NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

TOPIC: PATENT POOILNG IN PHARMACEUTICAL LEADING

TO INNOVATION OR INVASION OF INNOVATION

Submitted by – Kriti Khare

Roll No. – 2019LLM69

LLM

Submitted to – Prof. Vijay Kumar Singh

Assistant Professor
 TABLE OF CONTENTS

ACKNOWLEDGEMENT...........................................................................................................................3
CHAPTER-2...............................................................................................................................................7
PATENT POOLING IN PHARMACEUTICALS AND ITS EFFECT ON COMPETITION LAW...........7
CHAPTER-3.............................................................................................................................................10
INTERNATIONAL POSITION WITH RESPECT TO PATENT POOLING IN PHARMACEUTICAL
AND ITS EFFECT ON COMPETITION..................................................................................................10
INDIAN POSITION WITH REGARD TO PATENT POOLING IN PHARMACETICAL AND ITS
EFFECT ON COMPETITION LAW........................................................................................................13
 ACKNOWLEDGEMENT

I  would like to express my special thanks of gratitude to my teacher Prof.

Vijay Kumar Singh who gave me the golden opportunity to do this wonderful project on the
topic “Patent Pooling In Pharmaceutical Leading To Innovation Or Invasion Of Innovation”,
which also helped me in doing a lot of Research and I came to know about so many new things I
am really thankful to them.

Secondly I would also like to thank my parents and friends who helped me a lot in
finalizing this project within the limited time frame.
 INDEX OF AUTHORITIES

Indian cases

Haridas Exports v All India Float Glass Mfrs Assn & Ors , AIR 2002 SC 2728.......................................22
Manoj Hirasingh Pardeshi v Gilead Sciences Inc, Case No. 41/2012........................................................17

Statutes

Antitrust Guidelines For The Licensing Of Intellectual Property, 1995....................................................11

The Competition Act, 2002, section 3 (India)..........................................................................................16
The Patents Act, 1970, No. 39, § 3(d) (India)............................................................................................14

Treatises

The Trade Related Aspect of Intellectual Property Rights, 1995...............................................................13

Treaty Establishing The European Community.........................................................................................12

foreign cases

AstraZeneca v European Commission, Case C-457/10P...........................................................................11

Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006)......................................................11
In re Summit Technology Inc and VISX Inc, 24 March 1998 (No 9286)..................................................12
Oil Co v United States, 221 US 1 (1911)...................................................................................................12
Standard Sanitary Manufacturing Co v United States, 226 US 20 (1912).................................................12
United State v Line Material, 333 US 287 (1948).....................................................................................12
 CHAPTER-1

INTRODUCTION

The imperatives of “unfettered competition” and “innovation” are indispensable for

attaining sustained economic growth. The balancing of competition with innovation is an
extremely difficult task since prima facie there seems to be apparent tension between the tenets
of IP law and Competition policy. While IP law aims at providing protection to the creators
and innovators of intellectual work, by conferring exclusivity upon them competition policy
strikes at the ‘exclusivity’ which hampers free and fair trade. But if looked closed then it can be
realized that both these are complementing each other as both gives preference to innovation.
There is a very thin line existing between complementing and contradiction of IPR laws and
Competition laws. Per se these two rules are complementary of each other but when that thin line
is broken by way of certain restrictive practice then begins the contradiction between these two
laws which gives rise to serious issues from over the years.

This tension between IPRs and competition policy is sought to be resolved by the
competition authorities in major jurisdictions such as US and EU. The Indian economy also
came up with many economic reforms after the MRTP Act got repealed and newer competition
Act came into force. The newer Act changed the approach of dealing with IP laws as it followed
uniform IP laws in relation to TRIPS. Therefore it excludes IP laws within the purview of
Competition until and unless they are using such restrictive practices causing adverse affect on
the competition.

Patent pooling is one such strategy in the IP laws which provides platform for multiple patent
holder to share their patent and exchange information with respect to third party. Patent pooling
is mostly encouraged in pharmaceutical, nanotechnology sectors etc. in order to help the
developing countries to get access of efficient drugs at reasonable rates. However nowadays the
situation is changed and patent pooling in pharmaceuticals is created among efficient competitors
in order to control the market which definitely created adverse effect on the competition leading
to tussle between competition and IP laws. Although India has not so much developed in this
field but other developed jurisdiction gives instances of the same.

