Memorial for Appellant

24A TH

4

JUSTICE HIDAYATULLAH MEMORIAL NATIONAL MOOT COURT COMPETITION

CASE CONCERNING PATENTS & COMPETITION LAW

IN THE HON’BLE SUPREME COURT OF INDIA New Delhi India

Russel Inc. (Appellannt) v. Pharma India Ltd. (Respondent)

ON SUBMISSION TO THE HON’BLE SUPREME COURT OF INDIA MEMORIAL FOR THE APPELLANT RUSSEL INC.

MEMORIAL ON BEHALF OF APPELLANT

Page 1

TABLE OF CONTENTS

ABBREVIATIONS........................... ........................................ .......................... .......................... ........................... ........................... .......................... ......................... ............

Iii

INDEX OF AUTHORITIES..........................................................................................................iv-ix

1.

STATEMENT OF JURISDICTION…………………………………….................10

2.

STATEMENT OF FACTS.…..……………………….…………………….......11

3.

STATEMENT OF ISSUES.…..……………………………………....................14

4.

SUMMARY OF PLEADINGS..………………………………………...……….15

5.

ARGUMENTS ADVANCED…..…………………………………………….....17

6.

PRAYER……………………...…………………………...............................41


Page 2

TABLE OF CONTENTS

ABBREVIATIONS........................... ........................................ .......................... .......................... ........................... ........................... .......................... ......................... ............

Iii

INDEX OF AUTHORITIES..........................................................................................................iv-ix

1.

STATEMENT OF JURISDICTION…………………………………….................10

2.

STATEMENT OF FACTS.…..……………………….…………………….......11

3.

STATEMENT OF ISSUES.…..……………………………………....................14

4.

SUMMARY OF PLEADINGS..………………………………………...……….15

5.

ARGUMENTS ADVANCED…..…………………………………………….....17

6.

PRAYER……………………...…………………………...............................41


Page 2

ABBREVIATIONS

1. &

-

And

2. AIR

-

All India Reporter

3. All E.R.

-

All England Law Reports

4. AC

-

Appeal Cases

5. Anr.

-

Another

6. Art.

-

Article

7. Co.

-

Company

8. Ed.

-

Edition

9. Ltd.

-

Limited

10. Ors.

-

Others

11. p.

-

Page

12. Pvt.

-

Private

13. SC

-

Supreme Court

14. SCC

-

Supreme Court Cases

15. SCR

-

Supreme Court Reporter

16. v.

-

Versus

17. vol.

-

Volume

18. &

-

And

19. para

-

Paragraph

20. HC

-

High Court

21. SC

-

Supreme Court

22. Sec.

-

Section

23. Bom

-

Bombay

24. Ker

-

Kerela

25. Pat

-

Patna


Page 3

INDEX OF AUTHORITIES

S.no.

[BOOKS/ SECONDAY MATERIALS ]

1. L.Bently And B. Sherman, ‗Intellectual Property Law‘, Third Edition, Oxford University Press 2. James Marson, ‗Business Law‘, Oxford University Press 3. S. Jeyaseela Stephen, ‗Trade and Globalisation‘, Rawat Publications 4. Kalpana Markandey & S. Simhadri, ‗Globalization, Environment and Human Development‘, Rawat Publications 5. Jayashree Watal, ‗Intellectual Property Rights In The WTO And Developing Countries‘, Oxford University Press 6. Jagdish Bhagwati, ‗Free Trade Today‘, Oxford University Press 7. Jagdish Bhagwati, ‗In Defense of Globalisation‘, Oxford University Press 8. Kalyan C. Kankanala, ‗Indian Patent Law and Practice‘, Oxford University Press 9. Vinod Dhall, ‗Competition Law Today‘, Oxford University Press st

10. Narasani. k. arun ,indian patent law and pratice(.oxford university press ,1 edtn) rd

11. Sherman brad, intellectual property law(.oxford university press ,3 edtn) 12. A.K kaul , guide to the wto and gatt,(satyam law international, 2 st

nd

edtn)

13. Vinod dhal, competition law today,(oxford university press ,1 edtn)


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S. no.

[TABLE OF CASES]

1. Smith v.Nichols…………………………… ,…. 88 U.S. (21 Wall.) 112, 22 LEd. 566 2. Hollister v. Mfg. Co.,…………………………… 113 U.S. 59, 5 S.Ct. 717, 28LEd. 901

