Patent regime and historic developments in India for the life sciences sector

These days, economic development depends on new ideas and new technologies, which can fundamentally change the way we live and further improve the quality of our lives. R&D plays a critical role in advancing such technologies. It is crucial for the success of companies, whether large or small, in the modern ultra-competitive world to improve the innovation ecosystem which is vital to sustain competition.

The connections between advanced technologies, manufacturing and the innovation ecosystem are vital for the fortunes of any scientific R&D-based organisation. Patents are no longer seen as merely a means of protecting innovation, but are also considered an important part of a company’s assets which can be licensed or sold through strategic decision making to attack or defend competitors. Intellectual property is an integral part of a company’s strategy and smart companies are the ones that know how to manage their intellectual capital.

Evolution of India’s pharmaceutical industry

While many large US and European pharmaceutical players can trace their histories back to the 19th century, in India the sector only took off in the 20th century, with the majority of drugs imported from foreign countries. India was a British colony and after World War I the demand for drugs rocketed. This led to the market being flooded with cheap and often adulterated drugs, much like United States after the Mexican-US war of 1846-1848. To control this trade, the then government introduced a number of acts and regulations starting with the Poisons Act 1919, which regulated possession or sale of substances defined as ‘poisons’.

Although the Indian government took steps to nurture the embryonic pharmaceutical sector the market was dominated by foreign multinationals, with only a few Indian manufacturers. A dearth of patent protection led to a lack of focus on R&D. The cost of drugs was extremely high and supply depended heavily on imports, leading to low market availability. This prompted the government to step in yet again and pass several acts and rules not only to regulate the sector but also to boost the growth of Indian pharma companies.

In pursuit of these policies, the government established five public sector companies of which two – Hindustan Antibiotics Ltd and Indian Drugs and Pharmaceuticals Ltd, founded in 1954 and 1961 respectively – played a major role in developing technical competencies for the pharma sector. Hindustan Antibiotics was the first drug manufacturing company to be set up in the public sector by the government with the objective of providing affordable drugs throughout the country. It began by manufacturing penicillin and later commenced bulk production of streptomycin sulphate, penicillin-G, 6-APA and ampicillin. It went on to discover two new molecules – hamycin and aurofungin.

While the Indian pharma sector experienced impressive growth in the 1970s and was valued at Rs720 million for bulk drugs and Rs3.7 billion for formulations, Indian pharmaceutical companies were not seeing the benefit. Multinationals still had by far the biggest share of the market and sold high-value products, taking advantage of product patents established by the Patent Act 1911. Both public and private entrepreneurs were involved in the same period, lowering the cost of bulk drugs. In order to reduce the monopoly of multinational companies, the government introduced the Patents Act 1970, which prohibited patents on products that are useful as medicines and food. It also shortened the term of chemical process patents and significantly expanded the availability of compulsory licensing.

Under the act, process patents would last the shorter of five years from sealing or seven years from the date of the patent, while the term of all other types of patents was 14 years from the date of the patent. This provided Indian companies with an unprecedented opportunity to develop new processes for producing drugs in India. Innovating multinationals used to patent large number of processes in order to protect their products and delay competition from generics. One example of this was Eli Lilly, which protected its anti-infective drug Cefaclor through 32 processes – India’s Ranbaxy nevertheless managed to develop a new process for manufacturing this and was thus able to produce and sell the drug at a cheaper price.

The act did indeed succeed in dislodging the multinationals’ stranglehold on the Indian pharma sector. An increasing number of domestic pharma companies began to produce drugs using different manufacturing processes, which they discovered by reverse engineering. This not only made new drugs available cheaply, but also resulted in a wide variety of substitute drugs which were offered instead of more expensive imported drugs. The changes also resulted in increased exports to destinations such as Russia, Africa, China and South America, as well as the export of drugs for which patents had expired. India’s pharmaceutical sector experienced a vast expansion, not only as a result of this policy but also due to subsidies and infrastructural facilities provided by the government.

