The Parallel Import Debate in India: Some Concluding Thoughts
SPICY IP:
I thank readers for engaging in this fascinating discussion which helped deepen my own understanding of this section. Surprisingly, many of our commentators never revealed their identity, making it impossible for one to see where they were coming from and which interest group they represented (if at all they did..).
Based on our discussions in the comments section of this post, it seems to me that there is considerable ambiguity in the section. In this concluding post, I want to try and examine how such ambiguity might be resolved in a manner that hews as close as possible to the text of the section.
Section 107A(b) exempts from infringement an “importation of patented products by any person from a person who is duly authorized under the law to produce and sell or distribute the product”. The problem with the section is this:
A literal reading of the section suggests that the permission of the patentee need not be taken. Particularly in the light of the fact that the 2005 amendment expressly changed the earlier clause requiring the permission of the patentee (”duly authorised by the patentee”). Contrary to what some of our commentators assumed, the current version of section 107A(b) only speaks about “due authorisation under the law” and not “permission from the patentee” or “national exhaustion” or “international exhaustion”.
Now the issue is this : does “law” in section 107A(b) mean Bangladeshi law or Indian law? If it is read to mean Indian law, there is a clear logical inconsistency and we end up begging the question. i.e. what is “Indian law” on this point? Isn’t section 107A (b) itself Indian law on the point? We end up with some heavy duty circular reasoning.
It therefore has to mean the law of the exporting country. Unfortunately, if the exporting country is Bangladesh where there is no patent, then the import into India by a CIPLA or Ranbaxy pretty much hits at the essence of the exclusive right to import guaranteed under the Patents Act (section 48). And such an interpretation may even violate Article 28 of TRIPS (since it does not involve an exhaustion and is therefore not saved by Article 6).
Will an Indian court be concerned about this impact on a patentees right, if a Roche vs CIPLA kind of situation came up? I’m not too sure…we’ll have to wait and watch. In a land where there is too much rhetoric around pharma patents and where the injunction jurisprudence is heavily skewed against the patentee, it is safe to bet that there will be a judge or two who are not likely to sympathetic to lamentations that such a reading would destroy the exclusive rights of a patentee.
Most of us thought that CIPLA’s brazen strategy of openly infringing (and not opposing the patent through regular channels) was likely to prejudice its case in court. And look what happened.. In short, I don’t think any of us can conclusively state at this point as to which way an Indian court is likely to turn on section 107A(b).
How then does a judge (who is concerned with the rights of a patentee) interpret section 107A(b)? To recapitulate the section, it exempts from infringement an “importation of patented products by any person from a person who is duly authorized under the law to produce and sell or distribute the product”. What does the term “patented product” mean?
A clever judge (seeking to avoid controversy) could hold that generic goods produced by CIPLA in Bangladesh are automatically excluded from the purview of the section, as they are not “patented products” i.e. not “patented” in Bangladesh? In other words, if CIPLA manufactures in Bangladesh and exports to India, it cannot avail of the defence under Section 107A. And such an import would be a violation of the patentees exclusive right under section 48.
However, one may cast some doubt on the above interpretation by pointing to the definition of “patented article” in section 2. This section defines the term to mean an “article patented in India”. Therefore, the term “patented product” in section 107A(b) has to mean a product patented in India only. In other words, if one reads the term “patented product” to mean a product patented in Bangladesh, then this goes against the definitional section.
However, this deviation from the definitional section is quite minor, if a judge is of the view that the harm done to a patentees right (if section 107A is read to mean that Bangladeshi products can be brought in) is considerable. And certainly a better way to resolve this issue than to insist on the logical fallacy of interpreting “law” to mean “Indian law”.
To conclude, section 107A(b) is ambiguous and only time will tell how an Indian court will end up interpreting this provision.