3. Pursche v. Atlas Scraper & Engineering Co ………..…..... C.A.Cal., 300 F.2d467, 472 4. Firestone Tire Rubber Co. v. U.S. Rubber Co ……C.C.A. Ohio , 79 F.2d 948, 952, 953 5. Tribhuwan Prakash Nayyar v. Union of India……………………….. ….1970]2SCR732 6. East India Hotels Ltd. v. Union of India …………...……………… AIR 2001 SC 231 7. Godrej Soaps Ltd. v. Hindustan Lever Ltd. PTC …………………. Suppl. (1) Cal 501 8. Sri Gajalakshmi Ginning Factory Ltd. v. CIT ……………….(1952) 22ITR 502(Mad). 9. Hollister v. Mfg. Co…………………………… 113 U.S.59, 5 S.Ct. 717,28 L.Ed. 901 10. Bishwanath Prasad Radhey Shyam v. Hindustan Metal Industries…..1979]2SCR757. 11. Anr.Vs. Cipla Limited ………………………………………….. 2008(37)PTC71(Del) 12. Sodhi Transport Company V. State of UttarPradesh …………….. AIR 1980 SC 1099 13. R.S. Nayak V. A.R. Antulay............................... AIR 1986 SC 2045 JT2010(10)sc 26 14. CCI v. Steel Authority of India Ltd …………………… Civil Appeal No.7779 of 2010 15. Neeraj Malhotra v. Deustche Post Bank Home Finance Opposite Parties Ltd. & Ors. ………………………………………………………………….. AIR 2009(34)SC 123


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STATEMENT OF JURISDICTION

That the Appellants have approached this Hon‘ble Court under Article 136 of The Constitution of India Special leave to appeal by the Supreme Court:

(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India (2) Nothing in clause ( 1 ) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces.


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STATEMENT OF FACTS

[ENTITIES INVOLVED] 1. Russel Inc. – A multinational pharmaceutical company incorporated in the United States of America and having a registered unit(office) in India at New Delhi. 2. Candestol – A drug molecule which has the capacity to destroy cancerous cell. 3. EU - European Union. 4. Lifreocan – The tablet formulation of Candestol. 5. Pharma India Ltd. – An Indian Company with its registered office in Hyderabad. 6. Eurox – EU company that has started selling its product under the trade name of Eurocan. 7. Xin Ltd.. – Subsidiary of Eurox. 8. Destocan

–

The generic version of Candestol sold under the name of

Lifreocan by Pharma India Ltd. [EVENTS LEADING TO THE DISPUTE]

1. Russel Inc. , under the US law holds patent for the drug molecule ‗Candestol‘ and it had applied for patent in India for the same in 1999 which was granted in October 2008 with Patent No.4862579 and the molecular name of patent was 'A Novel [6,7-BIS(2-Methoxyethoxy) Quinazolinone -4-YL] (3-Ethynylphenyl) Amine Hydrochloride'. 2. Russell Inc. had registered ―Lifreocan‖ with the Central Drug Standard Control Organisation, Directorate General of Health Services, Government of India in December 2005 and from thereon is importing and selling the same in India at a market price of Rs. 2.65 lakhs per month‘s course. MEMORIAL ON BEHALF OF APPELLANT

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3. Pharma India Ltd., had opposed the patent in pre-grant and post grant proceedings on the following grounds:i.

Candestol is not an invention under the Patent Act, 1970 as it is only a derivative of already existing substance and is hit by S. 3(d) of the Act and patent conferred is invalid.

ii.

Candestol is one of the derivatives of Quinazolinone and amounts only to an improvement in the existing prior art which is obvious to any person skilled in the art. Hence there is lack of inventive step and patent conferred is invalid.

iii.

There are 2 EU Patents using other derivatives of Quinazolinone and hence the invention lacks novelty and patent conferred is invalid.

iv.

The complete specification does not sufficiently and fairly describe the invention and the method in which it is performed and hence the patent conferred is invalid.

v.

The invention is not commercially worked in India but only imported.

However, the patent office disregarded the arguments. 4. Russel Inc.‘s drug is largely available in the shops of north India only and it holds 95% of the market for the medicine. 5. Two EU companies have patent on using other derivatives of Quinazolinone and since 2006 one of the EU companies Eurox has started selling its product under the trade name of “Eurocan” in India through its subsidiary Xin Ltd.. Russell Inc. holds 10% share in Eurox. 6. “Eurocan” is mostly available in the shops in southern part of India at a price of Rs. 2.62 lakhs per month course and holds 95% of the market in South India. Neither Eurox nor Xin Ltd.. applied for grant of patent i n India. 7. The dispute arose in January 2010, when Russell Inc. noticed that its market share in “Lifreocan” has gone down by 50% in North India and on further enquiry Xin Ltd.. reported similar decline by 45%.

8. It was discovered by Russell Inc. that Pharma India is manufacturing, marketing and selling a drug under the brand name “Destocan” , a generic version of its MEMORIAL ON BEHALF OF APPELLANT

