The Mailbox and Exclusive Marketing Rights

1The Patents (Amendment) Act 1999 newly introduced a sui generis right known as the Exclusive Marketing Rights or EMR. (Chapter IVA was introduced by the Patents (Amendment) Act 1999 with retrospective effect from 1 January 1995.) The amendment also provided for a system of filing product patent applications for pharmaceuticals and agricultural chemicals in advance through a means popularly known as the 'mailbox' or 'black-box'. (TRIPS Agreement, arts 70(8) and (9).) These measures were brought into the Patents Act as a transitional arrangement in the manner provided for under the TRIPS Agreement. EMR is a patent-like right granted in anticipation of a patent. Since its introduction, EMR has been granted to some major pharmaceutical players, including, Novartis India Ltd for its life-saving, anti-cancer drug Glivec or Gleevec (Imatinib mesylate) and Wockhardt India Ltd for its topical anti-bacterial drug Nadoxin (Nadifloxacin). In both the cases, infringement suits were instituted against the competitors after the grant of EMR and subsequently, the patent applications based on which EMR was granted came to be rejected by the Controller of Patents in 2006. (See Novartis AG v Adarsh Pharma (2004) 3 CTC 95, (2004) 29 PTC 108 (Mad); Novartis AG v Mehar Pharma (2005) 30 PTC 160 (Bom); Intas Laboratories Pvt Ltd v Novartis AG (2005) 1 CTC 27 (DB), (2005) 1 MLJ 309 (DB); Wockhardt Ltd v Hetero Drugs Ltd (2006) 32 PTC 473 (Mad); Wockhardt Ltd v Hetero Drugs Ltd (2006) 32 PTC 65 (Mad) (DB); Hetero Drugs Ltd v Wockhardt Ltd (2006) 32 PTC 479 (SC).) As the provisions of ch IVA were in the nature of a transitional arrangement, the Patents (Amendment) Act 2005 has omitted ch IV A, but has saved all EMR granted prior to 1 January 2005.

Origin of EMR

2By becoming a member of the WTO, India had agreed to conform its intellectual property laws with the requirements of the TRIPS Agreement. Accordingly, the Patent Act was amended in 1999, 2002 and 2005 to meet India's international obligations. The TRIPS Agreement offers patent protection for any invention, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step, and are capable of industrial application. India had undertaken to align its patent laws with TRIPS by 1 January 2005. A 10-year period was granted to developing countries like India to align their patent laws so as to provide patent protection for food or drugs. In return, India had agreed to offer some concessions during this transition period, the most significant of these being the grant of EMR for products patented in other countries, pending consideration of the product patent applications in the Indian Patent Office. Earlier only process patents were granted for medicines and drugs by the Indian Patent Office. This allowed Indian pharmaceutical companies to manufacture drug products patented elsewhere by using a different process. EMR was introduced to curb such unregulated replication of patented drugs.

3During the Uruguay Round of the WTO negotiations, the developed countries introduced EMR as step to enter into the markets of the developing countries that did not offer patent protection for food, medicine or drug. It seems very likely that the concept of EMR evolved from a US federal legislation, the Hatch-Waxman Act 1984. (The Drug Price Competition and Patent Term Restoration Act.) The said Act provides for exclusivity to the innovator for a period of at least five years—a period which is much akin to the period of EMR. The grant of EMR would offer patent-like protection which the foreign companies would not have enjoyed, given the loose form of patent protection offered by the developing countries. A close analysis of events preceding the introduction of EMR in India would reveal that India was pressurised by the developed countries into accepting the proposition of granting EMR.

Dispute Before the WTO Panel

4The issue of EMR was brought into the fore by the United States before the Panel of the WTO's Dispute Settlement Body. The European Community (EC) later intervened as a third party, but had chosen not to join the United States as a co-complainant. The key issue in United States v India was whether India had established a mechanism that adequately preserved novelty and priority with respect to patent applications covering pharmaceutical and agricultural chemical inventions given that under the Indian Patents Act substances classified as 'food, medicine or drug' were not entitled to patent protection. ('India –Patent Protection for Pharmaceutical and Agricultural Chemical Products', WT/ DS50/R, 5 September 1997.) The provisions relevant to the dispute were arts 70(8)(a) and 70(9) of the TRIPS Agreement.

