Guest Post: The Power of IPAB to Stay the Operation of Patent

by Mathews P. George.

Mathews is a fourth year student of WBNUJS. He has previously posted on "Originality and Fair Dealing".

The Intellectual Property Appellate Board (hereinafter IPAB), on the 13th of July, suspended the operation of patent held by Ramkumar. Professor Shamnad Basheer has discussed the development here. In this post, we shall discuss the vires of this Order.
The Order Sheet states as follows: “Counsel for the applicant present. Despite service of notice in M.P. Nos. 11 & 12/2009, none appeared on behalf of the respondent. In M.P No. 12/2009 Interim stay of operation of registered patent No. 214388 granted till September 2009. Let the matter be posted for hearing in the month of September, 2009. The Registry is directed to issue notice of hearing to both the parties. Accordingly, M.P No. 11/2009 stands disposed off.”

The character of this Order is very different from that of an ordinary temporary injunction restraining a defendant from pulling down a building in a property dispute. Although, the latter case involves pre-judgment interference with substantive rights, the substantive rights in toto are not suspended here. On the other hand, the Order of IPAB has the effect of suspending the rights of patent holder in toto during the stated period.

The default rule of statutory interpretation, as has been held in various Supreme Court judgments, is to give a statute its plain meaning. If the meaning so discerned is ambiguous, intrinsic and external aids, in the same order, shall be used for interpreting the statute. The concept of pragmatism gives interpreters an obligation to contribute productively to the statutory scheme.

IPAB derives its powers from Section 117-B of Chapter XIX of Indian Patents Act, 1970 for discharging its “functions under the Act”. It states that Section 95 of Trade Marks Act, 1999 shall apply to the Appellate Board in discharge of its functions under the Patents Act, 1970 as the Section applies to it in the discharge of its functions under the Trademarks Act, 1999. Accordingly, the Appellate Board has the powers to issue interim orders including grant of stay. However, it is difficult to discern the power to grant “stay of operation of patent” for the following reasons:
• Firstly, the statute is silent on the scenario of temporary revocation of patent. Section 53 lays down the term of patent to be twenty years from the date of filing of the application for the patent. It does not offer any other method for calculating the term of a patent.

• Secondly, the interim stay of operation of a registered patent amounts to temporary revocation of patent. It has the effect of granting the prayer for final relief of revocation of patent under Section 64 of Patents Act. Interestingly, the Andhra Pradesh High Court in Hyderabad Chemical Supplies Limited v. United Phosphorus Limited and Anr (2006(6)ALT 515), on a similar prayer, declined to grant the prayer for interim suspension of patent. The Court based its reasoning on the principle that an interim order which has the effect of granting the final relief can be made only in “exceptional circumstances”. The Court, in the instant case, declined to bring in the prayer for interim suspension of patent under the ambit of “exceptional circumstances”.

• IPAB is not bound by Civil Procedure Code as per Section 92 of the Trademarks Act. It, therefore, does not have powers akin to a High Court or a Civil Court in issuing interim injunctions. As already pointed out, even a High Court is barred from granting interim relief amounting to final relief. Section 92 requires IPAB to be bound by the principles of natural justice. Granting of interim relief amounting to final relief is against the principles of natural justice as interim relief is not granted on the basis of substantive arguments. The IPAB's powers are clearly defined by Section 64 of the Patents Act. The final relief envisaged by this Section is the revocation of patent. A complete revocation of patent which is the final relief cannot be granted as an interim relief.

For the above mentioned reasons, the Order staying the operation of patent is ultra vires. As expected, the Order has already been stayed by the Madras High Court. Mint has reported this development here. The final judgment will hopefully settle down the dust pertaining to this question of law.

Husha Busha – We All Fall Down!

With Rakhi Sawant’s swayambhar coming to a close, I was all ready for unexpected drama. However, drama unfolded elsewhere and the main actors, NASSCOM and  Manufacturers' Association for Information Technology (MAIT), gave the government and the IT industry quite a jolt.

The drama was in relation to the Draft Policy on Open Standards for E-Governance, introduced by the Ministry of Information and Communication Broadcasting last year. The policy has been high on controversy ever since it’s release. In an earlier post on SpicyIP I had commented on the first version of the policy. Since then the draft policy has been modified a couple of times and after two years the (presumably) final version is ready for release.

A brief background is as follows: the policy aims to enunciate the principles based on which government agencies are to adopt a single, royalty - free open standard for their e-governance projects. The importance of this policy is reflected in the fact that the standard which the government adopts in keeping with this policy will guide the multi-billion dollar procurement of IT software and hardware across government departments so as to ensure interoperability among disparate IT systems.

In terms of reactions, while biggies like Red Hat and Sun Microsystems are praising the present draft policy, other industry powerhouses like Nasscom, MAIT and Microsoft are opposing the policy on the grounds that it may hurt business interests of some companies, given the fact that in order to be in the race for lucrative government contracts many companies would have to alter their standards and adopt a more open, transparent setup. CIS, Bangalore has been involved in the modification of this policy and their write ups work as a useful guide on the issue.

Moving on, the latest ruckus was created by NASSCOM which, along with MAIT, sent a letter to the DIT recommending inclusion of clauses which allow for ‘multiple standards’ and ‘royalty on software’ as against ‘single’ standard and ‘free’ software.

The present draft of the policy supports a single royalty - free standard. The reasoning behind supporting a single standard is explained in paragraphs 4.3 to 4.4 of the final version of the policy. These paras read as follows:

“4.3 The naive approach [to adopt multiple standards] is neither desirable, nor necessary. The usual way out is for each application to be based on a single standard to which other choices can be bidirectionally converted and/or interfaced. A judicious choice of this single standard is very critical. Ideally it should be a well-established, unencumbered, open standard, adopted and maintained in a collaborative and transparent manner by all stakeholders. This will ensure maximum choice and a level playing field for all technical innovations, which only need to ensure complete conformance with the single selected open standard.

4.4 This Policy has been designed to meet these objectives. GOI shall select a single open standard for each domain using the verifiable fair and transparent process outlined in Section 6.1.”

NASSCOM’s letter and differential stance reflects the split in the IT industry. In her write up on NASSCOM’s stance, Shalini Singh states that NASSCOM’s half hearted support for development of open standards is a result of lobbying of some tech companies against adoption of such Open Standards. This understanding is also reflected in Fosscom’s statement that, "Two central features of the draft policy are - single and royalty-free standards. However, we understand that there is a lot of pressure from vested interested [parties] to dilute these key aspects of the policy, by sneaking in provisions for 'multiple standards' as also possibilities of allowing revenue streams from some 'proprietary' standards."

Defending its stance, Mr. Rajdeep Sehrawat, Vice President, NASSCOM said that, “Ways can be worked out commercially to make a large e-governance project viable. Making everything patent-free may not be a commercial proposition as there might not be good standards available. On the other hand, adopting a single standard may constrict the country to adopt an old standard, if a new and better standard emerges in future. We support multiple standards which ensure interoperability at zero cost.”

Arguing against NASSCOM’s stance, Mr. Venkatesh Hariharan, Corporate Affairs Director, Red Hat states that, “... [Nasscom’s] two recommendations (RAND terms and multiple standards), if accepted, will lead to nullifying the work of the committee that has toiled for the last two years to create this policy because it will land us back to the current status quo dominated by multiple, proprietary standards…..

…E -Government data like land records etc remain relevant for hundreds of years. If this data is stored in proprietary formats, it will prove expensive for the country in the long-term. It is also seen that proprietary formats are controlled by monopolistic outfits that (a) drive the adoption of a technology (b) file a thicket of patents around that technology and (c) litigate or threaten litigation if royalties are not paid. India must avoid getting into this trap at all costs.

