The following observations apply to the Patents Act (1970) as it is proposed to be modified by the Patents (Second Amendment) legislation pending before the Indian Parliament.

1. Discrimination on the basis of whether patented product imported or manufactured outside India

Importation of a patented product results in discrimination in India as to the procurement or enjoyment of patent rights in a number of ways. These provisions are inconsistent with (and often were the specific inspiration for) Article 27.1 of the TRIPS Agreement.

- Importation of the patented invention that hinders the working of that invention in India is a ground for issuance a compulsory license [Sections 90(e),]

- A patent applicant that is "either the first importer of an invention into India, or a person to whom an invention is first communicated from outside India" is disqualified under Indian law from being able to file a patent application (i.e., such a party is deemed to not be "the first and true inventor"). [Section (1)(y) as applied to Section 6(1)]

- Importation of a product imputes public knowledge of its means of production in India, which can be cited to oppose the grant of a patent. Marketing or distribution of a product that was manufactured locally does not impute public knowledge of its means of production. The provision operates to exclude patents on processes that would otherwise qualify for protection under Indian law, solely on the basis that the product was imported rather than locally manufactured. [Section 25(d)(1)]

- Indian law allows the Government to import a pharmaceutical that is the result of a process patented in India without the patent owner's consent, where importation is for its own use, for supplying a Government hospital, dispensary, or for supply a private hospital or dispensary that the Government "having regard to the public service of that institution… may specify." [Section 47.4]

2. Discrimination on the basis of the field of technology of the invention

- The Indian law defines as per se unpatentable many inventions that satisfy the conditions of patentability found in virtually all countries. The most serious of these exclusions is the exclusion of new uses of previously known compounds, which operates to preclude the grant of patents on new, useful and nonobvious methods of using known compounds (e.g., therapeutic process inventions). Other per se exclusions include "the mere admixture of known substances" and the mere arrangement or re-arrangement of known devices. [Article 3(1)(d), (e) and (f)]. The law adds an exclusion that precludes patents on business methods, which have been the basis of significant recent filings in the United States.

- Section 47.4, noted above, also constitutes discrimination as to the field of technology of the invention, as it applies solely to pharmaceutical process inventions that are patented in India.

- Indian law excludes patent protection for methods of agriculture or horticulture, which may not be excluded under Article 27 of TRIPS.

3. Compulsory licensing authority

A significant portion of the current Indian compulsory licensing regime will remain unchanged after the proposed legislation takes effect. The retention of the principle features of the current regime will result in numerous inconsistencies with Article 31, in addition to those provisions noted above that are likely to be changed as part of the proposed legislation, and beyond the discrimination provisions noted in the preceding two sections.

- Section 84(2) and 93(2) of the law permit the holder of a voluntary license to request and obtain a compulsory license. This conflicts with Article 31(a) of TRIPS, which specifies that a compulsory license may only be granted if there is a failure of the applicant for a voluntary license to obtain one. Thus, if a voluntary license has been granted to a third party, the condition required in Article 31(a) has not been met, and a compulsory license cannot be granted.

- Two provisions of the Indian regime indicate that the discretion given to the Controller in setting the compensation for the compulsory license does not allow the Controller to set the compensation level to reflect the economic value of the authorization of the license.

- Section 95(1)(i) provides that the terms of the license are to be set so as to provide remuneration to the patent owner that is reasonable considering the nature of the invention, the expenditure made by the patent owner in developing the invention and the cost of obtaining the patent and "other relevant factors." Articles (ii) and (iii) add factors that favor the licensee rather than the patentee. None of these factors requires consideration of the economic value of the authorization, which is a variable that is to be based on the intellectual property reflected in the product (i.e., the additional value that can be ascribed to non-production or non-patent procurement costs). The evaluation for compensation must be based on the value of allowing the third party to manufacture and sell the patented invention.

- Section 93(5) specifies that the holder of a compulsory license may petition to change the terms of the license if the license terms are "more onerous than originally expected" and he can only work the invention at a loss. Under Article 31(h), the patent owner is to be paid a license fee that will provide adequate remuneration that reflects the economic value of the authorization (i.e., the economic value of the license). This means that if the economic value of the right to use the patented invention is higher than the "commercially preferable" license rate requested by the applicant, that higher rate must be imposed. There is no authority in Article 31 to take into account the profitability or commercial interests of the third party in setting the rate of a license. The provision should be deleted.

