The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) imposes several obligations on the Government of India in the area of patent protection. It calls for substantial changes in the Indian Patent Act, 1970 to satisfy these obligations. The Agreement helps India to introduce the changes at three different stages. To satisfy the first set of obligations, the Patent (Amendment) Act, 1999 was enacted after India lost the dispute with USA in the WTO. The Patent (Second Amendment) Bill, 1999 was intended to satisfy the second set of obligations. This included changes in patentable inventions, grant of new rights, extension of the term of protection, provision for reversal of burden of proof in case of process patent infringement and conditions for compulsory licences. India has time up to 2005 to introduce protection for microorganism, pharmaceutical products, agricultural chemical products, inventions relating to atomic energy and plant varieties. Apart from the provisions for satisfying TRIPS obligations some other provisions are also included in the Bill to modernize the Indian Patent Act to suit the requirements of the technological changes. This paper is an attempt to analyze the Bill to find out the desirability of the changes introduced.

1. Patentable Inventions

The TRIPS Agreement for the first time not only laid down uniform international norms for an invention to be patentable but also spelt out the exceptions based on which patents could be denied. Article 27(1) has not defined the term "invention" but only lays down the norms/test to find out what constitute an invention whether it is a product or process. For an invention to be patentable as per TRIPS, the invention shall be "new", having "inventive step" and "capable of industrial application". It is important to note that these terms are not defined in the TRIPS. It appears that the Bill introduced a new definition for invention to satisfy Article 27(1). The Bill also defined ‘inventive step’ and ‘capable of industrial application’. It is felt that these amendments are not required at this stage as the present Act and the case law produced under them serve the purpose proposed to be achieved by the amendments.

The Patent Act 1970 followed a unique approach in identifying the inventions capable of patent protection in India. We have defined the term ‘invention’ and expressly excluded certain inventions as not inventions for the purpose of the Act. Even though inventions relating to atomic energy are treated as inventions we excluded some of them from patent protection. In case of medicine or drugs and chemical products there is no product patent but only process patent protection. This was done to take care of the public interest particularly of food security and health care.

An analysis of the existing definition of invention further makes it clear that it includes both product and process inventions and incorporate the test of patentability i.e., ‘novelty’ and ‘utility’. It is true that the terms ‘new’ and ‘useful’ are not defined in the Act. But the terms ‘novelty’ and ‘utility’ have been interpreted by the Supreme Court in M/s. Bishwanath Prasad Radhey Shyam v. M/s. Hindustan Metal Industries to take care of the situation. The Act also mandates that the patent examiner should examine the patent application for anticipation by prior publication before grant of patent. Similarly an application can be opposed on the grounds of anticipation by prior publication, prior use, lack of utility, obviousness and lack of inventive step. These grounds have direct relation to the terms ‘new’, ‘inventive step’ and ‘capable of industrial application’ mentioned in the TRIPS. We have not experienced any difficulty in the existing definition; nor are our provisions in conflict with Article 27 of TRIPS. So there is no need to introduce a new definition for invention. 

In fact the new definition may create difficulties for interpreting other terms. For example, the term "product" is not defined. It is doubtful whether this will include products of manufacture and other things as well. It is the application of inventive faculty or the extent of human intervention that is traditionally treated as inventive step in India. In section 25(1)(e) obvious and inventive step are treated as two separate grounds to be established in case of opposition. As such the present definition of ‘inventive step’ runs counter to our present understanding. The term obvious has not yet been subjected to any judicial interpretation in India. The US Courts in a number of cases interpreted the term and it is different from inventive step, as we understand in India. The TRIPS Agreement note 5 however helps us to treat the terms ‘inventive step’ and ‘capable of industrial application’ synonymous with the terms ‘non-obvious’ and ‘useful’ respectively. In this situation it may be better for us to maintain the status quo.