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patented drug Candestol marketed and sold under the name „Lifreocan‟ at a market price of Rs.9600 per month‘s course. 9. The suit along with the counter claim was transferred to the High Court of Delhi for decision when Russell Inc. filed a suit for infringement in the District Court and Pharma India filed a counter claim for revocation of patent granted to Russell Inc. 10. In April 2010, Russell Inc. filed an application seeking ad-interim injunction, restraining Pharma India to use the drug Candestol, for which they hold a valid patent. 11. Pharma India opposed the application and on 20

th

April the High Court declined

to grant interim injunction on the ground of huge public interest. 12. Russell Inc. filed special leave petition in the Supreme Court against the order of the Delhi High court refusing to grant it ad interim injunction. The Supreme Court refused to interfere in the decision of the High Court and the SLP filed by Russell Inc. was dismissed. 13. Russell Inc. then entered into exclusive supply agreement with major distributors in North India stating that it holds a valid patent and assuring that they wouldn‘t deal with distributors who are aiding Pharma India and violating their patent rights and the decision would be in their favour since any decision of the court contrary to the rights of Russell Inc. would violate India‘s obligations under the Agreement on Trade Related Aspects of Intellectual Rights ( TRIPs). 14. Xin Ltd.. was under the impression that prices of the medicines in India get inflated because of huge profit margin at each stage in the distribution chain for which allowance has to be made in the MRP, so they devised a detailed price mechanism in South India whereby they fixed the price of their drugs at each level of distribution chain and the drugs were supplied only to those wholesalers and retailers who had agreed to market only Eurocan and at price fixed by Xin Ltd.. 15. After application of such mechanism Eurocan was made available at Rs. 1.5 lakh per month‘s course and within a month‘s time Russell Inc. also adopted similar


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price mechanism for ‗Lifreocan‘ and it was available in the market at Rs. 1.7 lakh per month‘s course. 16. Pharma India complained to the Competition Commission of India when their market share came down to 5% and 10% in North and South India respectively, on the ground that there is an arrangement between Russell Inc. and Xin Ltd.. which amounts to cartel and exclusive supply agreement between Russell Inc. and the dealers in north India violates Section 3(4) of the Competition Act and is intended to nullify the effect of the High Court‘s decision of not granting interim injunction. Moreover, it was alleged that Russell and Xin Ltd.. have carried out a similar campaign in South India as well and the arrangement amounts to resale price maintenance and is covered under S3(4)(e) of the Competition Act and are anti-competitive as they are designed to protect the monopoly of Russell Inc. and

Xin Ltd.. 17. Russell Inc. filed an appeal in the Supreme Court of India against the decision of the Competition Appellate Tribunal which upheld the decision of CCI. The Supreme Court called the case pending before the Delhi High Court and heard both the cases together stating that they are related.


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STATEMENT OF ISSUES

I.

II.

III.

Whether CCI and the Competition Appellate Tribunal erred in taking jurisdiction in the case?

Whether the Controller of Patents erred in granting the patent?

Whether the Competition Commission of India and the Competition Appellate Tribunal had erred in holding that the resale price maintenance, exclusive supply agreement was anticompetitive under section 3(4) of the Competition Act and Russel Inc. and Eurox were working under an arrangement and thus violating section 3(3) of the Competition Act?


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SUMMARY OF PLEADINGS

1 .Whether CCI and the Competition Appellate Tribunal erred in taking jurisdiction in the case? It is submitted that the jurisdiction exercised by CCI in this case has been wrongly assumed and based on some misconception of facts.

2 .Whether the Controller of Patents erred in granting the patent? It is humbly submitted before the hon‘able Supreme Court that Competition Commission Of India and the competition appellate tribunal erred in its jurisdiction in holding that the resale price maintenance, exclusive supply agreement as anticompetitive and that Russell Inc. and Eurox were working under an arrangement thus violating section 3(3) of the Competition Act. And Controller of Patents has not erred in granting the patent to Russell Inc. but also the patent is still subsisting. The drug candestol has been given patent as it has been able to satisfy the patentability requirements i.e. Patentable Subject Matter, Industrial Applicability, Novelty, Inventive Step and Specification 3. Whether the Competition Commission of India and the Competition Appellate Tribunal had erred in holding that the resale price maintenance, exclusive supply agreement was anticompetitive under section 3(4) of the Competition Act and Russel Inc. and Eurox were working under an arrangement and thus violating section 3(3) of the Competition Act?

It is humbly prayed before the hon‘able supreme court that the Competition Commission of India and the Competition Appellate Tribunal had erred in holding that the resale price maintenance, exclusive supply agreement was anticompetitive under section 3(4) of the Competition Act and Russel Inc. and Eurox were not working under an arrangement and thus violating section 3(3) of the Competition Act


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PLEADINGS

1. Whether CCI and the competition appellate tribunal erred in taking jurisdiction in the case?

It is submitted that the jurisdiction exercised by CCI in this case has been wrongly assumed and based on some misconception of facts. In my humble submission I would establish that 1.1 Establishment and Jurisdiction of CCI a)

CCI has committed error on the face of record

b)

CCI has no material to act upon

c)

CCI has not observed prudent policy

d)

CCI has interfered on wrong assumptions.

Jurisdiction of CCI: —

Competition Act, 2002 is enacted to provide, ― keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto‖. Act makes provision for establishment of Competition Commission of India

(hereinafter referred as CCI) for the purpose of various objectives mentioned in the preamble of the Act.

