IPR Newsletter – The Evergreening Debate: Balancing Innovation And Access : November 2024

Introduction

The Cambridge Dictionary defines Evergreen as “always seeming fresh or remaining popular:”

The moot concept of evergreening in context of Intellectual Property Law is quite similar.

Evergreening is a strategy used by some companies to extend the patent life of their products beyond the standard period by making minor changes to the original product.

Evergreening in IPR is not a major issue in itself and can be considered as a remarkable tactic used by corporations to maximise gains. But the issue is highlighted when pharmaceutical companies rampantly start indulging in it.

What Is Evergreening

Evergreening is a strategy used by various companies and industries to extend the profitability and exclusivity of a product or intellectual property beyond the original protection period. It involves making incremental modifications to an existing product, design, or intellectual property to re-secure rights or extend control.

In general, evergreening can apply to any industry where patents, copyrights, or trademarks are important.

The purpose of evergreening across industries is generally the same: to protect and lengthen the revenue stream from an original invention or product by prolonging the period before competitors can legally enter the market with comparable products. This approach raises questions about innovation and competition, as it can sometimes restrict consumer access to alternatives or affordable versions without necessarily offering substantial new benefits.

Arguments in favour of Evergreening

1. evergreening incentivizes companies to keep investing in improvements to existing products. Even small changes, such as refining a formula, enhancing software features, or modifying a design, can make a product more effective, user-friendly, or durable.
2. Evergreening can drive incremental but meaningful advancements, leading to better versions of existing products. In pharmaceuticals, for example, a new formulation might reduce side effects, improve drug stability, or make a medicine easier to take, benefiting patient compliance and outcomes.
3. Developing products in research-intensive fields like pharmaceuticals, tech, and manufacturing requires significant investment. Evergreening helps companies recover these costs by extending the period during which they can earn exclusive revenue, which is particularly beneficial for smaller companies that rely on long-term profitability.
4. By extending the revenue stream from a product, evergreening can help fund new research and development. Extended profits from a successfully greened product can be reinvested in creating groundbreaking products that benefit society and advance the industry.
5. Evergreening often introduces new options or features that meet different consumer needs or preferences. In the technology industry, software updates or upgraded devices provide consumers with more choices, allowing them to select products that best meet their specific requirements, even within an existing brand.

In conclusion, while some critics view evergreening as a means of profit protection, it unarguably ensures sustainable growth and competitiveness, allowing industries to evolve and consumers to access refined, high-quality options in an increasingly dynamic market.

Arguments Against Evergreening

1. Evergreening encourages companies to prioritize minor modifications over investing in genuinely new products or solutions. This focus on incremental changes diverts resources from groundbreaking research, potentially slowing down true innovation in the industry.
2. By extending exclusive rights, evergreening effectively delays the entry of competitors and generic alternatives, especially in pharmaceuticals. This prolonged market control reduces competition, allowing companies to maintain higher prices, limiting consumer choices, and preventing other businesses from developing competitive products.
3. Evergreening keeps prices high, particularly in essential sectors like healthcare, by delaying access to more affordable versions of products. This disproportionately impacts patients and healthcare systems, especially in lower-income regions, where high prices can lead to restricted access to essential medicines and treatments.
4. Critics claim that evergreening often exploits patent laws and regulatory loopholes intended to protect genuine innovation, rather than minor or superficial changes. This manipulation of the system can undermine the integrity of intellectual property laws and lead to public distrust.
5. Evergreening increases inequalities, as those in need may be unable to afford high-cost products or treatments. This issue is particularly significant in public health, where extending patent rights can delay access to life-saving generics, potentially impacting public health outcomes and amplifying healthcare disparities.

Evergreening often prioritizes profit over genuine innovation and public access. It challenges the fundamental purpose of intellectual property systems, which is to balance incentives for innovation with public access. Reforming evergreening practices could foster a more equitable, competitive, and dynamic marketplace, promoting true innovation that better serves consumers and society at large.

Legal Framework

In Europe, evergreening practices are scrutinized under various legal frameworks, including competition law and patent law. Article 102 of the Treaty on the Functioning of the European Union (TFEU) addresses abuse of a dominant market position, which can include certain evergreening strategies if they are deemed anti-competitive.

Regulatory bodies in Europe have established guidelines to limit abusive patenting practices:

1. Post-grant Opposition: Generic companies have a nine-month window to challenge patents after they are granted, which can help mitigate evergreening effects.
2. Supplementary Protection Certificates (SPCs): These can extend patent protection for up to five years but are subject to strict eligibility criteria.

