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By
Prabhash Ranjan,
LLM Scholar, School of Oriental and African Studies (SOAS), University of London, UK
India and the US were involved in a dispute on patents in the World Trade Organisation (WTO) in 1997. The case is important because it led India to change its patent law.
The dispute arose on the basis of a complaint made by the US regarding the absence of: - patent protection for pharmaceutical and agricultural chemical products in India
- a means for the filing of patent applications for pharmaceutical and agricultural chemical products
- legal authority for the granting of exclusive marketing rights (EMR) for such products
Background
The adoption of the TRIPS agreement led to the establishment of a minimum standards patent regime under which all forms of technology, whether product or process, had to be patented.
Under the TRIPS agreement, the process of producing a particular product could be patented as also the product itself, provided conditions such as novelty, involvement of inventive step and capability of industrial application were fulfilled.
Before the TRIPS agreement developing countries like India had not recognised product patenting for pharmaceuticals. India had benefited a lot from a patent regime in medicines which only recognised process patents and not product patents. This regime allowed generic manufacturers to produce the same medicines by adopting different processes; hence ensuring that there was abundant supply of medicines at affordable prices.
After the adoption of the TRIPS agreement, India and other developing countries that had not recognised product patenting in pharmaceuticals were given a 10-year transitional period to implement product patenting.
However, the countries that were given a 10-year transitional period had to introduce a means by which applications for patents could be filed. They had to set up a mechanism whereby potential product patenting invention applications could be filed in the transitional period. This mechanism is known as the ‘mail box' system.
Potential product patent applications were to be considered after the expiry of 10 years when the product patenting regime would have been put in place.
The primary purpose of the ‘mail-box' system was to provide legal security for a patent application, to protect priority in the transitional period.
After the formation of the WTO in 1995 and coming into existence of the TRIPS agreement, the Indian government promulgated an ordinance on 31 December 1994 , which amended the India Patent Act of 1970.
The amendment provided for the filing and handling of patent applications for pharmaceutical/agricultural chemical products. However, this ordinance lapsed in March 1995. Subsequently, the Indian government introduced a bill (Patents Amendment Bill, 1995) in Parliament to amend the Indian Patent Act of 1970.
This amendment was to put in place a system for filing of applications for product patents in the field of health and genetic engineering.
However, this bill was not passed by the Indian parliament. (The bill was passed in the Lok Sabha or lower house but could not be passed in the Rajya Sabha or upper house). Hence, after March 1995, there was no legal regime for filing patent applications for pharmaceutical and agricultural chemical products.
As the Indian parliament did not amend the patent law, the Indian government set up a mail box system through an administrative order.
The dispute between India and the US arose on this very issue of creating a suitable mechanism or ‘a means' by which potential product patenting applications could be filed.
India argued that through the administrative order, it had put in place a suitable system under which all the product patent applications could be filed and their priority could be legally protected.
The US argued that an administrative mechanism did not provide the adequate legal security to a patent applicant under the ‘mail box' system.
The US argued that the India patent law, by not providing for a ‘mail box' provision, was inconsistent with India 's obligations under the TRIPS agreement as given in Article 70.8.
A disputes panel was established to examine the complaint made by the US .
The US complaint was that India should have provided for a ‘mail box system' in the Indian Patent Act. India argued that the ‘mail box' system set up by an administrative order was working effectively by allowing applicants of pharmaceutical and agricultural product patents to file their applications, and there was no need to bring about a change in the Indian patent law.
There were other grounds of dispute as well.
Transparency requirement under Article 63
Article 63 of the TRIPS agreement imposes a transparency obligation on member countries.
It states that all laws, regulations, final judicial decisions, administrative rulings of general application made by a country pertaining to the subject matter of the TRIPS agreement shall be published or publicly made available in such a form so as to enable the right holders or the governments of other countries to become acquainted with it.
This article also imposes an obligation that countries shall notify the laws and regulations that have been made public to the Council for TRIPS.