AIMS
The researcher has following Aims in relation to this project:-

 To know the Interface between Competition laws and IP laws

 To know the laws related patent pooling in pharmaceuticals and its effect on competition
 To compare the patent pooling laws in pharmaceuticals and its effect on competition law
in other jurisdiction
 To know the Indian position with regard to patent pooling laws in pharmaceutical

METHODOLOGY

 The researcher has adopted the doctrinal methodology and the paper is descriptive in
nature. The author has mainly resorted to several online articles for the completion of the
project. However the documentary material in the form of books and articles in the
library has also been referred to for the subject matter at hand.

RESEARCH QUESTION

 The author has formulated the following two research questions:

 1. What is the Interface between Competition law and IP laws?
 2. How other jurisdiction like US and Europe deals with the patent pooling in
pharmaceutical leading to adverse effect on competition
 3. What is the position of India in relation to patent pooling in pharmaceuticals?

SCOPE AND LIMITATION

The researcher has limited the scope of the research with the case laws and statutes prevailing in
USA, European Union and India with respect to patent pooling in pharmaceutical sector.
 CHAPTER-2

PATENT POOLING IN PHARMACEUTICALS AND ITS EFFECT ON COMPETITION

LAW
There has been a close interface between competition law and law related to Intellectual
Properties. “Prima facie it seems that the both these laws are contradicting each other. IP laws
recognize innovation and grants them exclusivity over it whereas competition law does not favor
exclusivity as it restricts the market and free flow of competition. But if these laws are properly
analyzed then it can be seen that these laws are not contradicting each other in fact
complementing each other.”1 The major purpose of the IP laws is to recognize innovation so that
the people get inspire to work harder with better ideas in order to generate something more
innovative therefore indirectly promoting competition. Similarly the competition law emphasizes
on “something better than before”. Thus it can be concluded that IP laws per se promote
competition.

2.1 THE NECESSITY OF PATENT POOLING IN PHARMACEUTICALS IN

DEVELOPING COUNTRY

The problem arises when the patent holders are so rigid with their licensing policy restricting to
very limited people and also charging very high royalty in lieu of license resulting in dominance
in the market which in return was causing an adverse effect on the competition. Moreover it
creates a great problem for developing countries, like “India faced a huge difficulty in acquiring
ODS (Ozone depletion Substance) as very high price has been asked for it by the patent holder.” 2
Another problem which was arising from the above mentioned situation is that it results a lot of
litigation cost in concerned with matters relating to “patent trolls and patent assertion entities” 3
which in return causing adverse effect on competition.

1
“Santa Cruz and et al.,. Interaction Between Intellectual Property and Competition Laws, International Centre for
Trade and Sustainable Development (ICTSD) and World Economic Forum, 2015, www. e15initiative.org.”
2
“Watal J, The issue of technology transfer in the context of Montreal protocol: Case study of India in achieving
objectives of Multilateral Environment Agreements: Lessons from Empirical Studies, (UNCTAD, Geneva), 2000.”
3
“Gopakumar G Nair and Andreya Fernandes, Patent Policies and Provisions Relating to Pharmaceuticals in India,
19 Journal of Intellectual Property Rights, 7-17 (2014).”
In order to get rid of these problems there evolve a strategy called patent pooling which can be
defined as “An agreement between two or more patent owners to licence one or more of their
patents to one another, or to licence them as a package to third parties.”4 It has been established
in order to reduce patent overlapping and also litigation cases resulting from infringement of
patent. Patent pooling allows third person to collect patent for his technology from single owner
rather than going to a multiple owner holding specific patents. It therefore saves times and also
the person to make the use of patent for research and development purpose.

“Patent pooling was mostly in certain sectors like nanotechnology, biotechnology,

pharmaceuticals etc as most of the patent thicketing was prevailing in these mentioned
sectors.”Pharmaceuticals is one of the important sector in every country because it provide for
global heath but this area suffers a lot in developing country because there are no resources for
them to make drug and to avail drug from other country cost them an exorbitant price as they are
being patented. Thus “patent pooling provides a great solution to these problems like UNITAID
initiative to set up a pool with the help of GlaxoSmithKline to provide HIV/AIDS medicine to
the poor countries in need of it.”5 Thus “it helps in preserving the incentive of innovation with
lesser license transaction cost, risk and better medium to exchange information to people at
large.”6

2.2 TYPES OF PATENT POOL

“Patent pools are of two types- closed pool and open pool. Closed pool are those pools where
several members are part of it and out of those members one member is selected to manage the
pool and to grant licenses to the third party whereas in open pools contract is given professional
management companies such as joint venture to manage the pool. They could grant those patents
on behalf of every member to third party if he is fulfilling the desired criteria.” 7