5Article 70(8)(a) of the TRIPS Agreement imposes on the member states the obligation to establish 'a means' by which patent applications for pharmaceutical and agricultural products can be filed. It states that, where a member does not make available as of the date of entry into force of the WTO Agreement, patent protection for pharmaceutical and agricultural chemical products commensurate with its obligation under art 27, that member shall, notwithstanding the provisions of Part VI, provide as from the date of entry into force of the WTO Agreement a means by which applications for such inventions can be filed. Article 70(9) of the TRIPS Agreement states that where a product is the subject of a patent application in a WTO member country, EMR shall be granted for a period of five years after obtaining marketing approval in that country or until a product patent is granted or rejected in that country, whichever period is shorter. This is subject to the fact that a patent application has been filed and a patent granted for that product in another member country and marketing approval has been obtained in that country after 1 January 1995.

6On 31 December 1994, a day before the WTO Agreement came into force, the President of India promulgated the Patents (Amendment) Ordinance in order to establish a means for filing mailbox applications. As the Parliament was not in session, the Ordinance automatically lapsed six weeks after it reassembled in February 1995. A Bill attempting to implement the contents of the Ordinance was approved, but it was never enacted into law due to the dissolution of Parliament in May 1996.

7The Government of India maintained that certain 'administrative instructions' issued in April 1995 continued the mailbox system established by the Ordinance. India maintained that the purpose of art 70(8)(a) of the TRIPS Agreement is to ensure that the member received patent applications from 1 January 1995, and maintains a record of them, on the basis of which patent protection could be granted in 2005, the year that the patent provisions of the TRIPS Agreement enter into force for India. India argued that TRIPS did not require legal certainty that the patent applications and the patents based on them will not be rejected or invalidated in the future. India also maintained that the purpose of the EMR provision under art 70(9) was to enable developing countries to postpone legislative changes.

8The United States, on the other hand, maintained that under art 70(8), reasonable assurances of treatment for mailbox applications must be provided. The United States further contended that the obligation to provide EMR in art 70(9) became effective upon entry into force of the WTO Agreement in 1 January 1995, and not in 2005, as India argued. The WTO Panel concluded that India did not comply with its obligations under art 70(8)(a) of the TRIPS Agreement, and violated its obligation to provide EMR during the transitional period under art 70(9). The WTO Appellate Body upheld the panel's conclusions. ('India–Patent Protection for Pharmaceutical and Agricultural Chemical Products', WT/DS50/AB/R 19 December 1997.)

9As a result of the WTO Panel's decision which was upheld by the Appellate Body, the Indian Parliament passed the Patents (Amendment) Act 1999. The Act, which was made to have retrospective effect from 1 January 1995, endorsed the patentability of pharmaceuticals, but postponed acceptance of applications until after 31 December 2004. As a prelude to full implementation in 2005, the Act provided that applicants may immediately receive EMR.

The Grant of EMR

10Compared to the large number of mailbox applications made to the Patent Office, the number of EMR applications have been far and few. Two instances of the grant of EMR, ie, to Novartis India Ltd for Glivec (imatinib mesylate) and Wockhardt India Ltd for its Nadoxin (nadifloxacin), have lead to contentious proceedings both before the Controller of Patents as well as the high courts. The EMR granted to Glivec, being the first grant from the Patent Office, is discussed below in detail.

11In November 2003, the Controller of Patents granted EMR to Novartis, for its patented anti-cancer drug, Glivec used in the treatment of Chronic Myeloid Leukaemia (CML) and Gastrointestinal Stromal Tumours (GIST). The drug containing imatinib mesylate did not enjoy patent protection in India, though it was patented in various countries. However, under ch IVA of the Patents Act, Novartis was able to obtain EMR for imatinib mesylate which allowed Novartis to exclusively sell or distribute the drug. This move affected many Indian pharmaceutical companies who had been manufacturing the same drug under different trade names.

12The procedure of granting the EMR is quite unique. Though the EMR grants a patent-like protection to the holder, it does not follow a patent-like procedure in its grant. The grant of EMR results in an exclusive right to sell or distribute the drug covered by the grant. There is no provision for anyone to oppose the grant of EMR at, before or after, its grant. Whereas the Patents Act has rigorous procedures for opposing a grant of a patent. It is submitted that the procedure for the grant of EMR is against the principles of natural justice, and can result in arbitrary exercise of the power in granting the EMR. In short, EMR can be used as an instrument to get quick monopoly right to sell or distribute a drug without any opposition over the grant.

13Chapter IVA of the Patents Act, as it existed before the Patents (Amendment) Act 2005, dealt with EMR. Under s 24A of the Act, as it was before the Patents (Amendment) Act 2005, the Controller is required to refer the application for patent to an examiner for making a report as to whether the invention is not an invention within the meaning of the Act in terms of s 3 or s 4, before granting the EMR. The language of s 24 A(1) clearly states that such a reference is mandatory. Under s 24A(2) the Controller has the power to make other investigations if needed.

