Novartis AG v Union of India (2007)

Summary

"The prayer in both the writ petitions is one and the same namely, for a declaration that section 3(d) of the Patents Act, 1970, amended by Patents (Amendment) Act 15/2005, is unconstitutional." (para 1) In the first writ petition "M.P.No.1/2007 came to be filed in that writ petition seeking to delete the prayer for a direction to the Patent Controller to allow the application and it was accordingly ordered. Therefore as on date in the two writ petitions, the Constitutional validity of section 3(d) alone is in challenge, both on the ground that it violates not only Article 14 of the Constitution of India but also on the ground that it is not in compliance to 'TRIPS'." (para 1) The learned single Judge "came to the conclusion that the writ petitions require the attention of a Division Bench of this court" (para 1). The Bench recorded that "The challenge to the amended section is mainly on two grounds namely," that "it is not compatible to the agreement on Trade Related aspects of Intellectual Property Rights, hereinafter referred to as 'TRIPS' for convenience sake; and" that "it is arbitrary, illogical, vague and offends Article 14 of the Constitution of India." (para 2)

On the first ground the Bench held that "Article 64 of 'TRIPS' read with World Trade Organisation's understanding on Rules and Procedures governing the settlement of disputes provides a comprehensive settlement mechanism of any dispute arising under the agreement" and that "this court has no jurisdiction to decide the validity of the amended section, being in violation of Article 27 of 'TRIPS'" (para 8); it found "that the petitioner in each writ petition is not entitled to even the declaratory relief." (para 9) On the second, it held that "the amended section with it's Explanation is capable of being understood and worked out in a normal manner not only by the Patent applicant but also by the Patent controller" (para 16) and that "the amended section cannot be invalidated solely on the ground that there is a possibility of misusing the power." (para 18) "For all the reasons stated above, on issue (c ) we hold that the amended section is not in violation of Article 14 of the Constitution of India and accordingly, both the writ petitions are dismissed with no order as to costs." (para 19)

