Delhi High Court Strikes Down Section 24(5) of the Plant Varieties Act as Unconstitutional

On December 2, 2016, the Delhi High Court struck down Section 24(5) of the Plant Varieties and Farmers Rights Act, 2001 (Act) as unconstitutional in Prabhat Agri Biotech Ltd. et al. v. Registrar of Plant Varieties. As will be discussed in more detail below, the Court held that Section 24(5) violated Section 14 of the Constitution of India. Specifically, the Court held that this section of the Act gave unbridled power to the Register, who was not required to have a legal background or possess any legal expertise, to grant interim relief to a breeder against any abusive third party act occurring during the pendency of an application for registration of a variety.

Background

The Protection of Plant Varieties and Farmers Rights Act, 2001 (Act) was passed in 2001 and went into effect in November 2005. The stated rational of the Act is to establish a system for the protection of plant varieties, rights of farmers and plant breeders as well as encourage the development of new plant varieties in India. Additionally, the Act is intended to provide the protection needed to facilitate the growth of the seed industry in India, ensure the availability of high quality seeds and planting material for farmers as well as protect plant breeders’ rights for accelerated agricultural development within the country.

Section 12 of the Act establishes the Plant Varieties Registry (Registry) to facilitate the registration of varieties while also providing for the appointment of as many registrars (Registrars) as necessary to allow for the registration of such varieties. Section 13 of the Act provides for the maintenance by the Registry of a register called the “National Register of Plant Varieties” (Register). The purpose of the Register is to record the names of all registered plant varieties along with the names and addresses of the respective breeders, the right of such breeders in their registered varieties, the particulars of the denomination of each registered variety, its seed or other propagating material along with specification of the salient features and any other information which may be required for registration of the variety.

Section 2 of the Act provides a number of definitions of key terms that are used throughout the Act. For example, Section 2(za) defines a “variety” as a “plant grouping except a microorganism within a single botanical taxon of the lowest known rank, which can be:

(i) Defined by the expression of the characteristics resulting from a given genotype of that plant grouping;
(ii) Distinguished from any other plant grouping by expression of at least one of said characteristics; and
(iii) Considered as a unit with regard to its suitability for being propagated, which remains unchanged after such propagation,
and includes propagating material of such variety, extant variety, transgenic variety, farmers’ variety and essentially derived variety.”

Section 2(i) defines an “essentially derived variety”. Specifically, this section states that a variety (the initial variety), shall be said to be essentially derived from such initial variety when it:

(i) “is predominantly derived from such initial variety, or from a variety that itself is predominantly derived from such initial variety, while retaining the expression of the essential characteristics that results from the genotype or combination of genotype of such initial variety;
(ii) is clearly distinguishable from such initial variety; and
(iii) conforms (except for the differences which result from the act of derivation) to such initial variety in the expression of the essential characteristics that result from the genotype or combination of genotype of such initial variety.”

Section 2(j) defines “extant variety” as a variety available in India which is:

(i) “notified under section 5 of the Seeds Act, 1966 (54 of 1966); or
(ii) farmers’ variety; or
(iii) a variety about which there is common knowledge; or
(iv) any other variety which is in public domain”.
(v)
Section 2(k) defines “farmer” as any person who:
(i) “cultivates crops by cultivating the land himself; or
(ii) cultivates crops by directly supervising the cultivation of land through any other person; or
(iii) conserves and preserves, severally or jointly, with any person any wild species or traditional varieties or adds value to such wild species or traditional varieties through selection and identification of their useful properties.”

Section 2(l) defines a “farmers’ variety” as a variety which:
(i) “has been traditionally cultivated and evolved by the farmers in their fields; or
(ii) is a wild relative or land race of a variety about which the farmers possess the common knowledge”.

A variety can be registered by submission of an application to the Registrar. According to Section 16 of the Act, an application can be submitted by any “person”. A “person” includes:

(i) any person claiming to be the breeder of the variety; or
(ii) any successor of the breeder of the variety; or
(iii) any person being the assignee of the breeder of the variety in respect of the right to make such application; or
(iv) any farmer or group of farmers or community of farmers claiming to be the breeder of the variety; or
(v) any person authorized in the prescribed manner by a person specified under items (i) – (iv) to make application on his behalf; or
(vi) any university or publicly funded agricultural institution claiming to be the breeder of the variety.

Section 18 describes the specific technical and other information that must be included in each application. According to Section 15, once an application has been submitted, a variety can be registered only if it satisfies the criteria of novelty, distinctiveness, uniformity and stability. During the examination process, the application can be amended if requested by the Registrar. Once an application is accepted, it is published for opposition. If no opposition is filed or if an opposition is rejected, the Registrar will register the variety and issue a certificate. If the certificate issued is for an essentially derived variety, the certificate is valid for nine years from the date of registration for trees and vines and six years from the date of registration for all other plants (which is renewable). However, , the total period of validity of a registration cannot exceed:

(i) eighteen years from the date of registration for trees and vines;
(ii) fifteen years from the date of the notification of that variety by the Central Government under section 5 of the Seeds Act, 1966 (54 of 1966) for extant varieties; and
(iii) fifteen years from the date of registration of a variety in all other cases.

According to Section 28(1) of the Act, a certificate confers an exclusive right on the breeder or his successor, agent or licensee, to produce, sell, market, distribute, import or export the variety. One interesting provision of the Act, which will be discussed in more detail below, is Section 24(5) which gives the Registrar the “power to issue such directions to protect the interests of a breeder against any abusive act committed by any third party during the period between filing of application for registration and decision taken by the Authority on such application”.