4
“Overwalle G & et al., .Models for facilitating access to patents on genetic inventions, 7 Nat Rev Genet,143-154
(2006).”
5
“Indrani Barpujari, Facilitating Access or Monopoly: Patent Pools at the Interface of Patents and Competition
Regimes, 15 JIPR 345-356 (2010).”
6
“Clark J, Patent pools: a solution to the problem of access in biotechnology patents?, (last visited Apr 20, 2018,
8.00 PM (N.T.M.)), www.uspto.gov/web/offices/pac/dapp/opla/patentpool.pdf.” 
7
“Priyanka Rastogi, India: Patent pool, (last visited Apr 19, 2018, 8.00 PM (N.T.M)),
http://www.mondaq.com/india/x/325602/Patent/Patent+Pool.”
2.3 PATENT POOLING ADVERSE EFFECT ON THE COMPETITION

There is no doubt that patent pooling helped a lot in solving priorly existing problem but at the
same time it is also contended that it is not a solution of every problem arising from patenting a
product or process and affecting competition. “Patent pool can be seen as highly lucrative
platform for developed manufacturer or seller of particular product to make a pool and hold
market in hand.”8 “Also to have their monopoly, they charge very exorbitant price for becoming
a part of the pool therefore it results in blocking of market for the new comers and obstruct the
whole purpose of initiating this strategy.”9

“Patent pooling allows sharing of license by which various horizontal and vertical agreement
taking place leading to territorial exclusivity, fixation of price and barrier to entry and causing
appreciable adverse affect on the competition. Vertical agreements are the agreement existing
between the players of the same cadre and they are void per se whereas the vertical agreements
are those agreements existing between the players of either ascending or descending cadre like
the agreement between the manufacturer and wholesaler.”10

Patent pooling per se a strategy acceptable in both the competition law as well as the law related
to Intellectual property rights because if used properly it is welfare enhancing strategy giving
people a way to use patent product for further research leading to greater innovation but if used
improperly then might lead to restrictive practice by locking the technology and production in
fewer hands thereby making it difficult for outsider to enter in the pool by imposing
unreasonable condition or by “misleading with wrongful statement as done in the Astra Case.”11

8
“Bessen J, Patent thickets: Strategic patenting of complex technologies, (last visited Apr 20, 2018, 9.00 PM
(N.T.M.)), http://www.researchoninnovation.org/thicket.pdf.”
9
“Victor Rodriguez, Patent Pools: Intellectual property rights and competition, 4 Open AIDS 62-66 (2010).”
10
“MHRD govt. of India, Horizontal Agreements under competition Act, 2002, (last visited Apr 20, 2018, 9.00 PM
(N.T.M)),
http://epgp.inflibnet.ac.in/epgpdata/uploads/epgp_content/law/03._competition_law/11._horizontal_agreements_und
er_competition_act_2002__/et/5652_et_11et.pdf.”
11
“AstraZeneca v European Commission, Case C-457/10P.”
 CHAPTER-3

INTERNATIONAL POSITION WITH RESPECT TO PATENT POOLING IN

PHARMACEUTICAL AND ITS EFFECT ON COMPETITION.

3.1 PATENT POOLING IN PHARMACEUTICALS AND COMPETITION

LAW IN USA

The same debate regarding the clash between Anti trust law and IP laws are followed in the
USA. “The traditional views relating to these laws were that IP laws results in monopoly which
is contrary to the competition law.” 12 In due course of time this view changed and finally “US
Antitrust Guidelines for the Licensing and Acquisition of Intellectual Property Rights, 1995 was
passed under which very few horizontal restraints as challenged as per se unlawful. Among those
restraints which have been held per se unlawful, price fixing, market division and output
restraints and certain group boycotts are most prominent.” 13 The standard for determining the
presence of these elements can be envisaged by applying rule of reason. 14 Similar position is with
patent “pooling and cross licensing if they are resulting in price fixing, coordinated output
restrictions among competitors or foreclosure of innovation then they would be subjected to
liability under Anti trust law.”15 “There have been several cases in USA where patent pooling is
found to be guilty of many anti competitive practice containing price fixing, tying arrangement,
post sales restriction on patented goods.”16 In the case of United State v Line Material 17 “the
court held that there is nothing wrong in licencee paying royalty to the patent holder the problem
is when it is resulting in price fixation.” 18 Similarly in the case of In re Summit Technology Inc
and VISX Inc19 “where patent pooling created by two companies engaged in laser operation with
the condition that no third party would be allowed to enter in the pool, was held anti competitive.

