The Intellectual Property Owners Association’s (IPO) submission (7 February 2014, USTR-2013-0040) to USTR’s 2014 Special 301 Review expressed concern over various aspects of India’s policies including “India’s Forced Technology Transfer, Compulsory Licensing, and Lack of Effective IP Protection” and “Third Party Access to Essential Facilities in India.”
The IPO also cited India’s actions in international fora:
India has played a leading role in driving an IP weakening agenda at the UNFCCC, WTO, and WIPO, where government officials consistently represent intellectual property rights as a barrier to economic advancement and access to technology for developing countries despite a lack of evidence supporting this view. These claims threaten to undermine not only U.S. innovation and industries, but economic development and innovation in India, where domestic companies are in the process of maturing their capabilities in the IP generation and policy advocacy space. They also continue to distract negotiators in these and other fora from the real technology, trade, environmental and healthcare-related issues that they are or should be seeking to address.
The docket number for this submission is: USTR-2013-0040.
Here are some choice quotes from the IPO submission to USTR.
II. COUNTRY-SPECIFIC CONCERNS
India is an important and growing market for U.S. companies. The country draws heavily on global investment and trade, and counts innovative industries including information and communications technology, infrastructure, services, healthcare, and entertainment as increasingly important contributors to economic growth. However, as described below, India is pursuing an agenda of forced technology transfer in contravention of a fundamental principle governing international trade – national treatment – while seeking to weaken IP rules and frameworks domestically and internationally. India is also systematically denying U.S. companies the protection and opportunities afforded its own industries, including with respect to IPR. These efforts not only threaten to diminish India’s ability to innovate and attract investment, but they also unfairly disadvantage American businesses. The consistent use and threat of compulsory licensing and a continued lack of effective trade secrets protection are additional core issues of concern.
India’s National Manufacturing Policy
The government of India is taking measures across sectors, including pharmaceuticals and green technologies, to advance a program to compulsory license foreign proprietary technology, in direct contravention of the more limited scope of compulsory license provisions in the WTO TRIPS Agreement. One primary purpose appears to be to enable domestic industries to avoid paying commercial rates for technologies. For example, India has announced its intention to engage in policies that would violate the intellectual property rights of foreign green technologies in order to favor domestic companies. Section 4.4 of India’s National Manufacturing Policy (NMP), for example, states that India-based clean technology companies “have the option to approach the Government for issue of a Compulsory License for the technology which is not being provided by the patent holder at reasonable rates or is not being worked in India to meet the domestic demand in a satisfactory manner.” The National Manufacturing Policy lists healthcare- related technology as another strategic industry, alongside clean technology.
Trade Secret Protection and India’s National IPR Strategy
India released a draft National IPR Strategy in 2012,6 which was broad in scope and appeared to represent an effort to tackle some of the important weaknesses that remain in India’s IPR policy and enforcement. Publication of the Policy was a hopeful sign, but no concrete action has been taken thus far.
One key problem in India continues to be the lack of an effective trade secrets protection regime. Although the National IPR Strategy recognizes that a “predictable and recognizable trade secret regime will improve investor confidence,” it fails to call for greater protection of trade secrets and asserts that they are already “protected through the contract law in India and [are] part of the concept of protection against unfair
competition.” To ensure full market access and non-discriminatory treatment of Indian and non-Indian companies, and in order to ensure full TRIPS-compliance, it is critical that India adopt an effective, codified, trade secret act. This would reduce the uncertainty now often faced by companies and the difficulties companies face protecting their proprietary technologies and confidential data. It would also incentivize U.S. companies to invest in India and to collaborate, share technology and know-how, and engage in mutually beneficial technology supply and partnership contracts with Indian
partners and customers.
Other Instances of India’s Forced Technology Transfer, Compulsory Licensing, and Lack of Effective IP Protection
India’s National Manufacturing Policy and its draft IPR Policy demonstrate a lack of effective IPR protection and enforcement. Another example includes a 2010 discussion paper published by a department in the Ministry of Commerce (DIPP), which argued that “compulsory licensing has a strong and persistent positive effect on domestic invention” and encouraged India’s Controller General of Patents to grant a compulsory license if, among other things, he was satisfied that the patented invention is not being worked (i.e., manufactured) in India.7
7 See http://dipp.nic.in/English/Discuss_paper/CL_DraftDiscussion_02September2011.doc
8 Known as Form 27, Statement Regarding the Working of the Patented Invention on Commercial Scale in India, available at: http://ipindia.nic.in/ipr/patent/patent_formsfees/Form-27.pdf
9 See http://ipindiaservices.gov.in/workingofpatents/
10 Some of these actions have been based on Section 84 of India’s Patent Act that states: “(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 license 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 84 of India’s Patent Act violates the WTO TRIPS Agreement’s national treatment provision in Article 3, which mandates that WTO members protect IP regardless of its origin, as well as TRIPS Article 27.1, which explicitly prohibits discrimination in national patent laws based on “whether products are imported or locally produced.” Section 84 also exceeds several TRIPS compulsory licensing restrictions, for instance Article 31(h) requiring pricing to be based on the “economic value of the authorization.”
