Category Archives: India

GROUNDLESS THREAT OF PATENT INFRINGEMENT

Introduction

Infringement proceedings involve high costs of litigation in defending the same with the possibility that any temporary injunction granted in the due course thereof would lead to revenue loss, loss of employment and several other impediments to the business. Moreover, embroilment in infringement proceedings or the mere possibility thereof leads to disrepute of the business. Thus, keeping in mind the serious effects and consequences associated with infringement proceedings for which no person should unnecessarily be subjected to baseless threats of infringement, groundless threats of Infringement has been kept as a civil wrong or offence.

Groundless Threat of Infringement

Groundless threat, also connoted to as unjustified/wrongful threat is a threat whereby the owner or any person (depending on the statute) threatens another with legal proceedings without basing the threat on any reasonable basis. IP laws provide protection to the victims of unjustified threats, by preventing the person(s) making the threats from doing the same. Examples of such provisions in IP statutes include Section 60 of the Copyright Act, 1957, Section 142 of the Trademark Act, 1999 and Section 106 of the Indian Patents Act, 1970.

Relief under Patents Act, 1970: –

The Court has the power to grant relief in cases of groundless threat of patent infringement under Section 106 of the Indian Patents Act, 1970. The scope of this provision includes a threat given by any person (who is entitled to or interested in a patent or not)  to any other person by circulars or advertisements or by communication, oral or in writing with proceedings for infringement of a patent. It is important to note that a mere notification of the existence of a patent does not constitute a threat of proceeding within the meaning of this section. The person aggrieved thereby may bring the suit praying for the following reliefs:

  • a declaration to the effect that the threats are unjustifiable;
  • an injunction against the continuance of the threats; and
  • such damages, if any, as he has sustained thereby.

 

LG Electronics India Pvt. Ltd. v. Bharat Bhogilal Patel & Others[1]

 

In this case the plaintiff approached the Hon’ble Delhi High Court on the premise that complaint preferred by Defendant No. 1, Bharat Bhogilal Patel, against the Plaintiff before Defendant No.2, Customs Office, on the basis of which said Customs department is acting upon and interdicting the goods imported by the plaintiff without approaching the Court in accordance with Patents Act, 1970 amounts to groundless threats. The defendant claimed to have obtained a patent in respect of “Process of manufacturing engraved design articles on metals or non-metals”.

Upon receiving show cause notice from defendant no. 2 Customs department, the plaintiff requested for the documents pertaining to the impugned patent and on perusing the same, found that the claims of CS(OS) No.2982/2011 Page No.3 of 10 the impugned patent allegedly lacked novelty as well as any inventive step. Accordingly, plaintiff filed revocation petition before the Intellectual Property Appellate Board (IPAB) challenging validity of the impugned patent. The Customs department continued interdicting the consignments of the plaintiff despite having been informed of the pendency of revocation proceedings. Subsequently, the case came up for hearing and the Court passed interim order in favour of plaintiff, staying the operation of complaint of Defendant No. 2 the Customs office.

Clause 4 of IPR (Imported Goods) Enforcement Rules, 2007: –

“It is pertinent to mention that while the mandatory obligations under Articles 51 to 60 of the TRIPS dealing with border measures are restricted to Copyright and Trade Marks infringement only, the said Rules deal with Patents, Designs and Geographical Indications violations as well, in conformity with the practice prevailing in some other countries, notably EU countries. While it is not difficult for Customs officers to determine Copyright and Trade Marks infringements at the border based on available data/inputs, it may not be so in the case of the other three violations, unless the offences have already been established by a judicial pronouncement in India and the Customs is called upon or required to merely implement such order. In other words, extreme caution needs to be exercised at the time of determination of infringement of these three intellectual property rights”.

Order passed by the Court: –

The Court explained the role of Customs officer in view of clause 4 of IPR rules and under para 95 of the judgement, “I do not agree with the statement made in the written statement by the Defendant No.2 Custom department that unless the stay orders are passed in the Revocation petition, they can proceed with the complaint filed by the owner of patent despite of any merit or demerit in the Revocation proceedings”.

The Court further explained the aspects of groundless threat and stated that “the custom shall act on the notice of the court, therefore if any proprietor or the right holder issues a notice to the custom officials and the custom officials act upon the same by causing restricting the imports of consignments of any party without the determination (prima facie or otherwise) of the factum of infringement of patent by the appropriated designated authority which is civil court under the governing law, then such notice by the right holder to the third party which is customs and the actions thereof by the customs either in the form of notice to that party or otherwise calling upon the party to explain its stand which no such position exists in law are all unnecessary illegal threats to that party”.

Conclusion

From the above discussion, it is clear that complaint to Customs and show cause notice sent by Customs Authority without adjudication of quantum of infringement by Civil Court amounts to groundless threat of patent infringement in light of clause 4 of aforesaid IPR (Imported Goods) Enforcement Rules, 2007.

Authors: Avadhi Joshi and Pratik Das, Legal Interns, Khurana & Khurana, Advocates and IP Attorneys and can be reached at info@khuranaandkhurana.com

References :

[1] 2012 (51) PTC 513 (Del) available at https://indiankanoon.org/doc/48055807/

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Modification in procedure regarding examination of patent applications involving the use of biological material

The Biological Diversity Act (the BD Act) was enacted with the goal to provide for conservation of Biological Diversity, sustainable use of its components and fair and equitable sharing of the benefits arising out of the utilization of biological resources. One of the provisions under the BD Act (section 6) relates to seeking prior permission from National Biodiversity Authority (NBA) before applying for any intellectual property right, if the invention is based on any research or information on a biological resource obtained from India. In the event of an intellectual property right (patent application) being filed without prior NBA permission, NBA permission may be obtained after the acceptance of the patent but before patent grant by the patent authority concerned.

It has been witnessed in a few recent Indian Patent Office (IPO) decisions that patent applications involving use of biological materials, not procured from India and sourced from commercial sources in countries like Switzerland, Spain, Japan and China, were rejected. In light of such IPO decisions, stakeholders at Mumbai and Delhi held meetings to put forward certain issues regularly faced by patent applicants regarding unwarranted objections raised by the IPO concerning requirement of permission from NBA and further delay in obtaining NBA approval.

In view of the submissions made by stakeholders, this issue has been considered by Indian Patent office and instructions/guidelines for NBA permission have been streamlined by way of the following:

S. No. Issue Modified procedure to be followed
1 Where the invention does not relate to a biological resource defined under the Biological Diversity Act 2002, such as:

(a)    Value-added   product

(b)       Bio- wastes

(c)        Synthetically prepared biological material

(a) Value Added Product:

Section 2 of Biological Diversity Act 2002 explicitly excludes value added products from the purview of “Biological resources”.

As per Biological Diversity Act, 2002:

Section 2 (c): “biological resources” means plants, animals and micro-organisms or parts thereof, their genetic material and by-products (excluding value added products) with actual or potential use or value, but does not include human genetic material;

Section 2 (p): “value added products” means products which may contain portions or extracts of plants and animals in unrecognizable and physically inseparable form.

