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31 May 2020
Prior to the Convention on Biological Diversity (CBD) becoming effective in 1993, biodiversity was considered to be the heritage of mankind; however, with the enactment of the CBD, contracting states were given sovereign rights over their biological resources. India, as a signatory to the CBD, enacted the Biological Diversity Act, 2002; the act’s three main objectives are for the conservation of biological diversity, sustainable use of its components and fair and equitable sharing of benefits arising out of the use of biological resources. The National Biodiversity Authority (NBA) is the competent authority responsible for the implementation of the act.
The act defines biological resources as plants, animals and microorganisms or parts thereof, their genetic material and byproducts (excluding value-added products) with actual or potential use or value, but does not include human genetic material. Hence, the term “biological resources” encompasses the genetic resources, organisms and parts thereof or any other biotic components of the ecosystem that are useful for the mankind. However, value-added products and human genetic material fall outside the scope of biological resources defined under the act.
Value-added products means products which may contain portions or extracts of plants and animals in unrecognizable and physically inseparable form. Chyawanprash and pudin hara, both ayurvedic health supplements, are classic examples of value-added products. Value-added products are exempted from the act so that their export is not hampered. Exemption of human genetic material also facilitates research in molecular biology and biotechnology. Further, conventional breeding and certain government-approved collaborative research projects involving use of Indian biological resources are also exempted from the competent authority approval. In addition, about 400 biological resources are also exempted by the central government under Section 40 of the act, provided that the use of listed biological resources should be used solely for trade as commodities. However, their other uses come within the ambit of the act and require necessary approval.
Further, the act distinguishes between Indian and foreign users of the biological resources where a foreign national, a non-resident Indian (NRI) citizen and a body corporate (even if said body is registered in India and has any non-Indian participation in its share capital or management) must seek prior NBA approval before obtaining any Indian biological resource or knowledge associated thereto for carrying out research or for commercial utilization or for bio-survey and bio-utilization. On the other hand, Indian users are not required to seek prior permission from the NBA to access the resources for research, bio-survey or bio-utilization purposes, but they must get prior approval from the respective authorities if the resources are being utilized for commercial purposes or other activities.
Similarly, local communities, traditional healers and farmers are also exempted from the act’s purview, except for obtaining intellectual property rights. Further, the exchange of designated accession of genetic resources of food crops and forages listed in Annex I of the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA) is also exempted for certain limited purposes. In addition, the Indian Patent Office, vide an office notification in 2018, clarified that value-added products, bio-waste and synthetic forms of biological material are exempted from requiring prior NBA permission.
Contravention of the act or abetment thereof is a cognizable and non-bailable offense and is punishable by imprisonment and/or fine. Several cases of bio-piracy and bio-smuggling of Indian biological resources were reported soon after the enactment of the act, several of which reached coursts.
The Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization forms the basis for the implementation of the third important objective of the CBD. In accordance with the articles of the Nagoya Protocol, the NBA has published regulations in the form of Guidelines on Access to Biological Resources and Associated Knowledge and Benefits sharing Regulations, 2014 (the ABS Regulations). Under Regulation 9, the mode of benefit sharing in IP rights is defined as where the applicant himself commercializes the process, product or innovation; benefit sharing would be in the range of 0.2 to 1.0 percent, based on the sectoral approach. However, if the applicant assigns or licenses the process, product or innovation to a third party for commercialization, the applicant shall pay to NBA 3.0 to 5.0 percent of the fee received and 2.0 to 5.0 percent of the royalty amount received annually from the assignee or licensee, based on the sectoral approach.
Hence, in the case of commercialization of a patent for invention involving use of biological resources, the quantum of benefit sharing would be based on the sale of the finished product rather than the quantity and number of biological resources used in the invention. In contrast, for biological resources access by entities falling under Section 3(2) of the act, the quantum of benefit sharing would be decided on the number of biological resources.
It is important to mention here that Regulation 3 of the guidelines is focussed on plant bioresources and is completely silent about the mode of benefit sharing for animals and microorganisms accessed. Further, Regulation 3 is also silent on bioresources accessed for research purposes and provides benefit sharing criterial for bioresources accessed by traders and manufacturers only. It is pertinent to point out that Regulation 9 provides the percentage range of benefits to be shared by the applicant in case of commercialization of IPR but fails to provide details on what basis the lower or higher range or intermediate value of benefits would be determined by the NBA. There is an urgent need that the competent authority should look into the matter and bring clarity and transparency in the existing regulations for the effective implementation of ABS regulations.
Intellectual property rights are private rights, hence inventions involving use of Indian biological resources would encompass private use of phenotypic and/or genotypic characteristics of biological resources and knowledge associated thereto for earning profits through commercialization of those IPR. Hence, to limit such unauthorized use of indigenous biological resources and traditional knowledge associated thereto, Section 6 of the act comes into play and requires the applicant for patent to obtain NBA approval even after acceptance of the patent but before the grant of patent. In view of the above, no patent should be granted for an invention involving use of Indian biological resources without approval of NBA.
The Indian Patents Act, 1970 as amended is in harmony with the Biodiversity Act and requires the applicant to disclose the source and geographical origin of the biological material used in an invention in the specification to comply with Section 10(4)(D) of the Patents Act. Further, the applicant is also required to declare in the application Form 1 that it would obtain necessary permission from the competent authority before the grant of patent. In the absence of NBA approval, the patent office would hold the grant of patent under Section 43 of the Patents Act.
Further, the Patents Act also provides several other checkpoints to prevent violation of the Biodiversity Act. For example, failure to provide details of biological resources as required under Section 10 of the Patents Act would lead to refusal of the patent under Section 15 of the Patents Act. Moreover, in case of pre-grant opposition under Section 25(1), clauses (d), (f), (j), and (k) provide ground for revocation of the patent, and in case of post-grant opposition, granted patents shall still be revoked under clauses (d), (f), (j) and (k) of Section 25(2) of the Patents Act.
