Pressure from US Is Unstated Reason
By K M GopaKumar, The Economic & Political Weekly| Vol. 51, Issue No. 21, 21 May, 2016
The National Intellectual Property Rights (IPR) Policy, announced by the Government of India’s Department of Industrial Policy and Promotion (DIPP) on 13 May, has been formulated at a time when India has been facing tremendous political pressure from the United States (US) to change its intellectual property (IP) regime primarily to serve the interests of pharmaceutical transnational corporations (TNCs). The process of putting together the policy had attracted the attention of both the IP “maximalist” as well as the IP “sceptic” ever since the government announced its decision to formulate such a policy on 8 September 2014. The main concern that had been expressed during the policy formation period was that the policy might tilt the country’s approach to IP towards a maximalist position, undermining its social and economic development needs, notably the goal of providing access to affordable medicines. The pharmaceutical TNCs used the opportunity to influence the policy in their favour to undermine public interest safeguards in the Patents Act. This article seeks to place the new IP policy in a development and public interest perspective and explains its context. While the policy is supposed to deal with IP in general, most of the policy measures target patents. Hence, it is important to look at its policy implications, specifically in the area of patent rights.
Context of the New IPR Policy
While India failed to resist the inclusion of IP rights as part of the Uruguay Round of international trade negotiations (1986–94), which resulted in the conclusion of the TRIPS Agreement (or the Agreement on Trade-Related Aspects of Intellectual Property Rights), the government followed a very cautious approach towards patenting of pharmaceuticals during the implementation of the TRIPS patent regime. It incorporated and used the public interest safeguards in the Patents Act using flexibilities within the TRIPS Agreement. Pharmaceutical TNCs chose not to recognise these flexibilities and also deployed various methods to curb their use. Not satisfied with the effectiveness of these strategies, in 2013, powerful lobbies of pharmaceutical producers formed a coalition with other industry associations and lobbied for the US government’s intervention. This resulted in the launching of two back to back investigations by the US International Trade Commission (USITC) on India’s IP law.1
Further, these groups intensified their lobbying with the US Trade Representative (USTR) to categorise India as a “preferred” foreign country in the Special 301 Report, which carries with it the threat of trade sanctions.2 (The Special 301 Report is prepared every year by the office of the USTR to identify what are called “trade barriers” to American companies and products due to the IPR laws of other countries, including laws on copyright, patents and trademarks; the report identifies countries that do not provide “adequate and effective” protection of IPR that is benchmarked on US industry interest.)
These pressures resulted in the creation of a high-level working group to discuss IP issues. Thus, for the first time, India agreed to formally engage with the US bilaterally on IP issues. The formulation of the new IP policy attracted the attention of both the US government as well as US industry groups. Meanwhile, certain actions of the DIPP and the Indian Patents Office led to speculation about the extent of US influence in shaping India’s new IP regime. First, the patent office proposed amendments to the Guidelines for Examination of Computer Related Inventions (CRIs), which sought to effectively bypass the explicit exclusion of patenting of software. The intervention of public interest groups forced the DIPP to cancel the amendment. Second, the rejection of the compulsory licence application by Lee Pharma on AstraZeneca’s diabetes medicine Saxagliptin, without assigning adequate reasons, casts doubts on the role and the autonomy of the patent office as an independent quasi-judicial body. Third, the office rejected the pre-grant opposition on Sofosbuvir, an anti-hepatitis drug, without taking note of the rejection of the same patent in other countries like Egypt. Fourth, the office amended rules to introduce fast-track patent examination for foreign applications.
Further, the US India Business Council (USIBC) submission to USTR revealed that the government gave an oral assurance against the issuance of compulsory licences. (A compulsory licence is an authorisation granted by a government without the permission of the patent holder following failure of the patent holder to agree to a voluntary licence on reasonable terms.) The submission also revealed that USIBC conducted training programmes for examiners and thus made the institution vulnerable to regulatory capture.3
The IP policy contains a vision statement, a mission statement and seven objectives. The operational part of the policy consists of seven objectives with a brief explanation and proposed policy measures.4 The policy, in many places, stresses the need for a “balanced approach” towards IP as well as the need to protect public interest. Objective 3 of the policy states it is necessary “to have strong and effective IPR laws, which balance the interests of rights owners with (the) larger public interest.”
