Working of Patents – A Workable Proposition?

The Working of the Patent System

The patent system promotes the progress of science and technology by granting exclusive rights to inventors for a limited period of time. On expiry of the limited period, the inventions enter the public domain and add to the pool of knowledge base for further inventive activity. It is believed that the exclusive rights granted by the patent system provide incentives to invent, invest, disclose and design, which push the limits of science and technology.

It is well understood that for the patent system to work effectively, a healthy balance between the patent incentives and public domain is essential. Every element of the patent system from patentability requirements to working of patents thrives to strike the right balance that suits the ideological, social, economic, public interest and other goals of the state. The elements of the patent system are designed by every state bearing in mind the said goals.

The invention life cycle in the patent system has some basic elements, which always remain constant, and cannot be disturbed if we wish to have a patent law in place. Some of such constant elements are patentability requirements to check worthiness of an invention, exclusive rights, patent term, public domain, etc. Depending on a country’s policy goals, and philosophical underpinnings, the scope and extent of the said elements are varied, but all of them are always present.

 Though natural law, social, economic, utilitarian, tragedy of commons, and other theories justify the need for the patent system based on different philosophical foundations, at some level, all of them run in circles, and often overlap with each other. Owing to their circularity, we often see the same reasoning to argue for and against the patent system. Despite continuing research for more than two hundred years, no theory till date has been able to prove, or disprove, the value of the patent system in promoting the progress of science and technology. Simply put, we really don’t know for certain if the patent system is actually furthering science and technology progress, and we also don’t know whether science and technology will progress in the absence of the patent system. So, arguing for and against it is at some level a fruitless endeavour.

Now that we are vested with a patent system, it will probably make better sense to discuss what it seeks to achieve, atleast on paper, rather than going back and forth about its value. At its core, the primary goal of the patent system is believed to be public good (good of the public). Benefit to the public is articulated directly, or indirectly through scientific progress, economic progress, etc. Opponents of the patent system argue against benefit to the public using the same criteria, and debates often start and end at the same point. In reality, we are actually talking about two types of public interest – public interest by patents, and public interest against patents.

Object of the Patent System

In the Biswanath Prasad case, the Supreme Court of India articulated the object of the patent law as follows:

“The object of patent law is to encourage scientific research, new technology and industrial progress. The price of the grant of the monopoly is the disclosure of the invention  at the Patent Office, which, after the expiry of the fixed period of the monopoly, passes into the public domain.”

By quoting Justice Ayyangar, the Supreme Court articulated the objective of patent law in Novartis case as follows:

“Justice  Ayyangar  examined  the  nature  of  the  patent  right  and  considered  the arguments advanced as justifications/rationalizations for grant of patents. He described the patent law, in his report, as an instrument for managing the political economy of the country. He observed:

“It would not be an exaggeration to say that the industrial progress of a country is considerably stimulated or retarded by its patent system according as to whether the system is suited to it or not.” (p. 9, para 16)

He also quoted from Michell with approval as under:

“Patent systems are not created in the interest of the inventor but in the interest of national economy. The rules and regulations of the patent systems are not governed by civil or common law but by political economy.”

Working of Patents – Patents Act

Some sections from the Patents Act, relevant to this post, have been reproduced hereunder for reference.

Section 83

“General principles applicable to working of patented inventions

Without prejudice to the other provisions contained in this Act, in exercising the powers conferred by this Chapter, regard shall be had to the following general considerations, namely;

a.that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay; …”

Section 84

“Compulsory licences

(1) At any time after the expiration of three years from the date of the grant of a patent, any person interested may make an application to the Controller for grant of compulsory licence on patent on any of  the following grounds, namely:

a) that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or

 b) that the patented invention is not available to the public at a reasonably affordable price, or

 c) that the patented invention is not worked in the territory of India. …”

