Author Archives: IIPRD

Patentability of Genetically Modified Plant Breeds: The Monsanto Conclusion

On January 08, 2019, the Supreme Court of India, in the matter of Monsanto Technology LLC v. Nuziveedu Seeds Ltd.[1] held that genetically modified cotton seeds were patentable, and allowed U.S. company Monsanto to file their patent claims. The bench, comprising of Justice Rohinton Fali Nariman and Justice Navin Sinha, set aside the order of the Division Bench of the Delhi High Court, which had held such claims to be inapplicable in India. The Single Judge of the High Court had granted an interim injunction against any sale of Bt cotton seeds using the patent of Mahyco Monsanto Biotech, Monsanto’s Indian arm.

On 21.2.2004, the plaintiffs had entered into a 10-year sub-license agreement with the defendants to develop “Genetically Modified Hybrid Cotton Planting Seeds” using the technology provided by the plaintiffs, after paying a license fee for the same. However, the agreement was terminated by the plaintiffs on 14.11.2015 due to disputes in lieu of the price control regime by the government, which the defendants asked the plaintiffs to adhere to.

The defendants in the suit argued that their rights were statutorily protected under the Protection of Plant Varieties and Farmers’ Rights Act, 2001 (hereinafter referred to as ‘the PPVFR Act’). It was argued that the patent was bad as unlike the “complex biological processes” adopted by the defendants, “claims 1-24 were “process claims” concerning genetic engineering or biotechnology method to insert “Nucleic Acid Sequence” (NAS) into a plant cell as in claim 25-27” were practiced in laboratory conditions. Basically, it was contended that NAS could not reproduce itself and could only impart insect resistance through its Bt trait when it was injected into another organism, thereby resulting in a process that was not biological, and hence patentable. Thus, infringement was denied in lieu of Section 3(j) (the Act) of the Patents Act, 1970 concerning plants and seeds with DNA sequences. In addition, revocation of the concerned patent was sought under Section 64 of the Act.

The Single Judge prima facie observed that the termination was not of any significant consequence as the plaintiffs had benefitted from the agreement all these years and hence held the action unjustifiable. The Division Bench accepted the counter-claim of the defendants and upheld their contention. Dismissing the appeal filed by the plaintiffs, the patent exclusion under Section 3(j) of the Act would stand and the plaintiffs could register their patent under the PPVFR Act. However, the suit continued with regard to damages and other reliefs.

In the Supreme Court, the advocates for the plaintiffs contended that the issue of patentability was never an issue in the suit and that the issue was solely about patent infringement. It was argued that the issue of patent exclusion was a mixed question of law and fact. The impugned order did not restrict itself to the “process claims” (25-27) and went further and held the 1-24 claims also, as bad in law, which was contended. Even the Single Judge had admitted that the issue of patentability required expert evidence and could be decided only when during the final trial of the suit and not summarily. It was also brought to the attention to the court that this patented technology had the highest number of seeds sold, and that the plaintiffs never intended to sue any Indian farmer individually. It was argued that the PPVFR Act and the Act were not complementary but were mutually exclusive in nature. Hence, it was contended that such a DNA construct/gene was not a plant variety as it did not come within the definition of “plant grouping”, i.e. the lowest ranking of any plant – a species. Construing Section 2(za) read with Sections 14 and 15, it did not fall within the PPVFR Act. The advocates for the petitioners also went on to say that this required human intervention and was by no means purely a biological process.

The advocates appearing on behalf of the defendants contended that such genetically modified plant breeds could not be patented as the same would go against the scheme envisaged under the PPVFR Act. Such donor seeds had to be registered under this statute and were entitled to its constituent benefits listed under Section 26 as well. It was argued a proper construction of asserted claims and a determination of how the product infringes this claim, has to be proved in cases of patent infringement. In this case,  the plaintiffs argued that there was only an improvement of a prior, existing art form and this precluded the plaintiffs from claiming a patent for the same. It was further argued that even though it was a gene variety, the process made it an inherently transgenic plant. Further, this passes onto the progeny plants and infiltrates into every cell of the plant, even to the extent of going to the sub-cellular level. and that this irreversible biological process made the characteristics pivotal to the plant. Thus, an effective meaning of this process did not construe it to be a product claim. In addition, the insertion of NAS into the Indian varieties of plants developed an entirely new variety of plants. The use of such varieties under the PPVFR could not be undone by patenting the same. The lack of any inventive step and any industrial application was also argued for the applicability solely of the PPVFR Act and not the Patents Act, 1970. A conjoint reading of Section 2(j) and 3(c) of the Act did not allow biological processes to be patented. Moreover, no patent claims of this nature could deprive farmers from using this technology, as the powers under Section 48 of the Act could only be exercised against biotechnology companies seeking to exploit it. This would hold true, whether seen from the lens of the Patents Act or the PPVFR Act. As a last resort, it was prayed that the matter be heard fresh by the Division Bench only on the injunction matter.

After listening to the submissions of the counsels, the Supreme Court agreed with the decision of the Single Judge. It opined that owing to the complicated nature of this matter, the existing patent should not have been summarily adjudicated. The Division Bench, in their opinion, should have confined themselves to adjudging whether the injunction was valid or not. It held –

The Division Bench ought not to have examined the counter claim itself usurping the jurisdiction of the Single Judge to decide unpatentability of the process claims 1-24 also in the summary manner done. Summary adjudication of a technically complex suit requiring expert evidence also, at the stage of injunction in the manner done, was certainly neither desirable or permissible in the law. The suit involved complicated mixed questions of law and facts with regard to patentability and exclusion of patent which could be examined in the suit on basis of evidence.

The apex court then went onto examine Section 64 of the Act, dealing with revocation of patents. The same, in their opinion, necessarily presupposed valid consideration of all claims and consequent counter-claims. The bench stated that Section 9 and 10 of the Civil Procedure Code, 1908 dealt with the procedure of such suits all the way till the decree is passed. The court held that only in certain situations could a suit be tried summarily, and that the Division Bench erred in disposing of the suit without hearing all the arguments and assessing all the evidences before it.Referring to Alka Gupta v. Narender Kumar Gupta[2], it was seen that when the case is being tried on preliminary issues, an inquiry into other matters in the case could not be done without a trial. It said that the injunction granted by the Single Judge was valid and that no further interference was needed. Consequently, it set aside the order of the Division Bench and remanded the matter to the Single Judge for early disposal of the suit.

The Supreme Court of India has been, and rightfully so, strict with respect to the procedural aspects of intellectual property disputes which come up in appeal. Very often, High Courts across the country overstep their mandate and decide complex matters of law while deciding on a particular point. This has sought to be prevented by the Court, while allowing the lower courts to hear matters of such importance. Hence, the merits of the case were heard and the injunction was restored. Additionally, the Single Judge was allowed to dispose of the case after hearing both sides on merits. Purely from a legal standpoint as well, the courts have been encouraging towards newly developing patentable technologies in the field of agriculture. While some argue that this affects the rights of farmers, the same cannot be at the cost of invention. Hence, this judgment is important to set the tone and encourage such research endeavors for future progress.

Author: Dushyant Kishan Kaul, Jindal Global Law School, Sonipat, Haryana, Intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at pratistha@iiprd.com.