Examiners/Controllers shall verify from    the   disclosure in patent specification if the claimed invention resides in the biological resource or value-added product. If the invention resides in a value-added product, then they shall avoid

2 Where the biological resource/material used in invention is not obtained /sourced from India. Section 6 (1) of the Biological Diversity Act, 2002 states,

“No person shall apply for any intellectual property right, by whatever name called, in or outside India for any invention based on any research or information on a biological resource obtained from India without

obtaining   the    previous   approval   of  the    National
Biodiversity Authority before making such application.

Provided that if a person applies for a patent, permission of the National Biodiversity Authority may be obtained after the acceptance of the patent but before the sealing of the patent by the patent authority concerned; and,

Provided further that the National Biodiversity Authority shall dispose of the application for permission made to it within a period of ninety days from the date of receipt thereof.”

Thus, no    approval from   NBA   is  necessary when the invention is based on any research or information on a biological resource not obtained from India.Therefore, when an applicant makes unequivocal
declaration in application for patent (Form 1) that the
biological material used in the invention is neither
obtained from India nor sourced from India, then

Examiners/Controllers shall duly consider such
declaration before issuing FER and shall avoid raising an objection with respect to the requirements of NBA approval.

3. Marking of applications in the module regarding requirement of NBA approvals.
While examining the applications involving use of biological
resource, Examiners should mark these applications as
“NBA approval application” in the examination module
before sending the examination report to the Controller for
approval.
However, if the Controller is not satisfied with
requirement regarding NBA approval, he shall unmark the
application by giving reasons thereof.
4 Cases held up for grant
of patents only due to
non-submission of
NBA permission.
Where the applicant has complied with all the objections,
except submission of NBA approval, the Controller shall
mark the application in the examination module by remark
that “NBA approval pending, but in order for grant” and,
the System Administrator shall put a tag on such cases so
that these applications can be treated as if disposed of
the Controller.

IPO has further clearly stated that any false declaration on behalf of the applicant makes him liable for revocation of patent under section 64 (1) (j)/ 64(1) (p) of the Patents Act
1970 (as amended). Further, as per provisions in section 55(1) of Biological Diversity Act 2002, if the applicant contravenes or attempts to contravene or abets the contravention of the provision
of section 6 of the Biological Diversity Act 2002, he shall be liable for penal action under section 55(1) of the Act’.

With the streamlining of instructions/guidelines for NBA permission, the patent applicants can now effectively deal with the unwarranted objections raised by the IPO concerning the requirement of permission from NBA. Henceforth, the patent applicants can question the unjustifiable extension of applicability of Section 6 of the BD Act by IPO to reject patent applications even when the invention is not based on Indian biological resource and/or when the invention is one of a value-added product, bio-waste or a synthetically prepared biological material and hence, does not relate to a biological resource defined under the Biological Diversity Act 2002.

About the author: Tanu Goyal, Patent Associate at IIPRD and can be reached at: tanu@khuranaandkhurana.com

TATTOOS AS INTELLECTUAL PROPERTY- AN INDIAN PERSPECTIVE

INTRODUCTION:

Tim Parks in his book[1] wrote “You will only have copyright in a society that places a very high value on the individual, the individual intellect, the products of individual intellect.” In an overtly aware society like ours, there is no doubt that we not only value but are also more aware of our rights. In addition to our awareness, there is something else that is more peculiar about present times – our curiosity and our need to keep evolving with time. With this constant need for metamorphosis, our technology and art forms also are changing at a rapid scale, leading to the foundation and formation of various industries emerging from them including the Tattoo industry. This body graphics phenomenon, while may seem to have gained popularity very recently, has its roots inked all the way back in CA. 8000 BP where a ‘moustache’ was found tattooed on the upper lip of the South American Chinchorro mummy[2]. With the tattoo industry growing to become a $1 Billion industry[3], the legal framework to regulate this industry seeks evolution as well. With tattoos, the questions that need to be put to rest seem quite fundamental, beginning with – Do we have adequate laws and the legal framework to regulate and enforce the rights relating to tattoos? Are tattoos artistic enough to be copyrightable at all? If yes, who owns the rights? What is the extent of these rights? How do we enforce them?

This article tries to explore the answers to these questions while making an attempt to understand tattoo related jurisprudence across the world in comparison with current legal framework in India and its possible interpretations.

TATTOO – A COPYRIGHTABLE WORK?

Since copyrights are rights granted to artistic forms of expression on tangible mediums, tattoos ought to qualify, for copyright protection. Unlike in U.S. where the applicable statute[4] requires the “pictorial, graphic and sculptural” copyrightable work to be “original works of authorship fixed on a tangible medium of expression”, Indian law does not explicitly specify the need for tangible medium of expression. However, owing to the permanent nature of the tattoos and the human body being the “tangible medium of expression”, the reservations against tattoo not being copyrightable work, by definition, should be ruled out.  As if to prove Indian Copyright Office’s validation of tattoos as copyrightable works, the Indian Copyright Office, in 2011, granted Shahrukh Khan a copyright registration for his tattoo[5]. While there has not been a copyright infringement case for tattoos as yet in India, the news of the Warner Bros. making use of an unauthorized tattoo in their movie Hangover 2 in 2011 and then, being sued by the tattoo artist from Missouri[6] made quite a stir and has had the legal community thinking of the ramification of making the tattoos a copyrightable commodity. Though the case was discreetly settled, the million dollar question is still being debated as to who shall reap the benefits of the tattoo and can the standard injunctive damages apply, as they apply for paintings, books or other works of art.

To understand the applicability of copyrights to tattoos, one must recognize that it is only original and custom made tattoos that are the subject of this discussion. Standard tattoo in catalogues or on the walls of parlours are not to be considered thereto. Of all the ingredients, originality is the principal ingredient, without which a copyright does not exist. Having said that, the efforts made by the tattoo artists in inculcating the imagination of the tattoo bearer are worth marvelling about, it must be understood that if the copyrights of a tattoo are to remain in the possession of the tattoo artist, the rights to exploit the copyrighted ‘piece of art’ also rests with them. Among the various other rights of the copyright holder mentioned in the Indian Copyright Act, 1957, Section 14(c) (ii) specifies that the copyright holder has the right to communicate the piece of work to the public. It must be noted that this provision relating to the communication of the artistic work to the public speaks of ‘artistic work’ only implying that tattoo artist is entitled rights only of the “artistic work” i.e. the tattoo bearer’s body that has been imprinted with the tattoo while allowing the artist to restrict the replications of the artistic work in any other medium under Section 14. Thus, one may imagine the way in which a copyright holder, in this case the tattoo artist may incorporate the above mentioned right, considering that the ‘work of art’ which is to be communicated to the public is actually on somebody else’s body, unless the tattoo artist has tattooed himself. In other words, it may mean that the tattoo artist has the right to control and regulate the tattoo bearer’s activities which, by all means, violates the very right to freedoms promised to us by Art.19 and Art.21 of the Indian Constitution, to say the least. Another argument in the favour of the tattoo bearers holding the authorship rights is that the tattoo artist is a hired employee, in which case, S.17(c) of the Indian Copyright Act, 1957 may be interpreted as the tattoo bearer being a quasi-employer of the tattoo artist, is the first owner of the copyright, in the absence of a contract between the two. In practice, most tattoo artists, too, believe that once the customer pays for the tattoo, he owns the tattoo and all the rights that come with it.

