Foreign pharma may adopt differential pricing at last

Unnikrishnan of the Mint recently reported that foreign pharma companies are finally ‘mulling’ over whether to adopt differential pricing for their drugs in India.

The foreign drug makers plan to offer these medicines at different tiers of prices for government supply, patient access programmes, hospitals in rural areas and non-profit organizations, said an official with the Organisation of Pharmaceutical Producers of India (OPPI), an industry body that chiefly represents foreign drug firms present in India. The discussions are at an early stage and the strategy may vary for individual companies, he said.

The reasons behind this move are firstly the intense competition that they face from generic manufacturers secondly the recent Roche-Cipla judgment where the Court seems to have been influenced by the huge price differences between Roche’s patented drug and Cipla’s generic drug (Cipla’s drug was one third the price of Roche’s drug) and thirdly to avoid compulsory licensing by the government. Mint reports that companies such as Pfizer are reportedly developing a three tier price model for their anti-cancer drug Stuent.

SpicyIP is happy to hear of this development. Affordable medicines are always good news. But we are also a little skeptical on its implementation. As most of our readers may know MNC adopt the same prices in their Indian markets as in their foreign markets. The reason they do this is to avoid parallel imports into their Western markets. ‘Parallel imports’ refers to the practice of a distributor importing patented, trademarked products meant for one jurisdiction into his home jurisdiction. For e.g. if in case drug companies do indeed mark-down their prices in India then in that case it is very possible that an online pharmacy will start placing orders for these drugs and consequently sell them for a higher price in the Western markets.

Several western countries have legislations preventing parallel imports. (For a more detailed overview on this topic please click here for a detailed albeit dated paper on parallel imports in the pharma industry) But the fact of the matter is that parallel imports still do occur. For e.g. it was reported in 2002 that parallel imports in the U.K. cost the pharma industry a loss of 1 billion pounds a year. The pharma industry is obviously opposed to parallel imports since it erodes their profits.

In my opinion the differential pricing model may run into two problems: One is the problem of parallel imports. The other is the problem of enforcing a differential pricing model within India itself i.e. how exactly do they seek to ensure that drugs meant for the rural market, and hence cheaper, remain in the rural market without being imported into the urban markets. Basically the same problems as parallel imports but this time it is within the country. This is not to say that to implement such a model is impossible but merely challenging. Generics like CIPLA have been reported to have adopted such differential pricing models. Anyway here’s hoping for the best!

Roche vs CIPLA: "Public Interest" Imported into Indian Jurisprudence

Readers may recollect an earlier post on the recent Roche vs CIPLA decision, where we point to the fact that the Delhi High Court order refusing to injunct CIPLA effectively paves the way for "judicially created" compulsory licensing norms in India.

So how does Indian law on this point compare with the US? The key distinction appears to be that while US courts explicitly factor in "public interest" whilst deciding whether to grant an injunction (restraining order) or not, Indian courts do not normally recognise "public interest" as a separate factor. In a previous post explaining the US law on injunctions in IP cases, we note as below:

"Another landmark patent case that reforms US patent law to a considerble extent is "Ebay vs Merck Exchange". This case by the Supreme Court came down heavily on the CAFC (Court of Appeals for the Federal Circuit) practice of grating injunctions in patent cases routinely, and almost as a matter of right. The Supreme Court held that an injunction in a patent case is not automatic but is dependent on the facts of each specific case. It is no different from injunctions in other cases, and can issue only if four conditions are satisfied:

1) that it has suffered an irreparable injury; (2) that remedies such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the "public interest" would not be dis-served by a permanent injunction.

For an excellent discussion on the judgment, see this post from the leading patent blog in the US, Patently-O."

Subsequent to this case, in several electronics and IT cases, US courts have not granted injunctions, but only damages. Illustratively, see this note on a decision, where Microsoft benefited from the eBay rule. As one can appreciate, this operates very much like a "compulsory license" and if applied to pharma, would greatly favour the generic companies.

Contrast the US position/test above with the test in India where courts have traditionally gone by the 3 step test in the landmark British case, American Cyanamid vs Ethicon Ltd, and granted an injunction only when the IP owner has established:

i) That it has a prima facie case
ii) That the “balance of convenience” was in its favour
iii) That it would suffer “irreparable injury”, if the alleged infringer was not injuncted

As one can see, "public interest" is not a separate factor in the above 3 step test. Justice Ravidner Bhat however cleverly reads in "public interest" into the balance of convenience/irreparable hardhsip test (steps ii) and iii)). When assessing these factors, he not only looks into the direct convenience/hardship of CIPLA and Roche, but also factors in the interests of cancer patients in receiving affordable medication i.e public interest. I quote from the judgment:

"“ Court is of the opinion that as between the two competing public interests, that is, the public interest in granting an injunction to affirm a patent during the pendency of an infringement action, as opposed to the public interest in access for the people to a life saving drug, the balance has to be tilted in favour of the latter. The damage or injury that would occur to the plaintiff in such case is capable of assessment in monetary terms. However, the injury to the public which would be deprived of the defendant’s product, which may lead to shortening of lives of several unknown persons, who are not parties to the suit, and which damage cannot be restituted in monetary terms, is not only uncompensatable, it is irreparable. Thus, irreparable injury would be caused if the injunction sought for is granted.”

So now, we have "public interest" as a factor in our injunction jurisprudence (apparently even the first Novartis EMR case seems to rely on "public interest" for denying an injunction). And if Justice Bhat's ruling holds good, then in every case, where the "public interest" is in favour of the generic infringer (likely to hold true in most cases involving important drugs), no injunction would issue. Rather, the patentee is only entitled to damages i.e a "compulsory license" like situation prevails. In other words, apart from the compulsory licensing (CL) provisions in Chapter VII of the patents act, judicial decisions awarding compensation (whether as a lumpsum or as continuing royalties) operate as another stream of "compulsory licenses".

SpicyIP Tidbit: Now Pfizer Sues Ranbaxy

In SpicyIP’s 3 earlier posts, the on-going global struggle between Ranbaxy and Pfizer was reported. The latest news is that Pfizer has sued Ranbaxy alleging infringement of two of its Lipitor process patents. Here’s the complete article from MoneyControl:

The world's largest drug maker Pfizer has stepped up its offensive against Ranbaxy to block it from launching a generic version of its blockbuster heart drug Lipitor. Pfizer has sued Ranbaxy alleging that it has infringed two of Lipitor's process patents that expire only after 2016. The patent infringement relates to Lipitor and Caduet. The case has been filed at a federal court in Wilmington, Delaware.

Ranbaxy has already won a US court verdict that allows it to market generic versions of Lipitor from March 2010. Lipitor is a USD 12 billion anti-cholesterol drug and Ranbaxy has challenged its patents in over ten countries. Lipitor is a big drug and Ranbaxy could have had a one-time upside of USD 200-250 million dollars during the period of exclusivity if this would have been launched. This converts into a per share upside of Rs 40-45 in 2010, when this product would have been launched. This is a big generic opportunity for Ranbaxy in terms of launching a product of this size.

