Monthly Archives: June 2016

Trademark/ Copyright and Patents Suits/ Civil Proceedings: Why Non-uniformity in Jurisdictions Available to Plaintiffs?

Section 62 of the Copyright Act, 1957, Section 134 of the Trademark Act, 1999, Section 104 of the Patents Act, 1970 and section 20 of Code of Civil Procedure (CPC), 1908 govern the applicable jurisdiction to file suits/ civil proceedings in case of Copyright, Trademark and Patent disputes.

These sections have been reproduced below:

For Copyright:

Section 62 of the Copyright Act, 1957:  

Jurisdiction of court over matters arising under this Chapter.—

(1) Every suit or other civil proceeding arising under this Chapter in respect of the infringement of copyright in any work or the infringement of any other right conferred by this Act shall be instituted in the district court having jurisdiction.

(2) For the purpose of sub-section (1), a “district court having jurisdiction” shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), or any other law for the time being in force, include a district court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or other proceeding or, where there are more than one such persons, any of them actually and voluntarily resides or carries on business or personally works for gain.

P.S. – (Emphasis added)

For Trademark:

Section 134 of the Trademark Act, 1999:

Suit for infringement, etc., to be instituted before District Court.—

(1) No suit—

(a) for the infringement of a registered trade mark; or

(b) relating to any right in a registered trade mark; or

(c) for passing off arising out of the use by the defendant of any trade mark which is identical with or deceptively similar to the plaintiff’s trade mark, whether registered or unregistered, shall be instituted in any court inferior to a District Court having jurisdiction to try the suit.

(2) For the purpose of clauses (a) and (b) of sub-section (1), a “District Court having jurisdiction” shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908) or any other law for the time being in force, include a District Court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or proceeding, or, where there are more than one such persons any of them, actually and voluntarily resides or carries on business or personally works for gain. Explanation —For the purposes of sub-section (2), “person” includes the registered proprietor and the registered user.

P.S. – (Emphasis added)

For Patent:

Section 104 of the Patents Act, 1970:

No suit for a declaration under section 105 or for any relief under section 106 or for infringement of a patent shall be instituted in any court inferior to a district court having jurisdiction to try the suit: Provided that where a counter-claim for revocation of the patent is made by the defendant, the suit, along with the counter-claim, shall be transferred to the High Court for decision.

For Copyright, Trademark and Patent:

Section 20 of CPC:

Other suits to be instituted where defendants reside or cause of action arises.- Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction—

(a) The defendant, or each of the defendants where there are more than one, at the time of the commencement of the Suit, actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or

(c) the cause of action, wholly or in part, arises.

Explanation: A corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.

Analysis:

Section 20 of CPC provide for filing of suit at the court within local limits of which cause of action arises wholly or in part or at the court within local limits of which defendant resides, or carries on business, or personally works for gain. In the absence of any other specific section of the law currently in force, plaintiff cannot choose to file suit at the court within local limits of which he resides, or carries on business, or personally works for gain. Fortunately in case of Trademark and Copyright, section 134 of the Trademark Act, 1999 and section 62 of the Copyright Act, 1957 respectively provide for filing of suit also at the court within local limits of which plaintiff resides, or carries on business, or personally works for gain. Unfortunately Section 104 of the Patents Act, 1970 for patents does not provide such convenience. Section 104 of the Patents Act, 1970 only provides that infringement suits can be instituted at any court not inferior to a district court. As section 104 of the Patents Act, 1970 does not provide the details of the territorial jurisdiction of district/ high court where suits for patent disputes are to be filed, jurisdiction is to be decided in accordance with section 20 of CPC.

Reader is advised to read article written by IIPRD on the inclusive nature of section 62 of the Copyright Act, 1957 and section 134 of the Trademark Act, 1999.

