Tag: India patents

Investment Protection Proposals Under RCEP Threaten India’s Pharma Industry

Free trade agreements like the Regional Comprehensive Economic Partnership will infringe on India’s intellectual property laws. India must stand its ground in the interest of public health.

Despite earlier announcements that the negotiations at the Regional Comprehensive Economic Partnership (RCEP) were going to wind up by last November, the free trade agreement is still being straightened out. 

The 25th round of negotiations for RCEP concluded in Bali this February. In this round, investment protection proposals were discussed.

But these investment proposals threaten India’s ability to ensure access to new medicines. India’s stated position on intellectual property rights in the context of free trade agreements, including the RCEP, is that it would not take any legal obligation, which mandates changes to India’s intellectual property laws.

India has reportedly objected to most of the proposals that came from Japan and South Korea to undertake obligations that go beyond the WTO’s agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), especially in the context of patents.

For instance, one such proposal is to extend the duration of the patent term by as much as 20 years, considering the delay in marketing approval for medicines. Acceptance of that proposal would give additional years of patent monopoly to patent holders and delay the competition in the market via the entry of generic medicines. India’s acceptance of proposals in the RCEP investment chapter would be a significant deviation from its stated position of opposition to TRIPS-Plus proposals.

Also read: India Will Not Cross Red Lines on Generic Drugs in RCEP, but Stay Vigilant, Say Officials

The objective of the investment protection is to provide protection to investors against the risk of what they may feel are arbitrary actions by host governments. This is done by creating a provision for compensation through the mechanism of investor-state international arbitration.

Investor protection treaties give very broad rights to investors without any corresponding responsibilities. They often undermine the host governments’ ability to regulate the actions of investors even for the protection of public interest. 

What has been India’s stand on investment protection treaties?

Through the years, India’s position on investment protection treaties has been full of contradictions. India, starting from 1995, entered into as many as 84-investment protection treaties commonly known as bilateral investment treaties (BITs). India also undertook an obligation to protect investors’ rights under various free trade agreements (FTAs).  

But then, after facing 4 to 5 international arbitration disputes seeking huge amounts as compensation under various BITs, India redrew its model BIT and also decided to withdraw from 58 BITs. India has also sent out certain clarifications with regard to the nature of the obligation to the remaining 25 BITs counter-parties, so as to reach an agreement and issue a joint interpretative statement in alignment with the 2015 Model BIT.

Under these circumstances, India’s willingness to negotiate investment protection provisions under the RCEP, which is contrary to India’s model law, is baffling.

Why is the RCEP pushing for investment protection?

One draft of the RCEP investment chapter was leaked in 2015. This document revealed that the definition of investment includes intellectual property rights (IPRs). Thus, the expanded definition of investment would give an opportunity to investors to challenge the measures adopted by host governments, to facilitate access to medicines, on the grounds that they undermine the investment and also enable them to seek compensation from the government through international arbitration.  

Trade ministers pose for a photo during a Regional Comprehensive Economic Partnership ministerial meeting in Hanoi, Vietnam, on May 22, 2017. Credit: Reuters

Trade ministers pose for a photo during a Regional Comprehensive Economic Partnership ministerial meeting in Hanoi, Vietnam, on May 22, 2017. Credit: Reuters

Even though, there are deliberations to provide limited exceptions to investors’ right in order to safeguard public interest such as the issuance of a compulsory license, many other public interest safeguards in the Patents Act can be challenged through the investment protection provisions in the RCEP.

Also Read: New Government Report Affirms India’s Patient-First Commitment on Pharma Patents

These safeguards include the revocation of patents, refusal to grant patent for nonfulfillment of patentability criteria, refusal of the court to grant an injunction, local working requirement of a patent and the obligation to submit information on local working of a patent, granting of marketing approval to generic medicines while the patent is in force, price control mechanism and bringing pro public-health changes to laws, policies and rules to facilitate access to medicines. Investors may allege that these measures constitute as indirect expropriation that undermines their investment and may seek compensation from host countries.

In the past, pharmaceutical companies used investment clauses in FTAs to threaten governments against using TRIPS flexibilities. For instance, in 2017 the US-pharmaceutical giant Gilead threatened to use the investor’s rights under the US-Ukraine BIT and claimed USD 800 billion from the Ukrainian government for allowing the registration of a generic version of Gilead’s Hepatitis C drug – Sofosbuvir.

Pharmaceutical corporations can also use several other provisions in the investment chapter of the RCEP such as those on “market access”, those requiring “fair and equitable treatment”, “expropriation” and “prohibition on performance requirement”. to threaten host governments.

In 2010-2011, a Canadian court revoked two new-use pharmaceutical patents (of drugs Zyprexa and Strattera) of Elli Lilly for lack of utility. In response to the invalidation of its patents, Elli Lilly initiated an investment dispute against Canada under the North American Free Trade Agreement (NAFTA).

The Company argued that it faced unfair and inequitable treatment due to the revocation of its patents. Even though the arbitral tribunal dismissed the pharmaceutical giants’ claims and awarded 5 million Canadian dollars for costs and legal fees, the Canadian government had already spent over 15 million Canadian dollars in attorney and expert-witness fees in this five-year-long battle.

Also Read: Delhi’s RCEP Talks on Intellectual Property Shouldn’t Forget India’s Role as ‘Pharmacy of the World’

The exorbitant damages and legal costs incurred for defending the public policy measures often create a chilling effect and prevent developing country governments to initiate measures to protect public health interests. What is more annoying and appalling about investment disputes is that a third party – the foreign investor – gets to question sovereign functions.