14Section 24B of the Patents Act, as it was before the Patents (Amendment) Act 2005, contained the conditions for the grant of EMR. The preconditions stipulated under that section were:

(1) the applicant should have made a claim for a patent covered under sub-s (2) of s 5 of the Act; (2) an application for the same invention should have been filed in a convention country on or after 1 January 1995; (3) the patent and approval to sell or distribute the invention should have been granted in that country on or after the date of making a claim in India; and (4) the approval to sell or distribute the invention should have been granted by the concerned authority in India.

15Upon the satisfaction of these conditions, EMR is granted from the date of approval till a period of five years or till the date of grant of patent or the date of rejection of application for the grant of patents whichever is earlier. The grant of EMR assures a patent-like protection to be extended to the product even before the patent application is processed.

16Such an interim arrangement of granting a monopoly through summary procedure was expected to have uncertain consequences. In the event of the patent application failing to materialise in the form of a grant, it would mean that the EMR holder has had a monopoly in selling or distributing products during the period of the EMR. It would mean that the EMR holder has had an unjustified monopoly to exclusively exploit new markets without the backing of a right to do so. The issues as to what could be the consequence of the infringement suit in the event of rejection of EMR, and whether the competitors could have a claim for damages are dealt with below.

Infringement of EMR

17The infringement actions filed by Novartis and Wockhardt have generated a spate of proceedings before the Supreme Court and various high courts. (Novartis AG v Adarsh Pharma (2004) 29 PTC 108 (Mad); Novartis AG v Mehar Pharma (2005) 30 PTC 160 (Bom); Intas Laboratories Pvt Ltd v Novartis AG (2005) 1 CTC 27 (DB), (2005) 1 MLJ 309 (DB); Wockhardt Ltd v Hetero Drugs Ltd (2006) 32 PTC 473 (Mad); Wockhardt Ltd v Hetero Drugs Ltd (2006) 32 PTC 65 (Mad) (DB); Hetero Drugs Ltd v Wockhardt Ltd (2006) 32 PTC 479 (SC).) The details of the infringement actions are dealt under separate headings.

Imatinib Mesylate Infringement

18Section 24E of the Patents Act provides that all suits for infringement of a right under s 24B shall be dealt with in the same manner as if they were suits concerning infringement of patents under ch XVIII. Pursuant to the grant of EMR for its patented drug Glivec (imatinib mesylate), Novartis was quick to initiate infringement action against Indian generic manufacturers. Novartis instituted a series of infringement actions before the Madras High Court and the Bombay High Court. (Novartis AG v Adarsh Pharma (2004) 3 CTC 95, (2004) 29 PTC 108 (Mad).) While the Madras High Court granted interim injunction in favour of Novartis, the Bombay High Court refused to grant injunction. (Novartis AG v Mehar Pharma (2005) 30 PTC 160 (Bom).)

19It is interesting to note that on similar set of facts, the two courts took diametrically opposite views on the issue of the grant of interim injunction. The decision of the Bombay High Court, as it came later in time, had the benefit of perusing the order of the Madras High Court granting interim injunction restraining the Indian manufactures from manufacturing the drug covered by the EMR. On the issue of grant of interim injunction, the Bombay High Court differed with the order passed by the Madras High Court, and concluded that the Madras High Court had not properly considered the settled law in the matter of grant of temporary injunction in relation to a patent of 'recent origin'. The court held that the plaintiffs were not entitled to the temporary injunction sought by them. (Ibid.)

20At the heart of the controversy is the applicability of a long-standing rule—whether an interim injunction can be granted for a patent of 'recent origin'? In the arguments canvassed before both the high courts, a plethora of decisions on the aforesaid issue were referred to and relied upon. Before the Madras High Court, it was submitted that since the EMR was of a 'recent origin' and once a challenge to the validity of the same is made, the court should not ordinarily grant an injunction. Reliance was placed on the decision of the same court in Manicka Thevar v Star Plough Works, where it was held that an injunction will not be granted if the patent is a recent one and where the defendant disputes the validity of the grant. (AIR 1965 Mad 327.) With regard to the criterion for determining the recent origin of a patent, the court formulated a proposition that any patent less than six years old was regarded as a recent one. The above ruling was considered and followed by other high courts on various occasions. (See Boots Pure Drug Co v May & Baker 52 CWN 253; Hindustan Lever Ltd v Godrej Soaps Ltd AIR 1996 Cal 367.) The Madras High Court distinguished the decision of Manicka Thevar by concluding that, since the validity of the EMR is for a period less than six years, then, a fortiori, the six-year rule of 'recent origin' will not apply. (AIR 1965 Mad 327.)