Below given table compares the convenience of plaintiffs being a corporation (which includes a company) in case of trademark/copyright and patent suits.

trademark copyright and patent suits

In the times to come when patent infringement suits will be on the rise, plaintiff should not be driven to file suits at the location where infringement took place or location where defendant resides, or carries on business, or personally works for gain. Change in law to bring the section 104 of the Patents Act, 1970 in lines with section 62 of the Copyright Act, 1957 and section 134 of the Trademark Act, 1999 is required to stop the inconvenience being caused to plaintiffs in case of patent suits.

About the Author: Swapnil Patil, Patent Associate at Khurana & Khurana, Advocates and IP Attorneys and can be reached at: swapnil@khuranaandkhurana.com.

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Analyzing the Applicable Jurisdiction for Trademark and Copyright Disputes

Years 2015 and 2016 have been very important in terms of what they have offered to bring clarity on the jurisdiction where suits/ civil proceedings related to Trademark and Copyright can be instituted. IIPRD has written one article discussing some of these cases. Intent of the instant article is not to discuss facts of those cases again but to understand the latest position on the applicable jurisdiction for Trademark and Copyright disputes.

Section 62 of the Copyright Act, 1957 (hereinafter referred to as section 62), Section 134 of the Trademark Act, 1999 (hereinafter referred to as section 134) and section 20 of Code of Civil Procedure (CPC), (hereinafter referred to as section 20) 1908 govern the applicable jurisdiction.

These sections have been discussed below:

For Copyright:

Section 62:

Jurisdiction of court over matters arising under this Chapter. —

(1) Every suit or other civil proceeding arising under this Chapter in respect of the infringement of copyright in any work or the infringement of any other right conferred by this Act shall be instituted in the district court having jurisdiction.

(2) For the purpose of sub-section (1), a “district court having jurisdiction” shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), or any other law for the time being in force, include a district court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or other proceeding or, where there are more than one such persons, any of them actually and voluntarily resides or carries on business or personally works for gain.

P.S. – (Emphasis added)

For Trademark:

Section 134:

Suit for infringement, etc., to be instituted before District Court. —

(1) No suit—

(a) for the infringement of a registered trade mark; or

(b) relating to any right in a registered trade mark; or

(c) for passing off arising out of the use by the defendant of any trade mark which is identical with or deceptively similar to the plaintiff’s trade mark, whether registered or unregistered, shall be instituted in any court inferior to a District Court having jurisdiction to try the suit.

(2) For the purpose of clauses (a) and (b) of sub-section (1), a “District Court having jurisdiction” shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908) or any other law for the time being in force, include a District Court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or proceeding, or, where there are more than one such persons any of them, actually and voluntarily resides or carries on business or personally works for gain. Explanation. —For the purposes of sub-section (2), “person” includes the registered proprietor and the registered user.

P.S. – (Emphasis added)

For both Copyright and Trademark:

Section 20:

Other suits to be instituted where defendants reside or cause of action arises. – Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction—

(a) The defendant, or each of the defendants where there are more than one, at the time of the commencement of the Suit, actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or

(c) the cause of action, wholly or in part, arises.

Explanation: A corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.

Section 62 and Section 134 are pari materia. It is important to note that both of these sections are ‘inclusive’ in nature. They are categorical in nature. The inclusive nature of these sections can be inferred from the word ‘include’.

To better understand the intent and effect of section 62 and section 134, let’s understand what recourse plaintiff would have in absence of these sections and what recourses they have now with these sections.

In absence of Section 62 and Section 134, having resort to section 20, plaintiff may be able to file the suit of infringement against the defendant only at the district court (in case of copyright) or at a court that is not inferior to the district court (in case of trademark) within local limits of which cause of action wholly or in part arises, or where defendant resides, carries on business or personally works for gain. But when we read Section 62 and Section 134 with section 20, plaintiff can also file suit for infringement at a place where he resides or carries on business or personally works for gain. Plaintiff is not barred to file suits at courts having jurisdictions where cause of action has arisen wholly or in part or at court having jurisdiction where defendant resides or carries on business or personally works for gain even if plaintiff is not residing or carrying on business or personally working for gain in any of those jurisdictions.  

