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INTERPRETATION OF SECTION 3(d): A case study on Novartis

Submitted By:

Guided By:
Prof. Dr.T.Ramakrishna

ID NO.605

Dated: August 16, 2014

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I am highly indebted to The National Law School of India University, Bangalore for the
guidance and constant supervision as well as for providing necessary information
regarding the project & also for their support in completing the project.
I would like to express my gratitude towards Prof.T.Ramakrishna for his kind cooperation and encouragement which helped me in completion of this project. This
project would not have been possible without his guidance and support.
I extend thanks and appreciations to my colleagues in developing the project as they
have willingly helped me out with their abilities.

ID NO.605

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The incorporation of section 3 (d) has attracted criticism from the global community. It has
raised a series of issues relating to patentability of drugs and incremental innovations. The
section is considered as vague and open to interpretation in regards to its application. Its
interpretation by courts have been unacceptable to a considerable section of society. Hence
there is a need to analyse this section and its scope to throw light on number of issues
connected thereto.
The concept of efficacy has not been defined in any of the patent legislations of the world.
This undefined status leaves discretion in its application in the hands of the patent authorities,
which results in arbitrariness and uncertainty in decision.
For the purpose of this paper the researcher has adopted Analytical and Doctrinal method of
Whether Section 3(d) of The Patents Act, 2005 is constitutionally valid and in compliance
with TRIPS provisions
Whether the words significantly enhanced efficacy under Section 3(d) is vague, thus grants
arbitrary discretion to the Indian Patent Office
Whether the standards adopted by the apex court in the Novartis case affected the Foreign
Direct Investments in Indian Pharmaceutical Industry

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The incorporation of Section 3(d) by way of amendment of 2005 has attracted a lot of
controversy and criticism in the global pharmaceutical market. The true intent of this section
is to prevent the ever greening of patents and promote enhanced level of innovation by
proving enhanced level of efficacy. The big multinational pharmaceutical companies having
practically no restraint of amount for research and development occupied dominant position
in the market. To prevent abuse of this dominant position in cases of life saving drugs and
other critically important drugs, it is paramount to protect the interest of generic drug
manufactures. However this has to be a balanced approach so that it does not affect adversely
to the economic and technological developments in India. It is also important to understand
that India being a developing country needs such protection for its generic drug manufactures
to promote significantly incremental innovations. Therefore, health concerns play chief role
in determining various policies in India and this also contributed for the incorporation of
section 3 clause (d) of the Patents Act 2005. Close examination of the issues discussed in this
submission would further clarify the intricacies involved in Section 3(d) of the Patents Act


The validity of Section 3(d) of the Patents Act 2005 was challenged by the Novartis in the
case of Novartis v. Union of India1, where it alleged that section 3(d) is unconstitutional and
also in violation of Indias obligation under the TRIPS. In order to examine this issue it is
necessary to look into the bare provision and the rationale behind incorporating section 3(d)
by amendment of 2005. The section 3 enlists what does not amount to inventions and sub-

1 (2013)6 SCC 1

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section (d) was incorporated in 2005 by way of an amendment. The sub-section (d) of section
3 can be read as:
the mere discovery of a new form of a known substance which does not result in the
enhancement of the known efficacy of that substance or the mere discovery of any new
property or new use for a known substance or of the mere use of a known process, machine
or apparatus unless such known process results in a new product or employs at least one new
Explanation - For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites,
pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other
derivatives of known substance shall be considered to be the same substance, unless they
differ significantly in properties with regard to efficacy
The inclusion of above quoted section 3(d) is basically to prevent the ever greening of patents
in connection with pharmaceutical substances. The Novartis challenged the constitutionality
of this provision by stating that it violates Article 14 of the constitution of India and
contravenes with the principles of equality enshrined therein. It pleaded that the words
sufficiently enhanced efficacy and enhancement of known efficacy is not described in the
act and can be given a vague interpretation. Thus the authorities may exercise their wide
discretionary powers in relation to grant of patent, which is against the very principle of
Now, to look into the issue closely we need to observe two important aspects. One, the
rationale behind section 3(d), and two the presence/absence of any guiding principle for its
interpretation. As stated earlier, the primary motive of section 3(d) is to prevent the ever
greening of patents in pharmaceutical industry. Analysing specifically in terms of Indian
scenario, the generic form of drugs are readily available which ultimately affects the R&D
expenses incurred by the manufacturer of drugs. This could be stated as a pre-domestic
industry measure as the big pharmaceutical companies are capable of getting patent for their
minor improvements and inventions also. This section is incorporated to prevent such
practices which may adversely affect the competition within a particular territory. Thus it
serves the public purpose and yet maintain the higher standards of patentability in India. As
far as the constitutionality of the section is concerned the explanation provided as quoted
above serves as a guiding principle for the interpretation. Hence when such guidelines are
2 The Patent (Amendment)Act,2005