21It is submitted that the above finding is incorrect on two accounts. First, a rigid reading of the six-year rule to mean nothing but six full years contributed to the finding that the EMR was for a shorter period than six years, and hence the rule will not apply. The six-year rule, which was formulated many decades ago, had its emphasis on the existing state of art, and implied that an invention would be deemed as new during the first six years. By no means can it be assumed that the six-year rule will apply uniformly to all fields of technology. The emphasis of the rule was on the fact that an invention would be open to challenge in its initial years.

22Secondly, it was erroneous to hold that the 'EMR' is of recent origin when the rule requires that the 'patent' should be of recent origin. As the EMR is granted on the basis of an earlier patent granted in another country, it would be incorrect to compare the term of the EMR, equate the same with the term of a patent, and conclude that the recent origin rule will not apply. Rather, the term of the earlier patent (foreign patent), and the date of its grant should be the relevant factors. In the instant case, the earlier patent came into force in August 2002, and would qualify for an invention of recent origin by any measure.

23It is a settled law that the grant of an interlocutory injunction is a matter of discretion, and depends on the facts and circumstances of each case. (American Cyanamid Co v Ethicon Ltd [1975] AC 396, (1975) RPC 513.) But the law remains uncertain when two high courts, on identical set of facts and circumstances, take opposing views on the issue of the grant of interim injunction. For cases dealing with transitory rights like EMR, an interim order rendered by the court can be very critical and can have the effect of conclusively deciding the case, more so when the case involves a life-saving drug. (See Roussel-Uclaf v GD Searle [1977] FSR 125, pp 131-132, where the court held that as there was no precise equivalent for the drug and as the drug could be life-saving, the balance of convenience was against the grant of an injunction. However, the above ruling was not relied upon in Biogen v Medeva (1993) RPC 475, p 483.)

24It is pertinent to note that in confirming the interim injunction granted in favour of Novartis, the Madras High Court had in fact granted a prayer which was beyond the scope of s 24B. The interim prayer sought for an order against the defendants from manufacturing for sale, selling, marketing and exporting their EMR protected anti-cancer drug. Section 24B restricts the EMR so granted on two accounts. First, EMR confers a right only to sell or to distribute the protected product. It does not confer any right and any consequent restraint over its manufacture and export. Secondly, the application of EMR will be limited to India as clearly stated in the above section. It would be beyond the scope of the section to restrain exports to countries where the drug does not enjoy any form of protection. It may be argued that since sale or distribution is prohibited in India, manufacture of the drug should also be precluded, as it is a prelude to the sale. Such a contention will have to be studied in the light of the Patents (Amendment) Act 2005 which has introduced a new provision for the export of patented pharmaceutical products in certain exceptional circumstances. (Patents (Amendment) Act 2005, s 92A.) On an application taken by one of the defendants, the court clarified and restricted its order to selling or distributing in India.

25The Novartis case was the first case in which the post-WTO amendments to the Patents Act came under judicial scrutiny. The case is said to have brought out important interpretational issues that can have a bearing on interpreting the provisions of the Patents Act introduced in the light of the TRIPS Agreement. The two important interpretational issues are summarised under the following headings.

26In interpreting the scope of s 24A, the court held that though the section specifically excluded the operation of s 12(1) of the Patents Act, inasmuch as s 12(1) provided for an examination under s 13, the requirements of s 13 also stood excluded from the purview of ch IVA. Based on this reasoning, the court concluded that an application by previous publication or by prior claim has no relevance while examining the patent claim in the context of deciding to grant or not to grant an EMR. (Novartis AG v Adarsh Pharma (2004) 29 PTC 108, p 120.) It has been observed that the court misinterpreted the legislative intent in referring to the claim though for a limited purpose of examination. A perusal of the grounds in s 3 will show the importance of an examination of novelty of the claim. Grounds (d), (f) and (p) of s 3 deal with concepts like 'known substance', 'known process', 'known devices' and 'known properties', the establishment of all of which will require an examination of novelty. This fact is made clear in the language of s 24A where a reference must be made to an examiner for making a report as to whether the invention is not an invention within the meaning of s 3 or s 4 of the Patents Act. The TRIPS Agreement is silent about an inquiry while granting EMR. (TRIPS Agreement, art 70(9).)

