Declining IP Rights in India Lead to Growing Bi-Partisan Congressional Concern

On July 18, 2013, at the US Chamber of Commerce, the Global Intellectual Property Center (GIPC) hosted an event, “India: International Outlier on IP.” The two-part event began with Congressmen John Larson (D – CT) and Erik Paulsen (R – MN) giving keynote speeches about the concerning status of IP law in India.  A panel discussion followed consisting of David Torstensson, Senior Consultant, Pugatch Consilium; Manisha Desai, PhD, Assistant General Patent Counsel, Eli Lilly; and Michael Schelsinger, Counsel, International Intellectual Property Alliance.

The GIPC previously released its International IP index, Measuring Momentum, on December 11, 2012.  Pugatch Consilium ranked nations based upon intellectual property rights (IPR) to provide a global overview. Various factors included patent enforcement, fairness of compulsory licensing, copyright term of protection, and membership to international treaties.   Not surprisingly, Brazil, Russia, India, and China (BRIC) comprised the bottom of the list.  While most would expect China to be ranked last, India was ranked last overall and in almost all individual categories, including Foreign Direct Investment (FDI), Research and Development Spending, and Membership and Ratification of International Treaties. David Torstensson of Pugatch Consilium noted that while IPR in China are lacking, some legislation does in fact exist, which helped its ranking. Notably, India is the only country in the study that is not a signatory for any international IP treaties, such as the Patent Law Treaty (PLT) and World Intellectual Property Organization (WIPO) Internet Treaties.

Newly implemented policies, compulsory licensing practices, and recent court decisions have heightened concern about IPR in India.  Congressmen Erik Paulsen and John Larson expressed their worries with India’s intellectual property violations in a letter written to President Obama. Over 170 members of Congress, consisting of a bi-partisan support, signed the letter.  During their speeches at the GIPC, the Congressmen emphasized that this bi-partisan support demonstrates the grave concern of IPR in India and the importance of persuading India to comply with global practices. The Congressmen sent the letter just prior to a visit to India by Secretary of State, John Kerry.

Since writing the letter, Congressmen Paulsen and Larson met with the Indian Finance Minister, P. Chidambaram.  Larson reported that the Finance Minister was unapologetic and stoked uneasiness by pointing to India’s key geographic location. However, when questioned about the possibility of breaking an alliance with India, both Congressmen seemed expectant that would not be the outcome. Congressman Paulsen emphasized that we have good rapport with India and share many of the same core values. Congressman Larson thinks IP enforcement will improve in India because of its potential beneficial impact on India’s economy.  Investors are not attracted to countries that do not protect intellectual property.  Thus, improving patent protection in India would not only benefit innovators, but also help the Indian economy.  While the impact of the meeting remains to be determined, both Congressmen are optimistic of a positive outcome as long as the dialogue continues to remain open between the countries.

After the keynote addresses, the panel discussed the substantive problematic issues of IP rights, protection, and practices in India.  One major area of worry is the practice of forced localization.  India announced in early 2012 a preferential market access (PMA) mandate for electronic goods.  When implemented, the PMA requires a government determined market share (up to 100 percent) of the product to be locally manufactured using India-based suppliers.  The PMA clearly violates Article III of the General Agreement on Tariffs and Trade (GATT), provisions of which have been incorporated into the World Trade Organization (WTO) rules.  These discriminatory policies are clearly not compliant with WTO rules.

Patent rights, especially for pharmaceutical drugs, are another worrisome area of IPR in India.  Only as recent as 2005 did India begin granting product patents for drugs and medicines after becoming a signatory of the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. Although India became a signatory in 1995, they utilized the full 10-year transitional period that is afforded to countries to comply with the agreement.  While improvements to patent protection have been made, India still has a higher standard of patentability than other countries for pharmaceutical drugs. Section 3(d) of the Indian Patents Act of 2005 requires an “enhanced efficacy” for known drugs in addition to the standard novelty, inventive step, and industrial applicability requirements.  This additional requirement is in theory to prevent evergreening, where small changes are made to known drugs in order to extend patent terms.

Recently, the impact of this heightened standard of patentability came to fruition when the Supreme Court of India denied a patent to Novartis for its leukemia drug, Gleevec.  Gleevec is the beta-crystalline form of imatinib mesylate. The beta crystal exhibits enhanced stability compared to that of the previously patented alpha form. Despite Novartis being granted patents for Gleevec by 40 other countries, the Supreme Court of India said Gleevec did not meet the increased efficacy standard, thus, denying its patent.

Notwithstanding the denial of a patent for Gleevec, India is now granting product patents. One audience member of the event noted that India granted 146 patents to Novartis, to which Dr. Desai agreed.  However, she noted that protection, not the granting, of the patents is the main problem area now.  Successfully marketed products are having their patents revoked. Last year, India revoked patents for Roche’s hepatitis C drug, Pegasys, which was the first product patent granted by India. India also revoked patents to Merck for asthma medicine and to Pfizer for a kidney cancer drug.  It seems that while India is comfortable with granting patents, once the patent has economic significance, revocation is a likely outcome.

Dr. Desai emphasized the poor recognition of the importance of innovation illustrated by India’s new pharmaceutical drug pricing policy.  The policy, that went into effect just this week on July 29, implements a price ceiling that will decrease prices and prohibits raising the current prices of drugs as well.  This policy affects what India deems to be 348 essential drugs and will comprise around 30% of drugs sold in India.  Prices are determined by an arithmetic mean, including the costs of the generic drugs, resulting in lower prices. For some cancer drugs, prices are reduced 80%.

Mr. Schlesinger provided an overview of IP concerns in addition to patent rights.  Alarming data was given, such as that 63% rate of software piracy in India and a loss of over $430M suffered by the music industry due to piracy.  Similarly, the film industry faces a major problem in India.  Pirated movies are made and sold as quickly as three days after the movie release, with over 50% of the world’s pirated movies now coming from India.

Because of these significant problems, India continues to remain on the 301 Priority Watch List.  The United States Trade Representative (USTR) releases an annual “Special 301” report that evaluates the protection and enforcement of IPR along with the market access of U.S. trading partners.  While the US is very concerned with IPR in India and the impact of the possibly deteriorating relationship with India, the speakers each noted the broader implications of India’s continued violations due to India’s influence over other emerging markets.


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One comment so far.

  • [Avatar for Marc]
    August 9, 2013 12:51 pm

    The USTR should have thought about these matters when issuing the denial of the ITC’s exclusion order on Apple’s IPads last week. By providing no real explanation the decision seems to arbitrarily favor a US company over a foreign manufacturer. Whether that was what happened or not the lack of a real explanation as to why for the first time in decades the administration has overturned an exclusion order creates questionable optics and leaves the TR’s office with the task of saying “do as I say not as I do” when it comes to dealing with countries like India.