For each application area, there must be only a single standard. The use of multiple standards will lead to tremendous complications in the practice of e-governance. Since data is at the heart of e-governance, the confusion created by using multiple e-government standards in the same domain may bring e-governance to a stand still. For example, if different government departments use different standards for document storage, it could greatly slow down or even thwart the process of exchanging files among government departments.”

His stance on the issue is available in greater detail here.

The problem with having multiple standards is further explained by Mr. Prodyut Bora in a blog post titled, When Commercial Considerations and National Interests Collide, wherein he states that, “Just imagine a world where all paper manufacturers came up with their own dimensions of A4 paper! You would need different sets of printers to print these varying ‘A4’ pages.

.. The current debate is.. should India adopt a single standard in its eGovernance projects, or should there be a multiplicity of ‘interoperable’ standards?

I would argue that this is the very beginning of the digital millennium and it is in our national interest to preserve our ‘digital sovereignty’. Our public data—whether it be land records, or taxation records, or governmental correspondence—is national property. Why should it be locked-up in the proprietary algorithms of a multinational software corporation, even if it comes to us at present for free? We owe it to our future generations to handover the data, information and knowledge we generate in a manner that is free of any technological encumbrance.

Given this perspective, the current demand for multiple standards by Nasscom is misplaced. Multiple standards would introduce duplicacy and reduce perfect interoperability between competing products. Whereas a single open standard would remove entry barriers and encourage innovation by small local firms with limited risk appetite, multiple standards would favour market-dominating multinational.. Multiple standards would also result in unnecessarily high costs incurred in writing ‘bridge’ code to connect different products, and things like data migration.

It is because of such short-sightedness in the past that we have landed up with a plethora of identity systems—Election ID Card, PAN Card, Ration Card—before finally the wisdom of a unified ID system dawned.”

The other concern is the attempt to include RAND terms instead of a royalty free set up. In this regard Mr. Hariharan argues that, “[given the fact that] the vast majority of standards are controlled by entities that lie outside our borders. If accepted, NASSCOM (and MAIT's) suggestions will mean that the country will pay huge royalties to foreign outfits. Does anyone remember what happened to us when the British East India Company came to us with a similar proposal?”

Addressing both these issues, Pranesh Prakash, Programme Manager, CIS, Bangalore states that, “even ‘reasonable and non-discriminatory’ terms of licensing of standards are in fact discriminatory as they prevent the development of free/libre/open source software based on those standards.  And while having multiple implementations of a standard is beneficial as it increases consumer (i.e., governmental) choice, having multiple incompatible standards is detrimental to the government's interest as the policy itself recognizes in paragraph 4.2, and the very purpose (as enumerated  in paragraphs 1, 3, and 4) of having standards is defeated.  Even if the multiple standards are bi-directionally interoperable, additional costs are incurred in having concurrent multiple standards.”

As far as the present situation is concerned, there seems to be a stalemate. As per Mr. Hariharan’s post, the situation as of now is that the industry associations have asked for more time to submit the views of their members and therefore DIT has postponed the next meeting of the Apex Committee to review the Draft Open Standards Policy. The meeting was to have happened on 15th July, 2009 but will now probably be held in August 2009. 

Hence, picture abhi baki hain doston…

 

 

 

 

First VIP Speaker at NUJS: Jayashree Watal on Doha and TRIPS

As mentioned in an earlier post, we're now running the VIP (Venting Ideas on Intellectual Property) series for this academic year at NUJS.

Our first speaker for this academic year is Jayashree Watal who will speak on “TRIPS and the Current Doha Round”. In her talk, she proposes to touch upon the current Doha negotiations, TRIPS and Development, IP and Public Health Issues, and issues of special interest to India such as geographical indications and protection of biodiversity. For those who wish to get a flavour of the latest IP issues thrown up by the current Doha round, see this excellent piece by Kaitlin Mara of IPWatch. Back to our speaker:

Jayashree Watal is presently a Counsellor in the Intellectual Property Division of the World Trade Organization (since February 2001). Before this she was a visiting scholar with the Center for International Development at Harvard University. From October 1998 to August 2000, she was a Visiting Fellow at the Institute for International Economics in Washington DC. She was also a visiting scholar at the George Washington University Law School from 1997 to 2000.

She has more than twenty-two years of experience in government in India, of which ten years of experience were in policy, diplomacy, research and administration on intellectual property rights, which includes having researched and published on issues related to intellectual property rights, including a book Intellectual Property Rights in the WTO and Developing Countries(Oxford University Press, India and Kluwer Law International, 2001). She has also consulted for the World Bank, UNCTAD and the UNDP in these areas.

The talk will be in the NUJS auditorium between 3 pm and 5.30 pm on August 12th.

I hope that some of our readers who are in Kolkata or nearby can attend. If you plan to attend, will you please email me at shamnad[at]gmail.com, so that I have some idea of the numbers? The address etc is listed on the NUJS website.

Compulsory Licensing by the Copyright Board: Whither Copyright Expertise?

SpicyIP just discovered that the mother of all compulsory licensing battles is being waged before the Indian Copyright Board, a statutory body entrusted with certain specific tasks under the Indian Copyright Act.

The warring factions involve radio stations (such as Radio City and Radio Mirchi) on the one hand who are seeking to gain compulsory licenses to broadcast music at low rates, and content owners (T Series) or administrators (PPL, IPRS) who wish to peg the rates as high as they possibly can. As noted in previous posts on this blog, this matter went right up to the Supreme Court and Justice Sinha categorically held that there is an automatic compulsory licensing right in favour of the radio stations i.e they could broadcast such music upon the payment of reasonable royalties. The key issue now is: what is a reasonable royalty?

Reasonable Royalty?

At the first instance, the copyright board opined that Rs 660 per needle hour was the royalty to be paid. However, this was challenged as an arbitrary figure, as the Board did not really give sufficient reasons for why it thought that Rs 660 represented a reasonable figure. The Supreme Court therefore quashed the Board's arbitrary figure (order) and remanded the case back to the Board. In this second inning, one hopes that the Board will consider expert evidence and come up with a well reasoned "reasonable" royalty figure. Apparently a number of expert affidavits have been filed, including that of the noted economist, Bibek Debroy.

While the radio stations wish the rate to be even lower than Rs 600 (and some of them have suggested that it should be 2.5% of the advertising revenues), the recording industry wants to peg it at Rs 2400 per needle hour. However, till such time as the Copyright Board came up with its figure, parties to this dispute have privately agreed to follow the Rs 660 per needle hour figure.

Whither Copyright or Judicial Expertise: A Constitutional Challenge in the Offing

The substantive merits of this dispute notwithstanding, what really troubles one about this case is the fact that the Board consists of members with little or no copyright expertise. Leading to the question: is there a constitutional challenge in the offing?

Lets first take a look at the full list of Copyright Board members listed out on the Copyright Website. The Board shall consist of the following members:

1. Dr. Raghbir Singh (Chairman)

2. Joint Secretary to the Government of India, in charge of Copyrights, Ministry of Human Resources Development (Member)

3. Joint Secretary and Legislative Counsel, Ministry of Law & Justice (Member)

4. Law Secretaries to the Government of Haryana, Gujarat, Maharashtra. Kerala, Bihar and Uttaranchal (6 Members)

5. Directors of the various leading National laws in India (5 Members)

From the above list, a Board consisting of 3 members is normally constituted to hear specific matters under the Copyright Act, when the need arises. For the current compulsory licensing dispute, the Board consists of Dr Raghbir Singh (Chairman), Secretary to Union Law Ministry, and Law Secretary, Govt of Bihar. To the best of my knowledge, none of them have had any prior copyright expertise or experience.