1

For achieving the foresaid duties, the Commission has jurisdiction to: i) Enquire into Anti-Competitive Agreements (E.g. Cartel, bid-rigging, etc.) [Section 3] ii) Enquire into abuse of dominant position 1

Section 7of The Competition Act,2002


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(E.g. Predatory Pricing, etc.) [Section 4] iii) Regulate combinations (Mergers, Acquisitions, etc.), [Section 5 & 6] 2

i) Enquire into Anti-Competitive Agreements

The regulations and control in relation to combinations is dealt with in Section 6 of the 3

Act. The power of the Commission to make inquiry into such agreements and the dominant position of an entrepreneur, is set into motion by providing information to the Commission in accordance with the provisions of Section 19 of the Act and such inquiry is to be conducted by the Commission as per the procedure evolved by the legislature under Section 26 of the Act. In other words, the provisions of Sections 19 and 26 are of great relevance and the discussion on the controversies involved in the present case would revolve on the interpretation given by the Court to these provisions. CCI has power to inquiry into certain agreements and dominant position of enterprise. Competition Act provides certain procedure for investigation of combinations. Section 29 provides where the Commission is of the prima facie opinion that a combination is likely to cause, or has caused an appreciable adverse effect on competition within the relevant market in India, it shall issue a notice of show cause to the parties to combination calling upon them to respond within thirty days of the receipt of the notice, as to why investigation in respect of such combination should not be conducted. After receipt of the response of the parties to the combination under sub-section (1), the Commission may call for a report 2

Section 3(1) states: No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. Section 3(4) states: Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including — (a) tie-in arrangement; (b) exclusive supply agreement; (c) exclusive distribution agreement; (d) refusal to deal (e) resale price maintenance, shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. Explanation. — For the purposes of this sub-section, — 2 (b) "exclusive supply agreement" includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person; 2 (e) "resale price maintenance" includes any agreement to sell goods on condition that the prices to be charged on the resale by t he purchaser shall be the prices stipulated b y the seller unless it is clearly stated that prices lower than those prices may be charged. 3 The Competition act 2002, section 6.


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from the Director General and such report shall be submitted by the Director General within such time as the Commission may direct. The Commission, if it is prima facie of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition, it shall, within seven working days from the date of receipt of the response of the parties to the combination, or the receipt of the report from Director General. 1.2

After inquiry CCI may pass Orders related to agreements or abuse of dominant

position. Section 27 of the Act Provides that where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the following orders, namely: — (a) Direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be;

(b) Impose such penalty, as it may deem fit which shall be not more than ten percentage of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse: Provided that in case any agreement referred to in section 3 has been entered into

by a cartel ,

the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of i ts profit for each year of the continuance of such agreement or ten per cent. of its turnover for each year of the continuance of such agreement, whichever is higher. (g)

pass such other order or issue such direction as it may deem fit.

The fact of this case suggests that even if jurisdiction of CCI was invoked, it was invoked without any prima facie case. Prima facie is a Latin expression meaning on its first appearance, or at

first sight. The literal translation would be “at first face”. It is humbly submitted that CCI has acted even without analyzing prima facie effect of the exclusive supply agreement and other related issues by Russell Inc. In fact CCI has committed an error on the face of record when it exercised jurisdiction without going into the question of Cartel formation and that too without any evidence. Not only this


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section 3 (5) of the Act makes IPR rights as an exception and companies has all the right to established and take measures for the protection of their rights. In the given case the IPR right of my client though was challenged in the Delhi High Court where application for interim injunction was refused, rightly so, and also equally, the appeal fil ed against this order in the this court was also rejected.

Though the contention of Pharma Co. is that the patent granted to my client is not proper but as far as de-facto or de-jure position is concerned, my client enjoys IPR protection as granted by appropriate authority and rightly recognized by competent court.


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2. Whether Controller of Patent erred in granting Patent?

It is humbly submitted before the Hon‘ble court that the Controller of Patents has not erred in granting the patent to Russell Inc. as the patent is still subsisting. 2.1 According to The Patents Act, 1970 "patent" means a patent for any invention granted

under this Act. 

4

Patent is a grant or right to exclude others from making, using or selling one's invention and includes right to license others to make, use or sell it. It is an official document conferring a right or privilege, letters patent; writing securing to an inventor for a term of years the exclusive right to make, use and sell his invention; the monopoly or right so granted.



5

The effect of the grant of patent is quid pro quo, quid is the knowledge disclosed to the public and quo is the monopoly granted for the term of the patent. Section 12, Patents and Designs Act sets out that a Patent once granted confers upon the patentee the exclusive privilege of making, selling and using the invention throughout India and of authorising others so to do. This is quo. The quid is compliance with the various provisions resulting in the grant of patent.

6

Under the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), India was given a transition time, to grant process and product patent to all inventions including drugs and medicines, until 2005.

