By Patrick Kilbride
Following Prime Minister Narendra Modi’s meeting with US President Barack Obama during his visit to America last month, the leaders released a joint statement enumerating a number of areas for bilateral collaboration. Among other things, they committed to establishing an annual intellectual property (IP) working group as a core element of the bilateral trade policy forum. US industry widely welcomed this statement, since a bilateral dialogue on IP will be an important part of optimising the US-India trade relationship.
This comes on the heels of another important statement on IP. Recently, officials of the Modi administration announced plans to establish an overarching intellectual property policy that, in concept, would both define India’s approach to intellectual property and enhance the clarity and transparency of its relevant laws. Such a step would be welcome news to the global business community that looks to India as a market of tremendous potential growth and already well-developed global influence.
What the business community will think of the policy that is put in place remains an open question. And yet, sometimes an unfavourable policy that is fairly, transparently and consistently implemented can be preferable to a sounder policy that lacks the same conviction. In such cases, business leaders can fairly evaluate the legal and regulatory climate and make investment and business decisions accordingly, with a high degree of confidence that the rules will be fairly, if strictly, enforced both for and against their interests. In extreme cases, the decision may simply be not to do business in a particular market, where the rules do not afford a fair opportunity to operate in a sustainable fashion.
A country and its people have no option but to live with the consequences of their policy choices, the wisdom of which will have a lasting impact on its prospects and the fortunes of its citizens. With its prospective IP policy, India has an opportunity to establish a legal and regulatory framework that solidifies its future economic competitiveness and unleashes its vast innovative potential. To that end, it is useful to examine the direction of India’s current IP laws and the very real disincentives that have unduly limited its capacity to commercialise new inventions and to enjoy access to innovations from other parts of the world. Three policy choices illustrate the point.
One, the threat of compulsory licensing, which occurs when the government permits the production of a patented drug without the consent of the IP rights holder, sends a chilling signal to global innovators that a market is not safe for their IP. International agreements recognise the existence of cases where compulsory licences may be legally and morally justified; however, a strong IP framework, supported by public officials, makes clear that such an extreme step is a last resort, taken in accordance with full due process and legal safeguards for the rights holder. India’s recent record on this issue is a sword of Damocles in the minds of investors.
Two, Section 3(d), India’s introduction of a “fourth step” for patentability, is out of step with international best practices and its international commitments. The WTO agreement on Trade-Related Aspects of Intellectual Property Rights clearly commits parties to a three-step patentability test of novelty, inventiveness and industrial applicability. In the pharmaceutical space, the addition of “enhanced efficacy” as a fourth step has the unintended consequence of preventing investment in the further development of existing molecules, both on and off patent. As a consequence, molecules for which original patents have expired may never fulfil their life-saving potential. Even in the seemingly more straightforward case of so-called “evergreening”, which occurs when a patent holder seeks extended patent protection due to new modifications to an existing drug, Indian policy ignores the substantial investment of money, time, and other resources required to bring a medicine to market in a new form. Critics of evergreening often accuse innovative companies of attempting to stymie competition from generics; yet, in the US, where the three-step patentability rules are in place, 86 per cent of all pharmaceutical needs are supplied by generics — including many Indian companies.
Finally, at once the simplest and yet possibly most difficult challenge to address is the inadequacy of the existing administrative and judicial framework to execute India’s IP laws. India has an enormous backlog of pending patent applications. In many cases, by the time a company can introduce a product to market the patent term has nearly expired, defeating the purpose of the country’s IP laws. Statements to date by the Modi administration seem to indicate that this consideration will be a clear priority for the new IP policy. Steps to streamline the bureaucratic process and provide essential administrative and judicial tools for fair, transparent resolution of disputes would be an important contribution to an enhanced Indian environment for innovation.
The writer is executive director at the Global Intellectual Property Centre, an affiliate of the US Chamber of Commerce.