STRATEGIC OPPORTUNITIES IN MANAGING IPRs:
BIODIVERSITY, DRUG INDUSTRY AND EMERGING OPTIONS
Anil K Gupta
Indian drug industry provides an outstanding example of its distinctive contribution in adapting global technologies for domestic demand through adaptive research in formulation of drugs. This has meant availability of large number of drugs at low cost. Having developed an expertise in reverse engineering, somehow we started to believe that we were capable of being outstanding only in this field of knowledge. Developing new drugs not just for Indian but global market apparently was beyond our reach. Consequently, a dominant opinion against product patent regime got developed in our country. However, success of Dr.Reddy’s lab and Ranbaxy in vying for global space for the locally developed technologies has started to change the mind set. Simultaneously, new partnerships between academic and commercial organisations within and outside the country have started emerging. Many small companies believed that given their limited resources, it will be almost impossible for them to do world class R&D and pursue the path of prosperity through protection of intellectual property rights.
In this paper, I first discuss the key concept of IPR and its relevance for our conditions. I then review the recent trends in filing patents based on herbal resources in US Patent Office during last two years compared to the trends apparent in 1992.
In part two I review the inter-organisational strategies for R and D drawing upon the excellence in informal sector as well as formal sector. Finally, I summarise the strategy that Indian pharmaceutical industry could pursue for global competitive advantage through protection of IPRs without compromising with the goal of universal health for all.
The basics of IPR
Patent granted by government to an inventor/s signify a contract. In lieu of disclosing the invention, the society allows the inventor to monopolise the commercial returns from the application of the invention for 17 - 20 years. If the inventor chose to use trade secret route of commercialising one’s innovation, the growth of the ideas may suffer. Further, simultaneous development of innovations similar to one’s own may emerge and be protected affecting the interest of the company or the inventor having the trade secrets. Further patenting does not necessarily imply that one should commercialise the applications. There are examples where companies as well as individuals have given away the rights for wider application of patented technology to WHO or to some other institutions. Thus, if someone opposes patent on ground of its excludability, then one should be clear as to whether the exclusion is deliberate or is it inherent in the nature of instrument. Patents can exclude anybody else from benefiting from the protected technology without a proper licence from the patentee. But this exclusion is subject to the wish and preference of the inventor.
Does patenting inhibit research and development? It could if some of the important processes and products crucial for derivative R&D are sought to be used without due authorisation. Otherwise, the only restriction a patent would impose on derivative R&D is to ensure that either the improvement is made available to the original patenteee through a cross licence. Or it should be proved that improvement can be operationalised without infringing the rights of the original patentee - a case very difficult to prove. In the case of Zantac discussed separately, similar dispute had arisen.
What can be patented?
Any product or process or design, which involves an inventive, novel and non-obvious step capable of industrial application, can be patented.
( Gupta, 1989, 1995, Gupta et al, 1996)
At least one cell out of the six should be new. That is, a known compound extracted or developed by known method but for a new use can be patented for that purpose. Therefore if a known compound from neem, say azadirachtin extracted by a known process has been used for curing cancer - an unknown use, the patent can be granted for that purpose.
Where does our competitive edge lie?
Building Upon Biodiversity and Associated Knowledge Systems:
India has about ten percent of the world’s biodiversity wealth but its share in total world trade based on biodiversity as per the recent Exim Bank report (1997) is negligible. Ayurvedic medicines export seems also to fluctuate. In 1993-94, our major exports were aimed at USA but in 1994-95 it was Russia which imported the maximum from us. Our exports have steadily increased at about 30 per cent per annum while imports have recently come down (Exim Bank Report, 1997). The expenditure on R & D by Indian companies has been abysmally low, exceptions apart. As against world average of 12-15 per cent of expenditure on R & D, Indian companies hardly spend about 1-2 per cent on an average. No intellectual property worth any thing can be generated with this kind of investment.
Discussions with Keith Richardson of Derwent Patent Data bases (one of the leading patent information providers on internet) revealed some interesting problems in analysing the situation with regard to patents on herbal drugs. None of the classification systems used by them (US,IPC,Derwent Classifications) have a classification for this category of knowledge. There is no way to reliably search via keyword.