References:

[1] 2019 SCC OnLine SC 25

[2] (2010) 10 SCC 141

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Modi’s New E-Commerce Policy 2018 (Impact on Online Retail Giants Amazon/ Flipkart, End Consumers and Benefits to the Local Retail Sector)

“Kya apna Kya paraya, iska farq hume aaj samjh aaya, thoda der se aaya par durust aaya”

Ahead of the 2019 Lok Sabha Elections Prime Minister Narendra Damodar Modi and BJP Government has brought in another Masterpiece legislation which is a Point Blank hit to online Retail Giants like Flipkart and Amazon. This is the Era of E-commerce from clothes to groceries, from furniture to electronics you and me buy everthing online  as a result of which, Jeff Bezos Founder , CEO, Chairman of Amazon ( Apni Dukaan) is one of the richest in the World whereas small retailers in your community, neighbourhood( actually apni dukaan) are vanishing day by day as they are unable to cope up with the hefty discounts and exclusive sale agreement of these big shots. However the Indian Government has come to their rescue, call it a pre-election gimmick or a masterstroke. Ladies and Gentlemen presenting the Latest E-commerce Policy of India, 2018.

The Policy
The retail sector in India  is one of the most regulated sectors and due to the involvement of a huge population, it is also politically sensitive. The government has often sought and tried to make policies which tend to restrict retail trade by foreign companies. The E-commerce policy of 2018 introduced by DIPP (Department of Industrial Policy and Promotion) under the Ministry of Commerce is one such policy which governs foreign direct investment (FDI) in E-commerce sector and thereby restrains online retail giants like Amazon, Walmart owned Flipkart etc and forces them to revamp their trade practices. There are speculations that due to this policy, business in India will no longer be viable for these online retailers.

Who will face the Impact?
This policy has impact on three major groups, i.e. the online retailers themselves, the small brick and mortar retailers which compete with the online retailers and finally, the end consumers. The small, local retailers have welcomed this policy as they will benefit from it, whereas the online retailers have labelled it as authoritarian. End consumers will not be able to make use of flash sales , high discounts which seems to be a prima facie loss to them. The key features of the policy and its implications on all the stakeholders have been discussed in detail in this article.

Highlights of the E-commerce policy, 2018

  • Any entity involved in e-commerce marketplace shall not exercise ownership or control over the inventory it offers to sell. Any such ownership over the inventory will convert it into inventory based model from marketplace based model, which is not entitled to FDI. Explanation – An entity shall be deemed to own the inventory of a vendor if over 25% of the purchases of such a vendor are through the said entity.
  • An entity shall not be permitted to sell products of a vendor if it owns any stake in the vendor’s company or exercises any form of control over the inventory of such vendor. The entity will also be prohibited from selling products of vendor companies over which it has equity interest.
  • All online retailers are required to maintain a level playing field for all the vendors selling their products on the platform, and it shall not affect the sale prices of goods in any manner. Further, the entity cannot enter into exclusive sales agreements with the vendors, pushing them to sell their products only on one platform.
  • The deep discounts offered by these online retailers will no longer be available, and they will have to make new business models to continue business in India.
  • According to an independent analysis conducted by PwC ( PriceWater Cooper) based on estimates and other publicly available information, online retail sales growth, tax collections and job creation would be directly and severely affected by this new policy. The analysis showed that the gross-merchandise value of goods sold online could reduce by $800 million. It is further predicted that the sales would hit a new low, dropping off by almost $46 billion by 2022.[1]
  • Soon after Thomson Reuters’ story on the PwC analysis was published, the Confederation of All India Traders, which has forever advocated tougher scrutiny over online retailers, refuted the predictions of PwC.

Effects of the policy on Online retailers
The online retail giants like Flipkart, Amazon, EBay  will now have to completely revamp and reform their business models  to comply with the policy. They will no longer be able to encourage sales of their preferred vendors as they are now required to make a level playing field for all vendors. They will also not be able to sell products of brands in which they have direct or indirect equity interest involved.

The discounts, flash sales and other benefits like cash backs offered by these online retailers will now become a thing of past, and this will severely hit their sales as these are the most alluring features which attract the customers to their platform. This policy  aims to clamp down huge online retailers and strengthen small retailers and encourage them to sell goods of their own label.

In response to this move of the government, online retail giants like Amazon and Flipkart plan on discussing their concerns with the government with the help of industry bodies like Confederation of Indian Industry (CII) and & Industry FICCI, other e-commerce firms, and investment giants such as SoftBank, Tiger Global, Sequoia and Naspers.[2]

Benefits to the Local Small Retailers
The present policy clearly aims to help small retailers to compete with the corporate giants. The customers who had been lured away by these big online retailers will again turn back to the local, brick and mortar retailers as they will get lesser options on online platforms. This policy is another step contributing to the Make in India project of the government. This policy will also ensure that money of India remains in India and is circulated in the market, which was not happening now. Each one of us, bought from online retailers majority of which was foreign owned, money flew from India, markets were cashless and circulation of money was restricted.

The Confederation of All India Traders has come out in support of the new policy, stating that it would bring equality and fair play in retail sector and stop multinational corporations from adopting unfair means to boost their own trade.[3]

Apart from these local retailers, small online retail companies (for example, Snapdeal, ShopClues etc) will also benefit from the policy as they will now be able to compete with the giants.

Impact on End Consumers
The group which is most affected by the policy is the end consumers, who made use of offers and discounts of online retailers for all their needs, including the most basic needs of groceries and clothing. The attractive flash sales and discounts going year round offered affordable products to middle class customers, but these will not be available to them anymore. Further, as the local and online retailers will offer no different facilities, and the discounts offered by online retailers will reduce substantially, they will be forced to switch to local retailers and look into more options to find the best price.

As the provision of cash backs will also be regulated, the incentive given to customers to shop more often from a said platform will reduce, affecting the decision of the customer. This will ultimately result in less shopping by a majority of customers. The end of exclusive deals will also implicate the customers, for example, there won’t be and exclusive partnership between OnePlus and Amazon that enables OnePlus to give away earphones for free.[4]

Contrast View
The new policy can also be seen as a heavy blow in the online retail sector, and has caught online retailers off guard and clueless about their future business policy in India. It will discourage foreign investment in the country as the investors will not be interested in investing in entities over which they have no control and which do not guarantee profits like the giant corporations do. Instead of making the retailers independent and strong enough to compete with MNCs, this policy blocks out competition in the market, and only provides crutches to the local retailers by reduced competition.

This policy can be seen as a example of excessive control of the government over trade, as it also restricts what can and what cannot be sold by the entities.

The policy was introduced in December, 2018, just a few months before the Lok Sabha elections, which the ruling party wishes to win. This policy can said to be a populist one, and it is an attempt to appease the small shopkeepers and local retailers, which form a major chunk of voters. Since these retailers were long been threatened by multinational giant retailers, they had been pressurizing the government to make amends to the E-commerce policy so that they can also compete viably.

End note
This article is only intended to provide information to the readers and the readers are free to choose whichever side of the coin is pleasant to him.