Prabhat Agri Biotech Ltd. et al. v. Registrar of Plant Varieties

The petitioners, Prabhat Agri Biotech Ltd. (Prabhat), Nuziveedu Seeds (Nuziveedu) and Kaveri Seed Company Ltd. (Kaveri), challenged the vires of Section 24(5) of the Act. Nuziveedu, a sister company to Prabhat, had, over the course of several years, various hybrid and parental cotton lines copied from one of the respondents, Maharashtra Seeds (Maharashtra). In fact, Maharashtra filed an application to register a hybrid variety of cotton which was alleged to have been developed using Nuziveedu’s proprietary parent lines. After filing its application, Maharashtra filed an application under Section 24(5) against Prabhat and Nuziveedu. The third petitioner, Kaveri, was not subject to an application under Section 24(5) by any third party.

During the proceeding, the Solicitor General, on behalf of the government of India, argued that Section 24(5) was necessary for the public interest. Specifically, the Solicitor General argued that this section of the Act was based on Article 13 of the International Convention for the Protection of New Plant Varieties, 1991 (UPOV), which necessitated Article 24(5) because it obligated parties to take suitable steps to safeguard the rights of applicants during the period during which their application was under evaluation. Specifically, the Solicitor General pointed to the statements in Article 13 of UPOV which states:

“Each Contracting Party shall provide measures designed to safeguard the interest of the breeder during the period between the filing or the publication of the application for the grant of a breeder’s right and the grant of that right. Such measures shall have the effect that the holder of a breeder’s right shall at least be entitled to equitable renumeration from any person who, during the said period, has carried out acts which, once the right is granted, require the breeder’s authorization as provided in Article 14. A Contracting party may provide that the said measures shall only take effect in relation to persons whom the breeders has notified of the filing of the application.”

According to the Solicitor General, Section 24(5) was based on sound public policy due to the fact that Article 13 of UPOV required a measure of interim protection. As a result, Section 24(5) had to be enacted.

In its decision, the Court stated that the power conferred upon the Registrar in Section 24(5), namely, the ability to make an interim order anytime during the pendency of an application, was simply too broad. Specifically, the Court stated:

“…its exercise is not in any manner conditioned upon consideration of any objective material. The only guidance given in the section was that such an order could be made if a person were engaged in an ‘abusive act’”.

According to the Court, an “abusive act” contemplated a range of behaviors from suspicion of infringement or use of someone’s material to the genuine use of material legitimately developed by a rival. As such, the Court stated:

“In other words, ‘abuse’ is not only wide and vague in its import, but ‘abuse’ by which entity – a specified third party, or generically all other parties (consider third parties) in the subject-object verb relationship sharpens the concern that the power (to issue interim orders) is overbroad and without any guidance. To illustrate, an abuse could be a case of theft of variety and its exploitation by sale; if demonstrable, that it is an abuse might be capable of injunctive relief. However, at the other end of the scale, if there is no theft or allegation of theft but rather claim by the applicant that it has developed the variety first and is, therefore, entitled to protection as opposed to the assertion of a rival that such a position is incorrect and the variety is an extant one, or a farmers’ variety, a possible view can be that use by such rival of the variety is an abusive act. Therefore, the basis for grant of an order under the impugned provision is existence of a vague and undefined state of affairs.”

The Court noted that the Act clearly provided the conditions that an applicant had to fulfill to secure the registration of a new variety. In contrast, the Act was less than clear and even vague in terms of what a Registrar had to scrutinize when deciding whether or not to grant interim relief under Section 24(5). What seemed to trouble the Court was the fact that the power of Section 24(5) was exercisable at any stage, even the moment after an application was filed, regardless of the merits of the case (namely, whether the applicant claimed to be a breeder or farmer of even if the variety was entitled to protection).

Additionally, the Court was further troubled by the fact that while the Act clearly spelled out the rights and obligations of the applicants, the qualifications to be fulfilled and the conditions to be made as well as the various steps involved in the granting or refusal of an application, it failed to specify the requirements and/or qualifications of individuals suitable to hold the office of Registrar. In fact, the Court noted that there was nothing in the Act that required that the Registrar have any judicial or quasi judicial expertise. In view thereof, according to the Court, it was constitutionally impermissible to give the Registrar the power to make significant legal determinations such as those contemplated under Section 24(5) given the potentially far-reaching implications.

The Court concluded stating:

“Given the importance of the Act, there is enormous danger in empowering authorities with unguided and uncanalized power through provisions that can implicate livelihoods and limit or impair food access to tens of thousands – potentially hundreds of thousands of farmers and users of plant varieties. The existence of a large section of farmers unschooled in the provisions of the Act and unaware of their rights renders unethical bioprospecting practices and spurious claims to development of new or other registrable varieties, entitled to registration, a real possibility. Section 24(5) of the Protection of Plant Varieties & Farmers’ Rights Act as cast as present may undoubtedly be an adequate remedy to prevent abusive practices (assuming that what is abusive can be defined over a period of time); yet the danger of abuse of the provision itself and the attendant (likely) long term injury to innocent breeders, framers and those in the business of development of hybrids and plant varieties far outweighs its benefits, in view of the unguided nature of the power, which is destructive of the rule of law and contrary to Article 14 of the Constitution of India. Section 24(5) of the Protection of Plant Varieties and Farmers’ Rights Act, 2001, is, therefore, declared void.”

This post was written by Lisa Mueller of Michael Best .

India’s Stringent and Shifting Policy on Genetically Modified Cotton Seeds

India’s Cotton Industry & Monsanto

India is the world’s second largest producer and exporter of cotton. While India produced cotton before the introduction of genetically modified seeds, Monsanto Company’s (Monsanto) Bacillus thuringiensis (Bt.) cotton technology has helped the country achieve astronomical gains in cotton production as illustrated below in Figure 1.

