Working Statements in India: Are You Compliant?

After a patent issues in India, the Patentee and each licensee (whether a nonexclusive or exclusive licensee) is required to file a working statement on an annual basis.  The working statement provides details describing the extent to which the patented invention was worked on a commercial scale in India during the previous calendar year.  The working statement must be provided to the Indian Patent Office (IPO) within three months from the end of the year, namely, by March 31st,using Form 27 (as required by pursuant to Section 146 (2) of The Patents Act, 1970).  Form 27 can be filed at IPO electronically by the Patentee, licensee or via an agent on behalf of the Patentee and/or licensee.

The legislative text in India is very clear that the granting of patents is not merely to “enable Patentees to enjoy a monopoly for the importation of the patented article”, but also to “secure that inventions are worked in India on a commercial scale and to the fullest extent reasonable”.  However, in the context of Article 27(1) of the TRIPS Agreement, it has been debated whether or not “importation” of a patented product or a product produced through a patented process constitutes working of the patent in India.  Some recent judicial decisions have upheld importation as constituting working of patent, particularly in situations where it is economically more practical to produce a patented product outside of India.

The purpose of a working statement is to inform the public whether a patented invention is or is not being worked in India.  In the event a patent has not been worked for three years from the date of grant, or, if the reasonable requirements of the public with respect to the patented invention have not been met, an interested third party can use this information to approach the Patentee for a (voluntary) license to the patent.  If, in response to such a request, the Patentee refuses to license the patent,  requests unreasonable terms to grant the license, or completely ignores the request (after the passage of  a reasonable amount of time), the third party can approach the IPO to request a compulsory license.  Once a compulsory license is issued, the government or any interested person can, two years after the expiration of the date of the order granting the first compulsory license, apply for revocation of the patent if the patented invention has not been worked in India (within those two years).  Therefore, under these circumstances, the burden falls on the licensee (of the compulsory license) to provide evidence of working in India to avoid revocation of the patent.

While a patent will not be held abandoned for failing to file a working statement, there are consequences for failing to make the submission.  Specifically, failure to file a working statement may result in a penalty of up to $25,000 U.S. dollars.  Additionally, knowingly furnishing false information in a working statement or knowingly or having reasons to believe that the information submitted is false or not true may result in criminal prosecution and imprisonment of up to six months.  Moreover, failure to submit a working statement may provide a valid ground for the granting of a compulsory license by the IPO.

If a patent is not being worked in India, the Patentee (and licensee) can provide one of the following explanations as to why the patent was not worked:

  • Lack of market potential for the invention; Market is being developed;
  • The invention may be worked in the future depending on market demand and/or when the technology is mature;
  • Patentee is actively working to develop a market for the patented product/process in India. The technology is available for licensing; or
  • Patentee is looking for working opportunities in a large scale.

If a patent is worked in India, the Patentee and licensee(s) are requested to provide: (1) the amount and value (in Rupees) of the patented invention; (2) whether the patented invention was or was not manufactured in India; and (3) whether the patented invention was imported from other countries (and if so, provide the country(ies) the patent invention is imported from).

Additionally, regardless of whether or not the invention is worked or not worked in India, the Patentee and licensee(s) must also indicate whether:  (1) any licenses and/or sublicenses were granted during the year; and (2) the public requirement has been met partly/adequately to the fullest extent possible at a reasonable price.

On January 10, 2018,  counsel for the Controller General of the IPO, appearing before  a Division Bench of the Delhi High Court, agreed to file a status report on the extent of non-compliance with working statements as well as the actions taken by IPO to amend the Patent Rules concerning working statements.  These submissions were made by the counsel for the IPO in response to a writ petition filed on January 19, 2015, by Shamnad Basheer, an Intellectual Property Professor and activist (Shamnad Basheer v. Union of India & Others (UOI)).  In his writ petition, Mr. Basheer highlighted the non-compliance of many Patentees and licensees in connection with working statements.  This writ petition appears to be the first attempt by any third party to enforce the working requirement using the judicial system.  Not surprisingly, on October 28, 2015, several months after Mr. Basheer filed his writ petition, an application to intervene in the litigation was filed by Mr. Narendra Reddy Thappeta.