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development  and Nayanikaa Shukla – Intern, at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com or at www.linkedin.com/in/shubhamborkar.

References:

[1]https://uk.reuters.com/article/us-india-ecommerce-exclusive/exclusive-indias-e-commerce-curbs-could-hit-online-sales-by-46-billion-by-2022-pwc-draft-analysis-idUKKCN1PA219

[2]https://www.business-standard.com/article/companies/flipkart-amazon-to-put-up-united-front-against-populist-e-commerce-policy-119010200954_1.html

[3]https://economictimes.indiatimes.com/industry/services/retail/modis-e-commerce-policy-here-are-the-winners-and-losers/articleshow/67285057.cms

[4]https://www.businesstoday.in/current/policy/achhe-din-over-for-indian-consumers-5-reasons-why-new-e-commerce-policy-should-worry-shopaholics/story/304655.html

Indonesia Issued Regulations on Recordal of IP License Agreements

Understanding of Enactment

In order to make registered IP agreements to be fully effective, Indonesian government has issued regulations for Recordation of Intellectual Property License Agreement. This enactment will enable the licensor to easily license their Trademarks to the third Party.

Benefits from Agreement

This recordation of IP agreements shall benefit the Businesses through stable royalty structure of their IP license agreements and will enable to enter into other sectors which are out of their forte. This can result in increase of sale and public awareness on new business lines.

To avoid disputes and keep healthy relationship between the parties, all parties have to abide terms and conditions that are set in Trademark License Agreement which will be recorded with Directorate General of Intellectual Property Rights (DGIP), which falls under Article 43 (3) of the Indonesian Trademark Law (“GR No. 36/2018). If License agreement is not recorded as per prescribed guidelines- It can result in Cancellation of Trademark and will not hold any legal effect towards third party.

The record of license agreement may be made against any of the intellectual property field like copyright and other related rights, patent, trademarks, industrial design, integrated circuit layout design, trade secret, and plant varieties.

 The following are few of the general requirements for recordation of license agreement GR No. 36/2018 :

  1. The licensor should not grant license to the licensee if terms of protection have lapsed or IP registration is withdrawn.
  2. License agreement must be written in Indonesian language
  3. Agreement cannot include provisions that may Harm Indonesia’s economy or national interests or result in unfair business competition or conflicts with prevailing laws, religion, morality and public order.

 For recordation of License, either the licensor or the licensee may file IP license agreement with DGIP.

An IP license agreement should consist of:

  1. Date, month, year, and location where license agreement was signed
  2. Name and address of the licensor and licensee
  3. Object of the license agreement
  4. Provision on whether the license is exclusive or non-exclusive, including sub-licensing
  5. Term of the license agreement
  6. Territorial scope of the license agreement
  7. The party who will make annuity payment, in the case of patent

In such cases where licensor or licensee are Foreigners and domicile outside territory of the Republic of Indonesia, then application for recordation should be filed through a local registered IP Consultant.

Recordation process can be filed either manually or electronically, by attaching the following required documents:

  1. Copy of the license agreement
  2. Official excerpts of the relevant IP certificate, or proof of ownership of copyright or related rights
  3. Power of attorney, if such application is filed through a proxy
  4. Payment receipt of the official fee for recordation.

Once the application is submitted, examiner will review the application and verify all documents.

Once the application is complete, the examiner will inspect the authenticity of documents within five days of submission. Post verification, Letter of recordation for license agreement will be issued which will also be recorded with the relevant IP registry and the recordatoin shall be published in the relevant official gazette.

In case of incomplete documentation, examiner will issue a written notice to the applicant for providing requested documents or rectify any shortcomings within 30 business days after the notice is received. Failure to do so will lead to withdrawal of application.

 Reordation Period

Recordation of a license agreement will be valid for the term of five years, after expiration of this term; the applicant can re-apply for recordation.

The issuance of this regulation is a welcome development considering that a license holder does not have a recognized right in Indonesia to enforce the licensed intellectual property rights against an infringer in the absence of such recordal. Moreover, the license holder’s use of the IP will not be recognized as “actual use” by the IP owner if the license agreement is not recorded with the DGIP.

For applications which were filed prior to the issuance date of the Regulation No. 8 Year 2016 must request for recordation of an IP license agreement and shall be processed in accordance with the above regulations.

Author: Ms. Deepika Sharma, Sr. Patent Associate at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at  deepika@iiprd.com.

References:

[1]https://id.rajahtannasia.com/media/3110/ahpclientupdate-06september2018.pdf

[2]https://www.tilleke.com/sites/default/files/IC_Nov%202018

[3]http://www.asiaiplaw.com/article/41/2635/

[4]http://www.gbgindonesia.com/en/main/legal_updates

Richest man of Vietnam Launched Smartphones: Vingroup

Vietnam’s one of the largest private corporation Vingroup launched 4 smartphones models in December 2018 and is ready to compete with various tech giants. These phones are considered to be first Vietnam made smart phones.

Vingroup was established in 1993 by young Vietnamese in Ukraine and was known as Technocom Group which operated in field of food and Great success with Mivina brand. It was amongst top 100 most powerful enterprises in Ukraine. In year 2000, Vingroup returned to Vietnam with aim to contribute in building the country. They are a well known name in Vietnam and operate in various industries like Real estate, retail and healthcare, among others.

Vingroup is owned by Pham Nhat Vuong, a billionaire who started his career selling dried noodles in Ukraine. According to Forbes his real time net worth is $6.7 billion

Nguyen Viet Quang, Vingroup’s vice chairman and CEO said they want to heavily invest in research and new technologies/techniques in order to make a prominent place of Vietnam in the World map.

Vingroup has built core business in real estate and retail sectors and have also branched out to include car manufacturing, gene decoding and now mobile phones. 

The Company celebrated launch of Smart phone models in Ho Chi Minh City of Vietnam last month. They unveiled four models of smartphones under brand name Vsmart. These phones will not only be available for domestic consumers but will also be sold overseas in markets like Russia and Spain. In home market, phones prices have already been set between 2.49 and 6.29 million dong ($107 to $270).

Company already has easy access to retail stores as they already have 1,200 supermarkets and convenience stores all over the country which would definitely benefit the brand and consumers by easy access and availability in market.

 Partnership with other well known brands

TheC ompany has announced its partnership with Spanish smartphone maker BQ and  holds 51% stake in the said organization. BQ is a Madrid-based company and follow similar strategy as Xiaomi, they sell the phones with high-end specs at extremely low prices.

They also revealed, they have entered into a patent licensing agreement  with Qualcomm, an U.S.-based semiconductor and telecom equipment company.  From a wider aspect, it is seen as a huge deal between the companies to bring New Technologies in the field of artificial intelligence (AI and will work together to develop more smartphones, 5G, IoT devices and autos.

Vingroup’s ambition is to help in growth of their country by identifying and investing for creation of industrial base and develop an ecosystem of electronics and smart devices. The biggest challenge for this Company is to make the product a success in the market and contribute to Vietnam’s GDP, which has been record as fast growing economic country in recent years.

Author: Ms. Deepika Sharma, Sr. Patent Associate at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at  deepika@iiprd.com.