In the defence of the tattoo artists’ rights to obtain the copyright, it may be said that like painters, they, too, create art and have a right to copyright the same to retain their originality. Also, as in the case of art collectors, the tattoo bearer may merely own the piece of art and the copyrights of the designs may still rest with the tattoo artist and certain amount of royalty may be reimbursed to the artist for replication or incorporation of this piece of art on various mediums such as video games, as in case of THQ Inc.[7], where the gaming company was sued by Mr. Conduit’s tattoo artist for illegally and wrongfully using the mixed martial artist’s tattoo in the game. Taking a leaf from so many cases of tattoo artist’s suing gaming[8] and entertainment companies[9], and also having burnt its fingers once[10], EA Games played it safe by taking permission from the tattoo artists of the respective sportsmen before using their work in their new NFL 15[11].

TRADEMARKING TATTOOS :

Quintessentially, the function of a trademark is to distinguish one’s services or goods from the others selling or providing similar goods or services. So when one gets a trademark or logo tattooed on himself or herself, given the aforesaid logic, the chances of them intending to confuse any member of the public of being the originator of any particular goods or service are rare. However, in some organizations, employees are encouraged to get tattoos of the organization’s logos or taglines[12].

On the other hand, in some cases, one might end up welcoming a cease and desist notice for tattooing a trademark without prior permission, like in the case of a coffee shop owner in New York who was slapped with a cease and desist notice for infringing the trademark “I ♥ NY” for tattooing “I [coffee cup] NY” on his knuckles. [13] The coffee shop owner, in this case, to avoid litigation, settled and agreed to certain terms of the said rightful owner that included restrictions on having his tattooed knuckles photographed and censoring of the cafe’s logo, which happened to be the tattooed knuckle, from the window pane of his coffee shop. While it is essential to note here that not only was there no direct trademark infringement but also the coffee shop owner had not copied the design of the logo as it is. He had introduced the image of a coffee mug instead of the “♥” which could be proved as distinctive form of expression and could have stood his ground pointing the difference in the tattoo design from the allegedly infringed logo. Having said that, like the idiom “every coin has two sides”, every legal argument can be fought from both the sides as well, making this jurisprudence ever so interesting.

CONCLUSION:

There seems to be crystal clarity, with the Warner Bros. case[14] verdict and Shahrukh Khan’s tattoo[15] being granted copyright registration, that tattoos are indeed copyrightable property. The variable in the equation, however, is the extent of the rights that are to be granted to the parties and its enforceability. While the moral rights like endorsing the tattoos in the name of the tattoo artists and giving them their credits when they are due, are undoubtedly implicit, the debate that needs to be put to rest is the statutory rights that are to be bestowed on either party.

Another question that needs the legal community’s immediate attention is the enforceability of these rights once they are granted. In order to protect and execute these rights, we are in need of a strong precedent that will define the limit the extent of injunctive relief that may be sought by the copyright holders without violating the infringer’s fundamental rights. With a Catch-22 situation before us and no binding precedent to break this deadlock, one can see only two definite possibilities – either the tattoo artists are granted their much earned and awaited royalties for every picture, endorsement, and social media coverage given to their art, or the conscious tattoo bearers is to carry fresh, newly drafted contracts for their tattoo artists to have their rights assigned to them every time they enter a tattoo parlour!

Author: Amruta Mahuli, Legal Associate at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at mumbai@khuranaandkhurana.com.

References :

[1] Where I’m Reading From: The Changing World of Books

[2] https://www.researchgate.net/profile/Aaron_Deter-Wolf/publication/275023614_The_Material_Culture_and_Middle_Stone_Age_Origins_of_Ancient_Tattooing/links/552ecd7f0cf2d495071a90b1/The-Material-Culture-and-Middle-Stone-Age-Origins-of-Ancient-Tattooing.pdf?origin=publication_detail

[3] https://www.ibisworld.com/industry-trends/specialized-market-research-reports/consumer-goods-services/personal/tattoo-artists.html

[4] 17 U.S. Code § 102

[5] http://archive.indianexpress.com/news/srk-registers-don-2-tattoo-in-his-name/817871/

[6]  S. Victor Whitmill Vs. Warner Bros., Civil Action No. 4:11-cv-752

[7]  Christopher Escobedo v. THQ Inc., Case No.: 2:12-cv- 02470-JAT, U.S. District Court, District of Arizona (Phoenix)

[8] Solid Oak Sketches, Llc V. 2k Games, Inc., U.S. District Southern District Of New York, No. 16-00724.; http://mitchellhamline.edu/wp-content/uploads/sites/37/2015/11/2-Copyrighting-Tattoos-Artist-vs.-Client-in-the-Battle-of-the-Wai.pdf

[9] Reed v. Nike, Inc, No. 05-CV-198 BR (D. Or. Feb. 10, 2005); http://www.brinksgilson.com/files/190.pdfl; Ibid. 5

[10]  Stephen Allen v. Electronic Arts Inc. et al., Case No.: 5:12-cv-03172, in the U.S. District Court for the Western District of Louisiana.

[11] http://www.barstoolsports.com/dmv/ea-sports-got-permission-from-colin-kaepernicks-tattoo-artists-to-use-his-ink-in-madden-15/;

[12] http://newsfeed.time.com/2013/05/02/employees-get-tattoo-of-company-logo-for-pay-raise/; http://www.bbc.com/news/business-28207945

[13] http://theconversation.com/who-owns-your-tattoo-maybe-not-you-56050

[14] Ibid. 4

[15] Ibid. 3

INDIA’S PROTECTION TO SECRETS OF TRADE

  1. Introduction

The global econoamy is trending towards an era of protectionism as can be seen from policies such as “Make America Great Again” and “Make in India”, thereby increasing the significance on exports and the manufacturing sector. As a corollary effect, the importance of Intellectual Property (IP) protection also increases due to the need to extend such to exports for its proper commercialization. On April 28, 2017, the Office of the United States Trade Representative (USTR) released the 2017 “Special 301” Report[1] which reviews global developments on trade and intellectual property (IP). The USTR placed India on the Priority Watch List and one of the reasons for doing so was an outdated and insufficient trade secrets legal framework.[2] It is pertinent to note that the so called Special 301 Report has vested interests of corporate lobbying from the likes of PhRMA (Pharmaceutical Research and Manufacturers of America), Business Software Alliance (BSA) and Intellectual Property Owners Association (IPOA). This piece will attempt to analyse India’s approach to trade secrets protection and its adequacy in terms of business.

  1. What are Trade Secrets?

Trade secret is a formula, process, device or other business information that is kept confidential to maintain an advantage over the competitors. It is the information which includes formula, pattern, compilation, programme, device, method, technique, or process, that derives independent economic value from not being generally known or readily ascertainable.[3] Therefore, the ingredients of trade secrets are- (a) it is such information not generally known to the public which in turn confers economic or commercial benefit through the maintenance of confidentiality and exclusivity, and (b) it is subjected to reasonable efforts of secrecy since disclosure would result in undue enrichment of others. For example, Coca-Cola’s formula for its aerated drinks and KFC’s recipe for its delicious fried chicken are considered to be trade secrets which have been preserved for many decades.