12
US Department of Justice and the Federal Trade Commission, Antitrust enforcement and intellectual property
rights: Promoting innovation and competition, (Last accessed Apr 10, 2018, 7.00 PM (N.T.M)),
http://www.ftc.gov/reports/innovation/P04010 PromotingInnovationandCompetitionrpt0704.pdf.
13
Antitrust Guidelines For The Licensing Of Intellectual Property, 1995 , (last visited Apr 10, 2019, 10.00 PM
(N.T.M)), http ://www.iustice.gov/atr/ public/ guidelines/0558.htm.
14
Ibid
15
Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006)
16
Standard Sanitary Manufacturing Co v United States, 226 US 20 (1912). See also Oil Co v United States, 221 US
1 (1911).
17
United State v Line Material, 333 US 287 (1948).
18
Ibid
19
In re Summit Technology Inc and VISX Inc, 24 March 1998 (No 9286)
Thus in USA patent pooling are subjected to rule of reason in order to determine their
compliance with Anti trust law.”20

3.2 PATENT POOLING IN PHARMACEUTICALS AND COMPETITION LAW IN

EUROPEAN UNION

The IPR/competition law interface finds expression in Article 81 of the EC Treaty 21 which
discusses the compatibility of IPR licensing agreements with competition policy. “Article 81(1)
list out certain categories which are anti competitive in nature whereas Article 81(3) provided
certain exception to Article 81(1). These exceptions are referred to as block exception and patent
pools are not block exception.” 22 These are determined on case to case basis. “The first case
relating to abuse in the pharmaceutical sector was AstraZeneca v European Commission”
23
”where the commission fined both UK and Swedish company for infringement of Article 82 of
EC treaty and Article 54 of EEA Agreement. There were general SPC guidelines according to
which patent protection can be extended only to five years but these companies were extending it
beyond five years by giving misleading statement about it. In this way they were excluding the
other generic firms and parallel traders from competing against AZ’s anti ulcer product Losec.
Thus these two companies were found to be engaging in anti competitive practice.”24

“ In order to make it stand clear EC came up with new regulation in 2004 wherein it has been
clearly stated in the preamble that it does not deal with licensing agreements to set up technology
pool. Nevertheless the guidelines provide certain indication in relation to patent pools compatible
with European Competition law.”25

Thus like USA, European Union also provide ground for patent pooling subjected to its
compliance with respective Competition law.

20
Supra note 19.
21
“ Treaty Establishing The European Community: ARTICLE 81,
http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12002E081:EN:HTML”
22
Ibid, Article 81(1) and 81(3).
23
AstraZeneca v European Commission, Case C-457/10P
24
Ibid
25
Supra note 5
3.3 TRIPS WIT REGARD TO PATENT POOLING IN PHARMACETICALS AND
COMPETITION LAW

This is the basic document relating to Agreement on trade related aspect of Intellectual Property
Rights. “The above agreement obliges the member state to adopt appropriate measures in order
to improve public health and nutrition and public interest in other vital sector according to the
provision of this agreement”26. “The provision defining the objective of this Act provides
contribution in the promotion of technological innovation in a manner so as to help in the welfare
of the people”.27 Thus the objective of TRIPS furthers the objectives of competition law.

“Article 31 and Article 40 of the TRIPS are the basic foundation for building the contention in
relation to IP laws and Competition laws. Article 31(b) and Article 31 (d) talks about
authorization of patent holder right to government with the consent of patent holder on the
reasonable commercial terms and condition and predominant supply of the domestic market
respectively but such authorization is not possible in case if they are anti competitive in nature.
Similarly Article 40 provides that no member state in their legislation should have such licensing
condition which would cause adverse affect upon the competition.”28

Thus TRIPS complements competition law and does not further any practice which would have
adverse affect on the competition. Therefore patent pooling per se is allowed but if involves
practices like tying arrangement, price fixation having adverse effect on the competition then in
such scenario it would be considered as anti competitive in nature

CHAPTER-4

INDIAN POSITION WITH REGARD TO PATENT POOLING IN PHARMACETICAL

AND ITS EFFECT ON COMPETITION LAW
4.1 INDIAN PHARMACEUTICAL MARKET

“The Indian Pharmaceutical market was dependant on multinational companies and imports for
drugs till 1970. In the year 1970, Indian Patent Act was passed which allowed only process