Figure 1: Average cotton yields in India, 1950-2010

chart 1

Monsanto’s presence in India is as Mahyco Monsanto Biotech (MMB), a 50:50 joint venture between Maharashtra Hybrid Seeds Company Private Limited (Mahyco) and Monsanto. MMB licenses two types of Bt. cotton seeds in India known as Bollard I and Bollard II, respectively. A description of these varieties is as follows:

  1. Bollgard I:
    1. Introduced in 2002, Bollgard Bt. I cotton was India’s first biotech crop technology approved for commercialization. It has built-in protection against infestations by the destructive American Bollworm, Heliothis Armigera, and contains an insecticidal protein from a naturally occurring soil organism. Use of this variety does not require the payment of a royalty fee as bollworms have developed resistance against this variety.
  2. Bollgard II:
    1. Bollgard Bt. II was approved in mid-2006. It provides protection against bollworms and Spodoptera caterpillar, which leads to better boll retention, maximum yield, lower pesticide costs, and protection against insect resistance. Use of this variety requires the payment of a royalty fee.

MMB currently licenses the Bollgard I and Bollgard II technologies to approximately 50 Indian seed companies. These seed companies have introduced the Bollgard technology into their own germplasm and manufacture over 300 different Bt. cotton hybrid seeds. As a result, MMB is the only supplier of genetically modified (GM) cotton seeds in India and more than 90% of the cotton grown employs Monsanto’s technology.

Cotton Farmers in India

Unfortunately, the rise of cotton production in India has not translated to prosperity for the country’s cotton farmers. Instead, high numbers of Indian farmers have committed suicide since 1995, with heavy indebtedness accrued from their cotton business believed to have played a role. The factors contributing to this heavy indebtedness are discussed in more detail below.

Cost of seeds

Bt. seeds can cost up to four times more than traditional varieties of seeds. Farmers purchase fresh seeds annually because the resulting hybrid cultivars contain “terminator” technology, thereby preventing farmers from replanting the seeds the following year.

Need for irrigation/wate

Bt. seeds require irrigation. Sixty-five percent of India’s cotton crop comes from farmers who rely on rain and who do not have access to irrigation. Therefore, unfavorable weather conditions acutely hurt their crops and pockets.

Need for insecticides

The bollworm was not a major pest in Indian cotton in the 1970’s but higher yielding plants produced from GM seeds have drawn more pests.  In 2010, Monsanto admitted that insects developed resistance to its Bt. I cotton seeds and that the Bt. I hybrid crops were no longer effective against the bollworms. In view of this, Monsanto has advocated that Indian farmers switch to Bt. II cotton seed technology because these varieties have a greater ability to delay insect resistance.

Critics have pointed out that insects will eventually develop resistance to the insecticide produced by  Bt. II cotton seeds. They have also noted that the toxin produced by the Bt. II cotton seed is active only for 90 days and that the bollworm is a late season pest (cotton season can last as long as 160 days). Therefore, bollworms have become problematic for cotton farmers. With the rise of industrial agriculture in India and the use of new hybrid and GM seeds, farmers have become increasingly reliant on insecticides. Unfortunately, the bollworms have evolved to become resistant to these insecticides and their natural predator populations have also declined. As a result, farmers must purchase large quantities of insecticides to harvest cotton.

Low pay for cotton farmers

Cotton farming is a low paying profession.  Not surprisingly, a dip in the global price of cotton can spell disaster for farmers. As a result, many farmers have turned to loan sharks to pay for fertilizers, insecticides, and hybrid and GM seeds. Cycles such as this have driven farmers deeper into debt and tragically to suicide.

Many of the materials needed for farming and agriculture in India are heavily subsidized or offered without cost to the farmers by the Indian government. Therefore, the purchase of insecticides and high priced GM seeds as well as the reliance on irrigation and sporadic rains ultimately drain farmers’ finances. Figure 2 below shows that over time, increased adoption of Bt. cotton correlates with an increase in number of suicides by farmers.

Figure 2: Farmer suicides in India, 1997-2006

chart 2.png

India’s Cotton Seed Regulations

The farmer suicide epidemic has resulted in the Indian government regulating prices for Bt. cotton seeds. The aim is to help decrease the financial burden of India’s cotton farmers and break MMB’s monopoly on the GM seed market.

On December 7, 2015, the Ministry of Agriculture and Farmers Welfare (“Ministry”) issued a price control order, entitled the “Cotton Seed Price (Control) Order, 2015”, to bring uniformity in GM Bt. cotton seed prices across the states in India where previously none existed. This Order was created under the section 3 of the Essential Commodities Act, 1955.

On March 8, 2016, the Ministry issued a Notification, under the Cotton Seed Price (Control) Order, 2015 which capped  GM cotton seed prices at Rs. 800 (11.90 USD) for a packet of 450 g of seeds for the financial year 2016-2017. It also reduced the royalty fees (referred to as “trait value” in the Notification) to Rs. 49 (0.73 USD) per 450 g of seeds.

Serial No.

Components Bollgard I version of Bt. cotton hybrid

Bollgard II version of Bt. cotton hybrid

1

Seed value (in rupees) 635 751

2

Trait value including taxes (in rupees)

0

49

3 Max. Sale price (in rupees) 635

800

Before the Notification, Bt. cotton seeds were sold at prices ranging from Rs. 830-1000 (12.30-14.80 USD). The royalty fee received by companies such as MMB was cut by 74% (excluding taxes) from the previous royalty fee of Rs. 163 to Rs. 43. The Ministry said that this Notification was prompted because Bt. Cotton’s ability to resist bollworm pest attacks had weakened.

