Cozy deals and conflict of interest mark Indian patent grant process

Cozy deals and conflict of interest mark Indian patent grant process

While it is difficult to prove specific wrongdoing in patents being granted, a Mint investigation, activists seeking transparency in India’s patent granting process as well as a report by an Austrian government entity all point to a nexus between government officials and private law firms that point to significant conflicts of interest and favouritism in the patent granting process.

Most of the 20 or so people Mint spoke to for this in-depth look at India’s patent granting process would only speak if they were not identified or if their information was used as background. Almost all the law firms named in this story declined to comment on specific questions posed by Mint.

These patent agents, often large and established law firms, who file some 90% of the patent applications in India’s four patent offices—in Delhi, Mumbai, Kolkata and Chennai—have nurtured relationships in each office and are very powerful in this commercially crucial department.

The rush in demand for patents in India has its roots in a 2004 amendment to India’s Intellectual Property Rights (IPR) law that added a few industries, such as agro-chemicals, food and drugs, to a product patent regime. It threw up an opportunity for companies— including foreign-owned ones —to patent their products in India, which, with its 1.1 billion-plus people, offers a significant domestic market for these firms.

This has in turn put professional patent filing services offered by the law firms, specializing in intellectual property law, in high demand.

“More than 80% of our clients are multinational companies, who want to file national phase applications in India," said a senior patent attorney at DePenning and DePenning, a Kolkata-based law firm that has a strong practice in Chennai, a key city because of its patent office. The attorney did not want to be named.

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De Penning is not alone.

There are at least a dozen law firms, including Remfry and Sagar, DP Ahuja and Co., Anand and Anand, RK Dewan and Co., among others, that serve a significantly large clientele base of foreign-owned firms for patent filing in India.

According to V. Rangasamy, assistant controller of patents and designs at Chennai, a majority of foreign patent applications filed in the Chennai patent office is through De Penning.

A patent official in Mumbai also notes that “there are two or three law firms, including Remfry and RK Dewan, (who) file (a) large chunk of corporate applications here".

Patents logjam

Since the new product patent regime kicked off in India on 1 January 2005, patent applications from foreign firms in the country’s four regional patent offices have shot up 300%, and the grants by 150%, according to the annual report of the Controller General of Patents, Designs and Trademarks, the Union government department that administers and monitors patents.

India issued about 11,000 patents in 2007-08, which was almost double the annual number granted in 2006. India, which has one of the most stringent patenting regimes in the world after Japan and Germany, has been granting an average 50 patents a day.

But the department has not made a proportionate increase in the staff strength. Though it initially posted 149 patent examiners, adding to some 10 staff engaged in such work in 2004, this number has been falling continuously as such experts get poached by patent agents and large companies. The department of patents and designs has lost at least 40 people in the past four years. It now has around 110 patent examiners and some 70 unfilled vacancies.

Murali Gopal Krishna, a former patent examiner from the Chennai patent office, who has filed a petition with the Central Administrative Tribunal against the department’s decision to cut his tenure prematurely, said he was regularly told by his superior officers not to raise objections in applications filed by some patent agents. He resigned last year to join a software company in Bangalore.

“The controllers used to overrule our objections while making decisions to grant patents," he said citing the example of patents granted to 36 software applications, mostly business methods, which are not patentable in India, filed by an information technology company based out of Bangalore, despite rejection of 30 applications in the first examination report.

Several firms, including International Business Machines Corp.’s (IBM) global services division “have patents granted on business methods," he said.

Responding to an email query, Satheesh Karra, counsel for intellectual property law at IBM, said: “IBM is not aware of any such allegations." He declined to name the law firm that files patent applications for his company, noting that “we don’t discuss this externally".

The problem, said a patents expert, is in the way patent rules are being interpreted.

“As of now, section 3(k) of the Indian Patents Act excludes ‘software’ per se and ‘business methods’ per se from patentability. What the term ‘per se’ means is not clear. In other words, as to what additional element has to be added to software or business methods to make them patentable is not known," said Shamnad Basheer, a patent lawyer and an associate at the Oxford Centre for Intellectual Property Research.

According to him, the US Patents and Trademarks Office has granted innumerable business method patents, including the famous “one click- check out" Amazon online shopping patent. Many scholars question the propriety of such patents, arguing that such methods of doing business are not really technological innovations worthy of monopoly protection and that a multitude of such patents unduly tax the patent office and choke online innovation.

