Delhi High Court adjudicates on the “grey” area of parallel importation

Indian courts have always towed the ‘ambiguous’ line on the issue of parallel importation in intellectual property matters – never obviously or directly pronouncing a verdict that grey market goods are “infringing” goods under the Trademarks Act, and instead granting injunctions against their imports on the basis of violations under the Standards of Weights and Measures Act, etc.

A 6th September order of the Delhi High Court in Samsung Electronics Company Ltd. And another v. Mr. S. Sahani [CS(OS) 1603 of 2006] tilts that balance in favour of trademark owners by categorically prohibiting parallel importations. The thirteen page ex parte order which painstakingly elaborates the reasoning for the grant of the injunction makes for very interesting reading.

Some extracts are reproduced below:

“The Plaintiff prays for an intelocutory injunction which, in essence seeks to combat and eradicate parallel importation by third parties into India of products manufactured by the Plaintiff itself, but in China. The case set up is that although the products are genuine, they are not meant for Indian markets inter alia, for their sale does not strictly conform to Indian laws and regulations…”

And then, very interestingly,

“It is common knowledge that multinational corporations have made a conscious preference to establish their manufacturing units in countries where a large percentage of the products leave from the ‘back door’ and thence for purveyance in the ‘grey market’. Countries not connected with the manufacturing process (such as India in the present case) whose economies have not received any economic benefit; are expected to expend their resources to fight malpractices to which they are not privy. It also places an added and heavy burden on the Indian judicial system, already staggering under the weight of an exponential increase in litigation, not adequately matched by a corresponding increase in the strength of judges, to fight an illegality in another country.”

The Judge evaluates the appropriateness of the Chinese laws in the aforesaid backdrop with the observation

“It appears that Section 3 of the Customs Regulation of Intellectual Property Rights forbids the import or export of goods that infringe property rights protected by Chinese laws. However, there is prevailing doubt over whether “infringing goods” will include parallely imported goods, as has been expressed in ‘Exhaustion and Parallel Imports in China’ a research supported by the National Natural Science Foundation of China.”

Consequently the Judge relies on Sections 29, 30 and 140 of the Indian Trademarks Act and Article 50 of TRIPS to conclude that the Indian legal regime permits an interpretation of the term ‘infringement’ to mean ‘parallel importation’ and grants an ex parte ad interim injunction against the Defendants from dealing in grey market ink cartridges and toners of the Plaintiff.

Needless to say, the members of the trade are up in arms on the issue and have been making fairly heated remarks to the press; it remains to be seen if it ultimately results in an actual contest in the courts.

PATENTS AND BIO-RESOURCES

The debate on the link between patents and bio-resources/TK continues to rage. The latest is an AIPPI report which is skeptical of any move to link up concerns of bio-resource protection/TK expropriation with patent regimes. An MIP news item states:

"The patent system should not be used for controlling whether IP owners follow rules on using genetic resources and traditional knowledge laid down in the Convention on Biological Diversity, according to members of the International Association for the Protection of Intellectual Property (AIPPI).

At its annual congress held in Gothenburg last week, the AIPPI voted in favour of treating traditional knowledge in the public domain in the same way as other information when assessing the patentability of inventions.

And the IP lobby group said that countries that adopt laws requiring patent applicants to declare the source of genetic material and traditional knowledge should only oblige them to identify to the best of their knowledge the source from which the inventor obtained the genetic material or the information based on traditional knowledge."

The AIPPI resolution says that "ways and means other than patent applications should be developed to deal with prior informed consent and access and benefit sharing concerning genetic resources and traditional knowledge connected with it".

It appears that the fight is not over whether TK/biodiversity/bio-resource expropriation ought to be actionable at all, but as to the means by which these concerns are redressed. AIPPI which is a patent friendly body is obviously sympathetic to the cause of patent owners, who see this as an undue obligation to fulfill whilst making and prosecuting patent applications. However, developing countries see the patent system as a critical machinery to help redress these concerns. As one can appreciate, by including this within a patent system, developing countries are avoiding some major enforcement problems. A link to a patent system would ensure compliance with bio-diversity/TK concerns much better (within the present context) than through other mechanisms that are currently available. And developing countries know this only too well!! Nonetheless, it is important to work through the details of what kind of information should be disclosed in a patent application, how it is to presented etc. I came across a presentation by Dr Stephen Smith, a patent consultant, which I thought raised some of the administrative issues in implementing this rather well. But once these are taken care of, I can't see a principled objection to including this within patent regimes. But then international IP (read "TRIPS") was never really about principles, was it??

