ParfumGigi@aol.com

John Bringardner

IP Law & Business

10-03-2007

Under palm trees bent by South India's monsoon winds, this summer hundreds of protesters gathered outside the onion-domed High Court complex in the city of Chennai (formerly known as Madras). Their signs urged Swiss pharmaceutical giant Novartis AG to drop its legal challenge to India's patent laws. The protesters feared that Indian generic drug manufacturers, which supply the bulk of medicine to the developing world, would be stifled by the stronger protection for innovative drugs that Novartis was suing to impose. "Patients, not patents!" was their cry.

The Chennai demonstrators were joined by more than a half million people worldwide who had signed a petition circulated by the international health group Doctors Without Borders urging Novartis to drop its suit. But as it turned out, the judges accomplished what the protesters couldn't. On Aug. 6, after months of procedural delays during which the litigation morphed into an international controversy, the High Court rejected Novartis' contention that India's patent laws are unconstitutional.

"In India we had to fight," says Ranjit Shahani, Novartis India's managing director. "For Novartis, a patent is non-negotiable." The rhetoric that Novartis used to defend itself in India -- how can we be expected to come up with new cures if the developing world runs roughshod over our IP rights? -- mimicked Big Pharma's volleys at regimes such as Thailand's military junta, which has shown little regard for patent protection in its compulsory licensing of AIDS drugs.

But such broad brush argument ignores important nuances. The story of Novartis in India is complicated, centering on patent applications on Novartis' breakthrough cancer drug Glivec (marketed in the United States as Gleevec) during a period of radical transition for India's patent laws. The recent Indian court decision wasn't simply about breaking a patent, as in Thailand. Instead, it said that Big Pharma must be content to earn profits only on its initial patents on an active ingredient, and that the industry will not get patent protection for incremental innovation in India as it does in the United States.

The irony is that while Novartis waged its legal battle to shift India more toward the U.S. view on incremental innovation, the American patent system was shifting closer to India's. Even the former president of Switzerland, Novartis' own country, who had chaired an IP commission for the World Health Organization, saw the drug company's moves as an attempt to prevent India and the developing world from using the flexibility on patents provided by international agreements.

What's more, lawyers with experience in India say that Novartis chose a losing litigation strategy and stuck with it. "The law firm that started the case for Novartis [New Delhi-based Remfry & Sagar] made fundamental errors, and they got creamed," says Mark Pohl, a partner with New Jersey boutique Pharmaceutical Patent Attorneys, who represents several large Indian generic drug companies. "This is a classic case of 'the other side isn't winning, Novartis is losing.'" Novartis declined to comment on the specifics of its litigation strategy. Remfry also declined to comment.

Though it sometimes can be hard to remember in this age of globalization, from its independence in 1947 until 1991 India developed a socialist economy largely shut off from the outside world. In 1972, Prime Minister Indira Gandhi banned product patents on all pharmaceuticals and agricultural chemicals. She calculated that India's impoverished masses would benefit more from a system promoting access to affordable medicine and plentiful food than from high-priced innovation. Her decision had a profound impact. Thirty-five years later, a country once prone to famine now feeds itself. India also developed a world-class generics industry, with more than 20,000 legal copycat drug producers and 85 U.S. Food and Drug Administration-approved labs for drugs that will be shipped to the U.S., the most outside the United States.

Banning drug patents "was the most important decision [Gandhi] made, ever," says Anand Grover, a public interest lawyer in Mumbai who has been fighting for years, with varying success, to keep drug patents out of India. He represented the Cancer Patients Aid Association pro bono to prevent the grant of a Glivec patent to Novartis, alongside lawyers from five of India's largest generics companies, including Ranbaxy Laboratories Ltd., Sun Pharmaceutical Industries Ltd., and Cipla Ltd.

India's economic perestroika began in 1991, when the government, prompted by a crippling foreign exchange crisis, embarked on a series of liberalizing measures, including a new openness to foreign investment. But it took longer for India to make changes in its laws regarding drug patents. Basel-based Novartis filed for its first U.S. patent on imatinib, the active ingredient in Glivec, in 1993 -- but not in India, where drugs still lacked IP protection. The original patent would protect the discovery of the effective ingredient. But subsequent research would be needed to turn it into a viable drug, which in turn would require more patents on the new beta crystalline form and delivery method.

Then, in 1995, India joined the World Trade Organization, just months after the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) became a prerequisite for membership. While the country's trademark and copyright laws were already well developed, India was given 10 years to bring its patent system up to TRIPS standards -- which meant dismantling Indira Gandhi's patent precedents. During that time, India accepted new drug patent applications in a "mailbox," to be opened and examined in 2005. These mailbox applicants could gain temporary "exclusive marketing rights," patent-like rights that lasted up to five years, or until the applications were examined starting in 2005.

Big Pharma hailed the change as a turning point for India, and in the late '90s, its patent offices were flooded with new applications from drug companies that had long shunned the country. Doctors Without Borders estimates that foreign drug companies are responsible for as many as 90 percent of the 9,000 Indian drug patent applications currently pending. Included in that rush of patent applications was Novartis' 1998 Indian patent application on Glivec.

To comply with its promise to the WTO, in 2005 India's parliament passed the Patents Amendment Act, reinstating product patents on drugs for the first time in decades. But here's the rub for Novartis. The new law only protects pharmaceuticals that were invented after 1995. In that law is a subclause, Section 3(d), that specifies that patents won't be granted for "the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance."

