Memorial for Appellant

8/3/2019 Memorial for Appellant

1/30

MEMORIAL ON BEHALF OF APPELLANTPage 1

24A

4TH

JUSTICE HIDAYATULLAHMEMORIAL NATIONAL MOOT COURT COMPETITION

CASECONCERNINGPATENTS & COMPETITION LAW

IN THE HONBLE SUPREME COURT OF INDIA

New DelhiIndia

Russel Inc.(Appellannt)

v.

Pharma India Ltd.

(Respondent)

ON SUBMISSION TO THE HONBLE SUPREME COURT OF INDIA

MEMORIAL FOR THEAPPELLANT

RUSSELINC.


2/30


TABLE OF CONTENTS

ABBREVIATIONS...................................................................................................................... Iii

INDEX OF AUTHORITIES..........................................................................................................iv-ix

1. STATEMENT OF JURISDICTION.................102. STATEMENT OF FACTS...........113. STATEMENT OF ISSUES.......................144. SUMMARY OF PLEADINGS......155. ARGUMENTS ADVANCED.......176. PRAYER..................................41


3/30


ABBREVIATIONS

1. & - And2. AIR - All India Reporter3. All E.R. - All England Law Reports4. AC - Appeal Cases5. Anr. - Another6. Art. - Article7. Co. - Company8. Ed. - Edition9. Ltd. - Limited10.Ors. - Others11.p. - Page12.Pvt. - Private13.SC - Supreme Court14.SCC - Supreme Court Cases15.SCR - Supreme Court Reporter16.v. - Versus17.vol. - Volume18.& - And19.para - Paragraph20.HC - High Court21.SC - Supreme Court22.Sec. - Section23.Bom - Bombay24.Ker - Kerela25.Pat - Patna


4/30


INDEX OF AUTHORITIES

S.no. [BOOKS/SECONDAY MATERIALS]

1. L.Bently And B. Sherman, Intellectual Property Law, Third Edition, OxfordUniversity Press

2. James Marson, Business Law, Oxford University Press3. S. Jeyaseela Stephen, Trade and Globalisation, Rawat Publications4. Kalpana Markandey & S. Simhadri, Globalization, Environment and Human

Development, Rawat Publications

5. Jayashree Watal, Intellectual Property Rights In The WTO And DevelopingCountries, Oxford University Press

6. Jagdish Bhagwati, Free Trade Today, Oxford University Press7. Jagdish Bhagwati, InDefense of Globalisation, Oxford University Press8. Kalyan C. Kankanala, Indian Patent Law and Practice, Oxford University Press9. Vinod Dhall, Competition Law Today, Oxford University Press10.Narasani. k. arun ,indian patent law and pratice(.oxford university press ,1st edtn)11.Sherman brad, intellectual property law(.oxford university press ,3rd edtn)12.A.K kaul , guide to the wto and gatt,(satyam law international, 2nd edtn)13.Vinod dhal, competition law today,(oxford university press ,1st edtn)


5/30


S. no. [TABLE OF CASES]

1. Smith v.Nichols,.88U.S. (21 Wall.) 112, 22 LEd. 5662. Hollister v. Mfg. Co.,113 U.S. 59, 5 S.Ct. 717, 28LEd. 901

3. Pursche v. Atlas Scraper & Engineering Co....... C.A.Cal., 300 F.2d467, 4724. Firestone Tire Rubber Co. v. U.S. Rubber CoC.C.A. Ohio, 79 F.2d 948, 952, 9535. Tribhuwan Prakash Nayyar v. Union of India...1970]2SCR7326. East India Hotels Ltd. v. Union of India...AIR 2001 SC 2317. Godrej Soaps Ltd. v. Hindustan Lever Ltd. PTC.Suppl. (1) Cal 5018. Sri Gajalakshmi Ginning Factory Ltd. v. CIT.(1952) 22ITR 502(Mad).9. Hollister v. Mfg. Co113 U.S.59, 5 S.Ct. 717,28 L.Ed. 90110.Bishwanath Prasad Radhey Shyam v. Hindustan Metal Industries..1979]2SCR757.11.Anr.Vs. CiplaLimited.. 2008(37)PTC71(Del)12.Sodhi Transport Company V. State of UttarPradesh.. AIR 1980 SC 109913.R.S. Nayak V. A.R. Antulay...............................AIR 1986 SC 2045 JT2010(10)sc 2614.CCI v. Steel Authority of India LtdCivil Appeal No.7779 of 201015.Neeraj Malhotra v. Deustche Post Bank Home Finance Opposite Parties Ltd. & Ors.

..AIR 2009(34)SC 123
http://fnopenglobalpopup%28%27/citation/crosscitations.asp','MANU/SC/0029/1969','1');http://fnopenglobalpopup%28%27/citation/crosscitations.asp','MANU/SC/0029/1969','1');http://fnopenglobalpopup%28%27/citation/crosscitations.asp','MANU/SC/0029/1969','1');http://fnopenglobalpopup%28%27/citation/crosscitations.asp','MANU/SC/0029/1969','1');


6/30


STATEMENT OF JURISDICTION

That the Appellants have approached this Honble Court under Article 136 of The

Constitution of India

Special leave to appeal by the Supreme Court:

(1)Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion,

grant special leave to appeal from any judgment, decree, determination, sentence or order

in any cause or matter passed or made by any court or tribunal in the territory of India

(2)Nothing in clause ( 1 ) shall apply to any judgment, determination, sentence or order

passed or made by any court or tribunal constituted by or under any law relating to the

Armed Forces.
http://www.indiankanoon.org/doc/1218877/http://www.indiankanoon.org/doc/1218877/http://www.indiankanoon.org/doc/465968/http://www.indiankanoon.org/doc/465968/http://www.indiankanoon.org/doc/465968/http://www.indiankanoon.org/doc/1218877/


7/30


STATEMENT OF FACTS

[ENTITIES INVOLVED]

1. Russel Inc.A multinational pharmaceutical company incorporated in theUnited States of America and having a registered unit(office) in India at New

Delhi.