The US alleged that India had violated Article 63 of the TRIPS agreement by failing to make public any information on the existence of a new system for the filing of mailbox applications after the expiry of the Patents (Amendment) Ordinance 1994.
The US alleged that India had not made public the ‘means' (administrative order in this case) through which India claimed to be fulfilling its obligation under Article 70.8 of the TRIPS agreement.
India had also not notified to the TRIPS Council about the ‘means' of filing the potential patent applications that it had set up through an administrative order.
India argued that under Article 65 of the TRIPS agreement, it was not required to comply with the requirements of Article 63.
Article 65 provides that no country shall be obliged to comply with the provisions of the TRIPS agreement before the expiry of the general period of one year following the date the WTO agreement came into force.
In other words, no country was required to fulfil the provisions of the TRIPS agreement from January 1, 1995 to December 31, 1995 , one year following the date ( January 1, 1995 ) the WTO agreement came into force.
Article 65 further provides that a developing country is entitled to delay the implementation of the provisions of the TRIPS agreement for a further period of four years.
On the basis of Article 65, India argued that it was not required to fulfil the transparency requirement given in Article 63 of the TRIPS agreement.
The question before the panel was whether Article 63 is a provision whose implementation could be postponed as provided in Article 65 or whether the transparency requirement of Article 63 was to be complied as soon as the TRIPS agreement came into force.
Providing Exclusive Marketing Rights under Article 70.9
The US also alleged that India had failed to fulfil its commitments under Article 70.9 of the TRIPS agreement by not providing a legal authority for granting exclusive marketing rights (EMR) for the products for which the potential patent applications were filed under the ‘mail box' system.
India argued that Article 70.9 of the TRIPS agreement did not impose an immediate obligation to provide EMR. India argued that the obligations under Article 70.9 arise only after the events specified in Article 70.9 have occurred.
Article 70.9 provides that where a product is a subject of a patent application as per Article 70.8 of the TRIPS agreement, exclusive marketing rights shall be granted for a period of five years after obtaining marketing approval in that country or until a product patent is granted, whichever is shorter. The granting of EMRs is contingent to filing a patent application in another member country and granting of patent and marketing approval in that member country.
The issue before the panel was whether Article 70.9 of the TRIPS agreement imposed an immediate obligation on India or whether there was no immediate obligation on India to grant EMRs.
Panel report
Article 70.8
The panel held that India was in breach of its obligation under Article 70.8 of the TRIPS agreement. The panel rejected India 's argument that the administrative instructions provided a suitable ‘means' under Article 70.8 for filing patent applications.
The panel held that Article 70.8 imposed a special obligation on member countries that benefited from the transitional provisions.
The panel held that the ‘means' for filing the patent applications was important because countries that do not provide patent protection under Article 27 of the TRIPS agreement (in India's case this meant not providing product patenting to pharmaceuticals) must examine, after the expiry of the transitional period, the applications that have been filed and consider them for patent protection.
The panel further held that in order to achieve and fulfil the objective of Article 70.8, it is important that the novelty of the patent applications is preserved.
Further, it held that for a patent application to be considered for patenting after the expiry of the transitional period, it is also important that the priority date of the patent application is maintained. If this priority date is not maintained, and if there is more than one patent application, it will become difficult to find out whose patent application should be considered first for granting patent after the expiry of the transitional period.
The panel argued that the novelty and priority of the patent applications could be maintained only through a legally sound filing system. The panel argued that the purpose of Article 70.8 was not only to provide a system where the patent applications were filed and novelty and priority was maintained, but also to ensure, beyond reasonable doubt, that the mailbox applications and eventual patents based on them will not be rejected or invalidated because at the date of the filing, the matter for which patent protection was sought was unpatentable in the country in question.
The panel went on to argue that a country providing a ‘means' under Article 70.8 should fulfil the ‘legitimate expectations' of other WTO member countries.
