Is Patent Act, 1970 Anti-Competitive?

In this article we will discuss the provisions of Patent Act to find out the answer that is Patent Act, 1970 Anti-competitive?

Meaning of Patent

A patent is an “Intellectual Property Right” related to the invention furthermore it grants an exclusive right to the inventor or assignee to exploit his invention for a limited period (i.e. 20 years as per Sec 53 of Patent Act, 1970). 

What are the rights of patentee?

According to sec 48 of the Patent Act the patentee acquires exclusive rights to prohibit third party from doing following acts without his consent over the patented product or process

  •  Making the Product/Process
    • utilizing the Product/Process
    • Right to Sale
    • Right to Offer for Sale
    • Importing things for the purpose of Product/Process

The exclusive right to the patentee to exploit his invention isn’t absolute but subject to certain conditions under the Patent Act. Although the commercialization of a patented invention is legally recognized in Sec 48, the processes plus practice taken up by the patentee or else the licensees in the commercialization raise issues concerning “fair play and anti-competitive practices”. There are certain provisions in the Act that are the exception on the grant on a patent. For national interest or for benefits of public, the Central Government can use any patented invention. In such cases, sufficient royalty is being paid to the patentee[1]. Also, the exclusive right of the patent holder may be constrained for the following purpose[2].

  1.  For Government use.
  2. For the purpose of research or else experiment as well as imparting instructions to pupils.
  3. Special provision with respect to drugs or medicines that they may be imported by the Government for the reason simply of its own use.

The Central Government may acquire any patented invention if satisfied that it is crucial for a public purpose. In such cases, only compensation is paid to the patentee or any interested person[3].  The Central Government may also revoke the patent if the Govt. is of the opinion that the patent or the mode in which it is exercised is mischievous to the state or injurious to the public[4].

Sec 83 of the Act makes a reference that the Patents are granted to promote inventions moreover to make sure that the innovations are worked in India on a commercial scale as well to the fullest extent that is reasonably practicable without undue impediment. Patents are not granted only to empower patentees to have the benefit of monopoly for the importation of the patented article. It intends to see that the patent right isn’t abused by the patentee otherwise individual inferring title or interest on patent from the patentee doesn’t remedy to practices which “unreasonably restrain” trade or adversely affect the international transfer of technology. Patents are granted to utilize the advantage of the patented invention accessible at “reasonably affordable prices” to the public. A patent granted can’t forbid Central Government in taking measures to guard public health.

Also Read: IPR: Emergence of a New Subject in the Field of Law

Statement in respect of working of the patent[5]

Every patent-holder or his assignee is mandated by the Government, to provide yearly, a statement showing the extent to which the invention has been worked in India on a commercial scale. If the statement isn’t submitted within 3 months of the end of each calendar year, then the patent-holder is legally responsible for a penalty. A compulsory license may be granted for the patented invention to other persons to commercially exploit the patent in cases of non-submission of the above-mentioned information.

“Bolar-like provision” and “Parallel import provision”

Several countries grant producers of “generic drugs” to exploit the patented inventions for R&D. They can acquire the statutory sanction by the compliance of information required under the law. The generic manufacturer may then sell their edition of “generic drugs” almost immediately as the patent expires. This proviso is termed as “Bolar-like provision” [6]or “regulatory exception”.

In India Sec107A (a) of Patents Act states such a proviso.

“any act of making, constructing, using, selling or importing a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product;”

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“Parallel import” proviso is given in Sec107A (b), which state that importation of patented products by anyone who is duly authorized by law shall not be regarded as an infringement. The objective of “Parallel import” is to scrutinize the abuse of patent rights and designed to control the cost of a patented product.

Sec140 of the Patents Act averts the patent-holder from making agreements by which a purchaser, lessee or else licensee is barred from:

  • acquiring patents apart from the patentee’s;
  • Executing  any other process excluding patented process; or
  • Challenging the legitimacy of the patent.

These provision endeavours to avert any “abuse of the dominance” of a patent- holder that is protected because of the monopoly incorporated in the patent Act.

Provision of Compulsory License under Patent Act

The provision of compulsory license in India was implemented initially in the case Natco v. Bayer [7] in regard to Bayer’s patented drug “sorafenib tosylate”.

The compulsory licence under Patent Act may be granted to any interested person after the cessation of three years from the date of grant of a patent, on any of the following conditions[8]

(i) that the reasonable requirements of the public with respect to the patented invention have not been satisfied; or

(ii) that the patented invention is not available to the public at a reasonably affordable price; or

(iii) that the patented invention is not worked in the territory of India.

The Central Government by way of notification may grant Compulsory licences to any person interested on the following grounds[9]

  1. a circumstance of national emergency; or
  2. a circumstance of extreme urgency; or
  3. a case of public non-commercial use

The controller may also grant compulsory license for export of “pharmaceutical products” in certain exceptional circumstances[10].

The CCI is also authorized to grant Compulsory licences. The preamble lays down the primary intent of the Competition Law is to cope with the “monopolistic unfair and restrictive trade practices” by creating a set of rules to strengthen competition in the market. The policies are anticipated to uphold efficiency, guarding the welfare of consumers, also to help in the formation of a business domain which depends on fairness, prompts proficient asset distribution and in which misuse of market power is prohibited or restrained. So, the Commission has the statutory power to grant Compulsory licences to avert any enterprise from abusing its “dominant position”[11]. The Commission may pass an order or give direction if after inquiry come to the conclusion that any enterprise is contravening the provisions of Sec 3 or Sec 4 of the Act[12].

The IP authority, if finds that decision pronounced by the authority may contravene the provision of Competition Act than the authority may refer the matter to the CCI[13]. The CCI may also refer to the cases associated with “compulsory license” to the appropriate IP authority[14]. Consequently, “compulsory license” ought to be advocated as an “anti-competitive” remedy use in cases where the exclusive management is debatable and any other remedy can’t be adopted.

Conclusion

Undoubtedly, it can be construed that the Patent Act is not anti-competitive there are provisions under Patent Act that balance the interest of inventors and that of the public. The law sponsors consumer protection as well as innovation.

Also Read: Fashion Laws And Intellectual Property Rights


[1] Patent Act, 1970 Sec 100.

[2] Patent Act, 1970 Sec 47. 

[3] Patent Act, 1970 Sec 102.

[4] Patent Act, 1970 Sec 66.

[5] FORM 27, THE PATENT ACT, 1970 (39 OF 1970) & THE PATENTS RULES, 2003.

[6] The exception was propounded in landmark US case Roche Products v Bolar Pharmaceuticals,733 f.2d 858 (fed. cir. 1984)

[7] Bayer Corporation v. Natco Pharma Ltd., Order No. 45/2013 (Intellectual Property Appellate

Board, Chennai)

[8] Patent Act, 1970 Sec 84.

[9] Patent Act, 1970 Sec 92.

[10] Patent Act, 1970 Sec 92A.

[11] Competition Act, 2002 Sec 4.

[12] Competition Act, 2002 Sec 27.

[13] Competition Act, 2002 Sec 21.

[14] Competition Act, 2002, Sec 21A.

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