On May 18, 2016, another Notification, entitled Licensing and Formats for GM Technology Agreement Guidelines, was issued under the Cotton Seed Price (Control) Order, 2015. This Notification provided tighter restrictions on GM technology providers, such as MMB. The main restrictions are:

  • GM technology providers cannot deny a license to any qualifying domestic seed company wanting to incorporate the approved GM technology into its own hybrids and varieties.
  • GM technology providers must award license for the GM technology within 30 days of receipt of a request from an eligible seed company. In the event this obligation is not met, the licensee (domestic seed company) is deemed to have obtained the license.
  • GM technology providers cannot charge royalty fees exceeding 10% of the maximum sale price, which is fixed at Rs. 800, for the first five years from the date of commercialization of the technology. After first five year period, the royalty fees are reduced by 10% of initial value every year.
  • If GM technology loses its efficacy, the GM technology provider is not eligible for any royalty fees.

Critiques of the Regulations

The Indian biotechnology industry opposed the regulations on GM technology providers. The Association of Biotechnology Led Enterprises-Agriculture Focus Group, a pro-GM advocacy group (which represents crop research companies such as Monsanto, Mahyco, Syngenta, DuPont, Pioneer, Bayer BioScience, BASF, Advanta) stated the decision would discourage companies from investing in research. Critics from the agriculture industry have called the new regulations arbitrary and innovation stifling. Opponents have criticized the regulations saying that they do not offer methodology on how the Indian government arrived at the final royalty fees, GM technology providers have little to no say on whom to give licenses, and that the aim of these regulations is to benefit one stakeholder: the domestic seed companies.

Monsanto representatives voiced that it would be difficult to justify bringing new technologies into India given the new regulations. The company also threatened to shut down its business in India.

Rescindment of the May 18, 2016 Notification

On May 24, 2016, the Central Government rescinded the notification of May 18, 2016 based on the advice of the Controller and after consulting with the Committee under the Chairmanship of Joint Secretary (Seed) and Controller, Department of Agriculture, Cooperation and Farmers Welfare which was involved in developing regulations.

After the rescindment, the Indian government laid out the May 18, 2016 Notification for 90 days  for comments and suggestions by the public before taking a final call. The decision to seek input by the public  was taken at the highest level of the Indian government because had the May 18, 2016 Notification been final, the move may have hurt foreign investment in agriculture research and discouraged the introduction of new technology in India.

This post was written by Lisa L. Mueller and Himani Nadgauda of Michael Best.

An Overview of the USTR’s 2016 Special 301 Report on the State of IPR in China

In this week’s post, the BRIC Wall Blog continues to examine the Office of the United States Trade Representative (USTR) 2016 Special 301 report (Report) reviewing the state of intellectual property rights (IPR) protection and enforcement in U.S. trading partners around the world. The Report details the results of extensive research and analysis, which led to placing eleven countries on the priority watch list and twenty-three on the watch list. China remains on the Priority Watch List, as the environment for protection and enforcement of IPR in China continues to be complex and contradictory. Surveys continue to indicate that many businesses chose not to offer their technology, goods, services, or investments in China. The choice was based on the obstacles that restrict foreign firms’ ability to fully participate in standards setting, the unnecessary introduction of inapposite competition concepts into intellectual property laws, and acute challenges in protecting and incentivizing the creation of pharmaceutical inventions and test data.

In the past year, China’s leadership developed draft reform measures on a range of subjects including copyrights, patents, trade secrets, drug review and approvals, Anti-Monopoly Law enforcement as it relates to intellectual property, and regulations on inventor remuneration. The State Council established the Office of the National Leading Group on the Fight Against IPR Infringement and Counterfeiting, currently chaired by Vice Premier Wang Yang. The group extended its online enforcement campaign in 2015 and has played a positive role in China’s IPR. Further, courts have been established in Beijing, Shanghai, and Guangzhou to study the merits of specialized intellectual property courts over a three year period.

Despite the reform measures, it is difficult to prevent the misappropriation of trade secrets due to deficiencies in China’s primary trade secrets law (found in the Anti Unfair Competition Law, or AUCL) that limit the law’s application; unresolved weaknesses in China’s civil enforcement system including limited injunctive relief and low damage awards; and difficulties in pursuing criminal enforcement, including the need to prove actual damages caused by the theft of trade secrets. In the Report, the U.S. urges China to consider drafting a stand-alone trade secrets law, which would provide an opportunity to address a broader range of concerns than possible as part of a reform to the AUCL.

The Report further indicates that the disclosure of critical intellectual property for foreign information and communication technology (ICT) products and services continues to be required as a condition of access to the Chinese market. The justification for this disclosure is purportedly for security measures. These measures were suspended in 2015, in response to strenuous objections from the U.S., other foreign governments, and the private sector. Furthermore, China’s draft counterterrorism law included provisions that appeared to require telecommunications business operators and Internet service providers to disclose critical proprietary intellectual property to regulators. Objection by the U.S. and others led China to remove some of the troubling aspects in the final version of the law. Similar concerns have arisen in China’s National Security Law and draft insurance sector regulations. The Report states that it is critical that China adhere to its commitments and not simply invoke security concerns in order to require the disclosure of critical intellectual property.

The Report also highlights the concern that certain government measures, policies, and practices that are purportedly intended to hasten China’s development into an innovative economy, instead put foreign right holders at a disadvantage. These measures appear to include the requirement that certain IPRs be developed in China or be owned or licensed to a Chinese party. Through engagement with the U.S., China has committed that:

  1. Technology transfer and technological cooperation shall be decided by businesses independently and will not be used by the Chinese government as a precondition for market access;
  2. It must treat intellectual property rights owned or developed in other countries the same as domestically owned or developed intellectual property rights; and
  3. Enterprises are free to base technology transfer decisions on business and market considerations, and are free to independently negotiate and decide whether and under what circumstances to assign or license intellectual property rights to affiliated or unaffiliated enterprises.

The Report states that the U.S. will continue to push back against existing measures that distort technology transfer.

