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India - Patent Protection for Pharmaceutical and Agricultural Chemical Products
Report of the Panel
The report of the Panel on India - Patent Protection for Pharmaceutical and Agricultural Chemical Products is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 5 September 1997 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report, an appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel, and that there shall be no ex parte communications with the panel or Appellate Body concerning matters under consideration by the panel or Appellate Body.
Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.
TABLE OF CONTENTS
1.1 On 2 July 1996, the United States requested India to hold consultations pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) and Article 64 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) regarding the absence in India of either patent protection for pharmaceutical and agricultural chemical products or formal systems that permit the filing of patent applications for pharmaceutical and agricultural chemical products and that provide exclusive marketing rights in such products (WT/DS50/1). No mutually satisfactory solution was reached in these consultations, held on 27 July 1996. The United States requested the Dispute Settlement Body (DSB), in a communication dated 7 November 1996, to establish a panel to examine the matter (WT/DS50/4). At its meeting of 20 November 1996, the DSB agreed to establish a panel with standard terms of reference in accordance with Article 6 of the DSU.
1.2 In document WT/DS50/5 of 5 February 1997, the DSB was informed that the terms of reference and the composition of the Panel were as follows:
Terms of reference
"To examine, in the light of the relevant provisions of the covered agreements cited by the United States in document WT/DS50/4, the matter referred to the DSB by the United States in that document and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."
Chairman: Mr. Thomas Cottier
Panelists: Mr. Douglas Chester
Mr. Yanyong Phuangrach
1.3 The Panel heard the parties to the dispute on 15 April and 13 May 1997. The Panel decided to give the parties the chance to comment, after the second session, in writing on each other's arguments related to the United States' claim based on Article 63, which claim had been made for the first time at the first session. The interim report was issued to the parties on 27 June 1997. Only India requested the Panel to review parts of the interim report and no request was received to hold an additional meeting.
II. FACTUAL ASPECTS
2.1 The questions before this Panel concern the obligations India has as a WTO Member by virtue of certain transitional provisions of the TRIPS Agreement and are to be divided into questions related to the provisions of Article 70.8 of the TRIPS Agreement and questions related to the provisions of Article 70.9 of that Agreement. In respect of these questions, issues were also raised relating to the publication and notification provisions of Article 63.
2.2 Obligations arising under international agreements or treaties are not, by their own force, binding in Indian domestic law. Appropriate legislative or executive action has to be taken for bringing them into force.
2.3 On 31 December 1994, the President of India promulgated the Patents (Amendment) Ordinance 1994, to amend the Patents Act 1970 to provide a means in the Act for the filing and handling of patent applications for pharmaceutical or agricultural chemical products (as required by subparagraph (a) of Article 70.8 of the TRIPS Agreement) and for the grant of exclusive marketing rights with respect to the products that are the subject of such patent applications (as required by Article 70.9 of the Agreement). 1 This Ordinance was issued in exercise of the powers conferred upon the President by clause (1) of Article 123 of the Indian Constitution, which enables the President to legislate when Parliament (either House or both Houses) is not in session and the President "is satisfied that circumstances exist which render it necessary for him to take immediate action". The Ordinance became effective on 1 January 1995 and lapsed on 26 March 1995, since legislation of this kind ceases to apply at the expiration of six weeks from the re-assembly of Parliament.
2.4 At the time of the promulgation of the Patents (Amendment) Ordinance 1994, a Press Note was issued providing an explanation of its background and purposes. According to paragraph 4 of this Press Note, the Indian Government had set up an Expert Group which had been entrusted with the task of suggesting specific amendments necessary in Indian laws to comply with India's obligations under the provisions of Articles 70.8 and 70.9 of the TRIPS Agreement and also to safeguard India's interests in this regard; this Expert Group had recommended a set of measures on which decisions had been taken by the Government. The Ordinance was also notified by India to the Council for TRIPS under Article 63.2 of the TRIPS Agreement (which notification had been distributed as document IP/N/1/IND/1). During this period, 125 applications had been received and filed.
2.5 A Patents (Amendment) Bill 1995, which was intended to give permanent legislative effect to the provisions of the Ordinance, was introduced in the Lok Sabha (Lower House) of the Indian Parliament in March 1995. This Bill was passed by the Lok Sabha and was then introduced in the Rajya Sabha (Upper House). In the Rajya Sabha, the Bill was referred to a Select Committee of the House for examination and report. The Select Committee started its work but could not present its report before the dissolution of the Lok Sabha on 10 May 1996. The Patents (Amendment) Bill 1995 lapsed with the dissolution of the 10th Lok Sabha on that date.
