(Adds new quotes, details from court order)
By S. Murari
CHENNAI, India, Aug 6 (Reuters) - An Indian court rejected on Monday a challenge by Novartis to Indian law that denies patents for minor improvements to known drugs, and the Swiss drug giant said it was unlikely to appeal.
The closely-watched case in the Madras High Court had become a key battle in the long-running war between multinational drug firms and humanitarian campaigners, who say "big pharma" is putting patents ahead of patients.
The court in the southern city of Chennai rejected the challenge, saying it had no jurisdiction on whether Indian patent laws complied with intellectual property rules set by the World Trade Organisation, as Novartis had questioned.
Novartis had said a part of the law violated the Indian constitution as it was "vague" and gave arbitrary powers to patent authorities.
But the two-judge bench dismissed the challenge, saying Novartis was "no novice" in pharmacology to not understand a law that says a patent applicant has to show that the discovery "resulted in enhancement of known efficacy of the substance".
The objective of the Indian patent act, they said, was also to "provide easy access to citizens to life-saving drugs".
"We disagree with this ruling, however we likely will not appeal to the Supreme Court," a Novartis spokeswoman said by phone from Basel, in Switzerland. "We await the full decision to better understand the court's position."
A statement from Novartis said that the ruling would "have long-term negative consequences for research and development into better medicines for patients in India and abroad".
Novartis says the Indian patent system stifles innovation, such as making a drug more heat-resistant or able to be swallowed rather than injected.
Critics say changes to the law would mean drug companies could extend their monopolies by patenting trivial changes, affecting the supply of affordable drugs, including anti-AIDS drugs, to other developing countries from India.
ADVOCACY GROUPS JUBILANT
Novartis had gone to the court to challenge a law that blocks the patenting of minor improvements in known molecules.
"Novartis brought this case forward because it firmly believes this was the right thing to do for patients," the statement said.
"Effective patent systems ensure incentives are in place that stimulate long-term research and development efforts critical for medical progress."
In April, the same court had also ordered a related challenge by Novartis to a January decision that rejected its patent application for a cancer drug, Glivec, be referred to an appellate board.
That patent application was turned down because the drug was a new form of a known substance.
India is a key source of cheap generic medicines, and advocacy groups worry that millions of poor people could lose access to key drugs if Novartis succeeds in its challenge.
Aid agency Medecins Sans Frontieres (MSF) said the court order confirmed exactly what it had been saying, that Indian courts were not the proper forum to raise this issue and Novartis should settle it at the WTO.
"We absolutely welcome this court order," said Leena Menghaney of MSF in India, which has been campaigning against the Novartis challenge.
"It means patents will only be granted based on research and development and not just tinkering around with the old molecule to make a new form of an old drug.
"It basically means fewer patents will be granted by the Indian patent office, and that means more affordable drugs can be produced by Indian manufacturers."
The Indian government said in April that it was "very concerned" that the challenge by Novartis could restrict the global supply of cheap anti-AIDS drugs.
India is home to the world's third largest population living with HIV after South Africa and Nigeria, with an estimated 2.5 million infected people. (Additional reporting by Jonathan Allen in New Delhi)