26
The Trade Related Aspect of Intellectual Property Rights, 1995, Article 8.1.
27
Ibid, Article 7
28
Ibid, Article 31 and Article 40
patent not product patent. This Act changed the whole scenario of India. They started patenting
drugs with a miniscule change in the process. Moreover in the year 1973, Foreign Exchange
Regulation Act was passed which limited the foreign investment to only 40% thus giving
advantageous position to Indians leading to higher profits. This whole scenario changed in the
year 1980 when India became a member to TRIPS. Therefore the provision of Indian Patent Act
is similar to the provision of TRIPS. Being a member to TRIPS, “the equal treatment should be
provided to both domestic investors as well as foreign investors.”29 Therefore limit was removed
and also product patent is given a place.”30

The pharmaceutical market can be per se divided into aspect in relation to competition law:31

1. Competition among different brand name eligible for same disease or treatment
2. Competition between generic drugs and drug with successful brand names

4.2 IPR IMPLICIT PROVISION RELATED TO PATENT POOLING

Patent pooling is one of the major remedy in developing countries like India in order to get
access of those drugs which are not invented in India and are highly required as the same done in
case of HIV/AIDS drugs. Although patent pooling is a very new concept in India and case laws
are yet to build but there are certain provisions in Indian Patent Act which paves a way for the
patent pooling. It provides the assignment of patent or a share of a patent to other person with the
condition that it should be in writing 32 and should be duly registered by the licensee. 33 It also
provides for the avoidance of any restrictive practice in the contract pertaining to the Assignment
or license. The above provisions states certain condition which would be restrictive in nature
like34-

 Restricting purchaser, lessee or licensee to acquire any article other than patented article
from any other seller, lessor or licensor who granted them license.

29
The Patents Act, 1970, No. 39, § 3(d) (India).
30
“Legistify, Pharmaceutical Industry: The Interface between Competition law and Patent law, (last visited Apr 11,
2018, 10.00 PM (N.T.M)), https://www.legistify.com/blogs/view_detail/124-pharmaceutical-industry-the-interface-
between-competition-law-and-patent-law/.”
31
Ibid
32
Supra note 24, Section 68.
33
Ibid, Section 69.
34
Ibid, Section 140
  Prohibiting the licensee from using any article or process other than patented article or
process which is not supplied by the licensor.
 Prohibiting the right of licensee to use any process other than patented process.
 Providing exclusive grant back, prevention to challenging the validity of patent and
coercive package challenging.

“Thus with these provision ground is already set for patent pool in order to deal with any cases
related to it in future. Patent pooling can be created either by voluntary licensing which is done
in almost cases or by non voluntary licensing which can be done by means of government
intervention or customary licensing. India has thus provision for both voluntary as well as non
voluntary licensing. Non voluntary however could be complex in nature.”35

4.3 COMPETITION LAW PROVISION RELATED TO PATENT POOLING ALONG WITH

JUDICIAL PRONOUNCEMENT

“Section 3 of the Competition Act, 2002 talks about Anti-Competitive Agreements which as a
whole states about horizontal and vertical agreements existing between enterprises or association
or person respectively causing appreciable adverse effect on competition within India and shall
be void.”36

“Section 3(3) talks about the horizontal agreement existing between competitors of the same
level like enterprises or associations of enterprises etc. leading to price fixation, limiting or
controlling production, supply, market, technical development or provision of services,
allocation of geographical area of market. These Agreements are per se wrong except by way of
joint ventures.”37

“Section 3(4) talks about the vertical agreement existing among enterprises or person at different
stages leading to tie in arrangement, exclusive supply agreement, exclusive distribution
agreement, refusal to deal and resale price maintenance. These agreements are subjected to rule
of reason and decided on case to case basis.”38

35
Supra note 5
36
The Competition Act, 2002, section 3 (India)
37
Ibid, Section 3(3).
38
Ibid, section 3(4).
“Section 3(5) talks about the exclusion of IP laws from the regime of competition law until and
unless it causes an adverse effect on the competition. Adverse effect on the competition can be
determined namely on the following factors39:-

(1) Creation of entry barrier to new comers.

(2) Driving out the existing competition from the market
(3) Foreclosure of competition by causing hindrance to enter in the market.
(4) Accrual of benefits to consumers.
(5) Improvement in production or distribution of goods or provision of services
(6) Promotion of technical, scientific and economic development by means of production or
distribution of goods or provision of services.”40

This is where the patent pooling comes into play. It is not per se wrong but when it involves
restrictive practice enshrined in Section 3 along with it then would be considered as anti
competitive in nature.