Looking Into The Deal Between GSK – Hindustan Unilever And What Ensues From The Same

INTRODUCTION

Recently,  in the first week of  December 2018, Hindustan Unilever announced  a merger with the local unit of GlaxoSmithKline.  The said deal is estimated to be of around $ 3.8 Billion and is anticipated to bolster the FMCG company’s (Fast Moving Consumer Goods)  (HUL ) position in the Indian market  significantly.  The deal involves the FMCG  giant Hindustan Unilever Limited (HUL) and GlaxoSmithKline’s Indian nutrition business. [1]

Hindustan Unilever Limited (HUL) is India’s largest FMCG company and enjoys a long heritage in India, i.e. about almost 80 years. HUL claims that on any given day, about 9 out of every 10 Indian households use its products. [2] HUL is a subsidiary of Unilever, a British – Dutch company . Some of the products that HUL manufactures include beverages, personal healthcare products, cleaning agents , and water purifiers. India happens to be the second  largest market for Unilever globally.

On the other hand, GSK is a science-led healthcare company which has its operations across the globe. In India, GSK enjoys an extensive product portfolio which encompasses prescription medicines and vaccines. [3]

THE GSK- HUL DEAL

The present deal of a whopping  $3.8 Billion is important in many respects. The move shall help HUL consolidate its position in India. As a consequence of this deal, popular health drinks like Boost, Maltova and Horlicks shall move to the HUL camp. [4]

 The present transaction  is an all equity merger and 4.39shares of HUL shall be allotted for every share in GSK Consumer Healthcare India. GSK’s other group companies shall continue holding 5.7 percent of the merged entity and are being expected to sell these shortly.

To successfully complete the deal, Cyril Shroff ,  Nivedita Rao and Ramgovid Kurupath acted for Hindustan Unilever, while Vinati Kastia, Ajay Bahl and Bharat Bhudolia acted for GlaxoSmithKline.

However, in this deal , Steer Engineering has approached the Delhi HC wanting appropriate protection for its Intellectual Property and to stop transfer of its IP post the acquisition of GSK Consumer Healthcare.

WHAT FLOWS FROM THE DEAL?

The said deal if successfully completed , shall be a win-win situation for both GSK and HUL. The deal shall help HUL strengthen its refreshment and food business as HUL shall enter the Health Food drinks which has seen  the entry of several global as well as Indian companies of late. It is estimated that HUL’s food and refreshment business which currently stands at 6500 crore (with brands like Knorr, Kissan and Kwality) would rise to 10000 crore, as GSL CH’s annual sales is about 4200 crore .  Also, post the deal, GSK’s losing market share and the threat of competition from other Key players like Mondelez International (Bournvita), Pediasure (Abbott Nutrition) and Complan (H.J. Heinz) shall be effectively dealt with.

However, the impending suit filed by Steer Engineering might actually affect the deal in some or the other manner. Steer Engineering claims that it has rights to protect its IP against transfer to any third party and its rights created in the technology.

ELEMENT OF IP IN THE GSK – HUL DEAL

After the announcement of the said deal between HUL and GSK CH, Steer Engineering has moved to the high court wanting appropriate protection  for its rights. It claims that it has provided certain important IP to GSK and it has rights over the same upon the transfer of the same to third parties.

Steer Engineering claims and contends that it was a result of its extensive efforts on hardware and  machine components  that certain important technology were developed . The company claims to have provided  GSK with the relevant technology that enabled scaling up of the “Two Twin Extrusion Process being employed by it”. It further contends that, in the light of the Development Services Agreement and the Task Order between GSK and itself,  the company is entitled to protect the technology in case, it were being transferred to GSK by the same [5].

Presently, the matter is sub-judice before the Delhi HC.  The court has agreed to give some time to the counsel on behalf of GSK to seek instructions and conclusively establish that the technological know-how and the IP owned by Steer Engineering (Petitioner) was being transferred to the third party. Also, it instructed GSK to file its response on an affidavit in the said matter and until then, its status quo order had to be maintained

 IP ISSUES IN ACQUISITIONS

Intellectual Property is an important element of Acquisitions and Mergers now a days. Also the understanding of IP of M & A that we use cannot be said to be restricted to Patent or Trademarks but even technology. A lot of times, an important reason of M & A, is the company’s goodwill and IP.  However it is not always so that the IP comes as  a part and parcel with the mergers and acquisitions. Due diligence must be observed while taking over, in mergers and even in acquisitions. [6]

It might happen that that as a result of a contact between two parties, the entity attempting acquisition might not be able to use the IP as becomes the third party in such a case and  the IP might be protected from the third party’s exercise of rights over the same.

A popular dispute involving absence of due diligence was the long lasting and extended battle  before the European Commission  involving Volkswagen, BMW and Rolls Royce Motor Cars.   [7]The matter involved Volkswagen purchasing the assets of Rolls Royce and Bentley automobiles for several millions. However, it was only upon the closure of the deal that Volkswagen realized that the IP assets did not include the right to use the trademark of Rolls Royce as the same was owned by Volkswagen’s competitor car maker BMW. Thus, IP due diligence plays a very crucial role in the cases of M & A. [8]

Similarly, the issue of IP due diligence is quintessential in the present case between GSK and HUL. The previous contract or agreements between Steer Engineering and GSK shall play a decisive role to play in the unfolding and the execution of the present deal between GSK and HUL.

CONCLUSION

As has been discussed, the two companies GSK CH and HUL, when combined, shall have a very important role to play in the market. However for an effective exploitation of the said deal, it is imperative that HUL enjoys atleast certain basic IP rights of GSK. What exactly is the mater in dispute and to what an extent the problem  persists is something that is confidential atleast until the matter is pending before the court. What eventually emanates from the deal and the legal battle shall be a matter to wait and watch. The next hearing in the said matter is scheduled before the Delhi HC on 23 January 2019.  Let’s hold back and wait until then.

Author: Kanay Pisal, Intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at pratistha@iiprd.com.

References:

[1]https://www.legallyindia.com/corporatemna/3-8bn-blockbuster-deal-cam-azb-help-hul-buy-gsk-india-s-horlicks-biz-20181203-9668

[2]  https://www.hul.co.in/about/who-we-are/introduction-to-hindustan-unilever/

[3]  https://india-pharma.gsk.com/en-in/about-us/

[4]https://www.thehindubusinessline.com/companies/hul-to-acquire-horlicks-maker-gsk-ch-india/article25653550.ece

[5] https://barandbench.com/gsk-hul-deal-steer-engineering-transfer-ip/

[6] https://blog.ipleaders.in/ip-issues-in-ma/

[7]https://www.ipeg.com/how-to-avoid-another-rolls-royce-ip-due-diligence-in-ma-transactions/

[8]https://uk.practicallaw.thomsonreuters.com/7-100-8290?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1

103rd Constitutional Amendment Act, 2018 “Economic Reservation in India” Highlights and Analysis

A big 10 %  of all government jobs and college seats will now have a reservation for people outside high income brackets as President Ram Nath Kovind cleared 124th Constitutional Amendment bill passed by parliament this week. Some call it a landmark achievement of Prime Minister Narendra Modi, others call it a pre-election gimmick of the ruling party, which is trying to do anything and everything that is possible to retain its power in the 2019 Loksabha Elections. In this Article we are not judging the motives behind the Amendments and would be limiting our discussion to the legal points only i.e. Highlights of the Amendment, Analysis of the same and the constitutional validity of the Reservation Criterion

