What is the working statement obligation?
Penalties for non-compliance
Significance of working statement obligation for life sciences and pharmaceutical industry
Case law relating to working of patents in life sciences and pharmaceutical sector
Important points to remember while carrying out working statement obligation

What is the working statement obligation?

The Indian Patents Act 1970 requires every patentee and licensee to commercially "work" their patents in India to the fullest extent. This is to encourage inventions and ensure that Indian patents are commercially worked in India to the fullest extent possible, within reasonable and practical limits, so that the Indian public benefits from them. A patent is considered "worked" in India if it has been commercially exploited – that is, the patented product must be available to the public either by manufacturing the product in India, by importing it into India, or both.

Section 146(2) of the Act requires all patentees and licensees to submit an annual "working" statement to the Indian Patent Office (IPO) regarding the working of their patents in a given financial year. This requirement is known as the "working statement obligation". The Patents (Amendment) Rules 2020 (the 2020 Rules) made certain changes to the working statement form (form 27), to simplify the required information and online submission thereof.

The 2020 Rules provide clarity regarding the timeline to submit the working statement. Now, a working statement must be furnished once every financial year (FY), instead of every calendar year, as under the old law, and within six months after the FY has ended. Further, the statement must be provided starting from the FY immediately following the grant of the patent. For instance, if a patent is granted in FY 2020-21, its working statement is required for FY 2021-22 by 30 September 2022.

The 2020 Rules also:

  • removed the need to provide the quantum of patented product disclosures;
  • added the possibility to combine and file a single consolidated statement for related patents;
  • eliminated the compulsory disclosure of information regarding the country of import and licensee; and
  • removed the requirement to respond to whether the Indian public's requirements have been met.

Penalties for non-compliance

If a patentee fails to submit relevant information under the working statement, it can be subject to a fine of up to approximately 1 million rupees (approximately $12,500). Nevertheless, no such penalty has so far been imposed on any patentee in any industry sector for non-compliance.

If the patentee submits false information in its working statements, it may be subject to imprisonment of up to six months, a fine, or in certain cases, both.

Significance of working statement obligation for life sciences and pharmaceutical industry

Though the law is equally applicable to all industry sectors, the life sciences and pharmaceutical sectors are particularly vulnerable to the consequences of non-compliance with the working statement obligation as this can trigger the possibility of a compulsory licence.

If the patented invention is not worked adequately within three years from the grant, as per section 84(1) of the Act, another interested person or party can apply to the IPO for a compulsory licence for the same patent, on grounds that the patented invention:

  • does not meet reasonable public requirements;
  • is not available to the public at a reasonably affordable price; and/or
  • has not been worked in India.

Under a compulsory licensing arrangement, the government permits the interested applicant or party to produce patented products or processes, by fixing a reasonable royalty fee. Since the non-working of patents is one of the grounds for seeking a compulsory licence, it has received particular attention in recent years.

Several interesting cases around the aspect of the working of patents have emerged from the Indian courts, some of which are discussed below.

Case law relating to working of patents in life sciences and pharmaceutical sector

Providing drugs at affordable rates
In 2013, Natco Pharma Ltd (Natco), an Indian generic drugs company, received the first ever compulsory licence for Bayer's patented kidney cancer drug, Nexavar. Natco claimed that Bayer had failed to provide patented Nexavar at affordable rates to the Indian masses. Natco relied heavily on the gaps in the working statements filed by Bayer while asserting the grounds available for a compulsory licence.

Bayer was selling Nexavar at 280,000 rupees (at the time, approximately $4,500) for a month's dosage – equivalent to 120 tablets. However, Natco proposed to sell the drug at around 8,800 rupees (at the time, approximately $150) per month. Based on the working statement submitted to the IPO, Natco asserted that not only had Bayer failed to meet the Indian public's requirements, it had also failed to work the patent in India at an affordable price.