7

2.2 To be patentable in India, an invention should satisfy patentability requirements. The

patentability requirements in India are – 1. Patentable Subject Matter

8

9

2. Novelty

3. Inventive Step; and

10

4

The Patents Act, 1970 Webster's Ninth New Collegiate Dictionary. 6 Raj Parkash v Mangat Ram Choudhary AIR 1978 Del 1 7 Art. 70, Para 9 of the TRIPS Agreement, 1994. 8 Kankanala, Kalyan C., Narasani, Arun K., Radhakrishnan, Vinita, Indian Patent Law and Practice, 17( st Oxford University Press, 1 ed). 9 Ibid. 5


Page 17

11

4. Specification

5. Industrial Applicability

12

A patent will be granted only if an invention satisfies all the patentability requirements. Grant of a patent is the cumulative effect of all the requirements and non satisfaction of even one of the requirements will make an invention ineligible for a patent grant. 2.3 Patentable Subject Matter

Invention is the act or operation of finding out something new; the process of contriving and producing something not previously known or existing, by the exercise of independent investigation and experiment. Also the article or contrivance or composition so invented. 

13

Invention is a concept; a thing involved in the mind; it is not a revelation of something which exists and was unknown, but is creation of something which did not exist before, possessing elements of novelty and utility in kind and measure different from and greater than what the art might expect from skilled workers.



14 15

Under the Patents Act, eligible subjects include products and processes. In other words, an invention should either be a product or a process in order to fall within the list of subjects. The subject matter which is not patentable falls under section 3 and 4 of the Patent Act, 1970.



Here the patent has been granted for a drug

16

molecule named ‗candestol‘ which has

the capacity to destroy cancerous cell and it has comparatively lesser impact on normal cells than all other drugs available in the market to date.

10

Ibid. Ibid., 12 Ibid., 13 Smith v.Nichols, 88 U.S. (21 Wall.) 112, 22 LEd. 566; Hollister v. Mfg. Co., 113 U.S. 59, 5 S.Ct. 717, 28LEd. 901. 14 Pursche v. Atlas Scraper & Engineering Co. C.A.Cal., 300 F.2d467, 472. 15 Section 2(1)(j), The Patents Act, 1970, as amended in 1999,2002, and 2005. Section 2(1)(j) reads as follows: "invention" means a new product or process involving an inventive step and capable of industrial application. 16 Under section 3(b) of the Drugs and Cosmetics Act, 1940, "drug" includes — Drug includes all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals. Sk. Amir v. State of Maharashtra AIR 1974 SC 469 11


Page 18



Therefore the invention is not frivolous or which claims anything obviously contrary to 17

well established natural laws , neither contrary to Public order or morality nor prejudicial to life and environment.

18

It is humbly submitted that the respondent contention that Candestol is not an invention under the Patent Act, 1970 as it is only a derivative of already existing substance and is hit by section 3(d) of the Act and patent conferred is invalid is not only a vague but a superfluous argument. 

Section 3(d) states ―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 reactant.

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;

19

The above lines clearly state that the derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy. Therefore the drug candestol which has been given patent is very effective and is even different with respect to the properties as it has comparatively lesser impact on normal cells than all other drugs available in the market to date. 

The constitutional validity of Section 3(d) was challenged by Novartis before the 20

Madras High Court in the case of Novartis AG v. Union of India . In this case it was said ―efficacy could be proved by showing a better therapeutic effect by the new form, which could be shown by objective and scientific evidence. It also stated the derivative of a substance should have a better efficacy than that of the substance in order to be patentable.‖ So here the drug molecule has better therapeutic effect as it has lesser impact on other cells

17

The Patent Act,1970 , Section 3(a) The Patent Act,1970 , Section 3(1b) 19 The Patents Act, 1970 section 3(d ), also see Tribhuwan Prakash Nayyar vUnion of India [1970]2SCR732 ; East India Hotels Ltd. v. Union of India AIR 2001 SC 231; Mohammed Hussain Khan AIR2001SC2984 20 (2007)4MLJ1153,Godrej Soaps Ltd. v. Hindustan Lever Ltd. PTC Suppl. (1) Cal 501. 18


Page 19

which increases its efficacy. It was totally a new product formulated for treatment of cancer and it only affected cancerous cell with little side effects on normal cell. The products and other drugs available in the market have greater side effects and cause major damages to normal cells resulting in sudden hair fall, loss of weight and several such other symptoms. 2.4 Novelty

An invention will be patentable only if it is novel or new in the light of prior art, or is not anticipated by the prior art.

21

Prior art includes all information and knowledge relating to

the invention that was available on the date of patent application. 

In Blackley v. Latham

22

, ―to be new in the patent sense, the novelty in the patent sense,

the novelty must show invention‖. In other words, in order to be patentable, the new subject matter must involve ‗invention‘ over what is old. 

The task of determining whether an invention is novel can conveniently be broken down into three separate questions. These are –

i. ii. iii.

What is the invention? What information is disclosed by the prior art? In light of (i) and (ii), is the invention novel?

"new invention" means any invention or technology which has not been anticipated by publication in any document or used in the country or elsewhere in the world before the date of filing of patent application with complete specification, i.e. the subject matter has not fallen in public domain or that it does not form part of the state of the art.‖

23

Here in the present case Candestol being a derivative of Quinazolinone is a new invention in the world of science as it has been able to reduce the impact on normal cells when compared with other drugs available in the market to date. 