Richardson searched on patents mentioning the words "herb# or herbal# or herbal medicine or herbalism or (traditional and (medicine or remedy). He stressed that it was unclear whether a patent containing one of these words actually was a herbal or traditional medicine patent. Nor would every herbal/traditional medicine patent mention one of these words - they might fail to mention any history of the technology in order to obtain exclusive rights. In any case, for getting a general trend he ran the search. There were 4328 patent records mentioning these words in Derwent's World Patents Index (available via the telnet online hosts - STN, Dialog, Orbit or Questel; also available for searching via the Derwent Search Service US703-706-4220). The World Patents Index covers 40 patent- issuing authorities, including the US, EP, PCT, Japan, China, etc. Derwent translate over 16,000 patents a week into English (from over 30 languages).
A: . Ownership of patents that mention the words "herb# or herbal# or herbal medicine or herbalism or (traditional and (medicine or remedy)"
It seems to be mostly individual inventors (last names followed by first initial) There are not many corporate names in this list of the top 100 patent holders compared with other areas of technology. First twenty in the list are given here in Table one.
RANK # OCC # PATS % PATS PATENT ASSIGNEE
------ ------- ------ ------ ---------------
1 28 28 0.65 TSUMURA & CO
2 24 24 0.55 WANG Z
3 22 22 0.51 INT FLAVORS & FRAGRANCES INC
4 20 20 0.46 LI Y
5 20 20 0.46 NISSHIN FLOUR MILLING CO
6 20 20 0.46 TSUMURA JUNTENDO KK
7 16 16 0.37 UNILEVER NV
8 16 16 0.37 WANG Y
9 15 15 0.35 CHEN J
10 15 15 0.35 UNILEVER PLC
11 14 14 0.32 WANG J
12 14 14 0.32 ZHANG Z
13 13 13 0.30 HASEGAWA CO LTD
14 13 13 0.30 KANEBO LTD
15 13 13 0.30 KAO CORP
16 13 13 0.30 LIU Y
17 12 12 0.28 BASF AG
18 12 12 0.28 FIRMENICH SA
19 12 12 0.28 LION CORP
20 12 12 0.28 NITTO ELECTRIC IND CO
B. THE AVERAGE INVENTOR/COMPANY APPLIES TO ONE COUNTRY ONLY
Derwent updates each patent record each time a patent is published in a new country - giving reliable patent family information.
In 1987 there were 164 patent records containing the words "herb# or herbal# or herbal medicine or herbalism or (traditional and (medicine or remedy)" and 69.51% of them only applied to one country. in 1996 there were 522 patents containing either of these words. 83.72% applied in only one country. But notice some of the higher numbers here compared to 1987 - some of these patents were applied for in 60+ countries. This would seem to indicate the technology is getting more important. It is very expensive to patent in that many countries - the patentee must feel there is long term viability.
C. IN 1996 CHINA PATENTED THE MOST OF THESE PATENTS - 239 PATENTS OR
45.79% OF THE 522. HERE ARE ALL THE COUNTRIES IN THE GROUP FROM DERWENT’S
RANK # OCC # PATS %PATS PUBLICATION COUNTRY
------ ------- ------ ------ ---------------
1 240 239 45.79 CN CHINA
2 132 106 20.31 JP JAPAN
3 62 62 11.88 RU RUSSIAN FEDERATION
4 95 60 11.49 EP EUROPEAN PATENT OFFICE
5 54 51 9.77 US UNITED STATES
6 69 50 9.58 AU AUSTRALIA
7 49 47 9.00 WO WORLD PATENT OFFICE
8 55 45 8.62 DE GERMANY
9 28 22 4.21 ES SPAIN
10 24 22 4.21 CA CANADA
11 21 17 3.26 HU HUNGARY
12 16 16 3.07 ZA SOUTH AFRICA
13 14 10 1.92 FR FRANCE
14 15 9 1.72 GB ENGLAND
15 11 8 1.53 CZ CZECH REPUBLIC
16 8 7 1.34 BR BRAZIL
17 7 7 1.34 RO ROMANIA
18 6 6 1.15 PT PORTUGAL
19 8 5 0.96 NO NORWAY
20 5 5 0.96 IT ITALY
21 5 5 0.96 SK SLOVAKIA
22 7 4 0.77 FI FINLAND
23 4 4 0.77 TW TAIWAN
24 6 3 0.57 AT AUSTRIA
25 3 3 0.57 CH SWITZERLAND
26 3 3 0.57 IE IRELAND
27 3 3 0.57 IL ISRAEL
28 2 2 0.38 BE BELGIUM
29 2 2 0.38 NZ NEW ZEALAND
30 2 2 0.38 SU SOVIET UNION
31 2 1 0.19 CS CZECHOSLOVAKIA
32 1 1 0.19 DD GERMANY
33 1 1 0.19 DK DENMARK
34 1 1 0.19 RD RESEARCH DISCLOSURE
D. IN 1992 THE COUNTRY RANK WAS VERY SIMILAR
The data from Exim Bank and the trends indicated here seem to suggest that we have to be careful in developing our future strategy. China, Japan and Russia are the major countries which seem to show major intellectual Property protection activity. Given the direction of our herbal exports, it seems to corroborate the trend in patenting. Except that China does not need to import herbs from us and instead, it relies on its internal supply.
