Guest post by Preston Richard*
It is that time of the year again in India when the patentee must file an annual statement of working of their every granted patent. The statement has to be filed by the 31st of March each year.
Unique to India, this annual ritual mandated under Art. 146 (2) of the Indian Patent Act requires the patentee (and licensees) to furnish a statement to the extent to which the patented invention has been worked on a commercial scale in India.
This requirement stems from the Ayyangar Report (PDF), a policy document drafted in 1959 that forms the basis of the Indian Patent Regime.
While some countries chose to have no working requirement of patents, the Ayyangar Report reasoned that the quid pro quo the society receives in return for the grant of the monopoly could only be ensured if the patent is used for the purpose for which it is granted. Therefore, the report concluded that for a then under-developed country like India, certain safeguards against patents of foreigners was necessary. This resulted in the principles relating to the working of the patent and the consequences in case of failure being codified in the Indian Patent Act.
Requirements and Consequences
Accordingly, the Patentee (and the licensees) have to file a statement in a Form – 27(PDF) which requires details if the patented invention was worked, the reasons for not working, and if worked, the quantum and value of the patented product. It also requires information whether the patented product was manufactured in India or imported from other countries, and the licenses or sub-licenses granted during the year. In addition to use for statistical purpose, these details are aimed to inform the public of the working of the invention and could form a ground for a compulsory license if not worked for three years.
Noncompliance of this requirement comes with a high penalty under Art. 122 of the Indian Patent Act which includes a fine of INR 1 million (~12.500 EUR) for each non-compliance, and could even lead to imprisonment of up to 1 year if false information was knowingly provided.
Relevance to Modern day
However, patentees have long complained that providing such information is not always straightforward and is practically challenging, if not impossible, for certain new technologies such as ICT related patents.
The Ayyangar Report had at that time (1959) noted that the information required in the statement including the quantum and value, was not difficult to obtain, since most of the industries in which patents were worked at that time were covered by the requirements of the then Industries (Development and Regulation) Act of 1951, under which the manufacturers were bound to furnish to Government particulars as to the working and other details of manufacture.
While India has since moved from a planned economy of the 1950’s (so-called “License Raj”), where manufacturers were required to furnish information to obtain a license to operate in India, to an open economy, no change has been made to the working requirement. Meanwhile, new industries have evolved with the growth of technology where the requirements on Form-27 does not translate well to them.
Problems with certain technology of inventions
In patents relating to Information and Communication Technology (ICT) inventions, one product is often covered by multiple patented inventions and patents across multiple jurisdictions. A certain device could be covered by hundreds or even thousands of patents. Therefore, it makes it difficult to estimate the value contributed by an individual patent in a single country. There have been suggestions that a patentee could simply disclose all ‘related’ or ‘associated’ patents for each product and easily meet the requirement. However, this information is not necessary under the Patent Act and would impose an additional burden on the patentee. Furthermore, it is often that these products (say a computer), or a particular technology (like CDMA) includes multiple patents owned by different patentees. These patentees then proceed to cross-license worldwide patent portfolio including multiple patents used in the same product or technology and might not include a monetary value added to those license agreements, making it more difficult to determine the value and quantity of the products made by the patented invention.
The patented invention could also relate to a method. For example, in the field of ICT, a patented invention could be implemented across borders where a server located in the USA implements a method which results in improved performance for a user accessing it in India via the internet. In such cases, it is impossible to provide details of the quantum of a product since it does not exist and the value of the patented invention, let alone the information if they are manufactured or imported to India. A similar problem exists in case of improvements which are not essential for the product itself, such as a method for improving the voice quality in a mobile phone. While such a method is implemented via a chip, it is impossible to estimate the value of such improvements in the absence of established market value.
Not going into the policy discussion of whether a working requirement based on a 1959 report is still applicable for India, there is an overall consensus that the Form-27 needs an update as it well past its renewal date and fails to take into consideration of the scientific and technological developments.
An opportunity for a change
And it seems the time for a change has finally arrived.
In a recent High Court (Delhi) order of February 7, 2018 in the writ petition (W.P. (C) 5590/2015), the Court noted that Form -27 has failed to take into consideration the several scientific and technological requirements as well as the confidentiality issues. Therefore, the court has ordered the Patent Office to take steps for modifying the form.
Subsequently, the Indian Patent Office has issued a circular inviting comment from stakeholders by the deadline of March 16, 2018 (entended to March 23, 2018), relating to the working of patents, and later will be inviting a select group for a discussion.
Hopefully, this would lead to the long-awaited change and for the better.
Disclaimer: The views and opinions expressed in this article are those of the author and do not reflect that of the past or current employers. The information provided is for general information only and should be construed as legal advice.
*Preston Richard is a Patent Attorney specializing in ICT related inventions, has an engineering degree in Electronics and Communication, and an L.LM in Intellectual Property and Competition Law from the Munich Intellectual Property Law Center. He has more than ten years’ multi-jurisdictional experience in IP as an Indian Patent Attorney, and currently as a European Patent Attorney for the IP law firm BARDEHLE PAGENBERG. He can be reached at https://www.linkedin.com/in/prestonrichard/