Blinded by Design: The Way the 2024 Patent Rules Have Undermined the Evidence Engine of Compulsory Licensing :Author: Aditi Pandey
When Natco Pharma requested India’s first compulsory licence for the cancer drug Nexavar in 2012, it did not gain access to Bayer’s commercial secrets through espionage or because of discovery in litigation; it got Bayer’s regulatory submissions . Under section 146(2) of the Patents Act, 1970, patent holders had to file an annual disclosure in Form 27 on how their inventions were being put to commercial use in India . The disclosures that Bayer itself made exposed a disturbing truth: the company was importing only a tiny quantity, just two per cent of eligible patients, and pricing the drug at a steep 2,80,000 for a month’s treatment
ARTICLE
Introduction
When Natco Pharma requested India’s first compulsory licence for the cancer drug Nexavar in 2012, it did not gain access to Bayer’s commercial secrets through espionage or because of discovery in litigation; it got Bayer’s regulatory submissions[1]. Under section 146(2) of the Patents Act, 1970, patent holders had to file an annual disclosure in Form 27 on how their inventions were being put to commercial use in India[2]. The disclosures that Bayer itself made exposed a disturbing truth: the company was importing only a tiny quantity, just two per cent of eligible patients, and pricing the drug at a steep 2,80,000 for a month’s treatment.[3] From these documents the Controller gathered the facts he needed to grant a compulsory licence under section 84, cutting the price of the drug by ninety per cent and turning statutory protection into real relief.[4] The system works because Indian patent law does not view exclusivity as an absolute right but patents are granted under section 83 to encourage local manufacturing, technology transfer and to prevent the creation of simple import monopolies[5]. The provision for compulsory licensing in section 84 offers a significant safety valve, allowing other parties to produce a patented product in situations of unmet public demand, unaffordable prices or where domestic production is not taking place.[6] But all of the statutory bases for such licensing require verifiable economic evidence. But because the internal accounts of the patentee are not available to competitors and public health campaigners, it is difficult to demonstrate the existence of market failure or unmet demand in the absence of detailed working statements. But in fact, Form 27 was meant to be the evidence engine of this licensing regime[7]. This engine was often evaded in the past, with the patent holders regularly leaving the forms blank or making one line evasive statements. This was the basis for the late legal scholar Shamnad Basheer to file a major public interest petition with the Delhi High Court.[8]
The court in Shamnad Basheer v Union of India, took the Patent Office to task for allowing non-compliance and directed it to strictly enforce disclosures on manufacturing volumes, importation
[1] Bayer Corporation v Union of India (Bombay High Court, 15 July 2014); Bayer Corporation v Union of India, The Controller of Patents and Natco Pharma Ltd (IPAB, 4 March 2013).
[2] Patents Act 1970, s 146(2); Patents Rules 2003, r 131 (as applicable before the Patents (Amendment) Rules 2024).
[3] Bayer Corporation v Union of India (Bombay High Court, 15 July 2014); Bayer Corporation v Union of India, The Controller of Patents and Natco Pharma Ltd (IPAB, 4 March 2013).
[4] Bayer Corporation v Union of India (Bombay High Court, 15 July 2014); Bayer Corporation v Union of India, The Controller of Patents and Natco Pharma Ltd (IPAB, 4 March 2013).
[5] Patents Act 1970, s 83.
[6] Patents Act 1970, s 84(1).
[7] Patents Act 1970, s 146(2); Patents Rules 2003, r 131.
[8] Shamnad Basheer v Union of India (Delhi High Court, W.P.(C) 4676/2014).
and pricing. But instead of improving transparency, the executive gradually dismantled disclosure rules that ultimately resulted in the overhaul of 2024. Form 27 was stripped of its investigative value by the Patents (Amendment) Rules, 2024, which were issued on March 15, 2024[1]. The obligation to indicate specific quantities, revenue figures and details as to the country of origin was totally abolished.[2] The new form did not have empirical reports, but just a binary tick box: ‘worked’ or ‘not worked’[3].
If the patentee checks the ‘worked’ box, he is absolved of the requirement to disclose either a single rupee figure or the volume of sales. Importantly, the form no longer requires the patentees to differentiate between products made in India and those imported from abroad. So now an overseas manufacturer can import small occasional batches and tick the box and legally hide pure import monopoly and say patent is being commercially worked. The procedural calendar makes the situation all the more ambiguous.
The amendments to Form 27 in 2024 mean this only needs to be filed once every three financial years[4]. The patentee is entitled by law to keep their working records for a period of up to fifteen months after the expiry of a three-year period, having regard to the concessions made under Rule 131(2) and Rule 138.[5] This results in a statutory time trap. Section 84 provides for the application of a compulsory licence three years after the grant of the patent[6]. But the new calendar has no working statements in the public register when that three year time period has expired. Therefore third parties cannot demonstrate that there has been unmet demand because the necessary data do not exist. The Jan Vishwas Act, 2023 amends Section 122 of the Patents Act, thereby further strengthening the lack of information.[7]
The amendment has removed criminal liability for false statements concerning the working of a patent, doing away with the possibility of imprisonment and reducing the penalty for failure to file from a fine of up to ten lakh rupees to an administrative penalty of one lakh rupees[8]. For big pharmaceutical companies, one lakh rupees is a negligible amount. This small fine discourages secrecy by being an inexpensive administrative fee for hiding details of domestic sales and supply. Subordinate legislation cannot legally override the clear intent of the parent legislation.[9] The executive has effectively nullified Section 84 by removing the verifiable economic data from Form 27, without changing the main text of the Patents Act. In the case of multi-patent electronics, policymakers argued that the compliance burden was excessive, but in the current case of deregulation pharmaceutical monopolies are direct beneficiaries.
What was once a tool for ensuring public accountability has been turned into an unverified system based on honor. In an effort to regain the trust of institutions, the government should re-implement detailed mandatory annual disclosures for public interest sectors such as healthcare. If there is no clear data on the public register, the statutory commitment to compulsory licensing is reduced to no more than an illusion.[10]
Reference
[1] Patents (Amendment) Rules 2024, Gazette of India, 15 March 2024.
[2] Patents (Amendment) Rules 2024, r 131 and Form 27.
[3] Patents (Amendment) Rules 2024, Form 27.
[4] Patents (Amendment) Rules 2024, r 131(2).
[5] Patents Rules 2003, rr 131(2), 138.
[6] Patents Act 1970, s 84(1).
[7] Jan Vishwas (Amendment of Provisions) Act 2023, sch; Patents Act 1970, s 122.
[8] Patents Act 1970, s 122, as amended by the Jan Vishwas (Amendment of Provisions) Act 2023.
[9] State of Tamil Nadu v P Krishnamurthy (2006) 4 SCC 517.
[10] Patents Act 1970, s 84.