As per the TRIPS Agreement there is no obligation to grant patent protection for the following inventions: (i) an invention the commercial exploitation of which is prohibited on the ground of public order and morality, (ii) an invention relating to diagnostic, therapeutic and surgical methods for the treatment of humans or animals and (iii) invention of plants, animals, plant varieties and biological processes. The amendments introduced in section 3 of the present Act are intended to make our exemptions in tune with TRIPS.

The revised clause (b) seems to be against the letter and spirit of Article 27(2) of the TRIPS Agreement. As per Article 27(2) an exemption is possible only in cases where there is an express prohibition by law the commercial exploitation of the products of the inventions on the grounds of public order and morality. This may include protection of life, health and environment. It is also made clear that such prohibition of commercial exploitation is not merely of the domestic law. This means that the prohibition must be in areas where majority of member states are also prohibiting commercial exploitation and denying protection. This presupposes the existence of a domestic law similar to that of laws in other countries prohibiting the commercial exploitation of the products based on new invention. Only then it will be possible to deny patent protection to that invention on the grounds of public order and morality. This is to ensure that in case there is no prohibition of the commercial exploitation of an invention in a country, the patent to an invention cannot be denied on the ground of public order and morality.

As per the new clause (b) it is not mandatory that in all cases the commercial exploitation must be prohibited by law. Even if there is no law prohibiting the commercial exploitation of the product of the invention, under this clause patent can be denied to the invention on the ground of morality or on the ground that the invention causes serious prejudice to human, animal or plant life or health or to the environment. Thus in a case where a patent to a new invention is denied on the above ground in India, the product based on that invention can be commercially exploited in India by any person if there is no law prohibiting the commercial exploitation of that product. This is what Article 27(2) wanted to prevent. Therefore the clause may be worded as follows:

The Bill included six more new clauses, to exclude life form, computer programe, works protected under copyright, method of mental acts or playing games and integrated circuits, from patent protection in India. The new sub-clause (j) in section 3 dealing with exemption of patent protection of inventions relating to life forms excluded microorganisms. This means that there can be immediate patent protection for microorganisms. It is true that as per Article 27(3) India is required to grant patent protection for new microorganisms. But as per Article 65(4) of the TRIPS Agreement India can have time up to 2005 to introduce product patent for microorganisms. So there is no immediate obligation to exclude microorganisms in this clause. It will be advantageous to India to delay the protection till 2005 since large number of microorganisms’ patents are filed by foreign corporations. All the new inventions till 2005 by these corporations could be kept outside the scope of Indian Patent Act and thus will be in the public domain so that the Indian industries could use them without paying any royalty. It is true that some of our new microorganisms will also go without protection in India though they could claim protection in other countries. But considering the large number of patents for foreign microorganisms, it is in our interest that we delay the protection till 2005 as we did in the case of drugs and medicines. So words "other than micro-organisms" may be replaced with "including micro-organism" in the provision.

It is common knowledge that the items like literary, dramatic, musical works will not fall within the scope of patent law. They are protected under the Copyright Act. If sub-sections (l) and (n) are included by way of abundant caution keeping in mind the new definition of "invention" there is no justification in excluding "sound recording" from this provision, which finds protection under the Copyright Act. It is necessary to include "sound recording" since this can also be treated as a product.

2. Rights of patent owner

The TRIPS Agreement has spelt out various rights available to the owner of product and process patent separately. This includes the new right of importation of patented products. Section 48 of the Patent Act is amended prospectively to satisfy this requirement. Thus the new rights are available to the owners of the patents granted only after the commencement of the Patent (Second Amendment) Act, 1999. The terminology used in the section is the same as that of the TRIPS Agreement. It is clear from the TRIPS Agreement that the right of importation will not affect the exhaustion of rights. Making use of this provision a new provision is introduced to facilitate parallel import of patented products. According to new section 107A importation of patented products by any person from a person who is duly authorized by the patentee to sell or distribute the product shall not be considered as an infringement of patent rights. This is a welcome step and will surely help to reduce the adverse impact of the right of importation.

