Patents And Equitable Benefit Sharing Of Indian Biological Diversity – Patent

I. BIOLOGICAL DIVERSITY ACT, 2002 (BDA)

India, a signatory to the United Nations Convention on
Biological Diversity (Biodiversity Convention), 1992,
which affirms nations’ sovereign rights to use their biological
diversity, attempted to realize the objectives expressed in the
Biodiversity Convention by legislating the Biological
Diversity Act, 2002 (BDA). The BDA was enacted in 2002
with three main goals akin to the Biodiversity Convention, which
are:

• conservation and sustainable use of biological diversity,




• addressing issues related to its access, and




• enabling fair and equitable benefit sharing
  (FEBS) arising from the use and knowledge of such
  resources with the local communities.
  

II. EQUITABLE BENEFIT SHARING IN INDIA

Biological components play a significant role in the existence
of humankind. Hence it becomes pertinent for every individual to
have access to such natural resources and share the benefits. This
concept is popularly known as Access and Benefit Sharing
(ABS). The principle facilitates sharing of biological
resources, specifically genetic resources, fairly and equitably
between innovators/users and creators/conservers/providers, thereby
enabling innovation and biodiversity conservation incentives.

The benefits arising from technological advancements and
innovations using such resources must be utilized by the innovators
and shared with the creators and conservers. The Biodiversity
Convention, in its regulations, explicitly addresses ABS, and since
India is a signatory, it practices the principles and fundamentals
of ABS.

The National Biodiversity Authority (NBA)
determines the equitable benefit sharing arising from using
biological resources. In exchange for commercial exploitation of a
genetic resource, an applicant is required to pay a fee, where 95%
of its amount goes to the indigenous and local populous. Under BDA,
the local people are referred to as ‘Benefit
Claimers’, who are engaged in conserving biological
resources and those who produce and maintain knowledge and
information on the use of biological resources. The benefits could
be monetary or non-monetary.

However, the provisions of BDA layout certain restrictions and
exemptions based on the identity of the persons accessing and using
the biological resource (e.g., Indian or foreign; local or
commercial enterprise) and the activity being performed (e.g.,
research for Intellectual Property Rights generation or
collaborative non-commercial research under Section 5 of BDA).

Moreover, the extensive aspects of the BDA’s framework, the
longstanding history of the conservation movement, and
international obligations in the form of international treaties to
which India is a signatory must be understood to grasp the
principle of FEBS.¹

A. Biological resources under BDA

India is one of the world’s prominent megadiverse countries.
Having only 2.4% of the world’s land area, it already
encompasses 7-8% of the documented species. India is known for its
agricultural diversity and is home to abundant varieties of plants,
animals, fishes, and millions of microbes, insects, and other
species. As per the Botanical Survey of India and the Zoological
Survey of India, the nation acquires around 46,000 flora species
and 81,000 fauna species.² Compared to other countries
globally, India’s ecological variety is unrivaled, and it is
home to multifarious biological resources.

Biological resources are defined in
Section 2(c) of the BDA, which refers to plants,
animals, and microbes, or parts of them, including their genetic
material and by-products that have actual or potential use or
value. However, the definition explicitly excludes value-added
products and human genetic materials. The value-added
product has been elucidated under Section 2(p) of
the BDA as the products that may contain unrecognized and
physically inseparable formed portions or extracts of plants and
animals. The reason for exempting value-added products from the BDA
is to ensure and soothe the domestic industry’s fear of
impeding value-added product exports.³

Considering the broad scope of the definition of Biological
Resource under the BDA, various concerns have been raised before
judicial authorities to opine if a particular resource of the
environment is a ‘biological resource’ or a
‘by-product’ or a ‘value-added product’.

A similar issue was addressed in Vishwanath Paper and
Boards Ltd. v. State of Uttarakhand⁴, before the High Court of
Uttarakhand (Court), which clubbed numerous writ
petitions filed by several paper manufacturers for the sake of
brevity. The Vishwanath Paper and Boards Ltd.
(Petitioners) sought relief on several grounds,
including whether the waste paper was included in the category of
‘biological resources’ defined in Section 2(c) or the
category ‘value-added products’ defined in Section 2(p).
The Petitioners’ companies were primarily using bagasse, rice
husk, waste paper, and wheat straw as raw materials, which they
claimed could not be considered biological resources under Section
2(c), and it was an industry, which did not come under the purview
of ‘commercial utilization’ as set out in Section 2(f) of
the BDA. Further, Petitioners acquired vast raw materials from
states such as Uttar Pradesh, Bihar, and others. In contrast, only
a small portion of these raw materials was obtained from
Uttarakhand.

