Sunday, May 27, 2012

Price Control Mechanism under the Patents Act 1970

One of the popular myths that is frequently aired and entertained about the Patents Act is that the only way to control prices of patented products is to invoke the compulsory licensing mechanism. This, in my opinion, is based on an incomplete interpretation of the Act.

It is my opinion that if Section 107A(b) of the Patents Act is interpreted as a government-invoked/triggered mechanism to import patented products, it could serve as the first gear in controlling prices of patented products before switching gears to invoke the compulsory licensing mechanism.

The advantage offered by Section 107A(b) is that one need not wait for a period of three years to lapse as one has to under the compulsory licensing mechanism in Section 84 of the Act. Further, under Section 107A(b), it is possible for the government to choose a manufacturer in that jurisdiction where the cost of manufacturing the patented product is the cheapest and thereafter import or facilitate imports of the products into India.

In a way, this means that the Act envisages a two-step calibrated mechanism wherein Section 107A(b) is the first step which permits importation of the patented product from a foreign jurisdiction pursuant to Indian authorisation, and the second step being an application for a compulsory license under Section 84.

It must be noted that under Section 85 of the Act, a patent may be revoked for non-working only after expiration of two years from the date of the order granting the first compulsory license. It must be understood that it is theoretically possible and practically plausible that no interested person may come forward to apply for a compulsory license after the three-year period under Section 84.

Given that it may not be permissible for the government to fit the definition of "person interested", it must be possible under the Act to invoke an option which protects public interest. The interpretation of Section 107A(b) which I put forth ensures that in the absence of any party/"person interested" who can act as a compulsory licensee, the government is not bereft of options to secure public interest in critical areas such as health and nutrition.

It is my genuine belief that interpretation of Section 107A(b) which I put forth strikes a balance between achieving the larger goals of public interest and imposing reasonable restrictions on the rights of a patentee, without unduly eroding the sanctity of a State-granted right or discarding time-honoured principles of statutory interpretation.

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