  1. Interface with Intellectual Property?

Article 1(2) of the Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS Agreement”), states that intellectual property shall include protection of undisclosed information.[4] Article 39 of the TRIPS Agreement states that in the course of ensuring effective protection against unfair competition as provided in Article 10bis of the Paris Convention, with respect to information which is (a) a secret not generally known or readily accessible, (b) has commercial value by virtue of secrecy, and (c) has been subjected to reasonable steps for ensuring its secrecy, Member nations are to ensure that natural and legal persons have the possibility of preventing such information, within their control, from being disclosed to, acquired by, or used by others without their consent, in a manner contrary to honest commercial practice. It is submitted that the possibility referred to hereinbefore implies that trade secrets should be accorded protection within the legal system and not necessarily in the IP legislative framework of the said Member nation.

  1. India’s Policy Approach

The 1989 GATT (General Agreement on Tariffs and Trade) discussion paper[5] of India sets out that as per India, trade secrets cannot be considered to be intellectual property rights, because while the fundamental basis of intellectual property right rests in its disclosure, publication and registration, trade secrets are premised upon secrecy and confidentiality. It may be noted that disclosure and publication are necessary before according the protection of exclusivity when viewed from the IPR context since the prosecution stage involves challenges and objections which test the grant of said exclusivity. The paper further goes on to state that the observance and enforcement of secrecy and confidentiality should be governed by contractual obligations and the provisions of appropriate Civil Law but not by intellectual property law.

On May 12, 2016 India approved the National IPR Policy with seven objectives and elaborative steps to be undertaken by the identified ministries/departments. One of these objectives was to ensure an effective legal and legislative framework for the protection of IPRs. The steps outlined to be taken towards attaining this objective include, among other things, identification of important areas of study and research for future policy development, and one such area identified was the protection of trade secrets.[6] Hence it may be noted that India has taken a step towards considering the protection of trade secrets under the ambit of IPR protection.

Subsequently, the U.S.-India Trade Policy Forum held on October 20, 2016 in New Delhi included a meeting of the High-Level IP Working Group, a side-event on trade secrets, and several notable consensus outcomes related to promoting IP. India announced that it has taken important initiatives and steps, designed to enhance trade secrets protection in India, showing India’s strong commitment towards the importance of trade secrets protection. These initiatives and steps include the following:

  • A workshop was convened with government officials, academics, legal experts and representatives from U.S. and Indian industry that facilitated the exchange of information and best practices on trade secrets protection in both countries;
  • India noted that it protects trade secrets through a common law approach;
  • A toolkit would be prepared for industry, especially SMEs, to highlight applicable laws and policies that may enable them to protect their trade secrets in India;
  • A training module for judicial academies on trade secrets may also be considered;
  • A further study on various legal approaches to protection of trade secrets will also be undertaken by India.
  1. India’s Common Law Approach

The Delhi High Court in American Express Bank Ltd. v. Priya Puri,[7] defined trade secret as formulae, technical know-how or a method of business adopted by an employer which is unknown to others and such information has reasonable impact on organizational expansion and economic interests. Indian courts have approached trade secrets protection on the basis of principles of equity, action of breach of confidence and contractual obligations.

  • Equity

In John Richard Brady v. Chemical Process Equipments P. Ltd.,[8] it was held that independent of an underlying contract or in the absence of one, he who has received information in confidence is not allowed to take unfair advantage of it. This lays down that undue enrichment at the expense or detriment of another goes against the tenets of equity and fairness which need not be dependent on contractual obligations.

  • Breach of Confidence

In Zee Telefilms Ltd. v. Sundial Communications Pvt. Ltd.,[9] it was laid down that in an action of breach of confidence, the obligation of confidence is not limited to the original recipient but also extends to those persons who received the information with knowledge acquired at the time or subsequently that it was originally given in confidence. In Diljeet Titus v. Alfred Adevare & Ors, it was held that the Court must step in to restrain a breach of confidence independent of any right under law and that such an obligation need not be expressed but be implied and the breach of such confidence is independent of any other right. Therefore, it is submitted that the protection of trade secrets does not always necessarily stem from the owner of such secret having a right per se in respect of the same but from the implied obligation to maintain confidence by virtue of the nature of trade secrets in general.

  • Contractual Obligations

In Niranjan Shankar Golikari v. Century Spinning[10], it was held that negative covenants in employment agreements pertaining to non-disclosure of confidential information operative during the period of the contract of employment and even thereafter, are generally not regarded as restraint of trade and therefore do not fall under Section 27[11] of the Contract Act, 1872 as a former employee should not be allowed to take unfair advantage of the employer’s trade secrets which are vital for business. Post service restraint in maintaining confidentiality and also carrying on any other business for a limited period is permissible under the exception to Section 27 of the Contract Act, as was held in Homag India Pvt. Ltd. v. Mr. Ulfath Ali Khan.[12]

  1. Conclusion

It is submitted that as explained hereinabove, the common law trinity of equity, breach of confidence and contractual obligations for the protection of trade secrets is well suited to business requirements in India. India’s position should not be mistaken to connote that there is insufficient protection accorded to trade secrets and confidential information in the country. In fact, it must be clarified that Intellectual Property may not be the correct form of protection accorded to trade secrets. Trade Secrets rely on their nature of secrecy which precludes the quid pro quo disclosure required by the State before granting a statutory right of monopoly. Moreover, secrecy prevents the subject matter from being tested with regards to the scope of “has commercial value” and “has been subjected to reasonable steps of secrecy”. It is also pertinent to note that statutory enactment may not be sufficient to define the scope of what constitutes trade secret and protection thereof which could be more adequately handled on a case to case basis by the common law approach. It would be apposite to mention that legal proceedings and pleadings pertaining to trade secrets should be based on high modicum of confidentiality to protect the nature of the information as such.]

Author: Pratik Das, Legal Intern at Khurana and Khurana, Advocates and IP Attorneys and can be contacted at info@khuranaandkhurana.com

References :

[1] Available at https://ustr.gov/sites/default/files/301/2017%20Special%20301%20Report%20FINAL.PDF

[2] In the International IP Index, 2017 released by the U.S Chamber of Commerce, India was ranked 43 out of 45 countries in terms of the IP regime existing in the said countries; available at https://www.uschamber.com/event/2017-international-ip-index-the-roots-innovation

[3] Black’s Law Dictionary, Ed. 8, cited in Bombay Dyeing & Manufacturing Co. Ltd. v. Mehar Karan Singh, 2010 (112) BOM LR  3759.

[4] All categories of IP that are the subject of Part II, Sections 1 to 7 of the Agreement; Section 7 is titled as “Protection of undisclosed information”.

[5] MTN.GNG/NG11/W/37.

[6] Paragraph 3.8.4, National IPR Policy, 2016.

