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On 6th March 2022, the Russian Government issued Decree No. 299, with a view to amend the methodology for determining the amount of compensation and the procedure for the payment to be paid to a patent holder, in case the government decides to use an invention, a utility model or an industrial design without the consent of the patent holder. With the amended methodology, the remuneration to be paid to the patent holders from ‘countries that commit unfriendly acts against Russian individuals and legal entities’ is 0% of the revenues generated from the use of such invention.!
HISTORICAL BACKDROP
Article 1360 of the Russian Civil Code provides Russian government the right in the interests of defense or security of the state to allow the use of an invention, utility model or industrial design without the patent holder’s consent and subject to prompt post factum notification and payment of a commensurate compensation to the patent holder. Although Article 1360 in its current wording was in force since January 1, 2008, it was not utilized by the state till the case of Remdesevir in 2020.
On January 31, 2020, the Russian Government issued Order No. 3718-r, allowing the Russian generic company Farmasintez to use inventions under Remdesevir-related patent nos. N EA025252, EA025311, EA029712, and EA028742 owned by Gilead Science Inc. and Gilead Pharmasset LLC till January 1, 2022, without the consent of the patent holder and subject to payment of compensation. In justifying the decision, references were made to Article 31 of TRIPS which provides the conditions to be considered for other uses of the subject matter of a patent without the authorization of the right holder, including use by the government or third parties authorized by the government.
Further, on October 18, 2021, the Russian Government approved the methodology developed by the Federal Antimonopoly Service for calculating the amount of compensation payable to a Russian patent owner for producing generic medicines intended for export to other countries in accordance with the Article 1360.1 of the Civil Code without the patent owner’s consent. The corresponding government decree No 1767 entered into force on October 28, 2021.
According to the current Article 1360.1 of the Civil Code the Russian Government may allow to use a patented invention for the production of a medicinal product by any party for export purposes under certain specific circumstances without the consent of the patent owner with the requirement of immediate notification of the patent owner and payment of the proportionate compensation for such a use, as we informed earlier here. The amount of compensation is 0.5% of the manufacturer’s actual revenue, which has exercised the right to use an invention, utility model or industrial design without the consent of the patent owner. The compensation is supposed to be annually paid during the period of validity of the corresponding government decision.
DEVELOPMENTS IN THE WAKE OF RUSSIAN INVASION OF UKRAINE
With the commencement of the Russian invasion on 24th February, 2022, the international community has condemned Russia for its actions in post-revolutionary Ukraine, accusing it of breaking international law and violating Ukrainian sovereignty. Many countries implemented economic sanctions against Russia, Russian individuals and companies. The UK and the EU have banned the sale of luxury goods to Russia including vehicles, high-end fashion and art. A ban on the export of goods used by Russian firms is also being introduced by the UK, EU, US and others. Moreover, all Russian flights have been banned from US, UK, EU and Canadian airspace.
In the event of happenings, the Russian Government is trying to counter the global sanctions imposed upon itself by the major economies. Russia has banned exports of more than 200 products until the end of 2022 including telecoms, medical, vehicle, agricultural, electrical equipment and timber.
In the wake of the same, the Russian Government has amended the methodology for determining the amount of compensation and the procedure for the payment to be paid to a patent holder, in case the government decides to use an invention, a utility model or an industrial design without the consent of the patent holder. With the amended methodology, the remuneration to be paid to the patent holders from ‘countries that commit unfriendly acts against Russian individuals and legal entities’ is 0% of the revenues generated from the use of such invention. The list of such unfriendly countries was approved by the Decree of the Russian Government dated 03.05.2022 No. 430r.On 03.05.2022 it includes: Australia, Albania, Andorra, United Kingdom (including the island of Jersey (Crown Dependency of the British crown) and controlled overseas territories. island Anguilla, British Virgin Islands, Gibraltar), States. members of the European Union, Iceland, Canada, Liechtenstein, Micronesia, Monaco, New Zealand, Norway, Republic of Korea, San Marino, North Macedonia, Singapore, United States of America, Taiwan (China), Ukraine, Montenegro, Switzerland, Japan.
These sanctions have also led the Russian judge to dismiss a copyright and trademark infringement lawsuit brought by the British company that produces animated series Peppa Pig. A Russian restaurant chain has recently adopted, and applied to register locally, a logo very similar to the famous golden arches of Mcdonald’s restaurant chain.