SpicyIP Tidbit: Govt. Disapproves Optical Policy Draft

In an earlier post by Sumathi, a reference was made to the optical disk legislation. Last November, it was reported that the Government was scrutinising the recommendations made with regard to the optical disk law to check piracy in the film industry. The draft law was prepared by members of the film industry along with FICCI at the initiative of the Government. According to the Business Line, a study titled “The Effects of Counterfeiting and Piracy on India’s Entertainment Industry” released by the US India Business Council (USIBC) with Ernst & Young shows that 800,000 direct jobs and Rs 16,000 crore are lost every year due to piracy which naturally explains the concerns of the film fraternity.

Unfortunately, it appears that the Government is not in favour of implementing the recommendations for they require inspection of content and consequently creation of a regime of inspectors. The IB Ministry Secretary Ms.Asha Swarup was quoted as saying that the draft law was not the Government’s preferred way of tackling piracy for it “goes against the very grain of liberalisation”.

Here’s an excerpt from the Business Standard giving industry reactions:

In his address, Yash Chopra, chairman, FICCI Entertainment Committee & Yash Raj Films, said that Indian cinema had transcended geographical boundaries. However, he added: "Piracy, IP protection in the animation segment and censorship are hurdles that the Indian media and entertainment industry have to overcome."

Rajeev Chandrasekhar, MP and president of FICCI, pointed out that the industry today had reached a point of critical mass. "I believe this industry is poised to achieve the scale and size required to have global value and presence," he said. The challenge for the industry over the next few years, he said, was to become globally relevant to the capital markets and investors; relevant to producers and consumers of entertainment all over the world.

Kunal Dasgupta, co-chairman, FICCI Entertainment Committee & CEO Sony Entertainment Television, said: "We are in talks with the Academy of Television Arts and Science in the US, which represents the popular Emmy Awards, and hopefully we will able to present an Indian version of the popular Emmy Awards by next year."

Amit Khanna, chairman, Reliance Entertainment & FICCI Convergence Committee, said new digital technology would reshape the distribution and exhibition business.

SpicyIP Tidbit: Indian Pharma shows off its figure(s)

In continuation of an earlier piece blogged by Sumathi (with very comprehensive comments by sai which are a really interesting read) here is another post on Pharma MNC's facing very stiff competition from their Indian counterparts.

The Economic Times reports that Indian companies have trounced fears that global pharma MNC's would dominate our domestic market in the product patent regime post 2005 as in the last year the market share of foreign companies has fallen from 24% to 22%.

I find the individual comparison more fascinating and so am quoting relevant excerpts:

"UK-based Glaxosmithkline (GSK), which held the number one position in 2006 with 5.59% market share, has now dropped to the 3rd position with 4.51% market share, according to the sales figures of research firm ORG IMS. "

"...Pfizer the only other MNC in the top 10 also dropped one position and is now at 9th position with 2.3% market share. "

With regard to growth -

"...Both GSK and Pfizer posted modest single digit growth off 7.8% and 9.8% respectively during the period against high double digit growth by the Indian companies in top 10. "

"...Cipla the market leader which now controls 5.9% of the Rs 25,000 crore retail market grew by 18.5% while Ranbaxy Laboratories, the second ranked company, grew by 12% in the same period. "

SpicyIP Tidbit: Need for amending the Trademarks Act?

This article chronicles the remarks of senior officials citing the advantages of amending the Trademarks Act for accession to the Madrid Protocol. These changes are to be incorporated in the Trademark Amendment Bill currently with Parliament.

The advantages of such amendments will be as follows:

1. Allowing Indian companies to apply for registration in multiple destinations from their local offices.
2. An 18 month deadline will be applicable for Indian companies applying for trademarks.
3. Global protection under the Madrid system can be availed of.
4. All these factors will be speak up the process of registering trademarks globally.

Will the real NGO please stand up?

The Delhi High Court in its recent March 19^th ruling on the Roche-Cipla issue had lamented about the fact that it did not have access to any accurate information as to how many patients were affected by lung cancer and how many of them actually had access to Roche’s drug. A lack of quality empirical evidence has been a lamentable feature in all policy debates regarding patents in India.

Three days after this judgment of the Delhi High Court a leading business daily carried a front page report quoting a ‘city based policy research group’ on how foreign MNCs have filed 413 patent applications for anti-cancer drugs. (We had blogged about it here) This ‘city based policy research group’ had also come to the conclusion that most of these drugs were not patentable since, according to them, most of the patents were for frivolous changes and this group also seemed to deliver a veiled warning to the patent office examiners when it claimed that “Our analysis shows that most of these applications do not qualify for patents in India. Therefore, the patent examiners need to be very careful while scrutinising them”.

SpicyIP however was shocked at the fact that this ‘city based policy research group’ did not want to be named in the report. One would think that a head-lining act in one of the most reputable business newspapers in the country would be excellent coverage for this ‘city based policy research group’ and they should have been more than happy to let the newspaper publish their name. Unfortunately they seek to hide behind a veil of secrecy. It is unacceptable that this ‘city based policy research group’ seeks to influence such a major policy debate and bring about pressure upon the patent office through such high profile publicity without fulfilling a basic requirement of any public debate – transparency. We have a right to know who is saying what. Publicly announced reports in India are not akin to covert intelligence reports where the source is afraid of revealing themselves to the public. Public debates in India are supposed to be based on transparency and a fully informed public. That includes knowing the credentials of this ‘city based policy research group’. At this stage we pick no bones with the substance of their report. It may be true, it may be false but we need to know what exactly this group has at stake in this debate. Are they involved in any of the high-stakes pharma patent litigation occurring in India at this moment? Do they seek to influence the ‘compulsory licensing’ cases which the Patent Office is currently hearing? What exactly is the methodology of this survey? What are the qualifications of the authors of the report?

The general quality of public debate in the world’s largest democracy has always been lamentable since we are burdened with a bureaucracy which is still obsessed with secrecy. Civil society organizations have been the only saving grace for democracy and debate in this country. For example highly reputable civil society organizations like Lawyer’s Collective, regardless of their agenda, have always been at the fore of filling in the information gap in crucial patent law debates. Unfortunately for us, we are now witness to the day where a civil society organization has sought to adopt the same evils of secrecy and intrigue, evils which the rest of their ilk have sought to combat for a lifetime.

Patents vs Patients: Cipla’s Victory and the Evolution of New “Compulsory Licensing” Norms

The verdict is finally out and we had blogged on the Roche vs CIPLA controversy here, here and here. More recently, Prashant did a short note on Justice Bhat's judgment here.

Extremely well researched judgment—I'm guessing that the judge was helped by a very bright law student (as law clerk). The influence of law clerks on the Indian judiciary is beginning to be felt and will make an excellent topic of research for those of you willing to investigate this issue. For a change, the court cites foreign case law with some bearing on the point and not blindly. And importantly, it cites the more recent case law from abroad, including the famed KSR vs Teleflex decision and eBay vs MerckExchange (both by the US Supreme Court).