What the court decided

1. Procedure The relief left in issue. "The prayer in both the writ petitions is one and the same namely, for a declaration that section 3(d) of the Patents Act, 1970, amended by Patents (Amendment) Act 15/2005, is unconstitutional." "Therefore as on date in the two writ petitions, the Constitutional validity of section 3(d) alone is in challenge" (para 1)
2. A treaty given domestic force. Of the House of Lords decision in Equal Opportunities Commission's case, the Bench found that "all the rights flowing out of the said Treaty and the Directives were available as Law in the United Kingdom, which can be enforceable. Only in that context, we state with respect that the House of Lords has given a declaration as prayed for." Of Salomon's case and the earlier English decision it recalls: "In our considered opinion, this is the direct judgment on the point. We have already noted that the judgment in Equal Opportunities Commission case is distinguishable on facts." (para 7)
3. A treaty as a contract. "Even otherwise, we are of the considered view that in whichever manner one may name it namely, International Covenant, International Treaty, International Agreement and so on and so forth, yet, such documents are essentially in the nature of a contract." "In other words, the court has to analyse the terms of such International Treaty; the enforceability of the same; by whom and against whom; and if there is violation, is there a mechanism for solving that dispute under the treaty itself?" (para 8)
4. The TRIPS dispute settlement mechanism. "Therefore we have no difficulty at all that Article 64 of 'TRIPS' read with World Trade Organisation's understanding on Rules and Procedures governing the settlement of disputes provides a comprehensive settlement mechanism of any dispute arising under the agreement." "When such a comprehensive dispute settlement mechanism is provided as indicated above and when it cannot be disputed that it is binding on the member States, we see no reason at all as to why the petitioner, which itself is a part of that member State, should not be directed to have the dispute resolved under the dispute settlement mechanism referred to above." (para 8)
5. Choice of forum in treaties. "As we began saying that any International Agreement possesses the basic nature of an ordinary contract and when courts respect the choice of jurisdiction fixed under such ordinary contract, we see no compelling reasons to deviate from such judicial approach when we consider the choice of forum arrived at in International Treaties." The Bench then held "that this court has no jurisdiction to decide the validity of the amended section, being in violation of Article 27 of 'TRIPS'" (para 8)
6. Declaratory relief under Article 226. "We have already found that the judgment in Equal Opportunities Commission case is not a precedent for giving such a declaration." "It is a settled position in law that nobody can compel the Parliament to enact a Law." "Even if a consequential relief is not asked for, courts have held, depending upon the facts available in each case, that a declaratory relief could be granted, provided, it is shown that such a declaratory relief would be a stepping stone to claim relief at some other stage." (para 9)
7. A declaration only on paper. "In other words, the declaratory relief, even if granted, would be only on paper, on the basis of which, the petitioner cannot claim any further relief in the Indian courts." Recording that "It has been held by the Supreme Court in an unreported judgment in Katakis Vs. Union of India (W.P.No.54/68 dated 28.10.1968) that no declaration would be given where it would serve no useful purpose to the petitioner", the Bench held: "Therefore, for the reasons stated above, we find that the petitioner in each writ petition is not entitled to even the declaratory relief." (para 9)
8. Ends of justice. "The amended section does not take away in toto the right of the petitioner to carry on the trade." "We also find that ends of justice, on the facts of this case, is not in favour of the petitioner, which would disable us from exercising our discretionary jurisdiction." (para 9)
9. The Controller's function. "The Statutory Authority in this case is the Patent controller. There is no doubt that he is exercising a quasi-judicial function namely, considers the patent claim application in the context of the objections received; hears parties on both sides and then passes an order, either granting the patent or rejecting the patent application, by giving reasons." (para 10)
10. Obiter Drafting of the amended section. "It is clear that the amended section appears to have been drafted in a great hurry without realising that it is likely to be struck down on the ground that it is incompatible with 'TRIPS' (we have already held that we cannot go into that question) and also being in violation of Article 14 of the Constitution of India (the later point alone survives now)." (para 10)
11. The pharmacology field. "The amended section is not confined only to drugs as it deals with machines and apparatuses as well. But however, we are clear in our mind that the portions of the amended section and the Explanation under attack is definitely referable only to the pharmacology field namely, drugs." (para 12)
12. Debates and statements of objects. "Therefore from the above pronouncement, it is clear that when the Bill is debated, new things are likely to emerge and the emerging new things may be taken into account while a final shape is given to the Bill before it was brought into an Act. The statement of objects and reasons also stands excluded as extrinsic aid to the construction of a Statute." "In Narasimha Rao's case referred to supra, the Supreme Court had held that the statement of the Minister, who makes the Bill in Parliament can be looked at, to ascertain the mischief sought to be remedied by the Legislation." (para 12)
13. The Ordinance and the Amending Act. "If we read the Parliamentary debate on Ordinance 7/2004, it appears that there was a wide spread fear in the mind of the members of the House that if section 3(d) as shown in Ordinance 7/2004 is brought into existence, then, a common man would be denied access to life saving drugs and that there is every possibility of 'evergreening'." "Therefore it is clear to our mind that section 3(d) brought by Amending Act 15/2005 is as a result of debates on Ordinance 7/2004 in the Parliament and due to debates change in the form is unavoidable and permissible" (para 12)
14. What the amended section declares. "As we understand the amended section, it only declares that the very discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance, will not be treated as an invention. The position therefore is, if the discovery of a new form of a known substance must be treated as an invention, then the Patent applicant should show that the substance so discovered has a better therapeutic effect." (para 13)
15. The meaning of efficacy. "Darland's Medical Dictionary defines the expression 'efficacy' in the field of Pharmacology as 'the ability of a drug to produce the desired therapeutic effect' and 'efficacy' is independent of potency of the drug." "Going by the meaning for the word 'efficacy' and 'therapeutic' extracted above, what the patent applicant is expected to show is, how effective the new discovery made would be in healing a disease / having a good effect on the body?" (para 13)
16. The applicant's knowledge. "In other words, the patent applicant is definitely aware as to what is the 'therapeutic effect' of the drug for which he had already got a patent and what is the difference between the therapeutic effect of the patented drug and the drug in respect of which patent is asked for. Therefore it is a simple exercise of, though preceded by research, - we state for any Patent applicant to place on record what is the therapeutic effect / efficacy of a known substance and what is the enhancement in that known efficacy." (para 13)