Figure 1. Patent trends at the Indian Patent Office

Source: Indian Patent Office Annual Report (2015-16)

Post-1995 situation

India signed the Uruguay Round Agreements on April 15 1994 and became a member of the World Trade Organisation (WTO) effective January 1 1995. This obliged it to amend its domestic IP laws in order to comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPs). Certain implementations were required immediately, although others were postponed during the transition period. Given that India granted no patent protection to pharmaceutical products at the time of its entry into the WTO, it was given 10 years (ie, until January 1 2005) to fully implement that portion of TRIPs.

A mailbox facility was created to establish pipeline protection for pharmaceutical product patent applications filed (but not yet examined by the Patent Office) during India’s 10-year TRIPs transition period. This, along with exclusive marketing rights (EMRs), was initially implemented by presidential decree.

It was during this time that three key pieces of legislation were introduced – the Patents (Amendment) Act 1999, the Patents (Amendment) Act 2002 and the Patents (Amendment) Act 2005 – paving the way for India’s innovative domestic life sciences industry.

Patents (Amendment) Act 1999

On March 26 1999, the Patents (Amendment) Act 1999 came into force with retrospective effect from January 1 1995. It introduced the following amendments:

• Section 5(2), which provided for filing patent applications in the field of drugs, medicines and agro-chemicals. These applications were stored in the mailbox or black box, which was due to be opened on January 1 2005.
• Chapter IV(a), which introduced EMRs – providing pipeline protection for pharmaceutical and agro-chemical manufacturers whose applications for products were being held in the black box.
• Chapter II(a), which was inserted into the Patent Rules to deal with international applications under the Patent Cooperation Treaty (PCT).
• Section 39 was omitted from the act, thereby enabling Indian rights holders to file applications both within and outside India simultaneously.

Patents (Amendment) Act 2002

The Patents (Amendment) Act 2002 came into effect on June 25 2002. This took Indian patent laws closer towards TRIPs compliance and introduced further changes to the patent regime.

It extended the patent term to 20 years from the date of filing, regardless of the field of invention. Previously, process patents lasted only for five years from sealing or seven years from the date of the patent – while all other types of patent lasted for 14 years from the date of the patent.

The act introduced provisions on national treatment in order to comply with the Paris Convention for the Protection of Industrial Property. Since India became a signatory to the PCT on December 7 1998, the provision for accepting national phase filings of international applications originally filed abroad under the PCT and designating India were embraced in the new amendments. Previously, patent applications could only be filed directly with the Indian Patent Office.

The definition of ‘invention’ was enlarged as per the TRIPs Agreement through the introduction of the concept of ‘inventive step’. The act redefined an ‘invention’ as a new product or process involving an inventive step and which was also capable of an industrial application.

‘Inventive step’ was defined as a feature of an invention which involves a technical advance compared to the existing knowledge or which has economic significance or both, and which makes the invention not obvious to a person skilled in the art.

The act introduced a system of examination called ‘deferred examination’. Under this the application is taken up for examination only on request from the applicant or any other interested person. Such request to be made within 48 months from the date of priority or from the date of filing whichever is earlier.

Under the act applications were published 18 months from the date of filing, thereby bringing India on a par with the rest of the world.

Section 39 was reintroduced, thereby prohibiting Indian residents from applying for patents abroad without prior permission or first filing in India.

Finally, microorganisms were made patentable, while inventions based on traditional knowledge were added to the list of non-inventions.