2. CandestolA drug molecule which has the capacity to destroy cancerous cell.3. EU - European Union.4. LifreocanThe tablet formulation of Candestol.5. Pharma India Ltd. An Indian Company with its registered office in

Hyderabad.

6. Eurox EU company that has started selling its product under the tradename of Eurocan.

7. Xin Ltd..Subsidiary of Eurox.8. Destocan The generic version of Candestol sold under the name of

Lifreocan by Pharma India Ltd.

[EVENTS LEADING TO THE DISPUTE]

1. Russel Inc. , under the US law holds patent for the drug molecule Candestol andit had applied for patent in India for the same in 1999 which was granted in

October 2008 with Patent No.4862579 and the molecular name of patent was 'A

Novel [6,7-BIS(2-Methoxyethoxy) Quinazolinone -4-YL] (3-Ethynylphenyl)

Amine Hydrochloride'.

2. Russell Inc. had registered Lifreocan with the Central Drug Standard ControlOrganisation, Directorate General of Health Services, Government of India in

December 2005 and from thereon is importing and selling the same in India at a

market price of Rs. 2.65 lakhs per months course.


8/30


3. Pharma India Ltd., had opposed the patent in pre-grant and post grant proceedingson the following grounds:-

i. Candestol is not an invention under the Patent Act, 1970 as it is only aderivative of already existing substance and is hit by S. 3(d) of the Act and

patent conferred is invalid.

ii. Candestol is one of the derivatives of Quinazolinone and amounts only to animprovement in the existing prior art which is obvious to any person skilled in

the art. Hence there is lack of inventive step and patent conferred is invalid.

iii. There are 2 EU Patents using other derivatives of Quinazolinone and hencethe invention lacks novelty and patent conferred is invalid.

iv. The complete specification does not sufficiently and fairly describe theinvention and the method in which it is performed and hence the patent

conferred is invalid.

v. The invention is not commercially worked in India but only imported.However, the patent office disregarded the arguments.

4. Russel Inc.s drug is largely available in the shops of north India only and it holds95% of the market for the medicine.

5. Two EU companies have patent on using other derivatives of Quinazolinone andsince 2006 one of the EU companies Eurox has started selling its product under

the trade name ofEurocan in India through its subsidiary Xin Ltd.. Russell

Inc. holds 10% share in Eurox.

6. Eurocanis mostly available in the shops in southern part of India at a price ofRs. 2.62 lakhs per month course and holds 95% of the market in South India.

Neither Eurox nor Xin Ltd.. applied for grant of patent in India.

7. The dispute arose in January 2010, when Russell Inc. noticed that its market sharein Lifreocanhas gone down by 50% in North India and on further enquiry Xin

Ltd.. reported similar decline by 45%.

8. It was discovered by Russell Inc. that Pharma India is manufacturing, marketingand selling a drug under the brand name Destocan, a generic version of its


9/30


patented drug Candestol marketed and sold under the name Lifreocan at a

market price of Rs.9600 per months course.

9. The suit along with the counter claim was transferred to the High Court of Delhifor decision when Russell Inc. filed a suit for infringement in the District Court

and Pharma India filed a counter claim for revocation of patent granted to Russell

Inc.

10.In April 2010, Russell Inc. filed an application seeking ad-interim injunction,restraining Pharma India to use the drug Candestol, for which they hold a valid

patent.

11.Pharma India opposed the application and on 20 th April the High Court declinedto grant interim injunction on the ground of huge public interest.

12.Russell Inc. filed special leave petition in the Supreme Court against the order ofthe Delhi High court refusing to grant it ad interim injunction. The Supreme Court

refused to interfere in the decision of the High Court and the SLP filed by Russell

Inc. was dismissed.

13.Russell Inc. then entered into exclusive supply agreement with major distributorsin North India stating that it holds a valid patent and assuring that they wouldnt

deal with distributors who are aiding Pharma India and violating their patent

rights and the decision would be in their favour since any decision of the court

contrary to the rights of Russell Inc. would violate Indias obligations under the

Agreement on Trade Related Aspects of Intellectual Rights (TRIPs).

14.Xin Ltd.. was under the impression that prices of the medicines in India getinflated because of huge profit margin at each stage in the distribution chain for

which allowance has to be made in the MRP, so they devised a detailed price

mechanism in South India whereby they fixed the price of their drugs at each

level of distribution chain and the drugs were supplied only to those wholesalers

and retailers who had agreed to market only Eurocan and at price fixed by Xin

Ltd..

15.After application of such mechanism Eurocan was made available at Rs. 1.5 lakhper months course and within a months time Russell Inc. also adopted similar


10/30

MEMORIAL ON BEHALF OF APPELLANT Page

10

price mechanism for Lifreocan and it was available in the market at Rs. 1.7 lakh

per months course.

