By: Manvi Sahni
INTRODUCTION
S.146(2) of the Patents Act, 1970 (hereinafter ‘the Act’) obligates all patentees and licensees to furnish statements indicating the extent to which their patent has been worked commercially in India. This is implemented through Form-27. Non-fulfilment of this criterion is a ground for granting compulsory license under S. 84. However, a recent report by the U.S. Trade Representative has placed India on its priority watchlist on the ground that such reporting requirements are excessive. In light of this, whether non-use of patents can be a ground for refusing temporary injunction warrants immediate legal analysis. This was recently examined by the Delhi HC in Enconcore N.V. v. Anjani Technoplast Ltd. (hereinafter ‘Enconcore’), where the court held that when patentees have not used the patent in India, they cannot, in equity, seek temporary injunction [para-24].
This paper argues that the legal validity of this decision is questionable on account of its failure to deliberate over certain essential aspects. To this end, this paper first, provides a comprehensive analysis of the verdict propounded in Enconcore. Second, it examines the legal positions that the court in Enconcore has overlooked. Third, it delves into the implications of the legal lacunae present in this judgement.
JUDGEMENT OF THE COURT
Enconcore N.V. is a Belgium-based company that had registered a patent in India that pertained to a technology employed in the production of thermoplastic honeycomb core materials and sandwich panels [para-2]. Enconcore had also issued several licenses for its patent [para-3]. In 2018, Enconcore N.V. claimed that Anjani Technoplast Ltd., (hereinafter ‘Anjani’), a Delhi-based company, had infringed its patent. However, it is well-established that Enconcore was neither manufacturing, nor selling its honeycomb panels in India [para-23]. Further, the court acknowledged that the Ministry of Defence was one of Anjani’s chief customers [para-14]. Therefore, the legal issue was whether non-use by a foreigner of a patent registered in India can be a ground for refusing temporary injunction.
Delhi HC refused to grant a temporary injunction on two grounds. First, Enconcore was not commercially employing its patent in India as it was not manufacturing honeycomb panels in India, and its sales were miniscule [para-23]. Thus, by relying on Franz Xaver v. New Yash Engineers (hereinafter ‘Franz’), HC re-affirmed that a person/entity that has registered patents in India but has not used them cannot be granted temporary injunction [para-12]. It endorsed the understanding that a patent is not private property but instead is a privilege that is subject to the condition of fostering the advancement of science [para-25]. Second, the court acknowledged that Anjani is one of the chief suppliers of defence equipment to MoD. Subsequently, to indicate the dire nature of Anjani’s circumstances, it took into account the purpose for which containers were sold to MoD and concluded that it is impossible to separate honeycomb panels from the containers [para-24].
Thus, the court proposed an interim arrangement instead of granting an interim injunction to balance the interests of both parties [para-27].
CRITICAL EXAMINATION OF LEGAL POSITIONS OVERLOOKED IN ENCONCORE
This section outlines the two legal standards that the Delhi HC neglected in Enconcore while deliberating whether the patent was being commercially worked/used in India.
Importation as a criterion for Meeting Local Working Requirements
Art. 27.1 of the TRIPS Agreement prohibits any form of discrimination regarding whether a patent is locally produced/imported. However, this conflicts with Art. 30 of the agreement, which provides the member states with discretion to permit restrictions, such as local working requirements on patentees’ exclusive rights. Subsequently, the position regarding the inclusion of importation within local working requirements is uncertain.
Several scholars argue that imports and manufacturing cannot be placed on an equal pedestal as S.84(7)(e) of the Act clarifies that importation cannot constitute ‘working in India’. The provision explicitly provides that any importation by the patentee or someone else would be considered as a hindrance to commercial working of the patent. India also advocated this position during the Uruguay Round of Multilateral Negotiations [para-9].
Nevertheless, the legal jurisprudence on this issue contradicts this position. In Bayer Corporation v. UoI (hereinafter ‘Bayer’), the Bombay HC ruled that S. 83 of the Act provides that patentees should not be permitted to enjoy a monopoly by importing their patent [para-27]. This implies that patentees are obligated to depict some efforts made to manufacture their patent in India. However, claims regarding the complete exclusion of imports from the criteria of local working requirements cannot be supported. This is because in cases where patentees can provide bona fide reasons for not being able to undertake manufacturing of the patent within India, value of imports can be included within local working requirements [para-27]. This position was reaffirmed in Novartis AG v. Cipla Ltd. (hereinafter ‘Novartis’) [para-71] and Telemecanique [para-31]. It is also illustrated by Form-27, which provides a separate column for patentees to list values of imports of the patent.