Multiple calls made to the office of T.C. James, director, department of industrial policy and promotion (DIPP), which oversees policies related to grant of patents, to have this and other issues clarified, weren’t returned.

Corruption claims

With limited transparency in the system, allegations of corruption in the Indian patent granting process run rife.

“Bribery in patent offices is very easy to allege, but very hard to prove as there is no evidence one can produce as no transparency is maintained in the process," noted Feroze Ali, asenior lawyer in Chennai, who argued frivolousness in the Indian patent of Swiss-drug maker F Hoffman-La Roche Ltd’s ant-infection drug Valcyte, in a post-grant opposition.

Since the patent examiners’ “examination remarks are not accessible to the public, it remains a secret when they are overruled", said Basheer. He recently led a campaign to make Indian IPR system more transparent as a means to reduce corruption.

Following this campaign early this year, the National Knowledge Commission had recommended several measures, including publication of patent applications and grant details online in simple language, instead of the current practice of publishing extracts with a delay of three-six months.

Some others point to the big markups in fees charged by patent agents on filings as another sign of how some law firms can get the patent application through.

The fees for applying a patent in India are Rs4,000 for a corporate applicant and Rs1,000 for individual applicants, each filing. Law firms charge between Rs40,000 and Rs2.25 lakh as service charge per application.

To be sure, law firms often levy fees at wide variance with actual costs of rendering the service and hefty fees in itself doesn’t constitute any evidence of any wrongdoing when it comes to interacting with the patent office.

But some say often the very patent examiners, who will clear applications, are engaged by the law firms to write out patent applications in the first place. Said the same Delhi-based patent lawyer who didn’t want to be identified: “There are more serious allegations, such as these underpaid patent officers even undertake patent drafting for individual and corporate clients."

A second assistant patent controller in Chennai blithely describes that relationship as “a moral help". While also insisting on anonymity, he claimed: “We help applicants to highlight the claimable innovations in the applications," adding: “Patent drafting is very crucial in making the examiner convinced on the claims, and this is the art that often wins a grant. However, several individual applicants fail to make a perfect application though they are good at science and technology".

But the involvement of the patent examiner or the potential for a conflict of interest is never disclosed.

Pressure tactics

It isn’t just in Chennai. Elsewhere too, this procedure appears to be fairly common.

An official in the Delhi patent office, requesting anonymity, agrees patent examiners there also advise applicants or point them to a professional agent.

In Mumbai, “there are even local and multinational corporates who ‘seek’ help of examiners and controllers to get their applications drafted, thereby ensuring a grant for a price", said a leading patent lawyer from the city, who didn’t want to be identified.

Another instance of this relationship between patent officials and patent agents is the case of a former official in the Chennai patent office who was forced to return to his parent cadre in 2005.

This official, who asked not to be named, said his contract was not renewed at the patent office despite a shortage of examiners and his parent department’s willingness to extend his deputation, because he questioned a number of unfair practices, including a financial fraud involving nearly 200 patent applications early in 2005 being backdated to escape a fee of Rs400 per page for a patent agent filing from 1 January that year.

The new fee was introduced through an ordinance on 31 December 2004 and a legislation was approved by Parliament months later.

“Considering 196 applications backdated, I believe, just one patent office must have made a loss of at least Rs1-2 crore. And the same manipulation must have taken place in other offices as well," said this person. “One can clearly make out (the extent of the loss to the government) by comparing the number of applications filed in the month of December 2004 and January 2005."

When asked about this specific allegation, the same assistant controller in the Chennai patent office, responded: “Because the law was still not in effect as the Bill was delayed, it was an ‘adjustment’ to not to charge the additional fee, which was notified in the ordinance, for a few days."

Patent offices across the country witnessed a sharp increase in filing of patent applications in December 2004, while in January and February 2005, when the new patent regime came into force, the number of patent applications were comparatively less in key patent offices where these law firms file most of their applications.

“If you look at the internal register of inward applications at these offices, which is not available in the public domain, this will be clear," said the same former patent examiner. The patents offices release monthly data on approvals, but not applications filed.