Contrast this judgment with the Madras High Court decision in the Novartis case, where in an article, along with Prashant Reddy, I bemoaned the tendency to rely on antiquated cases from abroad:

"The paper will argue that section 3(d) is compatible with TRIPS. It will also argue that although the Madras High Court got its conclusions right, it’s reasoning leaves much to be desired. It relied on an antiquated and wrong notion of "contract" law to rule that it had no jurisdiction to rule on a WTO-TRIPS issue. In order to defend the constitutionality of section 3(d), it again relies on propositions that are mutually contradictory and sometimes wrong.This is deplorable, given the fine repertoire of constitutional law jurisprudence that India is home to and which the court might have dipped into. The court also reveals a fascination for citing foreign case law, even when some of these judgments issued more than a century back and are at loggerheads with what the Supremes have ruled in this country. "


We finally have an Indian judgment that refers explicitly to the "Windsurfer" test on obviousness--long due, as Indian courts are often prone to citing British case law--and one always wondered why Windsurfer was left out (I could be mistaken here--if any of you know Indian patent decisions referring to Windsurfer, please let me know).

Importantly, the court castigates the patent office for not rendering a reasoned decision at the pre-grant opposition stage (recollect that Natco had filed a pre-grant opposition and this was decided by the patent office in favour of Roche). In particular, the court takes the patent office to task for relying blindly on the "suggestion, motivation, teaching" test in the US--a test deployed by the Court of Appeals for the Federal circuit in the US for a great number of years and one which which lowered the bar for patentability considerably. The US Supreme Court came down heavily against a formalistic application of this test in KSR vs Teleflex.

Little wonder then that Roche's argument that the pre grant opposition would render the patent immune from attacks on validity did not sway the court much. The court does not deal explicitly with whether or not CIPLA ought to have availed of the post grant opposition mechanism (instead of resorting to infringement and then counterclaiming validity). It seems to have agreed with CIPLA's argument that so long as the patents act independently recognises the right to ask for a revocation at any stage (and counterclaim invalidity), the lack of a post grant oppostion by the "revoker" is not critical. One also wonders whether this factor might have weighed in the minds of the court: how likely is the patent office to reverse its own decision at the post grant stage? (recollect that in an ill reasoned decision, the patent office dismissed Natco's pre-grant opposition).

We had blogged on the potential clash between the patent office and courts in the context of Bilcare case here. And with more patent decisions reaching courts, we're certain that there will be plenty of more cases where the two bodies reach different conclusions.

The court seems to have adopted a very prudent line of reasoning. In essence, their logic seems to be this: we're not sure whether this patent is valid or not. But till we determine this at the final stage, we're going to come down in favour of lung cancer patients, more of whom are likely to be able to afford the cheaper drugs from CIPLA. And to the extent that the patent is held valid at the final stage, CIPLA can always be called upon to compensate the patentee for its losses up to that stage.

Both jurisprudentially and from a policy perspective, I can't see problems with this line of reasoning. One tiny glitch though--the court admits that it lacks conclusive numbers (number of cancer patients in the country, numbers having access to Tarceva etc). But perhaps at the interim stage, intuiting that more prices means less access is a reasonable one. And the price differential was huge--3 times! Hopefully we'll see more numbers at the final stage..

I’ve received a number of emails asking me what I thought of the judgment and as to what were the implications for the pharmaceutical industry and for public health in general. If I were to summarise the most important implication of this judgment, it is this:

The judgment effectively introduces compulsory licensing for pharmaceutical patents. I’ve elaborated on this aspect in an article for the Economic Times that was published in the Delhi Edition yesterday. Unfortunately, I don't have a direct link to this. But if you go to the ET website and click on e-paper version yesterday (and chose the Delhi edn), you'll find it on the "policy" page.

Patents vs Patients: Cipla’s victory and the evolution of new “Compulsory Licensing” Norms

"In a major victory for public health advocates the world over, Justice Ravinder Bhat of the Delhi High Court recently ruled that CIPLA could continue producing generic versions of Roche’s patented anticancer drug, Tarceva (Erlotinib). Ignoring Roche’s statutorily granted right and ruling unequivocally in favour of the rights of cancer patients to access cheap medications, this could be India’s most path breaking patent decision till date.

The key issue before the court was whether or not the patentee, Roche was entitled to a temporary injunction restraining CIPLA from selling its version of Erlotinib, under the brand Erlocip.

Echoing the findings in an old British case, American Cyanamid Co vs Ethicon Ltd, the court held that a temporary injunction would issue in favour of Roche, only if it proved the following:
i) That it had a prima facie case
ii) That the “balance of convenience” was in its favour
iii) That it would suffer “irreparable injury”, if CIPLA was not injuncted

On the first condition, the court held that Roche had demonstrated the existent of a prima facie case of infringement, since it held a valid patent that was infringed by CIPLA. However, the court also noted that CIPLA had raised a plausible doubt that the patent was invalid, as it was “obvious” and it did not comply with section 3(d)—a unique section introduced in India’s patent regime to weed out frivolous pharmaceutical patents. Owing to the fact that this was only an interlocutory petition, the court did not delve too deep into the merits of this contention.

The court then looked to the second factor, namely “balance of convenience”. In other words, would the non-grant of an injunction inconvenience Roche more or would its grant inconvenience CIPLA (and the patients) more? Closely related to this analysis is whether or not Roche would suffer irreparable hardship if it did not obtain the injunction.

The court held that Roche would not suffer irreparable hardship from the non grant of an injunction. If Roche’s patent was to be found to be valid at the final stage, it could easily be compensated at that stage for all the losses accruing to it from the non-grant of a temporary injunction. To this extent, the court asked CIPLA to maintain accounts of sales etc.

In supporting CIPLA and holding against Roche, the court revealed a clear preference for patients over patents. It noted in pertinent part that CIPLA’s drug was 3 times cheaper than the Roche version. From this, the court concluded that more patients would be able access the CIPLA version, Erlocib.

Importantly, the court was also very concerned with the fact that Roche was not manufacturing the drug in India. Perhaps the pre 1970 position, where India was literally at the mercy of MNC’s (which more or less controlled drug supplies) might have played out in the mind of the judge.

In what must surely be music to the ears of patients and public health activists, the court elevated the right of a patient to access cheap drugs as a fundamental right to health under Article 21 of the Constitution.

Another major implication of the courts judgment is the introduction of new compulsory licensing norms. Thus far, we’ve known of only “statutorily” created compulsory norms in Chapter VII of the Patents Act. This chapter contains a number of provisions whereby a patentee could be forced by an applicant to license his/her invention on reasonable royalty terms.

Unfortunately, most grounds for compulsory licensing under this chapter kick in only after 3 years have elapsed since the date of grant of patent. For a drug like Tarceva patented only in 2007, CIPLA would have to wait till 2010 before approaching the patent office for a license. Under the Delhi High courts ruling however, CIPLA could cleverly achieve what the statute states without waiting for the 3 year period. All it has to do is to introduce generic versions of a patented drug and then wait to be sued!!

Although this is only a temporary ruling and we still await the final decision (after trial), the logic of Justice Bhat could be transposed to a final decision on the merits. In other words, if the patented drug is priced more than the generic (which is almost always the case) and is not manufactured in India (about 90% of MNC drugs qualify under this), the patentee will not be entitled to an injunction. Rather, damages will be taken as sufficient compensation for the losses to the patentee from infringement by a generic which sells its own cheap version of the generic.

