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Reworking the Statement of Working: The Patent (Amendment) Rules, 2020

Statement of working of patent

On 19 October 2020, the Government of India notified the Patent (Amendment) Rules, 2020, which, among other things, brought the first modern change to the Statement of Working. Patentees and licensees had for a long time been faced with answering the myriad ambiguous questions contained in the Form 27, and so, quite possibly owing to a direction from the Delhi High Court in Shamnad Basheer v. Union of India and Ors., the Government of India revamped the requirements under Form 27. The changes have been captured below:

Requirements under Form 27 prior to the Patents (Amendment) Rules, 2020

Requirements under Form 27 post the Patents (Amendment) Rules, 2020

PROS

A patentee would have to file a separate Statement of Working for each patent he holds.

A patentee can file a single Statement of Working for all related patents, i.e., all patents involved in a single product, subject to the fulfillment of certain criteria. *

In case of joint applicants, each patent holder would have to file a Statement of Working.

Joint patent holders can now file a single Statement of Working.

Quantum as well as value of the patented product in exhibiting proof of the working of the patent had to be submitted.

The Statement of Working now only requires the approximate value accrued in India. #

Patentees and licensees had to specify as to whether the “public requirement” of the patent had been met, based on ambiguous terms like ‘partly or adequately’, ‘fullest extent’, and ‘reasonable price’.

The need for specifying the meeting of public requirement has been done away with.

The Statement of Working had to be filed for every calendar year, and within 3 months from the end of the calendar year, i.e., by March 31st.

The Statement of Working has to be filed for each financial year, and within 6 months from the end of the financial year, i.e., by September 30th. ^

CONS

Patentees and licensees could file a joint Statement of Working.

Every patentee and every licensee (exclusive or otherwise) will have to file a separate Statement of Working. However, patentees need not specify the licenses given out in a particular year.

* – In order to qualify as related patents, the situation must be such that the (i) approximate revenue accrued from a particular patented invention cannot be derived separately from the approximate revenue accrued from the other related patents, and (ii) all patents have been granted to the same patentee(s).

# – However, patentees and licensees must still provide the differentiation in working through manufacturing in India, and importation into India. However, they no longer need to specify the country-wise details of importation.

^ – The new Rules clarify that the Statement of Working must be filed for the financial year immediately following the financial year in which the patent was granted. Ergo, if the patent was granted on 1st December 2020, the patentee would have to file the Statement of Working only for the next financial year onwards, i.e., for 2021-2022, and therefore the last date to submit the Statement of Working would be September 30, 2022.

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Way Forward for the Critical Requirement of Furnishing Statement Regarding Working of Patented Invention in India

statementofwokingofpatent.invntree

Statute corresponding to patents in India has provisions that mandate furnishing of information that attempts to establish the extent to which patented technology is being worked on a commercial scale in India. The nature of the information sought is such that compliance with these provisions is onerous, if not impossible, given the changing dynamics of business and inventions. Consequently, one could argue that most of the patent owners have in-principle failed to comply with these provisions. Further, although there are penal provisions applicable for noncompliance, such provisions have never been exercised.

Concerns regarding the above discussed provisions always existed among patent professionals and other stakeholders. However, these provisions are now being discussed extensively because of a public interest litigation, and the order that followed. The provisions, which are at the centre of the controversy include Sections 146(1), 146(2), 122, Rule 131 and Form 27.

146. Power of Controller to call for information from patentees

(1) The Controller may, at any time during the continuance of the patent, by notice in writing, require a patentee or a licensee, exclusive or otherwise, to furnish to him within two months from the date of such notice or within such further time as the Controller may allow, such information or such periodical statements as to the extent to which the patented invention has been commercially worked in India as may be specified in the notice.

(2) Without prejudice to the provisions of sub-section (1), every patentee and every licensee (whether exclusive or otherwise) shall furnish in such manner and form and at such intervals (not being less than six months) as may be prescribed statements as to the extent to which the patented invention has been worked on a commercial scale in India.      

122. Refusal or failure to supply information.

(1) If any person refuses or fails to furnish

(a) to the Central Government any information which he is required to furnish under sub-section (5) of section 100;

(b) to the Controller any information or statement which he is required to furnish by or under section 146, he shall be punishable with fine which may extend to ten lakh rupees.

(2) If any person, being required to furnish any such information as is referred to in sub-section (1), furnishes information or statement which is false, and which he either knows or has reason to believe to be false or does not believe to be true, he shall be punishable with imprisonment which may extend to six months, or with fine, or with both.

131. Form and manner in which statements required under section 146(2) to be furnished.

(1) The statements shall be furnished by every patentee and every licensee under subsection (2) of section 146 in Form 27 which shall be duly verified by the patentee or the licencee or his authorised agent.

(2) The statements referred to in sub-rule (1) shall be furnished in respect of every calendar year within three months of the end of each year.

(3) The Controller may publish the information received by him under subsection (1) or subsection (2) of section 146.

(Emphasis added)

 

Section 146(1) recited above gives power to the Controller to call for information describing the extent to which the patented invention has been commercially worked in India. In practice, the Controller can exercise the power conferred by the referred section to decide request for compulsory licence to a patent, which may not be sufficiently worked in India.

On the other hand, Section 146(2) read with Rule 131 requires every patentee and licensee to furnish, every year, information describing the extent to which the patented invention has been commercially worked in India. Failure to comply with either of the above referred sections attracts penal provision as recited in Section 122.

In our view, Section 146(1) is an extremely useful provision, which may be exercised in specific circumstances, as explained earlier. However, an amendment to the section to explicitly recite the circumstances under which the Controller may/shall exercise the power to call for information, may prevent arbitrary use of such power.