17. The Explanation. "In our opinion, the explanation would come in aid only to understand what is meant by the expression 'resulting in the enhancement of a known efficacy' in the amended section and therefore we have no doubt at all that the Explanation would operate only when discovery is made in the pharmacology field." "In this case we find that the Explanation creates a deeming fiction of derivatives of a known substance are deemed to be the same substance unless they differ significantly in properties with regard to efficacy." (para 13)
18. Derivatives differing significantly. "Therefore when the Explanation to the amended section says that any derivatives must differ significantly in properties with regard to efficacy, it only means that the derivatives should contain such properties which are significantly different with regard to efficacy to the substance from which the derivative is made." (para 13)
19. The test the section prescribes. "In our opinion, the amended section and Explanation give importance to efficacy." "Therefore in sum and substance what the amended section with the Explanation prescribes is the test to decide whether the discovery is an invention or not is that the Patent applicant should show the discovery has resulted in the enhancement of the known efficacy of that substance and if the discovery is nothing other than the derivative of a known substance, then, it must be shown that the properties in the derivatives differ significantly with regard to efficacy." (para 13)
20. Proof by comparative details. "As we stated earlier, due to the advanced technology in all fields of science, it is possible to show by giving necessary comparative details based on such science that the discovery of a new form a of known substance had resulted in the enhancement of the known efficacy of the original substance and the derivative so derived will not be the same substance, since the properties of the derivatives differ significantly with regard to efficacy." The Bench accepted as "rightly contended" that "the writ petitioner is not a novice to the pharmacology field but it, being pharmaceutical giant in the whole of the world, cannot plead that they do not know what is meant by enhancement of a known efficacy" (para 13)
21. General expressions in a statute. "Therefore it is clear from the case laws referred to above that Parliamentarians expresses its object and purpose in general terms when enacting a Statute and does not foresee the minute details that are likely to arise in the future and provide a solution for the same at the time when the Act itself is enacted." "Using general expressions in a Statute, leaving the court to understand it's meaning, would not be a ground to declare a section or an Act ultra vires, is the law laid down by the Supreme Court in Benilal's case referred to supra. Interpretation of a Statute must be to advance the object which the Act wants to achieve." (para 14)
22. The object of the amendment. "As rightly emphasized by Mr.Soli Sorabji learned senior counsel for the petitioners, the statement of objects and reasons for Amending Act 15/2005 emphasises in more than one place that the amendment is in the discharge of India's obligation to 'TRIPS'" "Article 7 of 'TRIPS' provides enough elbow room to a member country in complying with 'TRIPS' obligations by bringing a law in a manner conducive to social and economic welfare and to a balance of rights and obligations." "Therefore the validity of the amended section on the touchstone of Article 14 of the Constitution of India must be decided having regard to the object which Amending Act 15/2005 wanted to achieve." (para 15)
23. Guided discretion. "We reiterate here at this stage that the amended section with it's Explanation is capable of being understood and worked out in a normal manner not only by the Patent applicant but also by the Patent controller." The argument of want of guidelines "has to be necessarily rejected since, we find that there are inbuilt materials in the amended section and the Explanation itself, which would control / guide the discretion to be exercised by the Statutory Authority." (para 16)
24. Discretion and discrimination. "From the above extracted portion, it is clear that Article 14 can be invoked only when it is shown that in the exercise of a discretionary power there is a possibility of a real and substantial discrimination and such exercise interferes with the fundamental right guaranteed by the Constitution." "We find that the amended section by itself does not discriminate nor does it prohibit the trade being carried on." (para 16)
25. Arbitrary exercise of a discretion. "Therefore it boils down to only one question namely, could an arbitrary exercise of a discretionary power invalidate an Act?" The Bench held that "if the Statutory Authority, in exercising his power, mis-directs himself; abuses his power in an arbitrary manner and passes an order, then, the same could be corrected by the hierarchy of forums provided in the Act itself in addition to the further reliefs available before the Courts of Law. When that is the position, then, we have to necessarily state that the amended section cannot be invalidated solely on the ground that there is a possibility of misusing the power." (paras 17–18)
26. Latitude for economic legislation. "Therefore there cannot be any doubt at all that the Patents Act as it stood then and as it stands today, is designed to safeguard the economic interests of this country and if that is so, the amended section must be viewed with greater latitude." (para 17)
27. Only two grounds of invalidity. Recording that the Supreme Court in McDowell's case reiterated that "a law made by Parliament or the Legislature can be struck down by courts on two grounds and two grounds alone namely, lack of legislative competence and violation of any of the fundamental rights guaranteed in Part III of the Constitution of India or of any other Constitutional provision", the Bench added: "There is no third ground." (para 18)
28. Vagueness turns on construction. "In our respectful opinion, when the validity of an Act is challenged on the touchstone of Article 14 of the Constitution of India, the decision has to depend upon the provisions of the concerned Statute itself, which are in challenge." "It cannot be said that whenever arbitrariness and vagueness are the vices projected as grounds of attack, the court should close it's eyes and simply strike down the law without even finding out whether in the Act challenged there are such vices." (para 19)
29. The object of the Amending Act. "We have borne in mind the object which the Amending Act wanted to achieve namely, to prevent evergreening; to provide easy access to the citizens of this country to life saving drugs and to discharge their Constitutional obligation of providing good health care to it's citizens." (para 19)
30. Disposition. "For all the reasons stated above, on issue (c ) we hold that the amended section is not in violation of Article 14 of the Constitution of India and accordingly, both the writ petitions are dismissed with no order as to costs." (para 19)

What the court did not decide

"Since we have held that this court has no jurisdiction to decide the validity of the amended section, being in violation of Article 27 of 'TRIPS', we are not going into the question whether any individual is conferred with an enforceable right under 'TRIPS' or not. For the same reason, we also hold that we are not deciding issue No.(b) namely, whether the amended section is compatible to Article 27 of 'TRIPS' or not." (para 8)

Subsequent treatment

• Appealed — Not appealed. In Novartis AG v Union of India (2013) the Supreme Court recorded that the writ petitions "assailing section 3(d) of the Act were finally heard by a Division Bench of the High Court and dismissed by the judgment and order dated August 6, 2007. The appellant did not take that matter any further." (para 15)
• Followed — The Supreme Court in the same judgment recorded that the Intellectual Property Appellate Board, in its order of 26 June 2009 on Novartis's application, "also referred to the judgment of the Madras High Court, dismissing the appellant's writ petitions challenging the constitutional validity of section 3(d)" and to its statement of the object of the Amending Act (para 18).