 HIGHLIGHTS OF THE ACT

  • The Constitutional (103rd Amendment) Act got the assent of President of India on 13th January, 2018. The bill was passed in Lok Sabha by 323 members voting in favor and 3 members against the bill. It was subsequently passed by Rajya Sabha with 165 members in the favor and only 7 members against the bill.
  • It provides reservation of jobs in central government jobs as well as government educational institutions. It is also applicable on admissions to private higher educational institutions.
  • It applies to citizens belonging to the economically weaker sections from the upper castes.
  • This reservation is “in addition to the existing reservations and subject to a maximum of ten per cent of the total seats in each category”.
  • The Statement of Objects and Reasons of the Bill states that people from economically weaker sections of the society have largely remained excluded from attending the higher educational institutions and public employment on account of their financial incapacity to compete with the persons who are economically more privileged.
  • The bill states that it is drafted with a will to mandate Article 46 of the Constitution of India, a Directive Principle that urges the government to protect the educational and economic interests of the weaker sections of society. While socially disadvantaged sections have enjoyed participation in the employment in the services of the state, no such benefit was provided to the economically weaker sections.

AMENDED ARTICLES

  • Article 15 (6) is added to provide reservations to economically weaker sections for admission to educational institutions including private educational institutions, whether aided or unaided by the State, other than the minority educational institutions referred to in clause (1) of Article 30. The amendment aims to provide reservation to those who do not fall in 15 (5) and 15(4) (effectively, SCs, STs and OBCs).
  • Article 16 (6) is added to provide reservations to people from economically weaker sections in government posts.
  • An explanation states that “economic weakness” shall be decided on the basis of “family income” and other “indicators of economic disadvantage.”

ANALYSIS

 Constitutionality of Constitutional (103rd Amendment) Act, 2018

As the constitution stands amended, the only constitutional challenge left is conformity to the basic structure doctrine. So far, it has become an established principle that reservation shall have a cap of 50%.  These stipulations first arose in M.R Balaji v. State of Mysore[1] when court stated that reservation above 50% would imply dominance over section 16(1). The government notification providing 10% reservation to weaker economic sections of society was struck down in Indra Sawhney v. UOI[2]. However, it is noteworthy that these rulings were given in relation to a law or subordinate legislation and have never been discarded in violation of Basic Structure Doctrine. Moreover, the amendment only provides reservation to the extent of 10%. , however, the existing articles 15(4), 15(5) and 16(4) do not mention that reservation shall be 50% explicitly, by way of legislation. Consequently, any challenge pertaining to violation of basic structure does not seem to have a stand.

A writ petition has been filed by Youth for Equality contending that 103rd amendment violates the basis structure doctrine. Economic reservation finds its ground in terms of equality. It is difficult to see how economic reservation damages or destroys the concept of equality, and consequently Basic Structure. Therefore, the fact how equality and social justice is presently understood in Constitution, shall be no ground for striking it down while I agree that the 103rd amendment has created a logical mess and had put group determine, social and educational backwardness at war by inclusion of article 15 (6) and 16 (6).

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development  and Neha Rani – Intern, at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com or at www.linkedin.com/in/shubhamborkar.

References:

[1] M.R Balaji v. State of Mysore, 1963 AIR 649.

[2] Indra Sawhney v. Union of India, AIR 1993 SC 477.

Education In India (Problems and Solutions)

Introduction

Education is essential for the development of intellect and knowledge of a person as well as for the growth of economy of a nation. Enhancement in the education sector directly results in advancement in the economy of a nation, as it enhances the skill-set of the workforce which can make better use of the available technology. However, to the our utter dismay, currently, the Indian education system faces a number of setbacks, the primary one being lack of standardisation in both school and university/college level.

To understand the situation better, we should first enlist the problems that circumscribe the Education Sector in India.

Problems in the current system

  • The existence of different boards that govern education in schools results in divergent syllabus in the same grade. For example, the course material prescribed by Indian Certificate of Secondary Education (ICSE board) for 9th grade mathematics contains a chapter called commercial mathematics which is not prescribed in the books of Central Board of Secondary Education (CBSE board). Apart from these two, there are various state boards with different subjects and syllabus which in general are relatively lower in standards than the CBSE and ICSE’s. A standardised curriculum for students of same age is imperative, but there is no such standardisation due to the existence of these different governing bodies.

    Even in colleges, due to lack of a regulatory body and autonomy given to institutions, the course varies significantly. A student of law in one college is taught the law of torts and jurisprudence in the first year, whereas in some other university, these subjects are taught in the later years of the course.

    Homogeneity in curriculum is essential because a course material needs to be made by carefully evaluating the mental ability of a child of the said age, and such evaluation must apply to all children of the same age, there must be no disparity, otherwise this may hamper the development of the child and impact the process of learning which in the long run will hamper the India’s growth.

  • Unregulated Autonomy (Deemed Universities)

    Unregulated and unfettered autonomy has been given to universities and colleges by the University Grants Commission. The universities recognised by UGC have very limited set of rules and regulations governing them and are majorly unaccountable for their conduct.

    Some universities are not even UGC approved but are deemed or to-be-deemed universities accredited by the Department of Higher Education of the Ministry of Human Resource Development.

    Such difference in accreditation by different bodies and minimal set of rules governing the institutions gives these institutions unregulated discretion in deciding their mandates, and changes the standard of education offered by these institutes. Moreover, the independence of these institutes renders no higher authority for the redressal of the grievances of students.

  • Qualification and Status of the Educators

    One of the major problems that arise due to non regulation of educational institutions is that of qualification and status of educators. Since the institutions are free to decide upon the qualifications required for the post of a teacher of a particular subject, they may not give regard to the credentials of an applicant and the post may be given to a non deserving candidate due to connections. This is arbitrary and also a compromise with the quality of education.

    Further, since there is no binding mandate for the salary of teachers, it completely depends on the discretion of the institution, and therefore, in most places, the educators are underpaid. This directly and severely affects the standard of education as best brains don’t opt for teaching.

    The global ranking of Indian institutes, of both the school and university level is far below satisfactory. In 2018, India did not even participate in the Programme for International Student Assessment (PISA) organised by OECD for evaluation of education systems across the world. According to the Quacquarelli Symonds (QS) World University rankings 2018, IIT Bombay which ranked 162nd is the highest ranking Indian University on the list.[1]

    Different medium of teaching available to school students of different states poses a problem later as the university level education is majorly imparted in English, so a working knowledge of English language is necessary, but studying in vernacular language medium hampers this to a certain extent and puts the students in a disadvantage. By this statement , I do not want to mean in any manner that one should not learn his Vernacular language, however special attention should be given in learning basic English, Hindi. Further, local institutes also display parochialism, narrow-mindedness making them incompatible with other institutes.

  • Fees

    The lack of funds or improper distribution mechanism thereof is a major reason for the sorry state of education in India. There is no body which is solely responsible for collection and distribution and proper utilisation of funds. The problem increases even more in rural areas which are largely out of reach of the administration of any governing body.