On the contrary, the State of Uttarakhand
(Respondents) contended that waste paper was a
biological resource. Instead of deciding whether waste paper
qualifies as a ‘biological resource’, the Court dismissed
the petitions at the admitting stage and ordered that the
Petitioner company not be prosecuted.

The National Green Tribunal
(NGT) also cast a light on the dilemma through
Asim Sarode v. State of Maharashtra⁵. Order dated 03
November 2015 was passed by NGT where manufacturers and entities
using castor plants and other bio-resources for pharmaceutical
drugs and cosmetic products claimed that castor oil was a
value-added product and not a bio-resource. The manufacturing
entities contended that castor oil was a finished product because
it was sold in that state rather than in its raw form.

The order laid down that ABS under the BDA was applied to both
agricultural and other natural bio-resources. Further, the order
stated that ABS would apply to castor oil which was an agricultural
bio-resource when used for general commodities, but not when castor
oil was used for commercial reasons in pharmaceuticals and cosmetic
items, as well as bio-resources and bio-utilization for commercial
use. Therefore, the entities were ordered to make ABS payment to
Maharashtra State Bio-Diversity Board, given the continued
commercial usage of castor oil.

Yet another critical case is Bio-Diversity Management
Committee vs. Western Coalfields Ltd. and Ors⁶,
which provided legal ramifications to the coal as a ‘biological
resource’ under the BDA. The Bio-Diversity Management Committee
(Petitioner) of village Eklehara filed a petition
before NGT at Bhopal bench. The Petitioner considered coal as a
‘biological resource’ and demanded from Western Coalfields
Ltd. (Respondent), the 2% royalty from the revenue
of Rs 1,470 crore generated by the commercial excavation of coal
from their territory. The Ministry of Environment and Forest
(Environment Ministry) and NBA were made Respondents to the
petition.

The Respondents contended that the Biodiversity Convention and
BDA do not attract any provision to regulate minerals or fossil
fuels. Its key focus remains genetic materials, people’s
knowledge, and information on biological resources. Further, it was
submitted that the definition of the biological resource outlined
in Section 2(c) is extensive and only comprises plants, animals,
microorganisms, and their genetic material along with the
by-products, and because coal does not fit into any of the
foregoing categories, it cannot be classified as a biological
resource. Coal is a flammable, sedimentary, and fossil rock that
takes around 300 million years to build up. It cannot be equated to
a living thing, hence it cannot be classified as a biological
resource under the definition of BDA. The Respondents went on to
say that the Biodiversity Convention defines ‘genetic
material’ as any material of plant, animal, microbial, or other
origins that has a functional unit of heredity. Under optimal
conditions, the half-life of DNA, being the functional unit of
heredity, was estimated to be 521 years. Such optimal circumstances
for DNA survival were dried state, vacuum-packed, and frozen at
around 80ºC. Supporting the mentioned submissions, the
Respondents cited a study published in Proceedings of the Royal
Society of Biology conducted in 2012 by a New Zealand scientist.
Unlikely, coal dates back 63 to 300 million years. It is generated
at high temperatures and pressures, and as a result, it is turned
into a fossil. Given the above scenarios, the Petitioner’s
assertion that coal comprises the genetic material of plants stands
invalidated. Moreover, the fact that under Section 2(c),
value-added products had been explicitly excluded from the
definition of biological resources, coal cannot be brought under
the same.

The NGT upheld the Respondents’ above contentions,
concluding that coal is not a biological resource under the BDA.
Therefore, the Petitioner cannot rely on the BDA provisions that
allow it to charge for ABS. However, it refrained from going to the
merit of coal being treated as a value-added product or not.

B. Measures for implementing FEBS

While granting clearance for an Intellectual Property
Rights (IPR) application or a transfer of biological
resources or knowledge, the NBA can evaluate equitable benefit
sharing by implementing any of the following measures:

• granting the NBA or the benefit claimers joint ownership of
  IPR,




• technology transfer,




• locating production or research & development facilities to
  improve living conditions for the benefit claimers,




• associating Indian scientists, benefit claimers, and local
  residents for biodiversity research & development,




• establishing a venture capital fund to assist and compensate
  the benefit claimers, and




• awarding monetary compensation and other non-monetary benefits
  to the benefit claimers as the NBA may deem appropriate.
  