Although the suspension of intellectual property rights as an economic weapon in the context of a conflict is unprecedented at least in recent decades, there are a few records dating back to the first world war. During WW1, the US introduced the Trading With the Enemy Act that seized copyright and patents owned by enemy countries, including the patent to aspirin. Following the war, the Aspirin trademark owned by the German pharmaceutical company Bayer was given up to the US, France, UK and Russia, as part of Germany’s war reparations agreed in the Treaty of Versailles.
INDIAN PERSPECTIVE ON PATENT USE BY THE GOVERNMENT
While India has followed a sovereign, balanced and peaceful approach to the current war crisis, its interests in the waiver of TRIPS for the IPRs preventing adequate supplies, affordable pricing, and equitable distribution of Covid vaccine, medicines, and tests has been hampered by the actions of other member states. However, it is pertinent to note that the Indian Patents Act, 1970 provides the Indian Government with various options to circumvent or amend patent rights in the event of a pandemic such as COVID-19.
On 20th April 2021, even the Supreme Court of India declared the crisis triggered by the second wave of the Coronavirus as a “national emergency” asking the Central government to consider invoking powers vested under section 92 of the Patents Act, 1970, to hoist the availability of COVID -19 related drugs. Moreover, the Delhi High court directed the Central government to utilise the power vested in the government under section 92 of the Patent Act.
Below is a review on the provisions available to the government to circumvent the patent rights of the holder and the associated remuneration in specific scenarios :-
A) Section 47 of the Patents Act, 1970
Section 47 clearly permits the use of a patented invention on the behalf of the Government for the purpose of the government. Moreover, it precludes any action for indirect infringement against any contractor working on behalf of the government premised upon the intended use of the patented invention for the mere use of the government. Further, no royalty fee or other remuneration had to be paid to the patentee by the government when it is using the patented invention for a sovereign purpose.
The Bombay HC has opined that the government exemption under Section 47 would only be applicable to departments of the government and government servants and agents only
B) Section 92 of the Patents Act, 1970
This Section permits the central government to grant compulsory licenses (CL) for a patented invention by notifying in the Official Gazette. In particular, in settling the terms and conditions of the compulsory licenses granted under this section, the Controller shall endeavour to ensure that the articles manufactured under the patent shall be available to the public at the lowest prices consistent with the patentees deriving a reasonable advantage from their patent rights. Thus, the patentee is entitled to be provided with reasonable remuneration for the CL of their patented invention under this Section.
C) Sections 99 to 101 of the Patents Act, 1970
Under these Sections, a third person can also be allowed to use a patent for the “purposes of government” by payment of a royalty by the Government or a Government undertaking, or any person authorized by it. However, in case of Garware Wall Ropes Ltd. Vs. A.I Chopra, the Bombay HC clarified that such use contemplates a separate, clear and direct authority from the Central Government or its departments in writing. The Government is not entitled to use a patent without any cost for any purpose other than merely of its own use. It was also held that an agreement in the name of the President of India signed by the officers of a Government department is not the kind of authorization contemplated by the law.
Use of the invention for the purpose of the government under section 100 and right of the third to use the invention for the purpose of government under 101 is also deemed to be exempted from the infringement actions of the patentee. However, this use is not royalty free except in cases where an invention has, before the priority date of the relevant claim of the complete specification, been duly recorded in a document, or tested or tried, by or on behalf of the Government or a Government undertaking, otherwise than in consequence of the communication of the invention directly or indirectly by the patentee or by a person from whom he derives title, any use of the invention by the Central Government or any person authorised in writing by it for the purposes of Government may be made free of any royalty or other remuneration to the patentee. In all other cases in case of any such use of any patent, the patentee shall be paid not more than adequate remuneration in the circumstances of each case, taking into account the economic value of the use of the patent.
With the purported global war tactics involving controlling the IPRs and its associated rights fairly shaping in the new era post the Russian invasion of Ukraine, the Indian perspective for such situations is noteworthy. India has been a peace-seeking nation rightly believing in diplomatic solutions and peace talks for global problems. To empower the rights of the patent holders, in 2002, the Indian Government lifted the cap of four percent on royalty and other remunerations in respect of food and drugs patents. With such provisions in place, the triable action of a patentee would be possible in reference to the High Court of disputes as to use for purposes of Government. However, the dispute should be in relation to the terms for the use of an invention for the purposes of Government or the right of any person to receive any part of a payment made in pursuance of sub-section (3) of that section 100.
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