The respondent contention that there are 2 EU Patents using other derivatives of Quinazolinone and hence the invention lacks novelty and patent conferred is invalid and vague argument as it just talks about other derivatives and not the present derivative. The present derivative of Quinazolinone has not been published in any

21

st

See Indian Patent Law And Practice, p. 24 (oxford publication, 1 ed), 22 (1888)6 Pat.Ca.184 23 Section 2(1)(l), The Patents Act, 1970.


Page 20

document elsewhere. In fact it already holds patent under the US law and for the same they applied for patent in India and was granted patent in the year 2008. Novelty of an invention is determined in the light of single prior art reference and various prior art references cannot be combined for analysing novelty. In order to anticipate an invention, all elements of the invention must be present in a single prior art reference.

24

Here the drug candestol when compared with other derivatives of Quinazaloninoe is different and does not exist in the single prior art. 

The plea that Candestol would be a derivative of known compounds is a speculation. A person skilled in the art knows that the smallest change in a molecule can have dramatic effects and can totally change the efficacy of a molecule. Many examples in the pharmaceutical industry show that a small change in an active molecule can lead to an inactive or toxic molecule. Thus, changing the smallest Chemical group or a molecule cannot be seen as obvious. The person skilled in the art a priori never considers that it would have been obvious to change a Chemical group for another. The contention from the side of respondent is artificial and can only be the result of an ex post facto analysis. In the case of pharmaceutical products such 'reverse engineering' is employed with great effect.

2.5 Inventive Step 

An invention should possess an inventive step in order to be eligible for patent protection.

"inventive step" means a feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art; 

25

Inventive skill has been defined as that intuitive faculty of the mind put forth in the search for new results, or new methods, creating what had not before existed, or bringing to light what lay hidden from vision; it differs from a suggestion of that common experience which arose spontaneously and by a necessity of human reasoning in the minds of those who had become acquainted with the circumstances with which 26 they had to deal. —

24

st

See Indian Patent Law And Practice(1 Edn by Oxford, 2010), p. 32 25 Section 2(1)(ja), The Patents Act, 1970 26 Hollister v. Mfg. Co., 113 U.S.59, 5 S.Ct. 717,28 L.Ed. 901.


Page 21



As per the section, an invention will have inventive step only if it satisfies two conditions: 

First, the invention should be technically advanced in the light of prior art or should have economic significance. Here the invention is technically advanced and is even better in the light of the

prior art. No any drug as Candestol has less impact till date which makes the drug technically advance and with regard to the economic significance , it can be easily be submitted from the facts that it holds a huge market and that implies that it is very useful and beneficial for the people. 

Second, the invention should be non-obvious to a person with ordinary skill in the art in the light of prior art.

The invention is non-obvious to a person skilled with ordinary skill as the derivative produced by Russel helps the drug to differentiate between a normal cell and a cancerous cell which was not possible with Quinazolinone. Over expression of some of the cellular proteins present on the surface (-functional groups) of the cells helps the derivative drug to sit on the cancerous cells only. Therefore the invention is not obvious. 27

Moreover In Canadian General Electric Co. Ltd., v. Fada Radio Ltd

it was held that

under the general law of patents, an invention, which consists of a small inventive step but having regard to the conditions of the art, constitutes a step forward, and may be good subject matter for a patent. 2.6 Specification 

To obtain a patent, the applicant must file a patent application containing a specification. In the present case the objective is fulfilled as Russell Inc. provided complete information to the public about the invention, and the mode of carrying it out. The complete specification should enable the invention, which means it must fully and particularly describe the invention and its operation, or use and the method by which it is to be performed.

28

The specification

29

must end with a claim,

or claims defining the scope of the invention for which protection is claimed. Here Russell Inc. have clearly mentioned about their claim that it has comparatively 27

. A.I.R.,1930. PC.I.,

28

Section 10(4), The Patents Act, 1970 Bishwanath Prasad Radhey Shyam v. Hindustan Metal Industries [1979]2SCR757

29


Page 22

lesser impact on normal cells than all other drugs available in the market to date. Here the patent has already been granted on the basis of the specification, moreover Russell Inc. Had also registered the drug ―Lifreocan‖ with the Central Drug Standard

Control

Organisation,

Directorate

General

of

Health

Services,

Government of India in December 2005. 

Patent under the Act is granted after scrutiny at three levels; first, under Sections 11A, 12 and 14, then at the stage of pre-grant opposition under Section 25(1) and finally, under Section 43 when the patent is granted subject to satisfaction of the two pre-conditions. Given that in the present case the patent has been granted after elaborate technical verification and that itself proves that specification has been done.

30

2.7 Industrial Application 

An invention should be industrially applicable or capable of industrial application in order to be patentable in India. Section 2 (a) of the Patents Act, provides that an invention is capable of industrial application if it is capable of being made or used in an industry. An invention would satisfy this requirement if it can be made any number of times, and can be used for at least one purpose in any industry.



