Special 301 investigations are in violation of WTO norms

Written by Santosh Tiwari | Updated: May 8 2014, 02:23am hrs
Identification of India by the Office of the United States Trade Representative (USTR) in its Special 301 report as a priority watch country for failure to protect intellectual property is unjustified as the WTO doesnt permit unilateral action against the member countries. Biswajit Dhar, the director general of Research and Information System for Developing Countries, tells Santosh Tiwari that India should challenge the USTR report and send a clear signal to the US that the country will not accept any intrusion into its domestic policy-making space.

The much-awaited Special 301 report has stated that intellectual property protection and enforcement challenges are growing in India. What would be the implications of the reports findings and the fact that India is kept in the priority watch country list

It is important to recognise that it is not merely identifying India as priority watch country that has been done, they have also included us in the out-of-cycle investigation which means that instead of an annual review of our IP laws, we will be once again subjected to scrutiny in the fall. So, the implications are that there will be constant pressure on us to amend our IP laws, in particular the sections in the Patents Act against which the Special 301 has made some critical comments.

One is section 3D, which limits patenting particularly of pharmaceuticals to those products which are distinct improvements over the existing products. In other words, minor modifications of existing formulations or discovery of new usage of existing products would not qualify for a grant of patent in India. The major pharmaceutical companies in the US have been objecting to the strict standards for granting patent rights that India has been following.

The second provision relates to the grant of compulsory licences for patented products where the patent holder charges excessive price or is unwilling to produce the product in India. This provision has been used to make life-saving drugs accessible to patients at affordable prices. Pharmaceutical firms have been objecting to the grant of compulsory licences as this instrument was not allowing them to appropriate super-normal rents for their patents.

Now, they are pushing for the amendments of these two provisions which the government of India has introduced in the Patents Act, essentially to meet the requirements of the public at large.

While the US is seeking changes in the Indian patent regime, there have been instances when it took steps to protect its consumers against excessive rent-seeking by the patent holders in their territory. How will they be able to justify that

The US has a very elaborate institutional mechanism to prevent abuses of patent rights. The most important role in this regard is played by the Federal Trade Commission (FTC), the equivalent of the Competition Commission which closely monitors actions by the patent holders that violate consumer rights. For a number of years, the FTC has been engaged in reviewing the US patent law with a view to prevent abuse of patent rights. In 2003, the FTC undertook a comprehensive review of the US Patents Act with a view to ensure that this legislation does not impinge on competition in the market. More recently, the FTC has been taking action against the proprietary pharmaceutical firms that have prevented the introduction of cheap generics after the expiry of their patents. In the most recent annual assessment of the disputes between firms owning patents and generic manufacturers, the FTC has reported 140 final resolutions. Of these, 40 settlements may involve pay-for-delay payments as they contain both compensation to the generic manufacturer and a restriction on its ability to market its product.

According to the FTC, these settlements involved 31 different patented pharmaceutical products. In nearly half of these potential pay-for-delay agreements, compensation took the form of brand manufacturer's promise not to market its own generic version of the product in competition.

And then there is the issue of compulsory licensing

The US government has been issuing compulsory licences to protect the interest of the public as well as abuse of the patent monopoly. The best known case of use of compulsory licence was the grant of licence for Ciprofloxacin when there was an outbreak of Anthrax in 2001. Clearly, there are two standards, when the US deals with anti-competitive practices arising from the exercise of patent monopolies, it uses several instruments to ensure that the domestic consumers do not suffer. On the contrary, in its dealings with partner countries, the US administration champions the cause of its corporate interests even when they are in flagrant violation of public interest. In any case, the US has given several compulsory licences against only one that India has given thus far in pharmaceuticals. In any case, the US, according to a public interest group Knowledge Ecology International, has issued the largest number of compulsory licences on record.

There has been a case that India should take the US move to the WTO. How strong the Indian IP regime is as far as multilateral rules are concerned And are the US demands justified

By conducting these annual reviews of the patent laws of the partner countries, the US is clearly in violation of the spirit of the multilateral trading system. The WTO agreements were concluded with a clear understanding that the member countries of the organisation will not take unilateral action against fellow members. Any dispute had to be resolved through the dispute settlement body of the WTO. Although there is a ruling by the dispute settlement body on Section 301 of the US Trade Act in which the US had agreed not to take unilateral against any WTO member, India may consider taking the initiative along with other countries to once again challenge the Special 301 investigations that the USTR is conducting.

Given this backdrop, how do you see the future of bilateral dialogues, and what should be the Indian approach

I think India needs to make a strong point to the US administration that it will not accept any intrusion into its domestic policy-making space. India should make it clear to the US that it is in full compliance of all its WTO commitments and that its intellectual property laws fully meet the standards set in the TRIPS agreement. I believe that this clear stance will help in conveying the right message to the US and this may ease the pressure that they are putting on India.