Analysis of TRIPS – Novartis Conjunction in India

April 5, 2023by admin0

Abstract

India was referred to as the “Pharmacy of the Developing World” during the final quarter of the 20th century because it provided cheap, life-saving medications to the world’s most underprivileged populations. However, India was subject to the Agreement on Trade Related Aspects of Intellectual Property (“TRIPS”) when it joined the World Trade Organization in 1995. This agreement compelled India, among other things, to reinstate product patents on medications by a specific deadline. The Patents Act was amended in 2005 to do this, but it also contained several “TRIPS flexibilities” that were meant to mitigate the impact on access to medications. One of the crucial TRIPS flexibilities is the compulsory licensing clause, which stated that public interest requirements could force big-name pharmaceutical companies to agree to license their patented medicines. The anti-evergreening clause, which raised the requirements that pharmaceutical firms had to obtain a drug patent in the first place. The Amendments underscored the goals of these provisions: the compulsory licensing clause sought to protect the public’s health, while the anti-ever greening section sought to stop inefficient efforts to preserve shaky patents.

The Intellectual Property Appellate Board in Bayer v. Natco1, and the Supreme Court of India in Novartis AG v. Union of India2, sought to reaffirm the basic rationale of the two crucial TRIPS flexibilities in their two most significant decisions interpreting the 2005 Amendments to date. However, Bayer and Novartis construed the two flexibilities in ways that would have undermined the ideals they sought to uphold.

This article demonstrates how the TRIPS flexibility around the patentability standards can be used to successfully reduce incremental patenting through legislative inclusion. The article gives a succinct analysis of Novartis v. Union of India and speculate on the reasoning that the WTO (World Trade Organization) Appellate Body would use to determine whether the modified Indian Patents Act violates Article 27 TRIPS. According to the argument, the legal analysis considers potential impacts on welfare of the patentability criterion established by the Amended Act in accordance with Article 27 of TRIPS. To comprehend the socio-economic repercussions of various interpretations of Article 27, legal and economic considerations are employed. This article addresses the substantive question-entirely unaddressed by the Indian Court-about whether Section 3(d)3 of the Indian Patent Act and the TRIPS Agreement are compatible. While the judgment invites reflection on several intriguing issues related to the role of WTO law at the national level, this article focuses only on that issue. The question’s focus is on how Article 27 of TRIPS should be interpreted which establishes the requirements for patentability (i.e., an invention should be non-obvious, novel, and useful). It is obvious that the interpretation of these criteria, whether restricted or broad, would undoubtedly have an enormous influence on patent regimes around the world.

Introduction

One of the TRIPS flexibilities is the freedom given to WTO (World Trade Organization) members to determine what constitutes patentable subject matter within the bounds of their national laws and contexts and to exclude specific inventions, like diagnostics, methods of treating the human or animal body, and new applications of existing patents, from registration as patents. The general rule pertaining what constitutes patentable subject matter under the TRIPS Agreement is that, subject to the exceptions, patents shall be available for all inventions, whether products or processes, in all branches of technology, provided they are novel, involve an inventive step, and have potential for industrial application. The TRIPS Agreement does not define “innovation,” giving WTO members the freedom to define the meaning of the term “invention” as they see fit in accordance with their own national laws. The impact of this adaptability on patient access to medications could be both favorable and unfavorable. One the other hand, the absence of a definition would allow WTO members to exempt novel applications of medications from patentability under their domestic law. Therefore, standards should be established to prevent the granting of patents for “evergreen” or “me-too” pharmaceuticals that prolong the length of the patent without improving the efficacy of the drugs. These medications can be categorized as “chemically related to the prototype, or other chemical compounds that have an identical mechanism of action.” Ever-greening is a word used to describe a corporate contrivance in which a producer continues to get patent protection on an initially patented product for successive set periods on more than one feature, even though such attributes can be connected to a single product.

