Will India’s IP law and policy ‘Modi-fy’?

India’s compliance with the World Trade Organisation’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) has lead to significant domestic intellectual property (IP) reforms in the last two decades.

However, foreign investors in research-based and creative industries have relentlessly questioned India’s IP policy for being ‘under-protective’ and for lack of ‘effective’ enforcement. Notwithstanding constant pressures that India has faced during these years, an April 2011 statement released by Prime Minister’s Office (PMO) in the context of EU-India free-trade agreement (FTA) negotiations clarified that “…the Indian side shall not take on any obligation beyond TRIPS/domestic laws.” This position was largely taken keeping in mind concerns of domestic pharmaceutical industry and patient access groups. Such an approach was seen as providing a clear road map for maintaining a balanced IP regime for trade and investment protection vis-à-vis affordable access.

Interestingly, the BJP’s manifesto exhorts to “embark on the path of IPRs and patents in a big way” and “establish an Intellectual Property Rights Regime which maximises the incentive for generation and protection of intellectual property for all type of inventors.” It also speaks about the need to “create courts specially equipped to deal with IPR cases.” Although such an ‘IP maximalist’ view may appear as a radical departure from the current policy framework, there are several reasons why the new dispensation will follow into the footsteps of the previous Government in maintaining a balanced IPR regime.

Disagreement on linking IP with trade and investment

Yogesh Pai

There is considerable disagreement among free-trade economists on linking strong domestic IP regulation with trade and investment protection. For example: economists like Jagadish Bhagwati, who have otherwise advocated ‘free-trade’ and ‘free-market’ policies, oppose stronger IP regimes in developing countries. Based on the North-South free-trade induced economic development dialectics, the argument is that extension of maximalist IP standards will lead to both efficiency loss and transfer of benefits from southern consumers to northern innovators, which may further lead to a general decline in global welfare. Hence, simply linking trade and investment with IP does not bring welfare.

US foreign trade- IP policy driven by regulatory capture

Another free-trade economist, Aravind Panagariya, has recently gone on record to state that “India must call the US’ bluff on patents” since it is largely driven by US pharma lobbies engaged in regulatory capture. Driven by US industry groups, the self-serving annual ‘Special 301Report’ recently released by the United States Trade Representative (USTR) has criticised India’s patent law for alleged ‘discriminatory’ treatment meted out to pharma inventions and for issuing compulsory licences on certain grounds.

Aimed at preventing ‘ever-greening’ of patents (an anti-competitive phenomenon where patent thickets prevent early entry of low-cost generics), section 3(d) of India’s Patents Act is seen as a barrier for pharma innovation. In 2013, the Indian Supreme Court affirmed denial of a patent under Section 3(d) to Swiss pharma major Novartis on its cancer drug ‘Glivec’ citing lack of ‘enhanced therapeutic efficacy’. In March 2013, India’s patent tribunal had confirmed issuance of a compulsory licence on Bayer’s drug Nexavar (Sorafenib) on grounds of higher prices (` 2,80,000 per patient/per month), unmet demand (up to 98 per cent) and on the ground of lack of working of the patented invention, which includes non-manufacturing of the patented product in India. Both these events haven’t gone down well with research-based pharma companies.

Out-of- cycle review and likely trade wars

By not listing India as a “priority foreign country” in its Special 301 Report (a designation reserved for severe violations of US intellectual property abroad), the US has temporarily avoided India’s threat to launch a WTO dispute for initiating unilateral action outside the WTO’s rule-based framework. However, the US has held in reserve its decision to designate India as “priority foreign country” by way of a mid-term “out-of-cycle” review aimed at putting India’s new government in the dock. Special 301 may trigger sanctions by way of withdrawal of trade preferences worth $4.5 billion of India’s export to the US. India could also retaliate by placing higher anti-dumping duties on US imports. India may even contemplate moving the WTO dispute settlement against the US. Previously, a WTO panel has noted that a threat of unilateral action under the Special 301 adjudicatory process outside the WTO system undermines the basic principle of legitimacy of the WTO. The possibility of triggering protracted trade wars will push the US to retreat since India is on a relatively stronger footing at the WTO.

Domestic industrial policy priorities

Top in the priority list of the new Government are measures to boost India’s manufacturing sector. Low-cost production is the hallmark of competitive manufacturing. However, stronger patent regimes are known to constrain abilities of competitors by impeding freedom to operate and raise input costs. Furthermore, India’s position in international climate-change negotiations is reflective of the need for low-cost access to patent protected ‘green’ technologies. In all likelihood, a policy that links IP protection with broader industrial policy objectives will remain a defining feature in the years to come. Business models which promote active technology transfer through licensing may find favour with the new Government.

Much like any other

business litigation, IP cases also require speedy disposal. In a resource-constrained environment, special IP courts will require dedicating too many resources. However, any fundamental change in the IP law and policy landscape by turning such special courts into IP-plaintiffs’ court will have long-term consequences on the development of sound IP jurisprudence. Recent patent decisions of the US Supreme Court have rejected overly broad interpretations of patentable subject-matter that were largely influenced by pro-patent jurisprudence of the Federal Circuit courts created as special appellate courts on patent matters in early 1980s.

Need for a nuanced dialogue and transparency in IP decision making

There are visible dangers in unilateral ratcheting –up IP norms. For example, The Pesticides Management Bill, 2008 proposes a five-year data exclusivity period for agrochemicals, a move clearly beyond the TRIPS requirement. Similarly, certain IP enforcement standards are also TRIPS-plus. Evidently, no economic impact assessment has been conducted in such cases. An independent assessment of India’s bilateral investment treaties will reveal several onerous obligations that are beyond the common minimum standards of the TRIPS agreement.

The ambitious mission of linking existing standards of domestic intellectual property protection with higher local innovation will require holistic approaches towards developing national innovation systems. It may also require out-of-box thinking beyond IP.

Transparency in key IP policy decision making by formulating bright-line guidelines and convergence in decision-making among several ministries must be prioritised. Without discounting the landmark reforms in India’s patent office administration during the last decade, one may emphasise the need for far more transparency, consistency and accountability. Greater certainty and predictability in IP law and policy devoid of regulatory capture is the key to unleash innovation and provide affordable access in a knowledge-based economy.

(Views expressed are personal)