India promised to protect intellectual property when it signed up to the World Trade Organization's rules in 2005. Yet recent court decisions suggest the country still has a long way to go before property rights are truly protected.
Last week, Swiss drug company Novartis announced it would appeal a recent decision of the Indian Intellectual Property Appellate Board to deny it a patent on its anti-leukemia drug Glivec. The Board claims Glivec is not patentable under section 3(d) of the Indian Patents Act, which states drugs have to advance "efficacy" of treatment to qualify for a patent.
This finding is worrying for several reasons. First, the Board--which is populated by two judges and an official from the Kolkata Patent Office--found Glivec to be both novel and inventive and an improvement over older formulations of the drug. But it argued that Novartis has not demonstrate "significantly enhanced efficacy." The Board failed to set a clear rule for how it will determine this "efficacy" standard going forward, making it difficult for companies to know if it's worth the effort to go through the patent process.
Second, the Board argued Novartis should have included all materials in the original patent application and disallowed any new information on efficacy to be submitted by Novartis. Since this application was made in 1999 and the extra demand of proof of "enhanced" efficacy only became law in 2005, this additional demand is clearly unreasonable. This retrospective application of the law is probably in violation of World Trade Organization rules. Novartis could urge the Swiss government to bring a complaint under WTO law against the Indian government.
Third, the Board has made drug patents a political issue by arguing that granting Glivec a patent would lead to "public disorder" because the drug is expensive. Shamnad Basheer, professor of Intellectual Property Law at the National University of Juridical Sciences at Kolkata, argues: "One ought to draw a distinction between the grant of a patent and the subsequent use [or] abuse of a patent." In other words if the Indian government believes Glivec is too expensive, it could cap its price directly or drive competition by allowing generics firms to produce the drug. All of these methods have costs, but at least they are legal. But New Delhi has no legal authority to deny a patent on pricing grounds.
Novartis is not alone in its Indian patent travails. Another Swiss company, Roche, is about to appeal to the Supreme Court over the continued denial, most recently by the Delhi High Court in April, of its ability to exercise its patent on its lung and pancreatic cancer medication, Tarceva, without competitors' copies on the market. The Delhi Court found in April, much like the Board did against Novartis, that Tarceva was old knowledge and not worthy of a patent. It's unclear how the Supreme Court will rule. A decision is expected later this year.
India is a democracy and Prime Minister Manmohan Singh's government can't order the judiciary to rule one way or another. But Mr. Singh can remind the public and the courts that India signed up to the WTO's intellectual property rules back in 2005, and that those rules attract capital and innovation to India. Like all democracies, India has to deal with domestic lobbies arguing for rules which benefit them against the common good; the fact that product patents did not exist until 2005 was directly due to lobbying by domestic companies that wanted to copy foreign products. Mr. Singh stood up to these lobbies then, and he must do it again now. Some local firms will certainly benefit if Novartis is denied a patent and no doubt will lobby for the Board's ruling to be sustained by the high court.
India has benefited greatly from pharmaceutical investment over the past decade, largely because domestic and foreign companies believed their inventions would be protected. India has enormous potential for drug development, not least because it has a large, diverse, English-speaking population. The country also boasts many excellent local companies, such as Piramal and Ranbaxy, as well as international drug firms like Novartis and Roche. Both local and foreign firms are developing drugs that will benefit Indians and foreigners alike. The Board's Novartis decision puts this kind of investment at risk.
Novartis' appeal will be heard later this year. The court may uphold the rejection of Glivec's patent, but it should strike down the Board's damaging precedents of retrospective application of fact and other incorrect readings of the law. If it doesn't, both local and foreign drug companies may find that the cost and energy devoted to discovering cures for diseases isn't worth the effort--at least, in India.
Roger Bate is the Legatum Fellow in Global Prosperity at AEI.