From: chitoor@dwalin.cis.udel.edu (Srikrishnan R. Chitoor)
Newsgroups: soc.culture.indian
Subject: Re: AIDS drug by indian firm
Keywords: patent law, US, India
Date: 3 Jan 93 19:25:08 GMT
Followup-To: soc.culture.indian
Organization: University of Delaware, Newark

In article <1i509oINNslo@roundup.crhc.uiuc.edu> sunder@grusin.crhc.uiuc.edu (Srinivas Sunder) writes:
>In article <1993Jan2.194625.5575@udel.edu>, chitoor@dori.cis.udel.edu (Srikrishnan R. Chitoor) writes:
>|> Are we assuming that US patent laws are RIGHT ? Does not that kind of
>|> patent law encourage Monopoly and inefficiency (even if someone else
>|> finds a more efficient way to produce AZT, isn't it true that it cannot
>|> me made use of commercially ?).
>
>Actually, most patent laws are designed to expire in about 5-10 years. I
>believe that one of the intellectual-property quarrels between India and
>the US is about the fact that Indian laws allow only for a 5-year patent 
>protection period, while the US has a longer one. I think that in the US,
>you can use a more efficient process (so long as you have either
>invented the process or have bought rights to it) to manufacture something
>only if the original product-patent has been bought or has expired. In 

This is where the fault lies. I agree that Indian patent law has its
own faults, but does not resort to Monopoly to protect intellectual
property rights. Ofcourse I will present arguments to why I think so
shortly.

>India, there is apparently only a patent on the process, but not one on
>the product itself. So, they think that they are eligible to use the
>(more efficient?) process even though the product patent has itself not
>expired (actually, does not exist).

There are two kinds of patents, product patents and process patents.
The US patent law system mixes the two by allowing one who has
the product patent to automatically have the process patent too.
Indian law totally refuses to see the product patent part of it,
but is much more progressive (in the sense that consumer comes up
the winner).

[...]
>Fine. Since you brought up the question of whether or not US laws are 
>too monopolistic and anti-free-market, let me address that. The central
>idea that drives drug companies to do research and market their products 
>are the profits generated by marketing the products of their research. To 
>do research and develop a product takes millions (sometime billions) of 
>dollars, and the idea of providing a patent on the product before allowing 
>other producers with to manufacture it using the same basic research-results
>but a more efficient process from manufacturing it is to provide time for the
>original company to recover its investment. 

Another fallacious (I am good at plagiarizing :-)) argument. Here we 
just want to help the company regain its investment. That can be done
wihtout resorting to Monopoly (I will explain how shortly).

>
>The Indian Government, in its wisdom (or lack thereof) has decided that product 
>patents don't mean a damn thing and that only process patents matter. Is there 
>something wrong with such an approach? You bet your bottom dollar there is.

Yeah. Indian patent law has its own faults (in that it totally
disregards product patents, but it is any day better than mixing
product and process patent laws thus resorting to Monopoly).

>Right now, when there are hardly any companies in India doing any serious
>research to develop drugs (whether a cause or an effect of the lack of 
>protection is a chicken-egg problem), the idea of no product patents on drugs is
>eminently sensible -- but only if you are afflicted with myopia. If there is

Wait. This argument supposes that India follows its own patent law and
US follows its own (both of them have faults). Basically the logic you
are following has nothing to do with economics. It just says that
``Now that there is a established standard followed by economies (US, Europe
etc) worth more than half the total world economy, in the long run
it will hurt India if it does not follow that system''.
  Agreed, India will suffer, but that in now way proves that Indian
patent laws are myopic. Just think for some time the situation if
every country (ofcourse hypothetical) follows Indian patent system.
You will find that such a system is much more progressive.

