Column: Indias case at WTO may fail to sail

Written by Uttam Gupta | Updated: May 9 2014, 02:20am hrs
In the recently released Special 301 report on trade and industry practices, the US Trade Representative (USTR) has stopped short of putting India on its Priority Foreign Country (PFC) list.

Under Special 301, USTR tracks the intellectual property (IP) rights record of countries and lists them according to the strength of their IP environment. If, on review, it identifies substantial deterioration in any countrys IP regime, it gets downgraded to PFC status which carries with it trade and economis sanctions.

India may have escaped being listed as such for now, but the Damocles sword hangs over the country as the USTR intends to conduct what it calls out-of-cycle reviews to engage with India on IPR challenges.

Describing it as an unilateral probe under US law, which India is not committed to under WTO regulations, commerce secretary Rajeev Kher has ruled out Indias likelihood of being a party to the engagement. Instead, he insists that the issues can be discussed at US-India Trade Policy Forum.

The Indian governments stance draws strength from a 1999 ruling of the WTO dispute settlement panelin a dispute between the EU and the USthat a country cannot take unilateral action against another member country as it is inconsistent with WTO rules.

Just in case the US contemplates to impose sanctions on India, it will have to take the dispute to the WTO. Only if the multilateral trade body decides in the USs favour can the country seek authorisation from the WTO and proceed against India.

By leveraging this rule, the Indian government can, at best, get a temporary reprieve. The mere implausibility of any action against us without WTO sanction does not make us any less vulnerable. What if the US goes to the WTO and the latter finds our regime to be non-compliant.

Indian authorities have said time and again that the country is compliant with the commitments being a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) entails and that we have used flexibilities which are available to WTO members meaning that this is entirely within the remit and commitments made by India under WTO agreements. Yet, the US administration remains unconvinced.

We need to move away from ritual pronouncements (that at times become indistinguishable from rhetoric) to an objective and dispassionate analysis of whether our actions are truly in full compliance of the WTO norms.

There are three major areas of concern, viz., (i) poor enforcement of the Patent (amendment) Act 2005, (ii) denial of protection to proprietary data submitted for registration of new pharmaceutical and agrochemical products and (iii) refusal to recognise patents while granting market approval to me too registrants.

As regards the poor enforcement of the Patent Act 2005, the biggest area of concern is its Section 3(d). The section bars grant of patents to new forms of known substances, unless the new form results in significant enhancement in efficacy over the known substance.

This section was justified to prevent so called ever-greening of patents, an euphemism for extension of monopoly beyond the patent term. This premise is flawed. If, in the case of Glivec (the anti-cancer drug), the beta crystalline form of the pre-existing compound, imatinib mesylate, gets a patent, it is wrong to interpret it as ever-greening, as the original product will still be available for generic-makers at the end of the term of the patent held for it.

Yet, the scare of the alleged ever-greening has come into full play at various levels in our patent system and judiciary. Section 3(d) has been turned in to a vehicle for indiscriminate and incessant attempt to block the grant of patent.

During the past 18 months or so, as many as 15 medicine patents have been challenged. In several cases, the office of Patent Controller has moved with alacrity in either denying the patent or even revoking a patent already granted. The courts, too, have upheld the decision of patent controller. The order of Supreme Court (SC) in the Glivec case has made matters worse.

While rejecting a patent for the beta crystalline form of imatinib mesylate, the SC opined that the test of efficacy can only be therapeutic efficacy. This implies that pharmacological/chemical properties alone should be sole consideration for grant of patent. This hacks at the very foundation of incremental innovation and is the surest way of ensuring that no such patent is granted.

Ironically, even in areas where an MNC is able to thwart patent challenges, the government has taken recourse in granting of compulsory licenses (CL) to Indian companies. Thus, in 2012, it issued a CL for the domestic manufacture of Nexavar, a patented drug of Bayer, to Natco Pharma. Plans are afoot to grant CL to more drugs.

As regards protection of regulatory data, innovator companies spend millions of dollars in conducting long-term studies, viz., toxicological, environmental, etc, to demonstrate the safety and efficacy of new products before seeking market approval. This data needs to be protected to give them a reasonable opportunity for recuperating heavy investments in R&D and incentivises further investments in the same as well.

Article 39.3 of the TRIPS agreement requires member governments to protect such data. In February 2004, the Indian government had set up a committee under secretary, Department of Chemicals and Petrochemicals, to consider the steps to be taken in the context of provisions of Article 39.4. In May 2007, the committee recommended three years of data protection for agrochemicals and five years for traditional medicines. It also suggested protection of information against unauthorised disclosure/use of agrochemicals and pharmaceuticals.

In the Pesticides Management Bill (PMB), a provision was incorporated to protect the data relating to agrochemicals for three years. It was introduced in Rajya Sabha in 2008 and has been languishing ever since.

As regards recognising patent for granting market approval to me too registrants or patent linkage(as IP experts call it), the government has dismissed this outright as a TRIPS plus requirement.

Regulators, viz., Central Insecticides Board & Registration Committee for agrochemicals and Drug Controller General of India for medicines, have a crucial role in import/manufacture and sale of these products. If they grant registration to someone despite the existence of a patent and without the holders consent, it will be tantamount to nullifying the patent.

Far from being TRIPS plus, the denial of patent linkage by regulators is an act of blocking the enforcement of patent rights of the innovator.

Thus, even if government ignores the USTRs pronouncements, terming its review as unilateral, we have lot to answer in terms of WTO commitments. At WTO, India will have to deal with specific areas of deviation and non-compliance. Merely harping on flexibilities available under TRIPs Agreement may not be enough to stave off any possible punitive action.

The author is a policy analyst