“In India there is only one case named Manoj Hirasingh Pardeshi v Gilead Sciences Inc 41 dealing
with patent pooling in pharmaceuticals. The study of the following case is as follows:-

ISSUE:-

(1)Whether the tripartite agreement created by Medical Patent Pool via patent pooling with two
Indian companies is causing adverse affect on the competition and thus comes within the
purview of Section 19(3) of the Competition Act, 2000?

(2) Whether OP, USA based pharmaceutical company has dominant position in the market?

FACTS

39
Ibid, section 19(3) .
40
Ibid, section 3(5).
41
Manoj Hirasingh Pardeshi v Gilead Sciences Inc, Case No. 41/2012
The OP is a USA based pharmaceutical company engaged in the business of manufacturing
drugs. Medicines Patent Pool (MPP) is a Swiss non-profit foundation based in Geneva created
with an objective of forming a patent pool for medicines. Tenofovir (TDF), emtricitabine (FTC),
cobicistat (COBI), elvitegravir (EVG) and a combination of these four products called 'Quad' are
Antiretroviral (ARV) drugs used for treatment of HIV infection. The OP was presently
manufacturing TDF and FTC in USA and other countries whereas EVG, COBI and Quad are in
the development stage and yet to be approved for use in HIV treatment.

The treatment for HIV infection is known as Antiretroviral Therapy (ART) and is to be taken
life-long. The treatment prolongs and extends the life of the person affected by 20 to 25 years
and improves the quality of life. The treatment is segmented into three levels: first line, second
line and third line. TDF has been recommended by the WHO as the first line treatment and as
replacement of another first line ARV medicine stavudine. Another first line ARV medicine is
FTC. TDF is also used for second line treatment

In 2006, the OP entered into non-exclusive voluntary license agreements with about 10
companies including Medchem, Alkem, Aurbindo, Hetero, Matrix etc. for production and
distribution of TDF and other ARV medicines and also entered into a license agreement with
MPP to pool licenses and give sub-licenses to pharmaceutical manufacturers worldwide
including India

ARGUMENT BY PETITIONER

The informant alleged that the clauses of the tripartite agreement were anti-competitive and in
contravention of the provisions of the Act. The clause 4 of the tripartite agreement provided for
the payment terms i.e. royalty at 3% and 5% for different drugs and their combinations.

The informant pleaded the following three types of agreements were in contravention of the
provisions of the Act:
1. Voluntary non-exclusive agreements entered into by the OP directly with Indian
Pharmaceutical companies since 2006 for production and distribution of TDF and FTC
medicines and their combinations.

2. Licence agreement of the OP with MPP which allowed MPP to have sub-licences with Indian
pharmaceutical companies.

3. The sub-license tripartite agreement among the OP, MPP and the Indian pharmaceutical
companies.

The following license agreement according to the petitioner are anti competitive because of
certain grounds:-

a. The license agreements limited the production and supply as they restricted the purchase and
sale of API only from the OP or the OP approved licensees.

b. Restrictions on purchase of API also controlled price of API which could make production of
drugs expensive and unaffordable. The license agreements also restricted new combinations of
the drugs using same API, as the licenses were for fixed dosages and fixed combinations.

c. The said license agreements were among OP, MPP and Indian Pharmaceutical companies so
that the OP could have an exclusive supply agreement for API.

d. The license agreements were in the nature of exclusive supply agreements as they restricted
the purchasers, in the course of manufacturing and production process of the said medicines,
from acquiring or otherwise dealing, in any manner, with any other supplier of API other than
the OP or its licensees.

e. The license agreements were anti-competitive as they contained an 'exclusive distribution'

provision which limited, restricted and withheld supply of the drugs in question to any area
outside the list of countries mentioned.

f. Indian pharmaceutical companies would not be able to supply drugs produced under the
license agreements to any other country or territory not covered in the Appendix.

g. Many developing countries were left out of the licence agreements which were potential
markets for Indian pharmaceutical companies. This curtailed the freedom of licensees to compete
in the market, and restricted the market coverage for the pharmaceutical companies in India, and
had an adverse impact on international competition and prices of medicines.

h. The license agreements were like 'tie-in' arrangements as they required Indian pharmaceutical
companies to purchase API for the drugs in question and their combinations within the territory
from the OP and its licensed distributors and agents only.