Why is it that the Board does not include at least one person with decent copyright expertise? Its not that this country lacks folks with some experience in this area. What about some of our earlier copyright registrars? Two excellent names immediately come to mind: Zakir Thomas (author of the legendary "no copyright over fonts" decision and now advisor to the CSIR on its OSDD project) and Madhukar Sinha (now a professor with the Center for WTO Studies).

Given the lack of copyright expertise, can one question the constitutional validity of such a body? Perhaps the case concerning the constitutional challenge to the constitution of the Competition Commission might help in this regard?

For those interested in a quick overview of this case, in Brahm Dutt vs Union of India, the petitioner challenged the constitution of the Competition Commission on the ground that although it was vested with judicial functions, it was to be headed by a bureaucrat. This contravened the constitutional scheme of separation of powers. Although the Supreme Court agreed with the Petitioner, it refused to rule on the matter, since the government undertook to pass amendments to create a separate appellate body that would be vested with judicial functions. The resulting competition commission would then be a purely regulatory body.

How does all this apply to the case at hand? Sections 11 and 12 contemplate judicial functions for the Copyright Board. Cannot a similar argument be made here: that the Board must be presided over by a judicial officer to be appointed by the judiciary?

Qualifications of Chairman: Breach of Copyright Act?

Secondly, the Copyright Act clearly states that the Board shall have the powers of a civil court and that the proceedings shall be in the nature of judicial proceedings. But the composition of the Board outlined above does not appear to possess any judicial expertise (I could be mistaken in this assumption..so please feel free to correct me).

Thirdly, and perhaps most importantly, the Copyright Act (section 11.3) clearly states that the Chairman has to be a judge of the High Court, or an ex judge or qualified to be a judge of the High Court.

I'm not entirely sure if the present Chairman, Dr Raghbir Singh fulfills this requirement. But here again, I could be mistaken. What I do know is that Dr Singh was earlier with the IPAB. And prior to this, he appears to have been with the National Commission for Scheduled Castes . Google searches indicate that he possesses a bureaucratic and not a judicial pedigree. For those who have more information on this, please do share. For if the Chairman is not so qualified, it is a serious contravention of the Copyright Act. And all the proceedings of the Board so far will be null and void.

Conclusion

The Government of India ought to seriously review the constitutional implications of such a Board with no real copyright expertise. For it will be a criminal waste of time and resources, if it permitted the Board to continue with its proceedings only to find at the end that it suffered from serious constitutional infirmities.

Yet another Sound Mark Granted

The first sound mark was obtained in India in August, 2008 by Yahoo for its famous “yodel”. (Refer to a previous post on the same).This trend in favour of granting non-conventional trademarks has been further strengthened with the registration of a sound mark for Allianz Aktiengesellschaft, a German Company (Allianz). Allianz was represented by Fox Mandal Little. Another sound mark for Allianz is through with the prosecution and is expected to be granted the registration certificate very soon. These marks have been registered as Community Trade Marks since 2007.

The Trademarks Registry had so far maintained a confined approach towards Trademarks. Trademarks under Section 2(zb) Trademarks Act, 1999 are confined to “marks capable of being represented graphically”. Article 15 of TRIPS however, defines Trademarks from a wider perspective; “any sign, or any combination of signs..”

Sound marks can be registered in India, if they are capable of being represented graphically i.e, in the form of musical notes, satisfying the requirement of graphical representation under the Act. Sound marks are recognised in numerous jurisdictions across the world, including the European Union, United States and Australia. Incidentally Allianz's sound mark was the first to be registered in Chile after Chile modified its Trademark Law .

Other forms of non-conventional trademarks include smell trademarks, taste trademarks and moving image trademarks. The first olfactory mark was registered in the United States in 1990 when plumeria scent which was added to sewing thread and embroidery yarn was registered as a trademark. The mark was described in the application as “a high impact, fresh, floral fragrance reminiscent of Plumeria blossoms.” The mark was initially refused registration on the grounds that:
(1)The mark does not function as a trademark because it does not identify or distinguish applicant's goods from those of others.
(2)Fragrance mark is analogous to other forms of product ornamentation in that it is not the type of matter which consumers would tend to perceive as an indication of origin.
(3)Alleged mark was de jure functional.
On appeal by the applicant Celia Clarke, doing business as Clarke's OSEWEZ, this was reversed and the olfactory trademark was granted as the Clarke was the only person who marketed yarns and threads with fragrance and fragrance was not an inherent attribute or natural characteristic of applicant's goods but a feature applied by Clarke's.

The first olfactory trademark in the European Union was the registration as an olfactory mark of “the smell of fresh cut grass” for goods, namely tennis balls in 1999. The application was initially rejected by the examiner. On appeal the Board said that, the smell of freshly cut grass was a distinct smell which everyone immediately recognised from experience. The Board said that this was sufficient to comply with the requirement of graphical representation under Article 4 of the Community Trademark Regulation. The odour of beer for dart flights and the scent of roses for tyres were one of the first olfactory marks to be registered in the U.K. However an application by Chanel to register the fragrance of 'Chanel No 5' as an olfactory trade mark failed in 1994 as the smell of the perfume which was sought to be registered resulted from the nature of the good itself.

In 2004 Eli Lilly applied for a Community Trademark on “the taste of artificial strawberry flavour” as a taste mark or gustatory trademark for pharmaceutical preparations. The application was refused by the Examiner and subsequently by the Board of Appeal. The Board said that an exclusive right to Eli Lilly on the mark applied for would unduly interfere with the freedom of their competitors. Moreover, the Board said that such a taste could not distinguish the pharmaceutical preparations of one company from the other. The consumers would most likely assume that the flavour was added to mask the unpleasant taste of the product. Am attempt by N.V Organon towards patenting orange flavour for pharmaceuticals was rejected by the US Patent Office.

It however remains to be seen if the Indian Trademarks Registry will move towards the grant of more non-traditional trademarks like olfactory and gustatory marks in line with precedents in UK, US and the EU. With technology progressing at the speed of lightning, it remains to be seen as to how jurisprudence in the area of trademarks will progress.

Spicyip thanks Mr. Santosh Singh of Fox Mandal Little for bringing this news to our notice.

Another Win for Indian IP and Transparency: IPAB Website Updated

In a previous post, we lamented that the IPAB did not put up timely web updates of its decisions. Feroz Ali, author of the leading Indian patent book, wrote in to thank us for our note on the blog in this regard and inform us that the IPAB has now put up its most recent decisions. We thank the IPAB for having done this.

If any of you are aware of other Indian IP bodies that fail to make available their decisions/circulars etc to the public, please let us know. More publication translates to more transparency...which translates in turn to more accountability....

Is Recession the Mother of Innovation?

BusinessWeek has a special report on the current economic recession and the importance of innovation. One of the key articles in this report titled "Recession: The Mother of Innovation" states as below:

"Necessity may be the mother of invention. But could a recession be the mother of innovation? After all, many of the world's enduring, multibillion-dollar corporations, from Disney (DIS) to Microsoft (MSFT), were founded during economic downturns. Generally speaking, operating costs tend to be cheaper in a recession. Talent is easier to find because of widespread layoffs. And competition is usually less fierce because, frankly, many players are taken out of the game."

(pic: "Necessity" and "Recession" Fighting for Solomonic justice Over the "Innovation" Baby)

The report has several other interesting articles and podcasts, including one highlighting 20 top companies that were founded during economic recessions (depressions) and leveraged such troubled times to their advantage. The list includes Microsoft, Disney, GE, Eli Lilly, Intel, Mattel, Colgate Palmolive etc.

India Business Law Journal, a leading Indian law journal has two special articles by Vandana Chatlani on this issue, with special reference to the Indian context (as most of you aware, India is not as badly hit by the slump). We thank James Burden, the dynamic founder of IBLJ for making these articles available to SpicyIP readers. We've uploaded these articles to the IP Resources Section of the SpicyIP website.