16.Pharma India complained to the Competition Commission of India when theirmarket share came down to 5% and 10% in North and South India respectively,

on the ground that there is an arrangement between Russell Inc. and Xin Ltd..

which amounts to cartel and exclusive supply agreement between Russell Inc. and

the dealers in north India violates Section 3(4) of the Competition Act and is

intended to nullify the effect of the High Courts decision of not granting interim

injunction. Moreover, it was alleged that Russell and Xin Ltd.. have carried out a

similar campaign in South India as well and the arrangement amounts to resale

price maintenance and is covered under S3(4)(e) of the Competition Act and are

anti-competitive as they are designed to protect the monopoly of Russell Inc. and

Xin Ltd..

17.Russell Inc. filed an appeal in the Supreme Court of India against the decision ofthe Competition Appellate Tribunal which upheld the decision of CCI. The

Supreme Court called the case pending before the Delhi High Court and heard

both the cases together stating that they are related.


11/30


11

STATEMENT OF ISSUES

I. Whether CCI and the Competition Appellate Tribunal erred in takingjurisdiction in the case?

II. Whether the Controller of Patents erred in granting the patent?

III. Whether the Competition Commission of India and the Competition AppellateTribunal had erred in holding that the resale price maintenance, exclusive supply

agreement was anticompetitive under section 3(4) of the Competition Act and

Russel Inc. and Eurox were working under an arrangement and thus violating

section 3(3) of the Competition Act?


12/30


12

SUMMARY OF PLEADINGS

1 .Whether CCI and the Competition Appellate Tribunal erred in taking jurisdiction

in the case?

It is submitted that the jurisdiction exercised by CCI in this case has been wrongly assumed and

based on some misconception of facts.

2 .Whether the Controller of Patents erred in granting the patent?

It is humbly submitted before the honable Supreme Court that Competition Commission

Of India and the competition appellate tribunal erred in its jurisdiction in holding that the

resale price maintenance, exclusive supply agreement as anticompetitive and that Russell

Inc. and Eurox were working under an arrangement thus violating section 3(3) of the

Competition Act. And Controller of Patents has not erred in granting the patent to

Russell Inc. but also the patent is still subsisting. The drug candestol has been given patent

as it has been able to satisfy the patentability requirements i.e. Patentable Subject Matter,

Industrial Applicability, Novelty, Inventive Step and Specification

3. Whether the Competition Commission of India and the Competition Appellate

Tribunal had erred in holding that the resale price maintenance, exclusive supply

agreement was anticompetitive under section 3(4) of the Competition Act and Russel

Inc. and Eurox were working under an arrangement and thus violating section 3(3)

of the Competition Act?

It is humbly prayed before the honable supreme court that the Competition Commission

of India and the Competition Appellate Tribunal had erred in holding that the resale price

maintenance, exclusive supply agreement was anticompetitive under section 3(4) of the

Competition Act and Russel Inc. and Eurox were not working under an arrangement and

thus violating section 3(3) of the Competition Act


13/30


13

PLEADINGS

1. Whether CCI and the competition appellate tribunal erred in taking jurisdiction inthe case?

It is submitted that the jurisdiction exercised by CCI in this case has been wrongly assumed

and based on some misconception of facts. In my humble submission I would establish that

1.1Establishment and Jurisdiction of CCI

a) CCI has committed error on the face of recordb) CCI has no material to act uponc) CCI has not observed prudent policyd) CCI has interfered on wrong assumptions.

Jurisdiction of CCI:

Competition Act, 2002 is enacted to provide, keeping in view of the economic

development of the country, for the establishment of a Commission to prevent practices

having adverse effect on competition, to promote and sustain competition in markets, to

protect the interests of consumers and to ensure freedom of trade carried on by other

participants in markets, in India, and for matters connected therewith or incidental

thereto. Act makes provision for establishment of Competition Commission of India

(hereinafter referred as CCI) for the purpose of various objectives mentioned in the

preamble of the Act.1

For achieving the foresaid duties, the Commission has jurisdiction to:

i) Enquire into Anti-Competitive Agreements

(E.g. Cartel, bid-rigging, etc.) [Section 3]

ii) Enquire into abuse of dominant position

1 Section 7of The Competition Act,2002


14/30


14

(E.g. Predatory Pricing, etc.) [Section 4]

iii) Regulate combinations (Mergers, Acquisitions, etc.), [Section 5 & 6]

i) Enquire into Anti-Competitive Agreements2

The regulations and control in relation to combinations is dealt with in Section 6 of the

Act.3

The power of the Commission to make inquiry into such agreements and the

dominant position of an entrepreneur, is set into motion by providing information to the

Commission in accordance with the provisions of Section 19 of the Act and such inquiry is

to be conducted by the Commission as per the procedure evolved by the legislature under

Section 26 of the Act. In other words, the provisions of Sections 19 and 26 are of great

relevance and the discussion on the controversies involved in the present case would

revolve on the interpretation given by the Court to these provisions. CCI has power to

inquiry into certain agreements and dominant position of enterprise.