[7] (2006) HI LLJ 540 (Del).

[8] AIR 1987 Delhi 372.

[9] 2003 (27) PTC 457 (Bomb).

[10] AIR 1967 SC 1098.

[11] Agreement in restraint of trade is void.

[12] M.F.A. No. 1682/2010 C/W M.F.A. No. 1683/2010 (CPC) decided on 10.10.2012, Karnataka High Court.

Legitimacy of IPRS and PPL

What is a Copyright Society?

The collective administration of copyright by a society is a concept where management and protection of copyright in several works are undertaken by the said society of authors and other owners of such works.

In India, a copyright society is registered under Section 33 of the Copyright Act, 1957. Such a society is formed by authors and other copyright owners which may include licensing entities by virtue of assignment from the original author. The business of issuing or granting license in respect of literary, dramatic, musical and artistic works incorporated in cinematograph films or sound recordings shall be carried out only through a copyright society duly registered under this Act. Ordinarily, only one society is registered to do business in respect of the same class of work.

The minimum membership required for the registration of a copyright society is seven. On registration, a copyright society stays in existence for 5 years[i], after which it must apply for renewal. The functions of a copyright society include prescribing a license fee in accordance to its “Scheme of Tariffs” as decided by the members of the society. Under the Copyright Rules, 2013, every society must publish its tariff scheme on a regular basis. The society also decides how the collected fees shall be distributed among the members of the society.

 

What are IPRS and PPL?

The Indian Performing Right Society (IPRS) and Phonographic Performance Limited (PPL) were Copyright societies registered under Section 33 of the Copyright Act, 1957.

IPRS came into existence on 23rd August, 1969 to administer and issue license for usage of all performing rights associated with composition and lyrics and got registered as a copyright society in 1996.

The Indian Phonographic Industry (IPI), the association of phonogram producers was established in 1936. Subsequently, it decided to form a specialised body to administer the public performance and broadcasting rights, and so Phonographic Performance Limited (PPL) came into being in 1941 and just like IPRS, it also got registered itself as a copyright society under the Copyright Act, 1957.

Controversy involving the legitimacy of IPRS and PPL

In 2012, the Copyright Act was amended and a series of changes were incorporated. Following the amendment, string of litigation, unfolding of facts and judgements came to the notice.

The said amendment was made in Section 33 of the Act wherein subsection 3A was inserted, the proviso to which stated “every copyright society already registered before the coming into force of the copyright (amendment) Act, 2012 shall get itself registered under this chapter within a period of one year from the date of commencement of the Copyright (Amendment) Act, 2012”, and came into force on the 21st of June, 2012.

Both IPRS and PPL applied for re-registration on 8th May, 2013 and 10th May, 2013 respectively which was only a month prior to the expiration of the granted period for re-registration. However, IPRS in a letter dated 2nd June, 2014 and PPL in a letter dated 20th May, 2014 expressed their intent to withdraw their application for re-registration. Thus, due to failure to re-register IPRS and PPL, the earlier copyright societies were automatically disqualified to operate as Copyright societies under Section 33 of the Indian Copyright Act.

Now, both the entities operate as Private Limited Companies, registered under the Companies Act.

Such aforesaid actions by IPRS and PPL could have ensued due to the amendments brought about in 2012. It may be pertinent to note that authors of copyrighted works usually assign their rights in favour of IPRS or PPL for the licensing of said rights. The amendment in 2012 resulted in the change whereby “owners of the right” in Section 33 was substituted by “authors and other owners of right”. Therefore, as per Sections 33(4) and 33(5), the Central Government by virtue of the amendment could intervene in the administration of the said copyright society if the affairs of such society were being conducted contrary to the interests of the authors of the copyrighted works.

Moreover, by virtue of the amendment, an author of a copyrighted work shall have the right to withdraw the exclusive authorisation given to the copyright society to administer any right in a work without prejudice to the rights of the said society under any contract. Further, Section 35 has been amended to provide that every copyright society shall have a governing body with such number of persons elected from among the members of the society consisting of equal number of authors and owners of work for the purpose of the administration of the society. Section 35(4) provides that all members of a copyright society shall enjoy equal membership rights and there shall be no discrimination between authors and owners of rights in the distribution of royalties.

IPRS v. Union of India and Ors. & Hasan Kamal v. Union of India

(Writ Petition no. 2384/2014 with 2236/2014)

There were several complaints keeping IPRS in limelight for irregularities which  ranged from non-distribution of royalties, illegal sub-licensing of royalties, illegal transfer of mechanical rights and ring-tones royalties to another copyright society- PPL and lastly, forging signatures and misrepresentation to the Ministry of HRD. All these acts were violative of Sections 33-35 of the Copyright Act, 1957. Taking cognizance of such complaints, the government proceeded to pass an order to appoint an Enquiry Officer to make necessary enquiries into alleged complaints and to give suggestions to improve the administration of IPRS, thereby Justice Shri Mukul Mudgal was appointed. Post that, IPRS moved the High Court of Bombay and argued that  Rule 50 of Copyright Rules, 2013 provides for the appointment of an office above the rank of Deputy Secretary to the Government of India for the purposes of this enquiry and contended that the appointment of a former Chief Justice of the Punjab and Haryana High Court was not in compliance with the provisions of the Act. However, later in September 2014, the Justice resigned from the post of Enquiry officer as he did not want his qualifications to be a subject matter of litigation.

It further contended that since it failed to re-register itself as a copyright society as per the amendment, the order was inapplicable since it was made on the assumption that IPRS was still functioning as a ‘copyright society’. The High Court dismissed IPRS’s contention and said that if such contentions were to be accepted, “it would be adding premium to dishonesty” since it was a registered society from 1996 to 2013. In this regard, the Court stated;

“We do not think that the Legislature intended such an absurd result. We are, therefore, clearly of the view that the Central Government had jurisdiction to form a prima facie opinion that an enquiry is required to be conducted into the affairs of the petitioner society in respect of the alleged violations of the Act and the Rules”

IPRS moved the Supreme Court of India by a Special Leave Petition which was dismissed.

Whether IPRS and PPL can be construed as Copyright Societies or not?

The question as to whether IPRS and PPL are to operate as copyright societies is important as Section 33 of Copyright Act permits only a registered copyright society or an authorised agent to carry out the business of issuing and granting licenses. Both IPRS and PPL have publicly stated that they are not registered copyright societies and even the Ludhiana High Court ruled that IPRS was not a registered society in 2013.

Interplay between Section 30 and Section 33

Section 30 of the Act provides that “the owner of the copyright in any existing work or the prospective owner of the copyright in any future work may grant any interest in the right by licence in writing signed by him or by his duly authorised agent”

Thus, Section 30 provides for granting the license by agents on behalf of the owner. In the current scenario, the two entities, IPRS and PPL, claim to function as agents of their members and thus grant license in the name of the agent.