Section 85

“Revocation of patents by the Controller for non-working

(1) Where, in respect of a patent, a compulsory licence has been granted, the Central Government or any person interested may, after the expiration of two years from the date of the order granting the first compulsory licence, apply to the Controller for an order revoking the patent on the ground that the

patented invention has not been worked in the territory of India or that reasonable requirements of the public with respect to the patented invention has not been satisfied or that the patented invention is not available to the public at a reasonably affordable price. …”

Section 146

“Power of Controller to call for information from patentees

(1) The Controller may, at any time during the continuance of the patent, by notice in writing, require a patentee or a licensee, exclusive or otherwise,

to furnish to him within two months from the date of such notice or within such further time as the Controller may allow, such information or such periodical

statements as to the extent to which the patented invention has been commercially worked in India as may be specified in the notice.

(2)Without prejudice to the provisions of sub-section (1), every patentee and every licensee (whether exclusive or otherwise) shall furnish in such manner

and form and at such intervals (not being less than six months) as may be prescribed statements as to the extent to which the patented invention has been

worked on a commercial scale in India. …”

One important fact to be noted from these provisions is that Section 146 requires a statement with respect to the extent to which the patented invention has been commercially worked, while Section 84 and 85 simply state that a compulsory license may be granted and the patent may be revoked, if the patent is not worked in India. Section 84 and 85 do not require commercial working and any form of working, commercial or non-commercial is sufficient to avoid a compulsory license, and later, revocation. Also noteworthy is section 83, which states that an invention must be commercially worked to the extent reasonably practicable, and commercial working is not a strict mandate.

Two conclusions can be drawn from these sections:

  1. Working of a patent can be commercial or non-commercial, and section 146 refers to only commercial working; and
  2. Commercial working is mandated only to the extent reasonably practicable. If it is not reasonably practicable, an invention may not be the subject of commercial working.

Meaning of Working

During negotiations of the Paris convention, in Rome meeting in 1896, since all countries maintained different meaning for the term work, the meeting finally adopted the compromise opinion that the word work has different meanings and every member country has the right to interpret the term work themselves.

 The Indian Patents act, 1970, does not define the term work/working.  In the Bayer compulsory license case, while the controller concluded that worked in the territory of India means manufactured to a reasonable extent in India, IPAB avoided giving definition of work.  Further, the board concluded that working could mean local manufacturing entirely, and working in some cases could mean only importation.  It would depend on the facts and evidence of each case.  Though the Board did not define the meaning of working in the Bayer case, it can be reasonably inferred based on the approach taken by it that the term embraces all patent rights.

The rights granted to a patent holder under Section 48 would be instructive in this respect.

Section 48

“Rights of patentees

Subject to the other provisions contained in this Act and the conditions specified in section 47, a patent granted under this Act shall confer upon the patentee

(a) where the subject matter of the patent is a product, the exclusive right to prevent third parties, who do not have his consent, from the

act of making, using, offering for sale, selling or importing for those purposes that product in India; …”

A patent holder gets the following exclusive rights as per this section:

  • Right to Make;
  • Right to Use;
  • Right to Sell;
  • Right to Offer for Sale; and
  • Right to Import.

Logically, exercise of any of these rights must amount to working of a patent. In other words, a patent may be worked by manufacturing, using, selling, offering for sale, and/or importing. The aforesaid activities includes both commercial and non-commercial activities. Research uses, charitable uses, manufacturing for non-profit purposes, etc, can be considered as working of patents.

Now, what does Section 146 cover?

From its language, only commercial working. Other forms of working such as research, personal use, non-profit working, are not covered.

Patents – Workability

From the working point of view, patents can be categorized into two major classes:

  • Workable Patents – Patents covering inventions that can be worked; and
  • Non-workable Patents – Patents covering inventions that cannot be worked.

One may ask here how a patent may be granted if it cannot be worked? Enablement of an invention is satisfied if the invention is scientifically/technically capable of being worked, but the invention may not be workable for reasons other than scientific or technical factors. Reasons for non-workability may range from lack of capital to lack of government approval.

