India: Key SEP and Antitrust Challenges Demonstrate Judicial Desire to Strengthen Patent Regime

In summary

In this article, we briefly cover legislative changes, decisions in the two dominant fields of Indian patent litigation, India’s first decision on antitrust and patent law and orders that have refined patent jurisprudence.

Discussion points

• Legislative restructuring
• SEPs
• Life sciences
• Antitrust and patents
• Growing jurisprudence on patent law

Referenced in this article

• Delhi High Court Intellectual Property Division Annual Report 2022–23
• Intex v Ericsson
• Nokia v Oppo
• Novartis v Natco
• Boehringer Ingelheim v Vee Excel Drugs
• Consolidated case of Ericsson v CCI
• In re Swapan Dey and Vifor
• Patents Act 1970

Over the past two decades, the patent regime in India has been on a steady climb towards a place among the world’s strongest patent jurisdictions. The judiciary has been steering this drive and has shifted gears in recent years, resulting in the past year witnessing the start of India’s moment in the global patent jurisprudence spotlight.

The Indian judiciary has delivered very strong decisions in the past 12 months. It is also in the process of authorising some others, which are expected to refine nuanced yet important aspects of the Indian patent law.

In this article, we briefly cover legislative changes, decisions in the two dominant fields of Indian patent litigation (ie, standard-essential patents (SEPs) and life sciences), India’s first decision on antitrust and patent law and orders that have refined patent jurisprudence.

Legislative restructuring

Abolishment of the IPAB and creation of the IPD

In early 2021, Parliament announced its plans to abolish the appellate tribunal body in India, the Intellectual Property Appellate Board (IPAB), and transfer its cases to various high courts – a plan that, at the time, was regarded with uncertainty by patent litigators and prosecutors.

In 2022, the Delhi High Court answered the legislature’s call and became the first high court in the country to set up an IP division (the Delhi IPD). The Delhi IPD comprises three separate benches of single judges, and an appeal bench that presides over them, dedicated to hearing only IP cases.

Although it inherited over 3000 cases from the IPAB, the Delhi IPD’s first annual report card is impressive: in just one year, decisions were made in 45 per cent of all appeals from the Indian Patent Office (IPO), 66 per cent of all original patent invalidation petitions and 50 per cent of IP lawsuits filed before it.

The arrival of the Delhi IPD has already raised the standard of intellectual property in India: the IPO’s slow pace of decision-making and its notoriety for passing poorly reasoned orders have been deprecated by the Delhi High Court to the extent that the Assistant Controller General of Patents was made to undergo a course on passing judicial orders at the Delhi Judicial Academy after a trend was noticed whereby instead of providing the reasons behind the rejection of a patent application, the IPO had started simply to copy and paste the statutory provisions without delineating how they were applicable to the patent in question.^[1]

Following the success of the Delhi IPD, in April 2023, the Madras High Court in Chennai set up its own IPD, and other high courts are expected to follow suit.

India’s vision for the next decade of IP law is captured in the Delhi IPD’s Annual Report 2022–23. Some of the Delhi IPD’s aims in the coming years are as follows:

• establishment of IPDs in at least 10 to 15 high courts across India;
• creation of a robust panel of scientific advisers to assist the courts;
• acceleration of the patent litigation process;
• cultivation of a damages culture in IP cases;
• strengthening of the Indian judiciary by appointing specialist IP lawyers as judges;
• promotion of women inventors, single inventors and small businesses both at the IPO and in the courts; and
• development of India into a hub for high-quality patent drafting by promoting interdisciplinary education at the school and college level.^[2]

Procedural rules to fine tune and speed up patent litigation

The success attained by the Delhi High Court can be attributed to the speed, depth and maturity of its IPD judges’ adjudication. Each case is viewed not through a traditional lens but rather as an opportunity to refine the direction that Indian patent law and policy must take.