Section 33 of the Act provides “No person or association of persons shall carry on the business of issuing or granting licences in respect of any work in which copyright subsists or in respect of any other rights conferred by this Act except under or in accordance with the registration granted under sub-section (3)”

IPRS’ and PPL’s claim of functioning under Section 30 is overlapped by Section 33.  It needs to be reiterated that for the purpose of issuing or granting license, the entity needs to be a copyright society registered  under the Indian Copyright Act but IPRS and PPL maintain that they are not copyright societies and hence don’t come under the ambit of Copyright Act. Despite this, IPRS and PPL have repeatedly acted otherwise. In 2014, the IPRS filed a suit at the Delhi High Court where it verified that it was a copyright society, completely contradicting itself. In the same year, in other two cases — namely, IPRS v. Goodwin Jewellers and ors. – CS(OS)871/2014, and IPRS v. Black and White Media India and ors. – CS(OS)1274/2014, it approached the Delhi High Court as a copyright society, successfully managing to get the court to rule in its favour thereby digging its own grave.

Leopold Café Stores v. Novex Communications Pvt. Ltd.

Citation Order in Notice Motion No. 1451 of 2014 in Suit (L) NO. 603 OF 2014

In this case Hon’ble Bombay HC observed that “every agent also ‘carries on business’, but that is the business of agency, with the agent functioning as such, i.e., clearly indicating that it is acting on behalf of another, one who holds the copyright. This is the only manner in which both Section 33 and Section 30 can be harmonized. An absolute bar even on an agency, invoking Section 33, would undoubtedly run afoul of the plain language of Section 30 and render the words “or by his duly authorised agent” entirely otiose.”

“In order to qualify an agent, it is necessary for the agent to disclose that it is acting for and on behalf of the copyright owner in all the relevant documents.” Thus, license granted by IPRS and PPL can be only in the name of copyright holder and not itself.

On 14th August 2015, the Central Government announced the appointment of Y.P.C. Dangey, retired joint secretary and legal adviser of the Department of Legal Affairs in the Ministry of Law and Justice as Inquiry Officer to look into the inconsistencies and irregularities by IPRS and PPL all throughout its existence and submit a report. Further, IPRS was unsuccessfull in moving a writ petition regarding Dangey’s appointment against Union of India.

Chitra Jagjit Singh vs. The Indian Performing Rights Society 

Citation – MANU/DE/0917/2016)

In 2016, Delhi High Court restrained IPRS from granting any license in respect of the works of Jagjit Singh and also from recovering license fee from any third party in respect of the works, though it continued to collect license fee irrespective of the order. This case is landmark in the sense that for the first time court considered that IPRS is not competent in issuing license and collecting license fee, in furtherance of the decision of the court in the case of Novex Communications which was unclear on the standing of unregistered societies. The Hon’ble Court held that IPRS cannot claim to function as a company when it is issuing licenses in the capacity of a copyright society and hence, cannot issue licenses without being registered as such under the Copyright Act.

Recent Development

While Enquiry Commission’s report is still awaited, there has been a positive development as IPRS appointed Javed Akhtar – a noted poet, lyricist, scriptwriter as their chairman and Achille Foler – copyright administrator as a permanent advisor of the board.

Javed Akhtar on his appointment stated that it’s a “new chapter” and “writers, composers and publishers have risen above the past conflicts and have a taken a pledge to work together for the enhancement of Indian Music Industry’s reach and prosperity.”

Another positive step was taken by IPRS as it held the Extraordinary General Meeting on the 9th February 2017 which aimed to replace the Articles of Association. Moreover it was reported that the revamped IPRS has adopted a new working constitution which is fully in sync with the amended Copyright Act. The primary objective being, rightful royalty flow to the right’s owners, while simplifying the license procedure for the end users.

Authors- Himani Kohli and Pratik Das, Legal Intern at Khurana & Khurana, Advocates and IP Attorneys and can be reached at info@khuranaandkhurana.com

 

[i] Section 33 (3A) of the Copyright Act, 1957, inserted by Copyright (Amendment) Act, 2012

Enzo Biochem Inc. v. Applera Corp. – A case pertaining to Doctrine of Equivalents

On August 02, 2017, the United States Court of Appealsfor the Federal Circuit ruled in favor of Applera Corp.and Tropix Inc.in the matter of Enzo Biochem Inc., Enzo Life Sciences Inc., Yale University v. Applera Corp., Tropix Inc. The Court affirmed that the district court accurately interpreted proper construction of claims in U.S. Patent No.5,449,767 (“the’767 patent”) and correctly analyzed Enzo’s doctrine of equivalents argument. In over thirteen years of litigation between the parties, the Court has considered this present infringement action on three separate occasions.

Background

Technology as disclosed in the ‘767 patent pertains to use of nucleotide probes to detect presence of a particular DNA or RNA sequence in a sample or to identify anotherwise unknown DNA sequence. According to the ’767 patent, many procedures employed in biomedical research and recombinant DNA technology rely on use of radioactive labels such as isotopes of hydrogen, phosphorus, carbon, oriodine. The ’767patent also notes serious limitations and drawbacks pertaining to use of radioactive materials that include, elaborate safety precautions, expensive use and purchase, and short shelf-life. As an alternative to use of radioactive labels, the’767 patent elaborates on a series of novel nucleotide derivatives that contain biotin, iminobiotin, lipoic acid,and other determinants attached covalently to pyrimidine or purine ring. Further, the ’767 patent asserts that the use of modified detection approach provides detection capacities equal to or greater than procedures which utilize radio isotopes, and also overcomes other limitations and drawbacks pertaining to use of radioactive labels.

The disputed languageof claim 1 involves following limitation:

“wherein A comprises at least three carbon atoms and represents atleast one component of a signaling moiety capable ofproducing a detectable signal . . . .”

Procedural History

In 2004, Enzo filed a suitag ainst Applera alleging infringement of six patentsincluding the ’767 patent. After multiple years of litigation in 2012, an appeal to the federal court regarding invalidity issues decided on summary judgment, Enzo I, 599 F.3d 1325 (Fed.Cir.2010). The jury found Applera infringed the claims at issue and awarded $48.6million in damages. In appeal, Applera argued that the district court erred in its claim construction because claims of the ’767 patent only cover indirect detection and alternatively, if the claims cover direct detection, they are invalid for lack of written description andlack of enablement. The Federal Court agreed with Applera and reversed the district court’s claim construction, Enzo II, 780 F.3d 1149, 1150 (Fed. Cir. 2015). The Court concluded that the inventors were claiming only indirect detection and thus, held that “the district court erred in construingthe disputed claims of the patent-in-suit to cover bothdirect and indirect detection”. The Court then remanded the case to the district court to determine whether accused product infringes under proper claim construction. The district court agreed with Applera and rejected doctrine of equivalents argument raised by Enzo. Hence, Enzo Appealed.

Opinion of the Court

Firstly, the Court discussed scope of Enzo II and concluded that the district court correctly interpreted Enzo II. According to the Court, the district court rightly referred to specification of the ’767 patent and opined that specification does not support inclusion of direct detection.

Secondly, the Court discussed doctrine of equivalents. According to Enzo, Applera infringes claims under doctrine of equivalents and the district court “misconstrued” its expert declaration and improperly drew inferences in favor of Applera, rather than Enzo. Further, Enzo asserted that scope of equivalents focused on a particular subset of direct detection.