However, the main thrust of the policy is its unquestioning faith in the potential of IP as a development tool. The policy does not, however, provide an analysis of the role of IP in addressing the development needs of India. The policy neither explains the reasons for the measures suggested nor provides any evidence to back the policy measures. There is no information as to whether the IPR think tank, which drafted the initial version of the policy, carried out a study to identify India’s experiences after the implementation of the TRIPS regime.
The mission statement of the policy states that it is necessary to stimulate a dynamic, vibrant and balanced IPR system in India to focus on enhancing access to healthcare, food security and environmental protection. The statement, however, fails to mention the country’s track record in achieving self-sufficiency in food production and manufacture of pharmaceuticals without patent protection. The policy also ignores the fact that at present, a large number of patents are owned by foreigners and, therefore, any easing of rules for patent protection would benefit them much more than domestic applicants.
Erroneous Understanding of IP
The new IPR policy is based on an erroneous understanding of the role of IP in the socio-economic development of India. IP essentially operates as a monopoly and provides leverage to the IP owner to charge high prices for IP protected goods and services, while preventing competition from other manufacturers. In many developing countries, including India, IP protection acts as a tool to manage competition rather than incentivise research and development (R&D), innovation and creativity. In 2014, the Max Planck Institute for Innovation and Competition in Munich, Germany came out with a declaration signed by more than 40 globally renowned experts on IP. This declaration makes important observations about patents, and points out the fact that there has been an unprecedented increase in patent filings and grants. It states:
…the overall social benefits of innovation are reduced while an imbalance emerges between those able to cope with the resulting insecurities and related costs, such as multinational enterprises with their own patent departments, and those who cannot, such as small and medium sized enterprises or individual inventors.
The declaration takes note of the shift in the function of the patent system in recent times:
Patents are increasingly used as strategic assets to influence the conditions of competition rather than as a defensive means to protect research and development outcomes.
Reflecting the same stand, the Economist wrote on 8 August 2015, “Today’s patent regime operates in the name of progress. Instead, it sets innovation back. Time to fix it.”
The IPR policy is based on an outdated notion of IP that “knowledge owned is transformed into knowledge shared.” Further, it envisages that an all-encompassing IP policy would nurture the IP culture which would help creators and inventors “to realise their potential for generating, protecting and utilising IPRs which, in turn, would contribute to wealth creation, employment opportunities and business development.” The policy also conflates the concept of innovation with invention. Generally speaking, innovation is understood as the introduction of an idea into the market, which is different from an invention. An invention may or may not be introduced in the market. Patents protect inventions and not innovation and, therefore, play a very small role in innovation.
This faulty understanding of IP directs the vision statement and its seven objectives. The maximalist agenda of Objective 1 proposes massive campaigns on the benefit of IP, including patents, without mentioning the adverse impact of IP on accessing IP protected materials such as educational goods and services, seeds, food, medicines and environment technologies. The proposed activities under Objective 2 aim at increasing the quantity of IP generation rather than improving the quality of IP. It completely ignores the lessons learned over the last two decades wherein the Government of India earmarked financial resources for IP generation activities in public sector corporations, laboratories and research centres, including those under the Council of Scientific and Industrial Research (CSIR) and the Indian Institutes of Technology (IITs). An examination of the experiences of these organisations should have informed the formulation of the policy but this has not happened. The thrust of Objective 2 is to disproportionately shift all R&D towards an IP-driven R&D approach without recognising the limitations of such a model. This skewed view of IP would seriously compromise India’s technological needs in both the manufacturing and agricultural sectors and threaten self-sufficiency in pharmaceuticals. The policy thus pays mere lip service towards a balanced approach.
Lack of Development Orientation
A quarter century after the policies of economic liberalisation were initiated, India’s manufacturing sector has failed to make its presence felt in areas where high technology is involved. According to the Economic Survey of 2012–13, the total manufacturing value added (MVA) is only about 1.8% of total value addition. It stated:
The reason is India’s competitive disadvantage owing to low-level technology, higher input costs and poor quality infrastructure. A long-term trend analysis from 1995 to 2009 shows that India has lagged behind in increasing its share in MVA of sophisticated products.