The Court is aided in its endeavour through the newly enacted Delhi High Court Rules Governing Patent Suits 2022, which address new aspects, including:

• tests for proving infringement of SEPs (claim-chart mapping);
• the creation of a scientific panel of advisers to assist the court from a neutral position in highly technical litigation; and
• confidentiality clubs and the need to exclude non-licensing personnel, especially in the SEP context.

The Commercial Courts Act 2015 had already laid the foundation of speedy litigation through summary judgments, case management hearings and flexible trials, among other things. These new patent rules refine some aspects of traditional patent litigation and address new fields and concepts in patent law, which did not exist when the Patents Act 1970 was enacted.

SEPs

Intex v Ericsson

The most recent decision that tackled core SEP issues in India from a jurisprudential standpoint was Philips v Bhagirathi Electronics.^[3] Delivered in 2018, it remains India’s only judgment on SEPs, delivered after a full trial.

Between 2018 and 2022, some implementers started to declare that India’s stance has shifted, and interim relief is no longer available in SEP disputes. The Delhi High Court emphatically rejected this line of thought in March 2023 by upholding an interim order in Ericsson’s favour against the Indian mobile manufacturer Intex, which was refusing to license its SEPs.^[4] It also rejected Intex’s argument that India should follow the UK model and not grant an injunction until the full trial on validity and fair, reasonable and non-discriminatory (FRAND) terms is complete.^[5]

The Court noted that the judge–population ratio is low in India, which prolongs the time needed by the courts to pass decisions; however, this is the reason that India must grant interim injunctions, lest a domino effect arise by which the denial of interim relief discourages innovator companies from conducting further research and development directed at India.^[6]

More important than the outcome of the decision are the principles that the Court laid down for deciding future SEP disputes. Some of those principles are as follows:

• implementers do not need access to the SEP holder’s licensing agreements to make a counteroffer;
• an injunction, and not damages, is the answer to solving hold-out by an unwilling licensee;^[7]
• recent decisions in the United Kingdom such as InterDigital v Lenovo^[8] do not apply in the Indian context;^[9]
• injunctions and interim payments for the entire SEP portfolio can be decided even if just one patent in the suit is asserted (the silver bullet rule);^[10]
• even before interim relief, courts can direct the implementer to make ad hoc royalty payments (pro tem payments);^[11] and
• at the interim stage, the alleged infringer must do a lot more to avoid an injunction than simply claiming the invalidity of the SEPs; the challenge should be strong.^[12]

The decision has laid a strong foundation for SEP holders to litigate in India: it has positioned India as possibly the only jurisdiction in the world that not only grants interim relief to SEP holders but also recognises their right to receive pro tem royalties as security, at the beginning of a lawsuit, even before the court addresses the questions of infringement, FRAND compliance and validity.

Nokia v Oppo

Pro tem security orders are equitable orders passed by the court to balance the rights and interests of both parties until the case is finally decided. These orders present a unique facet of Indian litigation that enables parties to secure monetary relief even before the case is heard on merits of interim injunction etc. These orders have ranged from accepting bank guarantees by implementers to ordering an implementer to park away real estate and keep it free from third-party claims.

However, the latest decision by the Delhi High Court in Nokia v Oppo^[13] marked a milestone and has introduced the untested concept of pro tem security. After a 2018 cross-licence agreement between Nokia and Oppo expired, and the parties could not reach an agreement on renewing the licence, Nokia brought a suit against Oppo in India (among other jurisdictions). Nokia invoked a rather obscure provision of law^[14] to claim its right to receive pro tem security, before the Court heard the parties on merits, based on admissions made by Oppo regarding its liability to pay royalties to Nokia.^[15]

The court noted that a SEP holder (in this case, Nokia) is at a disadvantage relative to an implementer (in this case, Oppo) as it cannot seek an injunction without protracted FRAND negotiations;^[16] therefore, an implementer is duty-bound under Indian law to deposit ad hoc royalties with the court until the full suit is decided or the parties execute a licensing agreement. It held that Nokia had already established a prima facie case of infringement because Oppo had:

