The Delhi High Court recently dismissed an appeal against the Controller’s order rejecting a patent for an intermediate on the grounds of Section 3(d). Analysing the Court’s decision, SpicyIP intern Ayush Shetty argues how the Court might have erred in applying the provision by comparing the intermediate with the final product. Ayush is a fourth-year law student at the National Law School of India University, Bangalore, with a keen interest in patent law. He can be reached at ayush[dot]shetty[at]nls[dot]ac[dot]in.
A Stumble on the Tightrope? How the Delhi High Court’s Ruling in Zeria Pharmaceuticals Could Stifle Innovation
By Ayush Shetty
In a significant turn for Indian patent jurisprudence, the Delhi High Court’s recent decision in Zeria Pharmaceutical Co. Ltd. v. Controller of Patents has once again thrust Section 3(d) of the Patents Act, 1970 into the spotlight. The Court refused to grant a patent for an intermediate compound that the applicant claimed would improve the manufacturing process of the final drug, holding that such compounds can be eligible for patent protection only if they enhance the “therapeutic efficacy” of the final drug.
While the decision may effectively deter an alleged evergreening tactic trending in the pharmaceutical sector, wherein companies attempt to effectively re-patent a product by obtaining a patent on the intermediate compounds, it raises genuine concerns about whether the decision throws the baby out with the bathwater by discouraging innovation in the manufacturing processes of drugs.
Section 3(d) of the Act, a distinctive provision of Indian patent law, prohibits the patenting of new forms of known substances unless they demonstrate a significant improvement in “efficacy.” Introduced in 2005 as India opened its patent regime to pharmaceutical product patents, the provision was designed to curb “evergreening” by prohibiting the patenting of minor modifications made to otherwise known substances. However, nearly two decades later, key aspects of the provision remain controversial. Zeria Pharmaceuticals adds to the long list of cases that have grappled with the section, particularly regarding the appropriate test of efficacy that must be applied.
The Ruling Explained:
The judgment addressed the Controller’s refusal to grant the Appellant a patent in the “Compound Represented by Formula (5a)”, a novel intermediate compound. Intermediate compounds are substances formed during a chemical reaction that are not themselves the final product but are essential to the steps leading to it. Compound 5(a) was one such that could help synthesise Compound 7(a), a drug that had already been patented by Zeria Pharmaceuticals.
The patent application for the Compound 5(a) was challenged on two major grounds. Firstly, that the subject matter of the claims fell under the scrutiny of Section 3(d) of the Act, and secondly, that they also failed to constitute an invention under Section 2(1)(ja) of the Act.
The Court, in agreement with the views of the Controller with respect to the analysis under Section 3(d), determined that the subject matter was a mere discovery of a new form and a derivative of a known compound that was already disclosed in prior art, specifically a U.S. patent granted to a third party. The Appellant had protested against the application of Section 3(d) to the subject matter, claiming inter alia that it would not be feasible to demonstrate the “therapeutic effect” of what is only an intermediate compound. They nevertheless argued that the subject matter was significantly more effective than the compounds of the prior art in the synthesis of the final drug, owing to its reduced reaction time, higher isolation yield and reduced amount of impurities. The Court, however, dismissed this argument, and instead held that an intermediate compound that is merely a new form or a derivative of a compound disclosed in prior art must demonstrate how it contributes to enhancing the therapeutic efficacy of the final drug in order to satisfy the threshold of Section 3(d) and be eligible for patent protection. It ruled that the subject matter failed to do so since the data submitted by the Appellant could not establish the therapeutic efficacy of the claimed compounds over the prior art.
With regard to the objection under Section 2(1)(ja) of the Act, the Court held that the subject matter lacked an “inventive step,” as it was, firstly, disclosed in prior art and, secondly, rendered obvious to a person skilled in the art. It further clarified that Section 2(1)(ja) does not encompass “trivial mill-on-the-run” improvements that lack creativity or inventive merit. Accordingly, the Court upheld the Controller’s refusal to grant a patent to the subject matter of the impugned application and dismissed the appeal.
The Wrong Test for the Wrong Innovation: An Imprecise Application of Section 3(d)?
While the Court’s analysis of the patentability of the subject matter under Section 2(1)(ja) and its resulting denial of patent appear sound, its application of Section 3(d) in the case, wherein the intermediate compound is tested on its contribution to the therapeutic efficacy of the final product, raise significant concerns.
