The following is the text of the statement made by Shri Kamal Nath, Union Minister of Commerce & Industry, on the Ordinance relating to Patents (Third) Amendment at a news conference here today:
1. With the coming of the New Year, two significant developments in the world of commerce and industry open themselves to India. Both are connected with the world trading order, of which India is a part: one is the final phase-out of the Multi-Fibre Agreement, and the other is marked by India’s conformity with the international Intellectual Property System in all respects, on terms that are practical and credible.
2. When India decided ten years ago to accept and adopt the world trading order, we committed ourselves to fulfilling certain obligations on the understanding that other countries of the world too would commit themselves to the same obligations. And out of these common commitments would arise opportunities – opportunities that would not have come our way had we stayed outside the system.
3. The WTO system provides an organized multilateral framework within which India can claim trade demands as a legitimate right; and in this we have succeeded. Ten years ago, our exports stood at less than 32 billion dollars. A decade later they had doubled to 64 billion dollars. Now we look to doubling our exports in five years. This year we are already set to cross 75 billion dollars. All this translates into more employment opportunities and greater economic activity, with its concurrent benefits.
4. It must be remembered that it is not only India that is conforming – for every commitment of ours, there is a parallel commitment of other member States. Because of our stand on special and differential treatment, our major trading partners have had to reduce their tariffs to a greater extent. Where dissatisfied we have recourse to the Dispute Settlement Mechanism of the WTO. Of the 22 cases involving India which have so far been decided, India has won 9, and 7 were amicably settled on terms favourable to us.
5. The pharma industry and the IT industry are the two sunrise sectors for India. The ordinance amending the Patent Act provides for an enabling environment for both of these. Among the sectors that have experienced the greatest transformation in India, the Pharmaceutical Industry is perhaps the most significant. India’s WTO involvement during the last decade has encouraged our pharma companies to adopt a strategy of R & D based innovative growth. Thus, while Indian companies spent not even a fraction of a percent on R & D ten years ago, today the larger Indian companies are spending in the region of 6 to 8 percent of their turnover on R & D. (The norm for major MNCs is 12%). The transformed Indian pharma industry is itself looking for patent protection – particularly the bio-tech sector, in which India has aggressive prospects.
6. When we joined the WTO ten years ago Indian pharma exports were less than 4000 crore rupees. A decade later our pharma exports are 14,000 crore rupees, and account for more than a third of the industry’s turnover. This is the result of the confidence built up in our industry due to our progressive adherence to our IP commitments. Now we are poised to achieve an annual compounded growth rate of 30% in order to double our pharma exports in three years. Some 60 billion dollars worth of drugs are going off patent in the next few years. Indian industry can grab a lion’s share of this – provided we are a bona fide member of the international trading community, and are not in a questionable position, open to the possibility of retaliatory measures and sanctions, threatening not only our pharma exports, but other sectors as well – including our textiles sector.
7. Apart from manufacture of drugs, the pharma industry offers huge scope for outsourcing of clinical research. We have a vast pool of scientific and technical personnel, and recognized expertise in medical treatment and health care. India can take advantage of our strength in this provided we have the right legal framework in place, which provides IP protection to the results of that research.
8. In IT, the trend is to have software in combination with or embedded in hardware – such as in computers or cell phones or a variety of other gadgets. Software as such has no patent protection (the protection available is by way of copyright); but the changing technological environment has made it necessary to provide for patents when software has technical applications in industry in combination with hardware. This has been a demand of NASSCOM.
9. This Third Amendment is only the culmination of a process begun ten years ago. The provisions of the Ordinance are to be seen in conjunction with, and in the context of the Act, as well as of the earlier two Amendments of 1999 and 2002. Our Patents Act always provided for process patents in all fields, and product patents in all fields except drugs, food and chemicals. The Act had to be amended in order to provide for product patents in these also with effect from 1st January 2005. A Bill had been introduced in Parliament a year ago by the previous government, but lapsed.
10. The new Government set up a Group of Ministers on the matter. It was our desire to bring the Bill to Parliament first. But it was also necessary to consult with all stakeholders and political parties. The last comments we received were on the 21st of December – and so it was not possible to bring the Bill to this session of Parliament. This has necessitated the Ordinance. The ordinance will be discussed in detail in Parliament in the Budget session. The ordinance is an interim measure to fulfill our legal obligations within the stipulated time.
11. The ordinance is the same as the Bill introduced last year with improvements in some significant respects. We have introduced a provision for patenting of software that is embedded in hardware. We have also provided for a definite pre-grant opposition procedure. The earlier bill had only a post-grant opposition, with a weak pre-grant representation. After extensive discussions we have decided to have both pre-grant as well as post-grant opposition. Of course, we have rationalized the timelines, so as not leave everything open-ended, but have a definite time-table within which each of the stages should take place. This reduces by half the maximum time it would take for the processing of an application, from more than nine years to about four. Another significant modification is the introduction of a provision to protect Indian industry from infringement proceedings with retrospective effect. We have specifically provided that patent rights for mail box applications will only be available prospectively. We have made these changes after wide consultation, and we feel that these considerably improve the proposals.
12. The fear that prices of medicines will spiral is unfounded. In the first place we must realize the fact that 97% of all drugs manufactured in India are off-patent, and so will remain unaffected. These cover all the life-saving drugs, as well as medicines of daily use for common aliments. In the patented drugs also, in most cases there are always alternatives available. In fact a feature of patent protection is that it spurs research, so that constantly alternatives keep appearing in the market – and often the alternatives are better ones. Thus price control is inherently built in.
13. We have 13 Compulsory Licensing provisions under Chapter XVI in place. The Joint Parliamentary Committee discussed this issue threadbare three years ago. Their recommendations were the basis of the Second Amendment. The Act also has strong provisions under Chapter XVII for outright acquisition of the patent to meet national requirements. There is also the Drug Price Control Order administered by the National Pharmaceuticals Price Authority. With this framework in place it is clear that the concerns and fears expressed by various sections are wholly misplaced.
14. The Act ensures that the reasonable requirements of the public with respect to availability and affordability are taken care of. Public interest particularly public health and nutrition is protected. The law effectively balances and calibrates Intellectual Property protection with public health concerns and national security. By participating in the international system of intellectual property protection, India unlocks for herself vast opportunities in both exports as well as her potential to become a global hub in the area of R&D based clinical research outsourcing, particularly in the area of bio-technology.