• been an ex-licensee of Nokia for three years starting from 2018;
• continued to negotiate with Nokia for renewal of the licensing agreement;
• made counteroffers to Nokia;
• offered to make interim payments to Nokia; and
• approached the China court seeking determination of FRAND rates, which meant that the patents in question were SEPs.^[17]

Life sciences

Pharmaceutical patent litigation continues its turbulent path, with Novartis v Natco constituting an extremely progressive decision^[18] and Boehringer Ingelheim v Vee Excel Drugs^[19] constituting a setback to patentees. These decisions have seen conflicting views from separate judges on selection inventions (ie, the genus versus species debate).

Novartis v Natco

This decision alleviated some of the deep wounds delivered to pharma patent owners by previous decisions in 2021 that seemed to close the door on the concept of co-pendency of species and genus patents. While granting an injunction to Novartis, it arrived at the following findings:

• disclosure in a patent specification and coverage of its claims are distinct concepts;^[20]
• mere coverage of a compound in the claims of the genus patent is not sufficient to invalidate a later species patent – disclosure for lack of novelty is required;^[21]
• selection patents, although not mentioned specifically in statute, are valid and enforceable in India; and
• US Orange Book listings or patent term extensions that state that a drug is covered by both the genus and the species patent do not mean that the invention of the two patents is the same cannot be used against a patentee in response to an infringement claim.^[22]

Boehringer Ingelheim v Vee Excel Drugs

Two months after the Novartis v Natco decision, another bench of the Delhi High Court passed a diametrically opposite decision, which denied an injunction to Boehringer against entities that were marketing its patented drug linagliptin. Some of the Court’s reasons were as follows:

• if the compound claimed in the species patent was also covered in the earlier genus patent, the Court is likely to presume that it was also disclosed in the earlier genus patent;^[23]
• there is not much difference between the concepts of covered, encompassed and disclosed, apart from semantics;^[24]
• working statements (Form 27) or US Food and Drug Administration Orange Book listings, which show that one drug is covered by the genus and the species patent, suggest that the invention of both patents is the same;^[25] and
• selection patents may be granted in India, provided they terminate at the same time as the earlier genus patent.

The Court noted that Boehringer had made a previous statement to the IPO several years ago that linagliptin was disclosed in the earlier genus patent; therefore, the Court did not allow it to change course and later claim that it was disclosed only in the species patent. Further, the international search report on the species patent had also suggested that the species patent was not novel or inventive in respect of the earlier genus patent.^[26]

Some elements of this decision seem to contrast with the Novartis v Natco decision. While an initial glance may suggest that both decisions are completely contrary, on closer inspection, it becomes clearer that Boehringer was denied an injunction because there were some serious obstacles to the novelty of its patent not on principles of law, but on facts specific to that patent.

Antitrust and patents

Consolidated case of Ericsson v CCI

A 2016 decision in a case concerning allegations made against Ericsson for alleged non-FRAND practices with prospective Indian licensees and a 2020 decision in a case concerning allegations against Monsanto’s practices of allegedly charging high royalties, imposing one-sided terms on sublicensors for its patents over traits of Bt cotton, saw the Delhi High Court hold that claims of antitrust and abuse of dominance on the basis of alleged misuse of monopolistic patent rights (either denying entry to market or charging high royalties for a licence) were solely the domain of India’s competition regulator: the Competition Commission of India (CCI).^[27]

The 2023 decision has reversed this position and has held that the Patents Act is a specialised legislation that entrusts the Controller General of Patents to ensure that:

• patents are used in India;
• patented inventions are made available to persons at reasonably affordable prices and in sufficient quantity;
• patent licences are free of restrictive or unfair trade conditions; and
• compulsory licences are granted to interested applicants on reasonable terms if the patentee fails to use the patent in India or meet the public’s requirements.^[28]