3. Term of protection

The term of protection in India as per the existing law is fourteen years counted from the date of patent . But in case of process patent for food, medicine or drug, the period is five years from the date of sealing of the patent, or seven years from the date of patent whichever period is shorter. The existence of the patent is subjected to periodic renewal of the patent by payment of fee. The TRIPS Agreement mandate a uniform term of twenty years from the date of filing of the patent application irrespective of whether the invention is a product or process. The Bill introduces this uniform term of patent. To make it clear that there shall not be any protection for the invention after the expiration of the term of patent a new sub-section is also introduced. It is true that we have no option but to change the law. But the extension of period of patent protection is going to be disadvantages to Indian industry and economic growth considering the fact that the majority of the patents taken in India are by foreigners that to in sectors where we have the potential to grow.

4. Use without authorization

The Patent Act, 1970 envisages grant of compulsory licences and statutory licences for not working the patent in India to satisfy the reasonable requirements of the public. The compulsory licence is granted at the request of an interested person. The statutory licence include the general power of the Central Government to notify any patent as a patent endorsed with the licence of right and an express provision treating all patents relating to drugs or medicine as patents deemed to have been endorsed with licence of right. These provisions were introduced in the Act considering the fact that majority of the commercially viable patents taken in India were owned by foreigners and were not actually worked in India by manufacturing the product by the owners or by giving licences to Indian manufacturer. It was also felt that the existence of unrestricted patent monopoly was a hindrance to the industrial growth of our nation. The TRIPS Agreement introduced many restrictions regarding the use of patent by an individual or by government without authorization of the patent owner. These restrictions conflict with the existing provisions of the Patent Act. Many changes are introduced in the Bill to make the Act in tune with the TRIPS provisions.

One of the important restrictions in the TRIPS is that compulsory licence shall be granted only on the basis of individual merits and that too after the unsuccessful efforts by the proposed user to get a voluntary licence from the owner on reasonable commercial terms and conditions. This is to ensure that there must be efforts to get a voluntary licence by the proposed user before resorting to compulsory licences and also to make sure that there are no provisions for the grant of statutory licences. There is an exception to these requirements in case of national emergency, circumstances of extreme urgency and public non-commercial use. As per the existing provisions of the Act this is not required. There are also instances where after the expiry of three years of grant of patent the invention can be used by any one with out the permission of the owner by satisfying the conditions laid down in the Act (statutory license). To introduce the TRIPS conditions a new sub clause is introduced in the existing section 85 and sections 86, 87 and 88 dealing with licences of right (statutory licence) omitted. A consequential amendment is also introduced in section 89 dealing with revocation of patent on the ground of non-working even after the grant of compulsory licence. Thus the provisions dealing with statutory licence is taken away form the Act. But it is interesting to note that non-working of patented invention in India has been expressly provided as a ground for compulsory licence in section 84.

There are many circumstances under which the reasonable requirements of the public by working the patents in India will be deemed to have been not satisfied for the purpose of the grant of compulsory licences. They are spelt out in section 90 of the Act. These grounds take care of not only industrial growth of India but also availability of the products to the consumer at reasonable price. If these grounds are not satisfied it is possible to grant a compulsory licence. One of the conditions included in section 90 as a ground for satisfying reasonable requirements of the public is the obligation to actually manufacture the patented product either by the owner or by his licencee. Since Article 27(1) mandate grant of patent and patent rights irrespective of whether the patented products are imported or locally produced and Article 28 expressly recognizes importation of the patented products as a right of the patent owner, it is not obligatory on the part of the patent owner to actually manufacture the patented product in the country to satisfy the reasonable requirement of the public. It is possible for the owner to import the patented product and sell it at a reasonable price and satisfy the requirement of the public. Thus the grounds ‘failure to manufacture the products in India’ and ‘satisfying the reasonable requirements by importing the products’ are omitted from section 90 of the Act. But it is pertinent to note that section 90(e) dealing with importation affecting working of patents in India is retained with modification. It appears that this provision will conflict with the importation right of the patent owner and his right to enjoy his patent rights even without locally producing the patented product recognized under TRIPS. Just like clause (d) we have to omit clause (e) also.