Competition Act provides certain procedure for investigation of combinations. Section 29

provides where the Commission is of theprima facie opinion that a combination is likely to

cause, or has caused an appreciable adverse effect on competition within the relevant

market in India, it shall issue a notice ofshow cause to the parties to combination calling

upon them to respond within thirty days of the receipt of the notice, as to why investigation

in respect of such combination should not be conducted. After receipt of the response of the

parties to the combination under sub-section (1), the Commission may call for a report

2Section 3(1) states: No enterprise or association of enterprises or person or association of persons shall

enter into any agreement in respect of production, supply, distribution, storage, acquisition or control ofgoods or provision of services, which causes or is likely to cause an appreciable adverse effect on

competition within India.

Section 3(4) states: Any agreement amongst enterprises or persons at different stages or levels of the

production chain in different markets, in respect of production, supply, distribution, storage, sale or price of,

or trade in goods or provision of services, including(a) tie-in arrangement;

(b) exclusive supply agreement;

(c) exclusive distribution agreement;

(d) refusal to deal

(e) resale price maintenance,

shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an

appreciable adverse effect on competition in India.

Explanation.For the purposes of this sub-section,

(b) "exclusive supply agreement"2 includes any agreement restricting in any manner the purchaser in the

course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any

other person;

(e) "resale price maintenance"2 includes any agreement to sell goods on condition that the prices to be

charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated thatprices lower than those prices may be charged.3The Competition act 2002, section 6.


15/30


15

from the Director General and such report shall be submitted by the Director General

within such time as the Commission may direct. The Commission, if it is prima facie of the

opinion that the combination has, or is likely to have, an appreciable adverse effect on

competition, it shall, within seven working days from the date of receipt of the response of

the parties to the combination, or the receipt of the report from Director General.

1.2 After inquiry CCI may pass Orders related to agreements or abuse of dominant

position. Section 27 of the Act Provides that where after inquiry the Commission finds that

any agreement referred to in section 3 or action of an enterprise in a dominant position, is

in contravention of section 3 or section 4, as the case may be, it may pass all or any of the

following orders, namely:

(a) Direct any enterprise or association of enterprises or person or association of persons,

as the case may be, involved in such agreement, or abuse of dominant position, to

discontinue and not to re-enter such agreement or discontinue such abuse of dominant

position, as the case may be;

(b) Impose such penalty, as it may deem fit which shall be not more than ten percentage

of the average of the turnover for the last three preceding financial years, upon each of such

person or enterprises which are parties to such agreements or abuse:

Provided that in case any agreement referred to in section 3 has been entered into by a cartel,

the Commission may impose upon each producer, seller, distributor, trader or service provider

included in that cartel, a penalty of up to three times of its profit for each year of the continuance

of such agreement or ten per cent. of its turnover for each year of the continuance of such

agreement, whichever is higher.

(g) pass such other order or issue such direction as it may deem fit.

The fact of this case suggests that even if jurisdiction of CCI was invoked, it was invoked without

any prima facie case. Prima facie is a Latin expression meaning on its first appearance, or at

first sight. The literal translation would be at first face. It is humbly submitted that CCI has

acted even without analyzing prima facie effect of the exclusive supply agreement and other

related issues by Russell Inc.

In fact CCI has committed an error on the face of record when it exercised jurisdiction without

going into the question of Cartel formation and that too without any evidence. Not only this


16/30


16

section 3 (5) of the Act makes IPR rights as an exception and companies has all the right to

established and take measures for the protection of their rights. In the given case the IPR right

of my client though was challenged in the Delhi High Court where application for interim

injunction was refused, rightly so, and also equally, the appeal filed against this order in the this

court was also rejected.

Though the contention of Pharma Co. is that the patent granted to my client is not proper but as

far as de-facto or de-jure position is concerned, my client enjoys IPR protection as granted by

appropriate authority and rightly recognized by competent court.


17/30


17

2. Whether Controller of Patent erred in granting Patent?

It is humbly submitted before the Honble court that the Controller of Patents has not

erred in granting the patent to Russell Inc. as the patent is still subsisting.

2.1 According to The Patents Act, 1970 "patent" means a patent for any invention granted

under this Act.4

Patent is a grant or right to exclude others from making, using or selling one'sinvention and includes right to license others to make, use or sell it. It is an official

document conferring a right or privilege, letters patent; writing securing to an

inventor for a term of years the exclusive right to make, use and sell his invention;

the monopoly or right so granted.5

The effect of the grant of patent is quid pro quo, quidisthe knowledge disclosed tothe public and quo is the monopoly granted for the term of the patent. Section 12,

Patents and Designs Act sets out that a Patent once granted confers upon the

patentee the exclusive privilege of making, selling and using the invention

throughout India and of authorising others so to do. This is quo. The quid is

compliance with the various provisions resulting in the grant of patent.6

Under the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS),

India was given a transition time, to grant process and product patent to all inventions

including drugs and medicines, until 2005.7

2.2 To be patentable in India, an invention should satisfy patentability requirements. The

patentability requirements in India are

1. Patentable Subject Matter82. Novelty93. Inventive Step; and10

4 The Patents Act, 19705Webster's Ninth New Collegiate Dictionary.

6Raj Parkash v Mangat Ram Choudhary AIR 1978 Del 1

7 Art. 70, Para 9 of the TRIPS Agreement, 1994.8

Kankanala, Kalyan C., Narasani, Arun K., Radhakrishnan, Vinita, Indian Patent Law and Practice, 17(Oxford University Press, 1

sted).

9 Ibid.


18/30


18

4. Specification115. Industrial Applicability12

A patent will be granted only if an invention satisfies all the patentability requirements.

