Will India, US Bridge Divide Over Intellectual Property Rights?

Source: IP Watch

10 Dec 2014

There is an uptick in India-United States relations. US President Barack Obama will be in India in January as the chief guest at the country’s Republic Day Parade. Obama, who hosted India’s new Prime Minister Narendra Modi in Washington in September, will become the first US president to attend such a celebration, a display of India’s military might and ethnic diversity, as well as the first to visit India twice while in office.

A deal between India and the US on the contentious issue of public stockholdings of foodgrains for security has helped put global trade negotiations back on track.

“We believe in the promise of India,” US trade representative Michael Froman told a business audience in Delhi during his visit in November this year.

All this augurs well for expanding ties between the two countries after the low last year following the US arrest of an Indian diplomat. However, a key issue, intellectual property rights (IPR), a bone of discord between the two countries, is once again generating hard questions.

Beyond the optics and symbolism, what changes can one expect?

Context

The US business lobby, especially pharmaceutical companies, have not masked their displeasure with India’s patent laws that do not allow tweaking of existing inventions to win new patent protection and instead demand “genuine innovation.”

“Extreme measures such as patent revocations and compulsory licenses send shock waves through the market that reverberate around the world,” Patrick Kilbride, executive director for international intellectual property, Global Intellectual Property Center, US Chamber of Commerce told Intellectual Property Watch. “Above all, industry would welcome positive signals from the new Modi administration that it will re-commit India to a path of legal certainty for the business environment, creating a climate where innovative companies can invest and introduce products with the confidence that their legal rights won’t be later undermined. With a strong rule of law environment for business, India’s growth potential is boundless.”

Meanwhile, health advocates in India and outside accuse the US of ratcheting up pressure on India to relax patent conditions that have made the country the leading producer of lifesaving, generic drugs — the “pharmacy of the world.” They say that India’s IPR regime is fully compliant with TRIPS (the 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights), an international agreement administered by the World Trade Organization, and that public safeguards are vital for affordable medicines in a developing country.

The verbal jousts between India and the US over IPR reached a flashpoint in 2012 when India’s previous government led by the United Progressive Alliance granted acompulsory licence to Natco Pharma to produce and sell generic versions of Bayer’s cancer drug, Nexavar. The situation worsened in April 2013 after India’s Supreme Court rejected a patent application made by Swiss company Novartis for its cancer drug, Glivec. The office of the US Trade Representative in its 2014 ‘Special 301 Report’,retained India as a “Priority Watch Country” and for the first time launched an ‘Out-of-Cycle’ Review of India’s IPR laws. India says it will not cooperate with the US on IPR regime review, according to media reports.

India’s Commerce and Industry Minister Nirmala Sitharaman has announced that the country will soon have its own IPR policy. The India-US joint statement during Prime Minister Modi’s recent visit to the US is committed to establish an annual high-level Intellectual Property (IP) Working Group with appropriate decision-making and technical-level meetings as part of the Trade Policy Forum.

The Department of Industrial Policy and Promotion (DIPP) has constituted a 6-member IPR Think Tank to draft India’s National Intellectual Property Rights Policy and to advise the DIPP on IPR issues. And last month, a high-level delegation from the Intellectual Property Owners Association of the US or IPO came down to India.

So are differences between India and the US on the thorny issues surrounding IPR likely to be narrowed? Experts are cautious in their forecasts.

“The trip to India last week was very useful to us for learning about IP protection in India and exchanging information on the US and Indian systems. We are hoping for a narrowing of differences between India and the US on IPR, but it is too early to say whether the public statements, including the November 25 India and United States Joint Statement on the Trade Policy Form, will achieve a narrowing,” Herb Wamsley IPO Executive Director told Intellectual Property Watch.

Walmsley said the IPO delegation met with the Department of Industrial Policy and Promotion and discussed the “Make it in India” campaign. They also met with industry representatives while in India.

“Articles in the press in India before and during our trip highlighted that healthcare activists in India have a very different view from ours about patent protection for pharmaceuticals,” Walmsley conceded, adding, “We all want access to quality healthcare and affordable medicines, but IPO also believes it is important to use the patent system to encourage investments in new medicines and medical devices that can improve healthcare worldwide.”

The Organisation of Pharmaceutical Producers of India (OPPI), which represents the research-based pharmaceutical companies in India, is equally guarded in its reactions.

”We are glad that Government initiated discussion with the industry and expressed a willingness to engage in constructive dialogue to address intellectual property concerns and also resolve regulatory, quality, and safety challenges in India. There is a need for innovation in healthcare and we must demonstrate India’s genuine interest in fostering local innovation and improving patient access to new medicines. The recently announced Think Tank for formulating a national IPR policy is a good idea, but its membership lacks a diversity of perspective. We are disappointed that the research-based industry finds no representation at all!” Ranjana Smetacek, OPPI spokesperson told Intellectual Property Watch.

Significantly, health activists are equally unhappy about the composition of the IPR Think Tank. Speculation is rife about the choice of members of the Think Tank who are tasked to draft the National IPR Policy. But the Think Tank members themselves have not made any public statement. The DIPP website invites comments regarding the proposed l IPR Policy.

“Although the US pressure in the recent months has rattled the Indian Government and public health activists, I think it is difficult to imagine any immediate any substantial changes in the functioning of India’s patent system. The changes, if any, may be incremental in terms of exercise of administrative discretion and also by offering more clarity on patent office practices. India’s stand on disengagement with the United States on Section 301 Out-of-cycle review process initiated by the USTR only confirms that India wants play by global multilateral trade rules. It wants to benefit from the flexibilities enshrined in the TRIPS Agreement,” Yogesh Pai, assistant professor of law at the National Law University, Delhi told Intellectual Property Watch.

