Over a series of posts in the last leg of 2010, I had discussed the import of Section 107A(b) of the Patents Act, 1970. To be honest, I don’t think the line of interpretation that I had explored is the only possible or sensible one, in fact it could well turn out that it’s way off the mark.
That said, the fundamental purpose of those posts was to subject the provision to rigorous analysis, instead of merely assuming that it speaks of international exhaustion.
In this post, the idea is to continue with that line of enquiry, and use certain other provisions of the Act to try and support the interpretation I had advanced.
Before I proceed, let me pen down the gist of my earlier posts on Section 107A(b), i.e. the provision could be referring to an alternative to international exhaustion. Section 107A(b) reads thus:
107A. Certain acts not to be considered as infringement- For the purposes of this Act-
(b) importation of patented products by any person from a person who is duly authorized under the law to produce and sell or distribute the product,
Shall not be considered as an infringement of patent rights.
In my earlier series of posts, I took the view that Section 107A(b) requires due authorization, not for importation, but to produce and sell or distribute the patented product.
In other words, so long as the patented product is imported from a person who’s been “duly authorized under the law” to produce and sell or distribute, importation from such a person would not amount to infringement of the patent. Since the provision uses “duly authorized under the law”, I took the view that the provision probably does not refer to authorization under foreign law to produce and sell or distribute the product, because that would eviscerate the patentee’s rights under the Indian Act; the authorization to produce and sell or distribute must be under Indian law.
Stated otherwise, lawful production of the product outside India does not necessarily legitimize its import into India. Also, “duly authorized under the law” must be taken to mean specific authorization, as opposed to implied consent by way of international exhaustion. Not just that, the provision may not even be referring to international exhaustion because nowhere does it allude to first sale or exhaustion of rights post the first sale.
As I said, I may or may not be right, but that isn’t the issue. The issue is, have we considered the Act thoroughly enough to rule out this interpretation as a possible approach to the provision? Honestly, since I found the answer to be in the negative, I had to ramble over 5 posts to dissect the provision.
In this post, I will take up a combined reading of Sections 48, 83, 84(7)(e) and 107A(b) to further this line of enquiry. How do I intend to connect all these provisions meaningfully? I shall try and keep this as un-convoluted and lucid as I can. Here it goes:
1. Section 48, as popularly understood, does not grant to the patentee the right to practice his invention. It merely vests in him an exclusive exclusionary right i.e. to preclude third parties from doing any of those acts enumerated in Section 48, without his consent. For ease of reference, here’s Section 48:
48. Rights of Patentees: Subject to other provisions contained in this Act and the conditions specified in Section 47, a patent granted under this Act shall confer upon the patentee-
(a) where the subject matter of the patent is a product, the exclusive right to prevent third parties, who do not have his consent, from the act of making, using, offering for sale, selling or importing for those purposes that product in India;
(b) where the subject matter of the patent is a process, the exclusive right to prevent third parties, who do not have his consent, from the act of using that process, and from the act of using, offering for sale, selling or importing for those purposes the product obtained directly by that process in India.
2. That said, in order for a patentee to justify the grant of the right and to avoid attracting an application for compulsory license, the Act emphasizes on working/practicing the invention within the territory of India. Here’s Section 83:
83. General principles applicable to working of patented inventions- Without prejudice to the other provisions contained in this Act, in exercising the powers conferred by this Chapter, regard shall be had to the following general considerations, namely:
(a) that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay;
(b) that they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article;.......
3. If that be so, a patentee has to ensure that he doesn’t fall within the circumstances/situations spelt out in Section 84, including 84(7)(e). Here’s Section 84(7)(e):
84. Compulsory Licenses: .....
(7) For the purposes of this chapter, the reasonable requirements of the public shall be deemed not to have been satisfied-
(e) if the working of the patented invention in the territory of India on a commercial scale is being prevented or hindered by the importation from abroad of the patented article by-
(i) the patentee or persons claiming under him; or
(ii) persons directly or indirectly purchasing from him; or
(iii) other persons against whom the patentee is not taking or has not taken proceedings for infringement.
Let’s try and understand what exactly is covered under Section 84(7)(e). The gist of the provision is that a patentee would not be deemed to have fulfilled the reasonable requirements of the public under the Act, if the working of the invention on a commercial scale is prevented or hindered by importation of the patented article. But importation by who?
The importation could be by:
A. the patentee or persons claiming under him or
B. persons directly or indirectly purchasing from the patentee or
C. other persons against whom the patentee is not taking action for infringement.
This is the critical part of the discussion- the Section deems the patent to have not been worked reasonably if working of the patent in India is hindered or prevented by importation of the patented article under any of the above 3 circumstances.
What is to be noted is that these circumstances also include a situation where importation involves importation of the patented article by the patentee or persons claiming under him or persons directly or indirectly purchasing from the patentee.
This means if Sony Corp has a patent in India, and a person purchases the patented product in Pakistan from a licensee of Sony Corp and imports it into India, such importation could also hinder or prevent the patentee from fulfilling the reasonable requirements of the Indian public.
In effect, this provision requires the patentee to ensure that such importation does not affect his ability to meaningfully work/practice the invention by manufacturing it in India. Again simply put, if the Indian market is flooded by imported goods, albeit of the patentee, the parallel importation could make it unviable for a patentee to manufacture the goods in India.
Assuming that this train of logic is correct, it becomes a tad bit difficult to argue in the same breath that Section 107A(b) endorses international exhaustion. In other words, if the Act requires the patentee to ensure that he fulfils his working requirements and requires him to take action against any hindrance which arises on account of parallel imports, I don’t think it would be consistent to argue that the very same Act, speaks of international exhaustion in Section 107A(b).
I’ll mull over this proposition a bit more and come back with a few thoughts in another post.