    This also results in a chasm between fees to be paid by students in different institutions. The fees of a primary school student may vary from a few thousands per year to few lakhs per annum. To bridge this gap, there needs to be a set of rules governing the fees being charge by these institutions and to ensure that such fees is not exorbitant.

Vyapam Scam – The Epitome

The Vyapam scam was a humongous corruption scam that came in light in the year 2013 in the state of Madhya Pradesh. It involved a number of universities, colleges and government job placement offices and included fixing results of professional examinations, among other incidents of cheating, bribery etc. This scam proved that corruption in India has grown from an anomaly to a way of life; it is so deep-rooted that it can be referred to as a culture. No decision of a court or no scam has questioned the system as much as the Vyapam scam. So it is imperative to include this in the study of education system of India.

  • The Aftermath

    In the aftermath of this scam, in order to uproot the widespread corruption and in national interest, the courts took stringent measures and a plethora of doctors who took admission in their college by paying bribes were punished heavily, as the court cancelled their degree and put them behind bars, pushing their future into dark. As their actions constituted acts of deceit, it was deemed to be unacceptable. Apart from students, the police arrested many people involved, including bureaucrats and politicians, and other members heading the institutions which accepted the bribe and admitted undeserving students. Fingers were also pointed to the Ex-Chief Minister of Madhya Pradesh Shivraj Singh Chauhan.

  • The Mistake

    While on one hand the court was more harsh upon the students and lesser on others bureaucrats and politicians involved, it failed to take into consideration the doctors who although entered the college by giving bribe to the Management of the college, however, they  did well and earned their degree without any fraudulent means. They are qualified doctors. Such students did not deserve as harsh a punishment as they were given. Instead, their degrees could be put to some use for the society.

  • The Reformative Theory of Criminology

    The court should’ve given these doctors a mandatory term of serving the society by providing their services in rural places which suffer from a constant deficit of medical assistance. The court rightly applied the deterrence theory of criminal justice to the administrators involved in the scam, but to the students, the implications should have been little onerous. It is understandable that to prevent more such scams in future and to maintain the quality of education, it was necessary to lay down a bottom line, but the justice would have been truly achieved when the society would have ultimately benefitted through the Reformative theory of Criminology.

    According to this theory, the object of punishment should be the reform of the criminal, through the method of individualization. It is based on the humanistic principle that even if an offender commits a crime, he does not cease to be a human being. He may have committed a crime under circumstances which might never occur again which fits in the present case to the fullest. Therefore an effort should be made to reform him during the period of his incarceration. The object of punishment should be to bring about the moral reform of the offender. While awarding punishment the judge should study the character and age of the offender, his early breeding, his education and environment, the circumstances under which he committed the offence, the object with which he committed the offence and other factors. The object of doing so is to acquaint the judge with the exact nature of the circumstances so that he may give a punishment which suits the circumstances. After all they were not habitual criminal offenders (which the society should be afraid off )and were mere students who in the greed of getting admission into a good college paid bribe to the college .The court here was harsher on the students while more lenient on the administrators, while it should have been the other way around. It was the College management, administrators, politicians and the ones in power who enticed these students to pay the bribe.

Mentioning the problems will be of no use unless and until the solutions are proposed.

Potential solutions to the problems

    • Laying down the Basic Structure of Education

      The first and the paramount step towards solving most problems with the current education system of India is that the legislature must enact a legislation which lays down certain basic regulations that have to be followed by all educational institutions across the country. This legislation must aim at bringing uniformity in education provided by various institutions.

    • Powerful Central Body

      A powerful central body governing all schools should be set up. This body should have power to make by laws and regulations applicable to all schools. A proper syllabus based on the abilities of a child of a particular age must be made, which applies uniformly. All other boards like state boards, international boards etc must be abolished and a standard medium with standard curriculum must be set in place. A standard medium should not result in neglect of local languages; they should be recognised, but to bring all students on equal level, they must be taught in one medium of language. But it should be borne in mind that creating a central governing body does not necessarily imply that the schools will not have any amount of autonomy vested in them. The limits of an institution shall be defined in a fashion similar to memorandum of association of a company. They are accredited by the governing body but will be free to make decisions for the smooth functioning of the institution within the bounds of powers granted to them.

      Such body will be solely responsible for collection and management of funds given by central and state governments. The biggest problem of unrecognised institutions like madarsas that claim to be educators, etc can also be solved as for a degree to be recognised, the institution imparting such degree must be accredited with the said national body.

    • The International Inspiration

      More incites on the legislation can be taken from education systems of other countries like Poland, USA and Japan. In these countries, there is no distinction in the curriculums and the schools are on the same level.

      Similarly, the UGC must govern all universities and colleges, and all universities must be accredited by it. There must be no titles such as deemed or to-be-deemed universities and the power to give accreditation shall be vested only with UGC and no other authority. The curriculum for a particular course must be strictly laid down and followed. To ensure implementation of all guidelines, every university should have personnel presiding over its actions.

Conclusion

With the low standard of educational institutions, India still has a far way to go. The problems are multiple and too huge to be solved in a short span of time. A number of factors have to be employed simultaneously to improve the system. The unified system as proposed here in this article will allow equal growth of all students. It will also lead to better governance. It will also reduce parochialism and discrimination. Further, with equal opportunities given to every child irrespective of his caste, class or social background, the government will get an opportunity to review the reservation system and its need in the society. The government needs to take careful consideration of all facets before enacting any legislation, but ultimately, the unified system will benefit the students. This will further advance the global standing of Indian institutions and bring them at par with the leading institutions of the world.

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development  and Nayanikaa Shukla – Intern, at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com or at www.linkedin.com/in/shubhamborkar.

References:

[1]https://www.topuniversities.com/university-rankings/world-university-rankings/2018

Legality of Automobile Modification/Customization in India

Everyone of us have either did or would have at least thought of modifying/customizing our bike, our car as per your preferences and to make it look above the rest. However when I woke up on 10th January, my dreams of modifying my Royal Enfield Thunderbird shattered after reading the headlines “You can’t paint or modify your bike, car! It’s against the law”[1]. Newspapers are filled with such headlines after the Supreme Court reversed the judgement of Division Bench of Kerala High Court that allowed structural alterations in accordance with Kerala Motor Vehicles Rules, 1989.

After reading the headlines and abridged report, I went on to read to everything on the subject to have a better clarity on whether this is a blanket ban on each and every modifications or there are certain regulations surpassing which could lead to illegality of the modification.

The first impression of the Court’s ruling is certainly a setback for car and bike modification industry thriving on fancy requirements of their clients. Though these operations are confined to local garages the industry has seen some of the big names emerging too, these include DC motors, Rajputana Customs and Vardenchi. The industry takes care of modifications in the automobiles for performance enhancement and cosmetic redesigning.