Duncan Bucknell ran a podcast on this issue some months ago, involving IP thought leaders such as Teresa Stanek-Rea, Nick Redfearn, William New and Jeremy Phillips. Unfortunately, since my phone connection acted up that day, we did a separate session later.

During that time, I made some short notes in response to his questions which I list below:

I. In what ways have you seen the economic crisis impact on the way companies are using the IP ecosystem?

Cutting costs seems to be the main mantra. And from my various conversations with companies and laws firms, I gather that a number of them have reduced the number of patent and other IP filings to just those ones that are critical to their businesses and more importantly, to ones that are of good quality and likely to be issued.

This is a great opportunity to move away from quantity towards quality.

Secondly, costs can be cut by outsourcing the drafting of patents to countries such as India. Having spoken to some of the legal process outsourcing units or LPO’s, it would appear that the number of applications coming in from the US and EU have in fact increased.

Traditionally, the main roadblock for this sector was a cultural one…many of the big companies were extremely conservative and didn't want to ship their patents to India. One good thing about the downturn is that it will force them to move beyond their conservative shackles. And this I guess is the best part about the downturn—that it will force companies to consider approaches, some of them innovative, that they might have never considered earlier—when they were cocooned by a good economic run .

It is also likely that many IP owners will reduce the number of litigations or will want to settle existing litigations to cut down on costs. Perhaps it's the best time to push more IP owners towards alternative dispute resolution mechanisms such as mediation and conciliation.

Lastly, many companies that are IP users are likely to shift to lower priced substitutes such as open source software. So perhaps this phase will see a jump in the use of open source software as well.

II. What do you think is the single most important IP issue that companies should focus on in times such as these?

Innovation innovation innovation…. This is the only way companies can survive this downturn.

A blind reduction of costs by firing employees is really short sighted and not always the best answer. Rather companies should focus on innovative cost cutting methods. Eg. in so far as entertainment majors are concerned, low cost distribution models would help cut costs and garner more revenues. There is a huge place for innovation in all of this…..and companies ought to use the internet and web 2.0 in creative ways to help lower costs but sell more.

Similarly for big pharma, their greatest worry has been the escalating costs of drug discovery. This is therefore the perfect time to try and figure out alternative R&D methodologies that costs less. And even to consider alternative innovation approaches. I think the downturn presents an excellent opportunity for companies to introspect and move beyond their conservative shackles.

I’ve always heard the truism that in a downturn, it's the insolvency lawyers that do really well. With respect to patent filings, although the numbers will go down since everyone is cutting costs, I’m guessing that there’s going to be one kind of business method patent whose numbers will go up. I mean, patents over methods of cutting costs. Perhaps we can do a USPTO (US Patent and Trademark Office) search after a couple of more months and find out how many such innovative cost cutting methods have been filed so far.

Obama fought and won the presidential campaign on the “change” “matra”:

To survive this economic downturn, I think we must change “change” to “innovate”. In other words, our mantra ought to be: “Innovate we must. Yes we can..”

III. What mistakes should companies particularly be trying to avoid in times such as these?

Cutting costs by reducing R&D expenditure etc…and being less risk averse. This mentality will do more harm than good. As it is only innovative solutions and products etc that will give companies a leeway in this economic slump.

IV. What do you think governments should be doing on the IP front in light of the current economic situation?

i) Since private funding of R&D will reduce, the government ought to pump in more money into R&D. Korea did this during the Aisan economic crisis and it yielded rich dividends, since its companies did not have to play too much technology catch up when the slump ended.

ii) The government ought to ensure that its agencies such as the patent office begin focussing on patent quality, since such offices will now have a lesser work burden owing to the reduced number of applications filed. This is a great opportunity to get more quality patents.

iii) The government ought to take more steps to drive more litigants towards alternate dispute resolution: since more companies will be willing to settle expensive IP litigations..

iii) The government ought to encourage alternative innovation methods such as collaborative and open source innovation, prizes etc.

V. In what ways can the IP community assist the broader community to move out of the current economic situation?

By helping innovate our economy out of this mess. Innovative financial instruments, smothered with layers of greed and short sightedness got us into this mess. And it is innovation alone innovation that will lift us out of this economic dump….

And lastly, although I really didn't address this issue in the talk with Duncan, a few words on the global recession and the opportunity for India

Indian Innovation and the Recession Opportunity?

Although the domestic Indian market has not been hit very hard by the downturn, most of its technology intensive industries such as IT and pharma rely hugely on exports for their revenues. These industries are generally known to be "innovation shy" (which I know is a terribly euphemistic term). In an earlier post, I've asked why the Indian IT sector, despite being technologically proficient is not really innovative. I've also followed up that thought a little bit in this article here with an Italian economist, where we've labelled India as a "technologically proficient developing country" and not really an "innovative developing country".

Our IT and pharma industry should really use the current recession to ramp up their innovative capabilities. Particularly, when India is now a leader in attracting off shore R&D and can really leverage the slump to attract more R&D and technology transfer. Note this telling figure from the Mint:

"Half of Cisco’s core R&D work, including innovations in WiMAX and optical networks, and around 40% of business software firm SAP AG’s ideas for processes and product development come from India"

"In Transit" Drug Seizures and TRIPS: UK Decision May Help Indian Companies

The IPKat reports a very recent decision from the UK courts involving an attempted seizure of "in transit" goods. The brief facts are as below:

Nokia Corporation v Her Majesty's Commissioners of Revenue & Customs (HMRC) [2009] EWHC 1903 (Ch)

Nokia petitioned the UK customs authorities (HMRC) to seize counterfeit cell phones (bearing the Nokia trademark) that had reached London's Heathrow airport from Hong Kong en route to Colombia. HMRC refused and Nokia challenged the said refusal before the UK High Court.

Mr Justice Kitchin held that since the said counterfeit goods were mere "in transit" goods that were never meant for the UK market, it fell outside the ambit of the relevant EC Customs Regulation (Council Regulation No 1383/2003 of 22 July 2003).

In particular, he held that in order for alleged counterfeits to be susceptible to seizure or detention under the above mentioned regulation, the said goods must have been "used in the course of trade" within the UK. Transit goods do not satisfy this condition, unless and until there is a serious risk that they are likely to be diverted to the local market (the so called "Montex" exception)

Importance of Nokia Decision for Indian Drug Companies

This decision is of monumental significance to Indian generic companies whose drugs were seized by Dutch authorities in late 2008. I had blogged on the TRIPS implications of these seizures and opined that such actions were likely to violate TRIPS, which categorically states that IPR enforcement measures (including border measures) "shall be applied in such a manner as to avoid the creation of barriers to legitimate trade". Incidentally the EU regulation in question also makes a similar stipulation requiring that "..goods should, in so far as is possible, be kept off the market and measures adopted to deal effectively with this unlawful activity without impeding the freedom of legitimate trade."

I had also suggested as below:

"Therefore, along with exploring a TRIPS challenge, Indian companies must also ready themselves to challenge such actions under the EC regulation itself. Particularly since case law from the ECJ (European Court of Justice) suggests that the European courts may not be too sympathetic to seizures of in transit/transhipment consignments that were never meant for the EU markets and that are unlikely to impact the commercial interests of IP owners in the EU. However, most such decisions were in relation to trademarks and under an earlier regulation (European Council Regulation Number 3295/94 of December 22, 1994), that preceded the current 2003 EU regulation."

Applying Nokia Decision to Indian Drug Seizures

Having said the above, it bears noting that one cannot readily assume that Kitchin J's ruling in the context of "in transit" counterfeit phones would apply on all fours to the Indian drug seizure cases.