2.6 At the time that the period of validity of the Ordinance expired, the Patents (Amendment) Bill 1995 was still being debated. India informed the Panel that, in the light of this situation, the Indian executive authorities decided, in April 1995, to instruct the patent offices in India to continue to receive patent applications for pharmaceutical and agricultural chemical products and to store them separately for processing as and when the change in the Indian patent law to make such subject matter patentable would take effect. No record of this decision or of any administrative guidelines issued to or within the patent offices of India to this effect was made available to the Panel.
2.7 No public notice was given at that time of this administrative decision and no notification concerning it was made to the Council for TRIPS. However, on 2 August 1996, the Indian Minister of Industry responded to a question asked by a member of the Lok Sabha concerning whether applications for product patents in the pharmaceutical, food and agricultural chemical areas had been received in anticipation of changes in the Indian Patents Act 1970 in accordance with the requirements of the World Trade Organization; as reflected at Annex 2 of this report, the Minister responded by stating that the patent offices had received 893 patent applications in the field of drug or medicine from Indian as well as foreign companies/institutions up to 15 July 1996 and that applications for patents would be taken up for examination after 1 January 2005 as per the WTO Agreement.
2.8 Under Indian patent law, patent applications for pharmaceutical or agricultural chemical products made by any person entitled to apply under Section 6 of the Patents Act 1970 are subject to the same fee as any other patent application being received and allotted a filing date and advertised in the Official Gazette with serial number, filing date, name of applicant and title of invention. Under the administrative arrangements of the Indian patent offices pursuant to the decision taken in April 1995, such applications are, however, unlike other patent applications, being stored separately and not referred by the Controller to an examiner as specified in Section 12 of the Act.
2.9 The legal authority for these administrative arrangements that has been cited by India is Article 73(1)(a) of the Indian Constitution in conjunction with the Indian Patents Act 1970. Article 73(1) reads as follows:
"Extent of executive power of the Union. (1) Subject to the provisions of this Constitution, the executive power of the Union shall extend
(a) to the matters with respect to which Parliament has power to make laws; and
(b) to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any treaty or agreement:
Provided that the executive power referred to in sub-clause (a) shall not, save as expressly provided in this Constitution or in any law made by Parliament, extend in any State to matters with respect to which the Legislature of the State has also power to make laws."
2.10 The full text of the provisions of the Patents Act of relevance to the case in hand can be found at Annex 1 of this report. For the purposes of the case in hand, the main aspects of these provisions that are of relevance are as follows:
- Chapter III (Sections 6 through 11) deals with applications for patents. These provisions do not require that applications for patents must be limited to patentable subject matter. In respect of the subject matter of the claims, they only require that such applications should be for inventions.
- Inventions are defined in Section 2(1)(j) as, inter alia, any new and useful substance produced by manufacture, including any new and useful improvement of such a substance.
- Section 5 makes it clear that inventions claiming substances intended for use, or capable of being used, as a food, medicine or drug or relating to substances prepared or produced by chemical processes are not in themselves patentable, but methods or processes for their manufacture are. Under Section 2(1)(l)(iv) the term 'medicine or drug' includes insecticides, germicides, fungicides, weedicides and all other substances intended to be used for the protection or preservation of plants.
- Chapter IV of the Patents Act concerns the examination of applications. Section 12 requires that, when the complete specification has been filed 2 in respect of an application for a patent the application shall be referred by the Controller General of Patents, Designs and Trademarks to an examiner. The examiner shall ordinarily report to the Controller within a period of 18 months on, inter alia, whether the application and the specification are in accordance with the requirements of the Act and whether there is any lawful ground for objecting to the grant of the patent under the Act.
- Paragraph 2 of Section 15 states that, if it appears to the Controller that the invention claimed in the specification is not patentable under the Act, he shall refuse the application.
2.11 India informed the Panel that, between 1 January 1995 and 15 February 1997, a total of 1,339 applications for pharmaceutical and agricultural chemical products had been received and registered. Of these applications, United States' companies had filed 318 applications for pharmaceutical product patents and 45 applications for agricultural chemical product patents. On the day the Patents (Amendment) Ordinance 1994 had lapsed, 125 applications had been received and filed (41 made by US companies); prior to 15 February 1997, out of the other 1,214 applications (322 by US companies), 605 had been received and filed prior to the day the Patents (Amendment) Bill 1995 had lapsed.
