India: Section 3(d) of The Patents Act, 1970 (As Amended): A Deeming Provision!

Last Updated: 24 July 2017
Article by Dinesh Kumar Sharma

Ambiguous and inconsistent standards regarding interpretation of Section 3(d) of the Patents Act, 1970, as amended by the Patents (Amendment) Act, 2005, a provision peculiar to Indian law, has remained a key issue in India. The constitutional validity of Section 3(d) of the Patents Act, 1970, (as amended) came under judicial scrutiny before the Division Bench (DB) of the Hon'ble High Court of Madras (MHC) in Novartis AG & Anr. vs. Union of India & Ors. [(2007) 4 MLJ 1153]

One of the core issues before the DB of the MHC for consideration was whether amended Section could be held to be violative of Article 14 of the Constitution of India on the ground of vagueness, arbitrariness and conferring un-canalised powers on the Statutory Authority.

Does Section 3(d) Engraft a Deeming Fiction?

Novartis submitted that the Explanation added to the amended section creates a deeming fiction to the effect that all salts, esters, etc., etc., if derived from a known substance, then, such derivatives are also considered to be the same substance, unless the derivatives are shown to differ significantly in properties with regard to efficacy. Novartis argued that all derivatives need not necessarily be the same substance and therefore the deeming fiction created by the Explanation is bereft of any guidelines and is bad in law. It was strenuously argued that there must be some guidance or guideline in the Act itself as to when a derivative shall be held to be differing significantly in properties with regard to efficacy. Novartis argued that both the amended Section as well as the Explanation to the amended Section must prescribe in clear terms for the Authority constituted under the Act, the guidelines to decide in what circumstances it can be held that the discovery of a new form of a known substance had resulted in the enhancement of the known efficacy of that substance and when the derivatives are found to differ significantly in properties with regard to efficacy.

Ruling of DB of MHC

After going through the entire records in the light of the arguments advanced by the parties, reading the Parliamentary debates on Patents (Amendment) Ordinance, 2004 (Ordinance No.  7/2004) and bearing in mind the object which the Amending Act wanted to achieve namely, to prevent evergreening; to provide easy access to the citizens of this country to life saving drugs and to discharge their Constitutional obligation of providing good health care to its citizens, the DB found that the Explanation creates a deeming fiction that derivatives of a known substance are deemed to be the same substance unless they differ significantly in properties with regard to efficacy.

The Court observed that it is accordingly clear from the amended Section and the Explanation that in the pharmacology field, if a discovery is made from a known substance, a duty is cast upon the patent applicant to show that the discovery had resulted in the enhancement of a known efficacy of that substance and in deciding whether to grant a Patent or not on such new discovery, the Explanation creates a deeming fiction that all derivatives of a known substance would be deemed to be the same substance unless it differ significantly in properties with regard to efficacy. The Court opined that due to the advanced technology in all fields of science, it is possible to show by giving necessary comparative details based on such science that the discovery of a new form of a known substance had resulted in the enhancement of the known efficacy of the original substance and the derivative so derived will not be the same substance, since the properties of the derivatives differ significantly with regard to efficacy. While observing so, the Court also referred to, inter alia, a judgment of the Hon'ble Supreme Court in M/s. J. K. Cotton Spinning and Weaving Mills Ltd. Vs. Union of India (AIR 1988 SC 191) wherein the Apex Court observed, inter alia, that "the Legislature is quite competent to enact a deeming provision for the purpose of assuming the existence of a fact which does not really exist."

Accordingly, the Court rejected Novartis' argument that the amended Section must be held to be bad in law since for want of guidelines it gives scope to the Statutory Authority to exercise its power arbitrarily, as it found that there are in- built materials in the amended Section and the Explanation itself, which would control / guide the discretion to be exercised by the Statutory Authority. The Court also found that the amended Section does not suffer from the vice of vagueness, ambiguity and arbitrariness. Consequently, the Court held that the amended Section is not in violation of Article 14 of the Constitution of India and accordingly dismissed the Writ Petitions filed by Novartis. 

Import of Section 3(d) on the Determination of Infringement of Patent

In the recently decided high profile case of F Hoffmann-La Roche Ltd. v Cipla Ltd [RFA(OS) 92/2012 & RFA (OS) 103/2012] arising out of the judgment dated September 7, 2012 passed by the Single Judge (SJ) of the Delhi High Court (DHC), the DB of the DHC comprising Hon'ble Mr. Justice Pradeep Nandrajog and Hon'ble Ms. Justice Mukta Gupta was faced with a crucial issue as to whether manufacture of polymorph B of the compound Erlotinib Hydrochloride (for which product claims in Plaintiff OSI Pharmaceuticals, Inc.'s patent application IN/PCT/2002/00507/DEL were rejected by the Indian Patent Office) by Cipla Ltd. infringes the suit patent IN196774 allegedly disclosing polymorph A+B of Erlotinib Hydrochloride.

