Novartis AG v. Union Of India
Written by Manaswini, National Law University, Delhi
Introduction
The Novartis AG vs. The Union of India case posed the first significant challenge to India’s newly amended patent laws, setting a precedent in the nation’s intellectual property landscape. The controversy in this landmark case revolved around Section 3(d) of the Patents (Amendment) Act of 2005, which the appellants alleged to be violative of Article 27 of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS.)
The 2005 Amendment
Prior to the 2005 Amendment, there was no legal protection given to product patents filed by pharmaceuticals, which enabled Indian pharmaceutical companies to manufacture countless generic drugs at affordable prices. This affordability established India’s position as the de facto pharmacy for many developing countries.
However, to comply with the obligations laid down in the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), India amended its patent laws in 2005 and extended legal recognition to product patents from pharmaceuticals. Section 3(d), often referred to as the public health safeguard, mandates that a new form of a known substance must demonstrate “enhanced efficacy” to qualify for a patent. This provision was implemented with an aim to curb the practice of “evergreening”, where pharmaceutical companies seek to extend patent protection by obtaining patents on new forms or uses of existing substances rather than on the active ingredient itself.
The question that remains unanswered is what comprises “enhanced efficacy”?
Overview of Facts
The appellants had filed a patent application in 1997 for the therapeutic drug ‘Glivec’, which was used to treat gastrointestinal stromal tumors and chronic myeloid leukemia. In its application, it claimed to have invented the beta-crystal form of Imatinib Mesylate, which had already been patented in 35 other countries by then, by using a two-stage innovation procedure whereby a predetermined number of beta crystals were inserted into Imatinib’s base form.
The application lay dormant under the “mailbox procedure” until 2005 and came up for consideration after the necessary amendments were made. Subsequently, in 2006, the Madras Patent Office rejected the patent application as firstly, Novartis had already successfully applied for a patent of salt forms of imatinib in its 1993 applications and the imatinib mesylate was merely a salt form of the free base imatinib. Secondly, the new form of the known substance (imatinib) failed to demonstrate enhanced efficacy as required by Section 3(d).
Novartis, aggrieved by this decision, filed two writ petitions under Article 226 with the High Court of Madras, one appealing against the decision given by the Patent office and the other challenging the constitutionality of Section 3(d) as against Article 14 of the Indian Constitution, for being arbitrary and unclear as well as non-compliant with TRIPS. The High Court upheld the validity of the contested section and refrained from addressing the latter question, citing its lack of jurisdiction. Consequently, the appellants approached the Supreme Court.
Judgment
Definition of Efficacy
The meaning of enhanced efficiency is crucial to this case. The Hon’ble Court adopted a product-specific analysis in interpreting the meaning of the word efficacy by restricting its application to pharmaceutical products and gave three different interpretations listed as below.
i. Enhanced efficiency is subsumed under the legal standards for “industrial application” and “inventive step”.
ii. Increased effectiveness may also mean an improvement in how well a medication works.
iii. The third, more restrictive interpretation, adopted by both the Madras High Court and the IPAB, is that “enhanced efficacy” pertains exclusively to therapeutic efficacy.
The Supreme Court in dismissing the claim of the Appellants employed the third interpretation and held that the improvements in flow properties, thermodynamic stability and hygroscopicity did not meet the threshold of therapeutic efficacy. To demonstrate enhanced efficacy, the applicants must use research data obtained from in vivo animal studies. The court also stated that an increase in bioavailability is not indicative of enhancement of efficacy.
Also Read: Intellectual Property in the Age of Generative Artificial Intelligence
In simpler words, the test was whether the modification would have a unique therapeutic effect on the body. However, the court also held that this judgment should not be interpreted as a bar to all incremental inventions.
Furthermore, while examining the relationship between Section 2(1)(j) and section 3, the court observed that even though a product or process may fulfill the conditions laid down in section 2(1)(j) to be considered an invention, it could still be denied a patent under section 3.
Compliance with Article 27 of TRIPS
Article 27 of TRIPS lays down the criteria an invention must meet for it to be patentable. The invention, whether product or process, must be new, must have an inventive step and must be capable of industrial application. So the three criteria are novelty, inventive step and industrial applicability or non-obviousness. However, these terms have not been defined in TRIPS, giving member countries freedom to use their own discretion in governing their respective patent regimes. Furthermore, Article 1.1 permits member states to implement the provisions as they deem appropriate. Therefore, the
The TRIPS Agreement explicitly allows countries to exclude certain inventions from patentability to protect public health and societal interests. The Doha Declaration further supports this by emphasizing that TRIPS should be interpreted in a manner that promotes access to medicines and addresses public health concerns. In light of this, the framework adopted by India is well within the limits prescribed by TRIPS.
Balancing Protection of Intellectual Property and Public Health Concerns
The Novartis case brought Section 3(d) into sharp focus, underscoring the tension between encouraging pharmaceutical innovation and ensuring the affordability of essential drugs. Section 3(d) was designed as a safeguard against “evergreening,” a practice where companies extend patent protection by making incremental changes to existing drugs rather than developing genuinely new treatments. The provision mandates that for a new form of a known substance to be patentable, it must demonstrate “enhanced efficacy,” a criterion intended to prevent patents on minor modifications that do not contribute substantially to therapeutic improvement.
However, the Supreme Court’s interpretation of “enhanced efficacy” has led to considerable debate. By adhering to a narrow definition that emphasizes therapeutic efficacy, the Court set a high bar for patentability, which has sparked concerns about its impact on future foreign investment and domestic pharmaceutical innovation. While the strict interpretation aligns with the goal of preventing evergreening and ensuring that only truly innovative drugs are patented, it also risks discouraging investment by foreign pharmaceutical companies. The ambiguity surrounding what constitutes enhanced efficacy means that both multinational and Indian companies face uncertainty in securing patents for incremental innovations. This could potentially stifle advancements in drug development and diminish India’s attractiveness as a destination for pharmaceutical research and investment.
On the other hand, the decision reflects a broader commitment to public health and social justice. By rejecting conformity with Western patent norms and focusing on the practical impact of new drug formulations, Section 3(d) embodies a framework that prioritizes public health concerns. This approach aligns with global discussions on the role of IP in ensuring access to medicines, as highlighted by the Doha Declaration, which emphasized the importance of flexibility within the TRIPS Agreement to protect public health and promote access to essential drugs.
In balancing IP protection with public health needs, the challenge lies in crafting a legal framework that both incentivizes innovation and ensures that drugs remain affordable and accessible. Section 3(d) represents an attempt to navigate this balance by imposing stringent requirements for patentability while upholding India’s commitment to social equity. As such, it serves as a model for other developing countries grappling with similar issues, demonstrating how national patent laws can reflect both global IP standards and local public health priorities. However, the ongoing need for clarity and the potential negative impact on innovation highlight the delicate equilibrium required to achieve this balance effectively.