Background of the Case

The patent application for Gleevec, a ground-breaking medication used to treat chronic myeloid leukemia, was rejected by Novartis on April 1, 2013, and the Supreme Court of India supported this decision on the grounds that the patent did not adhere to section 3(d) standards4. With more than 90 paragraphs devoted to the parliament’s concerns when drafting section 3(d) about pharmaceuticals “artificially extending the period of patent to keep competitors out and keep the prices of… patented product high,” the court went to great lengths to explain in detail the ‘why’ and the ‘how’ of the law” in reaching its conclusion. After then, the court made it clear that it will interpret the statute “considering its ‘why’ and ‘how,’ as a result, Novartis researched ways to enhance the free base compound, first by converting it to imatinib mesylate, a specific salt form of the imatinib compound that was not mentioned in any of the 1993 applications, and then by identifying specific polymorphic salt forms that were especially stable, such as the beta crystalline form of imatinib mesylate that was ultimately used to make Gleevec. After India joined the WTO and TRIPS compliance became inevitable, Novartis submitted a patent application in India for the beta crystalline imatinib mesylate in 1998. The application included details about the drug’s use in Gleevec as well as other features of the solid form. The Assistant Controller of Patents evaluated Novartis’s application following the enactment of the 2005 Amendments, which granted product patent protection for the first time since 1970. He rejected the invention on the grounds that it lacked innovation and was not non-obvious. The Gleevec patent met both the standards for innovation and non-obviousness, according to the IPAB’s decision on appeal, yet the patent was nonetheless ruled to be invalid under section 3 (d).

Situation in Supreme Court of India

The ruling was challenged by Novartis before the Indian Supreme Court. The court ruled that imatinib mesylate beta crystalline, the substance that Novartis sought to patent, was indeed a novel form of the well-known drug imatinib free base, but that Novartis had not provided enough proof to show that imatinib mesylate beta crystalline had greater therapeutic efficacy than imatinib free base. This led to the court upholding the rejection of Novartis ‘s patent under section 3(d). The court thus addressed two crucial issues of interpretation raised by section 3(d): first, what constitutes the known substance to which one compares the form sought to be patented; and second, what “enhanced efficacy” as compared to the known compound is necessary to defeat a section 3(d) challenge.

India’s Tie with TRIPS

India agreed to establish minimal standards to safeguard intellectual property rights after signing the TRIPS Agreement (IPRs). This included the issuance of products and method of granting patents across all technological sectors (Article 27 TRIPS). India had previously only given process patents for pharmaceuticals and agrochemicals, which is said to have aided in the development of a pharmaceutical industry focused on generic copies of medications. India used a transitional agreement to embrace the TRIPS standards, allowing it to delay the award of these patents until 2005 if it provided a system to grant Exclusive Marketing Rights (EMRs) under the “mailbox facility.” The transitional phase ended in 2005, and the Indian Parliament passed a bill to incorporate the TRIPS mandate into national law to comply with the Agreement. Section 3(d) of the Act, that was not patentable, became the subject of much debate. It states, among other things, “the mere discovery of any new property or new use for a known substance or the mere use of a known process, machine, or apparatus unless such known process results in a new product or employs at least one new reactant.” As a result of this case, Novartis (Swiss pharmaceutical company) filed a significant lawsuit against the Government of India in 2006 and asked the High Court of Madras to declare Section 3(d) of the Indian Patents Act, as revised in 2005, to be in violation of the TRIPS Agreement and/or to be unconstitutional. All the petitioner’s requests were denied by the High Court of Madras in a decision that was issued on August 6, 2007. The Court did not address the merits of the problem in connection with the TRIPS Agreement’s violation because it determined that it lacked jurisdiction in this matter. The first petition filed by Novartis in 2007 was forwarded to the Intellectual Property Appellate Board (“IPAB”), a specialized tribunal established in accordance with Section 117-G5 of the Indian Patent Act to handle appeals from the various intellectual property offices located throughout the nation, before the High Court could issue its decision. The invention in question did not breach the originality and non-obviousness criteria, but failed the test of enhanced efficacy under Section 3 in 2009.

Conjunction of TRIPS and Section 3 (d)

Novartis claimed that Section 3(d) was against the TRIPS Agreement. There were at least three probable incompatibilities. At the outset, Section 3(d) added unique element to Indian patent law that distinguished it from the laws of other WTO Members; in addition to this, Section 3(d) made the Indian patentability standard stricter than what Article 27 requires; and Section 3(d) was seen as discriminatory in terms of the technology field because it focused on chemicals and pharmaceuticals.6 There was no other method to specifically interpret and clarify the meaning of TRIPS than through the processes outlined in the DSU (Dispute Settlement Understanding) and further developed in established WTO jurisprudence. TRIPS is a component of an organic body of law, which we may refer to as WTO law. Therefore, the use of interpretive principles that the Appellate Body and WTO Panels are frequently adhered to.