The Court gave an interesting explanation to section 3(5) of the Competition Act 2002 that exempted the reasonable exercise of IP rights from being categorised as anticompetitive practices. The Court held that the reason for the legislature to make this exception was to exclude patent licensing agreements from the scope of examination under the Competition Act and relegate this issue to the domain of the Controller General of Patents.^[29] As a result, the CCI proceedings against Ericsson and Monsanto have been quashed.^[30]

Whether this decision reflects the final position that India takes on this issue as a matter of law and policy remains to be seen. The CCI has the option of appealing the decision and having the final question be decided by the Supreme Court.

In re Swapan Dey and Vifor

October 2022 saw India’s first decision by the CCI on a claim of abuse of dominance and anticompetitive conduct against a pharmaceutical patent holder.^[31]

The claim against Vifor was that it prevented fair play in the market by granting licences only to two entities and by denying the claimant a licence for its patented drug ferric carboxymaltose for the treatment of anaemia.^[32] There was also a secondary claim that Vifor was supplying the drug to government institutions at much cheaper rates than market costs.^[33]

The complaint was dismissed at the outset, and the claimant’s request for investigating Vifor for anticompetitive conduct was rejected. Its reasons were as follows:

• Vifor entered into short-term patent licensing agreements (three years), with the possibility of extensions. The agreements were not restrictive or one-sided and were not anticompetitive.^[34]
• Vifor, as a patentee, has the freedom to choose who it wishes to license its patents to; third parties do not have a right to license its patent.^[35]
• The patent was expiring in October 2023, after which all players will be free to enter the market.^[36]
• Vifor’s decision to price its drug at a cheaper rate for government institutions than the price on the open market was not anticompetitive. Pricing under government programmes is not comparable with the open market.^[37]

The decision is encouraging for patent holders and supports the fact that the competition regulator in India will decide complaints in the most objective, neutral and case-specific manner.

Growing jurisprudence on patent law

Section 3(k): no blanket bar to software or business method patents

Section 3(k) of the Patent Act is pitted against every patent based on software and artificial intelligence (AI). The IPO has rejected several patents simply on the grounds that they relate to software. Without examining whether the inventions had technical effect, there was a valid concern that serial rejections of those patents would disincentivise the growth of AI technology in India.

In May 2023, the Delhi High Court clarified^[38] that software inventions are patentable if used in conjunction with hardware or if they contain a technical effect. It further held that a technical effect can be gleaned if the invention solves a technical problem, enhances a technical process or has some other technical benefit.^[39] It also cautioned that technical effect is an ever changing phenomenon that is entwined with technological growth and that the parameters of its definition must be continuously revised.^[40]

In OpenTV v Controller of Patents,^[41] the Court expressed concern at the rejection of business method inventions under archaic definition of section 3(k). Citing the 161st report by the Parliamentary Standing Committee on Commerce, the decision acknowledged that a large number of inventions concerning emerging technologies will be in the field of software, and, therefore, a relook at the strict implementation of section 3(k) was required.^[42]

New twists in the doctrine of equivalence

Two decisions of the Delhi High Court have brought the doctrine of equivalence to the forefront of infringement disputes.

The first case is that of Sotefin v Indraprastha Cancer Society concerning infringement of a patent for smart dollies.^[43] The Court discussed the well-established principle of the doctrine of equivalents but in the context of deciding whether the difference in the impugned product from the patent claims relates to an essential or non-essential element.

The Court laid down the ‘all-essential elements’ rule: a patent is infringed when all the essential elements of the claim are carried out by the alleged infringer.^[44] The absence of non-essential elements in the alleged infringer’s product will not establish non-infringement.^[45]

Whether an element is an essential element of a claim is determined based on the following factors:

• the common general knowledge of a person of ordinary skill in the art (POSA) on the date of publication of the patent;
• whether the POSA would have considered it obvious that a variant of an element of the claim would be irrelevant to the way the invention works; and
• the intent of the inventor, either express or implied from the claims, that a particular element is essential, disregarding any other evidence of the inventor’s intent that is external to the patent claims.^[46]

This decision has put a spanner in the works of many defendants, who have sought to confuse the courts by insisting that a patent is infringed only if all elements (and not all essential elements) of a claim are implemented by it.