C. Determination and Mode of FEBS

The NBA prepares benefit-sharing standards, which are published
in the Official Gazette. However, the benefit-sharing approach is
subjective and varies from case to case. The benefit amount is
mutually agreed upon by those seeking approval from the NBA and
local entities and benefit claimants. In addition, the NBA allows
5% of the benefits as administrative and service charges.

The applicant can pay for benefit sharing in ranges of 0.1 to
0.5 percent of the yearly gross ex-factory sale of the product,
which is calculated using the annual gross ex-factory sale minus
government taxes as shown below:

• When the applicant commercializes the process, product, or
  innovation himself, the monetary share ranges from 0.2 to 1.0
  percent, depending upon the sectoral approach, and is calculated
  based on annual gross ex-factory sales minus government taxes.




• Based on the sectoral approach, the monetary sharing ranges
  from 3.0 to 5.0 percent of the fee received (in any form, including
  the license/assignee fee) and 2.0 to 5.0 percent of the royalty
  amount received annually from the assignee/licensee where the
  applicant assigns/licenses the process/product/innovation to a
  third party for commercialization.

D. Liabilities imposed in violation of the BDA

To date, all offenses under the BDA are cognizable and
non-bailable. However, the Biological Diversity (Amendment) Bill
2021, which is under consideration, has proposed decriminalizing
such offenses and recognizing them as civil offenses. The penalties
for violating the provisions of the BDA are listed below:

III. PATENTS AND FEBS

To proceed to grant patents, applications based on biodiversity
components found in India must overcome specific additional
compliances.

The Applicant seeking protection under the Patents Act, 1970,
for invention based on biological material produced in India,
approval of the NBA is mandated as per Section 6(1) of the BDA.
Furthermore, the NBA is required to act on any application for
approval it receives within ninety days of receipt.

Additionally, Section 10 of the Patents Act, 1970 necessitates
disclosure of the source and geographical origin of the biological
material in the specification. The provision requires a declaration
and detailed information from the Applicant regarding any
biological material matter obtained from India.

One such case is NBA v. Sunev Pharma
Solutions⁷, a classic example of inappropriate
information and wrongful mention of the geographical source and
origin of the biological resource. Section 25(2) of the Patents Act
explicitly allows a third party to file post-grant opposition on
the grounds of wrongful disclosure of geographical source and
origin of biological resource utilized in the invention. By virtue
of the provision, NBA filed post-grant opposition before Indian
Patent Office against Sunev Pharma Solutions
(Applicant), who was granted patents on inventions
using biological components viz. Azadirachta indica, Berberis
aristata or Berberis vulgaris, Glycyrrhiza glabra, Jasminum
officinale, Picrorhiza kurroa, Pongamia pinnata, Rubia cordiflia,
Saussurea lappa, Terminalia chebula, Capsicum abbreviata, Nymphea
lotus, Curcuma longa; Tricosanthes diocia, Symplocos racemose,
Ichnocarpus frutescens, Sesamum indicum oil, Ricinus communis oil,
Cocos nucifera oil, Brassica juncea oil.

NBA submitted that after it examined the said patent
application, it was discovered that patents had already been
awarded in countries namely Europe, South Africa, the United States
of America, South Korea, and Mexico without prior permission, which
was a breach of Section 6 of the BDA. NBA supported its argument
stating that despite its rejection order passed because of the
Applicant’s wrongful disclosure of the source of biological
components used in the invention, a patent was still awarded to the
Applicant.

A search on the IPO database revealed that the patent was
granted on 10 October 2018 with the patent number 302105. The IPO
initially directed the Applicant to submit NBA approval in First
Examination Report to which the Applicant responded on 10 October
2015, submitting that Applicant had applied for NBA’s approval.
Following that, on 04 January 2018, the Applicant amended their
First Examination Report response to state that all biological
resources were imported from China, except for Sesamum indicum oil,
Ricinus communis oil, Cocos nucifera oil, and Brassica juncea oil,
which were sourced from India and are exempted from NBA permission
because these were notified as ‘Normally Traded
Commodities’ in the NBA notification dated 07 April 2016.

To present, the abovementioned post-grant opposition/order is
still pending considering the documents in regard to the post-grant
opposition proceeding/order are not available on the online records
of the IPO. However, it would be interesting to watch how the IPO
responds to the post-grant opposition in this matter. Not to
mention, as per Section 64(1)(j) and or 64(1)(p) of the Patents
Act, any false declaration made on behalf of the applicant will
result in the revocation of a patent.