Patents (Amendment) Act 2005

The Patents (Amendment) Act 2005 came into effect on January 1 2005, introducing further major changes to patentability for the pharmaceutical sector, including the following:

• the grant of product patents for medicine, food, drug and chemical processes, effective January 1 2005 – probably the most significant feature of the act;
• the removal of EMR provisions, following the grant of product patents for medicine, food, drug and chemical processes;
• amendments to the list of patentable inventions – specifically, that “mere new use of a known substance” is not an invention;
• compulsory licences for the manufacture and export of patented pharmaceutical products to any country with insufficient or no manufacturing capacity in the pharmaceutical sector for the relevant product which is necessary to address a public health problem, provided that compulsory licences are granted by such country or that such country has, by notification or otherwise, allowed the import of the patented pharmaceutical products from India;
• the introduction of both pre-grant and post-grant opposition procedures, which provides ample opportunity for such oppositions over the patentability aspects; and
• the creation of the IP Appellate Board, to which decisions by the controller can be appealed.

The board’s jurisdiction has since been enhanced and it now has jurisdiction to revoke patents also. All appeals relating to patent cases pending at the high courts were transferred to the board, except for infringement suits and countersuits for revocation.

Biocon – building a successful invention-based business in India

Biocon started its journey in 1978, when Dr Kiran Mazumdar-Shaw formed a joint venture with an Irish company. The initial stage of focus was the manufacture of enzymes for industrial applications, the first of which was papain, an enzyme extracted from the papaya fruit which stops chilled beer from turning cloudy. The company continued to grow, soon branching out into other sectors of the biotechnical industry.

Biocon has advanced from a small firm into a fully integrated biopharmaceutical establishment encompassing a balanced business portfolio of products and R&D services, with a special focus on diabetes, oncology and auto-immune diseases.

Although Biocon’s early success can be linked to enzyme manufacturing, its big breakthrough came in the 1990s, when it invented a new fermentation technology to replace the conventional tray-based culture of microorganisms. Fermentation of enzymes is at the core of biotechnology and is an essential process in the development of most biopharmaceutical products to make them suitable for human use. There are two main ways to ferment enzymes: by using a solid substrate (the surface on which an enzyme lives and reacts with) or a submerged substrate. Solid substrate fermentation has traditionally been used to manufacture fermented food products, such as soya sauce and the Japanese drink sake. However, in the biotech sector most companies use submerged substrate fermentation, as it is superior in terms of automation, containment and large volume production. Unfortunately it can also be prohibitively expensive, especially for start-ups and companies in developing countries.

Recognising the need for a cost-effective solution, Biocon made the most of its experience with enzyme manufacturing and in 1990 initiated an R&D project to innovate a bioreactor capable of conducting solid substrate fermentation with comparable levels of automation and containment as those in submerged substrate fermentation. After eight years of R&D, the company developed PlaFractor, a cost-effective bioreactor which enables all the different stage processes involved in the cultivation and extraction of microorganisms to be carried out within a fully enclosed system and under precise computer control.

PlaFractor makes fermentation repeatable, predictable and reliable. It requires less equipment and floor space than older solid substrate fermentation technologies, conserves energy and is not labour intensive. All of these qualities translate into a cost-effective product which meets international standards and yields the same quality results as more conventional and expensive technologies. The innovation of PlaFractor served as a technology bridge, allowing Biocon to cross from industrial enzymes into biopharmaceuticals. With it, Biocon was able to begin R&D in other areas such as immunosuppressants (used to reduce rejection risks of organ transplants), which are particularly difficult organisms to cultivate using conventional tray cultures.

In 2001, Biocon became the first Indian company to be approved by the US Food and Drug Administration for the manufacture of lovastatin, a cholesterol-lowering molecule.

Biocon’s R&D efforts are at the heart of its product innovation. It focuses on the entire drug development pathway, from process development to non-clinical and clinical research. The depth and breadth of its technological and scientific expertise has enabled it to develop new and affordable solutions for the world’s most debilitating diseases. Biocon’s core R&D philosophy of making high-quality affordable medicines is centred on a credibly capable matrix. In pursuit of its objective of enhancing global healthcare through innovative and affordable biopharmaceuticals, Biocon’s R&D function has built world-class competence and capability on the back of robust infrastructure, as well as a talent pool with extensive global product development experience. Its R&D core strategy is based on integrated discovery, a stage-gated approach to development, core disease area expertise (autoimmune and inflammation, oncology and diabetes) and a first-rate scientific advisory board.