But if China can become a world leader in herbal drug patents, why can not India ? One obvious answer is that we seems to be more concerned about the adverse effect of product patent regime on our common people than China which incidentally has achieved much higher growth in per capita income in recent years. It is not just the domestic supply of herbal drugs in which China leads but its share of the world trade also is significant. China produces about US$ 10 billion worth of drugs of which US$3 billion worth drugs are exported (Exim Bank, 1997). I disagree with the suggestion of Exim Bank report (1997:33) that given the high costs of developing new drugs, Indian companies can play major role in just "carrying out clinical trials, collecting and analysing test data from other centres". This is the same story as in software industry. We claim to provide some of the best software programmers in the world but we seem to be satisfied with servicing other’s needs at low level of margins. We do not seem to gather will to introduce our own branded products in global markets. Drug industry can go the same way if our strategy remains what it is at present. Ranbaxy is planning to enter US market under its own brand name next year and that shows its confidence in its ability to deliver.
While the potential of biodiversity based knowledge systems and herbal supply is well recognised, we do not have nay national or industry level strategy even in this field. Let me illustrate:
Lack of Strategy in Biodiversity Conservation and Prospecting:
Part Two: Inter-Organisational Strategy for R & D and patent advantages
There are several implications that follow from the analysis of the lack of strategy towards deriving competitive advantage in drug industry. I summarise the key arguments here:
Part Three: Where do we go from here?
IPRs are a means of helping society make a transition towards a meritocratic systems. The possibility of Knowledge Rich economically poor communities, nations and individuals making difference is clear. My faith stems not only from what I have seen but also from what I see as possible. There are hardly any patents on neem for instance which do not quote an Indian work and yet how many commercializable patents did we file on neem itself? There are examples where individual researchers have generated tremendous wealth through small scale research.
On one hand we have attempts to extend the life of existing patents as long as possible so that profits of large corporations continue. If a bill pending before US congress gets passed in next few months, pharmaceutical companies may be able to extend the protection for brand name products by as much as ten years by paying three per cent royalty to government. On the other hand we have recent decision of Australian government to introduce a modified petty patent system called as Innovation Patent System with 8 year protection and limited inquiry of novelty, only five claims per application and low costs. The idea is that small and medium enterprises might benefit most from such a system for quick registration of innovations at low cost. It will help reduce cost of gaining and thus commercialising the intellectual property.
We have to devise our strategies keeping our strength in view. Our domestic industry can be wiped out of we do not generate opportunities for new ways of collaboration among small and big, informal and formal and national and international actors. We should not just think of a few options which seem popular at present such as joint ventures with large corporations. That may be a way of gobbling up national partners. But we should think of making our small scale sector more inventive, and make public R and D system more closely aligned with the industry so that user perspective can be brought into every day decision making system. At the same time, we need to augment the capabilities of individual herbalists in villages who despite remaining poor have conserved this knowledge so that they become partners n the new wealth creation process.
Once the knowledge is lost, diversity will be like a library without a catalogue. Do we want to create such a situation. If not, how will a national campaign be generated to make IPRs and INSTAR as central instruments of creating wealth.
Select References to Our work :
Environmental Policy Analysis for Maintaining Diversity, The Indian Journal of Social Sci
ence, Vol.7, No.1, 1994, New Delhi, Sage Publications
The Right To Resource: Peasant Knowledge, Protocol of Its `Extraction' and Ethics of
Collaboration In Extractions. W.P. no-851, January 1990, P 12. Also published in brief as
Peasant Knowledge - Who has Rights To Use It ? ILEIA, News Letter, March 1990. pp 24-
"Indigenous Farming Technologies and Environment: Experiences in Bhutan" (Eds.