A. Persons who are mandated to acquire the NBA’s Prior
Approval before engaging in biodiversity-related activities

As per Section 3 of the BDA, without obtaining NBA approval,
certain persons are not permitted to engage in biodiversity-related
activities or obtain any biological resource occurring in India or
knowledge associated therewith for research, commercial
exploitation, or bio-survey and bio-utilization, which include:

• a non-citizen of India,




• a non-resident Indian citizen,




• a body corporate, association, or organization not incorporated
  or registered in India, and




• a body corporate, association, or organization incorporated or
  registered in India under any law in force that has any non-Indian
  participation in its share capital or management.

Therefore, it is evident from the legislation that every entity
having any foreign ownership or management is obliged to take NBA
permission before accessing any biological resource.

To access biological resources for doing research in India,
Indian researchers do not require prior authorization from any
agency, nor do they need to notify the State Biodiversity Board.
Under Section 7 of the BDA, prior notification to the State
Biodiversity Board is necessary if the study results are further
used for commercialization. However, all Indian citizens and
organizations accessing such resources mandatorily need to get
authorization for filing a patent application.

One such case related to NBA approval and FEB is Divya
Pharmacy v. Union of India & others⁸ where Uttarakhand State Biodiversity
Board was made a party in the Respondents. It was the case of the
Divya Pharmacy (Petitioner) that the Uttarakhand
State Biodiversity Board (Respondents) cannot
issue a demand under the Head of FEBS because the Board lacks the
authority and jurisdiction to do so. Secondly, since the Petitioner
was an Indian company with no foreign ownership or management,
cannot be forced to pay any amount in accordance with FEBS. The
Petitioner’s whole argument was based on a textual and
legalistic interpretation, particularly on the FEBS definition
clause.

The High Court of Uttarakhand (Court) decided
that the Respondents had jurisdiction to demand the benefit-sharing
amount from the Petitioner, clarifying that domestic companies
procuring biological resources are on par with foreign entities
under Section 3(2) of the Access and Benefit Sharing Guidelines,
2014 when it comes to benefit-sharing obligations. The Court
adopted a more expansive interpretation of the Nagoya Protocol,
ruling that a foreign and domestic enterprise must comply with FEBS
and share their benefits with local and indigenous groups. Further,
it opined that the FEBS should be interpreted with a broader
canvass view, as it cannot be looked through the narrow contours of
the definition clause alone. The FEBS concept is centered on
benefits for local and indigenous communities. The Nagoya Protocol
sees no difference between a foreign entity and a national entity
in terms of their commitments to local and indigenous inhabitants.
As a result, to bring out the actual meaning of FEBS, the
“ambiguities” in the national statute must be viewed in
light of the international treaties, namely Rio and Nagoya, and a
purposive rather than a restricted or restricted or literal
interpretation must be made.

B. BDA exempted activities and biological resources from
approval

Besides the above compliances regarding bio-resources, certain
exempted activities and resources do not need prior intimation or
approval from the NBA as stated under BDA. The exemptions are as
follows:

• use of biological resources from India that are normally traded
  as commodities, such as Pulses, Oilseeds, Fiber Crops, and Forage
  Crops (for some species), and for no other reason,




• utilization of value-added products (implied from Section 2(c)
  of the BDA),




• traditional usage of Indian biological resources or usage in
  collaborative search initiatives between India and international
  universities, publication of research papers, and knowledge sharing
  in any seminar or workshop with compliance and necessary approval
  from the Central Government (Section 4 and 5 of the BDA),




• utilization and consumption of bio-resources including
  conventional breeding, traditional practices by the cultivators,
  framers, breeders, animal husbandry, poultry farming, live-stock
  keepers, beekeepers, and traditional healers such as vaids, hakims,
  etc. (implied from Section 2(f) of the BDA), and




• Using entirely exhausted biological resources, i.e., bio-waste
  products.

In 4228/KOLNP/2008, the Applicant,
Romano Development Inc, was usingplant-based oils
and animal-derived eggshells. The Controller instructed the
Applicant to specify the source and geographical origin of the
biological components and acquire necessary approval from the NBA
if the same were obtained from India. The Applicant clarified in
its response that the oil was from the United States, whereas
regarding eggshells the Applicant submitted that eggshell was a
waste product with no practical application. Generating anything
useful such as the compound of the present invention by utilizing
waste was anyway a sincere contribution to the government’s
waste management efforts and can be considered a biological source
that was otherwise depleted, hence its sustainable use was
necessary, as stated in the objectives of the BDA. Eggshell waste
was generated in enormous quantities every day; it will not result
in any long-term reduction in biological diversity. Moreover,
eggshell waste was not a biological resource whose depletion could
be concerning. Because eggshell waste was an animal waste, using it
to isolate the compound of this invention will not degrade the
nation’s natural biological resources.