Law in question

The Motor Vehicles Act ,1988 is the chief legal instrument relating to motor vehicles in India. It delves into all aspects relating to motor vehicles in the country including the changes in road transport technologies, pattern of passenger and freight movements, developments of the road transport network in the country and improved techniques in the motor vehicles management and the controversial judgement of the Supreme Court deals with Section 52 of this legislation only, that specifically talks about Alteration in motor vehicles. This section has been amended by virtue of Amendment Act 27/2000 in the following manner :

“Amendment Act 27 of 2000 – Statement of Objects and Reasons­­ – The Motor Vehicles Act, 1988 consolidated and rationalized various laws regulating road transport .The said Act was amended in 1994.

2. Further amendments in the aforesaid Act have become necessary so as to reduce the vehicular pollution and to ensure the safety of the road users. It is ,therefore ,proposed and to ensure the safety of vehicles in any manner including change of tyres of higher capacity .However ,the alteration of vehicles with a view to facilitating the use of eco-friendly fuel including Liquefied Petroleum Gas (LPG) is being permitted. Further, it is proposed to conferpowers on the Central Government to allow the alterations of vehicles for certain specified purposes.”

Further the amended version of Section 52 that essentially deals with Alteration in a motor vehicle states

“(1) No owner of a motor vehicle shall so alter the vehicle that the particulars contained in the certificate of registration are at variance with those originally specified by the manufacturer”

Provided these modifications are in pursuance of the above mentioned objectives of enhancing fuel efficiency thereby reducing vehicular pollution or any other special purpose as exempted by the Central Government. Further, any modifications made in the vehicle need to be approved by State Government. 

Facts of the Matter

The dilemma began as in pursuance of the above law, the Kerala government issued a Circular specifying that the Registering Authorities must not issue a certificate of registration to those vehicles that are built or modified in violation of the prototypes set.  Based on the circular, a number of vehicles were denied registration on account of having dimensions different than those specified .This led to several vehicle owners filing Writ petitions in Kerala High Court against such denial. The decisions rendered by Single Judge benches of the High Court in two different cases were contrary to each other. While one decision stated that the Regional Transport Authority’s powers to “intelligently exercise their discretion” cannot be “fettered”, another stated that “derogation of a prototype cannot be approved.” Thus the matter was referred to a Divisional Bench wherein the High Court passed an order holding “structural alterations permissible as per the provisions of the Kerala Rules.”

Supreme Court’s ruling

The court found fallacy’s in the Divisional bench judgement mainly on the interpretation of the Rules . It held that the interpretation of the Rules should be done in a manner so as to support the intent of the Act. Further, the court on specific point of permissible changes held that the changes permitted under the Rules can be made subject to the exemptions imposed by Section 52 of the Motor Vehicles act while stating that Rules are subservient to the Act, the Court held .

“In our considered opinion the Division Bench in the impugned judgement of the High Court of Kerala has failed to give effect to the provisions contained in section 52(1) and has emphasized only on the Rules. As such, the decision rendered by the Division Bench cannot be said to be laying down the law correctly .The Rules are subservient to the provisions of the Act.”

Implications of the Judgment

It can be plainly assumed that no modifications shall be allowed in the vehicles unless those related to the exemptions under Section 52 , which namely includes changes done in pursuance with reducing vehicular pollution or ones specifically exempted by the Central Government.  However, does this mean any change can be done in the vehicle on the name of improving fuel efficiency?

Thus one carefully needs to understand the meaning of “alterations” as stated under section 52 of the Act.

“Explanation : For the purposes of this section, “alteration” means a change in the structure of a vehicle which results in a change in its basic feature.”

Thus, there lies ample space for the automobile modification industry to operate. Modifications in automobile may be approved if the basic feature of the automobile are intact and the modifications made thereupon does not harm road safety or violate the law stated above.

Some precedents mentioned in the judgement delve help us better understand the law :

  • S Rajesh Kumar v. The Additional Registering Authority of Kerala High Court[2]

In this case, the petitioner wanted to convert a a passenger vehicle into a cinema outdoor unit by fixing a generator set therein. The Court held that the petitioner has not made any alteration to either the chassis or the body of the vehicle as the manufacturer has manufactured only the chassis of the vehicle and not its superstructure . In pace of the seats meant for the passengers, the petitioner was fitting only a generator which was permissible. There was no violation of the provisions of section 52.

  • Javeed v. Union of India &Ors[3]

In this case chassis were changed as a necessity on account of an accident. There were no other changes in the structure of the vehicle. It was held that section 52(3) enables the owner of the vehicle to replace the engine of the vehicle but the factum of replacement has to be reported to the Authority within 14 days .Thus refusal of registration was held to be bad in law and set aside.

Thus it can be concluded, This Judgment is not a BLANKET BAN on each and every customization/modification  and it encompasses only the unwarranted cosmetic changes in automobiles especially application of higher capacity wheels or extension of body frames that pose threat to road safety or in any manner increases pollution caused by the automobile this would entail change in exhausts, changes in engine configuration. However, silver lining in the cloud is,  there is still room for modifications to continue in pursuance with objectives and exemptions laid under Section 52 of the Motor Vehicles Act, 1989 and cutom houses like DC, Vardenchi abd Rajputana Customs will continue to rule our hearts with their magnificent designs.

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development  and Gursimran narula – Intern, at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com or at www.linkedin.com/in/shubhamborkar.

References:

[1]https://www.businesstoday.in/current/economy-politics/you-can-paint-or-modify-your-bike-car-it-is-against-law/story/308685.html

[2]K.S Rajesh Kumar v. The Additional Registering Authority of Kerala High Court delivered on 1.2.2010

[3]Mohd.Javeed v. Union of India &Ors. (2001) 9 ALD 88 = 2009 1 ALT 507

Thailand, Soon To Be Asia’s Medical Marijuana Hub

The latest development in Thailand is that it will soon legalize “medical marijuana”, thereby, it will become the first Asian country to legalize marijuana for medical use and research. This proposal of  legalization is expected to become a law by May 2019 at the latest.

Marijuana: Part of Thai culture since ages

Marijuana was considered and extensively used as a traditional medicine in Thailand. It was mostly used as a pain reliever and muscle relaxer. However, Marijuana was banned in 1934 and so was its utilization.

It is pertinent to note that legalization of marijuana is restricted to only medical use namely inter alia, treatment of drug-resistant epilepsy and pain and nausea in cancer patients. Legalizing of medical marijuana would mean that doctors can prescribe the patients to use cannabis for their ailments, and will use Marijuana in research centers. Medical institutes can freely produce and test the drug for new inventions.

Doctors also may prescribe medical marijuana to treat:

  1. Muscle spasms caused by multiple sclerosis
  2. Nausea from cancer chemotherapy
  3. Poor appetite and weight loss caused by chronic illness, such as HIV, or nerve pain
  4. Seizure disorders
  5. Crohn’s disease

As it being the only country in Asia using marijuana for medicinal purposes, people from neighboring countries will take advantage and will head to Thailand which will increase medical tourists in the nation. Such legalization and usage of Marijuana will definitely push other countries such as Colombia, Denmark, USA, Britain, etc. to legalize marijuana. However, Uruguay and Canada have gone one step further and also legalized recreational use.

Battle between Thai and Foreign companies

Considering the suitable climate for Marijuana in Thailand leading to lower cost of production as compared to other countries, it is no less than a cash crop. Therefore, the Commerce Minister, Mr. Sontirat Sontijirawong is vouching for a tremendous economic growth in the country due to legalization of Marijuana.