Investment treaties have been known to have extremely adverse effects on access to medicines in developing countries. India must be cautious while negotiating investment provisions in the RCEP, given the likelihood of such agreements to significantly compromise the government’s ability to protect the public interest and use TRIPS flexibilities.

It is important that India maintain consistency in its negotiating positions to ensure that its resistance to TRIPS-Plus provisions in the RCEP is not eroded under the investment chapter.

Prathibha Sivasubramanian is a researcher associated with the Third World Network (TWN). TWN is an independent, not-for-profit organisation that carries out policy research and advocacy on issues around trade and development, with a focus on third world countries. 

Draft Patents Rules Undermine Safeguards Against Frivolous Patents

The government’s new proposals on patents may increase frivolous patents.

The Ministry of Commerce has floated proposed changes to the rules of the Indian patent Act.

Two of the proposed changes are very concerning. It proposes a new mechanism which will expedite decisions on patent applications. This proposed fast-track process seems to come with various other compromises on the functioning of India’s patent architecture and for protecting access to medicines, for example.

The monopoly of patents is often justified as an incentive to promote R&D. But in practice, patents are used to control competition and give fewer options to consumers. Towards this purpose, big corporations are known for obtaining multiple patents claiming minor changes on the same technology or molecule. This practice of creating patent-fences adversely impacts the industrial and technological development of countries like India, by preventing their firms from catching up with the latest technology.

As a technology-dependent country, India’s patents Act discourages patenting frivolous inventions and excludes patenting software, plants, animals or their parts and known chemical molecules.

But the proposed amendments to the Patent Rules seriously undermine this cautious approach of the Indian Patents Act on the scope of patentability.

Expediting patent approvals

Patentability standards contained in the Indian Patents Act are considered to be much more stringent than in the US or Japan.

The Patent Office examines patent applications filed by foreign applicants as per the provisions of the Act and decides whether a patent can be granted. Therefore, a grant of a patent in a developed country like the US or Japan does not guarantee a patent in India.

But despite these high standards on paper, in practice, it is a mixed bag. Researchers found that the Indian office granted patents in violation of the patentability standard contained in the Act. For instance, a study shows that there is a 72% error rate in granting patents in the area of pharmaceuticals.

Also read: India’s R&D Spending Up But It’s Not All That Matters

Now the proposed changes for fast-track examination say that if a patent is granted in a foreign patent office, then the applicant can apply for fast-tracking of the same application in India, provided that there is a bilateral agreement between the Indian Patent Office and the concerned foreign patent office.

The proposed amendment reads: “the applicant is eligible under an arrangement for processing an international application pursuant to an agreement between the Indian Patent Office with another participating patent office”.

India recently entered into such an agreement with the Japanese Patent Office (JPO). At the India-Japan Summit Meeting on October 29, 2018, both countries agreed to start a Patent Prosecution Highway (PPH) pilot programme. Under the PPH programme, a patent applicant can ask for fast-tracking a patent application citing the granting of a patent in Japan. The PPH only allows for expediting patent examination, without guaranteeing the grant of a patent in India.

However, the danger is in the actual working of the mechanism.

The PPH may make the Indian patent examiners rely on the examination report of the JPO and grant patents ignoring the strict patentability criteria provided in the Indian Patents Act.

This may lead to the “harmonisation” of Indian patentability criteria with Japanese standards – so far the standards have been distinct from each other. But if this harmonisation occurs, the patent approvals in countries like Japan can end up having a persuasive effect on their applications in India, going against India’s own high standards.

It can also lead to the granting of patents prohibited under the Indian Patents Act, such as a patent on software or a known molecule. In other words, the stringent standards for granting patents set by parliament in the Act would be ignored in practice.

Also read: Affordable Drugs Need a Compensatory Patent Commons

Developed countries want to achieve the global harmonisation of patent law by removing the existing difference in the application of patentability criteria. Since the legal route to achieve harmonisation involves public attention and resistance, the covert way to achieve the goal is through initiatives like PPH, which would ensure harmonisation at the functional level.

Japan’s Ministry of Economy Trade and Industry (METI) website states: “the Japan Patent Office (JPO) continues supporting Japanese companies to promptly acquire patents overseas, by expanding the PPH network, as well as standardizing and simplifying the procedures at IP offices worldwide.”

Recognising the threat of functional harmonisation, India opposed initiative like WIPO at the international forum. For instance, during the 19th Session of WIPO’s Standing Committee on Patents (SCP)(2014) India stated: India “work sharing would create a dividing line, i.e., the offices of some countries would forever remain on the receiving side of the dividing line thus depending upon the product delivered by the other countries […], enhancement of the competence of the offices would thus be a more preferred option”.

A government official aware of this matter explained to this author that the pilot PPH for now, would confine itself to IT-related patent applications and therefore was not a great matter of concern. But India does not allow the patents on software. Even so, a number of patents have been granted on software applications.

Once a mechanism for harmonisation is set up, even if confined to software for now, it becomes easy to add on other things, such as pharmaceuticals. This can spell danger to Indian and global patients who depend on Indian generic drugs, for example.

With all this in mind, the government would be well advised to uphold the legislative intent of the parliament and the Indian Patents Act, and reconsider the decision to participate in PPH and amend the Patents Rules.

K.M. Gopakumar is a researcher associated with the Third World Network (TWN). TWN is an independent, not-for-profit organisation that carries out policy research and advocacy on issues around trade and development, with a focus on third world countries.