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itself provided with the section, the enforcing authorities are bound to act within the scope
and limits of such guiding principles. Also the explanation is clear and elaborative to mitigate
any confusion arising so as to judge whether invention is there or not. Therefore, in the light
of above discussions it would be safely concluded that the incorporation of section 3(d) is
constitutionally valid and does not grant scope to act arbitrary and exercise their discretionary
Further, to throw light on the issue of TRIPS compatibility of section 3(d) it is compelling to
discuss Article 27 of the TRIPS Agreement. Article 27 talks about Patentable Subject-matter
and clause 2 of Article 27 reads as follow:
Members may exclude from patentability inventions, the prevention within their territory of
the commercial exploitation of which is necessary to protect public order or morality,
including to protect human, animal or plant life or health or to avoid serious prejudice to the
environment, provided that such exclusion is not made merely because the exploitation is
prohibited by their law
The Mashelkar Committee3 was given the task to examine the validity of Section 3(d) with
respect to TRIPS and the committee presented its report in December 2006. The committee
held that if a country limits the grant of patent for pharmaceutical substance to New Chemical
Entities (NCEs) then it would specifically amount to the violation of International obligation
under TRIPS. However, the committee also recognised that the real function of this section is
to support innovations which result in enhanced efficacy and therefore setting a higher
standard of patentability. Thus this committee has indirectly supported the incorporation of
section 3(d) and held that such incremental development should essentially be protected in a
country like India where most of the pharmaceutical inventions result through incremental
inventions only. Article 27 leaves some flexibility in the hands of member states to define
patentability criteria as per their domestic conditions. Even though it has incorporated words
like new and inventive but has not defined these terms. It should also be noted that countries
like US and Germany has also refined the patentability criteria as per their domestic set up.
Thus in the same way section 3(d) could also be construed as a refinement of patentability
criteria to cater to this inherent problem of ever greening in pharmaceutical industry and


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therefore specific provisions made under national laws would not amount to violation of
TRIPS provisions, specifically Article 27.
Therefore from above submissions it is clear that the section 3(d) of the Patents Act 2005 is
constitutionally valid and in compliance with international obligation under the TRIPS
The section 3(d) of The Patents Act 2005 depicts that unless a new form of an existing
substance results in increased efficacy, it cannot be protected as a new invention. If a
substance by virtue to incremental changes results in enhanced efficacy of the product then it
can be protected and a patent can separately be granted to that product. This section also
consists of an explanation which says that salts, esters, ethers, polymorphs, particle size,
polymorphs, complexes, combinations and other derivatives of already known substance shall
be considered to be the same substance, unless they differ significantly in properties with
regard to efficacy. Hence the section makes it quite clear that if a known substance needs to
be protected than enhanced efficacy is a deciding factor. But the problem arises when we
contemplate as to what exactly would amount to enhanced efficacy. The courts has given
narrow interpretation to the term efficacy and strict enforcement of section 3(d). This is the
paramount reason of lack of clarity on this issue. The court in the case of Novartis Ag v.
Union of India have stated efficacy means mere therapeutic efficacy. The word
therapeutic4 simple means healing of disease and having good effect on the body and
efficacy5 means the ability of a drug to produce the desired effect. This means that if we
have to prove that a drug is capable of showing increased efficacy, it is expected of you to
show that how effective the new drug is in terms of healing capacity without having any
lowered side effects. Generally, bio-availability factor comes into play to determine
therapeutic effect of a drug. Bio-availability6the degree and rate at which a substance (as a
drug) is absorbed into a living system or is made available at the site of physiological activity.
4 Medical dictionary meaning
5 Oxford dictionary meaning
6 Webster dictionary meaning