Unification of Jurisdictions

There are three significant paragraphs in Article 27 of TRIPS – WTO7. It is categorical to see that paragraph 1, paragraphs 2, and paragraph 3 allow for diversity. The second sentence of paragraph 1 creates a non-discrimination requirement; taken alone, this indicates that regimes may not only be non-discriminatory but also differ in almost any way. The conditions that may prevent inventions from being patented are listed in paragraphs 2 and 3 of Article 27. On logical grounds, a rule that permits a particular conduct without prescribing it opens the possibility for the introduction of alternative regimes.8 Considering paragraph 2, which states that inventions may be exempted from patentability to safeguard public health. The circumstances relating to public health as well as the impact of pharmaceutical patent regimes on public health vary from country to country. For instance, if one poor region is severely afflicted by the HIV/AIDS epidemic; it is plausible to believe that following Article 27.2 in that region would be allowed to exclude antiretroviral drugs (or at least some of them) from patentability. In other countries, where HIV/AIDS is not a major problem, the same exception may not apply. Thus, WTO Members, in line with Article 27.2, may implement different patent regimes because in one country there are specific needs in relation to the protection of public health different from those of other countries.

The first clause of Article 27.1, which lays out the requirements for patentability-novelty, inventiveness, and industrial applicability-makes the investigation of the uniformity issue more difficult. It is important to note that to demonstrate uniformity is a prerequisite for compliance, demonstration that each criterion individually calls for complete harmonization becomes necessary; in contrast, it would be sufficient to demonstrate that only one of the criteria permits variation to draw the conclusion that uniformity is not a prerequisite. In this way, each of the three criteria is examined separately and then conclude if we discover that any of them allows for variability. The TRIPS adds little to the definition of “inventive step,” which is still subject to various interpretations. It only specifies that the terms “inventive step” and “non-obvious” are interchangeable. In accordance with Article 3.2 DSU (Dispute Settlement Understanding), which affirms established norms of international law, the Appellate Body applies ordinary rules of interpretation of public international law while attempting to explain WTO legislation9. According to Article 31 of the 1969 Vienna Convention on the Law of Treaties, the most crucial interpretive factors are the plain meaning of the words (the text), the context, and the object and purpose of the Treaty.10 The common meaning of words is sometimes vague, leaving the text open to numerous interpretations. It would be helpful to examine various patent regimes to determine how the phrases “inventive step” and “non-obviousness” are typically defined in order to explain the terms’ meanings in this context. In many jurisdictions, the words “inventive step” and “non-obviousness” allude to the need that an invention be something that is not readily conceivable by a person experienced in the art.

The TRIPS requires some degree of uniformity, the term “inventive step” should refer to anything that cannot be readily devised by the person skilled in the art (commonly called PHOSITA by patent lawyers). If ingenuity goes beyond this minimal standard, it may be possible for WTO Members to differ from one another.11 According to Article 7 of the TRIPS Agreement, “the protection… of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, as well as a balance of rights and obligations.” Welfare effects of patent law varies from country to country to country. The reason for the difference could be influenced by a wide range of factors, including the country’s socioeconomic state, the industry’s structure to which the regime would apply, and the level of technical advancement.

Article 812 states, that ‘Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio – economic and technological development, provided that such measures are consistent with the provisions of this Agreement’.

Additionally, the interpretation of Article 4bis13 of the Paris Convention would seem to support the allowance of variation in patent criteria. It is important to emphasize in this context that the effect of Article 4bis of the Paris Convention would be lost if the granting of a patent in one country were to be regarded as a basis for patentability in another. The rule of treaty interpretation would be broken by such a reading. One of the corollaries of the “general rule of interpretation” in the Vienna Convention is that interpretation must give meaning to and effect to treaty’s provisions, as noted by the Appellate Body in US-Gasoline.14

An interpreter is not free to use a reading that would make entire sections or paragraphs of a treaty redundant or useless. Thus, uniformity of patent regimes cannot be regarded as a TRIPS requirement for the same reason. Finally, it is important to keep in mind that general principles of international law must also be considered when interpreting WTO law pursuant to Article 31.3(c), as acknowledged by the Appellate in US – Shrimp15 and later decisions. The use of the in dubio mitius principle would further support the idea that uniformity is not necessary in the matter at hand given the uncertainties of the phrases used in Article 27.1.16 This rule states that if the Treaty’s text is unclear, which is claimed to be the case in our situation, the text should be construed in a way that will cause the fewest burdens on each Member, might draw the conclusion from this concept that uniformity is not necessary because it is conceivable that the responsibility for developing and implementing patentability criteria will vary among nations with varied technological capacities. From this, it can be concluded that TRIPS does not require that all WTO Members have the same patent regimes considering the various arguments outlined above. Therefore, proving that India’s patent system differs from other WTO members’ is not conclusive regarding the issue of Section 3(d) compliance with TRIPS. If uniformity is not necessary, it is unclear on the limits of requirement of patentability and, in that case, whether Section 3(d) of the India Patent Act violates or complies with Article 27.