A technology-dependent country like India cannot afford an IP regime, especially a patent regime, which emphasises protection of IP rights, without focusing on technology transfer and its dissemination. India needs a patents regime which will facilitate technology catch-up. This can be done only through a patent law and policy which limits the scope of patent protection and facilitates the process of technology catching up through the use of flexibilities in the patent law such as strict patentability criteria, pre-grant opposition, compulsory licences, etc. This is what history tells us. The success of the Indian pharmaceutical industry has been largely due to the Patents Act, 1970 which prohibited product patent protection to pharmaceutical inventions, and this was continued due to the 10-year transition period for the product patent protection for pharmaceutical inventions under the TRIPS Agreement. In other words, the Patents Act delivered on a “Make in India” policy in the pharmaceutical sector long before the Narendra Modi government coined the slogan.
India should follow an IP law and policy which improves manufacturing capability rather than an untested IP maximalist agenda backed by propaganda instead of empirical evidence. Similarly, IP protection may hinder dissemination of new seeds and other agricultural inputs for enhancing crop productivity. The importance of a development-oriented approach to IP is very clear from India’s statement at the 2015 general assembly of the World Intellectual Property Organization:
A robust Intellectual Property regime provides the bedrock for innovation that is crucial to building the economy and aiding the development of any country. At the same time, we need to be conscious of our role as welfare States in safeguarding and providing for the needs of not only our own citizens, but also of the entire world community…. with Intellectual Property Rights, come Intellectual Property Duties, and we have to remain fully conscious of both.
The new policy ostensibly makes an attempt to address some of these issues, albeit in a limited way. First, it mentions technology transfer in the context of standard essential patents in the ICT (information and communications technology) sector. Second, it refers to developing guidelines for licensing agreements. Third, the policy talks of the need for curbing anti-competitive practices by initiating action through the Competition Commission. Fourth, it mentions the need for undertaking technology landscape studies to identify non-protected areas. However, these measures would not achieve its goals if the policy pushes for generation of IP without checking the quality of IP.
Use of Flexibilities
The new policy states:
India will continue to utilise the legislative space and flexibilities available in international treaties and the TRIPS Agreement, even as it continues to engage constructively in the negotiation of such international treaties and agreements. India shall remain committed to the Doha Declaration on TRIPS Agreement and Public Health.
It, however, completely ignores the policy measures that are required to stimulate the use of flexibilities. In fact, some of the policy measures may adversely affect the use of flexibilities. For instance, Objective 4 proposes to modernise and strengthen service-oriented IP administration. Such an orientation would compromise the role of IP offices as gatekeepers to ensure quality in IP protection. A service orientation of IP offices would make these offices treat applicants as clients, which can lead to private interests of the clients prevailing over public interest considerations such as the possible adverse implications of the grant of a patent on a life-saving medicine for patients in India.
The policy measure suggested in Objective 4, that is, promotion of technical cooperation in the area of capacity building and human resources building, can result in the effective harmonisation of the scope of IP protection, especially in the area of patents, and neutralise the flexibilities related to the scope of patentability. Thus, there would be little use of flexibilities in the area of scope of patentability to prevent the grant of frivolous patents. Although the policy mentions the promotion of open source software and open drug discovery programmes as well as achieving self-sufficiency in the production of active pharmaceutical ingredients, these measures are contradicted by other objectives of the policy such as the generation and securitisation of IP. Therefore, there is apprehension that these measures may not get an adequate push during the implementation of the policy.
Orientation of Public-funded R&D
The policy proposes to push public sector R&D towards an IP-oriented approach and thus ignores the diversity existing in the innovation ecosystem. In other words, the policy makes an attempt to introduce norms modelled on the US Bayh-Dole Act to facilitate the commercialisation of patents from publicly-funded R&D through various policy measures. However, these measures proposed in the policy ignore alternative models of R&D which can ensure both access and innovation by delinking the cost of R&D from the price of the product. First, there is the question of how to have a thrust for IP acquisition from the public-funded laboratories, universities and technology institutions. Second, there is the issue of linking IPR generation to research funding and performance evaluation. Third, there is the question of having IP creation as a key performance metric for publicly-funded R&D entities as well as technology institutions, and gradually extend such evaluation from Tier-1 to Tier-2 institutions. The fourth issue relates to creating uniform guidelines with researchers in public-funded R&D institutions for royalty sharing. These measures have been included in the policy without analysing the experiences of some public-funded institutions (in the CSIR and the IITs) for patent acquisitions during the last 20 years, which would reveal the limitations of the IPR-driven R&D model.
