The TRIPS Agreement and Intellectual Property Rights in India

What is the TRIPS Agreement and how does it affect IPR around the world and more specifically 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 (World Trade Organization), for the protection of intellectual property rights; it came into effect on the 1st of January, 1995 (Hereinafter referred to as “TRIPS”). TRIPS essentially stipulates the minimum standards to be adhered to by member countries for the protection of intellectual property rights, domestic procedures and remedies for enforcement of intellectual property rights, and dispute settlement mechanisms for the WTO countries, for disputes arising inter se. TRIPS does not, however, restrict countries from legislating beyond its scope so long as the domestic laws are in compliance with the standards laid down therein.

India signed the General Agreement on Tariffs and Trade (GATT) on 15th April, 1994, therefore making it mandatory for India to comply with the provisions of GATT which included TRIPS and availed the ten-year transition period for developing countries (1995-2005) to bring its domestic intellectual property laws in alignment with the TRIPS standards. With the inception of the WTO which replaced GATT on 1st January, 1995, TRIPS applies to all WTO member countries.

TRIPS & 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 of such substances 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 and 90% of them were not worked in India, and that MNCs were using the erstwhile process to exercise monopolistic control over markets relating to food, pharmaceuticals and chemicals which shunted the availability of affordable medicines, etc., to the public.

The TRIPS Agreement requires member countries to make patents available for any inventions, whether products or processes, in all fields of technology without discrimination, subject to the normal tests of novelty, inventiveness and industrial applicability. It is also required that patents be available and patent rights enjoyable without discrimination as to the place of invention and whether products are imported or locally produced (Article 27.1).

By way of the 2005 Amendment, Section 5 that contained the aforesaid exclusion of product patents relating to food, medicine, drugs or chemical substances was deleted from the Act, thereby allowing product patents in the excluded fields. Further, by way of the 2002 Amendment, the patent term for all patents was increased to 20 years.

One of the major concerns with introducing such a change was that there would be steep increases in drug prices, and consequent inaccessibility to essential drugs; on the flipside, it was argued that this inclusion of product patents incentivized investment in R&D and the development of new drugs, and that the existing law had safeguards against any inordinate rise in drug prices.

Doha Declaration:

The concerns pertaining to availability of medicines to the public in developing nations was addressed by the Doha Declaration which reiterated that members could take adequate measures in the interest of securing public health. As per the declaration, member countries could also make provisions for grant of compulsory licenses (with certain inclusions) and the freedom to determine the conditions under which such licenses were granted, among other measures.

Section 84 of the Patents Act stipulates the grounds for grant of compulsory license: (a) reasonable requirements of the public with respect to the patented invention have not been satisfied, (b) the patented invention is not available to the public at a reasonably affordable price and (c) the patented invention is not worked in the territory of India. However, a compulsory license can be granted only when the patentee is paid adequate remuneration taking into account the economic value of the authorisation. Under the extant Patent law, compulsory licenses can be granted 3 years from the date of grant of the patent, however exceptional circumstances like national emergency can justify the grant of a license on an earlier date.

Article 30 of TRIPS also permits members to “provide limited exceptions to the exclusive rights that have been conferred by patents” subject to the condition that it does not unreasonably conflict with the normal exploitation of the patent and does not unreasonably conflict with the rights of the patent holder, keeping in mind the legitimate interests of the third parties. Certain limitations, in addition to provisions relating to Compulsory licensing, etc., have also been incorporated in the Patent Act such as the provision (Section 3 (d)) to prevent “evergreening”- a method whereby the term of a patent is extended by pharmaceutical entities by patenting minor reformulations/ iterations of a patented drug without necessarily contributing to its therapeutic effectiveness.

Effect of TRIPS on the Pharmaceutical Industry:

As a result of the Amendment of 2005, and bringing India’s patent law in compliance with TRIPS, there has reportedly been an upsurge in the number of patent applications filed, and has impacted the economy such that the pharmaceutical industry of India has grown from 6 billion USD in 2005 to 30 billion USD in 2015 and is expected to continue to grow exponentially.

As regards pricing, the National Pharmaceutical Pricing Policy was approved by the cabinet and notified in the year 2012 which saw a shift from cost-based policy to market-based pricing; subsequently the Drugs Price Control Order was notified in May 2013. However, reportedly, this policy only covers 17.67% of the market and the availability of life-saving medication at affordable rates to the general public remains a problem. Although measures have been taken over many years to design an effective patent infrastructure, balancing the need to incentivize innovation, research and development, while at the same time ensuring access to and availability of affordable medicines, remains a challenge to this day.