27The other interpretational issue triggered by the Novartis case pertained to the issue of applicant of EMR." (Novartis AG v Adarsh Pharma (2004) 29 PTC 108, pp 123-126.) "For the grant of EMR, the same person should be the applicant in the patent application and for the market approval in India as well as abroad. Section 24B clearly indicates that the duty of fulfilling the obligations under sub-cl (a) rested on the applicant. The same applicant should have 'filed an application in a convention country', and should have been granted 'the patent and the approval to sell or distribute the article'. Form 27, as it was before the Patents (Amendment) Rules 2005, in which an application for EMR was to be made, throws more light on the issue of who can be the applicant. In cll (c), (e) and (f) of Form 27, the applicant has to make a declaration that the applicant has made the applications in convention country for which patents have been granted, that the applicant has been granted marketing approval, and that the applicant has obtained approval for marketing in India. This leads to an unmistakable conclusion that the applicant for the EMR should be the same person who is required to fulfil the obligations under s 24B. The application of the doctrine of 'single economic unit' by the court for the purpose of treating Novartis AG and its Indian subsidiary Novartis India Ltd as one entity for the purpose of determining the applicant under s 24B goes beyond the scope of the section, and the legislative intent behind it. (Novartis AG v Adarsh Pharma (2004) 29 PTC 108.)

Nadifloxacin Infringement

28The second case involved a process patent for benoquinilozines granted in favour of the plaintiff, Wockhardt. (Wockhardt Ltd v Hetero Drugs Ltd (2006) 32 PTC 473 (Mad).) The plaintiff had also made an application for a product patent as per sub-s (2) of s 5 of the Patents Act, and was granted manufacturing licence for Nadifloxacin 1 percent cream by the Controller General of Drugs. With the grant of EMR for Nadifloxacin, the plaintiff moved the court for restraining its competitors. The respondent was manufacturing Nadifloxacin 1 percent cream under the trade name Nadiderm which was licensed from patents in the US and Japan. The court of first instance was of the prima facie view that the respondent could not be injuncted from manufacturing and marketing Nadiderm on the strength of the manufacturing licence given by the Controller General of Drugs, and by the fact that the product of the respondent was manufactured and marketed based on the US and Japan patents. (Ibid, p 478.) On appeal before the Division Bench of the Madras High Court, the order of the single judge was reversed. The Division Bench based its reasoning on the fact that no material was produced by the respondent to show that the product was manufactured and marketed by adopting the US patent and the Japan patent. It also stated that the patent documents relied upon by the respondent did not show the product in the form of a cream, which was the subject matter of EMR. (Wockhardt Ltd v Hetero Drugs Ltd (2006) 32 PTC 65 (Mad) (DB).) The matter was taken to the Supreme Court where the order of injunction granted by the high court was modified and confined to the manufacture of Nadifloxacin cream 1 percent only. (Hetero Drugs Ltd v Wockhardt Ltd (2006) 32 PTC 479 (SC).)

Opposition Proceedings and EMR

29Every patent discloses information about the area in which the invention is claimed. The patent system—a term that signifies the conglomeration of all the patents granted, pending applications and information disclosed through patents or otherwise amounting to prior art—can itself be considered as an information bureau providing scientific and technological information. Opponents to a patent play the crucial role of supplying information that is not available to the Patent Office. The summary nature of the grant of EMR did not provide for any opposition proceedings.

30The EMR granted to Novartis for its drug Glivec, and to Wockhardt for its drug Nadoxin resulted in infringement suits. The patent applications for both the drugs were eventually rejected by the Controller. In January 2006, the Patent Office at Madras refused to proceed with the application for Glivec. In June 2006, the patent application for Nadoxin was refused by Patent Office, Mumbai. With the rejection of patent applications for the above drugs, the EMR stands automatically rejected.

31The patent application for the anti-cancer drug Glivec was filed on 4 July 1998. (Patent Application No 1602/MAS/1998.) The opposition before the grant under s 25(1) of the Act was held on 14 October 2005 before the Controller of Patents. On 25 January 2006, the Controller of Patents refused to proceed with the patent application for the above drug pursuant to opposition proceedings initiated by the competitors. With the rejection of patent application, the foundation on which the EMR was granted stands demolished, leaving thoughtful questions on what happens when the law provides for a monopoly in the present, anticipating a right that may or may not be granted in the future.

32The EMR granted for Glivec was in force for more than two years. The refusal by the Controller to proceed with the application will have the effect of treating the application as void ab initio. Most of the issues raised before the Controller of Patents at the time of the opposition proceedings were also raised by the competitors in the infringement suit filed by Novartis in different high courts. Though the courts did not get into the details of the validity of the grant, some pertinent issues have arisen with regard to initial proceedings before the Controller of Patents at the time of the grant of EMR.

