The Indian pharmaceutical industry is highly regulated, essentially on three aspects: patents, price, and product quality. The various legislations that govern the Industry are:
-- The Indian Patents Act,
1970 (and the amendments
thereafter)
-- Drug Price Control Order
-- The Drugs and Cosmetics Act, 1940

The patent system was first introduced in India in 1856 through the Exclusive Privileges Act, 1856. This Act provided exclusive right to the patent holder for a period of 14 years. Later on, the Indian Patents & Designs Act, 1911, replaced the previous Act, although the main clauses remained the same. To encourage indigenous research in the Indian pharmaceutical industry, the Government introduced a new system of patents through the Indian Patent Act (IPA), 1970.

Indian Patent Act, 1970 regulates patents for products processed or manufactured in India. It allows product patents for non-chemical substances and process patents for chemical substances, including pharmaceuticals, agro-chemicals and food products.

IPA places the burden of proof on the patent holder in the event of infringement of the patent. Patents granted for foods, medicines or drugs and other substances prepared by chemical processes were automatically deemed to have been endorsed with the words 'Licence of Rights', three years after the grant of the patent. However, a bill has been recently cleared and marked for President's approval, wherein the clause on 'Licence of Rights'has been deleted. IPA provides patent for a duration of seven years, form the date of filing of the patent, or five years from the sealing of the patent, whichever is earlier.

Two types of licences may be given to companies interested in manufacturing a patented product. These are compulsory licence and licence of right. If a company is interested in manufacturing a product that is under patent, it has to prove that the reasonable requirement of the public for the product has not been satisfied, or the particular product is not available at a reasonable price. In such a case, the company is allowed to apply for a 'compulsory licence' after three years of the grant of the original patent.

India is a signatory to the General Agreement on Tariffs and Trade (GATT), which is a binding contract on all its member countries. GATT was succeeded by World Trade Organisation (WTO) which was established in 1995. To harmonise international trade among member countries, WTO has certain specific articles such as Trade Related Intellectual Property Rights (TRIPS) and Trade Related Intellectual Measures (TRIMS).

In the transition period, Exclusive Marketing Rights (EMRs) are to be granted by the developing countries for a period of five years from the date of obtaining marketing approval in the country, or until a product patent is granted or rejected, whichever period is shorter. Therefore, the transition period provided to the developing countries has been nullified by the requirement that they provide EMRs to all applicants for product patents. In effect, the EMRs are recognition of product patents even before they have been examined under the country's laws for their eligibility for the grant of patents. For acquiring a valid EMR, the applicant must hold a valid patent granted after January 1, 1995, in any of the member countries and should have the marketing rights for the same. Moreover, the application for EMR must be made simultaneously with the application for the patent.

To comply with the obligations of the TRIPS agreement, the Indian Government has to accord recognition to product patents for which India has been given time till January 1, 2005 to amend its national legislation. In the meantime, the country is required to provide for a mailbox mechanism for accepting product patent applications and for examining and granting EMRs.

To incorporate the changes required under the TRIPS agreement, the Indian Government had drafted the Patent Amendment Bill, 1995. Although this Bill could not be passed by Parliament in 1995, an amendment Act, that is the Patents (Amendment) Act 1999, was introduced in 1999, which provided for the grant of EMRs. Subsequently, the Patents Second Amendment Bill, 1999, which incorporates some provisions with respect to TRIPs, was cleared by Parliament in May 2002. However, as far as pharmaceuticals are concerned, Indian law continues to recognise only process patents.

The first amendment to IPA was enacted in 1999 consequent to a WTO ruling following a complaint filed by the European Union and the US. The European Union and the US had filed a complaint against India at the World Trade Organisation (WTO) for its failure to comply with Article 70.8 (provision of mailbox) and Article 70.9 (provision for EMRs). The WTO's Dispute Settlement Body had set up panels to examine these complaints. The WTO ruled that India was in default of its obligations and also held that India was obligated to have a transitional system in place immediately. Thus, India was forced to amend the IPA. Consequently, the Patent (Amendment) Act, 1999 was passed in March 1999, which provides for the grant of EMRs. Under this Act, the legislation to allow EMRs and the mailbox facility for accepting product patent applications was cleared.

The Patents (Amendment) Act, 1999 has specified four pre-conditions to be met by an EMR applicant. These are:
-- The applicant must hold a valid patent on pharmaceutical product granted after January 1, 1995, in any of the WTO member countries
-- The applicant should have marketing rights in the member countries
-- A product patent application should already have been made in India and
-- Marketing approval for the same product should have been granted in India.

The WTO stipulation requires the first three conditions while the fourth is expected to act as a safeguard for the Indian pharmaceutical industry. This way, all EMRs are expected to take two to six years before clearance. This is primarily because the grant of marketing approval requires clinical trials as stipulated by the Drug Controller of India, which usually takes a long time.

In this context, the following provisions of the The Patents (Amendment) Act, 1999, are significant:
-- The invention, for which an EMR is filed, must have been made in India or any other WTO member country on or after the lst day of January 1995.
-- EMRs will be granted for a period of five years for
pharmaceutical and agro-chemical products.
-- The Government (Central Government) will be able to sell or distribute products for which EMRs have been granted by itself or a person authorised by it. This would only be done for non-commercial use in public interest.
-- The Government will have the discretion to determine the price of a product for which an EMR has been granted. This would be done in the public interest and for the reason to be stated by the Government.
-- The restrictions on applications for patents outside India, for inventions made in India, would be removed. This is possible as Section 39 of the IPA has been deleted. This Section stated that no person resident in India could make an application outside India for the grant of a patent without the Government's permission, unless the same application is made in India atleast six weeks before the international application.
-- Prior publication or use of the product, before the filing of a patent by the applicant in India or any other WTO member country, would not constitute a patent infringement.

The Patents Second Amendment Bill (PSAB) addresses the following issues.
-- Change in the definition of 'patentable inventions': PSAB provides for change in the definition of an invention.
Right of patentees: The Bill provides the patentee the right to prevent third parties not having the owner's consent, from making, using, offering for sale, selling and importing the patented product. This right also covers process patentees provided the product obtained from the patented process is not a non-patentable product.

Extension of term of patent: The Bill provides for a uniform term of 20 years for every patent, from the date of filing of the patent application. Under IPA, the term of process patent for food, medicine or drug was five years from the date of sealing of the patent or seven years from the date of the patent (the date when complete specifications are filed), whichever was shorter.

In a suit for infringement of a process patent, the Bill empowers the judicial authority to direct the defendant to prove that the process used by him/her (infringer), to obtain a product (identical to the product obtained through the patented process) is different from the patented process. Relating to certain actions that are not to be considered as infringement. The provision allows any party to use the patented invention (during the term of the patent) to facilitate his/her entry into the market as soon as the patent term is over. It has been made

Right to import: Import of a product by any person from another person who is authorised by the patentee to sell or distribute the product would not be considered infringement under this legislation. In other words, import of products would tantamount to working of a patent.

Deletion of 'Licence of Rights' clause and grant of compulsory licences: The Bill empowers the Controller to grant compulsory licence to an applicant (for manufacturing and selling a patented product) any time after three years from the date of sealing of the patent. Any party interested in manufacturing and selling a patented product may file an application. The Controller can grant the licence on the following grounds:
-- if reasonable requirements of the public with respect to the patented invention have not been satisfied,
-- if the patented product is not available to the public at a reasonably affordable price, and
-- if the patented invention is not available in India

A compulsory licence may be granted only on failure of the applicant to obtain a voluntary licence from the patentee on reasonable terms and conditions within a reasonable period of time.

Source: ICRA