In short, the Delhi High Court has effectively created another stream of “judge made” compulsory licensing. And to this extent, India has once again shown that it will strike a different chord from the rest of the world and evolve new “patient” friendly patent norms, when the situation so demands."

Big Pharma and neglected diseases

The BS and the Mint recently carried stories on Pfizer’s announcement that it will focus its R&D efforts on diseases affecting developing countries such as India. As of now Pfizer seeks to target diseases such as cancer, diabetes, neurological disorders and inflammation, with special emphasis on the regional characteristics of the ailments. Pfizer will also work on certain vaccines and other unmet medical needs. However it remains to be seen whether Pfizer actually translates its words into actions or whether this is a mere public relations exercise.

On a different note SpicyIP noticed that none of the above mentioned diseases are neglected diseases such as TB or Malaria, both of which are plaguing the developing world. We however did a random search on the R&D efforts into these neglected diseases and came out with some pretty interesting results. Contrary to common perception pharmaceutical majors are quite involved in developing drugs for neglected diseases. The business model however is not profit-oriented but instead depends on highly subsidized R&D through Public Private Partnerships (PPP). The operating fundamentals of these PPPs is simple – money (mostly from well endowed charities such as the Bill-Melinda Gates Foundation ) is donated for R&D to pharma majors following which any product of the successful research venture will be sold on a no-profit, no-loss basis. The main advantage of these PPPs is that they link the funding and logistical networks of charitable organizations to the impressive R&D infrastructure of MNCs. Only MNCs have libraries of millions of compounds and the adequate capabilities in medicinal chemistry to efficiently develop lead compounds to tackle the neglected diseases. Click here for a detailed note on some of these ventures.

The three most successful organizations – MMV, DNDI and the TB Alliance are all non-profit organizations. They all attempt to share R&D results in a bid to improve efficiency. GSK, Bayer and Novartis are TB Alliance partners. Lupin is involved in the TB Alliance Project and is in partnership with CSIR. Ranbaxy was a partner in the Medicines for Malaria Venture (MMV) until it pulled out in September, 2007. Similarly the Drugs for Neglected Diseases Initiative (DNDI) is partnering with drug majors like GSK to develop drugs for neglected diseases such as Leishmaniasis (Kala Azar). Even Sanofi-Aventis is in partnership with DNDI and introduced a successful anti-malarial drug for less than a $1 in Africa. Similarly Novartis developed Coartem with the Institute for Microbiology and Epidemiology in Beijing by combining a traditional Chinese plant-based remedy with a synthetic substance which has a 95% cure rate and is one of the most effective drugs in the market. These drugs are being supplied to WHO for distribution in Africa at no profit, no loss to Novartis. Pfizer is spearheading a similar venture in Africa which is aimed at eliminating Trachoma a disease that causes blindness.

This brings us to the million dollar question – why are the drug companies in such an altruistic mood? According to Bernard Pécoul, executive director of DNDI, a doctor and public health specialist who spearheaded the antimalaria project “It’s good for their image,” he says, “but it will also help with the penetration of these countries’ markets.” Building up business networks and contacts in countries where they have no marketing as of now is indeed important to these companies in the long run. The image make over is desperately needed especially after the disastrous patent litigation in South Africa and India. Just think of it as a really smart, zero-cost advertising campaign by the drug companies.

SpicyIP Tidbit: BBMP seeks to patent construction technology

The Hindu reports that the BBMP or the Bruhat Bangalore Mahanagar Palike is seeking to patent a novel technology which allows it to build an underpass for a fraction of its previous cost. While the usual cost of an underpass is usually Rs. 20 crores the novel technology would reduce costs to a mere Rs. 1 crore! The other huge advantage of these underpasses is that they take significantly lesser time to construct – a huge advantage in congested cities such as Bangalore. However this is not always the case - The BBMP had earlier gone to town how it would build underpasses in 72 hours and later ended up taking 33 days to do the same!

While the Hindu report was not very detailed, the technology seems to be based on extensively pre-fabricated structures which are later assembled at the site. A Bangalore blog had some details of the technology -
A precast factory-built unit will be erected at the site. The unit is buried into the earth at an appropriate depth. Then necessary approaches will be given to the underpass. In all, six such underpasses will be constructed by BBMP in the next few days. None of the news reports were clear on what exactly is novel in this technology because pre-fab constructions have been around for quite some time now.

This technology apparently has caused quite a buzz in the construction world leading to several enquiries because of which the BBMP is seeking to patent the technology and earn royalties by licensing it out to other municipal corporations.

SpicyIP Tidbit: Frontline's interview with Dr. Baltimore

The Frontline one of India's last few leftist news magazines' (The cover story last month was a tribute to the 'Living Legend'- Castro, the week after that the cover story was an attack on the 'Neo-liberal policies' of the UPA Govt.) carried a superbly detailed interview of Nobel Laureate David Baltimore. Dr. Baltimore shared the Nobel Prize for Physiology or Medicine with Howard Temin and Renato Dulbecco at the young age of 37. At the time, Baltimore's greatest contribution to virology was his discovery of reverse transcriptase (RTase). His research was also crucial to development of Glivec - Novartis' anti-cancer drug which was the subject of intense litigation last year.

The reason that SpicyIP is bringing this interview to your notice is the fact that it gives a scientist's perspective on the 'moral conundrum' regarding public health and patents. The interview also covers other interesting topics like the Bayh-Dole Act, the problems of maintaining a high-quality open source journal like Nature and the funding problems being encountered by the Bio-Tech Industry. Its a two part interview and a must read. Please click here for the first part and here for the second part. SpicyIP found the second part 'spicier'.

SpicyIp Tidbits:Google launches Open Social Foundation

The Open Social movement that was launched in November last year provides a common mechanism for developers to easily hook into many different social networks and extend their functionality.

To further this initiative, Google has teamed up with Yahoo and My space to form the Open Social Foundation, a ‘non-profit, private foundation dedicated to the sustainable and open development of the Open Social initiative and related intellectual property.’

Open Social Foundation will be structured to include both corporate and individual representation, and to foster a transparent and participatory community for the purpose of providing equal access to specifications published by the Open Social Foundation, at no charge.

The responsibilities of the Open Social Foundation include:

• Creating a structure and instituting practices for technical development by a broad base of contributors and community stakeholders, independent of any undue influence by any one party
• Creating a governance structure and instituting practices for oversight of community-based development, including review and voting procedures, working group charter creation, dispute resolution, and similar procedures.
• Establishing an intellectual property rights policy
• Holding assigned intellectual property
• Enforcing trademark and copyright
• Creating and maintaining the Open Social website and community.

Should this community initiative, stoke the social spirit in you, access details here to register in the activity and formation of the Open Social Project

Commercial Success v. Public Interest: Publicising Clinical Trial Data

Someone pointed out an extremely interesting article by Sarah Hiddleston in The Hindu to me. The article deals with striking that important balance between publicising information from clinical trials and a company's own commercial motive. While believing that the former outweighs the latter, the article states several relevant questions through various examples. I reproduce the article below (do go through portions highlighted that I found to be an eye-opener.)