Firstly, as is obvious, Kitchin's decision was limited to counterfeit goods (where identical trademarks have been used) and not patented goods. In pertinent part, Kitchin J held that customs seizures are defensible only when the entry of the allegedly infringing goods into the local border amounts to an "infringement" under the laws of the country whose borders have been breached. To this end, he relied on the wordings of the UK Trade Marks Act 1994 (and the corresponding EC Trademarks Directive, 1988) which stipulates that in order to amount to an infringement, the impugned trademark would have to be used by the alleged infringer in the "course of trade" within the UK. In other words, a mere "in transit" good that is never meant for trade within the UK cannot be said to infringe, merely because it had crossed the UK border.

The UK Patents Act (based on the EPC 1973, as revised by EPC 2000) does not contain any such "use in the course of trade" limitation. However, this by itself is not sufficient to conclude that any and all "in transit" goods that happen to infringe a UK patent could be detained by UK customs authorities. Rather, on the wordings of the UK Patents Act (1977), the allegedly infringing goods have to be "imported" into the UK in order for it to amount to an infringement.

In line with Kitchin J's reasoning in the Nokia case, it could be argued that an in-transit entry is not really an "import", as these goods were never meant for the UK market and were unlikely to harm the market of a patent owner within this territory. It also bears noting that drugs violating patent rights (which have been properly authorised by a drug regulator) cannot be equated with counterfeit goods. In fact, public health considerations dictate that such goods must be placed on a much higher and deferential pedestal than counterfeit goods.

UK vs Dutch Courts

Secondly, one may argue that the judgment, at best, reflects a UK understanding of the EC customs regulation and this may not necessarily tally with courts of other jurisdictions, most notably the Dutch courts themselves...who have been known to be more partial to IP owners (with a higher number of "infringement" findings and a lower number of "revocations") than their English counterparts. In fact in the case at hand, Nokia cited a judgment contending that in an earlier decision (Sisvel v Sosecal, Case No 311378 of 18 July 2008), a Dutch court found in favour of a patent owner seeking to detain "in transit" goods that were being transhipped from China to Brazil.

However Kitchin J cleverly distinguished the Sisvel decision on the ground that it was based upon the particular wordings of Article 6 of Regulation (EC) No 3295/94, a regulation that was subsequently replaced by the 2003 EC customs regulations.

Challenging the Drug Seizures before Local Dutch Courts

Should an Indian company challenge the drug seizures before a Dutch court, it is unclear as to how they would rule. Would they distinguish their earlier Sisvel decision in the same way that Kitchin J did? Would they examine TRIPS provisions on this count and interpret their local laws in such a way that they remain TRIPS compliant? One has to wait and watch.

Notwithstanding the above uncertainty, it is imperative that Indian drug companies challenge the seizures before Dutch courts to the best extent possible (if they haven't already done so) and the Indian government ought to help in whatever way it can. See this previous post, where we carried an explanation from Dr Reddy's as to why they hesitated to challenge the seizure before the Dutch courts.

TRIPS: An "Exhaustion of Remedies" Doctrine?

Assuming that a plausible local remedy lies in this case (a challenge before the Dutch courts), would this impact the WTO/TRIPS challenge that the Indian and Brazilian government are preparing to bring in Geneva? In other words, assuming such a dispute reaches a WTO panel, are they likely to duck the issue by asking the parties to get a confirmatory ruling from local courts suggesting that actions taken by Dutch customs authorities were "legal" under Dutch law? Is there any concept of "exhaustion of remedies' doctrine applicable to the WTO/TRIPS?

Most TRIPS cases have centred around disputes where the purport and ambit of the impugned local legislation have been (more or less) clear. The only challenge in such cases was the interpretation of TRIPS provisions themselves. If this drug seizure dispute goes up before a WTO panel, it may perhaps be the first case where the ambit of the impugned local legislation itself is far from clear.

The 50 most influential people in IP

Every year, Managing Intellectual Property publishes a list of the 50 most influential people in the field of Intellectual Property. It is not very often though that we find a mention!

In a list that pans the globe, MIP's list of the 50 most influential people includes politicians, academicians, in-house counsel and even the IP blogger! Starting with Google's inhouse counsel, Rose Hagan, the list includes a strong Asian flavour with some notable names being Mr. Wu Handong (President, Zhongnan University of Economics and Law), Jeong Hwan Lee (of GE Electronics), Toichi Takenaka (Chairman of Japan's Intellectual Property Organisation).

The Indian standout is of course Mr. Kurian who has been in the news lately for his stunning and controversial reforms in the Patent Office (blogged here). Calling him "India's efficiency champion", MIP notes that Mr. Kurian has managed to work through India's poor and confusing infrastructure and achieve remarkable results. An administrator by profession, Mr. Kurian has been able to strike the right balance by incorporating his managerial experience in handling a largely criticised organisation. By issuing regular circulars, memorandums and opinions, he has effectively carried out his plans to improve efficiency and begin the end of corruption in the Patent Office.

His managerial expertise is also evident in the manner he has now divided the Patent Office into specific subject groups to ensure a greater expertise in examination of the patent and thereby ensure that the work efficiently and not reluctantly. Mr. Kurian's work has been appreciated by top IP lawyers, who all acknowledge that his tenure has already seen a change in the system and has brought in greater transparency and efficient working in the IP offices.

Kudos to Mr. Kurian! In a slightly narcisstic move, find below their mention as to the IP Blogger :-)

"Informing opinion

The IP blogger

From the Afro-IP blog to Dennis Crouch's Patently-O, the influence of the IP blogger continues to grow...Blogs have become so prominent that last year Managing IP even published a guide to the most popular trade mark blogs, which was distributed at the Meet the Bloggers meeting at the 2008 INTA Annual Meeting in Berlin. More recently, Managing IP launched a weekly blog report, highlighting the best of the IP blogosphere. As the internet becomes more widely used and blogs continue to proliferate, one can only assume that their content and impact on the IP world will become even more significant."

Our congratulations to all those who have made the list.

Roche vs Cipla: Tarceva Patent to be reviewed by Indian Supreme Court

CH Unni of the Mint reports that Roche will soon be filing their appeal against the Delhi High Court order, which not only found against Roche, but also went on to subject Roche to costs of Rs 5 lakhs for alleged wrongful suppression of patent information.

In this article, I am quoted as stating:

"According to a patent law expert, the validity of Roche’s patent was in serious doubt. “In view of the existence of Gefatinib, an earlier known molecule, the court appeared to suggest that Erlotinib, Roche’s patented molecule, may not be inventive,” said Shamnad Basheer, a professor in intellectual property law at the National University of Juridical Sciences, Kolkata. “Secondly, there is a serious doubt about whether or not Cipla infringes the Roche patent at all.”

Unfortunately, this is not my statement or view, but my encapsulation (in an earlier blog post) of what the court suggested in its judgment. I noted then that:

"The appellate court overruled Justice Bhat on this point and held that on the evidence before the court, Roche had failed to establish a prima facie case. Firstly, the validity of Roche's patent was in serious doubt. In view of the existence of Gefatinib, an earlier known molecule, the court appears to suggest that Erlotinib, Roche's patented molecule may not be inventive.

Secondly, there is a serious doubt about whether or not Cipla infringes the Roche patent at all.

Since the court ruled that Roche had not even established a prima facie case, it did not have to wade into the other factors, such as the pricing of the drug and the public interest factor, something that the trial judge, Justice Bhat had based his judgement on."

The Legality of the Delhi High Court Order

My own views on this poorly reasoned appellate court judgment are found in a later blog post, where I note that:

"At best, whether or not Roche committed fraud by withholding pertinent information appears a contentious issue to me. And not a conclusive one or a strong enough one to merit the awarding of "costs" of Rs 5 lakhs. Imposing such costs on them when they were attempting to legitimately fight on the basis of what they thought to be validly granted patent rights appears a bit extreme to me...

