Editorials/Opinions Analysis For UPSC 2 February 2023
- Implementing the Patent Bargain
- Sovereign Green Bonds: A powerful tool for raising money
Implementing the Patent Bargain
The 32-page National IPR Policy was published in May 2016 by the Ministry of Commerce’s former Department of Industrial Policy and Promotion (now known as the Department for Promotion of Industry and Internal Trade). This document’s main objective was to lay out the government’s comprehensive vision for the nation’s IPR ecosystem in an effort to create a more inventive and creative Bharat.
GS Paper-3: Issues relating to Intellectual Property Rights
What does patent “Evergreening” mean? Discuss the problems it faces, paying particular attention to the Indian pharmaceutical industry, and make suggestions for how to fix them.
The goal of the national IPR policy
- The goal of the national IPR policy was to have “strong and effective IPR laws that balance the interests of right owners with the larger public interest.” This was stated under the heading “Legal and Legislative Framework.”
- The goal was to “modernise and strengthen service-oriented IPR administration,” under “Administration and Management.”
- The goal was to “strengthen the enforcement and adjudicatory mechanisms for combating IPR infringements” under “Enforcement and Adjudication”.
- Legislative and structural changes to the IPR ecosystem:
- Dissolution of IPAB: The jurisdiction of the Intellectual Property Appellate Board (IPAB) was once again transferred to high courts after the tribunal’s dissolution in April 2021 as part of tribunal reforms.
- IP division: This was followed by the Delhi High Court, arguably the nation’s leading court on the IPR front, creating dedicated IP benches (“the IP Division”) for quicker resolution of IPR disputes.
- Infrastructure: The Indian Patent Office is actively working to strengthen its infrastructure.
Benefits of such reforms
Benefits of such reforms include demonstrating to investors and innovators that India is an IP-savvy and even IP-friendly jurisdiction without compromising national interest and public health commitments. This is supported by the National IPR Policy, which expressly recognises, among other things, “the contribution of the Indian pharmaceutical sector in enabling access to affordable medicines globally and its transformation to being the second-largest pharmaceutical market in the world.”
Evergreening of the patent:
- Patent-friendliness, rather than patentee-friendliness: It seems that the country’s patent establishment has drawn a very different conclusion; it has gone into overdrive to demonstrate its patent-friendliness, rather than patentee-friendliness, in the pharmaceutical sector at the expense of public health and national interest, respectively.
- 20-year patent: despite the fact that the Patents Act contains legal protections, which were added between 1999 and 2005 to protect national interest and balance Bharat’s decision to grant product patents for 20 years for “substances intended for use or capable of use as food, or as medicine or drug,” this is true despite the existence of those protections.
- Mischievous Evergreening: Between 2002 and 2005, provisions in the Patents Act, including Sections 3(d), 53(4), and 107A, were specifically introduced to prevent the dishonest practise of “evergreening” patents, which pharmaceutical “innovator” companies had successfully resorted to in patentee-friendly countries like the United States.
- The Indian Patent Office continues to grant pharmaceutical innovator companies “evergreening patents” on drugs related to the treatment of diabetes, cancers, cardiovascular diseases, and other serious conditions o They are routinely enforced through courts at the expense of the statutory rights of generic manufacturers and to the detriment of patients.
- Decision of the Supreme Court: o The Supreme Court’s decision in Novartis AG v. Union of India & Others (2013), which brilliantly illuminated the legislative purpose behind the insertion of Section 3(d) in the Act—to prevent the evergreening of a patent monopoly on a drug by making insignificant additions or changes that do not in any way improve the drug’s therapeutic efficacy—has not been applied.
- The SC’s decision, however, has not resulted in any favourable decisions from the Patent Office or lower courts; instead, it has delayed the entry of generic versions.
- In turn, this has a negative impact on patients in nations like Bharat, where the majority of middle-class or lower-class families are about to spend their hard-earned money after a hospital visit.
- It must be understood that IP legislations like the Patents Act do not exist for the exclusive benefit of IP rights owners.
- Patent Quid Pro Quo:
- The society that is anticipated to benefit from dynamic innovation-based competition between market players is the intended beneficiary of the quid pro quo underlying the Patents Act, better known as “the Patent Bargain.”
- Patent monopolies are given to inventors in the hopes that they will reveal something novel, creative, and useful to industry that the public can use without a licence from the patentee after the patent monopoly expires.
- Theoretically, this trade-off between society and patentees broadens the body of general knowledge that is available to the public.
- Innovation-driven competition: o The Patent Bargain is also based on the economic premise that it will spur innovation-driven competition among market participants, expanding the range of high-quality options available to consumers.