" Does putting full sets of clinical trial data in the public domain affect a company’s commercial interest? It might. But does the public interest not outweigh this? Yes, because if the product is useless or harmful, there should be no commerce in it in the first place.

The scientific study that exposed that expensive anti-depressant drugs including Prozac, used by 40 million people around the world, are no better than sugar pills has brought in its wake many questions about how and why these products were brought into the market. But the story also shows how, when used correctly, right to information laws are powerful tools for correction of abuses, and why such information should remain accessible to those who seek it. Furthermore, it makes a significant case why all trial data should be placed in the public domain for scientific scrutiny, rather than belonging exclusively to the company that generated it.

As it happens, India is about to experience a test case for its 2005 Right to Information Act with regard to data from clinical trials: Multinational major Monsanto’s subsidiary Maharashtra Hybrid Seeds Co Ltd is to take the Central Information Commission to court over two orders passed last year compelling the Department of Biotechnology to release data on health and environment safety tests conducted on genetically engineered brinjal, okra, mustard, and rice and the minutes of the meetings of the Review Committee of Genetic Manipulation (RCGM) that approved them for field trials.

The Central Information Commission heard, on April 13, 2007, its first appeal on a submission filed under the Right to Information Act denied to Divya Raghunandan by the Department of Biotechnology. The Commission found that the information, which was denied on the grounds that it could harm Mahyco’s competitive interest (section 8(1)(d) of the Right to Information Act), was a matter of public interest and so, as is clear from provisions of that section, could not be withheld.

When the Department of Biotechnology failed to comply, the Commission heard a second appeal on November 22, 2007. The Commissioner, after going through the Environmental Protection Act (1986) noted: “it is quite clear that genetically engineered organism [sic] or cells are recognised by the government as an item potentially hazardous to public heath. It automatically follows that full compliance with these rules is a matter for public interest.”

Genetically engineered crops are like drugs in that they both pose potential biohazards to the body. In the same way that drugs are tested for safety and effectiveness so the bio safety of transgenic crops must be determined. Ms. Raghunandan has asked for the proof generated from laboratory, greenhouse, and contained field trials that is required by RCGM before approval for multi-location open-air field trials. These, she submitted before the Information Commission, are difficult to control and open to the elements and wildlife. Mahyco’s case, submitted before the Delhi High Court on December 4, is that the information is a matter of commercial confidence and revealing such information before large scale field trials for agronomic advantage are completed could prejudice their chances of filing for a patent.

The question therefore is this: when does public interest in trial data outweigh commercial interest?

Dr Irving Kirsch, professor at the department of psychology at Hull University, and his colleagues in the United States and Canada were able to draw their conclusions about anti-depressants only because they were working from complete sets of raw test data. Their paper can be read in the open-access Public Library of Science journal, PLoS Medicine.

If the researchers had not gone to such lengths to obtain full data from the U.S. Food and Drug Administration (FDA) under the freedom of information act, we would never have known that published data available to the scientific community had not included significant information from unfavourable trials (nine of these were refused by the FDA, data from four of them were obtained from a company website). We would have also been ignorant of the fact that the FDA had not spotted data manipulations from which conclusions were drawn and approved the drug on that basis. Nor would we have known that the companies involved had breached the trust of those who underwent the trials, the doctors who prescribed the medicines, and the patients who took them. Nor that these companies have made massive profits for something that has not stood up in the trials.

What if a product was found not just to be ineffective, but harmful? Just 10 days after Kirsch’s results were published, GlaxoSmithKline was found to have withheld clinical trial data from the United Kingdom regulator, the Medicines and Healthcare Regulatory Authority (MHRA), that showed that its anti depressant increased the risk of suicide among teenagers, and that it had known this since 1998.

Does putting such data in the public domain affect a company’s commercial interest: Yes. But does the public interest outweigh this? Yes, because if the product is useless or harmful, there should be no commerce in it in the first place.

Companies claiming that this might affect their intellectual property would do well to remember that this is at the core of the a defined set of criteria through which society gives up its fundamental immediate right to health to grant a right to property. A patent, which gives a company a monopoly in recognition of the risks it undertakes in product development, is awarded if a product is new, involves an inventive step, and has an industrial application - in other words if it is useful.

Most companies already have patents on their products before they move to clinical trials. There could, possibly, be a case for re-examining the timing of the patent grant. But in today’s situation companies need not be concerned about losing the competitive advantage they have if the product is genuinely useful — no other company will be able to produce it because they already have the market monopoly guaranteed.

There are many voices in the scientific community calling for public disclosure of full sets of data for review to ensure independent evaluation of data. Perhaps nowhere is this more relevant than in India, where the government courts investment from overseas companies in clinical trials and its own industries seek to develop new products. As the subjects of much experimentation, Indians deserve to have the data generated from trials properly analysed. And for a country with a definite comparative advantage in this field, the government should ensure that it uses this capability to produce world-class products."

The article in my opinion raises several important and relevant questions:
1. Even if Companies are allowed to continue making profits, can this be done at the cost of a suffering public?
2. Even under the Right to Information, what information can the public actually be made aware of? And on what grounds can such information be refused?
3. Is there a right to information from private entities, such as pharmaceutical compnies for the mere fact that they are engaged in a business as critical as producing medicines that could save lives?
4. Is the fact of the product possibly becoming 'prior art' due to "public use/knowledge" any defence for the Companies against the claims put forth by the public?

These questions need answering, and it is commendable that the fourth estate that has drawn so much flak for wrong/flawed reporting, has understood and brought the attention of the common man to an important issue such as this.

SpicyIP Tidbits: Chrysler-Mahindra in Jeep-fight

Auto major Chrysler's South African arm has complained against a local ad run by Mahindra & Mahindra, which uses its automobile marquee "jeep", saying it owns the trademark to the world's oldest sport utility vehicle of World War II vintage.

An agency report on Sify says that "The Advertising Standards Authority of South Africa (Asasa) is looking at the matter even as Mahindra and Mahindra says it used "jeep" with a lower case to denote the generic name for the kind of multi-purpose vehicles it makes."

In response, Mahindra & Mahindra in South Africa has reportedly brought out a full-page counter-advertisement providing a "Public Declaration of Facts", defending the content and accuracy of its original ads, stating that it does NOT lay claim to the Jeep brand. Instead, it says that the original commercials were only meant to introduce South African consumers to the iconic (sic) Indian brand.

Now, I haven't been keeping track of developments in the auto sector, but I recall some reports not too long ago of Mahindra contemplating an Indian partnership with Chrysler, specifically for its Jeep brand, either via an equity-split, or through a manufacturing collaboration. This came close on the heels of the Indian company having abandoned its proposed Chennai-based JV with Nissan-Renault.

In fact, the Mahindra-Chrysler relationship dates back some decades: Mahindra was once the Indian distributor for Chrysler jeeps, and its own earliest products were manufactured on the iconic Willys Jeep platform (now part of the Chrysler group). In this context, it seems like there might be something below the surface that this South Africa report has not quite caught on to. Is this just a (highly unlikely) case of miscommunication between the company HQs and their regional subsidiaries? Or is there trouble brewing between the two companies, and are Mahindra's foreign associations jinxed yet again?