The most surprising part of the division bench decision is that they do not refer to the claims of the '774 patent even once. The key question ought to have been:

What exactly does the '774 patent claim? Does it cover Erlotinib Hydrochloride? As I've argued earlier, from my tentative understanding of claim construction and chemistry, the claim covers Erltoinib Hydrochloride. As to whether or not this is a valid claim is a different issue. But assuming it is valid, does not Cipla's use of a specific form or version of this compound infringe?"

Betting on the Outcome at the Supreme Court:

So which way is the case likely to go? Since Cipla has been on the market since 2007, it is unlikely that the Supreme Court will now issue an order of injunction against the sales of Cipla's Erlocip. It is likely to find that the balance of convenience is in favour of Cipla. This tentative conclusion is strengthened by the fact that the main trial in this case is proceeding before the trial court and is likely to conclude by the end of the year. The apex court may therefore direct that the trial itself be speeded up and a final decision on the merits of the case be issued quickly.

However, given the poorly reasoned decision of the Delhi Division Bench, the court is likely to step in and overturn some of their findings. In particular, I'd be very surprised if they sustained the findings on non disclosure and non infringement. As for validity and the lack (or otherwise) of a prima facie case, I find it difficult to wager either way. And the same is the case with "pricing" differentials and whether this factor can be used to deny an injunction.

In any case, this presents an excellent opportunity for the Supreme Court to step in and clarify the law on injunctions in patent cases. How should a court assess the existence or otherwise of a "prima facie" case? Should a court defer to agency (patent office) expertise? And if so, to what extent? Can a court look into pricing and public interest whilst deciding a patent infringement matter? One hopes that there will be more clarity on these and other issues by the end of this year.

Indian Intellectual Property: The (Differential) "Price" of Protection

I recently attended the IP Business Congress (IPBC) in Chicago organised by the well known IP magazine, IAM (Intellectual Asset Management), the brain child of the dynamic Joff Wild. Reviews of this conference can be found on the IAM blog.

A more detailed note highlighting some of the key sessions was penned by Michael F Martin on Broken Symmetry, a blog that I just discovered and have come to love. However, I must admit that this is one of those rare occasions when someone has chosen to grace me with the adjective "diplomatic".

IP's "Perception" Problem: Nobody Loves Me

While the key theme of the conference itself was the use of intellectual property as a business asset, the conference focused on other IP issues as well, such as the current negative "perception" problem faced by IP owners. There was an entire panel on this issue, with a particularly impressive presentation from Caroline Kamerbeek, Director for Communications (IP and standards) at Philips. Incidentally, Philips may be one of the only companies in the world to have a special communications person dedicated to IP (I believe there are only two such companies in the world today--but if any of you have better information on this account, please let us know).

For those interested in the IP and communication theme, Duncan Bucknell has a good note on this aspect on his blog, which elicited some very insightful comments, including one from David Kline, the famous author of "Rembrandts in the Attic: Unlocking the Hidden Potential of Patents". Also, Sara-Jayne Adams is tackling this issue in a full length article in the next issue of IAM.

I highlighted a bit of this negative "perception" issue in my talk at the IPBC. The most recent case that bears testimony to such a prevailing perception in India is the Novartis case, where the IPAB ignored existing law and went on a legal frolic of its own to build in an additional patentability hurdle i.e a patent will not be granted, if the price is too high! Luckily, this finding was only one of the grounds for rejecting the patent; the other one being non compliance with the famous 3(d), a section that has been discussed endlessly on this blog and one which bars the grant of patents to pharmaceutical derivatives that are not significantly more efficacious than already existing substances. I have reviewed this decision and its flawed reasoning here. See also Nina Mehta's well articulated review of this decision in the Economic Times.

In my talk at the IPBC, I went to offer some suggestions on improving the public perception of IP. I will focus on one such suggestion here, namely deploying a "differential pricing" strategy in India.

Low (and Differentially) Priced IP Goods

Although intellectual property rights entitle owners to charge monopoly prices (barring constraints in terms of compulsory licensing, pricing regulations etc) , they ought to consider lowering prices voluntarily in countries such as India, where the consumers are extremely price sensitive and the IP enforcers more prone to emotional rhetoric. This strategy has been attempted by some IP owners and early indications suggest modest success.

Consider the example of Moser Baer, the leading optical disc manufacturer in India, who vowed to wipe out piracy by selling CDs and DVDs containing music and movies at prices close to the pirated prices. They negotiated licenses with content owners and brought out CD's and DVD's at extremely cheap prices. I'd discussed this aspect in an earlier post, where I mentioned:

"...a normal DVD version of a movie costs around Rs 200 (USD 5) or upwards in India, whereas the version sold by Moser Baer costs around Rs 30-50 (USD 1). The pirated version also sells in places like Palika Bazaar for around the same amount (USD 1) or sometimes even more! With such low margins, pirates will find it hard to survive!

Indeed, the use of such "mild" economic principles is a much smarter way of tackling piracy than the oft "aggressive" and terribly expensive anti-piracy campaigns carried out throughout the country."

I haven't seen any comprehensive empirical data on this model and how well its worked--but anecdotal evidence suggests that it has proved a decent business model and one that has managed to address piracy in a relatively peaceful and perhaps less expensive manner. Given India's booming one billion plus population, I'd be very skeptical of critics that suggest that IP content holders are likely to suffer losses by selling at low prices to a rapidly expanding consumer base. Of course, the issue of whether or not this low priced IP model is likely to work in other "piracy prone" sectors such as software is indeterminate. Though I would wager that it would work, and it would work absolutely fine.

In pharmaceuticals, Merck proved to be a pioneer of sorts in India by introducing its diabetic drug, Januvia at 1/5th of the global price. This strategy appears to have stemmed from the much debated Roche vs Cipla decision, where the Delhi High Court refused to restrain Cipla from allegedly infringing the patent rights of Roche over an anticancer drug Tarceva, on the grounds that Cipla's version sold at only one third of the patented version. The judge may have been influenced by the fact that not only was the cost differential between the innovator product and the brand significantly huge, the innovator product was being sold in India at about the same price that it was being sold in the richer Western markets (UK and US).

The Detractors and the Parallel Imports Issue

In March this year, I was at a conference on "copyright exceptions and limitations" funded by the Ministry of HRD and organised by India's leading IP academic and my guru, Prof NS Gopalakrishnan. Much to my surprise, I found that other copyright industries (such as book publishers) were unwilling to accept the sagacity of Moser Baer's model--claiming that it would never work in their sectors.

Any innovative idea will naturally have its fair share of "status quoist" detractors...but this dismissal of Moser Baer's model could perhaps stem out of a fear that traversing down the differential pricing pathway could be fatal for IP owners: for it would lend pricing decisions to more public scrutiny . There is a danger that lower priced IP goods in India could lead to claims for lowering prices in the wealthy western markets. And of course, the much touted threat that some of these low priced goods could be shipped back to the western economies.

I'm not entirely sure how IP owners will tackle the first threat. As for the second threat, as we've been repeatedly harping on this blog, perhaps "technology" might prove a viable solution. See this post documenting Roche's "mass serialization" technology, which was deployed to keep out counterfeits from domestic markets--but there is no reason why something similar cannot be deployed to check imports into countries where the product is not intended to be sold.

I plan to discuss the other suggestions to tackle IP's negative perception in future posts. These include building "low cost" IP products for India and partnering with local companies and grassroot innovators to help boost local innovation capabilities.

WIPO's TK talks fail after 9 years of negotiation

A historic solar eclipse is 'round the bend, and like so many astronomical occurrences, bears ominous tidings.