Additionally, India’s patent statute requires every patentee and licensee to furnish periodic statements that include significant details of how they are working each patented invention on a commercial basis in India or, if not worked, the reasons why and the steps being taken to work the invention.8 Not only is this “Form 27” process highly burdensome from an administrative point of view, but we are concerned that the information that is provided could be eventually used to justify compulsory licenses in a variety of industries, as specifically contemplated in the Form. Recently, submissions of Form 27 have become publicly available, which is likely to result in even greater pressure on Indian authorities to compulsory license the covered products.9 Moreover, a majority of the questions in Form 27 are only directly answerable in a one-patent-one- product context and cannot clearly be answered for information technologies, for example. Notwithstanding the impracticality of attributing a specific commercial value to one patented feature of a complex technology, the form calls for criminal and civil penalties for submission of false information.
Since 2012, India has also infringed, overridden, or revoked nearly a dozen pharmaceutical patents held by foreign firms, in part because the patented product was manufactured outside of India. These and other instances of broad compulsory licensing are based on Section 84 of India’s Patent Act10 and pose a clear risk not only to U.S.
pharmaceutical industries, but to advanced manufacturing, industrial, and other innovative U.S. businesses.
Finally, the Indian Government not yet passed the National Innovation Act,11 which would have been a positive step towards providing a more robust IPR environment. The Innovation Act would include a range of measures to promote innovation (including an annual “Science and Technology Plan” and provisions to aid public/private partnerships, promote innovation financing and establish special innovation zones). It would also codify rules on the protection of confidential information. Because protection to date relies on common law principles, the scope of protection is often unpredictable.
Third Party Access to Essential Facilities in India
We commend efforts of the Indian Government’s Committee of the Ministry of Corporate Affairs to formulate a National Competition Policy for India that has evolved into a comprehensive and helpful framework for fair competition. One particular issue, however, is a serious cause for concern. Section 5.1(vi) of the Competition Policy contains a blanket requirement for dominant infrastructure and IPR owners to grant third party access to “essential facilities” on “agreed reasonable and nondiscriminatory terms,” without providing more specifics about the situations in which this requirement may or may not be justified.12
Experts have heavily criticized blanket application of an “essential facilities” doctrine to IPR owners, and such application has been severely curtailed around the world. A broad international consensus exists that the unconditional, unilateral refusal to license a technology rarely raises competition concerns. In addition, the decision not to license a technology is considered to be the most fundamental right conveyed under the IP rights laws – namely, the right to exclude. To impose a blanket duty to license on IPR owners could effectively nullify IP rights and impair or remove the economic, cultural, social and educational benefits created by them, ultimately hurting American innovators. The blanket inclusion of IP rights currently foreseen in the Policy is directly at odds with international competition standards and fundamentally irreconcilable with TRIPS. Although industry consultations with the Minister and Joint Secretary yielded a solution in which the Ministry agreed to review the essential facilities language, the final National Competition Policy has still not been passed or made public.
India’s Positions in International Fora
In addition to domestic policy actions such as those outlined above, we continue to be very concerned about India’s policy position on intellectual property in a range of international fora. India has played a leading role in driving an IP weakening agenda at the UNFCCC, WTO, and WIPO, where government officials consistently represent intellectual property rights as a barrier to economic advancement and access to technology for developing countries despite a lack of evidence supporting this view. These claims threaten to undermine not only U.S. innovation and industries, but economic development and innovation in India, where domestic companies are in the process of maturing their capabilities in the IP generation and policy advocacy space. They also continue to distract negotiators in these and other fora from the real technology, trade, environmental and healthcare-related issues that they are or should be seeking to address.
Unfortunately, India’s influence with respect to intellectual property policy may be expanding. In May 2013, the BRICS IP Offices agreed on a roadmap for collaboration.13 The roadmap identifies India as the lead IP office to improve the influence of BRICS offices within WIPO and other fora.
13 http://www.rupto.ru/rupto/nfile/786b6c92-696b-11e3-731c-9c8e9921fb2c/SIGNED-BRICS-IP- OFFICES-COOPERATION-ROADMAP.pdf