Basis, cost effectiveness, foreign companies are eyeing to move in and take over licenses for its production in the country, which will help them to run the lucrative market.  Thus, leading to an internal battle between local and foreign firms over control of a potentially profitable market. The Government is trying to fix this by prioritizing its residents first and has granted the rights of researching on Marijuana plant, its production and extracting rights to Thai companies. Further, Foreign companies may only be given an opportunity if it is a joint venture with a local Thai company. This move by Thailand has led to an incentive for other countries to invest more in Thailand and grow more presence in Thailand markets. For example, U.S. and Canadian companies are expected to increase their presence in Thailand through Joint ventures with local companies. Likewise they can produce and export marijuana which would increase the proximity to larger markets in India and China.

Concern of Thai Companies

Further, Thai business entities and activists have raised concerns that propel of patent requests filed by foreign firms could allow them to dominate the market and make it harder for researchers to access marijuana extracts.

According to Zion market research, string of patent requests filed by overseas firms could allow them to influence Thai companies out of what’s projected to be a $62.9 billion global marijuana market by 2024.

Rigid penalties for Illegal possession of Marijuana

Thailand encounters lot many cases of illegal possession of marijuana and thus, Thailand laws are very rigid with its laws on illegal possession of drugs. There are serious immigration consequences for a marijuana arrest which may lead to deportation by immigration, there is also the possibility of being “blacklisted” after which guilty people will never be able to return to Thailand.

Charges for Possession of marijuana in Thailand can entail the following punishments:

  • For minor use of marijuana, fine of up to 10,000 Baht or maximum of up to 1 year in prison sentence can be given.
  • For possession of up to 10kg of Marijuana, fine of up to 50,000 baht and maximum of up to 5 years in prison sentence can be given.
  • For possession of 10kg or more, this is considered as possession with intent to sell. The sentence can range from 2 – 15 years in prison, and/or include a fine of 20,000 to 150,000 baht. Charges can also be levied for amounts of 10kg or more for the intent to produce, import or export cannabis. The sentence is the same.

Author: Ms. Deepika Sharma, Sr. Patent Associate at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at  deepika@iiprd.com.

References:

[1]https://www.thejakartapost.com/life/2018/12/19/medical-marijuana-is-coming-to-thailand.html

[2]https://www.aseantoday.com/2018/12/thailands-move-to-become-asias-medical-marijuana-hub/

[3]https://www.reuters.com/article/us-thailand-cannabis/weeding-out-foreigners-strains-over-thailands-legalization-of-marijuana-idUSKBN1OB0D0

[4]http://www.thailand-lawyer.com/marijuana-arrest.html

Compulsory Licensing In India

Meaning of Patent

WIPO defines patent as an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem.[1] A patentee shall have exclusive rights over his invention for a period of 20 years, and he can exclude others from making any use of his patented product. But under certain circumstances, a compulsory license to make use of a patented product may be given to a third party. This concept of compulsory licensing has been given in the chapter XVI of the Indian Patents Act, 1970.

What are Compulsory Licenses under the Patents Act?

Compulsory licenses are authorizations given to a third-party by the Controller General to make, use or sell a particular product or use a particular process which has been patented, without the need of the permission of the patent owner. This concept is recognised at both national as well as international , with express mention in both (Indian) Patent Act, 1970 and TRIPS Agreement. There are certain pre-requisite conditions, given under sections 84-92, which need to be fulfilled if a compulsory license is to be granted in favour of someone.

As per Section 84, any person, regardless of whether he is the holder of the license of that Patent, can make a request to the Controller for grant of compulsory license on expiry of three years, when any of the following conditions is fulfilled –

  1. the reasonable requirements of the public with respect to the patented invention have not been satisfied
  2. the patented invention is not available to the public at a reasonably affordable price
  3. the patented invention is not worked in the territory of India.

Further, compulsory licenses can also be issued suo motu by the Controller under section 92, pursuant to a notification issued by the Central Government if there is either a “national emergency” or “extreme urgency” or in cases of “public non-commercial use”.

The Controller takes into account some more factors like the nature of the invention, the capability of the applicant to use the product for public benefit and the reasonability, but the ultimate discretion lies with him to grant the compulsory license. Even after a compulsory license is granted to a third party, the patent owner still has rights over the patent, including a right to be paid for copies of the products made under the compulsory licence.[2]

Cases pertaining to grant of compulsory license

India’s first ever compulsory license was granted by the Patent Office on March 9, 2012, to Natco Pharma for the generic production of Bayer Corporation’s Nexavar, a life saving medicine used for treating Liver and Kidney Cancer. Bayers sold this drug at exorbitant rates, with one month’s worth of dosage costing around Rs 2.8 Lakh. Natco Pharma offered to sell it around for Rs 9000, making it affordable for people belonging to every stratum. All the 3 conditions of section 84 were fulfilled and the decision was taken for the benefit of general public.

In some more cases related to grant of compulsory license in pharmaceutical industry, the controller rejected the grant on various grounds like failing to prove prima facie case, not applying for a license of patent prior to applying for compulsory license and failure to prove public use of the product sought to be use by the compulsory license.[3] It is said that in the law of patents, it is not sufficient merely to have registration of a patent. The Court must look at the whole case, the strength of the case of the patentee and the strength of the defence.[4]

In certain cases recently, the Indian courts have ruled that the provision against anti-competitive practices in the competition act and the provision of compulsory licensing in the patent act are not in exclusion of each other; in fact they have to be read conjunctly. The question whether a patentee had adopted anti-competitive practices could also be considered by the Controller. However, if CCI has finally found a patentee’s conduct to be anti-competitive and its finding has attained finality, the Controller would also proceed on the said basis and-on the principle akin to issue estoppel-the patentee would be estopped from contending to the contrary.[5]

The judicial approach with respect to grant of compulsory license is that the provision is for public welfare and it cannot be misused to diminish the rights of the patent holders. There must a balance between thee rights and making use of the product for welfare purposes.

Conclusion

The provision of compulsory licensing must be used judiciously as it is an exception and flexibility to the general rule of patent. The provision falls mid-way; neither full patent protection is granted, nor is it denied altogether it directly affects innovation funding and unfettered use of this provision may result in global pharmaceutical companies being hesitant to introduce new medicines in other countries. Hence the companies have to fix the cost of their patented module according to the economic status of the country if they want to protect their product from compulsory licensing.

Compulsory licensing has now become the hope for financially challenged patients in underdeveloped countries. India needs this provision owing to the economic condition of the majority population. But the challenge is that on one hand, it has to comply with the international standards of patent protection and on the other, it has to safeguard public health.

Author: Nayanikaa Shukla, Intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at  pratistha@iiprd.com.

References:

[1]https://www.wipo.int/patents/en/

[2]https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm

[3] http://www.khuranaandkhurana.com/2017/08/03/compulsory-licensing/

[4]Franz Xaver Huemer vs.  New Yash Engineers (08.03.1996 – DELHC) : MANU/DE/0015/1997

[5]Koninklijke Philips Electronics N.V. vs. Rajesh Bansal and Ors. (12.07.2018 – DELHC): MANU/DE/2436/2018.