This being so, I was rather puzzled reading a post by Varun Chonkar of Patent Circle, where he suggests that there is no ambiguity at all in section 107A(b). Rather, he interprets it to mean that the permission of the patentee has to be taken. Most readers will recall our earlier posts tracing out the history of this section, wherein an earlier provision specifically mandated that the “permission of the patentee” had to be taken for the import to be “legal”.
However, this provision was expressly changed in 2005 to dispense with such “authorisation” from the patentee. In other words, the clause “duly authorised by the patentee” was changed to “duly authorised under the law”. Any first year law student is likely to understand that this change meant something and that Parliament would not have undertaken such an amendment for nothing. Further, any interpretation where we go back to the earlier norm of having to specifically take the permission of the patentee might prove problematic even in cases of normal exhaustion–where the good may be sold and resold several times before being exported to India. In such a case, would an exporter/importer always have to contact the patentee to take permission, even when the first sale of the good has taken place by the patentee (or his/her agent) and the rights in that good have been “exhausted”.
In the light of this legislative history, I was taken back with his post that seemed to suggest that his interpretation (that completely ignored legislative history on this point) was conclusive and that we were all wasting our time debating this vexed issue. In particular, I was amused by his rather outlandish claim in the comments section that:
“Believe me there is no loophole in the provision, it stands as clear as mirror.”
I wish I could “mirror” his thoughts and save time trying to make sense of this provision. Had he bothered to study the issue more closely and looked at the legislative history and the present structure of the provision, he would have understood that the mirror is actually quite murky!
His post was interestingly titled “Mint Reported Irresponsibly” and targeted at a Mint Report that highlighted the ambiguity in section 107A. I’m not sure what motivated Varun to go after Mint in the way that he did. All that the Mint report did was highlight an ambiguity inherent in section 107A(b).
As our readers can appreciate, it is one thing to have a difference of opinion whilst interpreting a section. It is quite another to callously and arrogantly state that what one advances is the “conclusive” interpretation on the point. Worse still, is to castigate others (such as Mint) for taking a more nuanced look at the section and concluding that there is ambiguity. Mint reporters such as CH Unnikrishnan have set a new standard for patent reporting in the country and in some cases, their articles reveal a clearer appreciation for patent law than do some our patent experts.
Varun states that “It is always important that while reporting on critical issue such as section 107A (b) complete background research should be made.” And yet it is he who has not bothered to research this issue thoroughly. As made evident by critical flaws in his analysis. He states:
“This practice of parallel importation is legal if the country from which patented products is imported agree to international exhaustion. However, if the country from which patented products is imported do not agree to international exhaustion and instead follow national exhaustion then such importation of patented products by third party to other country will constitute infringement of patent.”
Contrary to what Varun asserts, in order to determine the legal of a parallel import, one has to look to the law of the importing country (i.e. India), and not the law of the exporting country or the country “from which patented products is imported” (i.e. Bangladesh). Mrinalini rightly points out this basic point to him in her response to his comment.
In other words, whether or not an import of a patented product into India is legal has to be determined in accordance with Indian law and not in accordance with Bangladeshi law, a proposition that is fairly clear (mirror like) and known to most patent students.
The intention behind SpicyIP carrying these posts (and responding to the 20 odd comments, despite them being from anonymous sources) was to generate more awareness and discussion around this section. We ended one of our posts with the query: “Perhaps some of our readers might have insights into how we ought to resolve this interpretative conundrum. “
Like section 3.d and many other provisions in the patents act, it is best that the legislature and policy makers be aware of the gaps inherent in section 107A(b). And take steps to plug these gaps, rather than wait for it to be sorted out through wasteful litigation, the results of which are subject to the whims of individual judges.
Fortunately, unlike section 3(d), this gap can be plugged relatively easily by the legislature. It is difficult to advance a principled objection to anyone desiring to block the possibility of section 107A(b) permitting imports that completely eviscerate the exclusive rights of a patentee. One is likely to get the “patent boosters” and the “patent busters” on the same side of the table here…