The decision of FMC Corporation and Ors v Natco Pharma Limited^[47] by the Appellate Bench of the Delhi High Court saw the Court refine the features of the doctrine of equivalence in the context of process patents. The traditional elements (ie, substantially the same function being performed, in substantially the same way, to achieve the same result)^[48] were modified to involve:

• identification of the essential elements of the two processes;
• identification of the necessary steps of the two processes; and
• examination of the interaction of the key elements at each step.^[49]

Only if there is substantial similarity in all three factors above, and the differences between the two processes are trivial, can a process patent be deemed infringed under the doctrine of equivalence.

Divisional patent applications

In Boehringer Ingelheim v Controller of Patents,^[50] the Delhi High Court declared that only the claims must be considered when assessing whether there is unity of invention or plurality of inventions. A divisional application is not maintainable if plurality resides in the specification and not in the claims.^[51]

The same principle was further reinforced in Novartis v Controller of Patents.^[52]

Amendment of patent applications

Nippon A&L Inc v Controller of Patents,^[53] the Delhi High Court held that applications to amend a patent before it is granted will be treated with leniency compared to those filed post-grant. With this test, the Court observed that the desire to amend the patent from a product-by-process patent to a process patent was admissible as the scope of the patent application was being narrowed and not expanded.^[54]

However, the decision in Nestlé v Controller of Patents clarified that there is no bar to an application to amend the patent after its grant.^[55]

Allergan v Controller of Patents cautioned against ‘hypertechnical‘ reasons for rejecting an application for amendment ^[56] and that the right of a patent applicant to amend the claims (in relation to the originally filed foreign Patent Cooperation Treaty (PCT) application) is not foreclosed as there is no occasion provided to the applicant to amend the claims at the time of the PCT application entering the India national phase.^[57]

In this case, the originally filed application in the United States contained method claims of the kind that were not patentable in India. The IPO’s rejection of the application to amend the Indian patent to include product claims on the ground that the national phase application did not conceive product claims. The Court’s reason was that there was no occasion for patent applicants to amend the claims as originally filed in the United States.

Simplicity is no bar to a patent

The Delhi High Court went back to basics in Avery Denisson v Controller of Patents and held that simplicity of the invention is not to be confused with obviousness.^[58] It also gave a rule of thumb for patent examiners, that if the prior art cited against the patent is quite old, it suggests the existence of an inventive step.^[59]

Pending challenges to patent validity do not prevent enforceability

In AstraZeneca AB v West Coast, the Delhi High Court shot down a misinterpretation by generic companies of a statement of the Supreme Court in Alloys Wobben v Yogesh Mehra that rights in a patent are not crystallised until a post-grant opposition pending against it is decided in favour of the patentee.^[60]

The Court applied the inversion test to determine that this statement was not the ratio decidendi of the Supreme Court’s decision, and clearly was not the test to decide whether a patent is enforceable against an infringer. The decision held that the grant of a patent entitles the patentee to file an infringement suit, irrespective of whether a challenge to its validity is pending.

Conclusion

The past year has seen continued advancements to maturing the status of Indian patent litigation. The establishment of the Delhi IPD marks a milestone in India’s judicial history that will pivot India to a truly modern patent system – a system that not only stands toe-to-toe with most modern jurisdictions but also follows its own unique path.

The true beauty of India’s IP regime lies in the fact that the very spirit and ethos of the Indian culture lies in ensuring balance and driving progress while maintaining an altruistic spirit and placing the greater good at the centre of efforts to innovate.

Footnotes