N.S.Jodha, M.Banskota and Tej Partap), Oxford & IBH Publishing Co Pvt.Ltd., New Delhi.
pp. 540 - 568., 1992.
(With Rakesh Singh) Corporate Investment in Agriculture Research: Issues in Sustainable
Development. CMA Monograph (No.155) on Agricultural Input Marketing (Ed.
S.P.Seetharaman), New Delhi, Oxford & IBH Publishing Co.Pvt.Ltd., pp.485-506.
(With Kirit K Patel, A.R.Pastakia and P.G.Vijaya Sherry Chand) Building Upon Local Creativ
ity and Entrepreneurship in Vulnerable Environments, published in Empowerment for Sus
tainable Development: Towards Operational Strategies (Ed.Vangile Titi and Naresh Singh),
Nova Scotia, Canada; Fernwood Publishing Limited; New Jersey, Zed Books Limited, 1995.
Biodiversity, Poverty and Intellectual Property Rights of Third World Peasants: A case for
renegotiating global understanding, in "Biodiversity: Implications for Global Food Security"
(Eds.M.S.Swaminathan, and S.Jana)
Biotechnology and Intellectual Property Rights: Protecting the interests of third world
farmers and scientists, IIMA Working paper No.1057., published in Commercialization of
Biotechnologies for Agriculture and Aquaculture: Status and Constraints in India (eds.,
U.K.Srivastava, S.Chandrasekhar), New Delhi, Oxford & IBH Publishing Co.Pvt.Ltd., pp.31-
Biotechnology and IPR: Third World Issues for Farmers and Scientists, published in Bio
technology Monographs: Focus on Third World Issues, Series 1, Number 1, May 1993
Ethical Guidelines to Access and Explore Biodiversity, a collective effort of Pew Conservation
Scholars based on three background notes including G 16 and G 17), published in Eubios
Journal of Asian and International Bioethics 5 (Japan), March 1995, pp.38-40.
Misinformation on Neem: What could be the motive?, A shorter version published in Down
To Earth, 1994
Neem-mania, What else?, published in Down to Earth, November, 1995, pp.52-53.
Patents on Neem: Will They Deprive Indian Farmers of Their Right to Use it as a Pesticide,
published in Biotechnology Law Report, Volume 15, Number 1, January-February 1996,
(With Kirit K Patel, et al) Participatory Research: Will the Koel Hatch the Crow's Eggs, in
the Proceedings of International Seminar on Participatory Research and Gender Analysis for
Technology Development, organized by CIAT, Colombia. 1997
Technologies, Institutions and Incentives for Conservation of Biodiversity in Non-OECD
Countries: Assessing Needs for Technical Cooperation, presented at OECD Conference on
Biodiversity Conservation Incentive Measures in Cairns, Australia, March 25-29, 1996,
published in the proceedings, "Investing In Biological Diversity:The Cairns Conference",
Poverty abounds in biodiversity-rich areas. Down To Earth, September 15,1992, pp33-36.
Honey Bee: An Accountable Global Network of Grassroots Innovators and Experimenters,
published in Development, 1993:3, pg.65, Journal of SID
Must Conservators Remain Poor, "Seminar" No.438, February, 1996, pp.48-53.
Are Efficiency, Equity and Scale Independent?, "Ecological Economics" 10 (1994) pp.89-
Intellectual Property Rights and Environment: Patents and People's Knowledge Systems,
"Sustainable Development and Accounting", CSE Publication, New Delhi, forthcoming
The Honey Bee Network Strengthens: Knowledge for Crops, Creativity and Compensation,
Diversity, Vol.12, No.3, 1996, pg.76-78.
(With Kirit K Patel) Turning Things Upside Down: Creativity and Innovations at Grassroots,
International Conference, January 1997, published in Forests, Trees and People, Newslet
ter No.31, September 1996.
(With Vijaya Sherry Chand) A River Without Tributaries: Liberating the Mind Through
Harnessing Grassroots Creativity, in The Indian Journal of Public Administration
(Quarterly Journal of The Indian Institute of Public Administration), July-Sept 1996,
Vol.XLII, No.3, pg.288-301.