India: ‘Working Statement' Time Of The Year!!

Last Updated: 17 January 2017
Article by Shrimant Singh

Most Read Contributor in India, July 2017

The Cause: Under the (Indian) Patents Act, 1970, the right holders (patentee/licensees) of the patented inventions are required to submit "working statements" annually in respect of each of their patents in India. This enables the Government to ensure whether an invention is actually worked in India and/or the public requirements with respect to the same are met or not.

One may regard the requirement of 'working statements' as amongst the duties placed upon the right-holders in exchange of the monopoly granted by the Government over their patented inventions in India. Simply put, the right-holder under this requirement declares that the patented invention has been commercially worked in India for the benefit of the public, or, that the invention is not yet worked while also giving out reasons for such non-working of the same.

THE ENABLEMENT: SECTION 146 OF THE (INDIAN) PATENTS ACT, 1970, PRESCRIBES THAT:

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.
  2. Without prejudice to the provisions of subsection (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.

Further, Rule 131(2) of the Patents Rules, 2003, states that the statements required under Section 146(2) shall be furnished in respect of every calendar year within three months of the end of every year.

In other words, (1) the Controller may ask the rightholders to submit statements [with details] regarding commercial working of a patent in India and the same shall be furnished within 2 months of such askance by the Controller; further, (2) the said statements referred in (1) shall anyways be furnished by the right holder for every calendar year in respect of each of its patents before 31st March of the subsequent year. To exemplify, a statement regarding commercial working of a patent for the year 2016 shall be furnished at the Patent Office by 31st March 2017.

The prescribed mode [Form 27]: Statements under Section 146(2) providing details of commercial working of a patent in India shall be furnished on Form 27 as prescribed under Rule 131(1) of the Patents Rules, 2003.

DETAILS REQUIRED TO BE FURNISHED IN FORM 27 ARE:

  1. Whether the patented invention has been worked or not worked in India:

    1. if not worked, the reasons for not working and the steps being taken for the working of the invention.
    2. if worked, the quantum and value (in rupees) of the patented product;
    1. manufactured in India;
    2. imported from other countries along with the details of each country;
  1. The licenses and sub-licenses granted during the year;
  2. Whether the public requirement has been met, at a reasonable price either partly, adequately or to the fullest extent.

The enforcement: Interestingly, prior to the 2005 amendments in the Patents Act, 1970, the penalty for not filing a working statement was INR 20,000 (USD 300 approx), however, it appears that the Parliament considered that the said penalty was not enough for the right-holders to take the provisions for working statements seriously enough. Accordingly in 2005, by way of an amendment in the Patents Act, the penalty was increased, rather drastically, by 50 times to INR 10,00,000 (USD 14,700 approx.). The relevant Section 122 of the Patents Act, 1970, after the 2005 amendment read as:

122. Refusal or failure to supply information: (1) If any person refuses or fails to furnish— (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]1.

Further, as per Section 122(2), in case a right-holder submits false information on Form 27 or information which he knows or has a reason to believe to be false or does not believe to be true, he shall be punishable with imprisonment up to six months or with fine as in Rule 122(1) or both.

Even after the said astronomical rise in penalty, it seemed that the 'desired' compliance of Section 146 (2) requirement by the right-holders was not achieved at the Patent Office. Accordingly, in 2009, the Office of Controller General of Patents, Designs and Trademarks (CGPDTM) issued a notification in this regard, directing all patentees and licensees to furnish details regarding the commercial working of patented invention in India in compliance with Section 146 of the Act and Rule 131 of the Patents Rules. The said official notice also emphasized on punitive provisions under Section 122 which can be invoked upon non-submission of prescribed information or submission of false information on Form 27. Again in 2014, a similar notification was issued by the Office of Controller General, appealing to the patentees and licensees to comply with Section 146 of the Patents Act, 1970.

The exceptionally high penalty and repeated public notices by the Patent Office reinforced the intention of the Parliament under Section 146 of the Act and emphasized that right holders shall strictly comply with the requirement of submitting statements regarding commercial working of their patented inventions in India.

The resultant: Under Section 146(3), it is provided that:

146 (3).The Controller may publish the information received by him under sub-section (1) or sub-section (2) of section 146.

In pursuance to the said provision, the working statements on Form 27 so furnished in respective patents were made available to the public by the Patent Office. Furthering the said cause, the recently updated website of the Patent Office now has a dynamic utility whereby year-wise data of a certain patent number, application number or the patentee can be searched. While the said dynamic utility has its shortcomings in the compilation and display of the information / working statements, however, the Patent Office's step of making the said information easily available to the public is appreciable.

[snapshot of IPO's dynamic utility to search for information submitted re commercial working of patents

SO FAR, WE HAVE DISCUSSED-

  • the cause as to why the working statements are required,
  • the enablement of said requirement under Indian laws,
  • the prescribed mode [Form 27] and timeline for complying with the said requirement,
  • the enforcement provisions for said requirement, and
  • the resultant of working statements made available to the public.

It is equally important to know how the said working statements can be used by the public or any interested party. Accordingly, we now delve into the use, i.e., how a person may probably use such information or "working statements" as available to them in respect of the patented inventions.

The said publically available data of the commercial working of patents, i.e.:

  1. amount in rupees for working of a patent in India (manufactured or imported);
  2. reasons for not working, where applicable, and also providing steps undertaken by the patentee/licensee towards working the invention;

can be of great importance while approaching a patentee for a license or assignment over the said patented invention or deciding upon the applications for compulsory license on patents by the Patent Office or IPAB.

It is pertinent to note that while granting the first compulsory license2, the Patent Office and later the IPAB – Intellectual Property Appellate Board heavy relied on the information provided in the statements of commercial working submitted by the patentee - Bayer. In the said case, Natco a generic drug manufacturer was granted a compulsory licensee to a patent owned by Bayer covering its Nexavar drug. While granting the compulsory license, the IPAB relied substantially on the information submitted under working statements by Bayer corresponding to the Nexavar drug patent. Further, the Bombay High Court in the Writ Petition No.1323 of 2013 and Supreme Court while hearing a SLP by Bayer in 2014 upheld the decision of IPAB granting of the compulsory license over Nexavar.

Further, the statement of commercial working of patent is relied upon in litigation while assessing whether the patent was actually worked commercially in India or not. If we consider another instance where the patentee files a case of infringement of patent and seeks injunction and damages or an account of profit under Section 108 of the Patents Act, the information so submitted as statements of commercial working of a patent [Form 27] in India by the patentee can be used in support (or against) such claim of damages before the Court.

CONCLUSION:

Submission of information relating to commercial working of patents in India is innate to the duties placed on the patentee under the Indian Patents Act. The due compliance of said provisions enables the Government, and in turn benefits the patentee as well, in ensuring that the patent is commercially worked in India so that the advantages of the invention can reach to the public at large. Further, as can be seen above, the true information of a commercially worked patent can assist the patentee in substantiating its prayer before the Court for injunction and/or damages in a suit for infringement.

Accordingly, coming back to the title of this article, as the due date of 31st March 2017 is nearing; a rightholder over patent(s) in India should start compiling true and accurate data with respect to the commercial working of each of its patent(s) in India. The commercial working statement on Form 27 shall be submitted timely with the Indian Patents Office on or before March 31st 2017.

Footnotes

1 Amendment in Patents Act with effect from 1-1-2005

2 Bayer Vs. Natco Pharma

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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