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A confrontation averted

US softening stance on Special 301 is an opportunity for India

Business Standard Editorial Comment  |  New Delhi 

Good sense has prevailed as the United States Trade Representative (USTR) has desisted from carrying out the threat of demoting India's standing on protection of intellectual property rights (IPR) under its Special 301 report. Though the USTR's decision to retain India on the "priority watch list" of nations with lax IPR regime is debatable, it has also indicated that the mutual differences over this would be resolved through negotiations. This softening averts a confrontation; New Delhi had warned that it would not co-operate with Washington on any investigation into India's IPR or trade laws, and that it might challenge any US action at the World Trade Organisation (WTO). If the USTR had put India on the "priority foreign country" list that allows trade sanctions against such countries, as was being demanded by a section of the US pharmaceutical industry, it would have further vitiated already strained bilateral trade ties.

The US charge against India that the country's IPR regime is non-compliant with the global accord on Trade-Related Aspects of Intellectual Property Rights (TRIPs) is untenable. The TRIPs agreement allows a great degree of flexibility to member countries to mould their domestic patent statutes in such a way as to safeguard their "urgent public interests". India has utilised some, though not all, of such flexibility in putting together its patent laws. It is the provisions concerning compulsory licensing and definition of patentability that have particularly worried the US pharmaceutical industry. The compulsory licensing clause allows the government to permit indigenous production of a patented drug to ensure its adequate availability in the local market at affordable prices. The definition of patentability expounded in India's patent law, on the other hand, is meant to prevent "evergreening" - a term that refers to the extension of patents on trivial grounds, such as insignificant and incremental innovation or minor tweaking of the formula, or even a marginal new use of the patented product.

Even if the US sees the Indian patent regime as tilted in favour of domestic industry, that is neither illegal nor unique. New Delhi has already begun to compile cases in which the US has breached IPR laws to shield its own companies' interests. In contrast, New Delhi has used the compulsory licensing clause only once so far, in the case of Nexavar, a drug that is used to treat liver and kidney cancer. The patentability issue was subject to scrutiny by the Supreme Court - and upheld - when the patent application of the Swiss company Novartis for anti-cancer drug Glivec was challenged. For the US, attacking Indian patent legislation, which is compatible with WTO norms, would thus be a futile action. It should, instead, make a sincere effort to remove the irritants that are preventing trade between the two countries to rise to its potential. This exercise needs to begin in earnest when the new government takes office after the ongoing general elections.

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First Published: Thu, May 01 2014. 21:38 IST