Whether a patent related to genetically modified cotton seeds is valid under Section 3(j) of the Patents Act, 1970; or was it exclusively under the domain of the Protection of Plant Varieties and Farmers’ Rights Act, 2001.
Short description of Patent: The patent was for transgenic cotton seeds named as Bt. Cotton, as they contained genetic strains that made them resistant to bollworms that typically infest cotton plants.
- Mahyco Monsanto Biotech India Pvt. Ltd. (Mahyco) had sublicenced the technology for Bt.cotton seeds to the Petitioner companies (seed manufacturers) vide sublicence agreements. Under these agreements, the seed manufacturing companies had to pay a recurrent “trait fee” as royalty for using the patented technology.
- In a dispute regarding payment of the trait fee, arbitration proceedings were initiated by Mahyco and they were successful in obtaining an arbitral award that directed that the Petitioners were liable to pay Mahyco Rs. 117.46 crores towards trait value for sales between 1st April, 2015 and 14th November,2015 under Sub-Licence Agreement, 2015 along with interest at the rate of 6% per annum from the date of invocation of the arbitration i.e. 23rd February, 2016 till the date of the award and interest at the rate of 12% per annum from the date of the award till the date of payment/realization.
- Aggrieved, the Petitioners filed instant Petition before the High Court of Bombay praying that the arbitral award be set aside.
Submission by Petitioners
- The main argument put forth by the Petitioners was that protection of seeds was not permitted under Section 3(j) of the Patents Act, 1970 and was possible only under the Protection of Plant Varieties and Farmers’ Act, 2001. Therefore, rights claimed by Mahyco under Patents Act are invalid.
- It was further submitted that patent disputes are not arbitrable as the Patents Act, 1970 is a complete code in itself providing adjudication mechanisms under Sections 64, 104 and 107 of the Act.
Submission by Respondents
- The Respondents took the argument that an arbitral award cannot be challenged on the basis of assumed invalidity of patents. The Petitioners have simplictor raised a plea that the patent is invalid under Section 3(j). However, it is to be noted that Section 3(j) does not declare any agreement to be void.
- The Respondent further submitted that the Patents Act is not a complete code in itself when disputes involving contractual relief are to be adjudicated.
- Regarding jurisdiction the Court ruled that as long as the triple test under Section 16 of the 1996 Arbitration Act is satisfied, the arbitral award cannot be challenged for want of jurisdiction. The three conditions to be satisfied are- (i) existence of a valid arbitration agreement, (ii)a properly constituted arbitral tribunal, and (iii) subject matter of the dispute should fall within the scope of the arbitration agreement.
- Regarding the alleged invalidity of patent under Section 3(j) of the Patents Act, the Court held the contention to be untenable. Section 3(j) does not prohibit any kind of agreement between parties and furthermore, dues claimed by the Respondent are not patent fees but what was contractually owed to them under the sublicence agreement. The Court highlighted in affirmation the finding made by the arbitral tribunal that claims by Mahyco are not regarding patent rights and hence, not invalid.