ANNUAL WORKING REPORT- INDIA’S UNIQUE REQUIREMENT
The requirement of filing Statement of commercial working of patents in India has been an integral part of the Indian Patents regime since inception. It has been observed in the recent years, that the dominant industries of the Indian market, especially pharmaceutical and telecom, have expressed their concerns against the requirement of Form 27, that is to state the working of their patented invention in India. The ongoing debate has almost transformed into a movement supported by Indian and Global industry alike, seeking a repeal or at the least introduction of radical changes to Section 146 of the Patents Act, 1970 [Act].
The Annual Reports published by the Indian Patent Office [IPO] for the period of 2012 – 2017 indicate a positive change in the outlook of patent holders and a growing compliance rate in meeting the requirement of Form 27.
The data published by the IPO in the Annual Reports as seen in the below table shows significant increase in the number of Form 27 filings in the past five years and is reflective of positive change in the attitude of the patent holders in these years.
AWR: AN OBLIGATORY REQUIREMENT:
From the standpoint of a patentee, the importance of ‘working’ an invention / consequences of non-working became evident when the first compulsory license was issued to Natco Pharma Ltd. in 2012 for Bayer Corporation’s patented drug Nexavar. Incomplete disclosure of information on Form 27 by Bayer and the failure of the drug to be worked to an adequate extent in the Indian territory proved to be Bayer’s Achilles heel and eventually resulted in a compulsory license being granted in favour of Natco. The Patent Office while granting the compulsory license adopted the view that working of a patent in India entails local manufacture in India. The only silver lining in the entire saga emerged when the Intellectual Property Appellate Board (IPAB), after hearing the appeal against the decision of the Patent Office, disagreed with the Controller General’s findings regarding ‘importation’ and recognized that the working requirement could be met by importation. The IPAB clarified that importation is relevant for the purposes of determining whether an invention has been worked in India. Between then and now, there are a plethora of judgments which have recognized importation to be sufficient to meet the working requirement.
The debate regarding working statement requirement was rekindled in the year 2015, when a a writ petition was filed before the Delhi High Court, to highlight lapses in the filing of statement of workings by patentees/licensees and lack of enforcement on part of the Patent Office. The objective of the writ petition was to request the Court to enforce patent working provisions and take necessary action to compel Patentees and Licensees to comply with the law.
The following issues were considered by the Hon’ble High Court –
Manifest failure to comply with Section 146 of the Act as well as no action initiated under Section 122 of the Act against the Patentees who did not follow the procedure,
Whether information provided under section 146 of the Act regarding licensees and sub-licensees is "Confidential" in nature.
The Hon’ble High Court directed the IPO to undertake consultation with stakeholders and make necessary amendments to the relevant section in the Act and Form 27 within a strict timeline, as submitted by the IPO. Even though the timeline set by the Delhi High Court has expired, no amendments with respect to AWRs have been introduced yet.
Further, the Hon’ble High Court held that the information regarding licensees (and sub-licensees) cannot be termed as confidential, as all information regarding the grant of patent is already available on the website of the IPO and failure to disclose such information by the Patentees would mean non-compliance with the requirements of Section 146 of the Act and thus, making such Patentees liable for action.
The non-compliance or failure to adhere to the working requirement can attract a high penalty under Section 122 of the Act, which includes imposing a hefty fine of approximately USD 14,500 (INR 1 million). Furthermore, if the information provided in Form 27 is found to be false, the person furnishing such statement is liable to be punished with imprisonment (which may extend upto 6 months, or with fine, or both). However, such punishment or penalty for non-compliance has not been levied on any patent holder yet.
In addition to the statutory provisions regarding the penalty, the Act under Section 64, confers a power on the Controller to order for revocation of a patent if he is convinced that the said invention has failed to be worked in the territory of India.
Certain unresolved problems related to Form 27 requirement continue to be debated and are hoped to be addressed in the future.
The IPO has recently taken an initiative of issuing notice to the Attorneys/ Agents seeking compliance of Annual Working Report (AWR) i.e. Form 27 of their granted patents. It appears that this initiative is an indication of stronger enforcement of the statement of working requirement, in the times to come.
The requirement of filing Form 27 in India is unique in many ways. One of the paramount rationales behind it is to prevent the Patentees from creating blocking monopolies, i.e. obtaining and maintaining patents for the purpose of blocking others from developing technologies in the vicinity of the patented inventions.
As stipulated in Section 83 of the Act that patents are not granted merely to enable patentees to enjoy a monopoly on a patented article, but to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay. The working statements of the invention undoubtedly give a concrete and clear idea about the effectiveness and commercial viability of an invention, they are important for valuation of patent portfolios and most importantly for issuance of compulsory licensing. Working statements are undeniably one of the important pillars to maintain the transparency of the system and help in preventing a blockage in the scope of creativity of inventions in the Indian patents regime.
Having said that, there is no doubt that the AWR system requires a relook. The threat of imprisonment and hefty monetary fines for non-filing of statement of working may be counterproductive to the growth of patent filings in India since it will be one of the aspects which patent applicants will consider while choosing India as a jurisdiction for patent protection. Moreover, it is not fair for hefty financial penalties to be imposed on patentees given that exemplary damages are not awarded against infringers in patent infringement lawsuits. Reforms are needed to ensure that business sensitive information is not published by the Patent Office under the garb of Form 27 requirements.
 C.L.A. No.1 of 2011
 Shamnad Basheer vs. Union of India and Ors. [W.P.(C) 5590/2015]