Pharma MNCs approach the DGCI: To take on the Patent office together

Citing the Cipla scenario as an example (and in light of the judgment that has already been discussed by SpicyIP), Pharma MNCs through bodies such as the Organisation of Pharmaceuticals Producers of India are all set to urge the Drug Controller General of India (DCGI) to better co-ordinate with patent offices across the country.

The Director General of the OPPI, Tapan Ray. has also been reported to have stated in great detail that the reason for the Cipla case in the first place is a procedural flaw on the part of the DGCI.

However, as reported by the Financial Express, patent attorneys point out that the MNCs’ demands are not viable especially since the any procedural requirement claimed by them are all part of the US law [The FDA Orange Book contains the approved drug list by active ingredient, proprietary name, applicant holder or applicant number and concurrently updated with publication of annual edition or the cumulative supplements] and do not have any binding force in India.

Perhaps it is a good idea for the Pharma MNCs to first know which law is actually applicable in this country and then take a look at prior Spicy posts where Shamnad has urged for transparency. Maybe it's a better idea to begin from scratch and build a strong system on our own rather than based on borrowed methods.

Find the full article here.

MNCs and Patent Applications: The Tip of the Iceberg and the Iceberg itself

According to a news item that featured today in the Business Standard, the Novartis and Roche controversies may just be the "tip of a huge iceberg." According to the report:

"358 of 413 drug patent applications for the disease in India are from top multinationals.

A city-based policy research group has found that multinational drug firms have filed over 350 patent applications for drugs used in cancer treatment.

An analysis of pharma patent applications pending with the patent office by the group, which did not wish to be identified, has put the number of cancer drug patent applications at 413. Of these, 358 came from top multinationals like Novartis, Aventis, Bristol Myers Squibb, Pfizer, Boehringer, Roche and Abbot.

The rush for patents on cancer medicine can be explained by the potential of the Rs 1,200 crore Indian market.

With nearly 2.5 million patients, cancer is one of the ten leading causes of death in India. Data sources from the National Cancer Registry Programme show that over 700,000 new cases and 300,000 deaths occur annually due to cancer.

However, not all 413 applications will pass muster with the patent office, a patent expert warned. India does not give patents on drugs patented elsewhere before 1995.

The patent expert said only two drugs in the list of applicantions were granted patent in the United States after 1995. Most applications, people involved in the research said, are for derivatives or minor modifications of medicines that are not eligible for patents.

'Our analysis shows that most of these applications do not qualify for patents in India. Therefore, the patent examiners need to be very careful while scrutinising them,' the researcher who leads the study said."

If this is truly the case, we can expect a spate of litigation under the famous (or infamous, depending on your perspective :D) Section 3(d) of the Patents Act. The discussions in the lower and upper houses of the Indian Parliament prior to the passage of the Patents Amendment Act 2005 reveal that one of the key concerns was to prevent evergreening of patents. As has been emphasized by a number of us in Spicy IP, section 3(d), if used appropriately can be an effective tool to weed out non-meritorious patent applications.

While MNCs are busy seeking patents on what they perceive to be patentable inventions or "improvements," on the other side of the fence, generic companies continue to do what they are best at: copying and making low(er) cost "versions" of patented drugs available in the market. According to another news item in the Economic Times, "Natco Pharma is considering launching its generic copy of Tarceva at a price less than Cipla’s version of the same drug"

Needless to say, Natco's decision is a direct result of the recent Delhi High Court decision allowing Cipla to sell its generic version of Tarceva even though Roche holds a product patent on Tarceva in India. While refusals of temporary injunctions do not guarantee a final victory, the courts reasoning (as reported in the Mint) for denying the interim injunction (that "irreparable damages would accrue to the patients who will have their lives cut short if a cheaper version of the drug was denied to them,") may also be applied if the court chooses to deny a permanent injunction. Has the Indian judiciary created a precedent that allows generic companies to bypass the statutory requirements under the "compulsory licensing" provisions of the Patents Act? If the decisions similar to the recent Delhi HC decision become the norm, will India be in violation of TRIPs? Possibly... especially if the generic companies now use delaying tactics to prevent a speedy final decision on the merits. More on this issue in a later post...

Clearly, the final decision in the Tarceva case has to address the issue of validity of the Roche patent. However, having opened the pandora's box on "public interest" arguments, it would be interesting to see how (if at all) the court addresses this issue if it finds the Roche patent to be valid.

SpicyIp Tidbits: Federal Court of Canada nays Ranbaxys claims to Generic Lipitor

The Federal Court of Canada has reversed a lower court order that had earlier held that Pfizer could not bar Ranbaxy from obtaining approval for manufacturing a generic version of Lipitor the cholesterol lowering drug. The appellate court has issued an order prohibiting regulatory approval of Ranbaxy’s product in Canada until Pfizer’s enantiomer (calcium salt form of Lipitor) patent-Canadian Patent No. 2,021,546 “(refer Spicyip post) on the blockbuster drug expires in November 2011.

A Netherlands court has also restrained Ranbaxy from producing the generic version of the Lipitor before the expiry of the patent term.

Ranbaxy is likely to seek to review of this decision at the Supreme Court of Canada

SpicyIP Tidbits: Indian piracy in numbers

An Indo-US film industry study has been doing some number crunching for piracy in India, of which Mint here gives us a sneak preview.

The study titled The Effects of Piracy and Counterfeiting on India’s Entertainment Industry, set to be revealed at the Ficci Frames conference later this week, estimates that piracy and counterfeiting have lost the Indian entertainment industry almost 40% of potential annual revenues, approximately Rs16,240 crore (or USD 4 billion), as well as around 820,000 jobs.

The industry hopes to use the results of this study to lobby for “a robust legal ecosystem” from the state, including the adoption of optical disc legislation to protect intellectual property rights. SpicyIP looks forward to reports of the conference, and can't wait to see what non-traditional and innovative best practices the study has to suggest in tackling piracy, especially the online variety.

SpicyIP Tidbits: Harpic vs Domex: an Indian Water-Loo

Another pair of FMCG majors in India have gone to the mattresses in yet another comparative ad case (there seem to have been a spate of these of late). Reckitt & Benckiser India (R&B) has moved the Delhi High Court seeking restraint on a Domex - Hindustan Unilever (HUL) ad that has allegedly brought discredit to its own brand Harpic. The court has reserved judgement on the matter.

An agency article on this case can be found in BS which SpicyIP originally came across on this blog. An ICMR in-depth marketing case study on this issue can be found here, which brings to light the mudslinging between the two companies over the past few months.

A brief history, as culled from the case study:
In late 2007, R&B launched a TV ad for its brand Harpic Power claiming its acid-based product was better than bleach-based products in the market. HUL, whose Domex Cleaner is bleach based, took R&B to the Madras High Court arguing that the claims made in the ad were false and incorrect. In December 2007, the High Court passed an order restraining R&B from airing the ad, which was allegedly ignored. HUL proceed with a contempt of court application. In January 2008, R&B claimed before the court that it had instructed the TV channels not to air the ad from the 'knowledge of court injunction'.

In response to HUL's Madras case, in February 2008, R&B filed a lawsuit against HUL in the Delhi High Court seeking a restraint on HUL's TV ad for Domex, alleging that the ad discredited its Harpic (and this is where we are now).

