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Working of patents in India

 By  Siddharth Sharma & Ranjan Matthew        

Why the need? – A rational perspective        

Primarily, in order to understand the reasoning behind why a patentee or a licensee thereof is required to furnish information regarding the working of patents in India, it may be pertinent to study the Statutory provisions envisioned under Section 83 of the Patents Act, 1970 hereafter referred to as the Act.          

Section 83, under Chapter XVI, which is titled “Working of patents, compulsory licences, and revocation”, teaches us the general principles applicable to the working of patented inventions. Inter alia, this Section lays down the reasoning or legislative scheme behind the granting of patents, including that patents are granted to encourage inventions and to secure the working of the patented article in the country (Section 83 (a)). Furthermore, from the broader perspective of the Act, the patenting system ensures that a quid pro quo is maintained. In return for the monopoly granted by the government over the patented article, the patentee and the licensee are expected to disseminate this inventive knowledge to the public (for example through the publishing of the patent), as well as work the patented invention, and provide the patented invention to the public at a reasonable cost. Even though Section 83 provides only guiding principles and not rules by mandate, it is helpful in understanding the requirement of working patented inventions in India.          

Furthermore, the statement of working provided by patentees and licensees can also provide useful insight into the effectiveness of the patenting system for various industries and companies that utilize the patented inventions in their course of business.          

Working of patents in India - Legal Overview          

According to Section 146 read with Rule 131, a patentee or a licensee, exclusive or otherwise, of a granted patent, is required to submit a statement regarding the working of the patented invention on a commercial scale in India in the prescribed manner (Form 27).          

Furthermore, the Controller of patents may issue a notice in writing, requiring the patentee or a licensee to furnish such information related to working in Form 27 within a period of two months from the date of issue of such notice (Section 146 (1)). Form 27, amongst other details, requires the patentee or the licensee to furnish the following relevant information:

 1)      Whether the invention has been worked;    
(a)  if not worked, the reasons for not working the invention, and the steps being taken to work the invention;
     
(b)  if worked, quantum and value (in rupees) of the patented product:
i)        manufactured in India,

ii)      imported from other countries, giving details of the countries concerned;      
2)      Licences and sub-licences granted during the year;        

3)      Whether the public requirement has been met, at a reasonable price either partly, adequately or to the fullest extent.

As per Rule 131, this information should be filed every calendar year, within three months of the end of each year. Thus, the latest that a patentee or licensee can file such information for a given calendar year is March 31st of the following year.
         
Failure to oblige          

Failure to furnish such information creates a presumption of non-working, and may assist the process of grant of compulsory licences. It is also a punishable offence and may incur a fine which may extend to rupees ten lakh (i.e., INR one million or USD sixteen thousand). Additionally, intentional furnishing of false information is an offence punishable with imprisonment for up to six months, or a fine, or both (S. 122).            

Recent developments in India – The system works!             

In a recent unprecedented move, the Indian Patent Office (IPO) made all the working statements filed by patentees during the year 2012 publically available. Section 146 (3) clearly provides this power to the Controller to publish the information received by him under Sections 146 (1) and (2).

The publishing of such a vast quantum of working statements by the IPO provides a host of valuable information regarding the effectiveness of the patenting system in India and can be utilized by various forums, such as academicians, potential licensees, and law makers to improve or amend the law of Patents in the country as well as to valuate the patents covered under these published working statements.                     

Compulsory licensing, revocation, and the working of patents


The legal provisions relating to compulsory licences are closely interwoven with the provisions relating to the working of patents. Section 84 states that an interested person may, after the expiration three years after the grant of a patent, apply to the Controller for a compulsory licence on the patent on grounds that, inter alia, the patented invention is not worked in India (S. 84 (1)(a)). Occasionally, the Controller may also adjourn the application for a compulsory licence, specifically to allow sufficient time for working in certain conditions (S. 86). This includes a decision, by the Controller, whether the patentee has taken adequate steps to at least begin working the invention on a commercial scale in India.

Furthermore, two years after the grant of the first compulsory licence, anyone may apply to the Controller to revoke the patent, if, inter alia, the patented invention has not been worked in India. The onus lies on the applicant of the compulsory licence to furnish the facts upon which such revocation is sought and the nature of the applicant’s interest. Such an application must ordinarily be decided within one year of its presentation to the Controller (Section 85).            

Industrial benefits
       

Besides encouraging development in the field of science and technology, the publishing of working statements has other numerous advantages related to business and trade. For instance, a working statement pertaining to a patent can help in estimating the worth/value of a patent and thus may help a potential licensee to negotiate the fee for obtaining a licence based on the value of the patent. On the other hand, working statements may prove to be of significant importance from a business merger or a business takeover perspective, as patents can form a significant part of the intangible assets of a company, and a good patent portfolio along with the information about its working may help companies in negotiations.           
 Furthermore, small scale industries may customize resources spent in research and development (R&D) according to the prospering technology pertaining to their field, based on information gathered from available working statements. Thus, data about working of inventions, inter-alia, gives an idea about the effectiveness and commercial viability of inventions, for valuation of patent portfolios and compulsory licensing.           

[ The first author is an Associate and the co - author was a Senior Associate, IPR Practice, Lakshmikumaran & Sridharan, New Delhi ]
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