Grant of a patent is the cumulative effect of all the requirements and non satisfaction of

even one of the requirements will make an invention ineligible for a patent grant.

2.3Patentable Subject Matter

Invention is the act or operation of finding out something new; the process of contriving

and producing something not previously known or existing, by the exercise of independentinvestigation and experiment. Also the article or contrivance or composition so invented.

13

Invention is a concept; a thing involved in the mind; it is not a revelation of somethingwhich exists and was unknown, but is creation of something which did not exist

before, possessing elements of novelty and utility in kind and measure different from

and greater than what the art might expect from skilled workers.14

Under the Patents Act, eligible subjects include products and processes.15In otherwords, an invention should either be a product or a process in order to fall within the

list of subjects. The subject matter which is not patentable falls under section 3 and 4

of the Patent Act, 1970.

Here the patent has been granted for a drug16 molecule named candestol which hasthe capacity to destroy cancerous cell and it has comparatively lesser impact on normal

cells than all other drugs available in the market to date.

10 Ibid.11

Ibid.,12

Ibid.,13Smith v.Nichols, 88 U.S. (21 Wall.) 112, 22 LEd. 566;Hollister v. Mfg. Co., 113 U.S. 59, 5 S.Ct. 717,

28LEd. 901.14Pursche v. Atlas Scraper & Engineering Co. C.A.Cal., 300 F.2d467, 472.15 Section 2(1)(j), The Patents Act, 1970, as amended in 1999,2002, and 2005.

Section 2(1)(j) reads as follows: "invention" means a new product or process involving an inventive step and

capable of industrial application.16 Under section 3(b) of theDrugs and Cosmetics Act, 1940, "drug" includes

Drug includes all medicines for internal or external use of human beings or animals and all substancesintended to be used for or in the diagnosis, treatment, mitigation or prevention of disease in human beings or

animals. Sk. Amir v. State of Maharashtra AIR 1974 SC 469


19/30


19

Therefore the invention is not frivolous or which claims anything obviously contrary towell established natural laws

17, neither contrary to Public order or morality nor

prejudicial to life and environment.18

It is humbly submitted that the respondent contention that Candestol is not an invention

under the Patent Act, 1970 as it is only a derivative of already existing substance and is hit

by section 3(d) of the Act and patent conferred is invalid is not only a vague but a

superfluous argument.

Section 3(d) states the mere discovery of a new form of a known substance whichdoes 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;19

The above lines clearly state that the derivatives of known substance shall be considered to

be the same substance, unless they differ significantly in properties with regard to efficacy.

Therefore the drug candestol which has been given patent is very effective and is even

different with respect to the properties as it has comparatively lesser impact on normal

cells than all other drugs available in the market to date.

The constitutional validity of Section 3(d) was challenged by Novartis before theMadras High Court in the case ofNovartis AG v. Union of India

20. In this case it was

said efficacy could be proved by showing a better therapeutic effect by the new form,

which could be shown by objective and scientific evidence. It also stated the derivative

of a substance should have a better efficacy than that of the substance in order to be

patentable.

So here the drug molecule has better therapeutic effect as it has lesser impact on other cells

17The Patent Act,1970 , Section 3(a)

18 The Patent Act,1970 , Section 3(1b)19

The Patents Act, 1970 section 3(d), also see Tribhuwan Prakash Nayyar vUnion of India[1970]2SCR732 ;East India Hotels Ltd. v. Union of India AIR 2001 SC 231;Mohammed Hussain Khan AIR2001SC298420 (2007)4MLJ1153,Godrej Soaps Ltd. v. Hindustan Lever Ltd. PTC Suppl. (1) Cal 501.


20/30


20

which increases its efficacy. It was totally a new product formulated for treatment of

cancer and it only affected cancerous cell with little side effects on normal cell. The

products and other drugs available in the market have greater side effects and cause major

damages to normal cells resulting in sudden hair fall, loss of weight and several such other

symptoms.

2.4Novelty

An invention will be patentable only if it is novel or new in the light of prior art, or is not

anticipated by the prior art.21

Prior art includes all information and knowledge relating to

the invention that was available on the date of patent application.

InBlackley v. Latham22, to be new in the patent sense, the novelty in the patent sense,the novelty must show invention. In other words, in order to be patentable, the new

subject matter must involve invention over what is old.

The task of determining whether an invention is novel can conveniently be brokendown into three separate questions. These are

i. What is the invention?ii. What information is disclosed by the prior art?

iii.

In light of (i) and (ii), is the invention novel?

"new invention" means any invention or technology which has not been anticipated by

publication in any document or used in the country or elsewhere in the world before the

date of filing of patent application with complete specification, i.e. the subject matter has

not fallen in public domain or that it does not form part of the state of the art. 23

Here in the present case Candestol being a derivative of Quinazolinone is a new invention

in the world of science as it has been able to reduce the impact on normal cells when

compared with other drugs available in the market to date.

The respondent contention that there are 2 EU Patents using other derivatives ofQuinazolinone and hence the invention lacks novelty and patent conferred is invalid

and vague argument as it just talks about other derivatives and not the present

derivative. The present derivative of Quinazolinone has not been published in any

21

See Indian Patent Law And Practice, p. 24 (oxford publication, 1st

ed),22(1888)6 Pat.Ca.184

23 Section 2(1)(l), The Patents Act, 1970.


21/30


21

document elsewhere. In fact it already holds patent under the US law and for the same

they applied for patent in India and was granted patent in the year 2008.