Additionally, the Report states that online piracy and counterfeiting in China’s massive e-commerce continues to be a wide-spread problem, which results in great losses for U.S. right holders involved in the distribution of a wide array of trademarked products, as well as legitimate music, motion pictures, books and journals, video games, and software. The piracy extends to unauthorized access or copies of, scientific, technical, and medical publications as well. China has the largest internet user base in the world, with the annual sales of goods on the Internet projected at nearly half a trillion U.S. dollars. China’s State Administration for Industry and Commerce (SAIC) reported that more than 40 percent of goods that SAIC purchased online during a 2014 survey were “not genuine”. Furthermore, the USTR’s 2015 Notorious Markets List reported that China is the manufacturing hub of counterfeit products sold illicitly around the world. The effects of these counterfeit goods go beyond lost sales volume and harm to the reputations of U.S. trademark owners, as counterfeit goods potentially threaten the health and safety of consumers around the world. A positive development in 2015 was the reported removal of over 2.2 million unlicensed works at the request of the National Copyright Administration of China. In the Report, the U.S. urges China to accelerate the development of its E-Commerce Law and to ensure that it addresses online piracy and counterfeiting, while providing appropriate safeguards to Internet service providers.

Regarding patent related measures and policies, according to the Report, IPR and technological standards in China heighten U.S. concerns regarding a range of Chinese government policies and practices. Membership or participation rights to foreign parties have been denied by China, which prevent foreign parties from participating in the standards setting process. In addition, there is also the concern that patent holders may be forced to contribute proprietary technologies to standards (and to license them to implementers) against their will. The U.S. secured commitments in the 2015 U.S.-China Joint Commission on Commerce and Trade in which China stated that:

  1. It welcomed the participation of U.S.-invested firms in the development of national recommendatory and social organization standards in China on a non-discriminatory basis; and
  2. Licensing commitments for patents in voluntary standards should be made voluntarily and without government involvement in negotiations over such commitments, except as otherwise provided by legally binding measures.

The Report also disclosed the state of Anti-Monopoly Law (AML) enforcement. Specifically, it stated that Chinese competition authorities may target for investigation those foreign firms that hold IPRs that may be essential to the implementation of certain technological standards. In this regard, the U.S. has secured a number of commitments from China, including that:

  1. The objective of a competition policy is to promote consumer welfare and economic efficiency rather than promote individual competitors or industries;
  2. Enforcement of competition laws should be fair, objective, transparent, and non-discriminatory; and
  3. China’s AML enforcement agencies are to be free from intervention from other agencies in enforcement proceedings.

The Report further states that China also committed to attaching great importance to maintaining coherence in the rules related to IPR in the context of the AML, based on the pro-competitive effects of intellectual property licensing.

With regards to pharmaceutical patents, the Report states that China was once generally consistent in its review of patent applications with the U.S. and leading patent offices in other countries. However, an applicant’s ability to provide supplemental data in support of an application was severely restricted after revisions were made to the interpretations of the guidelines of the Chinese Patent Office. The revisions have resulted in the denial of patents and invalidation of patents that the U.S. and other jurisdictions have granted patent protection to in similar cases. According to the Report, China subsequently agreed to work with the U.S. to follow up on implementation of a revision of its policy on data supplementation in late 2013; however, industry generally reports only partial progress as a result of the change. Furthermore, the U.S. has concerns about the extent to which China provides effective protection against unfair commercial use of, unauthorized disclosure of, and reliance on, undisclosed data generated to obtain marketing approval for pharmaceutical products.

According to the Report, some of China’s proposals for reform appear to contain provisions that would provide regulatory incentives for companies to shift manufacturing to China or participate in selected national projects and programs. Proposals such as these may have lasting negative effects on promoting global innovation and would appear more consistent with forced technology transfer industrial policies.

Although there have been promising developments to IPR protection and enforcement in China, including repeated affirmation of the importance of intellectual property by China’s leadership, an ongoing intellectual property legal and regulatory reform effort, and encouraging developments in individual cases in China’s courts, the Report indicates that substantial issues remain.

In the next post, the BRIC Wall Blog will examine in detail the Report’s findings on the state of IPR in Algeria and Kuwait.

This post was written by Lisa Mueller and Kate Merath of Michael Best.

The much awaited Indian National IPR Policy has arrived!

On May 13, 2016, the much awaited National Intellectual Property Rights (IPR) Policy was released by the Indian Government. The goal is to create awareness about the importance of IPRs as a marketable financial assets and economic tools.  The twenty-eight page policy lays down seven objectives and the necessary steps to be undertaken by the relevant Ministries/departments.  A copy of the policy is attached here:  National_IPR_Policy_12.05.2016.  A brief summary of the objects of the policy are provided below.  A more in-depth analysis of each of these objectives will be provided in subsequent BRIC Wall blog posts.

What are the main objectives of the new National IPR Policy?

  1. To create public awareness on the economic, social and cultural benefits of IPRs among all sections of society

A nationwide promotion program is proposed for the purpose of improving the awareness about the benefits of IPRs and their value to rights holders and the public, including the less visible IP generators and holders.  The goal is the creation of an atmosphere where creativity and innovation are encouraged in private and public sectors, research and development (R&D) centers, industry and academia thus leading to the generation of protectable IP that would ultimately be commercialized.  “Creative India; Innovative India” is the proposed slogan for this program.

  1. To stimulate the generation of IPRs

There is a need in India to tap the talent pool contained in R&D institutions, enterprises, universities and technical institutes to stimulate the creation of IP assets. The policy proposes a comprehensive IP audit or base line survey across these sectors to allow for the formulation and implementation of targeted programs.  Focus will be placed on facilitating researchers and innovators in areas of national priority, and initiating the steps necessary to ensure that the benefits of the IPR regime reach all inventors, especially micro, small and medium enterprises (MSMEs), start-ups and grass root innovators.

