Intellectual Property17 June 2021By Gitanjali Balakrishnan, B. Karthik
What is the TRIPS Agreement, and how does it affect IPR — in the world and in India?
The TRIPS (Trade Related Aspects of Intellectual Property Rights) Agreement is a multilateral, international agreement entered into by the members of the WTO for the protection of intellectual property rights; it came into effect on 1 January 1995. TRIPS stipulates the minimum standards to be adhered to by member countries for the protection of IP rights, domestic procedures and remedies for enforcement, and dispute-settlement mechanisms between WTO countries. It does not, however, restrict countries from legislating beyond its scope, so long as domestic laws comply with the standards laid down.
India signed the General Agreement on Tariffs and Trade (GATT) on 15 April 1994, making it mandatory to comply with GATT — which included TRIPS — and availed the ten-year transition period for developing countries (1995–2005) to align its domestic IP laws with TRIPS standards. With the inception of the WTO, which replaced GATT on 1 January 1995, TRIPS applies to all WTO member countries.
TRIPS and India's law on patents
Historically, under the Patents and Designs Act, 1911 there were provisions for product patents of all kinds. It was with the 1970 Act that, for inventions relating to food, medicine, drugs or chemical substances, only patents relating to the methods or processes of manufacture could be obtained — thereby excluding pharmaceutical and agrochemical industries from the ambit of product patents in India.
The basis of the Patents Act, 1970 was the Ayyangar Committee report, which had noted that foreigners held between 80–90% of India's patents, that 90% of them were not worked in India, and that MNCs were using the process to exercise monopolistic control over markets in food, pharmaceuticals and chemicals — shunting the availability of affordable medicines to the public.
The TRIPS Agreement requires member countries to make patents available for any invention, whether product or process, in all fields of technology without discrimination, subject to the normal tests of novelty, inventiveness and industrial applicability; and patent rights must be enjoyable without discrimination as to the place of invention or whether products are imported or locally produced (Article 27.1). By the 2005 Amendment, Section 5 — which contained the exclusion of product patents relating to food, medicine, drugs or chemical substances — was deleted, allowing product patents in the excluded fields. By the 2002 Amendment, the patent term for all patents was increased to 20 years.
A major concern with this change was that drug prices would rise steeply, causing inaccessibility to essential drugs; on the other hand, it was argued that product patents incentivise investment in R&D and the development of new drugs, and that the law contained safeguards against inordinate price rises.
The Doha Declaration
Concerns about the availability of medicines in developing nations were addressed by the Doha Declaration, which reiterated that members could take adequate measures in the interest of securing public health, including provisions for the grant of compulsory licences and the freedom to determine the conditions under which they were granted.
Section 84 of the Patents Act sets out the grounds for a compulsory licence: where the reasonable requirements of the public have not been satisfied; where the patented invention is not available to the public at a reasonably affordable price; and where it is not worked in the territory of India. A compulsory licence may be granted only where the patentee is paid adequate remuneration, taking into account the economic value of the authorisation, and generally only three years from the date of grant — though exceptional circumstances such as a national emergency can justify an earlier grant.
Article 30 of TRIPS permits members to provide limited exceptions to the exclusive rights conferred by patents, subject to the condition that they do not unreasonably conflict with the normal exploitation of the patent or the legitimate interests of the patent holder and third parties. India's Act also contains Section 3(d), which prevents "evergreening" — the extension of a patent term by patenting minor reformulations of a drug without a genuine contribution to therapeutic effectiveness.
Effect of TRIPS on the pharmaceutical industry
Following the 2005 Amendment and the alignment of India's patent law with TRIPS, there was reportedly an upsurge in patent applications, and the Indian pharmaceutical industry grew from about USD 6 billion in 2005 to USD 30 billion in 2015, with continued growth expected.
On pricing, the National Pharmaceutical Pricing Policy was approved and notified in 2012, marking a shift from cost-based to market-based pricing, followed by the Drugs Price Control Order in May 2013. Reportedly, however, this policy covers only around 17.67% of the market, and the availability of life-saving medication at affordable rates remains a problem. Balancing the need to incentivise innovation, research and development against ensuring access to affordable medicines remains a challenge to this day.
This note is for general information only, may reflect the law as it stood at the date of writing, and does not constitute legal advice. For advice on a specific situation, please seek independent counsel.
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