Novelty of an invention is determined in the light of single prior art reference and various

prior art references cannot be combined for analysing novelty. In order to anticipate an

invention, all elements of the invention must be present in a single prior art reference.24

Here the drug candestol when compared with other derivatives of Quinazaloninoe is

different and does not exist in the single prior art.

The plea that Candestol would be a derivative of known compounds is a speculation. Aperson skilled in the art knows that the smallest change in a molecule can have

dramatic effects and can totally change the efficacy of a molecule. Many examples in

the pharmaceutical industry show that a small change in an active molecule can lead to

an inactive or toxic molecule. Thus, changing the smallest Chemical group or a

molecule cannot be seen as obvious. The person skilled in the art a priori never

considers that it would have been obvious to change a Chemical group for another. The

contention from the side of respondent is artificial and can only be the result of an ex

post facto analysis. In the case of pharmaceutical products such 'reverse engineering' is

employed with great effect.

2.5Inventive Step An invention should possess an inventive step in order to be eligible for patent

protection.

"inventive step" means 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 a person skilled in the art;25

Inventive skill has been defined as that intuitive faculty of the mind put forth in thesearch for new results, or new methods, creating what had not before existed, or

bringing to light what lay hidden from vision; it differs from a suggestion of that

common experience which arose spontaneously and by a necessity of human reasoning

in the minds of those who had become acquainted with the circumstances with which

they had to deal.26

24

See Indian Patent Law And Practice(1st

Edn by Oxford, 2010), p. 3225Section 2(1)(ja), The Patents Act, 1970

26Hollister v. Mfg. Co., 113 U.S.59, 5 S.Ct. 717,28 L.Ed. 901.


22/30


22

As per the section, an invention will have inventive step only if it satisfies twoconditions:

First, the invention should be technically advanced in the light of prior art or shouldhave economic significance.

Here the invention is technically advanced and is even better in the light of the

prior art. No any drug as Candestol has less impact till date which makes the drug

technically advance and with regard to the economic significance , it can be easily be

submitted from the facts that it holds a huge market and that implies that it is very useful

and beneficial for the people.

Second, the invention should be non-obvious to a person with ordinary skill inthe art in the light of prior art.

The invention is non-obvious to a person skilled with ordinary skill as the derivative

produced by Russel helps the drug to differentiate between a normal cell and a cancerous

cell which was not possible with Quinazolinone. Over expression of some of the cellular

proteins present on the surface (-functional groups) of the cells helps the derivative drug to

sit on the cancerous cells only. Therefore the invention is not obvious.

Moreover In Canadian General Electric Co. Ltd., v. Fada Radio Ltd27 it was held that

under the general law of patents, an invention, which consists of a small inventive step but

having regard to the conditions of the art, constitutes a step forward, and may be good

subject matter for a patent.

2.6Specification To obtain a patent, the applicant must file a patent application containing a

specification. In the present case the objective is fulfilled as Russell Inc. provided

complete information to the public about the invention, and the mode of carrying it

out. The complete specification should enable the invention, which means it must

fully and particularly describe the invention and its operation, or use and the

method by which it is to be performed.28

The specification29

must end with a claim,

or claims defining the scope of the invention for which protection is claimed. Here

Russell Inc. have clearly mentioned about their claim that it has comparatively

27

. A.I.R.,1930. PC.I.,28Section 10(4), The Patents Act, 1970

29Bishwanath Prasad Radhey Shyam v. Hindustan Metal Industries [1979]2SCR757


23/30


23

lesser impact on normal cells than all other drugs available in the market to date.

Here the patent has already been granted on the basis of the specification, moreover

Russell Inc. Had also registered the drug Lifreocan with the Central Drug

Standard Control Organisation, Directorate General of Health Services,

Government of India in December 2005.

Patent under the Act is granted after scrutiny at three levels; first, underSections 11A, 12 and 14, then at the stage of pre-grant opposition under

Section 25(1) and finally, under Section 43 when the patent is granted subject to

satisfaction of the two pre-conditions. Given that in the present case the patent has

been granted after elaborate technical verification and that itself proves that

specification has been done.30

2.7Industrial Application An invention should be industrially applicable or capable of industrial application

in order to be patentable in India. Section 2 (a) of the Patents Act, provides that an

invention is capable of industrial application if it is capable of being made or used

in an industry. An invention would satisfy this requirement if it can be made any

number of times, and can be used for at least one purpose in any industry.

Here the drug molecule is marketed and is used in the industry for tabletformulation. This tablet is registered under the name Lifreocan and holds a huge

market.

An invention, in order to be patentable, must be capable of being made or used insome kind of industry. In this context, "industry" should be understood in its

broadest sense as including any useful, practical activity as distinct from purely

intellectual or aesthetic activity, and does not necessarily imply the use of a

machine or the manufacture of an article. An "invention" within the meaning of the

Act is an invention for a manner of new manufacture that is in some way associated

with trade and commerce; meaning traffic in goods, i.e., exchange of commodities

for money or other commodities.31

30F.Hoffmann-La Roche Ltd. and Anr.Vs. CiplaLimited2008(37)PTC71(Del)

31Sri Gajalakshmi Ginning Factory Ltd. v. CIT(1952) 22ITR 502(Mad).


24/30


24

The fifth contention of the respondent that the invention is not commerciallyworked in India but only imported is also no ground for the patent to be invalid as

under section 47(4)32

of The Indian Patent Act, 1970, medicine or drug may be

imported.