  1. To have strong and effective IPR laws, which balance the interests of rights owners with larger public interest

While India has an effective and TRIPs compliant IPR regime, it is important for it to protect its rich traditional medicinal knowledge from misappropriation.  One suggestion proposed by the policy is to undertake a review of India’s existing intellectual property laws, in consultation with the relevant stakeholders, and update and revise these laws to remove any anomalies and/or inconsistencies, if needed.  This suggestion is important as it shows the willingness of the Indian Government to take a fresh look at India’s existing laws and improve upon them for the better.

  1. To modernize and strengthen service-oriented IPR administration

The administration of the Copyright Act, 1957 and the Semiconductor Integrated Circuits Layout-Design Act, 2000 will now be brought under the aegis of the ‘Department of Intellectual Policy and Promotion’ (DIPP).  Additionally, a cell (namely, a dedicated team/department) for IPR Promotion and Management (CIPAM) is proposed to be created.  According to the policy, it is believed that this will facilitate more effective and synergetic working between various IP offices, as well as the promotion, creation and commercialization of IP assets. The policy also envisages promoting awareness about patents to IPR officials at all levels regarding the objects and reasons behind India’s IPR laws and international obligations.

  1. Obtaining value for IPRs through commercialization

The policy envisages a concerted effort for capitalizing India’s existing IP assets by creating a public platform to connect creators and innovators to potential users, buyers and funding institutions.

  1. To strengthen the enforcement and adjudicatory mechanisms for combating IPR infringements

The policy envisages various measures to strengthen the enforcement of IPRs such as sensitizing inventors and creators of IP on the available measures for protecting and enforcing their rights, a need to build the capacity of enforcement agencies at various levels, the strengthening of IPR cells in State police forces, devising measures to check counterfeiting and piracy, conducting regular IPR workshops, etc.  The policy also emphasizes the need to adjudicate IPR disputes through specialized commercial courts and to explore alternate dispute resolution mechanisms.

  1. To strengthen and expand human resources, institutions and capacities for teaching, training, research and building skills in IPRs

The policy notes that in order to harness the full potential of IPRs for India’s economic growth, it is essential to develop and increase the pool of IPR professionals and experts in all spheres such as policy and law, strategy development, administration and enforcement.  It is believed that developing such a reservoir of experts will facilitate the generation of IP assets in India and their utilization towards commercial development.

This post was written by Lisa Mueller with ‘IP Alerts’ shared by Arun Kumar of K & S Partners.

 

An Overview of the USTR’s 2016 Special 301 Report on the State of IPR in India

In this week’s post, the BRIC Wall Blog continues to examine the Office of the United States Trade Representative (USTR) 2016 Special 301 Report (Report) released on April 12, 2016. The Report reviewed the state of intellectual property rights (IPR) protection and enforcement in U.S. trading partners around the world, and following extensive research and analysis, placed eleven (11) countries on the priority watch list and twenty-three (23) on the watch list. India is one of the 11 countries on the Priority Watch List in 2016. Although India has made efforts to improve its IPR, and the Indian courts retain their reputation for providing fair and deliberate treatment of both foreign and domestic litigants, long-standing and systemic deficiencies remain, in particular, in the pharmaceutical industry. Just yesterday, the Union Cabinet approved the National Intellectual Property Rights Policy, and a body of government-selected experts (the IPR Think Tank) is working closely with the United States to identify target issues for Indian policymakers. In particular, the Report expresses concerns regarding copyright infringement, patent system policies, trade secrets protection, and trademarks and counterfeiting.

With regards to copyright infringement, India has one of the highest rates of video piracy in the world, and according to a 2013 study, the number of incidents in India accounted for approximately half of all such piracy cases in the Asia-Pacific region that year. Despite the massive $4 billion dollar cost of pirated music and movies per year, India’s media and entertainment industry continue to grow and flourish; it is therefore even more imperative that India incorporate into its legal system more effective measures to counter piracy. To combat copyright infringement, the Report states that the United States has urged India to enact anti-camcording legislation, remodel its statutory license provisions, fully establish India’s Copyright Boards, and take steps to prevent public broadcasters from disseminating pirated content. The United States and India also announced important developments with respect to copyright through the 2015 Trade Policy Forum (TPF) Joint Statement, in which both countries agreed to strengthen copyright protection. The United States additionally held a workshop for a delegation of Indian government officials involved in copyright protection and enforcement, to discuss measures to curb piracy and promote content creation.

The patent system infrastructure in India also poses serious concerns for IPR protection. There is a significant backlog in the prosecution of pending patents, and Section 3(d) of the India Patents Act may limit the patentability of potentially beneficial innovations. The interpretation and application of Section 3(d) is unpredictable, and inventions that have successfully navigated prosecution in other countries can be denied patentability in India. This has been especially noticeable for inventions in software, biopharmaceuticals, agricultural chemicals, and green technologies. In 2015, India’s Ministry of Commerce and Industry issued The Patents (Amendment), Rules, 2015 (Patent Rule Amendments) in an effort to reduce delays in prosecution, however, the proposal incentivized the manufacture of products in India, going against international patent norms. The Indian government also needs to improve the conditions for which a compulsory license would be permitted, as only one compulsory license has been issued under Section 84 of India’s Patent Acts. The Report additionally urged India to provide an effective system for protection against unfair commercial use, without which companies are able to copy certain pharmaceutical products and seek immediate government approval for marketing based on the original developer’s data.

The Report also highlighted that India has not established reliable protection for trade secrets, and it is reportedly difficult to obtain compensation when these laws are violated. Additionally, India’s court system lacks sufficient procedural safeguards to protect trade secrets divulged through discovery, and there is a risk that such information may be publicly disclosed through the course of judicial proceedings. India is making efforts to improve laws that protect trade secret.