4. Government use provisions

Indian law specifies that the Central Government can take a number of actions to deprive the patent owner of rights under a patent without recognizing or adhering to the safeguards of Article 31 of the Agreement.

- Sections 47(1) and (2) authorize the Central Government to import a patented invention, to make or authorize the making of any machine, apparatus, or other article, or the product of patented process," and to use or authorize use of a patented process for the purpose "merely of its own use".

- As noted earlier, Section 47(4) authorizes importation of pharmaceutical products that are the result of a patented process by the Central Government in certain situations. This provision is also inconsistent with the provisions of Article 28.1(b), as the rights of a process patent in India are to extend to provide the patent owner with the exclusive right to import the product that results from directly from the patented process. The provision also is inconsistent with Article 31, in so far as none of the conditions required of compulsory licenses are to be applied to actions taken under this authority.

- The Central Government can revoke a patent if, after ordering the patent owner to "make, use or exercise" the patented invention according to its terms, the patent owner refuses. [Article 64(4)].

- Section 100(2) allows the Central Government to use a patented invention without compensation or other conditions if it has been described in a written document (presumably non-public) provided to the Central Government prior to the priority date of the application giving rise to the patent. The authority exists outside the compulsory licensing regime.

- Section 102 authorizes the Central Government to exercise what amounts to "eminent domain" of a patent. The provision specifies that if the Central Government concludes "it is necessary that an invention which is the subject of an application for a patent or a patent should be acquired from the patentee" then, after publishing a notice, the patent shall be deemed to be transferred to the Government. The authority is inconsistent with most of Article 31, particularly paragraph (e), which forbids exclusive compulsory licenses (e.g., which operate to deprive the patentee to use the patented invention), and paragraphs (c), (d) and (f), which impose other general conditions with a license. The provision is also inconsistent with Article 5A of Paris, incorporated through Article 2 of TRIPS, which forbids forfeiture of a patent other than to remedy a working-related abuse of the patent. Under a more general construction of the TRIPS Agreement, forfeiture or revocation of a patent is forbidden unless it is on the grounds that there is some defect of patentability of the invention (e.g., lack of novelty).

- Sections 100(4) and 101 are provisions that act to "shield" parties from patent infringement liability when they have been authorized by the Central Government to act. These two provisions operate to expand the scope and effect of the various government use provisions noted above to shield third party behavior.

5. Unauthorized grounds for revocation of a patent

A number of provisions of Indian law envision the summary revocation of a patent. These provisions do not reflect any of the restrictions imposed by the TRIPS Agreement, under which revocation is may occur under one of two situations; namely:

- a failure of the invention claimed in the patent to meet the substantive conditions of patentability (e.g., novelty, inventive, step, industrial applicability, disclosure), or

- the structure of the Paris Convention, which involves a sequence of events under a specified time structure which can result in forfeiture on the grounds of a failure to work the patented invention that is not remedied through the grant of compulsory license.

The following revocation authorities in the Indian law are inconsistent with Article 28 of the Agreement (i.e., respect of exclusive rights to be provided), Article 31 (i.e., due to the absence of any conditions relating to compulsory licenses), and Article 5A(3) of the Paris Convention (incorporated through Article 2 of TRIPS).

- Section 64(4) allows the Central Government to revoke a patent if the patent owner fails to comply with a request by the Government to "make, use or exercise the patented invention for the purposes of the Government".

- Section 66 provides for revocation of the patent if the Central Government finds that "a patent or the mode in which it is exercised is mischievous to the States or generally prejudicial to the public." This provision also is inconsistent with Article 4quater, which precludes invalidation of patents on the ground that the sale of patented invention is subject to regulation.

6. Inadequate Definition of Exclusive Rights and Non-Compliance with Transitional Obligations

A number of provisions of the law are inconsistent with the terms of the TRIPS Agreement but do not fall into any clean category.

- There is authority authorizing the court to shift the burden of proof to the defendant in an action involving infringement of a process invention. Under the TRIPS Agreement, to shift the burden of proof the patent owner must show that the product derived from the process is new or that there is a substantial likelihood that the product is made by the patented process. Article 34 of the TRIPS Agreement does not permit Members to require both factors simultaneously, which is the structure of the new proposed section 104A of the Indian legislation. [Section 104A] The 1970 Patents Act does not provide this authority. - Product-by-process protection is provided but in a TRIPS-inconsistent fashion.