i. Patent pooling was a restrictive practice as it locked the technology and production in a few
hands by entering into agreements to pool patents, thereby making it difficult for those
companies outside the pool to compete.

j. The license agreements entailed unreasonable conditions on non-patented drugs, restricted

competition in the market by dividing the markets among pharmaceutical companies that would
otherwise compete using different technologies.

k. The license agreements that the licensees were to enter into with the re-sellers were also to be
scrutinised and approved by the OP and the agreements could be terminated at the behest of the
OP.

l. The license agreements limited the innovation and technical development of Indian
pharmaceutical companies as these agreements provided for one time know-how transfer from
the OP to Indian pharmaceutical companies and the OP had no obligation to reveal any kind of
improvements to Indian pharmaceutical companies.

m. The license agreements provided that royalty be paid and continued to be paid even though
there was no patent granted on the drugs. The royalty was to be paid by Indian pharmaceutical
companies to the OP and it would pay a fixed amount to MPP for tripartite agreement. The
payment of royalty where there was no product patent in India on the drugs was alleged to be
unreasonable.

n. The license agreements also restricted the use of drugs only for HIV and in the case of TDF
for hepatitis-B also. Hence, if there was a new use of the known medicine, it could not be sold or
produced by the licensee for such new use. o. API license was bundled with the product as such a
generic manufacturer would be unable to produce a TDF product under the license using API
produced by entities not licensed by the OP

DECISION

After taking into consideration petitioners argument and NACO court came to conclusion that
patent pooling by opposite party is not causing adverse effect on the competition based on the
following reasoning:-

In India about 16 lakh people are considered HIV affected but around only 5,00,000 people are
taking treatment under NACO Programme, where treatment is provided free of cost. A very
small portion of the patients suffering from HIV go to private practitioners. Even the private
practitioners may prescribe either the generic version of ARV or the patented version of the
drugs. Therefore, the market for patented drugs for HIV treatment is negligible as compared to
the market for generic formulations as approved by WHO. There are 21 companies
manufacturing 152 brands of ARV generic drugs in India. In 2006, India accounted for more
than 80% of the donor funded developing countries market These pharmaceutical companies
were getting international contracts for supply of ARV drugs. For example, Hetero drugs won $
20 million order from South Africa and Aurobindo Pharmaceutical in 2011-12 made a gross
turnover of Rs.43387.3 million and experienced a growth of 13.4% only in ARV sales. Thus, it
can be easily stated that the market for the OP's patented drugs being manufactured on license
basis was too small to have appreciable adverse effect on the competition. Even if the contention
of the petitioner is accepted that the license agreements were anti-

competitive, still there would be no appreciable adverse effect on competition since only the
private practitioners who recommend the drugs in question, and cater only to a miniscule number
of patients as compared to the national AIDS control programme. Therefore, in the opinion of
the Commission, no appreciable adverse effect on competition would be there due to the alleged
agreements and no contravention under section 3(4) of the Act was made out.

Regarding Issue 2 court held

As abuse of dominance was also alleged, the applicability of section 4 of the Act was examined.
It was noted that the informant discussed five ARV drugs namely TDF, FTC, EVG, COBI and
Quad and their availability in the market, however, it was learnt that there were many other drugs
present in the market including Zidovudine, Lamivudine, Nevirapine, Indinavir, Nelfinavir etc. It
was also noted that these drugs were sold in different combinations under different brand names
by the pharmaceutical companies. As stated above, there were more than 150 brands
manufactured by more than 20 companies in India.

The explanation to section 4 of the Act defines dominant position to mean a position of strength
enjoyed by an enterprise in the relevant market in India which enables it to operate independent
of competitive forces prevailing in the relevant market or affect its competitors or consumers or
the relevant market in its favour. On examining the dominant position of the OP, it was seen that
the OP had no legal existence in India and did not engage in any business in India. Further, the
relevant market was fragmented with many players engaging in the activity of production/
manufacture of ARV drugs in India. Accordingly, the OP was not a dominant player in the
relevant market in India and therefore, no abuse as envisaged under section 4 of the Act could
exist.

Simailarly in India, In order to determine the anti competitive nature of patent pooling in
pharmaceutical, it is necessary to calculate the population to whom it would affect.