The movements of the skies were portended by the developments of a fortnight ago in Geneva almost eerily, when the fourteenth session of the WIPO Intergovernmental Committee on Genetic Resources, Traditional Knowledge and Folklore (IGC), meeting in a midsummer week from June 29 to July 3, 2009, to discuss the future work in continuation of its nine years of existence, simply concluded thus:

"The Committee did not reach a decision on this agenda item",

as reported on the Decisions of the Committee. These ten words belie the agitated conversations that took place behind the scenes, of which few were witness to, but which could have decided the fate of an intellectual property very dear to several communities and states around the world.

In a beautifully detailed narrative of the goings-on at the WIPO IGC deliberations, Thiru Balasubramaniam of Knowledge Ecology Interational (KEI), writes of the "intractable Gordian knot" that the IGC finds itself in, which is now left for the WIPO General Assembly to deliberate upon in September 2009. Other, briefer, reports can be found here and here. If nothing else, these notes offer a fascinating insight into diplomatic negotiations, and a ringside view of the international politics that are played out in an arena such as WIPO.

Bringing the discussions down were irreconcilable differences on three core issues: the demands for one or more international legally binding instruments, text based negotiations, and a clear timeframe.

There was some hard-hitting realpolitik on display, as can be seen in India's comments towards the end of the session. India's representative, whom we tried to contact for comments but with no success, suggested that member states were less than committed to seriously negotiate agreement(s) on TK, and related matters, in contrast with the more aggressive discussions that are taking place at forums like WHO, WCO, and ACTA, where "countries want greater protection and enforcememt of the rights of patent and copyright holders."

Brazil attempted to articulate why it was important to have a legally binding instrument in this matter, for the practical need to entitle indigenous communities with rights to protect their intangible assets, and for the sentimental need to stop treating indigenous communities as second-class.

A few distinct interest groups emerged in the course of the discussions. Led by the African Group, which mooted the proposals stated above, were a group of developing countries, including India, China, Brazil, and others. Throughout, this group was consistent in the belief that "text-based negotiations on a timetable and one or more international legally binding instruments" was "the only way to guarantee effective protection of local and indigenous rights in developing and developed countries".

The EU, the US and South Korea refused to accept the principles of "text-based negotiations” and “internationally legally binding instruments”, while Australia, Canada and New Zealand accepted “text-based negotiations” but were unsure about “legally binding instruments”. The general criticism was that their objections were without reason.

The discussions appear to have been a combination of perceptive observations and amateur under-researched remarks that reveal the hugely varying degrees of interest among members to pursue the Committee's activities to a fruitful end.

Pakistan, for instance, warned that the IGC served as a “great example of a committee that could negotiate for years without any sign of light”. and that it did not wish to renew a “deaf and dumb mandate”. There were already documents available with WIPO that served as good working papers on issues of Traditional Cultural Expression and Tradition Knowledge, but were being ignored.

South Africa added that the IGC lacked political will and disregarded the development agenda, noting that the “current mandate is not enough to insure political will. Lack of support from some countries will reinforce status quo of misappropriation.”

South Korea, while refusing to commit to text-based negotiations, was concerned that such protection would "erode the public domain", and "reduce resources for innovative activities". The South Korean representative made a peculiar and inexplicable digression into kimchi, with observations that were bordering on the callow and hysterical. For that reason alone, it is worthy of reproduction:

“Korea has kimchee, if a foreign company tries to patent a recipe we will try to invalidate it. But does that mean Korea owns kimchi? Do we have right to authorize its production by foreign companies? Could we get license fees from them? If so we would have to pay Japan for sushi, Italy for pizza. Perhaps we could have certificates of origin with proprietary rights. New rights will raise costs which will be borne by the public consumers."

Brazil remarked that "It’s surprising that when developing countries present their interests here they must make such efforts for their demands to be taken as seriously as the demands of the developed countries. Even for them to have to say ‘binding’ is an offense."

India's "larger point", towards the end of the session, was similarly evocative of a tiredness on the part of the developing world to constantly have to "prove" something to their more developed counterparts, in order to have their demands met:

"I make a larger point: our organization administers 25 agreements on patents, copyrights, trademarks, industrial designs. Most of the IP in these areas is owned by our developed partners, if we had suggested it should only be “guidelines” on patent rights would they have accepted it? Today for the 1st time developing countries are asking for protection of their rights, it’s only a very small portion of the global IP rights. Non-binding wouldn’t be acceptable because it wouldn’t amount to any difference on the ground. We need to recognize the need for equity balance and justice, these are principles. The crisis shows the need for balance in equity, political rights. We can bring proportion equity and justice."

So what are the options? The IGC mandate comes to a close in December 2009, after which it is left to the WIPO General Assembly to decide its future. One option, as KEI suggests, is to split the existing committee into three = one for each of the subjects under discussion, i.e., traditional knowledge, genetic resources and folklore. At any rate, it is of immediate concern for the General Assembly to ensure that the nine years of the IGC have not been wasted. Some form of mediation may need to be executed here. This includes establishing clarity on what "legally binding" entails, and making it clear that the act of ratification, and the consequences thereof, is independent of arriving a legally binding agreement.

In keeping with the astronomical metaphor that I began with, I came across this lovely haiku by Matsuo Basho, written over four hundred years ago: Summer moon–/ Clapping hands,/ I herald dawn. Basho derived inspiration perhaps from the annual summer solstice, which has just gone by for us too, celebrating a warm season in a cold country, and the coming of a new day. Can we hope that the powers that be at WIPO bear similarly pleasant tidings in the months to come?

Part I: European Commission’s Competition Inquiry into the Pharmaceutical Sector

The investigation into the anti-competitive conditions in the pharmaceutical sector was begun by the European Union Commission on January 15, 2008. The Preliminary Report was released in December 2008 (Refer to previous post titled "Prelim report points to anti-competitive practices in EU's Pharma industry"). The investigation; “Pharmaceutical Sector Inquiry” launched by the Commission under Article 17 of Regulation 1/2003 (of 16 December 2002) on the implementation of the rules on Competition laid down in Articles 81 and 82 of the Treaty. Article 17 provides for investigations by the Commission into sectors of the economy and into types of agreements. An inquiry is conducted when the trend of trade between Member States, the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market.

The report aims to improve the access of patients to medicines which are safe, innovative and affordable. The inquiry specifically focused on the (1) reasons for observed delays in the entry of generic medicines to the market and (2) the apparent decline in innovation which is measured by the number of new medicines entering the market. The inquiry concentrates on practices which the companies may use to block or delay generic competition as well as to block or delay the development of competing originator products. In other words the report primarily focuses on the competitive relationship between the originator and generic companies and amongst originator companies.

The report begins with recognising intellectual property rights as a key element in the promotion of innovation and competition particularly by generic medicines as essential to keep public budgets under control and to ensure widespread access of medicines. Thus, stressing the importance of ensuring that generic medicines reach the market without any delay. In this context the report examines some recent changes in the pharmaceutical sector. The report points out that a large number of blockbuster drugs have gone off patent in recent years and that more will follow making originator companies increasingly dependent on revenues from existing products. And the firms are willing to employ every trick in the book to extend their existing patents on drugs. The report also notes the recent trends of consolidation in the industry, whereby originator companies are acquiring other originator companies and generic companies. This has enabled larger originator companies to invest in the fast growing generic market. Mergers among generic companies are also not rare in order to increase their economies of scale and expand into other geographic markets.

While analysing the trends in the pharmaceutical industry, the Report points out that it took more than seven months, on a weighted average basis, for generics to enter the market after the patented medicines lost exclusivity. This trend is disturbing as prices at which generic companies enter the market are on an average, 25% lower than the price of the originator medicines, before the loss of their exclusivity. It must also be noted that the prices of originator products fall following the entry of a generic equivalent into the market. Delayed entry of generic equivalents into the market adversely impacts public spending on health and the consumers.