Section 62 and section 134 are not in derogation of section 20, instead they just provide an additional forum for the suing to the plaintiff. Such interpretation of section 62 and section 134 has been confirmed by division bench of Hon’ble Madras High Court in M/S. MICRO LABS LIMITED, REP., BY ITS COMPANY SECRETARY V/S M/S. ERIS LIFE SCIENCES PVT. LTD., decided on Tuesday, September 15, 2015.

After INDIAN PERFORMING RIGHTS SOCIETY LTD. Versus. SANJAY DALIA AND ORS: (2015) 10 SCC 161 decided on July 01, 2015 by Hon’ble Supreme Court and ULTRA HOMES CONSTRUCTION PVT. LTD Versus PURUSHOTTAM KUMAR CHAUBEY & ORS FAO (OS) 494/2015 & CM 17816/2015 decided on January 20, 2016 by Hon’ble division bench of Delhi High court, plaintiff being a corporation (which includes a company), can sue at places as discussed below:

Picture2

By drawing analogy from the case laws read with section 134, section 62 and section 20, below is produced a table that discusses the applicable jurisdiction that may arise in different cases.

Picture1

About the Author: Swapnil Patil, Patent Associate at Khurana & Khurana, Advocates and IP Attorneys and can be reached at: swapnil@khuranaandkhurana.com.

Submission on SEPs and Their Availability Under FRAND Terms

  1. Introduction

This submission is with respect to the discussion paper published by DIPP on Standard Essential Patents (SEPs) and their availability under FRAND terms. As one of the prime objects of IP laws is to promote/establish a fair balance between IP protection and Public interest, it is becoming essential for the governing bodies to have a closure look on the way SEPs are being commercialized.  In absence of any clear frameworks or guidelines by the government and standards making organizations, a lot of concerns have been raised recently with regards to working of standard essential patents.  It has been observed across the globe that there is no standard for terming any patent as Standard Essential Patent and there certainly are no standard /clear enforceable guideline under which the SEPs should be licensed to interested parties.

In view of the issues raised during recent litigations and foreseen issues related to SEPs and the ways they are licensed, the DIPP has taken a welcome step to develop a suitable policy framework to define obligations of the essential patent holders and their licensees.  Though the discussion paper under heading of “issues for resolution” attempts to explore a variety of issues, the objective appears to be conservatively defined. We think that the objective should be to develop a suitable framework/guideline for (a) Standards Setting Organizations (SSOs), (b) Government Bodies that approve or mandate any standard, (c) Rights holders of SEPs and  (d) Potential Licensees; and to evaluate need for change in domestic laws, if required.

Through this paper, we intent to submit our opinion on different issues listed for resolution and some other inputs to be evaluated further. We have also made an attempt to propose some obligations for each of the above listed entities

  1. Legislative measure

Let’s start with the first issue listed for resolution.

  1. Whether the existing provisions in the various IPR related legislations, especially the Patents Act, 1970 and Anti-Trust legislations, are adequate to address the issues related to SEPs and their availability on FRAND terms? If not, then can these issues be addressed through appropriate amendments to such IPR related legislations? If so, what changes should be affected.

Though the Patent Act, 1970 incorporates several provisions (like compulsory license) to strike a balance between the interest of IP owners and public interest, the issues related to SEPs were never explored to be addressed by the law.  As the issues related to SEPs have potential to directly impact public interest, it is right time for the legislators to explore possibility of suitable changes in the law or clarification of law to address the issues related to SEPs.

            The patent act 1970 through section 66 has also provided tool for revocation of patent in public interest that reads as “Where the Central Government is of opinion that a patent or the mode in which it is exercised is mischievous to the State or generally prejudicial to the public, it may, after giving the patentee an opportunity to be heard, make a declaration to that effect in the Official Gazette and thereupon the patent shall be deemed to be revoked”.Though the provision has been rarely, in fact never,  invoked (at least to my knowledge), there should be some clarify on the term “generally prejudicial to the public”, and whether the section 66 can be a potential tool to revoke the SEP if the public interest is undermined due to abuse of dominance by the SEP holders.  Here are some of the proposals that can be incorporated through appropriate amendments after careful evaluation.