Cipla's defence to the charge of infringement was essentially based on a claim that while the patent sought to be enforced was for Polymorphs A+B, the product actually under manufacture by both Roche and Cipla was Polymorph B which ought to be assumed to be in the public domain and hence its activities are non-infringing in nature.

Cipla argued that the very filing of a separate patent application was indicative of the fact that Polymorph B of Erlotinib Hydrochloride was a separate invention. Cipla urged that Polymorph B was neither disclosed, enabled nor claimed in the suit patent in any jurisdiction and hence something which came into being later cannot be argued as being retrospectively covered in an earlier patent. It was argued further that Section 3(d) is a deeming provision in a legal sense, but in a technical sense it cannot be presumed that once the patent/patent application for a new form of a known substance is rejected / abandoned then said new form is covered under a prior patent relating to that substance.

Interestingly, there were several indian patent infringement cases including Merck Sharp And Dohme Corporation And Anr. Vs. Glenmark Pharmaceuticals that witnessed a trend where the respective Defendants took the similar argument of defence to the charge of infringement as Cipla took in F Hoffmann-La Roche Ltd.

Ruling of DB of DHC

At the outset, the DB discussed the legal position concerning construction of claims. The DB referred to a number of decisions including the recent decision of the DB of the DHC in Merck Sharp And Dohme Corporation And Anr. Vs. Glenmark Pharmaceuticals [FAO (OS) No.190/2013] (arising out of SJ's Order dated April 5, 2013 dismissing Merck's application for grant of an interim injunction) wherein the DB comprising Justice Ravindra Bhat and Justice Najwi Wajiri held that claim construction to determine the coverage in the suit patent has to be determined objectively on its own terms with regard to the words used by the inventor and the context of the invention in terms of the knowledge existing in the industry. Subsequent abandonment of an application cannot remove what is patented earlier nor can it include something that was excluded earlier and that a patent is construed by the terms used by the inventor and not the inventor's subjective intent as to what was meant to be covered. Merely because an inventor applies for a latter patent that is already objectively included in a prior patent, but which inventor subjectively feels needs a separate patent application, doesn't mean it is to be taken at face value and therefore neither Section 3(d) nor abandonment of subsequent patent application can be used to read into terms of prior application, which has to be construed on its own terms.

The DB found itself unable to agree with Cipla's arguments on the import of rejection of patent application for polymorph B. The DB observed that the purpose of the qualification threshold laid down by Section 3(d) as to what subject matter would qualify as the 'same' or 'known' substance and what would qualify as a 'new' substance is that when something is the same/known substance, then the derivatives of such a substance as enumerated in the Explanation to Section 3(d) would be covered under the same protection that exists for the known substance. The DB specifically observed, inter alia:

"....What Section 3(d) certainly does NOT do, is doubly penalize the innovator, which appears to be the argument advanced by learned senior counsel for Cipla. If the argument is to be taken to its logical conclusion, it would mean that a rejection of a polymorphic version of Roche's existing patented molecule (i.e. the 'known substance' in this case) on the anvil of Section 3(d) would also result in effectively permitting all manufacturers of the said polymorph from being deemed non-infringers under Section 48. That is in fact not the import of Section 3(d) nor the legislative intent behind the provision.

73. We understand Section 3(d) as a positive provision that in fact recognizes incremental innovation while cautioning that the incremental steps may sometimes be so little that the resultant product is no different from the original. The inherent assumption in this is that an infringement of the resultant product would therefore be an infringement of the original i.e. the known substance and by no stretch of imagination can Section 3(d) be interpreted as constituting a defence to infringement."

Accordingly, the DB held that the rejection of the patent application for Polymorph B by the Indian Patent Office leads to a direct conclusion that there was a lack of sufficient matter to suggest that Polymorph B qualified as a 'new product' for consideration under Section 2(1)(j) for patentability and should therefore be regarded for all practical purposes as the allegedly old product itself i.e. Polymorphs A+B. The DB further held that as interestingly Cipla's argument would shoot down the polymorph because of Section 3(d) and also attempts to shoot down the main compound, because of the polymorph's rejection, it cannot be done.

The DB finally held that claim 1 of the suit patent is a sufficiently broad claim that is clearly not limited to any polymorphic version of Erlotinib Hydrochloride, but to Erlotinib Hydrochloride itself and this compound may exist in several polymorphic forms, but any and all such forms will be subsumed within this patent and therefore as Cipla's Erlocip is admittedly one particular polymorphic form of the Erlotinib Hydrochloride compound (Polymorph B), it will clearly infringe the suit patent.

