point segues into the second question stated

above, asking what mechanism can be put in place to ensure that pharmaceutical companies have

financial incentive to continue their life-saving research and development? Considering that

India’s patent regime is not likely to change, this author proposes three alternative solutions.

The first is to incentivize the Indian government’s investment in First World pharmaceutical

research, particularly in big pharm firms, in exchange for the importation of newly patented

123 Id. at 158. 124 Id. at 158. 125 Brian Kraus, Few New Drugs: Why the Antibiotic Pipeline is Running Dry, (May 24, 2015, 3:02 AM)

http://www.healthline.com/health/antibiotics/why-pipeline-running-dry. 126 Id. 127 Id.

34

drugs at a low price. This can be achieved through favorable equity positions, training programs

and job offerings to Indian scientists in big pharm research centers, and selling non-patented

foreign-manufactured drugs and even medical equipment to India at lower prices. The second

solution is for First World pharmaceutical companies to guarantee low priced exports of patented

drugs in exchange for low cost yet fully regulated human drug testing in India, one of the most

prohibitive costs in the First World. The third solution is for India to guarantee a patent term for

longer than the standard 20 year time limit in exchange for pharmaceutical companies’

guaranteeing to sell their products at a fixed, low price. Nevertheless, India’s current patent

regime in many ways permits the outright pirating of pharmaceutical patents at no cost to the

government, a condition that reduces any incentive for change. Hence, these proposed solutions

may have to be accompanied by the intervention of foreign governments who have the means to

apply economic pressure to enact change.

The government of India is in an undoubtedly challenging position. On one hand they

want to be a member-in-good-standing in the international community and the WTO, while on

the other hand a familial culture drives their social obligation to ensure the accessibility of

inexpensive medicine to their predominantly poverty stricken population of 1.252 billion people.

This obligation is entrenched their patent regime, but its lofty goals may have long term negative

effects both on India’s own population and globally. Therefore, creative and timely solutions

must be found that address both the pharmaceutical industry’s profit incentives and India’s

pressing socio-economic needs.