4.4 EXTRA TERRITORIAL JURISDICTION OF PATENT POOING IN

PHARMACEUTICAL CAUSING ADVERSE EFFECT ON COMPETITION

There also raises a question about the extra territorial jurisdiction competition Act because most
of the companies engaging in patent pooling are foreign companies. Section 3242 vividly solves
this problem by bringing foreign companies also within its jurisdiction if they are causing
appreciable adverse effect on the competition in India. In the case of Haridas Exports v All India
Float Glass Mfrs Assn & Ors. 43 “The Supreme Court allowed extra territorial jurisdiction on the

42
Supra note 32, section 32.
43
Haridas Exports v All India Float Glass Mfrs Assn & Ors , AIR 2002 SC 2728
basis of effect doctrine by removing the restriction imposed on MRTP Act. Thus the court
established the principle that CCI has power to take action against foreign entity.”44

Thus taking into consideration the above precedent it can be concluded that the patent pooling
could only be stated as anti competitive and everyone can be brought within its scope when it is
causing an appreciable adverse effect on the competition in India.

CONCLUSION

In can undoubtedly be inferred now that both IP and competition law have complementary goals.
Both are working towards achieving the ultimate objective of promoting innovation and
protection of consumer & economic welfare. IP furthers innovation which consequently results
in promotion of competition in the market. Over the time, direct goals of these two domains of
law have been sufficiently reconciled for attaining the optimum middle path. IP confers rights to
the property holder to enjoy the returns of the disclosure, while competition law is required to

44
Supra note 39.
deal with IPR in a manner of not absolutely curtailing it rather reconciling it with the goals of
competition law. Competition law should impose regulation on IPR only to the extent of
interference by holder of IPR which nowadays occur by way of patent pooling in certain sectors.

Patent pooling allows two or more patent holder by way of exclusive or non exclusive voluntary
license to share their patents in order to provide access to the third party. Patent pooling is most
common in pharmaceutical sector as it the most required and emerging issue. Thus most often it
results in indulging in various restrictive practices like tie up arrangement, fixation of prices etc
leading to controlling the market. In the case of tying arrangements, a highly usable product or
service is tied with a less marketable product or service and the seller agrees to sell both together
irrespective of the choice of the buyer. Practicing illegal, tying arrangements is against the
competition law or anti-trust law. Therefore there is a dire need to have a clear cut policy in
relation to this overlapping of both these laws. According to the present situation the patent
pooling which was introduced as a vehicle of great innovation by allowing other person to also
have a access in order to improve their research is now became a great invasion to innovation by
just restricting the innovation in fewer hands.

BIBLIOGRAPHY

Articles referred

1. Bessen J, Patent thickets: Strategic patenting of complex technologies, (last visited Apr 20,
2018, 9.00 PM (N.T.M.)), http://www.researchoninnovation.org/thicket.pdf
2. Clark J, Patent pools: a solution to the problem of access in biotechnology patents?, (last
visited Apr 20, 2018, 8.00 PM (N.T.M.)),
www.uspto.gov/web/offices/pac/dapp/opla/patentpool.pdf

3.Gopakumar G Nair and Andreya Fernandes, Patent Policies and Provisions Relating to
Pharmaceuticals in India, 19 Journal of Intellectual Property Rights, 7-17 (2014).

4.Indrani Barpujari, Facilitating Access or Monopoly: Patent Pools at the Interface of Patents
and Competition Regimes, 15 JIPR 345-356 (2010)

5. MHRD govt. of India, Horizontal Agreements under competition Act, 2002, (last visited Apr
20, 2018, 9.00 PM (N.T.M)), 10

6. Overwalle G & et al., .Models for facilitating access to patents on genetic inventions, 7 Nat
Rev Genet,143-154 (2006)

7. Priyanka Rastogi, India: Patent pool, (last visited Apr 19, 2018, 8.00 PM (N.T.M)),
http://www.mondaq.com/india/x/325602/Patent/Patent+Poo

8. Santa Cruz and et al.,. Interaction Between Intellectual Property and Competition Laws,
International Centre for Trade and Sustainable Development (ICTSD) and World Economic
Forum, 2015, www. e15initiative.org

9.Victor Rodriguez, Patent Pools: Intellectual property rights and competition, 4 Open AIDS
62-66 (2010)

10. Watal J, The issue of technology transfer in the context of Montreal protocol: Case study of
India in achieving objectives of Multilateral Environment Agreements: Lessons from Empirical
Studies, (UNCTAD, Geneva), 2000

11. Legistify, Pharmaceutical Industry: The Interface between Competition law and Patent law, (last
visited Apr 11, 2018, 10.00 PM (N.T.M)), https://www.legistify.com/blogs/view_detail/124-
pharmaceutical-industry-the-interface-between-competition-law-and-patent-law.