Contrary to the statement of the finance minister that the policy does not recommend any changes in the existing law, the new policy does open up the door for changes in the law. The policy recommends a review of existing laws with the purpose of updating and improving these or to remove anomalies and inconsistencies. This would expose India to the pressure to undertake “TRIPS-plus” obligations and limits public interest safeguards during free trade agreement negotiations. Further, it also recommends amendments to the Cinematography Act, 1952 to provide for penal provisions for illegal duplication of films. This may result in undermining the limitations and exceptions that have been provided in the Copyright Act to ensure fair use of copyright protected works. The new policy also recommends further studies and research on the interplay between IP laws and other laws to remove ambiguities and inconsistencies. However, the policy does not make it clear in case of inconsistency between IP law and other law, which law is going to prevail. It also talks of the interface between IP law and competition law and the formulation of guidelines on administration and endorsement of patents and for ensuring biodiversity. These measures threaten the dilution of stringent requirements of access and benefit sharing contained in the Biological Diversity Act.
Irrespective of the assurances provided on the need for a balanced approach and for upholding public interest, the new IPR policy in effect follows a maximalist agenda without recognising the limitations of IP. Even though the policy contains certain measures to protect public interest, these measures can get undermined during implementation of the policy due to the overall thrust on IP generation and commercialisation without adequately recognising India’s socio-economic imperatives. One of the unstated reasons for putting together the policy is to ease pressures from the US to deliver on IP awareness, service orientation of the Patent Office and IP generation. Thus the policy bears the danger of further increasing the pressure instead of minimising it.
1 This investigation was initiated at the joint request of the Senate Committee on Finance and the House Committee on Ways and Means in August 2013. In their joint letter these committees requested the USITC to prepare a fact-finding investigation report by 30 November 2014. The joint letter dated 2 August asked the USITC to conduct an investigation regarding Indian industrial policies that discriminate against US imports and investments for the sake of supporting Indian domestic industries, and the effect that these barriers have on the American economy and on jobs in the US.
Prior to this letter, 17 industry and trade associations, including the Pharmaceutical Research Manufacturers of America (PhRMA), had written to the US President urging him to use bilateral pressure, including diplomatic and trade tools, to reverse India’s policies on local content and intellectual property protection. For details, see Gopakumar, Intellectual Property Issues Dominate USITC Public Hearing on India, http://www.twn.my/title2/health.info/2014/hi140201.htm.
2 “(US Trade Representative) Ambassador (Michael) Froman welcomed the efforts of the government of India to prepare a National IP Policy and constituting an ‘IPR Think Tank’ in this regard. The Think Tank followed an extensive and transparent process to solicit comments from stakeholders. (India’s Commerce and Industry) Minister (Nirmala) Sitharaman reiterated India’s ongoing efforts to reduce pendency and strengthen the IP regime in India through this policy and other measures like increasing technical manpower and streamlining procedures”—from the United States and India Joint Statement on the Trade Policy Forum, available at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2015/october/united-states-and-india-joint.
3 The USIBC Submission states: “…the US-India Business Council believes there have been important developments related to the Intellectual Property… policy in the last 12 months in India that have paved the way for substantive improvement in India’s IP environment. ..The Government of India has privately reassured India it would not use compulsory licenses for commercial purposes. …Recently DIPP and the Ministry of External Affairs (‘MEA’) partnered with USIBC on a conference that convened policymakers, global experts, industry leaders, and relevant stakeholders for a conference entitled ‘Growing the Innovative Bio-pharmaceutical Industry and Expanding Healthcare Access in India’. USIBC also partnered with DIPP to organise a workshop with patent examiners, which provided a platform for officials from India, Japan, the United Kingdom, and the United States to discuss global intellectual property standards and practices in the area of biopharmaceuticals.” Available at
4 These seven objectives are: (i) IPR awareness: outreach and promotion—To create public awareness about the economic, social and cultural benefits of IPRs among all sections of society; (ii) generation of IPRs—to stimulate the generation—to have strong and effective IPR laws, which balance the interests of rights owners with larger public interest; (iv) administration and management—to modernise and strengthen service-oriented IPR administration; (v) commercialisation of IPRs—get value for IPRs through commercialisation; (vi) enforcement and adjudication—to strengthen the enforcement and adjudicatory mechanisms for combating IPR infringements; and (vii) human capital development—to strengthen and expand human resources, institutions and capacities for teaching, training, research and skill building in IPRs.