According to the Court, the district court rightly explained that the patent “describes its method of indirect detection as a superior means of detection as compared to direct detection, with ‘detection capacities equal to or greater than products which utilize’ direct detection”. The Court explained that “the specification provides additional support that claim 1 covers only indirect detection”.

The Court relied on Dolly, Inc. v. Spalding & Evenflo Cos., 16 F.3d 394, 400 (Fed. Cir. 1994), according to which “the concept of equivalency cannot embrace a structure that is specifically excluded from the scope of the claims” and noted that the same principle applies in the present case. “Including direct detection as an equivalent of indirect detection would render meaningless the claim language on which decision in Enzo II was based”. Thus, direct detection cannot be an equivalent of indirect detection in relation to these patent claims.

Conclusion

The doctrine of equivalents is generally considered when a product or process does not literally infringe a patented invention but the product or process contains elements identical or equivalent to each claimed element of the patented invention. Further, an analysis of role played by each element in context of function, way, and result of the claimed element and the product or process is required. In the present case, the court excluded direct detection from the scope of claims by referring to specification of the patent application even when the claims expressly did not exclude direct detection. Thus, the present case is an instance of difficulties pertaining to analysis of doctrine of equivalents and indicates proving doctrine of equivalents as unfeasible.

CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP) OF JAYPEE INFRATECH: IMPLICATION ON WISHTOWN & JAYPEE AMAN HOUSING PROJECT – CLAIM SUBMISSION BEFORE AUGUST 24, 2017

  1. Introduction

On August 9, 2017, the Allahabad Bench of National Company Law Tribunal (“NCLT”) admitted[1] the insolvency application of IDBI Bank against Jaypee Infratech Ltd. under Section 7 of the Insolvency and Bankruptcy Code, 2016[2] (“IBC”). On June 13, 2017, the Reserve Bank of India (“RBI”) issued a press release[3] whereby it identified 12 accounts which represented 25% of the gross bad loans in the banking system that would be eligible for immediate reference for bankruptcy proceedings. The said criterion for referring accounts for resolution under IBC was identification of total outstanding amount greater than ₹5000 crore, with 60% or more classified as non-performing by banks as of March 31, 2016.

Although RBI did not disclose the identity of said 12 accounts, Jaypee Group, along with Essar Steel, Bhushan Steel and Lanco Group, is considered to be among the said identified accounts. The said application of IDBI, a government owned financial services company, against Jaypee Infratech was in respect of default of an amount of ₹526 crore. Jaypee Infratech Ltd. is the construction arm of the Jaypee Group and was responsible for the construction of the Yamuna Expressway connecting Noida to Agra.

  1. Wishtown and Jaypee Aman Housing Projects

Jaypee Infratech had constructed the Wishtown Housing Project in Sector 128, Noida and Jaypee Aman Housing Project in Sector 151, Noida, with a promise of delivery by 2012-13. However, the aforesaid projects have not been completed and possession has also not been given to the flat owners. These projects were built on land given to Jaypee by Noida Authority in return for the construction of the Yamuna Expressway. Subsequently, Jaypee Infratech had taken loans from financial institutions including IDBI Bank for the construction and completion of the said projects. Flat owners are apprehensive that in the event of liquidation secured creditors such as IDBI would get preference in repayment thereby leaving flat owners with no possibility of refund of the amount paid. Moreover, it is speculated that the amount received from the sale of assets of Jaypee Infratech might not be sufficient to complete said projects and deliver possession to the flat owners.

  1. Public Announcement

In accordance with Section 13 of the IBC, the NCLT made a public announcement[4] with regard to initiation of CIRP of Jaypee Infratech and appointment of Mr. Anuj Jain, Chartered Accountant, BSRR and Co. as the Interim Resolution Professional (“IRP”) who shall be vested with the management of the affairs of Jaypee Infratech. It is pertinent to note that NCLT has also ordered a moratorium prohibiting institution of fresh suits or continuation of any legal proceedings against Jaypee Infratech in any court, tribunal and/or arbitration panel. Therefore, all proceedings of flat owners pending in consumer courts/any other proceedings pertaining to the non-delivery of possession/incompletion of the housing project has been effectively stayed till the date of approval of resolution plan by NCLT or passing of liquidation order. It is also to be noted that the CIRP is to be completed within a period of 180 days (extendable by 90 days) from the date of insolvency commencement, that is, August 9, 2017.

  1. Proof of Claims

Under the IBC, after the initiation of CIRP, the public announcement calls for submission of proof of claims against corporate debtor (Jaypee Infratech) from financial creditors, operational creditors and employees and workmen. It is pertinent to note that on August 16, 2017, the Insolvency and Bankruptcy Board of India (“IBBI”) notified[5] the IBBI (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2017 whereby inserting Regulation 9A, titled “Claims by other Creditors” and in effect, has introduced a new class of creditors under the IBC, that is, those creditors who does not fall under the ambit of financial or operational creditors. Under the IBC, CIRP can be initiated by financial creditor, operational creditor and also, corporate debtor itself. Although, the amendment does not indicate that CIRP can be initiated by any ‘other creditor’. This amendment is a welcome move since it recognizes that there could be situations when the claim is legitimate but cannot be classified as either financial or operational, as in the case of flat owners of Wishtown and Jaypee Aman.

The amended regulation has introduced Form F and flat owners have been directed to submit said Form F to the IRP by August 24, 2017. Form F is available here http://jaypeeinfratech.com/communication/2017/6-Form-F-Other-than-Financial-Creditors-and-Operational-Creditors.pdf

The above named amendment has specified that the following documents are required to establish the claim of these ‘other creditors’:

  • documentary evidence demanding satisfaction of the claim (Example: Allotment letter, communications from Jaypee);
  • bank statements of the creditor showing non-satisfaction of claim (Example: EMI Monthly Instalments);
  • order of court or tribunal that has adjudicated upon non-satisfaction of claim, if any (Example: orders of consumer courts).

As per press release dated August 18, 2017, (available here http://jaypeeinfratech.com/communication/2017/Press-Release-dated-18-August2017.pdf), the IRP has specified that no claim shall be disqualified for the reason of submission of incorrect form.

It is also pertinent to note that Regulation 12(2) of IBBI Regulations allows a creditor who has failed to submit proof of claims before last date mentioned in the public announcement to submit such proof at any time before approval of resolution plan by committee of creditors. As explained hereinbefore, Regulation 9A has recognised the flat owners as a separate distinct class of creditors and hence, it may be argued that proof of claims by flat owners may be submitted even after the aforesaid date. However, in order to be cautious, flat owners should adhere to such aforesaid date and as instructed by the IRP in aforesaid press release, may submit only additional information in respect of the claim after the deadline.