All the condition necessary, i.e. patentability requirement:Patentable Subject

Matter;33

Industrial Applicability;34

Novelty;35

Inventive Step;36

Specification;37

are fulfilled and Hence the product which has been patented by Russell Inc. is eligible to

be patented and Thus, Controller of Patents have not erred in granting patent to Russell

Inc.

32THE PATENT ACT,1970, Section 47(4) in the case of a patent in respect of any medicine or drug, the

medicine or drugmay be imported by the government for the purpose merely of its own use or for

distribution in any dispensary, hospital or other medical institution maintained by or on behalf of the

government or any other dispensary, hospital or medical institution which the Central Government may,

having regard to the public service that such dispensary, hospital or medical institution renders, specify in

this behalf by notification in the Official Gazette.33

supra 934 Ibid.,35

Ibid.,36Ibid.,

37 Ibid.,


25/30


25

3. Whether the Competition Commission of India and the Competition Appellate

Tribunal had erred in holding that the resale price maintenance exclusive supply was

anti-competitive under section 3(4) of the Indian Competition Act and Russell Inc

and Eurox were working under an arrangement thus violating section 3(3) of the

Competition Act ?

3.1It is humbly prayed before the honble court that the Competition Commission of India

and the Competition Appellate Tribunal had erred in holding that the resale price

maintenance exclusive supply was anti-competitive under section 3(4) of the Indian

Competition Act and Russell Inc and Eurox were working under an arrangement thus

violating section 3(3) of the Competition Act.

According to Section 3(4) competition act 2002 and its explanation38

which talks about

different forms of agreement.

According to section 3(3) of competition act, it is stated that:

Any agreement entered into between enterprises or associations of enterprises or persons

or associations of persons or between any person and enterprise or practice carried on, or

decision taken by, any association of enterprises or association of persons, including

cartels, engaged in identical or similar trade of goods or provision of services, which

(a) directly or indirectly determines purchase or sale prices;

(b) limits or controls production, supply, markets, technical development, investment or

provision of services;

38 Competition act 2002, Section 3(4): Any agreement amongst enterprises or persons at different stages or

levels of the production chain in different markets, in respect of production, supply, distribution, storage, saleor price of, or trade in goods or provision of services, including

(a) Tie-in arrangement;

(b) Exclusive supply agreement;

(c) Exclusive distribution agreement;

(d) Refusal to deal;

(e) Resale price maintenance,

shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an

appreciable adverse effect on competition in India. The explanation of these terms exists as "exclusive

supply agreement" includes any agreement restricting in any manner the purchaser in the course of his trade

from acquiring or otherwise dealing in any goods other than those of the seller or any other person;

"Resale price maintenance" includes any agreement to sell goods on condition that the prices to be charged

on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices

lower than those prices may be charged.


26/30


26

(c) shares the market or source of production or provision of services by way of allocation

of geographical area of market, or type of goods or services, or number of customers in the

market or any other similar way;

(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to

have an appreciable adverse effect on competition

General concept of anti competitive agreement:

An agreement includes any arrangement, understanding or concerted action entered into

between parties. It need not be in writing or formal or intended to be enforceable in law

What is an anti-competitive agreement?

An anti-competitive agreement is an agreement having appreciable adverse effect on

competition. Anti-competitive agreements include:-

Agreement to limit production & supply

Agreement to allocate markets

Agreement to fix price

bid rigging or collusive bidding

Conditional purchase/sale (tie-in arrangement)

Exclusive supply/distribution arrangement

Resale price maintenance

Refusal to deal

3.2 The objectives of the Competition Act are to prevent anti-competitive practices,

promote and sustain competition, protect the interests of the consumers and ensure

freedom of trade. Thus section 3 of the competitive act puts a restraint on anti-competitive

agreement. But the question here involves as to what is exclusive supply and resale price

maintenance. But in general exclusive supply means any agreement restricting in any

manner the purchaser in the course of his trade from acquiring or otherwise dealing in any

goods other than those of the seller or any other person. But for this purpose we need to


27/30


27

understand the different restraints. There are two kinds of restraints: horizontal and

vertical. But for the purpose of this case we need to know only the vertical restraint.

3.3 Vertical restraints are agreements between firms or individuals at different levels of

the production and distribution process. Vertical restraints are to be distinguished from so-

called horizontal restraints, which are agreements between horizontal competitors.

Vertical restraints can take numerous forms, ranging from a requirement that dealers

accept returns of a manufacturers product, to resale price maintenance agreements setting

the minimum or maximum price that dealers can charge for the manufacturers product.39

So-called intra-brand restraints such as resale price maintenance govern products made

by a particular manufacturer, while inter-brand restraints regulate a dealers or

manufacturers relationship with its trading partners rivals. Quintessential examples of

inter-brand restraints include tying contracts, whereby a purchaser agrees to purchase a

second product as a condition of obtaining a so-called tying product, and exclusive

dealing agreements, whereby a dealer agrees not to purchase products from suppliers that

are rivals of the manufacturer.

To quote generally it can be said that [exclusive dealing refers to when a retailer or

wholesaler is tied to purchase from a supplier or manufacturer on the understanding thatno other distributor will be appointed or will receive supplies in a given area] or the said

distributor or wholesaler shall not be dealing in the goods of other manufacturer or

supplier. Thus, there are two forms of exclusive dealing - one being an agreement binding

both the distributor and the manufacturer or supplier and the other being a compulsion

only on the part of the distributor.