Here the drug molecule is marketed and is used in the industry for tablet formulation. This tablet is registered under th e name ―Lifreocan‖ and holds a huge market.



An invention, in order to be patentable, must be capable of being made or used in some kind of industry. In this context, "industry" should be understood in its broadest sense as including any useful, practical activity as distinct from purely intellectual or aesthetic activity, and does not necessarily imply the use of a machine or the manufacture of an article. An "invention" within the meaning of the Act is an invention for a manner of new manufacture that is i n some way associated with trade and commerce; meaning traffic in goods, i.e., exchange of commodities for money or other commodities.

31

30

F. Hoffmann-La Roche Ltd. and Anr.Vs. Cipla Limited 2008(37)PTC71(Del) Sri Gajalakshmi Ginning Factory Ltd. v. CIT (1952) 22ITR 502(Mad).

31


Page 23



The fifth contention of the respondent that the invention is not commercially worked in India but only imported is also no ground for the patent to be invalid as under section 47(4)

32

of The Indian Patent Act, 1970, medicine or drug may be

imported. All

the 33

condition

necessary,

i.e. 34

patentability 35

requirement: Patentable 36

Subject

37

Matter; Industrial Applicability; Novelty; Inventive Step; Specification;

are fulfilled and Hence the product which has been patented by Russell Inc. is eligible to be patented and Thus, Controller of Patents have not erred in granting patent to Russell Inc.

32

THE PATENT ACT,1970, Section 47(4) in the case of a patent in respect of any medicine or drug, the medicine or drugmay be imported by the government for the purpose merely of its own use or for distribution in any dispensary, hospital or other medical institution maintained by or on behalf of the government or any other dispensary, hospital or medical institution which the Central Government may, having regard to the public service that such dispensary, hospital or medical institution renders, specify in this behalf by notification in the Official Gazette. 33 supra 9 34 Ibid., 35 Ibid., 36 Ibid., 37 Ibid.,


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3. Whether the Competition Commission of India and the Competition Appellate Tribunal had erred in holding that the resale price maintenance exclusive supply was anti-competitive under section 3(4) of the Indian Competition Act and Russell Inc and Eurox were working under an arrangement thus violating section 3(3) of the Competition Act ? 3.1 It is humbly prayed before the hon‘ble court that the Competition Commission of India

and the Competition Appellate Tribunal had erred in holding that the resale price maintenance exclusive supply was anti-competitive under section 3(4) of the Indian Competition Act and Russell Inc and Eurox were working under an arrangement thus violating section 3(3) of the Competition Act. 38

According to Section 3(4) competition act 2002 and its explanation which talks about different forms of agreement. According to section 3(3) of competition act , it is stated that:

Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which —

(a) directly or indirectly determines purchase or sale prices ; (b) limits or controls production, supply, markets, technical development, investment or provision of services;

38

Competition act 2002, Section 3(4): Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including — (a) Tie-in arrangement; (b) Exclusive supply agreement; (c) Exclusive distribution agreement; (d) Refusal to deal; (e) Resale price maintenance, shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. The explanation of these terms exists as "exclusive supply agreement" includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person; "Resale price maintenance" includes any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.


Page 25

(c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or t ype of goods or services, or number of customers in the market or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition General concept of anti competitive agreement: An agreement includes any arrangement, understanding or concerted action entered into between parties. It need not be in writing or formal or intended to be enforceable in law What is an anti-competitive agreement? An anti-competitive agreement is an agreement having appreciable adverse effect on competition. Anti-competitive agreements include:•

Agreement to limit production & supply

•

Agreement to allocate markets

•

Agreement to fix price

•

bid rigging or collusive bidding

•

Conditional purchase/sale (tie-in arrangement)

•

Exclusive supply/distribution arrangement

•

Resale price maintenance

•

Refusal to deal

3.2 The objectives of the Competition Act are to prevent anti-competitive practices,

promote and sustain competition, protect the interests of the consumers and ensure freedom of trade. Thus section 3 of the competitive act puts a restraint on anti-competitive agreement. But the question here involves as to what is exclusive supply and resale price maintenance. But in general exclusive supply means any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person. But for this purpose we need to