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For instance, if drug A is more bio-available than drug B this means that drug A can be
consumed in lower quantity to achieve same effect as drug B. But it cannot be said that drug
A has enhanced therapeutic effect as compared to B, unless it is proved that drug A is less
toxic also i.e. to say it has good effect on body and is effective in less quantity also. Now, that
we have understood the meaning of enhanced efficacy it is simpler to understand the
meaning of significantly enhanced efficacy. To prove that a substance possess significantly
enhanced efficacy, the existence of prior art is a must. Thus this section presumes that there is
a prior art for comparison of efficacy. Unless there is a prior art, we cannot determine the
enhanced efficacy. If prior art is not there than there may be chances of arbitrary actions on
the part of patent authorities. However, if prior art is in existence than it is difficult to say that
patent authorities has sufficient scope of arbitrariness since they are guided by the above
mentioned principles. Although, no patent legislations in the world has concretely defined the
term efficacy, India has narrowed down its scope of interpretation as well by confining it to
the therapeutic efficacy. Hence it becomes extremely difficult to conclude as to what
exactly constitutes sufficiently enhanced efficacy. There is a strong need to define the scope
of this term in context of Section 3(d) in order to save higher cost of litigation.
This research problem will cover substantial part of the landmark Novartis judgment in order
to deal with the issue at hand effectively and elaborately. The Novartis case could be traced
back to 1997 when Novartis, a multinational pharmaceutical giant filed a patent application in
India for its drug Glivec. Glivec is a drug for the treatment of blood cancer and has obtained
patent in 40 countries. However in India, the Novartis faced heavy litigation and approached
the apex court for grant of patent for its drug Glivec. Since in India, drug patenting was not
available until 01 January 2005 so Novartis claimed patent through mailbox application.
Meanwhile various pharmaceutical companies like Ranbaxy, Hetro Drugs and Cipla were
selling generic versions of Glivec in India. In 2005 when product patent for pharmaceuticals
were introduced in India, the mailbox application of Novartis was consequently examined by
the Assistant Controller of Patents. Several generic drug manufacturing companies strongly
opposed granting of patent to Novartis on the basis of lack of novelty, enhanced efficacy and
wrongful priority. The patent application of Novartis was rejected by the Assistant Controller
after examining then pre-grant objections. After being rejected by the Indian Patent Office,

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Novartis moved the Madras High Court by filing two writ petitions alleging that the Section
3(d) of The Patent (amendment) Act, 2005 is unconstitutional and not in compliance with
TRIPS Agreement. The constitutional validity of the provision was challenged by arguing
that the words significantly enhanced efficacy and enhancement of known efficacy is
vague and thus gives discretionary powers to the patent authority, which is against the very
principle of equality before law, as mentioned under article 14 of the Constitution of India.
With regard to this particular issue the court held that the explanation accompanied with the
section acts as a guiding principle for the patent authorities hence the authorities are bound to
act accordingly. Therefore, there is no scope of exercising arbitrary powers by the authorities.
As far as TRIPS provisions are concerned, court raised the jurisdiction issues and said that
WTO is the appropriate authority to settle dispute under TRIPS. The question relating to
efficacy was to be decided by the IPAB. The IPAB failed to give sufficient reasons as to why
the drug lacked efficacy. In 2009, the Novartis then appealed to the Supreme Court against
the decision of IPAB. The Supreme Court held that the drug lacks the criteria of sufficiently
enhanced efficacy and thus patent is not granted to the Glivec drug. It was expected of the
apex court to give clarity on the scope of section 3(d) and the term sufficiently enhanced
efficacy but it has given a narrow connotation to this term and said that it only related to
therapeutic efficacy. However, the Supreme Court has successfully maintained comparatively
higher standards of patent in cases of minor or incremental innovations relating to
drugs/substances already known and protected. This is particularly appreciable in Indian
scenario where generic drug manufacture needs protection so as to promote innovations and
safeguard their economic interest. At the same time, much clarity was expected from the
Apex Court on this issue of efficacy as various multinational pharmaceutical companies was
keeping an eye on the judgment.
Now the question arises whether this decision of Justice Aftab Alam in the Novartis case has
affected the Foreign Direct Investment in Indian Pharmaceutical Industry? I would most
humbly like to submit here that despite section 3(d) being the most controversial provision in
the entire act, it has not come in the way of patenting incremental inventions which meet the
criteria of patentability. This is quite evident from the statistics. There was a steep increase in
the grant of patents during 2005-2009 from 1911 to 18,230 overall grant of patents.7During
the same period the number of pharma patents were recorded from 765 to 2373.8It is also
pertinent to note that from the year 2005 to 2009, the Indian Patent Office has granted 3506
7 Reply to Lok Sabha unstarred Question No.2173 dated 20 July 2009