Additionally, the phrase ‘manufacture in India’ under the erstwhile S.90 of the Act has been omitted from S.84(7) of the present Act in the context of satisfying the reasonable requirements of the public [para-25]. This implies that the legislative intent was to not limit the ambit of local working requirements to solely manufacturing and instead leave open the possibility of including importation.
Therefore, conflicting viewpoints persist over the question of whether imports of the patent are included within local working requirements.
Inclusion of Sale by Licensees under Local Working Requirements
The main purpose of S.83 is to ensure that patentees do not enjoy a monopoly and the patent is accessible to the public at a reasonable price [para-58]. This necessitates the question of whether manufacturing of the patent by licensees should also be included within local working requirements. This is because it can be argued that licensees are also contributing towards making the patent more accessible, thereby conforming to the underlying purpose of S. 83. Further, the current legal position provides that obligation to meet reasonable requirements of the public, under S. 84(1), can be achieved either by the patentee themselves or through their licensees [Bayer, para-22; Novartis, para-16]. Thus, local working requirement under S. 84(7)(d) can be fulfilled by either the patentee or its licensees as it is merely elaborating upon the prerequisites for application of S. 84(1).
RE EVALUATING THE IMPLICATIONS OF LEGAL LACUNAE PRESENT IN ENCONCORE
This section will delve into the implications of the legal positions established in Section III and certain essential factors that were overlooked in Enconcore.
Delhi HC neglected several considerations while adjudicating whether the patent was being worked commercially in India. For instance, firstly, the court did not delve into the reasons responsible for Enconcore’s inability to manufacture the patent within India, which essentially is a legal requirement, as provided in Bayer. There could have been multiple bona fide reasons substantiating the lack of manufacturing of the patent such as lack of funds or waiting for further improvement into the patent. Additionally, the level of demand for a good depends on the nature of industry and patentees are not required to flood the market with their patent in the absence of any reasonable demand [para-66]. In the present scenario, Enconcore was involved in manufacturing honeycomb sandwich panels, which were used essentially in the defence industry. This is a niche industry with no immense level of demand. Consequently, it is plausible that the minuscule level of sales of Enconcore’s patent in India is reflective of its demand.
Secondly, the court did not consider the possibility that, in light of potential bona fide concerns, it may be reasonable to take into account imports of the patent. Further, since Enconcore had licensed the patent to several entities, it is essential to also include the sales made by these licensees within local working requirements. This is because even sales made by licensees achieve the underlying purpose of S.83(g), which is to ensure proper access of patents to the public. Consequently, the court may have erred in estimating the fulfilment of local working requirements.
Lastly, it was propounded in Novartis that accusations regarding patentees deliberately relying on importation to enjoy a monopoly are relevant only in the context of compulsory license or revocation of patentee’s exclusive right [para-100]. This cannot be taken as a defence by the defendant to resist a suit for infringement. Therefore, it was ruled that the non-working of a patent cannot be the sole ground for refusing an interim injunction [para-100]. However, this position conflicts with Franz, which held that a person/entity, which has registered patents in India but has not used them, cannot be granted a temporary injunction [para-12].
Therefore, it can be safely concluded that the legitimacy of the legal basis underpinning the court’s refusal to grant temporary injunction in Enconcore is questionable due to the court’s failure to consider certain vital factors.
CONCLUSION
This paper concludes that Delhi HC’s decision to deny Enconcore a temporary injunction was rendered without due consideration of certain crucial factors, thereby giving rise to apprehensions concerning its credibility. Nonetheless, this case gives rise to a pertinent question that warrants further deliberation. S. 83(c) provides that the main purpose behind having a minimum working requirement is to ensure that a transfer of technology occurs for mutual benefit of both the producer and users [para-18]. However, by including imports under local working requirement there will always remain a possibility that patentees would simply import finished products to India, without actively engaging in transfer of technology. While the Delhi HC did not effectively delve into this legal conundrum in Enconcore and instead limited the scope of the judgement to refusal of temporary injunction, this is a concern that requires immediate resolution in order to ensure the efficacy of S.146(2).
(Manvi Sahni is a law undergraduate law at National Law School of India University, Bangalore. The author may be contacted via mail at manvi.sahni@nls.ac.in)
Cite as: Manvi Sahni, Examining the Complex Discourse Surrounding Local Working Requirements in India’s Patent Code, 2nd June 2024, <https://rmlnlulawreview.com/2024/06/02/examining-the-complex-discourse-surrounding-local-working-requirements-in-indias-patent-code/>date of access.
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