A Form That Has The Patent World Divided

There are those who believe that patent holders shouldn’t be asked to make disclosures that hurt innovation. There are others who emphasise that innovation shouldn’t be rewarded at the cost of public interest.

This summarises the diametrically opposite views on the newly notified Form 27 under the Patents Act, 1970. The form requires patent holders to disclose the extent to which a patent has been worked in India—details of its commercial use and whether the public requirement is reasonably being met.

This form should actually capture what the demand is in India and to what extent the patent holder is meeting that demand, T Prashant Reddy, an advocate specialising in intellectual property laws, said. “This is a form that’s used by generic pharma companies to file for compulsory licenses. So, the burden of disclosure on the patent holder should be high.”

Only last week, the government decided to lower it after over a year of consultations.

Hari Subramaniam, managing partner at the law firm SNA, welcomed the move saying years of hard work, research and immense costs go into an invention and often several failures have to be surmounted before success is achieved.

“While it’s fair that law must ensure that there is no abuse of such monopoly rights, a patent holder should not be ‘penalised’ by mandating him to disclose his sensitive business and financial information, merely because he has been awarded a patent,” he said.

New Form 27: Impact On Compulsory Licensing

Until now, the form required disclosure of details of patent licensees and sub-licensees, the quantum of product manufactured vs imported, sales and revenue generated from direct, indirect use, among others. The information was critical for the grant of compulsory licences.

Three years after a patent has been granted, the Patent Act allows the grant of a compulsory licence to any person. The person who gets the compulsory licence can then produce the patented product without the owner’s consent, but it needs to be demonstrated that the patent holder had declined the request to voluntarily provide the licence.

A compulsory licence is granted only if any of these conditions are satisfied:

Reasonable requirement of the public with regard to the patented invention isn’t being satisfied.
That the patented invention isn’t available to the public at a reasonably affordable price.
That the patented invention isn’t worked in India.

Obtaining a compulsory licence might become much harder now since the revised form only asks for approximate revenue from a patent granted in India.

The government is letting off patent holders by giving bare minimum data, Reddy pointed out.

This data is self-certified and just saying whether you’ve worked the patent or not doesn’t help anybody. Just disclosing the revenue is not enough. So, for a pharma company, you need to disclose the number of units which were sold, how many patients were treated with those units etc.

T Prashant Reddy, Advocate

The requirements so far were onerous and rather unfair, Subramaniam countered.

He opined that whether or not public demand has been met at a reasonable price can be subjective—the nature of technology, affordability, the target customer are all important factors. And that the situation may change from month to month.

It was a very onerous task for a patent holder to determine whether reasonable requirements of the public was being met or not. And incorrect information could invite penal consequences, not simply at the Patent Office level but even during enforcement.

Hari Subramaniam, Founder and Managing Partner, Subramaniam & Associates

The question of requirement being met can always be determined during any proceedings for a compulsory license on the basis of evidence led by both parties, he added.

New Form 27: Bundling Patents Made Easier?

There’s another important change to Form 27.

It says that a single form can be filed for multiple related patents held by the same patent holder. This can be done in cases where the patent holder cannot determine the approximate revenue or from a patented invention from other related patents.

This will disproportionately benefit patent holders who engage in portfolio licensing, especially in the telecom sector, Reddy said.

If you cannot determine the accrued from a particular invention, you shouldn’t hold the patent in the first place. Most disputes on standard essential patents are around royalty rates. In a bundled offering, you can’t distinguish the of a useful patent from a not-so useful one.

T Prashant Reddy, Advocate

This just makes it easier for companies in the telecom space to bundle patents. “If the government insisted that you have to each patent separately, determining rates based on their usefulness would be much easier. They’ve just made this process murkier,” he explained.

Reddy also pointed to usefulness of this commercial data for the anti-trust regulator to determine abuse of dominance by patent holders.

But Subramaniam pointed to valuation challenges where patents are inter-related.

A single product, for example, a cell phone may be protected by a bouquet of patents for its individual components such as the chip, transmitter, transceiver, combination of hardware and software etc., although the cell phone itself may not be protected by any patent, he explained. In such a situation, he pointed out, it’s difficult to assess the quantum of sales in terms of in rupees for each individual component.

It gets more complicated when some parts are manufactured locally, some are licensed to different licensees, some are imported, yet the cost of the final product may not just depend only upon the patented technology. Even the underlying software, algorithm and the brand (none of which are patent eligible subject matter) would play an important role in the final cost.

Hari Subramaniam, Founder and Managing Partner, Subramaniam & Associates

Even if the could be assessed, a patent holder would have to part with some very sensitive and vital confidential information, which its competitors would be delighted to lay their hands on.

“The net effect would be that a patent holder would be compelled to share his sensitive, proprietary information, while someone, who has never done any research, not only gets to keep his sensitive information a secret, but gets free access to sensitive information—which, in my opinion, would be rather unfair,” Subramaniam said.