The real problem, in our opinion, lies with Section 146(2), which requires voluntary submission of information, on a yearly basis, describing the extent to which the patented invention has been commercially worked in India. In our view, Section 146(2) should be amended to require at least one among patentee or licensee to state whether the patented invention is commercially worked or not in India, instead of requiring information concerning the extent of working of patented invention in India.

Our proposed amendment to Section 146(2) is based on the very purpose of having this provision in the Act, and the practical usage of the information furnished under this provision. The information submitted under Section 146(2) may be used to adjudicate request for compulsory licence to a patent, request to revoke a patent, or request for injunction. However, the proceedings concerning each of the listed requests may typically involve extensive submission, by parties involved in the dispute, of information describing the extent to which the patented invention is commercially worked in India, and the eventual judgement may rely of such information, and not on the information submitted under Section 146(2) on a yearly basis. In case the listed topics were to be adjudicated purely based on information collected under Section 146(2), then the efforts involved in putting together such information is colossal, if not impossible for large patent portfolios. The legislature also recognises the same, and its intent is expressed by the very fact that Section 146(1) exists. In view of all this, the information sought under Section 146(2) is redundant, and unnecessarily burdensome.  

In conclusion, in our opinion, Section 146(2) should be amended such that, it should suffice if the patentee submits whether the patented invention is worked or not commercially in India, on a yearly basis. In case the patented invention is not worked, then the patent may be considered for license or compulsory licence, by third party. On the other hand, if the patented invention is marked as worked, then in all probability, detailed proceedings would follow when the patent is the subject matter of a challenge, in which case the Controller has the power to call for information under Section 146(1).

We hope this article was a useful read. 

Please feel free check our services page to find out if we can cater to your requirements. You can also contact us to explore the option of working together. 

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Significance of Statement of Working In The Indian Patent System

Introduction to statement of working 

Statement of working is a disclosure provided by the patentee or the licensee to the patent office stating if the patent is commercially exploited in the country to meet the reasonable requirements of the public. 

Governing statute 

Statement of working of the patent has to be submitted as per Section 146(2) of the Indian Patent Act and rule 131. This statement can be submitted in Form 27 each year within 3 months from the end of the calendar year.


Section 146(2) of The Indian Patent Act:
 (2) Without prejudice to the provisions of sub-section (1), every patentee and every licensee (whether exclusive or otherwise) shall furnish in such manner and form and at such intervals (not being less than six months) as may be prescribed statements as to the extent to which the patented invention has been worked on a commercial scale in India.  

Rule 131 of The Patent Rules: 
(1) The statements shall be furnished by every patentee and every licensee under sub-section (2) of section 146 in Form 27 which shall be duly verified by the patentee or the licencee or his authorised agent. 
 (2) The statements referred to in sub-rule (1) shall be furnished in respect of every calendar year within three months of the end of each year.
 
In addition to the above voluntary disclosure, the controller at any time, if required, may ask the patentee or the licensee to provide details in writing as to what extent the patent has been commercially exploited in India, as per Section 146(1).

Section 146(2) of The Indian Patent Act:  
1) The Controller may, at any time during the continuance of the patent, by notice in writing, require a patentee or a licensee, exclusive or otherwise, to furnish to him within two months from the date of such notice or within such further time as the Controller may allow, such information or such periodical statements as to the extent to which the patented invention has been commercially worked in India as may be specified in the notice. 
 
Details to be furnished in the statement
 

 (i)   The patented invention: {        } Worked {        } Not worked

(a)  If not worked: reasons for not working and steps being taken for working of the invention.

(b)  If worked: quantum and value (in Rupees), of the patented product:

i)   manufactured in India

ii)  imported from other countries (give country wise details)

(ii)   licenses and sub-licenses granted during the year;

(iii) State whether public requirement has been met partly/adequately/to the fullest extent at reasonable price.

 
Significance of the statement 
Penalty: 
If a patentee or licensee refuses or fails to furnish information required under Sec 146, the patentee or licensee will be punished with fine, which may extend up to Ten lakh rupees under Section 122(1)(b). Further, providing wrongful information or statement can impose the patentee /licensee to imprisonment up to six months or fine or both Section 122(2).

Section 122(1)(b) of The Indian Patent Act:

 122. Refusal or failure to supply information (1) If any person refuses or fails to furnish—

 

 (b) to the Controller any information or statement which he is required to furnish by or under section 146, he shall be punishable with fine which may extend to ten lakh rupees.

 
Compulsory licence: 
Information provided in the statement of working is used while deciding on applications for compulsory license on patents. The Intellectual Property Appellate Board (IPAB) of India, while granting the first compulsory licence in India heavily relied on the information provided in the statement of working submitted by the patent owner.  
 
In the above instance, Natco was granted a compulsory licensee to a patent, which was held by Bayer, covering the Nexavar drug. The IPAB relied substantially on the information submitted by Bayer corresponding to the patent, while granting the license. 
 
Patent litigation: 
In case of infringement, the patent owner, as relief, can seek injunction and damages or an account of profit under Section 108. The information submitted in statement of working can be used by the court to estimate the damages that may be awarded. On the other hand, in case statement of working is not filed, the alleged infringer may argue that the patent owner might not have encountered any damages in view of the missing statement of working.
 
Conclusion:
Patents are granted to encourage the growth of technology and to ensure that the patented invention is commercialed for the welfare of the public. Filing of statement of working provides the patent office to seek periodic information relating to Commercialization of the patented invention in the territory of India thereby preventing the misuse or non use of patented inventions. Therefore, the filing of Form 27 after the grant of a patent is a statutory requirement and the patent office should enforce strict action against those violating the law.
 
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