A new ground is introduced in section 90 to prevent imposition of unreasonable conditions while granting voluntary licence. Now it is possible to grant a compulsory licence if the patentee insists on including an exclusive grant back clause or a clause preventing the challenges to the validity of patent or a coercive package licensing as conditions for grant of licence. This is a welcome move. To satisfy other conditions in Article 31 an amendment is introduced in section 95 dealing with the conditions for grant of compulsory licence. A new section 95A dealing with termination of the compulsory licence is also introduced since there is no such provision at present in the Act. This allows the patentee or others interested in the patent to approach the Controller for the termination of the compulsory licence since the circumstances under which the licence was granted are not in existence and are unlikely to occur. The provisions dealing with the power of the Government to use the patent is also amended.

The history of administration of compulsory licencing provisions in the Act shows that these provisions were used only on very limited occasions. This may be due to the nature of the industrial and economic policies followed in India. But in the context of liberalization and globalization the compulsory licencing provisions may be of better use for Indian industrial growth. Even today 85 per cent of the patents taken in India are owned by foreigners. Many of them are not worked in India by actual manufacture of the products. At least in some sectors Indian industries are capable of manufacturing these new products if permission is granted. It is needless to mention that it is the actual manufacture of the patented products in India by our industries that will enable us to get the maximum return for the grant of patent monopoly. But the strict conditions particularly prior negotiations, non- exclusive and non-assignable nature of licence, use of the licence predominantly for supply of the products in the Indian market, provision for termination of the licence when the circumstances for the grant of compulsory licence are unlikely to occur etc., will make the fate of the provision as same as that of its predecessor. These conditions will force the Indian manufactures to go for voluntary licencing with strict conditions or for equity participation or for joint venture rather than manufacture the product based on compulsory licences. This will make the Indian industry and economic growth largely dependent and controlled by foreign patent holders who are undoubtedly large corporations.

Other Amendments

1. Procedure for obtaining patent

Technological changes that were taking place globally had its impact on the administration of patent system as well. International norms regarding the acquisition and transfer of patent have been modified to suit these changes. Indian law remained unaltered due to economic, industrial and political reasons. India’s accession to the Patent Cooperation Treaty (PCT) recently, calls for legislative changes in the procedure for acquisition of patent. One of the basic principles of PCT is that the international application shall be deemed to be an application filed in the member country for patent protection when that country is designated in the international application for patent protection. Amendments are introduced in section 7, section 10 and section 138of the Act to satisfy this requirement.

There is no product patent protection for inventions based on biological materials in India. According to the TRIPS Agreement India is bound to grant product patent protection for inventions based on biological materials at least in some areas latest by 2005. One of the problems relating to patent protection of biological materials is the difficulty in describing the invention in the patent application. To overcome this depository system was introduced through an international convention and many developed countries now have provisions in their patent laws to this effect. Since there was no patenting of biological materials in India our Act had no provision dealing with deposit of biological materials. A new sub clause is introduced in section 10 to facilitate deposit of biological materials. In such cases the applicant must also satisfy the following conditions while filing a patent application: (1) the biological material must be deposited not later than the date of the patent application; (2) all the available characteristics of the material required for it to be correctly identified or indicated is included in the specification including the name, address of the depository institution and the date and number of the deposit of the material at the institution; (3) after the date of the application for patent in India the material must be accessible and (4) the source and geographical origin of the biological material in the specification must be disclosed.

