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Yogesh A. Pai,
Associate Fellow, Centad
The recent judgment of the Madras High Court in Indian
Network for People living with HIV/AIDS and Others v.
Union of India and Others (Writ
Petition No. 24904 of 2008 and M.P.Nos. 2 & 3 of 2008,
Available at: MANU/TN/1217/2008)
has temporarily entombed the legal debate concerning mandatory nature
of India’s pre-grant patent opposition hearings. The Patent Act,
1970 (as amended by the 2005 Act), provides that where an application
for a patent has been published by the patent office, but a patent
has not been granted, any person
may, in writing,
represent by way of opposition to the Controller against the grant of
the patent on the only grounds listed in Section 25(1) (a-k), and
that the Controller shall,
if requested by such
person for being heard, hear him and dispose of such representation
in such manner and within such period as may be prescribed. The
question before the court was whether the use of word “shall” in
Section 25(1), when read with appended Rules, does cast a “mandatory”
or “directory” obligation on the Patent Controller
to hear a pre-grant opposition on request by any person. After a thoughtful
evaluation of all arguments presented, the court adjudged that
“shall” in the context of pre-grant opposition hearing is indeed
mandatory. Setting aside the disputed patent, the court remanded the
case back to the patent office for pre-grant opposition hearing.
In the instant case,
though the petitioners’ notice for pre-grant opposition was
admitted by the patent office, they were not heard on merits before
the grant of patent. The patent office and the patent applicant (one
of the respondents in the case) satisfied among themselves about the
presumed validity of the patent without the office disposing the
petitioners who had filed objections. In a way, petitioners were kept
privy to the proceedings. Respondents argued that the proceedings
before the Controller at the pre-grant stage were merely acts in an
administrative capacity and hence the hearing was only optional - not
being in the nature of ‘quasi-judicial’ proceedings. However, the
court came up with the proposition that pre-grant opposition
proceedings were indeed ‘quasi-judicial’ in nature since the
Controller was acting under Section
77 of the said Act, which vested him with powers of the civil court,
unless specifically excluded by the Act or Rules. Given that the
Controller, by applying his mind, decides over a controversy of
whether or not to grant a patent, any lax in giving an opportunity of
hearing to either of the parties in a quasi-judicial proceeding goes
against the seminal principle of natural justice: audi
alteram partem- no
person shall be condemned unheard. As per the court, “when law
consciously confers right on a person to object at a pre-grant stage,
that right must be protected in the way it has been granted, namely
the right to object with a right of hearing”.
The court also noted that wider public interest concepts like preserving
public health, nutrition, affordability of medicines were well
grounded in the principle of providing an opportunity for hearing at
the pre-grant stage. For the same reason, the court reading the
statement of objects and reasons of Patents Amendment Act 2005 and
narrower position prior to the amendment, said: “any person”
could have a locus standi
at the pre-grant opposition stage, irrespective of any business, commercial
or trade interest. It noted that “grant of patent virtually confers
the right of monopoly, which is a right in rem” granted in favour
of the patent applicant, and therefore “before such a right is
granted, law has provided that right of objection to any person”.
To cut the long story short, the court without stressing on aspects
of quality of a granted patent has however shown tacit concerns about
presumed validity of patents granted without hearing objections at
the pre-grant stage and the long term implications that flow from a
legally unsustainable grant. It is precisely because all economic
rights start flowing after the grant of patent and not before. This
is also clearly visible from the court’s denial to accept the
contention that the petitioners could always have an opportunity to
challenge the patent anytime after the grant, including at the
post-grant stage. The court noted that “an unfair trail cannot be
cured by a fair appeal” and the “insufficiency of the opportunity
of hearing at the pre-grant stage cannot be made good by grant of
opportunity at the post-grant stage”.
It wouldn’t be an overstatement to emphasize how the Supreme Court of India has on
various occasions interpreted the word “shall” to be “mandatory”
and at times “directory” in nature. Nevertheless, courts have
appositely and cautiously invented ways to look into the specific
context of the Act, possible intention of the Legislature and the
consequences that flow from the interpretation. As legal realism
stands testimony in the instant case, the court could not have fared
better to rationalize the tacit will of the Indian Parliament.