33Under s 24A of the Act, the Controller was empowered to refer the patent application to an examiner for making a report on whether the said invention came under the excluded category of inventions detailed in ss 3 and 4 of the Act. It is not know whether such a reference was made and if such reference was made, what its outcome was. Section 3 contains exhaustive grounds on which an invention will not be regarded as patentable. One of the grounds for rejecting the patent application was that the drug was not an invention under s 3(d) of the Patents Act. Ideally, the examination under s 24A should have revealed that the drug was not a patentable invention under s 3(d), and it was only a new form of a known substance as held later by the Controller. This lapse could be directly attributed to the lack of opposition proceedings before the grant of EMR.

34In a suit for infringement of patent, the high courts have to look into the validity of an invention if the defendant raises any of the grounds of revocation as a counter-claim. However, the courts are not obliged to look into the validity of a grant at the interim stage. But where the grant was based on a summary procedure devoid of any opposition mechanism, and where the courts were urged with details of invalidity, the courts could have considered the issue of validity as a preliminary issue. The Bombay High Court did consider the issue of validity is some detail. (Novartis AG v Mehar Pharma (2005) 30 PTC 160 (Bom).) Ironically, the patent application was rejected by the Controller on the same ground on which a revocation was prayed for before the high courts.

35The Patent Office must determine, at the first instance, that the conditions for the grant of EMR are satisfied before the grant. In the opposition proceedings before the Controller it was alleged that the application filed in India on 17 July 1998 as a convention application claimed Swiss priority, when Switzerland was not a convention country on that date. The Controller agreed with the merit in the above contention. This raises critical questions about the information supplied at the time of application. More so, in the light of the allegation that the EMR holder had mislead the Patent Office was specifically raised before the Bombay High Court. (Novartis AG v Mehar Pharma (2005) 30 PTC 160 (Bom).)

36The summary nature of the grant of EMR appears to be the root cause for the above anomalies. To begin with, the nature of grant of an EMR was discreet and discretionary. The summary nature ensured the entire process was accomplished quickly without the fanfare of publication and the opposition that usually followed it. The opposition proceedings before the Controller clearly indicate that the knowledge about an earlier invention or a disclosure should essentially come from the competitors who have expertise in that particular field of technology.

Public Interest and EMR

37In the Novartis case, the Madras High Court restrained the competitors from manufacturing any generic version of the patented drug. The competitors took that matter on appeal. (Intas Laboratories Pvt Ltd v Novartis AG (2005) 1 CTC 27 (DB), (2005) 1 MLJ 309 (DB).) "One of the key issues that arose before the Division Bench was the pricing of the anti-cancer drug. The six Indian pharmaceutical companies who have been manufacturing Imatinib mesylate were doing so at one-tenth of its price of Novartis' Glivec. Serious concerns were raised as to the affordability of the drug to patients who were currently undergoing treatment for cancer if other pharmaceutical companies manufacturing cheaper versions were not allowed to manufacture the drug. Novartis countered this by stating that it had introduced its free drug distribution programme called GIPAP (Glivec International Patient Assistance Program) in India, and that it could take care of public interest.

38On this issue, the Division Bench opined that the issue of public interest of the patients who were suffering from Chronic Myeloid Leukaemia (CML) deserves serious concern, and remarked that the public interest should not be made to suffer on account of legal battle between the trading parties. In the light of the above observation and an undertaking given by Novartis, the conditions imposed in the GIPAP were relaxed by the Madras High Court to the following effect:

(1) Novartis would supply Beta Crystalline form of Imatinib Mesylate (Glivec) to all the patients, who are suffering from Chronic Myeloid Leukaemia (CML), and are earning less than Rs 3,36,000 per month; (2) In the case of patients suffering from CML, who are entitled for insurance for CML, any amount which falls short of insurance policy shall be met by Novartis; (3) Similarly, in the case of patients suffering from CML, who are covered under reimbursement scheme, any amount falling short of reimbursement shall be met by Novartis; (4) Beta-Crystalline form of Imatinib Mesylate (Glivec) medicine required for the patients, who are diagnosed as suffering form CML by whichever hospital, shall be supplied by Novartis to the hospitals as per their requirement, and the hospitals while placing such orders shall also inform Novartis, the amount that would be met by the insurance company (reimbursing authority) and the amount to be met by Novartis. (Intas Laboratories Pvt Ltd v Novartis AG (2005) 1 CTC 27 (DB), (2005) 1 MLJ 309 (DB).)

