US patent reform seen helping Indian firms

US patent reform seen helping Indian firms
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First Published: Tue, Feb 19 2008. 01 00 AM IST
Updated: Tue, Feb 19 2008. 01 00 AM IST
Mumbai: Indian pharmaceutical firms, which make most of their revenues and profits from the manufacture of off-patent, or generic, drugs, are set to play a larger role in the US, the world’s biggest drug market.
That is, if a US plan to reform patent laws by including provisions for what is called post-grant opposition to patents and limiting avenues for extending patent protection for medicine companies becomes law.
The immediate impact of the law change will be to ease challenges on drug patents and also lower legal costs in such challenges.
The changes anticipated in the Patent Reforms Act, which has already been passed by the US House of Representatives in February, would allow opposing a patent after its grant in the US, as is possible in countries such as the UK, Germany and India, along with a general tightening of patentability rules in the US.
It would also, to a large extent, halt the tactics of research-based drug giants in the US to include all possible claims in the patent application by modifying it several times during the life of a patent through what is known as “ever-greening”.
With the reforms, the US patent office sought to limit the number of times to two that a patent applicant can file “continuations” of patents. Currently, there is no limit on the number of times that a patent holder can keep updating its patent claims through such filings. The draft law is now under consideration of the US Senate.
The patent reforms in the US are aimed at eliminating frivolous patents as also invalidating several existing patents that have received such protection through “continuation” filings based on simple modifications. This would help generic players to enter the market with more products as the legal expenses will go down.
Patent experts said that the reforms that the US has initiated are an attempt to harmonize its patent law with the rest of the world, which follows a comparatively higher threshold for patentability.
The new rules, for instance, will replace the current US system that grants patents to applicant who can prove “first-to-invent” status with a “first-to-file” regime in force in others countries.
With the provision of post-grant opposition, generics companies will get a new opportunity to argue against the unsubstantiated claims made by the patent holder without going to court of law or infringing the patent—both expensive options.
Once the opponent to the patent wins the post-grant opposition, then the inventor’s position will be substantially weakened as a technical body (the US Patent and Trademarks Office, in this instance) has already overturned the patent claim, said Gopakumar Nair, chief executive of Gopakumar Nair Associates, a Mumbai intellectual property advisory firm.
“The three major changes expected in the US patent rule are the ones already incorporated in Indian patent rules. Though the Indian rules were widely criticized by the US in the past, it wants to follow us now,” notes Yusuf Hamid, chairman of Cipla Ltd, ranked among India’s top three drug makers by revenue.
According to him, the post-grant opposition will allow opponents of a patent an opportunity to argue their case in the patent office, though applying for re-examination of a patent is currently allowed in the US.
According to Shamnad Basheer, a patent expert at the Oxford University’s Intellectual Property Centre, the changes to the US patent rules will widen the scope of the current “re-examination” procedure.
Since this is cheaper than litigation, it is expected that a number of Indian generics will prefer this remedy. And, if the patent is cancelled, any generic firm can enter the market immediately after getting approval from the industry regulator.
In contrast, currently generic firms have to file what are called Para IV filings, under the Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch-Waxman Act, which allows the challenger to find loopholes in patents.
In the filing, patents are circumvented by either finding a fault in it or proving that the generic equivalent is “non-infringing”. Typically, this process which ends up in courts, lasts for less than a year but can be very expensive.
“Post-grant opposition in the US will be good as it provides an alternative forum, other than expensive litigation, to tackle patents given to dubious inventions,” said drug maker Ranbaxy Laboratories Ltd’s executive director Ramesh Adige. “Overall, (the US reform) does bring a global standard to patent litigation.”
The reforms in the US patent law was triggered by the US Supreme Court, for raising “patentability” standards. While reacting to the very liberal test for determining “non obviousness” or “inventive step” by a lower court last year, the court had asked to raise the threshold for patentability. Under the apex court’s direction, the lower courts have already begun to apply tighter standards while taking decisions on patent litigation, say experts.
Another recommendation by the court was that an injunction in a patent case should not be automatic but should instead depend on the facts of the case. Subsequently, in several electronics and information technology cases, the courts have not granted injunctions but only damages. “If applied to pharma, this would greatly favour the generic companies,” said Basheer.
“At first sight, these bills seem to be pro-generic. Since several bills are awaiting deliberation, we would need to see the fineprint and the final form (in which) these bills are cleared,” said a senior patent executive, who preferred anonymity, at Sun Pharmaceutical Industries Ltd, one of the active Indian companies in the US generics market.
The US patent reforms, if passed by the Senate, will also have provision for compensatory damages, among the most controversial provisions in the Act, and being opposed by big drug companies. Currently, in most of the cases involving patent infringement, the court grants damages based on what is called the “entire market value” rule.
Under current rules, if a challenger is found guilty of infringement, it is liable to pay as much as three times the sales of the drug under dispute for the period the generic variant was in the market. This poses a big risk for generic challengers.
The amendments will value such fines based on the value addition that the patent owner can demonstrate in its product over other existing drugs.
It is unclear when the Senate will vote on the proposed legislation.
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First Published: Tue, Feb 19 2008. 01 00 AM IST