In my last post on the IPAB’s decision in the Bayer -NATCO Compulsory licensing case, I had written that the IPAB’s analysis of working requirements under the Patents Act, 1970 was far from satisfactory. In several earlier posts on this blog and elsewhere, I have written on the issue of local working. Extracted below is the post I wrote after the CL order was delivered last March by the Controller:
“In 2 earlier posts elsewhere, I had wondered if a patentee may cite un-workable circumstances to express his inability to domestically manufacture a patented invention. Also, what would happen if the Controller of patents has to choose between access to a life-saving drug by turning a blind eye to large scale importation of the drug to make it both affordable and available to people in India, and fulfillment of domestic working requirements under the Act? This issue too was broached briefly by several speakers in the Roundtable at NLU Jodhpur.
On the issue of “local manufacture” to satisfy working requirements under the Act, I am inclined to state that, TRIPS-compliance aside, the Patents Act exhorts domestic manufacture to prevent reliance on imports and to promote transfer of technical skills to the local population. After all, the idea is reduce the yawning technological deficit between India and the developed world.
The celebrated Ayyangar Committee report, which is the travaux preparatoires to the 1970 legislation, sheds great light on the wording of Section 83 of the Act with respect to working of a patented invention.
In particular, under Part II of the report titled “The Patent System in India”, Paragraphs 37 and 38 are of importance to the issue of working and compulsory licensing. A few lines from these paragraphs are educative and go a long way in understanding and clarifying the Act’s position on local manufacture:
“37. In the present decade under the impact of the national plans that have been formulated for the economic uplift of the country and the raising of the standard of living of its people, the conservation of foreign exchange is a matter of prime importance. In the context of this need, it would be seen that any increase in the price of the patented products imported into the country must, to that extent, be a disadvantage to the country’s economy..........
38. I have already set out the considerations which are said to constitute the quid pro quo for the grant of the patent monopoly, namely (1) the working of the invention within the country so as to result in the establishment in the country of a new industry or an improvement of an existing industry which would profitably employ the labour and capital of the country and thus increase national wealth, and (2) disclosure to the public of the invention and the manner of its working so that on the expiry of the life of the patent, the public are enabled to work the invention themselves and in competition with each other.
Where the patentee has no intention of working the invention in this country either because he considers this is not profitable or because he prefers to expand the production in his home country so as to achieve there greater efficiency or more production, or is otherwise not interested in working the invention in India, the grant of the patent might tend to improve the patentee’s home country, but offers little advantage to us. Unless therefore the law provides for measures to compel the patentees to work the invention within the country, and these measures are effective to achieve their purpose, the social cost involved in the grant of the patent is not offset by any benefit to the community....”
Considering the unequivocal crystallisation of objectives sought to be achieved by and using the Patents Act, it could be said that local manufacture is an essential and mandatory requirement under the Act. However, should we make an exception when it comes to life-saving drugs? If yes, does the Act in its current form allow for such an exception?”
Given that in Bayer CL Order, the IPAB categorically states that the Ayyangar Committee report remains relevant and immensely educative on the objectives sought to be achieved by the Patents Act, one is surprised that the Committee’s observations with respect to local working and the reasons for its mandatory requirement under the Act have not been given their due in the IPAB’s decision.
The Committee’s position, in fact, leaves very little room for the following unrestrained view of the IPAB:
“In any event, we are not furnished with any evidence regarding this aspect viz., whether the appellant in its facility in India, which admittedly the appellant does not deny, could not have manufactured this drug. So, with regard to Section 84(1)(c), we find that the word ‘worked’ must be decided on a case to case basis and it may be proved in a given case, that ‘working’ can be done only by way of import, but that cannot apply to all other cases. The patentee must show why it could not be locally manufactured. A mere statement to that effect is not sufficient there must be evidence. Therefore, while we are of the opinion that the word ‘worked’ has a flexible meaning, and to that extent we differ from The Controller. The appellant has not proved working and so his conclusion is right. Working cannot mean that the requirement of working would be satisfied by having import monopoly for all patented inventions. We also look at Section 84(7)(iii) which says that the reasonable requirements of public shall be deemed not to have been satisfied if a market for export of the patented article manufactured in India is not being supplied or developed. Therefore, ‘working’ could mean local manufacture entirely and ‘working’ in some cases could mean only importation. It would depend on the facts and evidence of each case.”
The Ayyangar Report makes it evident that the kind of flexibility the IPAB has read into the Act with respect to local manufacturing requirements is simply not based on the statute or the history of the legislation. Importation may, at best, supplement a patentee’s efforts in fulfilling his working requirements under the Act, but under no circumstances can import alone constitute working.
Comments and corrections are welcome!