The text of Article 102 states:

“Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.”

In USA, the legal framework addressing is multifaceted, involving patent law, regulatory practices, and competition policy.

1. The U.S. patent system allows for new patents on modifications of existing drugs. However, the obviousness doctrine under 35 U.S.C. § 103 is crucial in combating evergreening. 35 U.S.C. § 103 states:
   
   “A patent for a claimed invention may not be obtained, notwithstanding that the claimed invention is not identically disclosed as set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. Patentability shall not be negated by the manner in which the invention was made.”
   
   This doctrine states that a patent may be denied if the invention is deemed obvious to someone skilled in the relevant field. Strengthening this application could reduce the number of patents granted for minor modifications that do not significantly enhance therapeutic efficacy.

2. The FTC has been actively investigating practices related to evergreening. In late 2023, it challenged numerous pharmaceutical companies over the validity of patents listed in the FDA’s Orange Book, which can impede generic drug entry. The FTC’s scrutiny aims to eliminate “junk listings”—patents that do not contribute meaningfully to innovation but serve to prolong market exclusivity. Ongoing investigations could lead to removing some patent protections and fostering competition.

3. Recent legislative efforts have focused on enhancing competition and reducing drug prices. The Biden administration announced initiatives aimed at curbing practices that allow pharmaceutical companies to maintain high prices through evergreening tactics. These include collaboration between the FDA and the U.S. Patent and Trademark Office to reform patent listings and improve transparency.

4. Courts have also played a role in challenging evergreening practices. For instance, a federal judge recently ruled against Teva for improperly listing patents related to its asthma medication, highlighting judicial willingness to scrutinize patent listings that may delay generic competition.

India’s legal framework to combat evergreening in the pharmaceutical sector is primarily encapsulated in the Patents Act of 1970, particularly through provisions that restrict the patentability of incremental innovations. This framework aims to balance the protection of genuine innovations while preventing the extension of patent rights for minor modifications of existing drugs.

Sections pertaining to Evergreening in Indian Legal System

1. Section 3(d) of the Patents Act

This section explicitly states that a new form of a known substance cannot be patented unless it demonstrates a significant enhancement in efficacy. It aims to prevent the mere discovery of new forms, properties, or uses of known substances from being patentable.

Section 3(d) has been pivotal in rejecting numerous patent applications for drugs that do not show substantial improvements over existing treatments. The landmark case of Novartis AG v. Union of India (2013) exemplified this, where the Supreme Court upheld the rejection of a patent application for the cancer drug Glivec on the grounds that it did not meet the efficacy requirement set forth in section 124.

2. Sections 3(e) and 3(i)

Section 3(e): This provision prohibits patents on mixtures of known compounds unless they exhibit a synergistic effect, further discouraging evergreening through minor modifications.

Section 3(i): This section states that methods of treatment cannot be patented, reinforcing the notion that advancements in healthcare should remain accessible and not monopolized through patents24.

 

Regulatory and Judicial Framework

1. Indian Patent Office (IPO) Guidelines

The IPO is responsible for examining patent applications rigorously, applying sections like 3(d) to ensure that only genuinely innovative products receive patent protection. However, there have been criticisms regarding inconsistent application and enforcement of these provisions.

2. Judicial Precedents

Indian courts have played a crucial role in interpreting and enforcing anti-evergreening laws. The Supreme Court’s ruling in the Novartis case affirmed India’s commitment to preventing evergreening practices, thereby prioritizing public health over extended patent rights12.

Conclusion

In conclusion, evergreening is a complex and multifaceted issue that sits at the intersection of innovation, market competition, public welfare, and legal boundaries. While evergreening allows companies to safeguard investments and continuously improve their products, it also raises ethical and economic concerns about accessibility, affordability, and genuine innovation. Jurisdictions around the world have responded differently, with countries like India adopting stringent measures against patent extensions for minor modifications, while others maintain systems that can facilitate evergreening through regulatory exclusivity and lenient patent standards.

The legal frameworks surrounding evergreening reveal a global struggle to balance corporate interests with public needs, especially in areas like healthcare and technology, where prolonged monopolies can have significant social impacts. This debate challenges the traditional purpose of intellectual property rights, questioning whether current practices serve innovation or simply protect profit. As industries evolve and global interdependence grows, it becomes imperative for lawmakers and stakeholders to find a middle ground that protects both the drive for innovation and the public’s right to affordable, accessible options. Addressing the nuances of evergreening fairly and effectively will not only promote a more dynamic market but also uphold the broader values of equity and social responsibility in our global intellectual property system.