Imatinib was an original invention, the Indian patent office reasoned, when Novartis patented it in the United States and other countries in 1993. But that date of discovery was two years before the 1995 date when drugs became eligible for patent protection in India. The Indian office saw Novartis' 1998 application in India as a mere tweak to the earlier drug. This line of argument was put forward by the five Indian generic companies, joined by the Lawyers Collective, the nonprofit group representing cancer patients, in a 2004 pregrant opposition to the Glivec application. (Pregrant opposition is provided under India's new patent law, and so far generic companies have filed pregrant oppositions against almost every Indian drug patent application, says Rahul Das, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner in Washington, D.C. Indian law also gives third parties a chance to challenge a patent application at the patent office after a patent is granted, a proposal that is part of the current patent reform debate in the United States.)

Of course, incremental innovation makes it hard to draw a line between one new chemical entity and the next. Novartis claims that the beta crystalline form of imatinib mesylate, covered by its 1998 Indian patent application, provides 30 percent more bioavailability than the 1993 compound; in other words, it is more easily absorbed by the body. Section 3(d) adds another hurdle to patentability as defined elsewhere in the world, says Novartis' Shahani. In the United States and Europe, a patent must be non-obvious, have an inventive step, and commercial value. Section 3(d) adds to this the question of effectiveness, which is unique to India. But the definition of effectiveness is fuzzy, and with the Glivec case, Novartis sought to clarify a crucial legal point. Shahani poses a hypothetical, which India's current patent laws cannot answer: "If I have a headache pill and it removes my headache in half an hour, and then another pill removes it in 15 minutes, is it significantly more effective, or does it have to remove it in 15 seconds?"

Critics suggest that had Novartis simply pursued a discreet, technical appeal to the Indian patent office, asking for clarification of "effectiveness" rather than challenging the constitutionality and the validity of India's patent laws before the WTO, it would have had a better chance to get the Glivec patent. Shamnad Basheer, an Indian IP lawyer now teaching at George Washington University, says that by inadvertently letting the patent rejection blow up into an international showdown, Novartis' attorneys let their opponents gain the moral high ground. The effort by Big Pharma to protect its prices, however reasonable they may be because of the high costs of developing drugs, can quickly be turned against them with emotionally charged public relations campaigns by patient groups.

"With the kind of money Novartis spent on this, they could have done a lot better," says Basheer. Novartis relied on local counsel Remfry & Sagar, a venerable patent prosecution firm, to lead its legal challenge. But most Indian patent firms have little or no experience with litigation. Of roughly 7,000 Indian IP cases in the past 50 years, only 300 involved patents, says litigator Pravin Anand of New Delhi law firm Anand & Anand. Furthermore, Indian prosecution firms working for foreign clients before 2005 often functioned more like clerks, taking the U.S. or European patent application, attaching a cover letter, and walking it over to the patent office. Novartis declined to comment on its choice of law firm.

According to Calab Gabriel, co-founder of IP firm K&S Partners in New Delhi, Novartis tried to bolster its patent litigation team before the High Court, but it was too slow. Generics company Cipla hired K&S as co-counsel on the matter the day before Novartis came knocking, says Gabriel. Novartis and Remfry & Sagar quickly hired several of the country's top litigators, including a past solicitor general of India, to argue the case in court and to make it impossible for them to work for the generics companies. Novartis opted for big-name litigators, but their star power could not hide the fact that none had ever tried a patent case before.

The High Court in Chennai convened in February 2007 to hear the case. Lawyers flew in from New Delhi, Mumbai and Bangalore to argue the case that day, but the three-judge panel put off a second day of hearings for weeks. From the United States and Europe, Big Pharma watched eagerly, hoping that stronger IP protection would allow them to expand their operations in India. In the United States, both the drug-industry group PhRMA and the U.S. trade representative spoke out in favor of the Novartis appeal. Meanwhile, California Congressman Henry Waxman joined the chorus of protesters asking Novartis CEO Daniel Vasella to drop the case.

On Aug. 6 the High Court issued its long-awaited decision, denying Novartis' claim that Section 3(d) is an unconstitutional hindrance to the course of business. Novartis India chief Shahani says the company will not appeal the case to the Indian Supreme Court. (The court did not rule on whether 3(d) is compliant with TRIPS. That is the jurisdiction of the World Trade Organization itself, said the judges. However, there is no indication that any nation will argue against India's IP laws at the WTO.)

The High Court's decision was hailed as a victory for the poor by nonprofit groups, but the war is not yet over. Novartis has moved its patent campaign further, to the Indian political frontline. Shortly after the High Court's ruling, Shahani told India's Economic Times that China is now its favored destination for investment. India takes economic competition with China very seriously, and the comment was seen by many as retaliatory.

The high profile of the Glivec case has attracted the attention of many Indians to the drug patent issue. Some observers predict that legislation will be introduced to clarify what is patentable, rather than waiting for the courts to interpret the patent law. If the current administration doesn't take action, a new government in 2009 likely will, says Manoj Pillai, an IP attorney with New Delhi firm Lex Orbis.

The whole affair is an expected evolutionary step for the Indian legal system, says Pohl, the New Jersey patent attorney. "Old-line Indian firms have been in business for decades, but what they've been doing for 50 years has very little to do with what they're expected to do in the next five or 10 years," he says.

Litigator Anand says, "the only way for the Indian patent system to mature is through case law, which brings clarity to the legislation."

Novartis certainly didn't anticipate the vast changes that India would undergo in the 1990s and early 2000s, but at least it knows what not to do in a situation it's likely to see again.