Ambit of Patentability Criteria

As argued earlier, WTO Members may interpret the patentability standards differently. However, it is necessary to identify a region to limit the applicability of the patentability rules. To put it another way, the principle of effective treaty interpretation also demands that the patentability requirements have certain conceptual boundaries to prevent them from becoming meaningless. What are the limits of the patentability standards in that case? And does Section 3(d) fall under these restrictions? limit our examination to the non-obviousness requirement since it is the most important criterion for applying patent law to pharmaceuticals because of the wide range of concerns that may be involved in evaluating the general bounds of the patentability criteria. By examining the TRIPS’s goals and guiding principles as outlined in Articles 7 and 8, there is an attempt to deepen the understanding of the non-obviousness criterion.

According to Article 7, the non-obviousness standard’s level of strictness may vary to “help to the promotion of technical innovation and to the transfer and diffusion of technology in a way conducive to social and economic prosperity.” Thus, Section 3(d) may be interpreted as enacting a stricter Non obviousness criteria to accomplish these objectives. However, it is difficult to determine whether Section 3(d) is an effective strategy for achieving these objectives using only legal-analytical methods; the problems raised are better understood by other social sciences. Economic analysis can help us in determining if a stricter non-obviousness requirement can promote technology in a way that is beneficial to societal and economic progress in this setting.17 A positive response to the above-mentioned question would indicate that Section 3(d) does not violate the TRIPS, however a negative response would not suggest that a violation had taken place. In fact, Section 3(d) may still be interpreted as meeting the requirements of Article 27.2. (here termed as public health provision). In this situation, we would have to determine whether the public health protections offered by Section 3(d) outweigh the exclusion of patentability. This question is empirical and economic research may aid in providing a solution.

Conclusion & Way Forward

The situation of Novartis Company in India is a good illustration of national patentability standards. It is critical to choose lessons from nations with socioeconomic conditions that are comparable to those in the SADC (South African Development Community) when determining the sources of lessons from outside the area for the SADC. Although the Indian legislative inclusion of the essential TRIPS flexibility may be viewed as going slightly beyond the minimum stipulated by the TRIPS Agreement, i.e., TRIPS-plus, such inclusions are TRIPS-compliant. The Novartis ruling conveys the message that the issue of subpar patents persists and is exacerbated by subpar patent examinations conducted in the absence of pre-grant and post-grant patent opposition. It is now appropriate for the third world to emulate India’s section 3(d), and this imitation appears to have already begun in earnest in Thailand, China, and Argentina. The Novartis ruling shows that TRIPS flexibility is not a paper tiger and may be deployed despite pressure from major pharmaceutical firms and the US government. The Novartis lawsuit established a precedent that allows governments in underdeveloped nations to impose strict patentability requirements on drugs to promote the early entry of life saving, affordable generics. The Supreme Court’s decision to interpret section 3(d) in Novartis’ favor or to invalidate it entirely would have had a severe impact on the availability of medicines in general and HIV/AIDS medications. President of the New Delhi Network of Positive People (DNP+), Loon Gangte, effectively summarized the significance of this choice in the context of HIV/AIDS. He was quoted by William New as saying, “We rely on the availability of affordable AIDS treatments and other important medicines made by the Indian generic manufacturers to keep alive and healthy” on the eve of the Novartis case judgment.

The degree of strictness of the patentability criteria, and specifically of the non-obviousness criterion therein provided, has been demonstrated in this analysis. This is vital for a basic comprehension of Article 27 TRIPS. In many cases, a loose non-obviousness requirement might hinder innovation instead than fostering it. Therefore, it is incorrect to think that India should adopt “pro-patent” patentability rules under the post-2005 regime. As a result, the non-obviousness standard carved into Section 3(d) appears legitimate, and other developing nations may decide to follow suit. They may decide to set the level of rigor of the patentability standards in full autonomy, provided that the goal of promoting technological innovation is respected. The Novartis case is significant because it demonstrates that, with a government that is sensitive to the unique public health needs of its citizens, it is possible to fully utilize the TRIPS flexibilities with the help of an independent judiciary and a strong civil society that effectively collaborates with its international counterparts. By stopping incremental patenting and ever-greening, the ruling gave the generic industry in India a triumph. The same has been upheld and relied upon by the Supreme Court and various High Courts, time and again, through several landmark cases, such as, FMC Corporation and Ors. v/s GSP Crop Science Private Limited18, Best Agrolife Limited v/s Deputy Controller of Patents and Ors.19, and Natco Pharma Limited v. Assistant Controller of Patents & Designs and Ors.20.


