A unique requirement in Indian patent law requires patentees and licensees of granted patents to file statements as to whether their patented inventions are being worked on a commercial scale in India. The format for this ‘Statement of Working’ (SOW) is contained in Form 27 of the Indian Patent Rules, 2003.
The rationale for SOWs can be found in the general principles of working (Section 83, Indian Patents Act, 1970): patents are granted to encourage innovation and the dissemination of new technology, and not merely to enable monopolies. By extension, no unreasonable trade or technology transfer restraints are allowed. It follows that granted patents should be worked commercially, in a practical manner, and without delay.
Form 27 has been revised periodically, usually to simplify requirements, and to collect more meaningful and relevant data. The Patent (Amendment) Rules, 2024 (2024 Rules) issued recently state that patentees need no longer furnish the revenue/ value accrued by manufacturing or importing the patented invention in India; instead, they need only state whether the patent is worked, and provide reasons if not.
Newly introduced in Form 27 is the option to declare whether the patent is available for licensing. If yes, the patentee may invite expressions of interest from prospective licensees by providing contact details. On the face of it, this opens up opportunities for patentees that want to license their invention. But is it a strategically prudent move?
The SOW is a trove of information that can be used or abused by players in the patent system in many ways.
For example, courts may refer to Form 27 to assess and provide reliefs, e.g., interim injunctions, in infringement suits. If a patentee indicates an intention to license, a court may not be inclined to grant an interim injunction.
Separately, not working a patented invention for three straight years is a ground for any person to seek a compulsory license, and the Indian Patent Office (IPO) may use SOWs as prima facie evidence to assess requests for compulsory licenses.
Picture yet another scenario: suppose a patentee, in good faith, intends to license the patent, and states thus in its Form 27, but a private licensing business opportunity arises, and the patentee refuses to license it thereafter to anyone else – would the patentee’s original declaration of intent be regarded as false? Note that, under the 2024 Rules, any person may complain regarding contraventions of Sections 120, 122, or 123 of the Patents Act. These provisions include submitting information under Form 27 that is either known to be false, or have reasons believing it to be false. Penalties include the lesser of a sum equal to 0.5% of total sale or turnover, or Rs. five crore (approx. USD 0.63 million).
This newly introduced section relating to a declaration of intent to license has arguably created a conundrum for patentees, with answers in the affirmative or negative each having its own advantages and disadvantages.
A declaration of being open to licensing, would allow potential licensees to approach patentees directly; be useful in defending against the grant of compulsory licenses; and help in establishing wilful infringement and damages. On the other hand, it would lower the chances of an injunction, besides increasing the administrative burden of handling licensing requests.
If, however, a patentee states that they are not interested in licensing, it may not impact interim injunctions, and have no additional paperwork related to prospective licensees. But it would make the patent vulnerable to compulsory licenses, as well as accusations of patent hold-ups (a situation where a patentee holds out on granting licenses in anticipation of higher royalties).
As things presently stand, the requirement to advertise intent to license is not mandatory. If the intended purpose of introducing such a declaration is to create a patent pool, or somehow facilitate access to patented technology, then it might be more practical for the IPO to launch a separate scheme with such an explicitly stated purpose, rather than extracting such information from patentees in stealthy ways. Unless there is clarity in how this information is likely to be used by various stakeholders, it would not appear tactically sound for patentees to disclose such information voluntarily.
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