Here, it is very necessary to understand the difference between the two forms. The first

form of exclusive dealing where there are bilateral obligations - on the distributor to

distribute the goods of the manufacturer or supplier exclusively in a given area and on the

part of the supplier or manufacturer to supply or distribute his goods only through the said

distributor in a given area - has been established.

3.4 Such agreement is hardly harmful to the competition because it does not close the

doors of the distributor to other manufacturers or suppliers and neither does it restrict the

39http://www.indiankanoon.org/doc/1000517/( Mahindra and Mahindra Ltd . vs . Union of India ( UOI )

and Anr . ( 24 . 01 . 1979 - SC ))


28/30


28

manufacturer or supplier from supplying or distributing their goods through other

distributor in other areas.

The second form of exclusive dealing is arbitrary to the distributor on the face of it in that

it restricts the distributor from distributing the goods of other suppliers or manufacturers.

Thus, it adversely affects the competition by foreclosing a particular distribution channel

to other players in the market.40

3.5 The Exclusive Supply Agreement is an agreement between a distributor and a supplier

whereby a distribution of a certain product engages a supplier on an exclusive basis to

distribute and sell to customers within a given territory. The Exclusive Supply Agreement

mainly sets out the way the product is ordered by the distributor and supplied by supplier,

the method of delivery, title of loss, payments for supply, product warranty and respective

liabilities of each party. This agreement is customizable for your companys specific

usage. "Exclusive supply agreement" includes any agreement restricting in any manner the

purchaser in the course of his trade from acquiring or otherwise dealing in any goods other

than those of the seller or any other person.41

In this case no such agreement was done between Russell Inc. and Eurox.

Now we have to look at the detailed meaning of resale price maintenance.

Resale price maintenance (RPM) is the practice whereby a manufacturer and its

distributors agree that the latter will sell the former's product at certain prices (resale price

maintenance), at or above a price floor (minimum resale price maintenance) or at or below

a price ceiling (maximum resale price maintenance). If a reseller refuses to maintain

prices, either openly or covertly, the manufacturer may stop doing business with it.

3.6 Resale price maintenance prevents resellers from competing too fiercely on price,

especially with regard to fungible goods. Otherwise, resellers worry it could drive down

profits for themselves as well as the manufacturer. Some argue that the manufacturer may

do this because it wishes to keep resellers profitable, and thus keeping the manufacturer

profitable. Others contend that minimum resale price maintenance, for instance, overcomes

40http://indiankanoon.org/doc/1313927/ (Aamir Hussain Khan vs The Director General Aamir Hussain

Khan vs The Director General)

41http://indiankanoon.org/doc/346379/ (Steel Authority Of India Limited vs Competition Commission Of

India)


29/30


29

a failure in the market for distributional services by ensuring that distributors who invest in

promoting the manufacturer's product are able to recoup the additional costs of such

promotion in the price they charge consumers. Some manufacturers also defend resale

price maintenance by saying it ensures fair returns, both for manufacturer and reseller and

that governments do not have the right to interfere with freedom to make contracts without

very good reason.42

Definition of Resale price maintenance: Resale price maintenance is the effect of rules

imposed by a manufacturer on wholesale or retail resellers of its own products, to prevent

them from competing too fiercely on price and thus driving profits down from the reselling

activity. The manufacturer may do this because it wishes to keep resellers profitable. Such

contract provisions are usually legal under US law but have not always been allowed since

they formally restrict free trade.43

Now looking at the detailed of the concept of exclusive supply and resale price

maintenance we can easily say that there was no arrangement between Russell Inc. and

Eurox in their mechanism of working. The policy they adopted was simply an marketing

business and they reduced the price to protect themselves from heavy loss. The price was

high due to the huge profit margin in each level of its distribution thus to maintain the

market balance they fixed the profit at each level of distribution and thus they have not

brought down the price due to the competition against Pharma India but it was just to

maintain the market balance in economy system. Thus we can conclude that the

competition commission of India and competition appellate tribunal had committed error

in holding that the resale price maintenance exclusive supply was anti-competitive under

section 3(4) of the Indian Competition Act and Russell Inc and Eurox were not working

under an arrangement thus do not violating section 3(3) of the Competition Act.

42 http://en.wikipedia.org/wiki/Resale_price_maintenance, visited on 23 september 201143

( http://economics.about.com/od/economicsglossary/g/resalep.htm), visited on 23 september 2011


30/30

PRAYER FOR RELIEF

Wherefore, in the light of facts of the case, issues raised, arguments advanced and

authorities cited, this Court may be pleased to adjudge and declare that:

(a)the Competition Commission of India and the Competition AppellateTribunal has no jurisdiction over all claims in this case,

(b)Controller of Patents has not erred in granting the patent, and(c) the Competition Commission of India and the Competition Appellate

Tribunal had erred in holding that the resale price maintenance, exclusive

supply agreement was anticompetitive under section 3(4) of the Competition

Act and Russel Inc. and Eurox were working under an arrangement and thus

violating section 3(3) of the Competition Act

And pass any other order in favour of the appellant that it may deem fit in the ends of

justice, equity, and good conscience.

All ofwhich is respectfully submitted.

PLACE:N

EWDELHI

DATE: 15TH

OCTOBER 2011

Documents

Memorial for Appellant