(b) Article 70.9
2.12 The Indian executive authorities do not have the legal powers under present Indian law to accord exclusive marketing rights in accordance with the provisions of Article 70.9. No request for the grant of exclusive marketing rights has so far been submitted to the Indian authorities.
III. FINDINGS AND RECOMMENDATIONS REQUESTED BY THE PARTIES
3.1 The United States requested the Panel to make the following rulings, findings and recommendations:
(a) India has failed to implement the obligation in Article 70.8 to establish a mechanism that preserves the novelty of applications for pharmaceutical and agricultural chemical product patents during the TRIPS transition period, regardless of when those applications are filed during that period.
(b) Article 70.8 of the TRIPS Agreement requires India to ensure that persons who filed or would have filed "mailbox" applications had the "mailbox" 3 been in place on time and maintained can file such applications and receive the filing date they would have received.
(c) In the alternative, if the Panel finds that India has had a valid mailbox system 4 in place, India has failed to comply with its transparency obligations under Article 63 of the TRIPS Agreement.
(d) The obligation to establish an exclusive marketing rights system arose on 1 January 1995, based on the text of Article 70.9. Because India has failed to implement an exclusive marketing rights system legislatively, it is currently out of compliance with this obligation under the TRIPS Agreement.
(e) India has failed to implement the obligation in Article 70.9 that marketing rights be granted so that competitors of the owner of such right will not be permitted on the market absent the owner's consent.
Article 70.8 and 70.9
(f) That the Panel recommend that India bring its measures into conformity with its obligations under the TRIPS Agreement.
(g) That the Panel suggest that India implement its obligations under Article 70.8 and 70.9 in a manner similar to the way in which Pakistan has indicated it is implementing these obligations.
3.2 India requested the Panel to reject the United States complaints on the basis of the following findings:
(a) India is providing a means for filing patent applications for pharmaceutical and agricultural chemical products consistently with Article 70.8 of the TRIPS Agreement. This means is capable of attaining the objectives of Article 70.8 of the TRIPS Agreement.
(b) The United States' request, referred to under 3.1(b) above, is a request for a ruling on how India should eliminate the consequences of an alleged violation of Article 70.8 of the TRIPS Agreement. Article 19.1 of the DSU does not permit the Panel to make a ruling on how India should eliminate the consequences of the alleged violation of Article 70.8 of the TRIPS Agreement.
(c) The United States' request for findings based on Article 63 should not be considered by the Panel, since the Panel's terms of reference do not cover the United States' Article 63 claim and the scope of factual and legal claims cannot be expanded after the first written submission.
(d) In the alternative, if the Panel were to consider that it can examine the United States' claim:
(i) Article 63 does not apply to developing countries until 1 January 2000;
(ii) if the Panel were to consider that Article 63 already applies to India, India has published the elements of its means of filing that are subject to the transparency requirements of Article 63.1.
(e) Since there has not been any request for exclusive marketing rights in India, India has not failed to accord exclusive marketing rights to any product entitled to such rights under Article 70.9 of the TRIPS Agreement.
(f) Since the issue of the scope of exclusive marketing rights was not an issue relating to an existing measure, the United States' request, referred to under 3.1(e) above, amounts to a request for a declaratory judgement, which type of finding does not fall within the competence of panels because Article XXIII of GATT 1994 and the DSU permit only complaints on measures actually taken.
Article 70.8 and 70.9
(g) The United States' request that the Panel suggest that India implement its obligations under Article 70.8 and 70.9 in a manner similar to the way in which Pakistan has indicated it is implementing these obligations should be rejected as procedurally and legally inappropriate.
1. The Patents (Amendment) Ordinance 1994 stipulated, in essence, that applications claiming patent protection for pharmaceutical and agricultural chemical product inventions could be made, although such inventions were not patentable, and that their handling would be postponed until 1 January 2005 or until an application for the grant of an exclusive marketing right for the product in question was made, if such would occur earlier; the Ordinance also laid down the procedures for applications for the grant of exclusive marketing rights, the scope of these rights and their enforcement.
2. Pursuant to Section 9, the complete specification must normally be filed within 12 months of the date of the filing of the application, which can be extended to 15 months, failing which the application is deemed abandoned.
3. For an explanation of the term "mailbox system", see footnote 4 below
4. The term "mailbox system" is used as shorthand for provisions to be put in place which allow for the filing of patent applications for pharmaceutical and agricultural chemical products as required by Article 70.8.
Continue on to Part 2 of India - Patent Protection for Pharmaceutical and Agricultural Chemical Products