Hence, according to the panel, India should have set up a system that allayed reasonable doubts that parties/countries might have regarding the security of the mail box applications.
India had argued that under Article 1.1 of the TRIPS agreement, member countries are free to determine the appropriate method for the implementation of the provisions of the TRIPS agreement within their legal system and practice.
Hence, under Article 1.1, India was very much within its right to set up a ‘means' given in Article 70.8 through an administrative order/instructions.
However, the panel held that in order to find out whether the administrative system put in place by India fulfilled the objective of Article 70.8, it was important to analyse the Indian patent law.
Analysing the Indian Patent Act of 1970, the panel held that Section 15 (2) of the act provides that any application for the grant of a patent on a pharmaceutical or agricultural chemical product must be refused by the patent Controller for lack of patentability.
This, according to the panel, created confusion regarding the security and predictability of the administrative order in preserving the novelty and priority of the patent applications.
The panel held that potential patent applicants suffered legal insecurity due to the mandatory legislation to restrict the patent applications on pharmaceuticals and agricultural chemical products.
For the reasons discussed above, the panel held that the ‘means' set up by an administrative order or instructions were not a suitable ‘means' under Article 70.8 of the TRIPS agreement. Hence India was in breach of the obligation imposed by Article 70.8.
Article 63
The panel held that India was in breach of the obligation imposed by Article 63. India should have made public and also notified to the TRIPS Council the ‘means' that it adopted to fulfil the obligation given in Article 70.8.
The panel rejected the Indian argument that it was not required to implement the transparency obligation given in Article 63 till 31 December 2000 due to the provisions given in Article 65.
The panel held that in the TRIPS agreement there were numerous institutional and procedural provisions that came into existence from January 1, 1995 .
One such provision was related to dispute settlement. If all the institutional and procedural provisions were to be applied after five years of the WTO agreement coming into force, even the dispute settlement provisions would be rendered inapplicable for a period of five years. This, according to the panel, was illogical.
Therefore, the panel held that the ‘means' developed by India under Article 70.8 was a measure of ‘general application' and hence should have been made public and also notified to the TRIPS Council.
Article 70.9
The panel held that India had failed to implement its obligations under Article 70.9 of the TRIPS agreement.
The panel held that just like Article 70.8, Article 70.9 of the TRIPS agreement also contains the words ‘notwithstanding the provisions of Part VI', which meant that the transitional provisions given in Part VI of the TRIPS agreement did not apply to Article 70.9.
According to the panel, the effective date of the implementation of the TRIPS agreement was 1 January 1995 and not December 31, 2000 for developing countries and hence the granting of EMR had to take effect from January 1, 1995 .
The panel held that Article 70.9 must be interpreted in good faith taking into account the legitimate expectations of member countries.
The panel hence made a recommendation to the WTO dispute settlement body (DSB) that India should be asked to bring its transitional regime for patent protection in conformity with its obligations under the TRIPS agreement.
The AB report
India appealed against certain aspects of the panel report. India 's appeal with the Appellate Body (AB) was essentially on four grounds.
Firstly, India questioned the panel's application of the principle that ‘legitimate expectations of the member countries must be taken into account' while interpreting the TRIPS agreement.
India also argued that:
- The panel did not properly interpret the requirement under Article 70.8.
- The panel erred in the treatment of the Indian municipal law or in its application of burden of proof in examining whether India had complied with Article 70.8.
- The panel did not properly interpret to Article 70.9.
Legitimate expectations
India argued before the AB that application of a faulty interpretative principle had resulted in misinterpretation of Articles 70.8 and 70.9 by the panel.
Before examining what the AB said on Articles 70.8 and 70.9, we must examine what the AB said on the ‘legitimate expectations' principle developed by the panel.
The AB held that the panel was wrong in using ‘legitimate expectations' as an interpretative principle of the TRIPS agreement.
