STATEMENTS OF WORKING IN RESPECT OF GRANTED INDIAN PATENTS
In accordance with the provisions of Section 146 (2), every patentee and licensee under a patent is required to file each year commencing with the year following the grant of a patent a statement as to the extent to which the patented invention has been worked on a commercial scale in India. To assist you in appreciating this better, we quote hereafter the entire content of Section 146:
- “Power of Controller to call for information from patentees – (1) The Controller may, at any time during the continuance of the patent, by notice in writing, require a patentee or a licensee, exclusive or otherwise, to furnish to him within two months from the date of such notice or within such further time as the Controller may allow, such information or such periodical statements as to the extent to which the patented invention has been commercially worked in India as may be specified in the notice.
- Without prejudice to the provisions of sub-section (1), every patentee and every licensee (whether exclusive or otherwise) shall furnish in such manner and form and at such intervals (not being less than six months) as may be prescribed, statements as to the extent to which the patented invention has been worked on a commercial scale in India.
- The Controller may publish the information received by him under sub-section (1) or sub-section (2) in such manner as may be prescribed.”
From the quoted section, you will observe that it is sub-section (2) which applies to the obligation of a patentee or his licensee to file statements of commercial working.
Since the requirement is prescribed by Section 146 (2) of the Act, it is a statutory one and hence is required to be complied with. According to Rule 131 of the Patents Rules, 2003, a statement of the extent of working of a patent in India must be made on the prescribed Form 27 (see copy of the form at the end of this Note) by March 31 of each year in respect of the previous calendar year. This implies that a statement of working is to be filed from January 1 to March 31 of such year. Since this time is prescribed by the Rules and not by the statute, it is possible to obtain an extension but to do so is relatively expensive and should therefore be avoided if possible.
Referring to the Form 27, it must be borne in mind that “working” as understood by Indian patent law is actual working in India. Importation of the patented article into India has not been deemed to constitute working and could actually be construed as a valid ground for the grant of a compulsory licence.
Thus, Indian patent law and its interpretation by the Patent Office has always been that only manufacture in India can be considered to constitute working of a patent. Indeed, this was the view expressed by the Controller General in his decision on the compulsory licence application of NATCO Pharma versus Bayer AG. Subsequently, however, when the Controller General’s decision was appealed, the Intellectual Property Appellate Board (IPAB) took the view that the requirement of working in respect of a patented product could also be satisfied by importing the patented product provided the patent holder proved to the satisfaction of the Indian authorities under the Patents Act that manufacture of the patented product was not possible in India. The IPAB held that it was not essential in every instance for manufacture in India to be carried out for the requirement of working to be satisfied.
In other words, the view taken by the IPAB was contingent upon certain specific conditions obtaining and that view was substantiated when the IPAB’s decision was subsequently appealed before the High Court which stated that the question of manufacture in India as opposed to importation of a drug into India had to be decided on a case to case basis to determine what was considered to be working in the context of that case.
Despite the flexibility introduced by the IPAB and the High Court, in our advice to clients, we have always played it safe by adopting a more conservative view that for working to be deemed working, the patent in question has to be worked in India though, of course, there could be exceptions to that rule.
What is significant, however, is that failure to file a statement of working does not affect the validity of an Indian patent in any way. The patent continues to remain in force.
Nevertheless, Indian patent law does also provide for the imposition of penalties in respect of a party which refuses or fails to supply information called for under the Act. As far as the obligation to provide details of commercial working is concerned, the pertinent section relating to the imposition of penalties is Section 122 which we also quote hereafter for your convenience:
“Refusal or failure to supply information
– (1) If any person refuses or fails to furnish –
- (a) to the Central Government any information which he is required to furnish under sub-section (5) of section 100;
- (b) to the Controller any information or statement which he is required to furnish by or under section 146,
he shall be punishable with fine which may extend to ten lakh rupees.
(2) If any person, being required to furnish any such information as is referred to in sub-section (1), furnishes information or statement which is false, and which he either knows or has reason to believe to be false or does not believe to be true, he shall be punishable with imprisonment which may extend to six months, or with fine, or with both.”
The two sub-sections of Section 122 cover respectively (i) a punitive provision under sub-section (1) and (ii) a penal provision under sub-section (2). The latter provision applies only when there has been a wilful submission of false information by a patentee or licensee or the submission of information which a patentee or licensee believes to be untrue. Since it is reasonable to assume that no patentee worth his salt will stoop to providing wilfully wrong information, what applicants will have to concern themselves with are the punitive provisions of sub-section (1) of Section 122.
Where a patentee or licensee submits a statement which says that no commercial working has taken place in respect of the invention in question during the immediately preceding calendar year, he is not exposed to any punitive action whatever.
If a patentee refrains from taking action and files no statement whatever, he is technically liable to a fine imposable under Section 122 (1) which in United States dollars amounts to approximately $ 17,000. 00. The problem for the Controller would be how to ensure that his demand under that section is complied with and the fine recovered. This is why we are not aware of any instance over the past forty-two years of the Controller imposing a fine on any party which fails to file a statement of commercial working.
Instead, the recourse which the Controller has resorted to in the past in the instances where a statement of non-working is filed or where no working statement whatever is filed is to advertise the fact in the Gazette of India [on the assumption that there has been no commercial working of the invention in question] and to invite interested parties to apply to him for grant of a compulsory licence to work the invention.
To be honest, this ploy has not had any real effect and if one goes by the total number of compulsory licences granted over the past thirty odd years, these could without difficulty be counted on the fingers of both hands. Very few, if any, of such applications ever culminated in the grant of licences - which is probably why the Indian Patent Office’s decision in 2012 to grant the a compulsory licence to NATCO over Bayer was hailed as the first compulsory licence to have been awarded. No such award has had its origin in any notification by the Controller inviting interested parties to approach him for that purpose.
It is very possible that patentees, particularly foreign patentees, are aware of the Controller’s inability to impose and recover the fine proposed by Section 122 and this could have led many a patentee to take a decision not to file a statement of working. A very cogent reason for a patentee to take such a decision is the knowledge that failure to file a statement of working does not affect the validity of an Indian patent in any way.
To sum up, it will be appreciated that failure to file a working statement does not result in invalidation of an Indian patent. Nevertheless, any Indian patent practitioner worthy of the name cannot very well recommend or even suggest that a patentee willfully decide not to file a statement of commercial working since the requirement to do so is a statutory one and therefore needs to be complied with.
Finally, the mere action of granting a licence to a third party does not per se constitute commercial working of an invention and indeed as will be observed from the wording of Section 146 (2), the requirement to file actual statements of working is imposed equally upon both patentees and their licensees.