CHENNAI, India, April 4 (Reuters) - A court in southern India on Wednesday reserved its verdict on a challenge by Novartis AG <NOVN.VX> against an Indian law that blocks patenting of minor improvements in known molecules.

India is a vital source of cheap generic medicines and campaign groups are worried that the poor in the developing world could lose access to vital drugs if the Novartis challenge succeeds.

The giant Swiss drugmaker has argued that tightening of intellectual property laws would boost investment in developing more medicines, and says that the Indian patent system stifles innovation.

The Madras high court on Wednesday did not fix a date when it would hand down its ruling on the Novartis challenge.

Madras is the old name of the city of Chennai where the closely watched case is being fought.

The affair has become a test-case in a long-running war between "big pharma" and humanitarian campaigners who say drug makers are putting patents ahead of poor patients.

The two-judge court also ordered that another challenge by Novartis to a January decision that rejected its patent application for cancer drug, Glivec, be referred to an appellate board, consisting of experts and headed by a former judge.

"We do not want to express any opinion," the bench said on the Glivec case.

Last month, Novartis chief executive Daniel Vasella said the company did not seek "popularity awards" and would continue with its legal action over the Indian patent system to "serve our patients and remain competitive".

In sub-Saharan Africa, home to two thirds of the world's HIV-positive people, the concern is more acute, as some fear the case -- if it goes in favour of Novartis -- could undermine India's role as a source of cheap generic medicines, especially AIDS drugs.

Humanitarian agency Medecins Sans Frontieres has said tens of thousands of people being treated for AIDS will suffer if the Swiss company succeeds in changing India's patent law.

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