With regards to trademarks and counterfeiting, the Report noted that the level of production sale, distribution, importation, and exportation of counterfeit goods affecting India’s market remains concerning. Trademark holders face the risk of diminished profits and loss of reputation when consumers purchase fake products, and governments lose tax revenue since infringers generally pay no taxes or duties. The United States continues to express concerns about counterfeit and pirated goods produced in India and shipped to the United States.

Although India is taking steps to improve IPR protection and enforcement, the United States remains concerned about policies that appear to favor local manufacturing or Indian innovators in such a manner that damages the patent infrastructure not only in India but also around the world. Copyright and trademark infringement continue to pose a serious problem, and the unpredictable interpretation of the law provides modest legal coverage for inventors. It is encouraging that India is working to resolve these issues, however there are a number of important changes that need to be made and additional resources that need to be dedicated to strengthen IPR protection in India.

In the next post, the BRIC Wall Blog will examine in detail the Report’s findings on the state of IPR in China.

This post was written by Lisa Mueller and Caitlin MacNair.

Foreign Filing Restrictions and Licenses in India – Part 3

Foreign Filing Restrictions and Licenses in India – Part 3

This is part 3 in our series examining foreign filing restrictions and licenses in the U.S. and in a number of countries throughout the world. To view part 1, foreign filing restrictions and licenses in the U.S., click here. To view part 2, foreign filing restrictions and licenses in the China, click here.

Foreign filing licenses in India

There are a myriad of reasons an Applicant (such as an entity or individual filing a patent application) may wish to obtain a foreign filing license to first file a patent application abroad rather than directly in India. These include:
• A desire to cater to foreign markets outside of India;
• The subject matter of patent application has no or low market potential in India;
• The subject matter of patent application is considered to be non-patentable subject matter in India; and/or
• There are research and development teams across countries are working together

Obtaining a foreign filing license in India provides an Applicant with the requisite permission to file a patent application outside of India. The specifics involved in this process are described below.

The Indian Patent Office rules are unique in that the requirement for obtaining a foreign filing license is not necessarily based on the place of invention, but the resident status of the inventor. What constitutes “resident” status in India is also discussed in more detail herein.

If a person is considered to be resident in India, then a foreign filing license is needed in the cases of filing a patent application directly in a foreign country less than 6 weeks from filing the application in India or without a direct filing in India. Examples of specific cases requiring a foreign filing license include:
• Filing patent application directly in a foreign country, without first filing in India
• Filing international patent application under the Patent Cooperation Treaty (PCT) in a country other than India, without first filing in India
• Filing patent application directly in a foreign country, less than 6 weeks from filing in India
• Filing patent application under the PCT in a foreign country other than India, less than 6 weeks from filing in India

What are the Indian Foreign Filing Restrictions?

Similar to other countries, the procedure for obtaining a foreign filing license in India is designed with the intention of allowing the Indian government to monitor inventions, especially the inventions that relate to defense/atomic energy and those that are relevant to national interests.

The Indian Patent Office is administered by the Office of the Controller General of Patents, Designs and Trade Marks (CGPDTM) and it administers the Indian patent law. The Indian Patent Act (IPA) of 1970 consolidates the law relating to patents in India. The foreign filing license requirement is detailed in Section 39 of the IPA, as reproduced below.

39. Residents not to apply for patents outside India without prior permission.—
1) No person resident in India shall, except under the authority of a written permit sought in the manner prescribed and granted by or on behalf of the Controller , make or cause to be made any application outside India for the grant of a patent for an invention unless—
a) an application for a patent for the same invention has been made in India, not less than six weeks before the application outside India; and
b) either no direction has been given under sub-section (1) of section 35 in relation to the application in India, or all such directions have been revoked.
2) The Controller shall dispose of every such application within such period as may be prescribed:
Provided that if the invention is relevant for defense purpose or atomic energy, the Controller shall not grant permit without the prior consent of the Central Government.
3) This section shall not apply in relation to an invention for which an application for protection has first been filed in a country outside India by a person resident outside India.

35. Secrecy directions relating to inventions relevant for defense purposes.—
1) Where, in respect of an application made before or after the commencement of this Act for a patent, it appears to the Controller that the invention is one of a class notified to him by the Central Government as relevant for defense purposes, or, where otherwise the invention appears to him to be so relevant, he may give directions for prohibiting or restricting the publication of information with respect to the invention or the communication of such information.
2) Where the Controller gives any such directions as are referred to in subsection (1), he shall give notice of the application and of the directions to the Central Government, and the Central Government shall, upon receipt of such notice, consider whether the publication of the invention would be prejudicial to the defense of India, and if upon such consideration, it appears to it that the publication of the invention would not so prejudice, give notice to the Controller to that effect, who shall thereupon revoke the directions and notify the applicant accordingly.
3) Without prejudice to the provisions contained in sub-section (1), where the Central Government is of opinion that an invention in respect of which the Controller has not given any directions under sub-section (1), is relevant for defense purposes, it may at any time before grant of patent notify the Controller to that effect, and thereupon the provisions of that sub-section shall apply as if the invention where one of the class notified by the Central Government, and accordingly the Controller shall give notice to the Central Government of the directions issued by him.

Therefore, a foreign filing license is required if an Indian resident (either an Applicant, an inventor, or one inventor out of several inventors) wishes to file a patent application directly in a foreign country without first filing an application in India or if an international filing is filed within 6 weeks from the date of filing in India. However, if a patent application is filed in India, a foreign filing license is not needed if 6 weeks have passed since the Indian filing date.

In order to obtain a foreign filing license, permission is needed from the Controller (Controller General of Patents, Designs, and Trade Marks).