After this case, the IPO has issued no other compulsory licences.

Importing patented products to be considered as "working" of that patent
The case Novartis Ag v Cipla Ltd dealt with the questions of whether importing a patented product in India is considered "working" and whether "public interest" arose regarding the rights of the patentee. Cipla argued that the patented drug had not been manufactured in India and had been imported only in small quantities, which did not meet patient demand in India.

The Delhi High Court held that merely because a patent is not worked in India, this cannot take away the rights of the patentee, which includes interim relief by an injunction. The Court clarified that "working" in India can also include import of the product to India. The important factor was that sufficient quantity of the drug was made available, regardless of whether this was through imports. The Court considered that the sufficiency of drug by import must be analysed based on patient demand, whether the drug is a life-saving drug and whether other similar drugs are available to patients in India. The Court held that Cipla had failed to establish its case that granting the injunction would be contrary to the public interest and had failed effectively to challenge the validity of the patent.

"Exporting" non-worked patented product used as defence for infringement of patent
The case Bayer Intellectual Property GMBH v BDR Pharmaceuticals International Pvt Ltd dealt with the question of whether the export of a patented drug and accompanying economic activity can be stretched as "public interest". The patentee, Bayer, sued the defendant, BDR Pharmaceuticals (BDR), for the drug Vardenafil. BDR argued that since Bayer had not worked the patent, export of the drug by BDR "earns foreign exchange" and "encourages economic activity" in India.

Rejecting this argument, the court opined that if the parameters of manufacture and export and its economic impact were to be adopted as part of "public interest", it would allow infringement in all cases of non-working. The court thus effectively rejected the enlarged scope of "public interest" relied upon by BDR and asked it to pay royalties to Bayer for all future exports.

Enforcing patent rights despite non-working of patent
In the case EISAI Co Ltd v Satish Reddy, concerning the drug Lorcaserin, neither the defendant (Satish) nor the plaintiff (Eisai) had a product in the Indian market. The cause of action was based on the defendant taking steps to obtain regulatory approval and its intention to launch its product in the market.

Satish argued that the patent had not been worked in India and that Eisai was misusing its monopoly and causing harm to the Indian public by not making it available to patients. Satish further argued that Lorcaserin is used in the treatment of obesity, which can be a life-threatening illness. Thus, non-working of the patent was detrimental to the Indian public.

The Delhi High Court, however, rejected this argument and observed that Satish had sought marketing approval of the drug without first invoking revocation proceedings or attempting to obtain a compulsory licence under sections 83 and 84 of the Act. The Court held that non-working of a patent, particularly for a pharmaceutical product, cannot have a bearing on the rights of a patentee under section 48(1) of the Act and hence, prima facie, Eisai had a strong case for grant of interim injunction.

Important points to remember while carrying out working statement obligation

If a patentee submits that the patent has been worked, it is important to provide information relevant to the approximate revenue or value accrued in India to the patentees or licensees through manufacturing, import or licence into India.

If the patentee submits that the patent has not been worked, it is advisable to provide one or more appropriate reasons for such non-working – for example, that:

  • the commercial feasibility of the drug is still under study;
  • there is a regulatory delay; or
  • a licensee is being explored.

For further information on this topic please contact Anupam Trivedi or Deepa Tiku at K&S Partners by telephone (+91 80 4042 7900) or email ([email protected] or [email protected]). The K&S Partners website can be accessed at www.knspartners.com.


(1) Section 48 of the Act reads as follows:

48. Rights of patentees

(1) Subject to the other provisions contained in this Act and the conditions specified in section 47, a patent granted after the commencement of this Act shall confer upon the patentee-

(a) where the patent is for an article or substance, the exclusive right by himself, his agents or licenses to make, use, exercise, sell or distribute such article or substance in India;

(b) where a patent is for a method or process of manufacturing an article or substance, the exclusive right by himself, his agents or licensees to use or exercise the method or process in India.