Though the basic legal framework appears to be effective for the implementation of the Biodiversity Act, there are challenges associated with the implementation of act both for research purposes as well as for commercialization of patents comprising use of Indian biological resources. One of the major issues reported as a hindrance in the compliance of the Biodiversity Act provision is confusion regarding what forms of a biological resource fall within the ambit of the act.
For example, rice seeds per se are a biological resource, while rice flour purchased from the market, which has been prepared after milling any unknown rice variety, also requires NBA approval. Similar is the case for use of commercially available oils in the process for invention, as it is difficult to be certain whether the oil being used is processed from oilseeds produced in India or imported from outside India, but oil falls within the purview of act. Further, there is confusion whether the applicant should be liable to share benefits with the NBA when the applicant has paid at the time of purchase the value for oil used to the retailer of the trader or manufacturer. It is because of this confusion that some applicants do not file an application for NBA approval at the time of filing the patent application.
In this regard, 13 cases were filed in 2013 by several private Indian companies, including those of ayurvedic drugs, oil, paper, coal extracting, liquor, cosmetics and flavours, as well as food and industrial processors, against the Madhya Pradesh State Biodiversity Board (SBB) under Section 7 of the act, stating that the raw materials used by the aforesaid companies were Indian biological resources and, hence, liable to pay the benefit sharing amount decided by the NBA on a case-by-case basis.
The companies approached the National Green Tribunal (NGT), which directed the authority to formulate the ABS guidelines and accordingly collect the benefit sharing about from them. Similarly, in Divya Pharmacy v. State of Uttarakhand, the court decided that the Uttarakhand SBB has jurisdiction to demand benefit-sharing amount from Divya Pharmacy, thus clarifying that domestic companies procuring biological resources are at par with foreign entities under Section 3(2) when it comes to benefit sharing obligations under the ABS Guidelines, 2014.
Considering the lack of awareness about the provisions of the act and due to the sheer volume of non-compliant cases, the Ministry of Environment and Forest and Climate Change issued an office memorandum in September 2018 giving an opportunity to certain categories of users, including foreign users, for obtaining NBA approval, with retrospective effects. A second chance for retrospective NBA approval was also given through a memorandum issued in March 2019 that extended the opportunity through May 17, 2019.
Amid a regulatory maze and non-clarity of ABS Regulations, the competent authority is sending model ABS agreements to the applicant for necessary execution by the authorized representative of the applicant.
The ABS agreement for obtaining IPR is between the NBA and the applicant where secretary, the NBA, is the signing authority. The effective date of the ABS agreement shall be the date on which the NBA signed the agreement and would remain effective until the subsistence of IPR and shall remain in force till the applicant complies with the obligations mentioned in the agreement. In case of third-party transfer of IPR, all rights and obligations shall be binding upon the assignee or licensee or legal representative of the applicant, as the case may be.
Permission granted under the agreement shall be solely for obtaining IPR in India only and in case the applicant files a corresponding application outside India, he shall inform the authority about the same and the authority shall update the ABS agreement accordingly.
Further, the agreement contains liabilities and indemnification clauses where the applicant is solely responsible for damages caused due to revocation of the approval and/or termination of agreement. In case of claim by any third party during the subsistence of the agreement, the applicant shall be solely responsible for that. The NBA shall keep the information provided by the applicant as confidential, if the applicant makes such request, and would disclose it only in case of emergency or if it is in national/public interest.
In case of breach of the agreement, the applicant shall pay damages incurred to the Republic of India or to the benefit claimers as decided by the appropriate forum. The applicant is also under obligation to keep the NBA informed about any modification or improvement or commercialization of the invention, product or process of the IPR and also update the NBA if they were to withdraw or abandon the patent application. Further, the applicant is required to submit a status report not later than two months from the end of each reporting year and a copy of Form 27 within one month of submitting the same with the IPO. The mode of payment of fair and equitable benefit sharing shall be monetary and/or non-monetary benefits.
The NBA shall monitor the activities approved under the agreement and shall send a notice in case of prima facie evidence received for breach of agreement. The applicant is required to send his reply statement within the stipulated time failure of which lead to imposition of penalty and or damages as per Section 55 of the act. Further, if the breach or default committed involves violation of any provisions of the act, appropriate legal proceedings shall be initiated under Section 61of the act.
The ABS agreement shall stand automatically terminated on the completion of period as agreed to between the parties. In case the applicant wishes to terminate agreement before the due date, he shall inform the NBA of the wish by way of notice stating a valid reason for the same. Should the NBA find the reason stated above to be satisfactory, it shall notify the applicant accordingly within the stipulated time. Further, the NBA shall also withdraw the approval and revoke the agreement in case of occurrence of any of the conditions specified in Rule 15 of the Biological Diversity Rules, 2004, or if the applicant performs activities contrary to any restriction or prohibition imposed by NBA or under the act and the rules.
Though the terms and conditions of ABS agreement and obligations on the part of application are general in nature yet more clarity and transparency is required on the quantum of benefit sharing amount to be paid by the applicant. There exists a procedural lacuna in terms of biological resources exempted under the act. The non-clarity of terms like value-added products and processed forms of biological resources may lead to delay of grant of patent. Some researcher-friendly provisions must be added to facilitate cross-border research and sharing of knowledge related to Indian biological resources. The procedure of withdrawal of the NBA application should be simplified and with minimum cost and time. Examination of the application by the authority must be expedited so that approval may be granted without any time lag. Last but not least, researchers, lawyers and public officers must function in the spirit of the act and cooperate in the conservation of Indian biodiversity.