1 Bayer Corporation Vs. Union of India and Others, Order No. 45/2013 (Intellectual Property Appellate Board, Chennai).

2 CIVIL APPEAL Nos. 2706-2716 OF 2013.

3 (d) the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant. Explanation. -For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy;

4 Civil Appeal No. 2706-2716 of 2013.

5 The 1970 Act, supra note 44, § 117G. L. Lee, Trials and TRIPS-Regulations: India Patent Law and Novartis AG v. Union of India, 23 BERKELEY TECH. L.J. 281, 287-88 (2008) (noting that the Indian judicial system comprises a specialized tribunal entitled the Intellectual Property Appellate Board (“IPAB”) established on September 15, 2003 to hear appeals from Registrar of Trademarks and Geographic Indications and from the Controller of Patent.

6 Saby Ghoshray, ‘3(D) View of India’s Patent Law: Social Justice Aspiration Meets Property Rights in Novartis v. Union of India & Others’ (2014) 13 J Marshall Rev Intell Prop L 719

7 Article 27 titled Patentable Subject Matter reads as following:

  1. Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.9 Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.
  2. Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect order public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.
  3. Members may also exclude from patentability: (a) diagnostic, therapeutic and surgical methods for the treatment of humans or animals; (b) plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, Members shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof. The provisions of this subparagraph shall be reviewed four years after the date of entry into force of the WTO Agreement.)

8 Ibid

9 Gasoline (US – Gasoline), WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, at 16; for a general discussion see Van den Bosche, 206-209 and for a more in depth analysis Pauwelyn, J. (2001); for an analysis of the use of other rules of international law to interpret the TRIPS see Frankel, S. (2005)

10 Article 31, General rule of interpretation reads as follows:

  1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
  2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:
    1. any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;
    2. any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
  3. There shall be taken into account, together with the context:
    1. any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
    2. any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
    3. any relevant rules of international law applicable in the relations between the parties.

11 CHAUDHURI, S. (2013). The Larger Implications of the Novartis-Glivec Judgment. Economic and Political Weekly, 48(17), 10-12. http://www.jstor.org/stable/23527177

12 Part I – General Provisions and Basic Principles, Uruguay Rounds Agreements: TRIPS

13 Article 4bis of the Paris Convention is integral part of TRIPS and it deals with ‘Independence of Patents Obtained for the Same Invention in Different Countries’ The Article reads as following:

  1. Patents applied for in the various countries of the Union by nationals of countries of the Union shall be independent of patents obtained for the same invention in other countries, whether members of the Union or not.
  2. The foregoing provision is to be understood in an unrestricted sense, in particular, in the sense that patents applied for during the period of priority are independent, both as regards the grounds for nullity and forfeiture, and as regards their normal duration.
  3. The provision shall apply to all patents existing at the time when it comes into effect.
  4. Similarly, it shall apply, in the case of the accession of new countries, to patents in existence on either side at the time of accession.
  5. Patents obtained with the benefit of priority shall, in the various countries of the Union, have a duration equal to that which they would have, had they been applied for or granted without the benefit of priority.

14 US-Gasoline, supra note 12, para. 23

15 United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R and Corr.1, adopted 6 November 1998, modified by Appellate Body Report, WT/DS58/AB/R, DSR 1998:VII, 2821 (US-Shrimp) Para. 158 and footnote 157.

16 EC – Hormones, Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998: I, 135 (EC – Hormones) Para. 165,, where the AB states that ‘the interpretative principle of in dubio mitius’ is ‘widely recognized in international law as a “supplementary means of interpretation.”‘ The definition of the principle reported by the AB is the following: ‘The principle of in dubio mitius applies in interpreting treaties, in deference to the sovereignty of states. If the meaning of a term is ambiguous, that meaning is to be preferred which is less onerous to the party assuming an obligation, or which interferes less with the territorial and personal supremacy of a party, or involves less general restrictions upon the parties.”

17 Ibid

18 CS (COMM) 662 of 2022.

19 W.P. (C)-IPD 11/2022; CM 32/2022, 54/2022, 55/2022.

20 2023/DHC/000268.

Author –  Shyamli Shukla, Associate

Co- Author – Manshaa Nagpaal, Intern, Jindal Global Law School

Re-post – https://articles.manupatra.com/article-details/Analysis-of-TRIPS-Novartis-Conjunction-in-India /

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