According to R&B, HUL's ad allegedly shows its white-coloured Domex killing germs more effectively than a blue-coloured liquid. R&B's petition hinges on the argument that its blue-coloured Harpic, a household name, has been in the market for 80 years, and that the colour is synonymous with its product in this category. R&B alleged that the Domex ad was intentionally telecast to disparage the entire class of blue liquid toilet cleaners and in particular Harpic. HUL, on the other hand, argued that this did not hold valid as R&B's Harpic was being sold in non-blue formulations as well.

I came across another analysis here which suggests that Domex is trying to capture the unorganised Phenyl segment in the household-cleaning market, which would explain its 'white' USP. That would also explain why it is priced much lower down compared with Harpic because its target consumers are different. Harpic has a gigantic 80% share in the toilet cleaning segment, and even if Domex is trying all sorts of tactics to get a share of the pie, it will take a while. Nevertheless, this looks like it might be fun. I wonder which of the two FMCG giants will meet their Waterloo (sic).

SpicyIP Jobs: Patent Attorney and University Patent Consultant for US Firm

A friend of mine who works for a US corporation out of Bangalore informs me that they are looking to hire. I extract portions of his email to me spelling out what the respective jobs entail. If you are interested in either of these positions, please write to me at shamnad@gmail.com, with your resume. Please also specify which of the below positions you intend to apply to. Also, please feel free to forward this announcement to friends etc who might be interested.

1. Patent Development Manager

The selected person will be responsible for managing outside patent attorneys and overseeing the patent application, patent issuance, and patent optimization process. Patent development managers will build, review, and manage a group of outsourced patent attorneys to ensure that the company has a balanced mix of relationships at the best economic cost such that enough patent filing slots are available for use. Candidates should have a patent attorney / agent background locally and have working knowledge of U.S. patent law and processes. Also, it would be ideal if the candidate already has some experience with drafting of US patents.

2. Business Development Manager

Business development managers are persons with business skills that will be responsible for building relationships with inventors, the inventors’ sponsoring institutions, government agencies, law firms, and other business partners. The primary mission for a business development manager is to build and nurture relationships with institutions, such as universities and to create and implement marketing strategies that build the overall company brand.

Ideal candidates will have experience in dealing with universities and research institutes and in business development for businesses that require long lead times to fully nurture and realize transactions from relationships. The position requires creativity – the ability to achieve short-term goals while managing an overall relationship strategy that will produce steady results over a long period of time. Over the long term a Business Development Manager will help build a the brand in India. They will also develop marketing programs, material and IP products for the Indian inventors. They should be able to connect with best inventors in India, understand the needs of inventors and build long term relationships.

So if you are a tech transfer officer or have some experience with tech transfer etc, this is the job for you. You also need to have very good sales and relationship building skill and talent. You should also have experience building a brand and managing marketing programs.

3. Invention Development Manager (IDM)

Invention development managers are persons with technical skills or subject matter experts that work with inventors to drive invention disclosure flows. The number of technical experts hired in each office will vary according to the technology sectors that a country has strength in and by the number of institutions and inventors signed. Invention development managers are expected to assist inventors on a day to day basis, to build and nurture relationships with inventors, and to build and be able to mine a database of inventors to optimize channeling invention topics to the right inventor to maximize disclosure flow. Invention development managers are also expected to be able to participate in the creation of invention topics and in triage of disclosures, and to assist portfolio architects in managing the invention topics relevant to their domain area and within their respective country.

These managers should have extensive technical experience in one or more technical fields. Candidates should also possess a keen interest in technology areas other than the one area they may have specialized in – given our broad technology categories, the ideal candidate will possess working knowledge or at least have the capacity to tap into a network of specialists across a broad technology category (IT is one example, where we may find a semiconductor specialist who keeps up with latest developments in other IT fields).

Ideal candidates will have invented, have applied for patents, who are passionate about inventing. Candidates who are personable, able to build and nurture relationships. Candidates who are eager to explore new technology areas, who are creative problem solvers.

SpicyIP Tidbit: The North East on a GI roll!

Just today after reporting on the proposed geographical indication for the Byadgi Chilli, the North East has decided to join the bandwagon and bring a smile to thousands of entrepreneurs in Assam and Nagaland! The Indian Chamber of Commerce, is set to file applications seeking Geographical Indication Registration for the distinctive Assamese gamosa (a traditional piece of Assamese clothing in white and red to be draped around the neck) and the famous Naga shawl.

Seems like these garments are going to follow Assam Muga Silk, and Darjeeling Tea into the Registry! The North-east definitely knows how to protect products from its region.

Find the full story here.

Copyright and Current Reporting: FilmFAIR!

The Filmfare Awards. One of the biggest and most publicised events for the Hindi film industry. However, for the Indian IP enthusiasts, this name could now be synonymous with current reporting and fair dealing!

Recently this award show was screened at a primetime slot on Sony TV (India). As with most important and well publicised functions, Sony had made sure that they had acquired the exclusive license to broadcast the show. However, there were several other channels on television that broadcast excerpts of the show citing fair use as a defence.

Examining the situation under Section 39(b) of the Copyright Act, 1957, the Delhi High Court earlier this month summarily dealt with the case in what I think is an interesting order. Though the order expressly states that it cannot be considered precedent, deciphering the order may help in understanding what this means for reporting in India.

The order lays down two conditions under which excerpts of the show may be broadcast:

Firstly, a precondition. That such broadcast, even if for fair use, may be allowed only 90 minutes after the show was first telecast on Sony TV.

And, secondly, that the excerpts may be broadcast for a maximum of 8 minutes with the Sony TV logo, and comprising solely of information that may be considered "newsworthy" to the public. This would basically imply that while the channel may telecast Kareena Kapoor receiving her award, there could be no telecast of random shots such as her staring lovingly at beau Saif Ali Khan, or even of her performing during the show!

Essentially, the Courts have sought to strike a balance between the rights of the copyright holder and the "fair dealer". They have emphasised on the right of the copyright holder in broadcasting such work, and at the same time maintained that the news channels may continue to do their job- by focussing on the news and crediting the telecast to its original source. An interesting observation here is that the Court has not only looked into the duration of the clip but also newsworthiness of such content- thereby ensuring that substantial portion of the work is not reproduced and that the relevance of such work for purposes of current reporting continues to be maintained.

Other fair dealing cases involving big players such as ESPN still pending before the Courts. Perhaps then it is high time that Courts start to delve into the nuances of fair dealing, for not all cases will be as simple.

SpicyIP Tidbits: GIs getter spicier by the second!

After the Mysore Mallige and Darjeeling Tea, the Minister for Commerce has endorsed the need for another much spicier GI!

The Byadgi Chilli, grown in the Haveri district of Karnataka, is acclaimed for its colour and less pungent odour. Inaugurating a chilli processing plant that hopes to increase the production of the spice in line with demand, Minister Jairam Ramesh has stated this would definitely help farmer's in securing higher prices and better export value.

Looks like everything in IP seems to have a Spicy edge to it these days!