The reasons are not far to seek. “India’s IP regime is TRIPS-compliant. Any substantial change through legislative amendments to dilute public policy safeguards is politically sensitive. Similarly, it’s even more difficult to drive case-law jurisprudence in a direction that US delegations would anticipate owing to a strong and independent judiciary. However, I have a feeling that administrative discretion may be streamlined and/or diluted to some extent. The target may also be changes in patent office practices. The least that these delegations will achieve is to have some clarity and consistency in patent office practices specifically in relation to the implementation of Section 3(d) of the Indian Patents Act,1970,” Pai explained.

Pai was one of the academics consulted by the new government earlier this year on IPR-related issues. However, at the time of writing, the fate of the inputs given by the academics is not known.

Another Indian academic, Dinesh Abrol, professor in the Delhi-based Institute for Studies in Industrial Development, also asserts that IPR is a multilateral issue and questions the need to discuss it with the US in a bilateral forum.

“India’s IPR regime is fully TRIPS-compliant. Why did we agree to a bilateral mechanism to deal with it? Abrol told Intellectual Property Watch.

”The pointers are very clear. At the start, the government is unlikely to change the law because that would have to go through the Parliament. But changes could be through the IPR policy,” Abrol said.

Many organisations and individuals from across India have collectively sent a letter [pdf] to the Prime Minister Modi, expressing their concerns on the Joint Working Group on Intellectual Property (IP) set up between India and the US.

So is India really buckling under US pressure?

“Partly,” says D G Shah, secretary general of the Indian Pharmaceutical Alliance. “As the Department of Industrial Policy and Promotion (DIPP) has become very cautious for grant ofGovernment Use (Sec 92) CL, dealing with special provisions for compulsory licenses on notifications by central government. It wants to ensure that the Ministry of Health and Family Welfare has adequate funds to make use of the CL [compulsory licence] and that it has shortlisted companies with capabilities to produce the drug. It should not happen that a CL is issued but none applies to manufacture it.”

“As regards Private Commercial Use (Sec 84), the experience of NATCO is a deterrent,” Shah told Intellectual Property Watch. “Bayer, through a series of litigations initiated against NATCO, has succeeded in pre-empting others from considering this an option. Moreover, CL for India alone may not be commercially viable. NATCO was expecting that a few other countries will use TRIPS provision to allow imports from India. This has not happened….”

Professor Brook K. Baker of Northeastern University’s School of Law (US) says there are several signals that India is trying to mollify the US with respect to intellectual property and investment policy.

“On the medicines front, the (Indian) government has recently retracted some of its proposed price control measures. It is backing off compulsory licensing plans for cancer medicines, including Dasatinib despite the Health Departments strong support for accessing cheaper generic chemotherapy drugs. Government officials and leaders have been meeting with US industry representatives both in the US and in India, and the government is opening up India’s internal policy dialogue to US input both by government and industry representative,” Baker said.

“Throughout this process,” Baker told Intellectual Property Watch, “the US continues to harp on section 3(d) of the India Patents Act, which prevents evergreening of patent monopolies, on compulsory licences, on data exclusivity (now possibly through the side door of increased trade secret protection), on enhanced enforcement, and on a more secure and stable investment climate (a possible precursor to an investment clause with investor-state dispute resolution).”

On the fundamentals of resisting evergreening, Baker thinks it is unlikely that India will weaken section 3(d) and that it will stay opposed to ever greening. However, on compulsory licensing, he said, “there may be a real risk of a de facto moratorium, particularly as the government is now talking about cancer drug price controls rather than compulsory licenses for generic production. The more the US and industry have a chance to lobby government behind closed doors, the more likely it is that the government might make changes to create ‘a more favorable investment climate.’ “

This pressure, he told Intellectual Property Watch, “will intensify when President Obama visits India for a second time next year. I don’t see the US getting all that it wants, but danger of leadership accommodation is real. To preserve India’s status as the pharmacy of the poor, I hope India stands firm.”​

But Leena Menghaney, South Asia manager for Médecins Sans Frontières (MSF)’s Access Campaign, told Intellectual Property Watch that it is difficult to predict the position that India’s new government will eventually take on IPR.

“If you see India’s statement at the TRIPS Council on innovation,” she said, “it is very progressive, and talks about new business models and specifically refers to market failure as the reason for the inadequate state of antibiotic development. It also states that innovation should not be viewed within the narrow prism of intellectual property monopolies but framed within a holistic, knowledge ecosystem that includes open innovation, open knowledge approaches and the de-linkage of R&D costs from product prices.”

But in the India and United States Joint Statement on the Trade Policy Forum, under the heading Intellectual Property and related issues, Minister Nirmala Sitharaman together with USTR Froman state: “the paramount goal of ensuring the poorest populations in India and the United States have access to quality healthcare, and committed to identifying ways in which trade and innovation policies can enhance access to quality health and affordable medicines” Menghaney said.

Menghaney and other health activists vigorously assert that over the last decade, India has established a balanced position on the patent system and that while India does grant patent monopolies to a number of new pharmaceutical products, it is trying to strike a balance between providing IP protection and having the legal flexibility to protect the right to health.

“India’s new prime minister is in a unique position of responsibility in global health,” she said. “His handling of the intense pressure from the US successfully without undermining access to medicines will be key to India retaining its standing as the pharmacy of the developing world, on which MSF and millions around the world rely.”

In the tug of war between sections of the industry and health advocates, both are keeping score. Public health groups say even if India is under pressure, they have had victories. Activists successfully prevented meetings reportedly scheduled between a visiting delegation of US industry and judges of the Delhi High Court and the Intellectual Property Appellate Board in Chennai by publicly questioning the propriety of such discussions. That pressure is likely to be sustained in the days ahead.

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