>no incentive for Indian companies to do R&D to develop drugs (which incentive
>is robbed by the lack of protection for the product), we will be permanently
>reliant on foreign companies, and on our ability to plagiarize things that
>some foreign company like B_W or B_M_S (Bristol Myers Squibb) have spent
>loads of cash on, for our drugs. We will also wind up earmarked as a bad nation
>to do business or any kind of R&D in (leaving our scientists to rot away in
>Government owned labs), and that can't help but be bad for us in the long run.
>
>The law is not progressive, just short-sighted. Even if the process is found
>to be different, it is a bad idea in the long run, to be allowed to market
>it while B-W has yet to recover its investment, and can only result in a
>worsening of trade-relations between India and the US. The dispute here is
>more fundamental than the endless quibbling over whether the patent law-periods
>are too short in India or too long in the US. The dispute is over the entire
>concept of there being two separate patents for a product and the process
>requires to make it. India apparently does not believe in product-patents, only
>process-patents.

Now I will explain why US patent system is faulty and I will give an
alternative that avoids these faults. Go thru' it and tell me if you
still think US patent laws are `right'.
    My argument is that US patent law supports monopoly. Let us start
with the situation where there are two companies (ofcourse can be 
generalized to more than two) X and Y that are involved in the AIDS drug
research. Both of them spend millions (or billions as u say) on AIDS
research and one of them gets the drug first (say X). Now X gets to
market the product for 17 years. 
    Now since it is an AIDS drug, there is no demand side restraint
(If I have AIDS, I will buy the drug with my last savings even if
there is a slim chance of it saving my life) and there is a Monopoly
(nobody else can produce the drug). So what else do you require to
push up the prices (and people at X are not fools to let go of this
opportunity, after all they are business men). 
   So X makes a whopping profit (after `recovering' its investment).
At the end of 17 years, we have Y facing a loss of a few million (billion?)
dollars and X facing a profit of a few m(b)illion dollars. Now X has an
unfair advantage (it can even buy scientists from Y). This naturally
leads to a monopoly system (the next time X and Y start researching on
some thing, X can pump in more resources than Y). So do u agree
that in the long run the US patent laws encourage monopoly ?
  (Don't blindly refuse it).
  I also agree to that Indian patent laws must recognise product
patents, but it is not good to follow the US system blindly.
As an alternative, Indian patent laws can recognise both product
and process patents, but separate them. By this I mean that if
X finds that AZT cures AIDS, it can be patented and whenever
the *end* consumer uses the drug, X gets soem royalty directly
from the consumer.
   At the same time, the process to manufacture the drug should
be allowed to be replicated. The royalty should be charged from
the end consumer irrespective of which companies drug s/he uses
and passed onto X.
   This way 
   (i) X can recover its investment costs.
   (ii) Monopoly is not resorted to.
So do u agree that this is a better solution ?

>Fallacious reasoning. If a company is to spend tons of bucks developing a 
>product (which takes a helluva lot of resources -- much more than it does
>to develop a new process to manufacture it post-invention) only to see their
>profits grabbed away because some interloper managed to make the fruits of 
>their research cheaper, but did not spend a pie on the original work needed
>to develop the product, then you take away the incentive for them to
>do the R&D in the first place (after all, there will be no D if the R does not
>take place first).

Look at the above reasoning. Do not blindly support the US patent laws.

>Competition in drug manufacturing IS allowed in the US, but only after the 
>product patents have expired, which seems eminently fair to me (the concept
>i.e., we can quibble endlessly about the periods of the patents etc.)
>
>I hope that some Commerce ministry bigwig sees the logic in this and has the 
>sense to try and work out some arrangement like allowing the (new and improved, 
I hope that India does not fall into the US patent trap.

>
>but plagiarized) AZT to be marketed only in India, thus shutting off a market 
>for B-W, but without straining relations excessively by also butting into other 
This is the short term solution I would advocate.

>foreign markets. We NEED these foreign dudes and companies.
                     ^^^^^^^^^^^^^^^^^^^^^^^^
That does not mean blindly adhering to their system without considering
the merits and de-merits of the system.
>
>Srinivas Sunder                                         sunder@crhc.uiuc.edu
>
>If my employer shares these views, I'd be most surprised.
>-----------------------------------------------------------------------------

-Krishna.
Opinions are mine.