Using patent information is an integral tool that Biocon uses to determine which areas the company’s R&D should focus on. One example of this is how it used patent information to gain initial access to the field of human insulin production, where it is now a major player. The product patent on human insulin had long expired but it was still protected by strong patents on the production processes. While searching for a gap that would enable it to gain a foot-hold in the market, Biocon discovered that most of the patented processes in this area used e-coli and baker’s yeast. Biocon had expertise in a different type of yeast and had already licensed the intellectual property for it. It therefore started making its own insulin using pichia yeast. This was a new and unique process, which was not covered by any existing patents.

The resulting product was Insugen, which was released in India in 2004. Since then, Insugen has been sold in many countries.. It was the world’s first human insulin to use pichia yeast, which itself is the world’s first recombinant (ie, using artificial DNA or r-DNA) human insulin. Insugen allowed Biocon to enter the insulin market in India – which holds 25% of the world’s population living with diabetes – and also kickstarted its efforts in treating diabetes, a central focus of its strategy. Biocon eventually expects to develop orally administered insulin. Through using patent information, Biocon was able to take the first steps towards becoming a successful biopharmaceutical organisation.

Figure 2. Trends for international applications filed by Indians over the last five years

Source: Indian Patent Office Annual Report (2015-16)

In 1999, Biocon filed its first international application with the PCT system for PlaFractor, with protection granted by the European Patent Office in 2005. In 2004, Biocon filed a patent application for Insugen with the Indian Patent Office, which was granted in 2010.

Biocon has filed over 1,200 patent applications and currently holds around over 1,000 patents and 577 trademark registrations globally. This number is expected to increase as the novel molecules pipeline advances from the bench to the bedside in the coming years. The patents and patent applications cover the product, process, formulations and method of uses for Biocon’s ongoing novel biologics, biosimilars generic insulins and small molecules.

Advancement of Indian patent system:

More recent policies from the Indian Patent Office have introduced greater clarity around pharmaceuticals and provided new incentives for start-ups in the sector.

In 2014 the office released guidelines pertaining to the issuance of pharmaceutical patents. These incorporated features of various court decisions in order to help the office to establish uniform standards of patent grant and examination and were designed to provide uniformity with regard to patent examinations across all the various patent offices in India, in addition to giving inventors and companies more certainty as to how their applications would be examined.

Further, various administrative and procedural mechanisms have been brought up to date. The infrastructure of the Indian Patent Office has been improved, with new facilities developed for the proper management of an international searching authority and preliminary examining authority operation under the PCT.

The Patent (Amendment) Rules 2014 recently introduced a third category of applicant – that of ‘small entity’. This change is designed to allow small and medium-sized enterprises to benefit from lower fees compared to those paid by large entities.

With the introduction of Patent (Amendment) Rules 2016, which came into took effect on May 16 2016, India now has provisions for the expedited examination of patent applications. Such examinations can be requested on any of the following grounds, namely:

• that India has been indicated as the competent international searching authority or elected as an international preliminary examining authority in the corresponding international application; or
• that the applicant is a start-up.

Further, the fees for basic patent filing have been revised due to the introduction of e-filing, with lower fees available for applications which are filed electronically. The e-filing facility and search access to an online database was introduced by Indian Patent Office. In addition, stock and flow utility – which provides real-time status for patent applications and high levels of transparency – has been introduced. First examination reports are now dispatched to applicants via email and made available on the Indian Patent Office’s website via InPASS – a crucial development in accelerating the process. This is part of a wider drive to encourage paperless practices at the offices.

Taken together, these changes have the potential to address many of the issues encountered by stakeholders due to the lack of a uniform and consistent practice at the Indian Patent Office, along with insufficient human resources. This in turn should benefit all innovative life sciences companies, whether foreign or domestic.