Page 26

understand the different restraints. There are two kinds of restraints: horizontal and vertical. But for the purpose of this case we need to know only the vertical r estraint. 3.3 Vertical restraints are agreements between firms or individuals at different levels of

the production and distribution process. Vertical restraints are to be distinguished from socalled ‗horizontal restraints‘, which are agreements between horizontal competitors. Vertical restraints can take numerous forms, ranging from a requirement that dealers accept returns of a manufacturer‘s product, to resale price maintenance agreements setting the minimum or maximum price that dealers can charge for the manufacturer‘s product.39 So-called ‗intra- brand restraints‘ such as resale price maintenance govern products made by a particular manufacturer, while ‗inter - brand restraints‘ regulate a dealer‘s or manufacturer‘s relationship with its trading partners rivals. Quintessential examples of inter-brand restraints include tying contracts, whereby a purchaser agrees to purchase a second product as a condition of obtaining a socalled ‗tying‘ product, and exclusive dealing agreements, whereby a dealer agrees not to purchase products from suppliers that are rivals of the manufacturer. To quote generally it can be said that [exclusive dealing refers to when a retailer or wholesaler is ‗tied‘ to purchase from a supplier or manufacturer on the understanding that no other distributor will be appointed or will receive supplies in a given area] or the said distributor or wholesaler shall not be dealing in the goods of other manufacturer or supplier. Thus, there are two forms of exclusive dealing - one being an agreement binding both the distributor and the manufacturer or supplier and the other being a compulsion only on the part of the distributor. Here, it is very necessary to understand the difference between the two forms. The first form of exclusive dealing where there are bilateral obligations - on the distributor to distribute the goods of the manufacturer or supplier exclusively in a given area and on the part of the supplier or manufacturer to supply or distribute his goods only through the said distributor in a given area - has been established. 3.4 Such agreement is hardly harmful to the competition because it does not close the

doors of the distributor to other manufacturers or suppliers and neither does it restrict the

39

http://www.indiankanoon.org/doc/1000517 /( Mahindra and Mahindra Ltd . vs . Union of India ( UOI ) and Anr . ( 24 . 01 . 1979 - SC ))


Page 27

manufacturer or supplier from supplying or distributing their goods through other distributor in other areas. The second form of exclusive dealing is arbitrary to the distributor on the face of it in that it restricts the distributor from distributing the goods of other suppliers or manufacturers. Thus, it adversely affects the competition by foreclosing a particular distribution channel to other players in the market.

40

3.5 The Exclusive Supply Agreement is an agreement between a distributor and a supplier

whereby a distribution of a certain product engages a supplier on an exclusive basis to distribute and sell to customers within a given territory. The Exclusive Supply Agreement mainly sets out the way the product is ordered by the distributor and supplied by supplier, the method of delivery, title of loss, payments for supply, product warranty and respective liabilities of each party. This agreement is customizable for your company‘s specific usage. "Exclusive supply agreement" includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person.

41

In this case no such agreement was done between Russell Inc. and Eurox. Now we have to look at the detailed meaning of resale price maintenance. Resale price maintenance (RPM) is the practice whereby a manufacturer and its distributors agree that the latter will sell the former's product at certain prices (resale price maintenance), at or above a price floor (minimum resale price maintenance) or at or below a price ceiling (maximum resale price maintenance). If a reseller refuses to maintain prices, either openly or covertly, the manufacturer may stop doing business with it. 3.6 Resale price maintenance prevents resellers from competing too fiercely on price,

especially with regard to fungible goods. Otherwise, resellers worry it could drive down profits for themselves as well as the manufacturer. Some argue that the manufacturer may do this because it wishes to keep resellers profitable, and thus keeping the manufacturer profitable. Others contend that minimum resale price maintenance, for instance, overcomes

40

http://indiankanoon.org/doc/1313927/ ( Aamir Hussain Khan vs The Director General Aamir Hussain Khan vs The Director General) 41

http://indiankanoon.org/doc/346379/ (Steel Authority Of India Limited vs Competition Commission Of India)


Page 28

a failure in the market for distributional services by ensuring that distributors who invest in promoting the manufacturer's product are able to recoup the additional costs of such promotion in the price they charge consumers. Some manufacturers also defend resale price maintenance by saying it ensures fair returns, both for manufacturer and reseller and that governments do not have the right to interfere with freedom to make contracts without very good reason.

42

Definition of Resale price maintenance: Resale price maintenance is the effect of rules imposed by a manufacturer on wholesale or retail resellers of its own products, to prevent them from competing too fiercely on price and thus driving profits down from the reselling activity. The manufacturer may do this because it wishes to keep resellers profitable. Such contract provisions are usually legal under US law but have not always been allowed since they formally restrict free trade.

43

Now looking at the detailed of the concept of exclusive supply and resale price maintenance we can easily say that there was no arrangement between Russell Inc. and Eurox in their mechanism of working. The policy they adopted was simply an marketing business and they reduced the price to protect themselves from heavy loss. The price was high due to the huge profit margin in each level of its distribution thus to maintain the market balance they fixed the profit at each level of distribution and thus they have not brought down the price due to the competition against Pharma India but it was just to maintain the market balance in economy system. Thus we can conclude that the competition commission of India and competition appellate tribunal had committed error in holding that the resale price maintenance exclusive supply was anti-competitive under section 3(4) of the Indian Competition Act and Russell Inc and Eurox were not working under an arrangement thus do not violating section 3(3) of the Competition Act.

42 43

http://en.wikipedia.org/wiki/Resale_price_maintenance, visited on 23 september 2011 ( http://economics.about.com/od/economicsglossary/g/resalep.htm), visited on 23 september 2011


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Memorial for Appellant

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