39Though not exclusively the domain of law, programmes of drug donations may influence the way the court moulds an interim relief. In the Novartis case, the GIPAP programme weighed as a factor, albeit indirectly, in preventing other companies from selling or distributing the drug in India. The GIPAP, which is currently administered by The Max Foundation, contains a number of qualifications. (Details of GIPAP programme are available at https://maxaid.org/, accessed on 11 July 2006.) To avail the benefits of the GIPAP, the patient should come under the medical qualifications, financial qualifications and other qualifications imposed by the Max Foundation. In fact, pharmaceutical companies have developed special drugs, and have made them available through various drug donation programmes. Of special mention would be Merck's donation of its drug Mectizan (ivermectin) for treatment of river blindness, Glaxo Smithkline's donation of its drug albendazole for treatment of filariasis, Pfizer's anti-trachoma initiative, and Novartis' donation of multi-drug therapy for leprosy. (See Henry Grabowski, 'Patents, Innovations and Access to New Pharmaceuticals', Journal of International Economic Law, 2002, vol 5, pp 849, 858-859.)

40The order of the Division Bench altered the GIPAP substantially. First, the GIPAP calls for diagnosis of CML by a person who is qualified to diagnose, treat and constantly monitor CML patients. Additionally, GIPAP requires that the patient's physician and clinic must be qualified, and that the patient should make a request and be granted approval by the Max Foundation to participate in GIPAP. These medical qualifications have now been relaxed to persons 'who are diagnosed as suffering from Chronic Myeloid Leukaemia by whichever hospital'. Secondly, the order brings flexibility to the financial qualifications imposed by GIPAP to include persons with insurance and reimbursement. The order also clarifies that persons with insurance or reimbursement cover will not be excluded from the GIPAP. Novartis undertook to provide for that portion of the treatment which is not covered by insurance or reimbursement. Thirdly, the GIPAP, which was uniquely designed to provide drugs to individual patients as opposed to other free-drug distribution programmes, which supplied the drugs through hospitals and other organisations, will now supply drugs directly 'to the Hospitals as per their requirement'. The order assumes significance in the light of the recent initiative by the Ministry of Chemicals to bring down the price of cancer drugs by amending the Drugs (Prices Control) Order 1995.

EMR after the Patents (Amendment) Act 2005

41The Patents (Amendment) Act 2005 omitted ch IVA of the principal Act dealing with EMR and provided for certain transitional provisions. The said amendment introduced certain provisions to protect the interest of the generic manufacturers who have been manufacturing certain drugs patented elsewhere. (See Patents Act 1970, s 11A(7).) Section 11A(7) deals with certain privilege and rights granted to the patentee during the period from the date of the publication for patent till the date of grant. It grants certain deeming rights 'as if a patent for the invention had been granted on the date of publication.' The proviso to s 11A(7) limits the patent holders right to only 'receive reasonable royalty from such enterprises (Indian manufacturers) which have made significant investment and were producing and marketing the concerned product prior to 1 January 2005 and which continue to manufacture the product covered by the patent on the date of grant. It also states that no infringement proceedings shall be instituted against such enterprises.

42As the above provision pertains to applications made under s 5(2) of the Patents Act, a question naturally arises as to whether certain manufacturers of a product covered by EMR could avail the benefit of this provision. It is pertinent to note that s 78 of the Patents (Amendment) Act 2005 states that EMR granted prior to 1 January 2005 shall continue to be effective with the same terms and conditions on which it was granted. Moreover, the proviso requires that such enterprises 'continue to manufacture the product covered by the patent on the date of grant of the patent.' As the EMR holder would have restrained most of the Indian manufacturers from manufacturing the product covered by the EMR, the benefit of the provision will not be open to enterprises that have discontinued the manufacture of the concerned product.

43EMR clearly stands outside the scope of s 11A(7). This is evident from the first proviso to s 11A(7) which states that the applicant shall not be entitled to institute any proceedings for infringement until the patent has been granted. On the other hand, s 24E of the Patents Act, as it was before the Patents (Amendments) Act 2005 expressly provided the power to institute infringement proceedings as it equated suits relating to infringement of EMR to patent infringement suits. Moreover, it is clear that the above provision will take effect only after a patent is granted in respect of applications made under s 5(2). As the grant of EMR precedes the grant of a patent, the above provision will not be attracted.

44Certain issues have arisen with regard to the maintainability of a suit for infringement of EMR after the EMR is terminated. In the infringement suit filed before the Madras High Court by Novartis, one of the defendants had moved an application for rejection of the plaint in the light of the Controller's order rejecting the patent application for Glivec. The defendant has also filed an application for vacating the interim injunction granted in favour of Novartis in 2004 based on EMR. In defence, the plaintiffs raised a novel plea that the suit will survive even if the patent application is rejected for the purpose of damages suffered during which period a validly granted EMR existed. (Cipla Ltd v Novartis AG OA No 1617 and 1618 of 2006 in OS No 5 of 2004 before the Madras High Court (unreported).)

