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Patent ordinance: The finer nuances - Views on News from Equitymaster

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Patent ordinance: The finer nuances

Dec 29, 2004

On December 27, 2004, The Government of India issued an ordinance relating to patents (third) amendment act. With this, India has kept its promise to become TRIPS compliant by end of this year. Letís look at the major provisions that will have lasting effect on the industry, both domestic and exports. Letís look at the most important features of the ordinance:

  1. The new patent ordinance expands the patentability criteria from drugs and agro chemicals to other field of technology, such as embedded software companies.

  2. In 1999 patent amendment act, a provision regarding Exclusive Marketing Rights (EMRís) was introduced. This will now become redundant. However, the provision for transition has been made for companies, which are already given the EMRís. Both Novartis and Wockhardt will be affected by this, but to what extent is unclear.

  3. One of the major provisions introduced was regarding grant of compulsory license, which means that Indian manufacturers will be able to manufacture and export patented medicines to countries, which have insufficient or no manufacturing capacity. This means that Indian companies like Cipla and Ranbaxy will be able to continue producing and exporting AIDS drugs to African and South East Asian countries.

  4. Modification in the provisions relating to opposition procedures with a view to streamlining the system by having both Pre-grant and Post-grant opposition in the Patent Office.

  5. Another important provision made in the act is that the patent will be available from the day of patent is granted and not when it is published. This means that many Indian companies will be saved from infringement cases by the multinational majors, who might get patent for drugs which Indian companies are selling. What is likely to happen is that the companies that have the patent for a particular drug may force the company producing a generic version of the same to stop production, but they cannot bring a libel suit on the generic producer with retrospectively.

  6. Another important provision is relating to the extension of patents in case of incremental innovations. It means that the companies, which come up with new usage of the same product may not get patent for the new usage.

  7. Rationalisation of provisions relating to time-lines with a view to introducing flexibility and reducing the processing time for patent applications, and simplifying and rationalizing procedures.

While the government has just passed an ordinance in order to comply with the WTO agreement, the patent law in the country will come into affect when the parliament passes this ordinance. The government is likely to face certain hurdles from its own allies as well as the opposition. Since the pricing mechanism for patented drugs in the ordinance is not clear we might see some improvement on that front in the actual law and that may define new products being launched by the MNC pharma companies in the country. Till then, MNC majors will continue to keep their fingers crossed. But so will the Indian consumers, who would want to keep their healthcare expenses under check.


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