The Applicant further submitted that such eggshell waste could
be compared to the use of domestic and livestock waste, all of
which are entirely exhausted biological resources and exempted from
BDA. In addition, the current inventors devised a method for
isolating aminoglycan from the garbage in a cost-effective manner
and producing something valuable, such as cosmetics. Hence, the
Applicant stated that the claims do not and cannot invoke the
provisions of the BDA.

The Controller eventually approved the application in light of
the above submissions, given that NBA approval was not
required.

C. Provisions under the Patents Act, 1970 through which a third
party can initiate proceedings against the grant of patent/granted
patent using biological resources

Under the Patents Act, 1970, the following actions can be
taken:

• refuse to grant the patent: as per Section 15 of the
  Patents Act, violations of provisions imbibed in BDA
  result in refusal to grant the patent.




• initiation of opposition proceedings: pre-grant opposition or
  post-grant opposition procedures can be filed under
  Sections 25(1) and 25(2) of the Patents Act, 1970,
  respectively, if the entire specification fails to disclose or
  wrongly mentions the source and geographical origin of biological
  material employed for the invention.




• revocation of patent: one of the grounds to procure patent
  revocation under the Patents Act 1970, is non-disclosure or wrong
  mentioning of the source and geographical origin of biological
  material employed for the invention.

IV. THE BIOLOGICAL DIVERSITY (AMENDMENT) BILL, 2021

In December 2021, the Ministry of Environment, Forest, and
Climate Change introduced the Biological Diversity (Amendment) Bill
2021 (Amendment Bill) in Parliament amending the
Biological Diversity Act 2002 (BDA). The Amendment Bill cites
issues voiced by the medical, seed, and research sectors along with
their appeal to the ministry to “simplify, streamline, and
reduce compliance burden”. Hence, to address the said issues
and provide a conducive environment for resource exchange and
research study, reduce the compliance burden along with simplified
access to use bio-resources the Amendment Bill was proposed.

A. Main intent behind the Amendment Bill

The main reason behind introducing the Amendment Bill is to
attain certain goals, all without imperiling the Nagoya
Protocol’s objectives. The goals are as follows:

• expand the scope of AYUSH (India’s traditional medicine
  systems) researchers and practitioners by exempting the traditional
  healers from intimating biodiversity boards for gaining access to
  bio-resources/knowledge (vaids and hakims),




• attract more foreign investments in research and development of
  biodiversity,




• minimize the pressure on wild medicinal plants by fostering
  cultivation & framing of medicinal plants,




• fast-track and streamline the research patent application
  process including commercial utilization, expanding access, and
  sharing benefits with local communities.




• decriminalize and reclassify the violations of benefit-sharing
  law as civil offenses, because such laws are still recognized as
  criminal and non-bailable offenses.

The Amendment Bill authorizes State governments to establish
district-level intermediate biodiversity management committees.

However, the Amendment Bill contains not very clear provisions
to safeguard, conserve, or increase local communities’ stake in
biodiversity conservation and sustainable use. The phrase
‘bio-utilization’ which is a key part of the Act, is not
included in the Amendment Bill. Likewise, cultivated medicinal
plants are exempted by the Amendment Bill from the purview of the
Act.

Moreover, the meaning of Section 3 (2) has been expanded to
encompass a ‘foreign-controlled corporation’ that is
incorporated or registered in India.

As of now, the Amendment Bill has been referred to a Joint
Parliamentary Committee which is anticipated to submit a report by
the 2022 budget session. According to reports, the submitted report
will almost certainly be put up for public comment.

CONCLUSION

Consequently, for every innovator, researcher, and other
business or non-business entity, it is paramount to realize and
cognizantly comply with the requirements of the BDA.

Footnotes

1.
http://ifs.nic.in/Dynamic/book/page8.pdf

2.
https://www.cbd.int/doc/world/in/in-nr-02-en.doc

3.
http://nbaindia.org/content/19/16/1/faq.html#:~:text=Value%20added%20product%20implies%20products,unrecognizable%20and%20physically%20inseparable%20form.

4. 2016
SCC OnLine Utt 1094

5.
Application no.25 of 2015

6.
MANU/GT/0169/2015

7.
2648/DEL/2006

8. Divya
Pharmacy v. Union of India, 2018 SCC OnLine Utt 1035

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