The report makes known the numerous ways in which originator companies extend the commercial life of their products. These practices cause legal uncertainty which has a negative impact on generic entry. They are often used cumulatively with respect to blockbuster drugs. At this juncture it is categorically pointed out that the “use of several instruments that are in themselves legitimate does not necessarily render their combination contrary to competition rules.” In this way the report refuses to lay down and legal guidelines or recommendations. It leaves it to the adjudicating body to lay down specific guidelines in the area of competition law and stresses on a case specific analysis to establish the precise effects of company behaviour on generic entry. The technical annex to the Report provides illustrations and evidence without specifying that the behaviour in question in contrary to competition law.

(a) Filing of numerous patent applications for the same medicine, forming “patent clusters” or “patent thickets”.
(b)Filing of voluntary “divisional patent” applications: This leads to an extension of the examination period of the patent office as the examination continues even if the parent application is withdrawn or revoked (the European Patent Office has taken measures to limit possibilities and the time period during which the voluntary divisional patent applications can be filed)
(c) Using litigation to deter generic companies.
(d) Filing of oppositions, which take approximately two years to conclude (including the appeal procedures). The duration limits the ability of the generic companies to clarify the patent situation.
(e) Settlement agreements between originator and generic companies. Significant proportion of these settlements contained in addition to a restriction on the generic company's ability to market its medicine, a value transfer from the originator company to the generic company; in the form of a direct payment, licence, distribution agreement or a “side-deal”.
(f) Other agreements between originator companies and generic companies concerning the sale/distribution of generic medicines.
(g) Originator companies intervened before marketing authorisation and/or pricing and reimbursement bodies when generic companies applied for marketing authorisation and pricing/reimbursement status for their medicines.
(h) Marketing strategies of originator companies that questioned the quality of generic medicines, as part of a marketing strategy.
(i) Attempt by originator companies to influence wholesalers preparing for the supply of generic products and interventions by generic companies at supply sources for the active pharmaceutical ingredients needed to produce the generic medicines in question.
(j) Launching of second generation products by originator companies (the actual improvement of certain categories of changes, particularly with respect to therapeutic benefits has been questioned by generic companies and consumer associations). The companies undertake marketing strategies to aimed towards switching patients to the new medicine prior to the market entry of a generic equivalent of the first generation product.

The report also examines whether the behaviour of originator companies could be one of the factors hindering innovation. Companies employ patent strategies with the sole reason of interfering with the development of a competing medicine by a rival company thus hindering innovation. These strategies which mainly focus on excluding competitors without pursuing innovative efforts are termed as “defensive patent strategies”. These strategies also include introduction of voluntary divisional patent applications. It must be noted that originator companies opposing the patents of other originator companies have prevailed in 70% of the final decisions and in 19% of the cases, the scope of the patents was reduced. The originator companies also concluded agreements with other originator companies in the European Union for the resolution of claims with respect to patent disputes, oppositions or litigation. The fact that a majority of the agreements which were concluded were in relation to the commercialisation phase rather than the Research and Development phase was emphasised by the report.

The conclusions and recommendations of the Commission are as follows:
(1) Intensification of competition law scrutiny by the Commission under antitrust rules, merger control and State Aid control.
(2) Analysis of market concentration underway in the pharmaceutical sector involving both generic companies and originator companies.
(3) The report says that the Commission in cooperation with the national authorities will not hesitate to make use of its enforcement powers under the competition law, where there are indications of practices that have the potential to restrict or distort competition in the market.
(4) Working towards a rapid establishment of the Community Patent and creation of a unified litigation system.
(5) Adoption of high quality standard by the European Patent Office and acceleration of procedures.
(6) Streamlining of the market authorisation process; recommendations to national agencies and Member States to make better use of the possibility of mutual recognition; stronger coordination between national agencies to avoid discrepancies in the application of the legal framework. Documentation of and transparency of submissions made by third party in market authorisation procedures. Commission urges Member States to take action on the basis of Article 97 of directive 2001/83/EC, against campaigns of originator companies questioning the quality of generic medicines.
(7) Improvement of pricing and reimbursement systems; Commission invites Member States to consider the introduction of natural provisions enabling automatic granting/immediate pricing and reimbursement status to generic products, where the corresponding originator product already benefits from reimbursement.
(8) Commission points out that it considers the pricing and reimbursement procedures as bilateral proceedings between the applicant and the administration. Thus, originator companies should not intervene before the pricing and reimbursement authorities and raise bioequivalence issues or potential patent violation by the generic.
(9) Facilitation of cooperation between the Member States and the exchange of best practices.

The inquiry report restricts itself to providing the Commission “with reliable data on how competition functions in the pharmaceutical sector as regards the competitive relationship between the originator and generic companies and amongst originator companies”. The report put the onus on the Commission to rely on the facts exposed in the inquiry to identify specific needs for action and to set priorities thus falling short of making any recommendations. The report recognises that the situation can see improvement in the light of not merely better enforcement of competition law but improved implementation of intellectual property and regulatory systems.

Part II of this post will deal with follow up action that has been undertaken by the Commission in the form of initiation of formal proceedings against Les Laboratories Servier and a number of generic pharmaceutical companies and lessons for India from the Report.

SpicyIP Tidbits: IPO's latest note on PoAs

The IPO has issued procedural instructions that henceforth, until clear cut directions are made, patent and trademark applications may be accepted if accompanied with a request for filing a power of attorney (PoA) within one month. This is part of a series of changes that are being brought about in Patent Office Procedure by the Controller General over the past several months.

[Added Later: I forgot to hyperlink earlier to this post by Shamnad on whether a delay in the filing of a Power of Attorney prejudices patent/trademark applications or not. There's a fascinating discussion between commentators in this regard, some of which may have to be re-assessed in view of this newest circular that has been issued.]

This tiny but crucial procedural circular relating to the submission of Power of Attorney documents issued way back in June appears to have missed the attention of the IPO website manager. It is the only office circular that is not be seen on the home page of the IPO website. My first question, of course, is why this is so? - Is it a deliberate strategic oversight? Or is it an inadvertent uploading/CMS error?

According to the circular, "Patent and Trademark applications may be accepted if the forwarding letter contains a request for filing the power of attorney within a period of one month."

If you're wondering, like some of my friends were, as to where this circular is hidden, I invite you to wander around the IPO website, and reach the Office Circulars page (Home Page >> Resources (left frame) >> Notice Board >> Officer Circulars), where you chance upon Circular No. 12, issued on 26 June, available as a download here.

The circular appears to have been prompted by the great deal "of doubt and confusion on the question of power of attorney to be attached to Patent and Trademark applications." The IPO awaits a "clear cut" circular issued by the Controller General on the matter, until when the procedure mentioned here shall be followed.

There appears to be some concern over the stipulation of the one-month period for filing PoAs. In part, it imposes procedural limitations where none appear to exist, as neither the Acts nor the Rules (for patents and trademarks) explicitly specify time durations within which such documents have to be filed. Procedural practice appears to be that the documents are filed once they are received from clients.

A secondary concern appears to be the pressure such a regulation is going to create on applications filed on behalf, particularly, of international clients. Balancing the demands of establishing international standards in prosecution with the vagaries of traditional modes of communication is a tough act. Could the IPO have done better had it kept in mind such extrinsic challenges?

I say this not in criticism of the regulation, which I believe is a good thing, but in sympathy for applicants (and representatives of applicants), who may have to deal with circumstances beyond their control in submitting such documents, for whom some leniency may be appropriate.

Meanwhile, my concerns about the "Interactive Guidance" offered by the IPO for Patents and Trademarks appear to have gone unanswered. If the notes of the anonymous commentator on my previous post on this issue are to be believed, like so many others, I await to see if the CG will issue a circular on this too, soon.