The High Court was right in holding that Section 3(d) was applicable to intermediate compounds that are new forms or derivates of prior art, but erred in laying down the appropriate test for the same. The fundamental problem lies in what the Court chose to compare. Section 3(d) requires that derivatives of new forms of known substances enhance the efficacy of “that substance”— meaning the prior art from which it is derived. In the context of an intermediate compound that merely facilitates a process, the applicable test under Section 3(d) should be whether it offers a more efficient alternative in the manufacturing process to the prior art compound from which it is derived. Instead, the test, as articulated by the Delhi High Court in the present case, could risk denying patents for those intermediate compounds that significantly optimise the synthesis of pharmaceutical drugs but fail to contribute towards qualitatively improving the final product.
In establishing the aforementioned test, the Delhi High Court relied on Novartis v. Union of India. Drawing direct parallels with Novartis would be inconsistent since the patent in that case concerned an alternative form of the final drug, unlike the subject matter of the patent in the present case which is not an active ingredient but only an intermediate compound that facilitates the manufacturing of the drug. Their effects are inherently non-comparable since one contributes to the process, whereas the other is adjudged on the basis of their efficiency in curing a disease.
The accepted meaning of efficacy in Novartis was “the ability to produce a desired result”. It takes the shape of the “test for therapeutic efficacy” as we know it today only in the case of “a medicine that claims to cure a disease”. Similarly, the applicable test must be adjusted to the nature of the patent’s subject matter, especially since the scope of Section 3(d) is not limited to pharmaceutical products, as was even held by the Madras High Court in Novozymes v. Controller of Patents. In the present case, the appropriate test would have been to evaluate manufacturing efficiency instead.
The ruling could render manufacturing processes that reduce production costs, environmental impact, or production time unpatentable if they fail to make the final drug more therapeutically effective. This is particularly undesirable since Indian companies are proficient in innovating effective drug delivery mechanisms and optimising manufacturing. The narrow interpretation of Section 3(d), therefore, could risk stifling further innovation in those areas. (Please read Prof. Shamnad Basheer and Prashant Reddy’s piece “The “Efficacy” of Indian Patent Law: Ironing out the Creases in Section 3(d)” which also highlights the implications of a narrow interpretation of “efficacy”.)
Rethinking Evergreening Concerns
As previously mentioned, pharmaceutical companies would attempt to sidestep Section 3(d) by seeking a patent on intermediate compounds since therapeutic efficacy cannot be determined for something that is not used therapeutically. Securing a patent on an intermediate compound may involve clever claim drafting and include overlapping claims from the previous invention. This warrants a closer look at how evergreening might pan out in such cases.
The evergreening potential of this strategy is constrained by the nature of intermediate compounds themselves. Generic versions of the drug can be manufactured once the patent affording the patentee commercial monopoly over the drug expires. Such would not be curtailed by obtaining a secondary patent that covers a distinct aspect of the manufacturing of the drug. For instance, in the present case, pharmaceuticals engaged in the manufacturing of generic drugs would still be entitled to produce generic versions of the final drug upon the expiry of its patent, even if a patent had been granted for Compound 5(a). They would only be restricted from manufacturing the drug through the process that relies on Compound 5(a) as an intermediate.
However, the patenting of intermediate compounds is not entirely devoid of evergreening risks. A patentee could still file for an interim injunction and paralyze generic competitors by claiming that the latter are infringing their patent by employing a process that utilizes their subject matter as the intermediate. Considering that this allegation is a matter of trial, which usually takes years in India, patentees can maintain their exclusivity over a drug for a duration longer than 20 years.
Conclusion
The Delhi High Court’s ruling that patents for intermediate compounds do not escape the scrutiny of Section 3(d) is a laudable development towards curbing evergreening. However, the Court erred in applying the wrong test of efficacy. Had Compound 5(a) demonstrated an inventive step as required under Section 2(1)(ja) and proven to be a more efficient alternative to the prior art compound it would replace in the manufacturing process, denying it a patent solely because it failed to enhance the therapeutic efficacy of the final drug would have been unjustified.
The test of manufacturing efficiency, if adopted, must be rigorously applied. The Patent Office would need to carefully assess whether an intermediate compound meets the threshold under Section 3(d) of the Act. This requires determining, first, whether the claimed improvements in the drug’s manufacturing process can be directly attributed to the intermediate compound itself, and second, whether those improvements are significant.