While keeping India in its `priority watch list’ as in the previous years, the US Trade Representative (USTR) 2014 “Special 301 Report’’ has called for greater transparency about the ongoing inter-ministerial process that is considering over a dozen patented medicines as candidates for government- initiated compulsory licenses.

The report also urged India to allow opportunities for input by rights holders,  as appropriate, with respect to decisions concerning compulsory licenses. “While bearing in mind the Doha Declaration on TRIPS and Public Health, discussed in the Intellectual Property and Health Policy section of this Report, the United States also continues to monitor developments concerning compulsory licensing of patents in India,” the report said.

To further encourage progress on IPR issues of concern, USTR will publish a Federal Register notice and initiate an Out-of-Cycle Review (OCR) of India in the fall of 2014, commencing an assessment of the progress in that engagement, it said.

“In 2013, India made some limited progress in improving its weak IPR legal framework and enforcement system. India acceded to and implemented the Madrid Protocol; continued progress  toward digitization of cable networks to help efforts to combat signal theft by cable operators; and enacted rules to implement amendments to its Copyright Act. 2013 also saw more active copyright enforcement by the Delhi High Court through the issuance of Ashok Kumar and Anton Piller orders, which provide injunctive relief to rights holders,” it said.

“Recent actions by the Government of India with respect to patents, however, have raised serious concerns about the innovation climate in India and risk hindering India’s progress towards an innovation-focused economy. In the pharmaceutical sector and increasingly in other sectors, such as the agro-chemicals and green technology sectors, some innovators face serious challenges in securing and enforcing patents in India. In recognition of the fact that an environment conducive to the protection and enforcement of IP can help to address pressing domestic policy challenges, the United States encourages India to adopt policies that support both cutting-edge innovation to address important health challenges and a robust generic market,” the report said.

“The United States is concerned that section 3(d), as interpreted, may have the effect of limiting the patentability of potentially beneficial innovations. Such innovations would include drugs with fewer side effects, decreased toxicity, improved delivery systems, or temperature or storage stability. In practice, this standard has already been applied to deny patent protections to potentially beneficial innovations, some of which enjoy patent protection in multiple other jurisdictions.  Even after a product receives a patent, Indian law continues to pose challenges to the enjoyment of that IPR protection,” the report said.

“In addition, the United States continues to be concerned with the rationale underlying a decision by India’s Controller-General of Patents to grant a compulsory license under Section 84 of  India's Patents Act (which allows private parties to initiate proceedings seeking a compulsory license of a patented article), as upheld by a recent judgment of the IPAB. The grant of the compulsory license was based, in part, on the innovator's failure to “work” the patent in India because it imported its products, rather than manufacturing them in India,” it said.

“Although the government has issued only one compulsory license under Section 84, India has made clear that it views compulsory licensing as an important tool of industrial policy for green technologies, with the potential to be applied more regularly across economic sectors. Specifically, India has promoted compulsory licensing in its National Manufacturing Policy as a mechanism available for government entities to effectuate technology transfer in the clean energy sector,” it added.

“The United States also notes with concern the continuing challenges involved with enforcement of patent rights in India, including challenges that patent holders face in securing injunctions against firms that manufacture patented inventions without authorization from the patent holder. Additionally, when approving such manufacture without authorization, Indian state governmental authorities reportedly do not have a mechanism to confirm whether the item to be manufactured is under patent. Recent cases such as Merck v. Glenmark and Cipla v. Roche illustrate this problem and underscore the need for greater regulatory coordination between officials in state and central governments,” the report said.

“Finally, the United States also urges India to provide an effective system for protecting against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products, and to ensure that such a system applies to all pharmaceutical products and not just traditional Indian medicines. It is noteworthy, however, that the Pesticides Management Bill, currently before Parliament, includes provisions for data protection of agricultural chemicals for five years, although that time period begins with the product’s first marketing approval anywhere in the world. Meanwhile, data protection for pharmaceuticals remains under consideration by the Ministry of Health and Family Welfare. Without these types of protections in place against the unfair commercial use of clinical test data, companies in India reportedly are able to copy certain pharmaceutical products and seek immediate government approval for marketing based on the original developer’s data,” it said.