The panel had argued that protection of legitimate expectations of member countries regarding the conditions of competition is a well established GATT principle. In the context of the TRIPS agreement, the panel had argued that competitive relationship exists between a country's own nationals and the nationals of other countries.
The AB held that the panel had merged and hence confused two different concepts. According to the AB these two different concepts are:
- The concept of protecting the expectations of countries as to the competitive relationship between their products and the products of other countries. This concept developed in the context of violation complaints involving Articles III and XI, brought under Article XXIII:1(a), of the GATT 1947.
- The concept of protecting the expectations of countries as to the competitive relationship between their products and the products of other countries. This concept developed in the context of violation complaints involving Articles III and XI, brought under Article XXIII:1(a), of the GATT 1947.
The AB held that the principle of ‘reasonable expectations’ arose in the context of the ‘non violation’ disputes given in Article XXIII:1 (b) of GATT.
The AB held that the principle of ‘reasonable expectations’ arose in the context of the ‘non violation’ disputes given in Article XXIII:1 (b) of GATT.
Thus, ‘non violation' complaints shall not form basis of complaints and disputes under the TRIPS agreement. From 1 January 1995 to 31 December 2000 , the only basis of complaints and disputes under the TRIPS agreement was Article XXIII:1 (a) of GATT i.e. only ‘violation' complaints.
In light of Article 64.2, the AB argued that the panel's invocation of the ‘legitimate expectations' created confusion regarding the bases of disputes in the TRIPS agreement i.e. whether the bases was ‘violation' (Article XXIII:1 (a) of GATT) or ‘non violation' (Article XXIII:1 (b) of GATT).
Hence, the AB held that the invocation of the principle of ‘legitimate expectations' was not a right interpretative principle while interpreting the TRIPS agreement.
Article 70.8
The AB upheld the panel's view. The AB held that the ‘means' provided in Article 70.8 to preserve the novelty and priority of the patent applications should have a sound legal basis.
However, the AB reversed the finding of the panel that the mechanism that is to be set up by India as ‘means' under Article 70.8 of the TRIPS agreement should eliminate any reasonable doubts regarding whether the mail box applications could be rejected at the date of filing.
The AB held that under Article 70.8 of the TRIPS agreement, India was under an obligation to set up a sound legal basis for the filing of the patent applications. It had no obligations beyond this.
Interpreting the municipal law and burden of proof
India argued before the AB that the panel erred in its treatment of India 's municipal law because the municipal law as fact needs to be established by the party relying on it. India argued that the US did not do so. Instead of assessing the Indian law as a fact to be established by the US , the panel dealt with it as a law to be interpreted by the panel.
The AB did not agree with India 's argument and held that in the process of finding out whether a country has complied with its obligations, the panel has to examine the municipal law of a country.
Burden of proof
On the issue of burden of proof, the AB upheld the panel's view. The AB said that the panel had enunciated and implemented the burden of proof in the right manner.
`Burden of proof' means that the party claiming a violation of the WTO provision by another country must assert and prove its claim. In this case, the US had put forward evidence to support its case. India had given evidence to rebut the charges, which the panel did not find convincing.
Article 70.9
The AB upheld the panel's view on the issue of Article 70.9. The AB held that Article 70.9 came in force from the day the WTO agreement and hence the TRIPS agreement came into force. Hence, India was in violation of its obligation under Article 70.9 of the TRIPS agreement and it should put in place a mechanism to grant EMR.
Impact of the ruling on India
After losing the dispute in the WTO, India amended its Patent Act to provide for a mail box system and also provided EMR.
References:
- India-Patent Protection for the Pharmaceutical and Agricultural Chemical Products, Report of the Panel, WT/DS50/R, 5 September 1997
- India-Patent Protection for the Pharmaceutical and Agricultural Chemical Products, Report of the Appellate Body, WT/DS50/AB/R, 19 December 199 .
- Resource Book on TRIPS and Development' UNCTAD-ICTSD ( Cambridge University Press: New York : 2005)
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