The much awaited ‘Special 301’ report from the Office of the United States Trade Representative (USTR), detailing the results of the annual review of the state of intellectual property rights (IPR) protection and enforcement in the trading partners of the US, identifies India as a “priority watch” country. These reviews began in 1989 after the enactment of the Omnibus Foreign Trade and Competitiveness Act of 1988. Special 301 provisions of this Act authorises the USTR to identify annually the countries whose failure to protect intellectual property is the most onerous and has the greatest adverse impact on US products and those that are not making significant progress in providing adequate and effective protection of intellectual property rights (IPRs). The USTR has the rights to retaliate against any country if it “refused to reform its practices satisfactorily”.
Justifying the inclusion of India as a PWC, the USTR report observes that serious difficulties in attaining constructive engagement on issues of concern to the US and other stakeholders have contributed to India’s challenging environment for IPR protection and enforcement. Similar concerns have been expressed in respect of 9 other countries, including China, Brazil, Russia and Thailand, but India has been singled out for out-of-cycle review. This review will be initiated in the fall of 2014 and implies that the USTR intends to put further pressure on India to change its intellectual property laws to suit the interests of the US business.
The report states that protection and enforcement challenges involving various forms of intellectual property are growing in India and these include piracy of copyrighted material and counterfeiting of trademarks. However, the most serious of the problems, according to the USTR, had arisen in the area of patents, where India has restricted the enjoyment of their rights by the patent-holders.
It is instructive to consider the cases where India has “restricted” the rights of the patent-holders. The first of these arose in 2012 when the Comptroller General of Patents granted a compulsory licence to an Indian firm, Natco to produce an anti-cancer drug (Nexavar) in India, the patent for which was owned by the German firm, Bayer. Natco was granted the licence as the patent-owner was charging an abnormally high price (R2.8 lakh for a month’s dose). Under the terms of the licence, Natco was directed to provide a month’s supply of
Nexavar for R8,800 and to pay Bayer a royalty of 7% on the sales turnover of the drug.
The second is the judgment passed last year by the Supreme Court. The apex court struck down the application of Novartis AG for the grant of patent on the anti-cancer drug, Gleevec. The key message the judges conveyed through their ruling is that minor modifications of proprietary products does not qualify for the grant of patent rights. By doing so they endorsed the provisions of section 3(d) of the Indian Patents Act. The ruling allowed generic firms to market their version of the medicine at a price 15 times lower than that charged by Novartis, and was hailed as an important step in putting the interests of consumers ahead of the profits of the big pharmaceutical firms.
In its Special 301 report, the USTR had highlighted the use of compulsory licensing system by India, which, as mentioned above, has been used once to curb the excessive rent-seeking on the part of Bayer. The Indian authorities had to intervene in this market since Bayer’s avarice was leaving the patients in India without access to a life-saving drug. It must be pointed out that since 2000, there have been several instances where governments around the world, including that of the US, had to issue compulsory licences to safeguard the interests of the patients. One study shows that between 2000 and 2012, there are 24 cases of compulsory licensing, including the one issued by the US to make the antibiotic, ciprofloxacin, available to the patients in the aftermath of the anthrax outbreak in 2001. India, like the US, has used compulsory licensing provisions only once, but there are several other countries, including Brazil and Thailand who have used this instrument quite frequently, but have not been picked up for “naming and shaming” in the Special 301 report.
The author is director general, Research and Information System for Developing Countries