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patents relating to pharmaceutical innovations.9It is also worth noting that after 2005, 86
patents were granted for pharmaceutical products which were not breakthrough drugs but
only minor variations of existing pharmaceutical products.10 The total revenue of the pharma
companies, as per a compilation by the Indian Pharmaceutical Alliance on the basis of
published annual reports, grew from Rs.43986 crore in the year 2004-05 to Rs.80336 crore in
the year 2008-09.11Therefore on the basis of studies conducted in past 5 years, it can be
concluded that section 3(d) has not affected the FDI into the Indian Pharmaceutical Industry.
The section 3(d) ensures that higher patentability standards are adopted for patentability of
drugs and it has successfully demonstrated its application in the product patent regime. But I
strongly suggest that the scope of the term therapeutic efficacy should be defined in order
to avoid heavy litigation costs in future. Since, section 3(d) works on a presumption of
existence of prior art. If there is no prior art then it becomes extremely difficult to determine
exactly as to what amounts to enhanced efficacy. So in cases where no prior art exist, I
recommend that increased efficacy should be accessed with reference to the views of skilled
persons in the relevant art. Also there is a wrong assumption that section 3(d) only applies to
drugs. But to the best of my knowledge and understanding it also applies to other chemicals
such as agro-chemicals, fertilizers etc. If these aspects of section 3(d) are taken care of and
more careful drafting is incorporated than the real purpose of this section could be achieved
India is the only developing country where huge innovative capacity to reverse-engineer and
improve on existing processes is observed. In such circumstances it is of uttermost
importance to provide protection for significant incremental developments. Otherwise the
8 Ibid
9 Reply to Lok Sabha unstarred Question No.346 dated 03 August 2009
10 Study conducted by Indian Pharmaceutical Alliance
11 Article on Patent Protection and Innovation, Authored by TC James, page

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MNCs would monopolise the market and unfair trade practices is a common occurrence in
case of market dominance. This could stand in the way of public good and health and
Originally, the section 3(d) was intended to become a novel provision and aims at checking
the phenomenon of ever greening. Unfortunately, it has attracted a lot of criticism from
global community because of imperfect understanding and lack of well-defined standards of
patentability. If clarification is provided for this section and definite standards are laid down
in coming times then the provision would achieve its goal. Since, it has been proved in this
paper that incorporation of this section has not affected adversely the FDI and in fact
achieved what it intended out of it i.e providing higher standards of drug patenting and
preventing ever greening, it can hardly be argued that there is any need to amend this
provision. A mere clarification is indeed enough. However, to avoid any complications in
future India could restrict the application of this section only to major patent cases and
inventions and for all petty patent issues regarding this subject matter could be dealt under
the Utility Model Protection System12 of the WIPO. Since Utility Model Protection System
is widely considered as a tool of economic and technological inventions, it will reduce
unnecessary litigation and save the courts precious time as well. It is worthy of noting that
more than 130 countries13 have already enacted laws relating to petty patents but India is yet
to draft one.

13 A report on Utility Model; submitted by Dr. K.S.Kardam. Published in the IIP
Bulletin, Tokyo, Japan 2004 page38

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An Article titled A report on Utility Model; submitted by Dr. K.S.Kardam.

Published in the IIP Bulletin, Tokyo, Japan, 2004 page38. Available at

This report focusses on various aspects of Utility Model and its future
implications specifically with reference to minor incremental innovations. It
analyses how various countries has adopted this model and its suitability for
developing nation like India
An Article on Patent Protection and Innovation; authored by TC James,
available at
This article effectively demonstrates the implications of Section 3(d) on Indian
Pharmaceutical Industry. This writing of TC James critically examine the report of
US-India Business Council titled as The Value of Incremental Innovation: Benefits
for Indian Patients and Indian Business. This also discusses the Mashelkar
Committee Report to examine the TRIPS compatibility of Section 3(d)

Article titled A Critical Evaluation of the Patent (Amendment) Act, 2005.

Authored by Tilotma Singh. Available at

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Patent-Amendment-Act-2005-5574.asp#.U-3_EvmSwrg Last visited on
August 12, 2014.
This article has solely focussed on the implications of The Patent Act 2005 on
Product Patent System in India and Indian Economy. Substantial provisions have
been dealt in by the Author along with provisions relating to EMR

Article titled An Attempt at Quantification of Efficacy factors under

Section 3(d) of the Indian Patents Act. Authored by Aditya Kant. Available
at Last Visited on
August 15, 2014

This article dynamically discusses various aspects of efficacy and how it is

interpreted by the courts in recent past. It also critically examine the
shortcomings of Section 3(d) and the necessary clarifications for its proper
interpretation and application

Article titled Analysis of Section 3(d) of Indian Patent Act. Authored by

Dr. Dhanlakhshmi Iyer. Available at

This article talks about the development in Novartis Case and specifically
focusses on courts interpretation of efficacy. It also throw some light on The
Roche v.Cipla case and relevance of Orphan Drug Act in the context of Section

Article titled Ducking TRIPS in India: A Saga involving Novartis and the
legality of Section 3(d). Authored by Basheer, Shamnad and Reddy,
Prashant. Available at

This article deals with the Glivec patent case in India and the legality of section
3(d) in context with the constitution. It criticise the Indian courts for raising the
jurisdictional issues in relation to the TRIPS compatibility

Article titled Glivec verdict: A narrow view. Authored by CEO, Vision IPR
and MHRD Chair Professor, Tezpur University. Available at
Last visited on August 15, 2014.