Probably, Patent Act, 1970 (as amended up to date), can be singled
out as a unique legislation that provides for an effective pre-grant
patent opposition among comparative patent jurisdictions. At best,
for an Act that evolved out of healthy skepticism of both its
intended and unintended consequences, having a “safety-valve”,
couldn’t mean anything less than the mandatory character of
hearing. This is especially when neither the Act, nor the appending
rules, provides how such arguably “directory” discretion must be
exercised by the Patent Controller. The mandatory nature of hearing
in section 25(1) is indeed the essence of effectiveness of India’s
pre-grant opposition system.
Policy prescriptions may never stand a good scrutiny in the court of law. That’s what legal
precision demands! In an exceedingly polarized debate on
pharmaceutical patents, policy based arguments are not hard to come-
some cerebral, some radical, and some philistine. However, any
understanding of legal principles cannot be devoid of its underlying
policy rationale, provided such a policy perspective stands a good
chance of being convincingly articulated within the confines of the
object of legislation. Now, when it’s all quiet on the legal front,
it’s time to take stock of the policy rationale underlying the
legal debate. Out of many, emphasis can be laid on three of such
arguments based on patent quality, competition principles, and public
notice function of the patent system:
Patent Quality
Some recent law and economics scholarship in comparative patent jurisdictions has
provided empirical evidence for how innovation is stifled when patent
offices grant patents of questionable validity. Questionable patents
are those that are more likely to be invalid when challenged in the
court of law, or contain claims that are overly broad. With the flux
of applications to patent offices, it is evident that patent
examiners spend less time to cautiously evaluate them- a trait not
really unique to the Indian patent office. In other jurisdictions,
new models for ensuring patent quality, viz., patent peer review, and
patent law reforms that provide for a mandated opposition at patent
offices are up on the cards. Hence, it is not completely irrational
to present valid skepticism of the patent office’s ability to
carefully scrutinize all applications based on legal thresholds at an
early stage. There is no gainsaying in the fact that for an
over-burdened patent office, heeding to every pre-grant opposition
hearing may not sound a good proposition. This primarily being an
administrative concern, it may still be resolved by an increase in
staff capacity, demand management and by keeping the pre-grant
process time bound. Nevertheless, an early stage patent opposition
would only help the patent office to grant qualitative patents and
reduce the burden of socio-economic costs of unwarranted grants.
Competition Principles
When viewed from a competition perspective, the problem of some patents stifling
innovation markets and delaying generic competition has increasingly
come under scanner of the Competition/Antitrust authorities across
the world. The United States Federal Trade Commission was among the
early critics, which in a 2003 report on ‘competition and patent
law and policy’, highlighted that questionable
patents can deter or raise the costs of innovation, and also that in
industries with incremental innovation, questionable patents can
increase defensive patenting and licensing. This may prove
anticompetitive. Invalidity proceedings are on rise, and today, there
are more chances than ever that in most cases generic companies who
challenge secondary patents prevail in pharmaceutical patent
litigation. This is confirmed by a very recent November 2008
pharmaceutical sector inquiry preliminary report published by the
European Union Competition Commission which also reveals some more
startling facts about patent acquisition and enforcement strategies
in the pharmaceutical sector. It states: “one commonly
applied strategy [in the pharmaceutical sector] is filing numerous
patents for the same medicine (forming so called “patent clusters”
or “patent thickets”)….. the important objective of this
strategy is to delay or block the market entry of generic medicines.”
It further states, “Patent clusters can lead to uncertainty for
generic competitors as to whether and when they can start to develop
a generic medicine without infringing one of the many (new) patents,
even though patent holders admit internally that some of these
patents might not be strong”. Pre-grant oppositions could in fact
prevent the abuse of patent system by granting quality patents and
avoid wasteful litigation at some later stage.
Public Notice Function of the Patent System
Failure of public notice function of the patent system has led to a host of
new legal and policy challenges- which some scholars would
want to call as “patent failure”. Semantics apart, the argument
is: since patents are currently interpreted using different rules of
claims interpretation at different stages in the legal process, the
outer boundaries of a patent are almost vague. This uncertainty
created due to improper drafting of patent claims and varying styles
of claims interpretation cannot be remedied unless litigated by third
parties. Consequently, freedom to operate and innovate is impeded.
While both the patent applicant and the patent examiner have
first-hand information and the best means to clarify patent claims,
they do not have an incentive to create certainty in the claim
meaning for the benefit of third parties. Thus pre-grant opposition
could facilitate better understanding of how patent offices interpret
patents and thereby create more legal certainty for third parties at
an early stage. This indeed strengthens the legal and doctrinal
foundations of the patent system.
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