Workable inventions may further be classified into:

  • Patented Inventions immediately workable; and
  • Patented inventions workable in the future.

A large percentage of workable inventions may not be worked immediately because of various reasons such as:

Invention requires further experimentation to perfect it;

  • Further research studies must be performed to get government approval;
  • Invention is ready, but there is no market for it;
  • Essential technologies are still developing; etc.

Although the percentage varies from field to field, a very small percentage of patented inventions fall within the first category of immediately workable inventions. Some reports estimate the percentage to be close to ten percent of all workable patented inventions. The total number of patented inventions that reach the market is estimated to be less than one percent.

Quantification of Commercial Working

Out of the commercially worked patented inventions, quantification is possible only for a small percentage of inventions, which directly translate into products. For example, in pharma and chemistry fields, one product may be covered by one patent or a few patents, but in fields like telecommunications, information technology, etc, each product has several patents embedded in it. Sometimes, this number may be in hundreds for certain technologies. For example, one report estimates that more than three thousand patent families cover LTE.

In the said context, commercial working cannot be quantified easily. It is difficult to state with certainty how many products are made, and also, its financial value. Multi-level licensing, pooling, standardization, etc, add complexity to the equation. Therefore, any disclosure becomes a mere probability and not a certainty.

Value of Filing Statement of Working

One can argue based on objectives of patent law that every element of the law affects interests of the public in one way or the other. From that perspective, it is not really very difficult to make an argument about the value of statement of working. Also, as the statute mandates filing of the statement, one cannot easily argue against its implementation ability. But, when and how this statement must be filed, and when it is not required to be filed may be subject of interpretation.

To sum up all points made so far:

  • Working includes exercise of any of the patent rights – make, use, sale, offer for sale and import;
  • Section 83 lays down the principle that a patented invention must be commercially worked to the extent possible. It recognizes the fact that it may not be possible to commercially work an invention;
  • Section 84, which deals with compulsory licensing in case of non-working does not refer to commercial working. That means, a compulsory license will not be granted even if an invention is not commercially worked, as long as it is worked non-commercially;
  • Many patents are not workable on grant, and even among workable ones, only a few can be immediately worked;
  • It is not possible to quantify working with certainty due to various reasons; and
  • Section 146 requires filing of statement of commercial working, but does not cover non-commercial working, and therefore, has only limited relevance.

In the light of the aforesaid, one may conclude that the Act recognizes three aspects with respect to working: commercial working, non-commercial working, and non-working. From its language , statement of working under section 146 covers only commercial working of patents, and does not cover non-commercial working, and non-working. It will obviously be argued that the language in section 146 mandates filings by all patentees irrespective of the nature of working, but imposition of such strict mandate is not supported by the Act, and not warranted in the light of public interest.

Also, owing to difficulties in quantifying commercially worked inventions with certainty, the existing Form 27 may be further simplified. If the form is made much simpler, it will become easy to fill, follow and implement, and will further the relevant interests of patent law. To the contrary, if the form is made more extensive and onerous, it will be difficult to implement, and whatever little value it might have will be lost.

It is clear from its scope and extent of coverage that section 146 is not a tool based on which compulsory licenses may be sought as it covers less than what is mandated in section 84, it does not have much public interest relevance. Even if it is enforced, it will not make much difference to the existing situation. No statement of working norms are required, no strict mandate to patent office is required, and there is no need to make the form more detailed and stringent. In fact, if the aforesaid measures are taken, it would be counterproductive to public interest through patent incentives. It will tip the fine balance, and can have a devastating effect on the patent system in India.

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References- here
and Biswanath Prasad Radhey Shyam vs. Hindustan Metal Industries, AIR 1982 SC 1444
Image source/ Attribution- here. Governed by Creative Common License CC BY-SA 2.0