Proposed Legislative Measures:

  • Addition of grounds of revocation: An additional group of revocation under section 64 can be added to enable revocation of patent in case of failure of timely disclosure of essential patents related to a standard by a member or non-member of the associated standard, especially when the patent makes a claim of it being a SEP, to avoid any potential patent hold-up issues.
  • Requirement under section 146 rules 131 requiring disclosure on working on patents in form-27 to clearly state if the patent is a SEP and associated standard,if any, for which the patent has potential of becoming SEP. Though most of the SSOs require disclosure of the IP by member of the SSOs, the obligation is mostly contractual and may not have binding effect in the law of land, and hence a suitable legislative measure in this regard is required to avoid practice of patent hold-up.
  • Avoid injunction by the court if bona-fide intent is shown by the potential licensee: Courts should refrain from granting injunctions in suits initiated by the SEP holders without giving reasonable opportunity to the potential licensee to prove a bona-fide intent to take a license from the SEP holder.
  • Limiting the right conferred by a patent in case the patent is an SEP.
  • Provision for “license of right” should be explored in order to ensure license of the patent to a potential licensee at RAND terms. Section 46 of the UK Patent Act 1977 (as amended) provides a patent proprietor with the possibility of having an entry made on the register that licences are available as of right under a patent.   By having a patent endorsed “licences of right”, a patent proprietor effectively offers any third party the opportunity to have a licence under the patent, on reasonable terms. If terms of a licence cannot be agreed between the parties then the UK Patent Office sets the licence terms[1]. A similar provision can be made in India, as it benefits both the right holder and the potential licensee.  Through this provision, the patent holder can get rebate on the annuity fee as well.

Though it is a well perceived notion that the interference of Government in IP commercialization can undermine interest of the right holders, the same cannot be said for SEPs, as unregulated SEPs create opportunity for abuse of dominant position of right holders. Legislative measures to address issues related to SEPs have also been discussed and explored during thirteenth session by the WIPO standing committee on the law of patents[2]. The legislative measures are also required in absence of any strong enforceability within India for contractual violation by members of SSOs with respect to agreement of the members with the SSOs. Requirement of legislative measures has also been felt in recent cases which show uneven negotiating power of IP owner and potential licensor-especially in case of SEPs, where mutual contracts-especially with unreasonable terms of NDA-may not be right tool for executing the licensing agreement.  The advantages of these solutions are that they are universal, and also apply to non-participants in the standard-setting process.

  1. Guidelines for Standards Setting Organizations (SSOs)

The proposed policy framework should also define the guideline/obligation for standards setting organizations, especially with respect to adaptation of technology for setting the standard and terming any patent essential for standard. The rationale behind FRAND is that it benefits the inclusion of patented technology in technical standards while ensuring that the holder of SEPs should not abuse the dominant market position it gains from widespread adoption of a voluntary technical standard. It has clearly been observed by the communities over the world that Patents are essential to implement  chosen industry standards, and those patents (SEPs) cannot be exploited like any other patent, and certainly not to the exclusion of other market participants.

SSOs should also ask members to identify their most restrictive licensing terms and conditions, including the maximum royalty rate, basis of royalty (whether smallest tradeable unit or the end product etc.), that they would demand if access to their patents becomes necessary to implement the standard. Such disclosures, made in advance of a standard being selected, provide SSO members important information that allows them to choose a standard based not only on technical merit, but also on the cost of accessing the IP needed to implement that standard.

