Madras High Court, Novartis AG vs Union of India, Judgment of 6 August 2007.
Background
Article 27 of the TRIPS Agreement brought about the obligation to grant substance and process patents for pharmaceuticals and chemicals. Developing countries were granted an extended period of implementation up to January 1, 2005 but were required to offer so-called pipeline protection and allow the submission of patent applications to a mailbox prior up until that date. The pipeline and mailbox regulations of India were challenged before the WTO (India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, 19 December 1997) following resistance by generic industries and parliament to the international obligations incurred. India subsequently amended its 1970 patent act to bring it in line with Article 27 of the TRIPS Agreement. This provision essentially requires, subject to a number of exceptions, that patent protection must be granted “for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application”. The provision clearly bars generic producers from using patented products. However, it leaves open the question of to what extent Article 27 allows the patentability of existing substances to the extent a novel use and application is found so that they are inventive (so called ‘ever-greening’). Novartis AG challenged Indian patent law as being inconsistent with the TRIPS Agreement and Article 14 of the Indian constitution. The High Court of Madras denied jurisdiction to examine compatibility with the TRIPS Agreement and denied unconstitutionality on the basis of regulatory theory and precedent. In a subsequent case, Novartis v. India (Civil Appeals Nos 2706-2716 of 2013, April 1, 2013) the Supreme Court of India denied that Glivec (or Gleevec in the USA), a cancer drug based upon a previous patent, complies with the requirement of enhanced efficacy. These disputes led to a failed effort to resolve the issue within negotiations for a Swiss-India free trade agreement. They are the main reason why negotiations have not been concluded, much to the detriment of other interests at stake. Switzerland refrained from bringing a case before the WTO on the issue of ever-greening, afraid that a panel may find in favour of India. The case law and negotiations show an aggressive attitude on the part of Switzerland and other industrialized countries in the pursuit of enhanced patent protection. They also show the limits of such legal culture in achieving its goals.
Summary
The complainant, Novartis AG, argued that Section 3(d) of the Indian Patent Act of 1970, as amended by the 2005 Patent Amendment act, is unconstitutional and in violation of Article 27 of the TRIPS Agreement. Regarding patentability the amendment stated that “the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant”. The provision no longer allowed for unqualified ever-greening of existing substances as proposed by Ordinance 7/2004, which was dismissed by parliament and amended to include the requirement of enhanced efficacy, meaning in particular therapeutic improvement in the case of medicines. It was argued that the provision does not offer sufficient guidelines, amounting to an arbitrary exercise of power and to vagueness, contrary to Article 14 of the constitution and Article 27 of the TRIPS Agreement. The Solicitor General of India argued that the provision can be properly applied, taking recourse to expert knowledge and scientific evidence. Moreover, referring to English case law, it was argued that legislators are entitled to violate international law in the interest of general welfare. The High Court first dealt with UK precedents relating to the direct effect of European Community Law under the European Community Act. Direct effect of EU law, for obvious reasons, was dismissed as irrelevant in the case at hand. Instead, the Court cited the dualist tradition of the Westminster system which excludes direct effect of international agreements and recognizes priority of domestic law. The Court also cited US law and referred to international dispute settlement under the WTO Dispute Settlement Understanding. It denied examining of the compatibility of the amendment with the TRIPS Agreement. Also, the Court denied granting declaratory relief, as no fundamental right was found to be at stake. Furthermore, declaring that the amendment is incompatible with Article 27 TRIPS would not serve a useful purpose to the claimant as Parliament has no obligation to enact legislation. The Court limited its examination to Article 14 of the constitution. It ruled that the amendment is neither vague nor gives rise to arbitrary judgment. The amendment sufficiently conveys that a patent for a new form of a known substance can only be obtained if it shows improved efficacy and, in the case of medicines, has better therapeutic effect. The Court recalled the principles of delegation of powers and that Parliaments should limit themselves to enacting principles and laying down policy, leaving technical details to subsequent bodies. Finally, the Court referred to Articles 1 and 7 of the TRIPS Agreement, which grant adequate policy space to Members to pursue welfare goals in line with their own legal systems and practices. The Court stressed the obligation to provide health care for a population predominantly below the poverty line. Preventing ever-greening of drugs is a lawful objective in these circumstances. In assessing vagueness, it took into account that patents do not amount to fundamental rights, and thus are open to more flexibility while judicial restraint in reviewing legislation is warranted.