In order to request a foreign filing license from the Indian Patent Office, an Applicant must provide the following:
• “Form 25” titled “Request for Permission for making Patent Application outside India”
• The requisite fee
• A brief description of the invention covering the underlying inventive concept known to the Applicant at the time of making a request for the foreign filing license; The title of the invention and any related drawings should also be included
• The name(s), address(es), and nationalit(y/ies) of the inventor(s)/applicant(s) who are considered to be resident of India
• Names of co-inventors who are not resident of India
• The Power of Attorney from the inventor(s)/applicant(s) who are resident of India (mentioning their Indian addresses)
• Name, address, and nationality of any Assignee
• The country/countries in which the patent application is expected to be filed after obtaining the foreign filing license from the Indian Patent Office
• Reason for making such application (e.g. low market potential in India, non-patentable subject matter in India)

The Indian Patent Office generally acts on requests for foreign filing restrictions within 21 days from the date of filing the request, unless the invention relates to defense and atomic energy according to Rule 71, The Patent Rules, 2003, in which case the Controller shall not grant the foreign filing license without the prior consent of the Central Government.

71. Permission for making patent application outside India under section 39

(2) The time within which the Controller disposes of the request made under subrule (1), except in case of inventions relating to defence and atomic energy applications, shall ordinarily be within a period of twenty-one days from the date of filing of such request.

Who is subject to Indian Foreign Filing Restrictions?

The residential status of the applicant is relevant, while nationality and place of invention creation is not. Note that a foreign citizen can be a resident of India and an Indian citizen can be a resident of a foreign country.

Additionally, if there are joint inventors (and one or more of the inventors are Indian residents), then it is advisable to apply for a foreign filing license before filing the application.

The definition of “resident” of India is not defined in the IPA. Therefore, the meaning of resident can be interpreted from the Indian Tax Act of 1961 and the Foreign Exchange Maintenance Act of 1999, shown below:

According to Section 6 of the Income Tax Act of 1961, the term “resident” is defined as:
(1) An individual is said to be resident in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
(b) [Omitted]
(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.
[Explanation 1].—In the case of an individual,—
(a) being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and eighty-two days” had been substituted ;
(b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and eighty-two days” had been substituted.
[Explanation 2.—For the purposes of this clause, in the case of an individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.]
(2) A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India.
(3) A company is said to be resident in India in any previous year, if—
(i) it is an Indian company ; or
(ii) during that year, the control and management of its affairs is situated wholly in India.
(4) Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.
(5) If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income.
(6) A person is said to be “not ordinarily resident” in India in any previous year if such person is—
(a) an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or
(b) a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less.

According to Section 2(v) of the Foreign Exchange Maintenance Act (FEMA) of 1999, the term “resident” is defined as:
(v) “person resident in India” means-
(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include-
A. a person who has gone out of India or who stays outside India, in either case-
a. for or on taking up employment outside India, or
b. for carrying on outside India a business or vocation outside India, or
c. for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
B. a person who has come to or stays in India, in either case, otherwise than-
a. for or on taking up employment in India, or
b. for carrying on in India a business or vocation in India, or
c. for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in India;

Conversely, there is no indication in the IPA as to whether the Income Tax or FEMA definition of resident applies and there are no judicial precedents on this issue.

According to the Indian Income Tax Act, an individual is “resident” in India if he/she was in India for 182 days or more for the previous fiscal year (April 1-March 31) or was in India for a total of 365 days or more for the past 4 years, for a period or periods amounting in all to sixty days or more in that year. Note that if a person has handled the control and management of his affairs wholly outside of India, that person is not considered to be resident in India, even if he is an Indian national citizen.

If an inventor falls within the purview of any of the above definitions then he/she will need to obtain a foreign filing license before filing any international application.

Penalties

The penalties for failing to comply with Section 39 and obtain a foreign filing license before filing the application in a foreign country are the following:
• Imprisonment for up to 2 years
• Monetary fine
• Both imprisonment and fine
• Abandonment of any pending Indian Patent Application or revocation of an Indian Patent

40. Liability for contravention of section 35 or section 39

Without prejudice to the provisions contained in Chapter XX, if in respect of an application for a patent any person contravenes any direction as to secrecy given by the Controller under section 35, or makes or causes to be made an application for grant of a patent outside India in contravention of section 39 the application for patent under this Act shall be deemed to have been abandoned and the patent granted, if any, shall be liable to be revoked under section 64.

This post was written by Lisa Mueller and Himani Nadgauda of Michael Best and Nidhi Anand of Chadha & Chadha.

Biologics and Biosimilars Bits and Bytes – January 8, 2016

Revised Indian Biosimilar Guidelines Expected Soon

According to reports, the Indian Ministry of Health is planning on releasing revised guidelines on the approval of “similar biologics” sometime in February/March 2016. India’s biosimilar guidelines became effective on September 15, 2012. It is believed that the revised guidelines will address a host of items including increased requirements regarding comparability testing with a reference drug product, as well as various ethical questions.

U.S. FDA Approves a “Similar” but not a “Biosimilar” version of Lantus®

On December 16, 2015, the U.S. Food and Drug Administration (FDA) announced that it had approved Eli Lilly/Boehringer Ingelheim’s (Lilly) Basaglar® product as the first “follow-on” insulin glargine product for use in improving glycemic control in adult and pediatric patients with type 1 diabetes mellitus and in adults with type 2 diabetes mellitus.  Basaglar® is the first insulin product approved through an abbreviated approval pathway under the Federal Food, Drug, and Cosmetic Act. Specifically, Lilly submitted a 505(b)(2) application for Basaglar® that relied, in part, on the FDA’s finding of safety and effectiveness of Sanofi’s Lantus® for its approval. While similar to Lantus®, Basaglr® was not approved as a biosimilar. In contrast, in Europe, on September 9, 2014, the European Medicines Agency approved Lilly’s product as a biosimilar under the brand name Abasaglar (originally approved under the brand name Abasria).

While Basaglar® received tentative approval from the FDA in August 2014, a 30-month hold was placed on its market entry because of a patent infringement dispute with Sanofi which was settled in September 2015.

This post was written by Lisa Mueller.