Selection of SEPs should be one of the essential part during standard making.  Members should / must disclose all granted and pending applications, which should be examined by a team of SSO with respect to their essentiality and should be termed as SEP only if their essentiality is established at a broad level.  Members should also disclose in future any granted and pending applications in order to allow SSOs to evaluate essentiality and terming those patents as SEPs.  Members should essentially disclose the IPR which might be essential if that proposal is adopted and the law should be amended accordingly to ensure invalidation/revocation of IPRs in absence of such disclosure.

The SSOs should have a transparent system in which technology standards are adopted, and should have clear IP policy requiring binding obligation on the members to disclose their IP.

  • Representation of Government

To make the system more transparent, wherever possible or for standard having potential to impact public at large, there should be representation of the Government during standard making process.

  • Onus of SSOs to monitor SEP

Having technical experts in their panels, the SSOs should have an onus to monitor SEPs and evaluate IP declared by its members to determine whether the disclosed patent is essential for the standard or not.  There should be guideline on what becomes an essential patent and what should be reasonable terms and conditions for licensing the SEPs.

Washington District Court in Microsoft Corp. v. Motorola Mobility, Inc. defined SEP as “A given patent is “essential” to a standard if use of the standard requires infringement of the patent, even if acceptable alternatives of that patent could have been written into the standard.” A patent is also essential “if the patent only reads onto an optional portion of the standard.” Thus, it is impossible to manufacture standard-compliant products without using technologies covered by one or more SEPs.

The judgement very broadly defines the term SEPs and has never been examined by any other court in other jurisdiction, which leaves a question mark on the merit of the definition itself. With this very broad definition of SEP, the SSOs have to have  an obligation to define a transparent way in which  patents become SEPs and how they should be licensed. As some of the standards set by the SSOs are directly impacting the public interest, the SSOs can’t be an elite club of influential corporate houses and a tool for the elites to secure dominant position.  SSOs should take onus to getting the license from the IP owners and make them available at FRAND terms.

  • IP Policy of the SSOs

IP policy of the SSOs should have some mandatory provisions to create binding obligation on the members. Some of the essential provisions are listed as below

  • Disclosure requirement: IP policy should have a building clause for disclosure of patent or pending applications by the members on timely manner (may be within 6 month of claim being grated or application being filed).The ANSI Patent Policy Guidelines suggest that, in order to encourage early disclosure of essential patents, one or more requests be made to participants during the development of standards for the disclosure of essential patents. Such a request could be made by including it in letter ballots or in requests could be repeated at working group(s) or by a semi-annual notice given to each participant. The Guidelines, however, clarify that participants in the standards development process are not required to conduct a patent search of their own or others’ patent portfolios. The Guidelines also suggest that the ASD makes it clear that any participant in the process, and not only a patent holder, is permitted to identify or disclose essential patents. They state that it is desirable to encourage disclosure of as much information as possible concerning the patent, such as the identity of the patent holder, patent number, information regarding how it may relate to the standard being developed and relevant unexpired foreign patents. Further, the Guidelines encourage disclosure of existing pending US applications, although there may be an issue of confidentiality regarding unpublished applications and uncertainty as to whether the application would mature into a patent and what the scope of the claims in the granted patent would be.
  • Disclaimer to offer license on FRAND terms: Written declaration by the member to grant the license of SEPs on FRAND terms without any discrimination between existing or potential licensees should be mandatory. Agreement to grant the SEPS on FRAND terms should be the primary requirement when any technology is adopted by the SSOs and they must ensure that the FRAND terms are used in essence. Deviation of set guideline of FRAND should be treated as violation of agreement and should be linked with loss of IP rights.
  • Royalty base: Declaration by the members that they will negotiate Royalty for the SEPs based on smallest saleable component. The same view on royalty base has been suggested by the CCI and even by the some SSOs for example IEEE-SA. There can be an indicative price of royalty set by the SSOs, and share/percentage of each member, which respect to contribution of claim in the technology should be defined by the SSOs for each member. For example the SSO can define that the highest royalty rate for a compliant smallest saleable component would be “X” percentage of the cost of that smallest component, and royalty share for company A be M percentage of X, company B be N percentage of X and like that.
  • Injunction Against potential Licensee: Member can’t seek, or threaten to seek, injunction against potential licensee who is willing to negotiate for license.
  • NDA: Terms of the NDA for execution of licensing agreement can’t hide the SEPs in question. SSOs around the world have raised the issue of Patent Hold-up and Royalty Stacking in view of non-conformity of FRAND practices by licensors which gets complicated due to the discriminatory NDAs. Hence, there is a need to frame an acceptable framework for NDAs, in case both the licenser and licensees consider it as obvious in some cases.  To supplement, SSOs should seek advanced binding commitments from members before a standard is accepted.
  • Bundling of SEP patent with other patents: The member should not bundle SEPs with other patents of the members, as this creates an unfair practice and leads to abuse of dominance.
  • Patent Pool