THE DEVELOPMENT AGENDA AT WIPO

Most of you may be familiar with the efforts of developing countries to introduce a "Development Agenda" at WIPO.

For those that came in late (phantom style), here's the gist from the CPTech website:

"On October 4, 2004, the General Assembly of the World Intellectual Property Organization agreed to adopt a proposal offered by Argentina and Brazil, the "Proposal for the Establishment of a Development Agenda for WIPO" (sometimes referred to as "Item 12" because of its placement listing on the meeting's agenda). This proposal was strongly supported by developing countries, as well as by a large contingent of civil society. Prior to the General Assembly meeting, hundreds of nonprofits, scientists, academics and other individuals had signed the "Geneva Declaration on the Future of WIPO," which calls on WIPO to focus more on the needs of developing countries, and to view IP as one of many tools for development - not as an end in itself. "

The MIP now reports that efforts are underway to translate this agenda to practical results:

"Government officials attending the WIPO General Assembly have agreed on how they are going to tackle the controversial issue of the IP organization's Development Agenda.
Member states decided last week that they will hold two meetings in 2007 to consider more than 100 proposals that have been put forward as part of efforts to make WIPO more responsive to the needs to developing countries. The issues range from making available money for training IP officials to ensuring that policy makers consider the impact of their proposals on developing countries.
"The emphasis is going to be on getting practical results," said Francis Gurry, WIPO deputy director general.
On another controversial issue that divides developing and developed countries – patent harmonization – member states agreed to hold more talks during the first half of 2007."

The extracts above refer to "meetings" and more "meetings". Granted, that "meetings" are necessary to build consensus, particularly in controversial areas such as international IP--but then, at some point, WIPO has to be reminded that if it is to be seen as taking the development agenda seriously, "actions speak much louder than words".

INDIAN PATENT ACT FACES TRIPS CHALLENGE

In a rather predictable move, Novartis has challenged the contentious Section 3(d) introduced via the 2005 Amendments to India's Patent Act.

This unique section that finds no parallel anywhere else in the world provides in pertinent part 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’ is not patentable. It then states (via an explanation to the section) that salts, esters, esthers, polymorphs, metabolites etc shall be considered as the ‘same substance’, unless they ‘differ significantly in properties with regard to efficacy’.

For those familiar with the history of this case, it all began with the granting of an EMR to Novartis in 2004 and a consequent 20 times spike in the price of the drug. For those not familiar with the history of the case, I had blogged earlier on the rejection of the patent application by the Patent Office.

The Financial Express reports:

"Novartis AG on Wednesday said that it has filed a petition in the Madras High Court seeking a stay on the Asst Controller of Patents and Designs' order of January 25, 2006 invalidating its patent application for the beta crystalline form of Glivec (imatinib mesylate).

Novartis has also asked the court to declare section 3(d) of the Patents Amendment Act 15 of 2005 unconstitutional and in breach of India's obligation under the TRIPS agreement. Ranjit Shahani, vice chairman & managing director, Novartis India, said in a statement, “India needs to address some contentious issues before the patent law is fully aligned with TRIPs. We are strongly committed to defending international intellectual property rights for our most innovative medicines and ensuring that research to find new therapies for unmet medical needs continues.”

Although section 3(d) is badly worded and appears to be lifted from a European Drug Regulatory Directive, it amounts, in effect, to a heightened 'inventive step' or 'non obviousness' standard in the context of chemical/pharmaceutical substances. TRIPS only states that member states are to grant patents to all inventions that are "new", "non obvious or inventive" and "have industrial utility". It does not define any of these terms, leaving it upto the member states to do so. Therefore, it is perfectly acceptable for India to require a high level of inventiveness in so far as pharmaceutical/chemical substances are concerned. I personally think the TRIPS challenge is bound to fail. It is also not clear if an Indian court can strike down a provision as not being compatible with an international TREATY such as TRIPS. Lets wait and watch--this is one saga that will continue to occupy the "patent--public health-TRIPS--developing country" debate for a long time to come!!