- First, proposed Article 48 provides an exclusive right in the product that results from a patented process only for process inventions that result in a product that can be patented in India. The structure of the proviso to Article 48 is such that it excludes product-by-process protection where the underlying product is ineligible to be patented in India (e.g., chemicals, pharmaceuticals), but also because the product itself is unpatentable because it is not novel or does not involve an inventive step. The structure of the proposed Article 48 is inconsistent with TRIPS Article 28. [Section 48(b), with proviso]

- Second, proposed Article 48 is a de facto violation of Article 27.1 of the TRIPS Agreement, because it operates to deny product-by-process protection to a subset of inventions based on the technological field of those inventions.

- Third, the Indian law limits product-by-process protection to patents granted after the commencement of the new Act. This limitation is inconsistent with Article 70.2, which mandates that India extend all the benefits of the TRIPS Agreement to patents that were in force in India on January 1, 2000.

- There is no provision granting the patent owner the authority to obtain provisional relief. In contrast, several grounds exist that permit a third party to sue the patent owner to obtain a finding of "non-infringement" and to recover damages for the inconveniences caused by a patent enforcement action.

- The improvements to the provisions related to the term of protection (Section 25) only apply to patents granted under the new Act. Paragraph 2 of TRIPS Article 70, however, states that all of the TRIPS obligations apply to subject matter existing on the date of application. As a result, India must extend the term of all patents in force on January 1, 2000 to the term specified in Section 25 and provide the rights enumerated in Section 48 to all patents in force on that date.

7. Other problems added by the proposed legislation

- Additional non-patentability-related disclosure requirements. The failure or the failure to correctly disclose the origin of materials will serve as a basis for opposing the grant of a patent or revoking a patent. The problem with this type of requirement is that the information is not needed to support the enablement of the invention (i.e., it is not a requirement of disclosure linked to the traditional conditions of patentability). Article 29.1 of the TRIPS Agreement allows WTO Members to require information needed to allow the invention to be carried out by a person skilled in the art and may optionally require disclosure for best mode. There is no authority under this clause to require information that is not needed to practice the invention, or would not be relevant to the best mode of practicing the invention. [Sections 25(1)(j) and 64(1)(p)]

- International Exhaustion. It is not an infringement to import a product patented in India if the product was obtained by someone duly authorized by the patentee to sell or distribute the product. The product does not have to be subject to patent protection in the country of origin. As such, the patent owner may have not exhausted any patent right with the sale of distribution of the product in the country of origin. As such, this exception to the definition of infringement is not permitted by the TRIPS Agreement. [Section 107A(b)]

- Testing Exception. It is not an infringement to make or use a patented invention during the three years before expiration for the purpose of developing data to be submitted in conjunction with a request for marketing approval. Unlike in the United States, there is no complementary patent term restoration. This exception to the definition of infringement does not fall under the permitted exclusions in TRIPS Article 30 or is it subject to the safeguards of TRIPS Article 31. [Section 107A(1)]

8. Absence of data protection

The Indian law governing registration of pharmaceutical products for marketing in India does not provide for a period for the protection of test data against unfair commercial use. There is likewise no provision in this law that protects trade secret rights in confidential test data or any other information provided to the Controller of Drugs. Under Indian law, there has been some protection afforded to trade secrets under common law theories based on unfair competition. The absence of specific protections, however, is inconsistent with Article 39.2 and 39.3 of the TRIPS Agreement.

9. Absence of effective sui generis plant variety protection

The Indian law does not permit the grant of patents on plant varieties, which triggers an obligation under 27.3(b) to provide effective protection for plant varieties through a sui generis system. There is no regime in India that provides such protection

10. Trademark standards

The Indian government has tried unsuccessfully for the past five years or so to implement changes to its trademark regime. These efforts have revealed an intent to bring the trademark regime up to standards found in developed countries. The courts in India have also fashioned creative remedies in litigation to give effect to certain standards of protection. A trademark bill is to be included in the package of legislation that is being introduced at the end of this year in India.