The stacking up of royalty rates is a major issue, particularly in the IT industry where thousands of patents are involved in a single product.  In the instance of multiple royalty rates, that too with jacked-up values, at times the viability of profit diminishes, and thereafter, the burden shifts to the customer. A probable solution, although somewhat hard, would be step-down royalty rate or total royalty pool.  For step-down royalty rate, the share of each subsequent SEP holder will diminish as per a present declining rate. This makes sure that the multiple SEPs bring in their patents and the cost of the standard is disclosed to the SSO.

Patent pool managed by the SSOs can be a suitable option that may benefit all the members and potential licensees.  SSOs or any appropriate administrative body should facilitate patent pool for SEPs and define portion of royalty to be made to each SEP holders.  By doing so, chance of a single member getting an unreasonable royalty and undermining the interest of other member can also be avoided.   SSOs/ administrative body can work in coordination with Patent offices and should keep an eye on any potential patent-hold up. An attempt should be made to include maximum patents, those are essential for standard. A suitable royalty model for sharing of royalty among members can be explored.

In order to bring more transparency and predictability to the overall royalty price for the implementation of standards, some propose a new model (“Industrial Royalty Pie” model). In the telecom environment which is characterized by complex and dynamic standards having broad technical scope and long evolution cycles over many years, it is felt that a mere ex ante disclosure of licensing terms at the SSO is not effective, since it is too early for prospective patent owners to put a meaningful price tag on the technology. The Industrial Royalty Pie model therefore combines the ex ante process with other measures so that both individual royalty rates are FRAND-compliant and cumulative royalty rates are reasonable.

  • Special IP policy for Standards enforced/recommended by Government /Law

There should be guidelines from the Government for licensing of patents relating to technical requirements that are imposed by law, referred as technical regulations based a defined framework. There should be special guideline for licensing SEPs under FRAND for SEPs related to standards that are enforced by Government/law (like encryption Techniques, security features in automobile or medical devices etc.).

  1. Miscellaneous

Further question arises about scope of claim and rights protected for possibly changed claim in different countries.  As IP rights are territorial in nature, complete family of a patent can’t be essential. For example, a patent granted in US may be SEP, while the same patent granted in India may not be, as its scope of protection may have varied during prosecution, and again onus lies on the SSOs to compile the SEPs for different jurisdiction.

Special care should be taken by Government agency before issuing any ruling on a standard to be followed, keeping in view the potential IP licensing issues related to SEPs.

Disclaimer

Opinion and suggestion provided in this submission are personal to the author and not indicative of the organization that they belong to.

[1]http://www.bios.net/daisy/patentlens/2528.html

[2]STANDARD AND PATENTS DOCUMENT SCP/13/2   www.wipo.int/edocs/mdocs/scp/en/scp_13/scp_13_3.pdf

About the Author: Gyanveer Singh, Senior Patent Associate at Khurana & Khurana, Advocates and IP Attorneys and can be reached at:gyanveer@khuranaandkhurana.com and Harsh, Junior Patent Associate at IIPRD and can be reached at: harsh@iiprd.com.