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This article has very concisely yet effectively analysed section 3(d) and the
consequences of the Novartis Judgment. It also identifies two separate issues of
accessibility and affordability and how it is linked with obligations of the Patent

Article titled Importance of Section 3(d) and Section 8 of the Indian Patent
Act, 1970. Authored by Tech Corp Legal LLP. Available at
atent_applications_in_india/ Last Visited on August 15, 2014

This article focusses on the importance of section 3 and section 8 of the Patents
Act while prosecuting pharmaceutical applications in India. This article also
covers the investment of Multinational Pharmaceutical Companies in India after
the incorporation of Section 3(d), and proves that it has not affected the
patentability of products which fulfil the sufficiently enhanced efficacy criteria.

Article titled Indian Patent Act: Incentivising Innovation without

compromising affordable healthcare. Authored by Sanjeev K Kapoor.
Available at Last
Visited on August 15, 2014

This article analyses the Novartis Judgment and concludes that the Indian
courts have successfully upheld the standards of drug patenting without
compromising the affordability of health, thereby promotes the very purpose of
law in the light of public health and morality.

Article titled Is Section 3 (d) good for Innovation-No. Authored by Krishna

Sharma. Available at Last
Visited on August 15, 2014

This article analyses various aspects of section 3(d) and its implications on
future market strategy of pharmaceutical giants. It gives deferring views for
section 3(d).

Article titled Is Section 3 (d) good for Innovation-Yes. Authored by

Gopakumar G Nair. Available at

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good-for-innovation-yes/article4585237.ece Last Visited on August 15,
This article also analyses various aspects of section 3(d) and its implications on
future market strategy of pharmaceutical giants. It gives affirmative views for
section 3(d).

Article titled Section 3(d) of the Patents Act- Part 1. Authored by

I.V.Mueller. Available at Last visited on August 12, 2014.

This article discusses the Glivec patent saga and differentiates between ever
greening and incremental innovations. This differentiation has proved material
for this project submission.

Article titled Section 3(d): New Indian Perspective. Authored by Aditya

Kant. Available at

This article examines the relevance and actual working of section 3(d) and
emphasises on the need to retain it in the Patents Act 2005, but suggests certain
crucial modifications for its proper implementation.

Article titled Selection Patents and the Indian Patent Act Section 3(d).
Authored by Manisha Singh Nair. Available at Last Visited on August
15, 2014

This article makes differentiation between selection patent from a new claim of
the already known substance and suggests that the difference lies in defining
the prior art.

Article titled The Efficacy of the Indian Patent Law: Ironing out the creases
of Section 3(d). Available at

This article recognises the fact that the section 3(d) is not one of the best
pieces of legislations. Though its objective is achieved but in order to avoid

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future litigation, it suggests the changes to be made in the article. It also
acknowledge that an explanation cannot expand the scope of principle section.

Medical dictionary meaning of therapeutic;

tending to overcome disease and promote recovery. Available at
Novartis AG v.Union of India (2013)6 SCC 1. Available at

The Novartis Judgment of the Apex Court is a prime focus of this article and
various issues raised under this case has been elaborately dealt in this

Oxford dictionary meaning of efficacy; the ability to produce a desired or

intended result. Available at
Reply to Lok Sabha unstarred Question No.2173 dated 20 July 2009.
Reference taken from

This query has been elaborately discussed during parliamentary session

whether incorporation of section 3(d) has hindered the investments through FDI

Reply to Lok Sabha unstarred Question No.346 dated 03 August 2009.

Reference taken from

Study conducted by Indian Pharmaceutical Alliance in 2011. Detailed
report available at

Article titles as The Concept of Utility Models for petty patents. Available
The Mashelkar Committee Report on Patent Laws; available at

This committee was entrusted with the task of determining the TRIPS
compatibility of section 3(d) in the light of Novartis case. It was this committee
which suggested that the section 3 (d) does not violate Indians TRIPS

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The Patent (Amendment) Act, 2005. Available at

Section 3(d) exclusively is used for the purpose of this study.

Webster dictionary meaning of bio-availability; the degree and rate at

which a substance (as a drug) is absorbed into a living system or is made
available at the site of physiological activity. Available at Last Visited on
August 15, 2014.