45EMR is a right granted in anticipation of a patent. Chapter IVA of the Patents Act, as it was before its omission by the Patents (Amendment) Act 2005, provided for a temporary right, pending the disposal of the patent application. One of the prerequisites for the grant of an EMR is that a patent application ought to have been preferred before filing an application for EMR. (Patents Act 1970, s 24 B.) Thus, the EMR is dependent on the patent application. Section 24B of the Patents Act, before its omission, clearly stated that the right of EMR shall survive so long as the patent application survives. If the patent application is granted, the EMR would merge with the grant. If the patent application is rejected, then ipso facto, the EMR should also stand rejected with all the rights that flow through it. Thus, the patent application made in India is the foundation upon which the EMR stands. The language of s 24A makes it mandatory for the Controller to refer the application for patent to an examiner for making a report as to whether the invention was excluded under ss 3 and 4 of the Act. Such reference is a prerequisite condition for the grant of EMR. When the patent application of Glivec had been rejected, all the rights that flow through it, including the EMR, and the right to maintain an infringement suit based on the EMR, would necessarily expire. (Application No 1602/MAS/1998.)

46The consequence of the rejection of patent application is that the patent application will be treated as void ab initio. The rejection of the application will date back to the date on which the application was preferred and no rights will flow through it for the intervening period, ie, the period between the grant of EMR and the rejection of the patent application. But in the case of a revocation, where a lawful right subsisted till it was revoked, it is possible to raise a plea that the right survived during the period till it was revoked. In contrast, such a plea will not adhere well with the case of rejection of an application where no right was granted in the first place for the same to survive during the intervening period.

47Moreover, when the right upon which EMR is based, ie, the patent application, has not materialised into a grant, no proceeding for infringement can be maintained, and no claim for damages can be sought for. The suit filed before the Madras High Court survives solely on the basis of the EMR granted in anticipation of a patent grant. When the application based on which the EMR was granted has been rejected, the question of maintaining any suit based on the EMR will not arise. This view is strengthened by the fact that the Patents Act does not warrant the validity of any grant of exclusive right to sell or distribute. (Patents Act 1970, s 24F.)

48The plea of automatic revival of EMR was put forward before the high court as a counter to the application filed by one of the defendants to reject the plaint. (Cipla Ltd v Novartis AG OA No 1617 and 1618 of 2006 in OS No 5 of 2004 before the Madras High Court (unreported).) The application to reject the plaint was taken pursuant to the order of the Controller of Patents dated 25 January 2006 rejecting the patent application. The outcome of the order is that the patent application stands rejected. The operative part of the order reads as follows, 'In view of the above findings and all the circumstances of the case, I hereby refuse to proceed with the application for Patent No 1602/MAS/1998.' (Order of the Controller of Patents dated 25 January 2006 in the application No 1602/ MAS/98.)

49The effect of the order is that the Controller of Patent has refused to proceed with the application. As the application for patent is still in its preparatory stage, no plea that a grant has materialised can be entertained. The Patents Act does not contemplate any automatic revival of EMR. In fact, an EMR granted under the Act will have effect from the date of its grant till a period of five years or till the date of grant of patent or the date of rejection of application fro the grant of patent, whichever is earlier. It is submitted that there can be no stay against an order that results in the refusal to proceed with an application.

50EMR would be granted only if the basic conditions for the grant are satisfied. However, in cases where EMR is granted without following the stipulated procedure, a question arises as to whether those affected by the grant can claim damages from the EMR holder. In the opposition proceedings before the Controller it was stated that the application filed in India on 17 July 1998 as a convention application claimed Swiss priority, when Switzerland was not a convention country on that date. The Controller agreed with the merit in the above contention, and rejected the application. (Ibid.) It is surprising why the Patent Office did not consider, at the first instance, whether the conditions for the grant of EMR were satisfied. In a similar infringement suit before the Bombay High Court, allegations were raised that EMR holder had mislead the Patent Office in procuring the EMR in its favour. (Novartis AG v Mehar Pharma (2005) 30 PTC 160 (Bom).) However, none of the allegations have been proved. In cases where it is clear that there has been an abuse of the process of law which has resulted in the grant of a monopoly without the backing of a right to do so, an aggrieved person may be able to maintain an action for damages, if it can be proved that the action of the EMR holder was unfair and anti-competitive.