The new sub-clause (d)(ii)(D) included in Section 10(4) will help only to identify the source and geographical origin of the genetic material used in the invention. To prevent the genetic materials of India from unauthorized use and also to safeguard the Indian traditional knowledge, an additional provision may be included. The applicant in such cases shall attach the copy of the prior informed consent for the use of genetic material of Indian origin from the authority concerned, which is established under the proposed Biodiversity Act. This will help us to effectively enforce the obligation of prior informed consent and benefit sharing envisaged under the Convention on Biological Diversity. The clause may be worded as follows:

Another change introduced is regarding the examination of the application. Now it is not mandatory for the patent office to examine all the applications filed in the office. The patent office is obliged to examine the patent application only if a separate request in this regard is made within forty eight months from the date of filing of the patent application by the applicant or other interested person. This provision is applicable even to the pending patent applications. In case of failure to make an application for examination with the specified time, the patent application shall be treated as withdrawn by the applicant. Once the application for the examination of the patent application is made it is mandatory that a global search for anticipation must be conducted in all cases. To avoid delay in the completion of the procedure the time available for filing objections and other submissions is now reduced to twelve months from fifteen months. Restrictions are also put on the amendments of specifications.

The new clauses (j) and (k) are introduced in section 25 dealing with grounds of opposition to protect the genetic material from unauthorized use and also to prevent the traditional knowledge from being patented. To effectively achieve this one more clause needs to be added keeping in mind the new clause suggested in section 10(4) above. It should be possible to opposed the application on the following grounds: (1) non production the copy of the prior informed consent issued by the authority concerned; or (2) production of a false copy or falsely obtained copy of the prior informed consent; or (3) production of a copy of the prior informed consent issued by an authority not competent to issue the same under the existing law. The provision may be worded as follows:

2. Appellate Board

Many decisions of the Controller were often challenged as per the existing law before the High Court. It is needless to say that much time is spent to get a final decision. This is the case not only with patents but also with trademarks and designs. To overcome this difficulty the new Trade Marks Act 1999 has incorporated a provision to constitute an Appellate Board to here appeal from the decisions of the Controller. The jurisdiction of this Appellate Board is extended to patent matters as well. The only change in the constitution of the Appellate Board for the purpose of Patent Act is the inclusion of a Technical Member. The qualification of the Technical Member is mentioned as at least five years experience as Controller under this Act or a engineering degree holder with ten years experience as Registered Patent Agent etc. All the appeals from the decisions taken by the Controller under the Act and application for rectification of register shall now lie to the Appellate Board. The jurisdiction of other Courts to hear the matters that is exclusively within the power of the Appellate Board is also excluded. All the appeals from the decision of the Controller or application on rectification of the register pending before the High Court are also transferred to the Appellate Board. It is to be noted that there is no expresses provision in the Act dealing with appeals from the Appellate Board.

A specific section is also introduced to take care of the security and defence needs of India. This enables the Central Government to prevent the disclosure of any patent application containing invention prejudicial to the interest of the security of India. It is also possible to take any action including the revocation of the patents for the same purpose. The term security of India has also been defined. It is felt that in the light of the enormous power of Central Government under section 35 and section 66, this new section may not be needed. 

Historically patent legislation of countries particularly that of the developed countries underwent changes on the demands from the domestic industries. It is the competitive position of the industries that forces them to go for better protection to safeguard their investments. In the context of globalization the TRIPS Agreement forces these changes even if there is no demand for such a change from the domestic industries. The above analysis of the proposed amendments to the Indian Patent Act makes it clear that the amendments are introduced mainly to satisfy the obligations under WTO and has strengthened the position of the patent owner sacrificing the public interest provisions in the Act. The new Act will surely benefit the owners of patent whether Indian or foreigner. Considering the fact that majority of the patents taken in India are by foreigners the immediate benefit will surely be for them. The benefit will reach the Indian society only if we improve our rate of invention increasing the investment in R&D. There is no evidence to show that the R&D investment has considerably gone up after the liberalization of the economy either by Indian or by foreign investors. The foreign direct investment for manufacture has also not substantially increased in core sectors where we need investment for industrial growth. In this context the new amendments will be used as an effective instrument to create monopoly in the market to sell patented products manufactured abroad. The increase in import in the recent years is a clear indication in this direction. Liberalization of our economy coupled with the amended Patent Act will adversely affect our industrial growth unless we boost up investment in R&D and increase our inventions with potential for global commerce. This seems to be a remote possibility given the present status of our industries.