Interestingly, it bears recalling that the SJ of the DHC in the same case had not accepted the Plaintiffs' "deeming fiction" argument. The Plaintiffs while relying upon the Patent Office's Order dated December 15, 2008 rejecting the product claims in the application IN/PCT/2002/00507/DEL argued that there is a deeming fiction in law to treat the suit patent compound and Polymorphic version B as the same substance. The SJ, however, had observed that upon the mere reading of the provision Section 3(d) as well as the Explanation appended thereto, it cannot be said that the provisions use the words "deeming" or "deemed to be", rather the wording used is "considered". The SJ had opined that that there is only a limited scope of consideration which is enacted in the form of Explanation till the time the efficacy differences are shown and not the blanket fiction of law which has been enacted. The SJ had further opined that even if the fiction is engrafted under Section 3(d) to treat the Polymorphic version as a same substance, the said treatment has been accorded by the law only for the purposes of applicability of Section 3(d). The said limited fiction nowhere states and can be construed to mean that for all other reasons too including for the purposes of determining the infringement of the patent, the said Polymorphic version B shall be deemed to the same substance.

Implications of DB's Ruling in F. Hoffmann-La Roche Ltd. (Supra) and Need for Greater Clarity

The DB's ruling that the rejection of the patent application for Polymorph B leads to a direct conclusion that there was a lack of sufficient matter to suggest that Polymorph B qualified as a 'new product' for consideration under Section 2(1)(j) for patentability and should therefore be regarded for all practical purposes as the old product itself i.e. Polymorphs A+B appears to mean that salts, esters, etc. would be deemed to be covered by the suit patent and thus any manufacture of these will infringe the original patented product or in other words that the coverage of a patent can be wider than the disclosure made therein.

Some concerns and issues appear to arise in view of the DB's ruling in F. Hoffmann-La Roche Ltd. including particularly regarding the purported dichotomy between coverage and disclosure in a patent which was in fact ruled out by the Hon'ble Supreme Court (SC) in Novartis AG Vs. Union of India [2013 (5) SCALE 12] by specifically holding, inter alia:

"139. The dichotomy that is sought to be drawn between coverage or claim on the one hand and disclosure or enablement or teaching in a patent on the other hand, seems to strike at the very root of the rationale of the law of patent. Under the scheme of patent, a monopoly is granted to a private individual in exchange of the invention being made public so that, at the end of the patent term, the invention may belong to the people at large who may be benefited by it. To say that the coverage in a patent might go much beyond the disclosure thus seem to negate the fundamental rule underlying the grant of patents.......we would like to say that in this country the law of patent, after the introduction of product patent for all kinds of substances in the patent regime, is in its infancy. We certainly do not wish the law of patent in this country to develop on lines where there may be a vast gap between the coverage and the disclosure under the patent; where the scope of the patent is determined not on the intrinsic worth of the invention but by the artful drafting of its claims by skilful lawyers, and where patents are traded as a commodity not for production and marketing of the patented products but to search for someone who may be sued for infringement of the patent."

Some of the apparent concerns and issues that still appear to remain unaddressed or unresolved include - Whether the views taken by the DB in F. Hoffmann-La Roche Ltd. are in conformity with the observations made by the Apex Court in Novartis (Supra)? - For instance, whether DB's view that the purpose of Section 3(d) is to encourage incremental innovation in pharmaceuticals have the same meaning and import as the SC's view in Novartis (Supra) that Section 3(d) does not bar patent protection for all incremental inventions of chemical and pharmaceutical substances; whether claim construction is dependent on the scope of Section 3(d) vis-à-vis the purported improvement to basic patent?; Whether the rejection of the patent application for the derivative like polymorph would ipso facto make the derivative (polymorph) subsumed in the suit patent?; whether interpretation of Section 3(d) which leads to a conclusion that the product being excluded is actually being granted a patent, is contrary to the legislative intent?; and whether Section 3(d) can be utilized as a tool to enhance the ambit of a patent to cover even those forms for which patent applications have either been rejected by the Patent Office or abandoned by the patentee itself?

A Lost Opportunity

Roche vs. Cipla long-standing battle eventually, as expected, reached the SC as Cipla preferred Special Leave Petitions [SLP (C) No. 1677-78 of 2016] against the DB's ruling in F. Hoffmann-La Roche Ltd. (Supra). The SC was finally considering the various questions of law and issues including issues such as the true scope and import of Section 3(d) in the civil appeal. However, in a surprising development, after a series of legal proceedings, the parties have finally settled their disputes. On May 30, 2017, the SJ of the DHC disposed of the suit as well as the counter-claim in terms of the compromise arrived at between the parties and accordingly passed a decree. Finally, on Cipla's request, the SC on June 22, 2017 dismissed the civil appeals as unconditionally withdrawn and accordingly allowed Cipla's application for withdrawal of the appeals.

This development possibly means a lost opportunity to evolve patent jurisprudence further. It is now hoped that the day will come soon when a fitting case involving interpretation of Section 3(d) will reach the SC, allowing jurisprudence on the subject to be revisited and statutory provisions to be interpreted in a manner suited to the true intent behind their promulgation, thereby providing much-needed clarity and the legal certainty on the issues involved.

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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