A report on the Indian IPR system prepared by Austria’s Wirtschaftsservice (AWS), a public sector entity mandated to promote development of innovative firms and commercialize new technologies, in February, was forthright without the protection of anonymity.

There is, the report noted, “widespread ‘collaboration’ between patent attorneys and IP officials", and a “clear dependency of official examiners and legal representatives (patent agents) on patent drafting and searches that have been previously carried out in other national IPR jurisdictions".

The report went on to say: “Considering that the Austrian patent office has 100 examiners and approximately 3,000 annual filings, it seems impossible that 155 or 230 examiners can handle more than 30,000 applications annually, unless they simply follow the research reports of US patent office and Japanese patent office (and the weight of bribery)."

AWS prepared this Indian enquiry report for the Austrian ministry of commerce and labour after interviewing several officials at the four patent offices in Delhi, Kolkata, Chennai and Mumbai, including N.N. Prasad, joint secretary at DIPP, and executives and lawyers in 16 law firms located at these regions.

Controller general of patents, designs and trademarks V. Ravi declined to comment for this story. Calls made to his office, visits to his Mumbai office, and an email query remained unanswered.

Red tape

Despite this report and others pressing for reforms, for patent agents, it is business as usual. Some are even boastful of their success rate in filings.

“More than 95% of our total 6,500 filings in the country have been granted patents," said a lawyer with a leading law firm in Chennai, who also didn’t want to be identified. “We are comfortable with Chennai patent office as we know them (the officials) very closely."

While De Penning is a very strong player in Chennai, Remfry, Ahuja are key players in Delhi, Mumbai and Kolkata respectively, according to patent examiners in the regional patent offices. A second lawyer from De Penning said that the firm’s “grant rate" is more than 95% at the Chennai patent office.

A Remfry & Sagar executive in its Gurgaon office said he could not comment for this story as the firm typically doesn’t talk to the media.

Mohan Dewan, a senior patent attorney and partner at RK Dewan and Co., a Mumbai-based law firm specializing in IPR, said: “As far as we are concerned, we will not take a case, which is not crackable. I would say virtually every application that we have filed has been been granted." The firm files most applications of its clients in the Mumbai patent office.

There is no suggestion that either RK Dewan or any of the law firms noted here have done anything illegal in building such impressive success rates with filings on behalf of their clients.

Indeed, a “majority of our patent applications are through the international patent filing route (Patent Cooperation Treaty, or PCT) by multinational clients. Most of them are already granted in other parts of the world, including the US and Europe, and they are ought to get same treatment in India too. So, there is no controversy involved in the high rate of patent grants," said the lawyer at the Chennai law firm that claims a 95% success rate in its patent filings.

Not everyone buys that argument.

“Since the US law is too liberal, any claims such as minor modifications, incremental innovations or even business methods are patentable, but Indian law doesn’t allow such claims for granting a monopoly, unless they contribute significantly to its use," said Basheer, the patent expert.

Meanwhile, for large companies filing patents in India, the law firms offer a process that helps them to not deal with red tape.

“It is always hassle-free to proceed the national phase applications through experienced and capable patent agents in India, since most of our patent filings are handled by our parent organization through Patent Cooperative Treaty," said a senior F Hoffman-La Roche executive, who didn’t want to be named.

PCT is the international patent filing body that channels applications to respective countries where the applicant wants to secure patents.

With such prolific granting of patents—India grants an average of 50 patents a working day with 120 patent examiners on its rolls—it is not surprising that one granted in one patent office infringes another granted elsewhere.

Some recent examples include a court case between Eureka Forbes Ltd and Hindustan Unilever Ltd, related to double patenting of a water purifier technology, and the controversial patent of Bajaj Auto Ltd for a twin spark ignition technology, which was challenged by Chennai-based two-wheeler firm TVS Motor Co. Ltd.

Since litigations are expensive, said Gopakumar Nair, a patent consultant in Mumbai, only those seeing a clear return on opposing a patent will do so. “, many patents, which do not actually deserve a grant, would also be able to enjoy market monopoly by being not opposed," he said.

Meanwhile, some experts said that the bigger problem stems from what they see as the frivolous nature of some patents that are being granted.

“The implication of such decisions is serious, though the granting authority is not often very careful while taking the same," said D. Vedaraman, a Mumbai-based consumer activist.