In his writ petition, Mr. Basheer noted several examples of non-compliance with Section 146 (2) including:

  • Grant of compulsory license to Natco Pharma (Natco) in connection with Indian Patent No. 215758 covering an anti-cancer drug: In the compulsory license granted on March 9, 2012, Natco was required to provide an accounting of sales to the Controller on a quarterly basis (by the 15th of the succeeding month).  Mr. Basheer sought information from IPO about whether such reports had been filed and received information that “no details” were available.  Mr. Basheer informed IPO of the lapse several times by Natco but no action was taken.
  • Form-27 submitted by Ericsson: Ericsson refused to disclose licensing details in the form citing that the information was “confidential” or a trade secret.  Mr. Basheer pointed out that the Controller took no action with respect to this violation of  Section 146(2).

With respect to Ericsson, the Court noted that all Patentees and licensees are required to submit the details of licenses and sublicenses and that this information could not be termed “confidential” and that IPO had to treat non-inclusion of this information as a failure to comply with the requirements of Section 146 of the Patents Act, 1970. The Court adjourned the matter until January 18th and asked the Government to indicate whether amendments to Form 27 had been effected pursuant to the Patent (Amendment) Rules, 2015.  Not surprisingly, the Court’s order set off a debate on working statements in the country, particularly with respect to the type and extent of information to be submitted.

During the hearing on January 18, 2018, counsel for Natco presented evidence that it had submitted sales figures with the IPO on a quarterly basis and that its submission was available on the IPO’s website.  Unfortunately, the evidence submitted by Natco raised concerns about the quality of the data management performed across the multiple offices of the IPO.  Also during the hearing, the UOI raised concerns about the “confidentiality” of the information submitted as part of the working statement.  Specifically the UOI argued that the information relating to the amount and value of the patented invention worked in the country was sensitive information that could be misused to the disadvantage of the Patentee and/or licensee(s).  Additionally, the UOI argued that Form 27 simply requires mentioning the number of licenses and sublicenses granted during the previous year, not the name of each licensee and amount of each license.  Finally, arguments were made regarding the format of Form 27, specifically, that it was not suitable for all types of inventions.  It was argued that the form works well for Patentees of pharmaceutical inventions, but does not work well for Patentees in others sectors, such as in information and technology.  Specifically, Patentees in these areas find it difficult to provide information for at least the following reasons:

  • Patented inventions such as iPads or computers are often covered by hundreds of patents (for their various components and subcomponents);
  • Patentees of subcomponents may not always have control or knowledge regarding larger, composite products that incorporate their subcomponents to be able to accurately identify which of their patents require a working statement;
  • The global nature of the market makes it difficult to determine the amount and value of the patent invention;
  • There is a lack of an established market value for software such as auto-lock (which is not subject to FRAND); and
  • There is no uniform or standard method for determining public demand. For example, for subcomponents incorporated into larger, composite products, it is not possible to identify the public demand for the patented subcomponent separately.

The Court set another hearing for January 25, 2018.

In view of the writ petition and the Court’s direction to the Controller of IPO to file a status report on the extent of non-compliance and the action taken with respect to that noncompliance, Patentees and licensees should expect increased scrutiny and enforcement of Form 27 and its requirements.  The IPO is likely to amend the format of Form 27 to make it more practical to provide working information by technology companies.  Patentees and licensees should carefully review Form 27 and their responses to make sure they are fully compliant before filing in the IPO.  In cases where the correct working information was not provided due to difficulties in collecting and collating such information, it is recommended that the correct information be collected now and an amended Form 27 be filed with the IPO for any previous year in question.  In cases where the statement was filed as “worked” without providing  any additional information as to the specifics of the working, it is strongly recommended that the Patentee and/or licensee(s)  provide the additional information (via an amended Form 27) as quickly as possibly as the IPO may treat the previously submitted information as “false or incorrect” information.

The hearing in the writ petition is now scheduled for January 25, 2018, and we expect the Court will issue a decision clearly laying down the guidelines with regard to filing of the working statements to end the legal controversy associated these submissions.

Please continue to watch the BRIC Wall Blog for updates on the working statement issue in India.

This post was written by Lisa Mueller and Manisha Singh of LexOrbis.