SpicyIP Guest Series: Chris Ohly and Sal Patel on the US Patent Reform Bill

In a previous post, we promised to bring you a guest post by a well reputed and leading patent litigator in the US, Chris Ohly.

Chris has now sent us a very incisive piece on the latest US patent reform bill (co-authored with Sailesh Patel, another brilliant patent attorney and partner at Schiff Hardin). In particular, they focus on the highly contentious "damages" provision.

Unfortunately, blogger does not permit me to post footnotes. I've therefore uploaded the complete version of their article (with footnotes et al) on google docs. Please see here.

However, I have extracted some of the key provisions of their article below. In particular, they have a very interesting section on the implications of this proposed reform bill for India.

The US Patent Reform Act of 2007: Implications for Innovation and India
By D. Christopher Ohly and Sailesh K. Patel ( The authors are partners in Schiff Hardin, LLP. The views expressed in this article are those of the authors alone, and do not necessarily reflect, in any manner, the views of any other person or entity, including Schiff Hardin, LLP and its other attorneys, or any of the clients of the firm).

"The long debate over reforms to United States patent statutes appears finally to be nearing conclusion. On September 7, 2007, by a vote of 220-175, the United States House of Representatives passed the most comprehensive amendments to the US Patent Act in more than 50 years. In January 2008, the Senate Judiciary Committee reported a different version of the proposed law to the full US Senate for its consideration.

The Patent Reform Act of 2007 was the result of years of hearings, lobbying and negotiations among representatives of a number of stakeholders. Provisions of the Act were generally supported by the Business Software Alliance, high-tech companies and the financial services industry, all of which included businesses that have been the subject of frequent suits by perceived “patent trolls,” that own but do not always practice patents. The Act was generally opposed by large pharmaceutical companies, the Biotechnology Industry Association, the NanoBusiness Alliance, research universities, some “small” inventors, the United States Patent and Trademark Office, and some large manufacturing companies in the high-tech sector. Some in the latter group, that opposed the Act, have been frequent plaintiffs in patent cases against perceived infringers.

As Professor Shamnad Basheer has suggested, in a recent post on Spicy IP, “the issue has come to be a deeply politicized one and engendered its fair share of spin masters.” The politics continue, but seem likely to end soon. Several US unions recently wrote the Senate, following issuance of the Senate report, to “argue that the bill would place the US at a competitive disadvantage,” because the changes it proposes supposedly will “increase the likelihood of American inventions being stolen and provide incentives for American manufacturers to simply license their technology for production overseas.” BIO, “the world's largest biotechnology organization,” that primarily provides “advocacy, business development and communications services” to large pharmaceutical manufacturers, issued a new study, in mid-February, that purports to analyze the economic impact of the proposed legislation, claiming that its provisions will “reduce the value of patents and the intellectual property they represent, and dampen investments in vital R&D and the consequent pace of innovation.”

..........

Without surveying all of the provisions of the proposed legislation, the provision that seems to engender the greatest remaining comment would effect changes in the way in which damages are awarded in some patent cases. The Administration, in its letter to the Senate on February 4, identified only the proposed damages provision, as a “deal breaker.” The Administration has stated that this damages provision “will create more problems than it solves,” and would “likely lead to less than adequate compensation for many patent holders and could promote infringement.” At a time, the Administration has said, “when we are actively encouraging our foreign trading partners to strengthen their IP protection and enforcement systems, this legislation may send the opposite signal – that we intend to weaken aspects of our current law that deter infringement.” It is here suggested that the Senate bill, in its provisions relating to damages, does no such thing. Instead, it preserves existing law while, at the same time, clarifying circumstances in which damage awards ought to be limited, by circumscribing application of the “entire market value rule.”

The “entire market value rule,” which has been criticized heavily by the Business Software Alliance, and favored by BIO, is one that the Senate patent reform legislation proposes to apply only in some cases. The Senate proposal, now in the forefront of the remaining debate, would retain the “general rule” now found in existing law, that “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court, subject to the provisions of this section.”

........

The Senate bill would thus authorize the courts, in general, to apply the standards that have been applied for decades, under Georgia-Pacific and other cases, including, for example, standards relating to a “reasonable royalty” and standards relating to proof of actual lost profits. The bill would specifically authorize a court, in cases in which it is shown “that the claimed invention's specific contribution over the prior art is the predominant basis for market demand for an infringing product or process,” to continue to award damages based upon “the entire market value of that infringing product or process.” (emphasis added).

India
Today, in India, at least as far as the general public is lead to believe by news reports, much of the interest in patent reform has its roots in the pharmaceutical manufacturing sector. Ongoing litigation in India, centered on Section 3(d)’s notions of “increased efficacy,” provides a backdrop. Many Indian pharmaceutical manufacturers have expressed interests far beyond generic equivalence. The “grail” is an NCE, not a non-infringing alternative. So, in the longer term, Indian pharmaceutical manufacturers may find themselves favoring many of the same kinds of protection for their own intellectual property that are now sought by large US or European concerns, whether such Indian firms are the sole or joint-venture source of an innovation.

A longer term view would favor a flexible approach to patent damages. In cases where a pharmaceutical product is first introduced in the marketplace through use of a truly novel delivery form, or even in some cases through use of a known delivery form in a truly novel way, the drug substance may not be marketable but for the use of such a novel delivery system. In such a case, it might well be said that the predominant basis for market demand is the specific use of such a novel delivery system, and that but for the use of such a system, there would be no market demand. In such a case, application of the “entire market rule” may well be appropriate.

On the other hand, in other cases, in which, for example, a specific stereoisomer of a pharmaceutical product is selected and a known delivery system is employed, and in which the racemate was previously available in another, commercially successful, stable pharmaceutical composition, it may well be that the predominant basis for market demand is not the selection of the stereoisomer and is, instead, another factor, such as massive marketing. In such cases, it may well be that application of the “entire market rule” is not appropriate.

It may well be reflexive to argue that Indian pharmaceutical manufacturers, because of shorter term interests, should be interested in passage of legislation in the United States, such as that proposed by the BSA, that would forbid (or make extraordinary) the application of the “entire market value rule” in every case in which a “reasonable royalty” is sought. Clearly, in most Hatch-Waxman cases in which a “reasonable royalty” is sought, damages will be lowered if the “entire market rule” is not applied. The longer view, however, suggests that such a rigid approach to damages is not in the best interests of Indian pharmaceutical manufacturers, any more than it is in the interests of other pharmaceutical manufacturers. Such a flexible approach will allow Indian manufacturers, at times in the future when their inventive contributions will become far more evident, and new products will emanate from Indian innovations, to protect their own intellectual property to the fullest possible extent.

Just like others in the US and elsewhere in the world, India should welcome changes in US patent law, not because it will make it easier to show the obviousness of an invention, or “provide incentives for American manufacturers to … license their technology for production overseas,” or because it will decrease potential damages for patent infringement. Change should be welcomed because it will continue to harmonize US patent principles with those found elsewhere in the world, it will ensure that the rules are clear, and that those entering the US market will be faced with flexible but predictable and consistent principles. Indian manufacturers should eagerly anticipate the passage of US patent reform legislation, with the belief that, in the end, the fair changes to existing rules that it will enact will help all businesses, in both the US and India.