- However, when an evergreening patent is granted by the Patent Office and upheld by the courts, the Patent Bargain turns into a Faustian bargain because it results in the illegal extension of the monopoly’s twenty-year term, which reduces competition in the market and allows patentees to extract more from society than is permissible.
The society, the government, the patentees, and their rivals are the four stakeholders listed in the Patents Act. Each of these parties has rights under the law, making them all right owners. When the Act is exclusively interpreted, applied, and enforced in the patentees’ favour, particularly when those patentees are evergreening, the legal rights of other stakeholders are restricted. In order to promote public health obligations and long-term national interest, on the one hand, and attract investment, on the other, the IPR ecosystem must strike a delicate balance.
Sovereign Green Bonds: A powerful tool for raising money
- The government recently started selling Sovereign Green Bonds (SGrBs) totaling Rs 8,000 crore. The auction was run using a variety of price-based techniques.
- The success of the Centre’s first-ever auction of sovereign green bonds (SGrB) indicates that investors have a healthy interest in these instruments.
GS Paper-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment
How do sovereign green bonds work? Talk about the importance of these bonds.
Sovereign Green Bonds: What Are They?
- A bond is a financial instrument used to raise debt, and they are known as sovereign green bonds when the government or a sovereign provides guarantees for the repayment of principal and interest (SGrB).
- They are issued by any sovereign entity, intergovernmental organisations, or alliances, as well as corporations, with the intention of using the bond proceeds to fund environmentally sustainable projects.
- The proceeds from the sale of these bonds will be used to fund public sector initiatives that lower the economy’s carbon intensity.
- Four key principles—encouraging energy efficiency in resource utilisation, reducing carbon emissions and greenhouse gases, promoting climate resilience, and improving natural ecosystems and biodiversity, particularly in accordance with SDGs—are used to categorise projects as “green” (Sustainable Development Goals).
Why are these ties significant?
- Climate Change Threats: Over the past few years, Green Bonds have become a crucial financial tool for addressing the threats of climate change and associated difficulties.
- According to the International Finance Corporation (IFC), a unit of the World Bank Group, climate change poses risks for agriculture, food, and water supplies as well as communities and economies.
- To address these issues, a sizable amount of funding is required.
- Green Bonds are a means of establishing a link between environmental projects and the capital markets and investors in order to direct capital towards sustainable development.
- Platform for ethical behaviour: Green Bonds give investors a chance to act ethically and influence bond issuers’ business strategies.
- They offer a way to protect against the risks associated with climate change while generating returns on investment that are at least comparable to, if not superior.
- According to the IFC, this is how the growth of green finance and green bonds indirectly disincentivizes projects with high carbon emissions.
- Fund Utilization: SGrBs use their funds differently than other types of government bonds. The public sector initiatives that lower the economy’s carbon intensity must receive funding from SGrBs.
- India’s Commitments: Given the commitments made at COP26, including ensuring 500GW of power production from renewable energy by 2030, reducing the carbon intensity of the economy by 45% from 2005 levels by 2030, and achieving net zero emission by 2070, the country needs enormous funds for building clean energy infrastructure.
- SGrBs assist investors in fulfilling their ESG (environment, social, and governance) mandates in addition to assisting in the achievement of climate control goals.
- Secure Bonds: These bonds are extremely secure because the central government guarantees both the principal and the interest payment.
- Cons of green sovereign bonds
- Bonds might become unmarketable: Since fewer of these bonds will be issued than non-green bonds, it might be challenging for an investor to sell the bond before it matures.
- Lower Returns: Since green bonds are typically issued on a global scale at higher premiums, the returns are typically lower. Returns may even be lower because they are being issued with a sovereign guarantee.
Do you know?
- The SGrB is a component of the Green, Social, and Sustainability (GSS) bonds, according to the Bank for International Settlements’ (BIS) database.
- The first green bond ever issued was a Climate Awareness Bond from the European Investment Bank in 2007.
- In November 2008, the World Bank issued its first green bond, which was the first to specify project eligibility and to guarantee, through a provider of a second-party opinion, that eligible projects would address climate change.
- Poland and France were the first countries to issue sovereign green bonds in early 2017.
- The percentage of sovereign issuers in the total amount of outstanding GSS bonds was only 4.2% at the end of 2019, but it rose to 7.5% by the end of June 2022.
- Despite the lower interest rates, many investment funds would be happy to lock in to these investments for the long term. The Centre can raise funds at a lower cost than traditional government bonds.
- To maintain the credibility of these instruments, however, the Center must follow the SGrBs framework that was adopted in November of last year, or in 2022.
- The Center must be prepared to withstand both domestic and foreign investors’ scrutiny.