  1. Conclusion

It is pertinent to note that the resolution plan, to be finalized within 180 days of insolvency commencement date, has to be approved by 75% majority of committee of creditors. Under the IBC, all financial creditors are constituted into the said committee. It would be pertinent in public interest to allow said flat owners to have adequate representation in the committee of creditors and for their claims to be treated at par with those of financial creditors such as IDBI Bank and other financial institutions. Section 16(5) of IBC specifies that the term of the IRP shall not exceed 30 days from date of appointment, thereby in this case tenure of IRP will be from August 9, 2017 till September 8, 2017. Moreover, Regulation 17 of IBBI Regulations mandates the IRP to constitute committee of creditors before expiry of aforesaid 30 days and that first meeting of said committee shall be convened within 7 days of constitution. In the first meeting, the committee, by 75% majority, decides whether to appoint IRP as resolution professional and in the event it does not, it must recommend a resolution professional to NCLT.

It is hoped that all the claims of the flat owners are verified and collated in such a way so as to ensure that their interests are protected. It is to be seen whether the government takes any tangible step to ensure that the claims of flat owners are treated at par with those of the financial/operational creditors.

Author: Pratik Das, Legal Intern at Khurana & Khurana, Advocates and IP Attorneys and can be reached at info@khuranaandkhurana.com

Reference:

[1] Order available at http://nclt.c2k.in/OtherNCLT/interim_orders/allahabad/09.08.2017/1.pdf

[2] Available at http://ibbi.gov.in/Law/IBC%202016.pdf

[3]Available at https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=40743

[4] Available at http://jaypeeinfratech.com/communication/2017/2-Public-Announcement-EN.pdf

[5] Available at http://www.ibbi.gov.in/CIRP_Amendment.pdf

Compulsory licensing

Compulsory licenses are sovereign state authorizations which enable a third party to make, use, or sell a patented product without the consent of the patent holder. Provisions pertaining to compulsory licensing are provided for under both the Indian Patent Act, 1970, as well as the international legal agreement between all the member nations of WTO – the TRIPS. In India, Chapter XVI of the Indian Patent Act, 1970 deals with compulsory licensing while the conditions which need to be fulfilled for the grant of a compulsory license are laid down under Sections 84 and 92 of the Act.

In accordance with Section 84(1) of the Indian Patent Act, 1970, after three years from the grant of a patent, any interested person may make an application for a compulsory license on the grounds that the patented invention:

(a) Does not satisfy the reasonable requirements of the public;

(b) Is not available to the public at a reasonably affordable price; and

(c) Is not worked in the territory of India.

In addition to the aforementioned grounds, according to Section 92 of the Act, compulsory licenses can also be issued suo motu by the Controller of Patents 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 said section enables the Government of India to notify to the public of such extreme circumstances, whereupon, any person interested can apply for a compulsory license and the Controller in such case may grant to the applicant a license over the patent on such terms and conditions as he thinks fit.

The patentee, however, has the right to be heard in the compulsory licensing application process.

India’s first ever compulsory license was granted by the Patent Office on March 9, 2012, to Hyderabad-based Natco Pharma for the production of generic version of Bayer’s Nexavar, an anti-cancer agent used in the treatment of liver and kidney cancer. It was established in the Bayer vs Natco case that only 2% of the cancer patient population had an easy access to the drug and that the drug was being sold by Bayer at an exorbitant price of 2.8 lakh INR for a month’s treatment[1]. Further, on the ground that Nexavar was being imported within the territory of India, the Indian Patent Office issued a compulsory license to Natco Pharma, which assured that the tablets would be sold for Rs. 8,880/- per month. It was settled that 6% of the net sales of the drug would be paid to Bayer by Natco Pharma as royalty.

In the second case of Compulsory licensing in India, the Controller rejected BDR Pharmaceuticals’ application for compulsory license (made on March 4, 2013) for BMS cancer drug, SPRYCEL[2]. The Controller rejected the compulsory license application made by BDR for stating that BDR has failed to make prima facie case for the making of an order under section 87 of the Act. Controller in the said case observed that BDR Pharmaceuticals had not made any credible attempt to procure a voluntary license from the Patent holder and the applicant has also not acquired the ability to work the invention to the public advantage.

In the most recent case of compulsory licensing in India, Lee Pharma, a Hyderabad based Indian pharma company, filed an application for compulsory license (dated 29.06.2015) for the patent covering AstraZeneca’s diabetes management drug Saxagliptin. In order to make a prima facie case, Lee Pharma strived to show that their negotiations for a voluntary license with the patent owner were not rewarding as they did not receive any response from the Patent owner within a reasonable period. The grounds alleged by Lee Pharma were that:

  • the patentee has failed to meet the reasonable requirements of the public,
  • the patented invention is not available to the public at a reasonably affordable price, and
  • the patented invention is not worked in India.

However, all the three grounds of Lee Pharma were rejected by the Controller General and the Compulsory license application was refused[3]. The application was rejected on the basis that Lee Pharma failed to demonstrate what the reasonable requirement of the public was with respect to Saxagliptin and further failed to demonstrate the comparative requirement of the drug Saxagliptin vis-a-vis other drugs which are also DPP-4 inhibitors. Further, Controller General held that all the DPP-4 inhibitors were in the same price bracket and the allegation that Saxagliptin alone was being sold at an unaffordable price was unjustified. The Controller General also stated that Lee Pharma failed to show the exact number of patients being prescribed the patented drug and how many of them were unable to obtain it due to its non-availability and consequently it was difficult to hold whether manufacturing in India was necessary or not.

Considering the last two compulsory license cases in India, it is clear that the provisions of compulsory license cannot be misemployed to diminish the rights of the patent holders and that the basic jurisprudence governing the subject of compulsory license lies in balancing the conflicting interest of the patentee’s exclusive rights and making the invention available at an affordable price to third parties in case of need.

About the author: Tanu Goyal, Patent Associate at IIPRD and can be reached at: tanu@khuranaandkhurana.com

[1] http://thefirm.moneycontrol.com/story_page.php?autono=1132015

[2]https://iiprd.wordpress.com/2013/11/13/indian-patent-office-rejects-compulsory-licensing-application-bdr-pharmaceuticals-pvt-ltd-vs-bristol-myers-squibb/

[3] http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/india-rejects-compulsory-license-application-of-lee-pharma-against-astrazenecas-saxagliptin/articleshow/50652935.cms

GST IMPLICATION ON INTELLECTUAL PROPERTY

GST IMPLICATION ON INTELLECTUAL PROPERTY

  1. Once upon a time . . .

Before the Goods and Services Tax (GST) regime,the Union government exclusively used to levy tax on transactions relating to Intellectual Property (IP) rightsif such were classified as services[1] (under Service Tax, Chapter V, Finance Act, 1994), while the State governments used to levy tax on IP rights if the transaction involving such were classified as sale/deemed[2] sale of goods[3] (under State Sales Tax/State Value Added Tax or Central Sales Tax which was collected and retained by the originating State). The aforesaid indirect tax system required interpretation on the classification of the transaction.This often led to double taxation when the same transaction was subjected to both sales tax and service tax due to the industry being cautious so as to avoid penalties of avoiding tax.

 

  1. Growing Stronger Together

With the advent of GST, the need to classify transactions involving IP as either relating to rendering of service or sale/deemed sale of goods was absolved. This is due to GST being concurrent[4] in naturewith the Centre and the States simultaneously and seperately levying it on a common base or transaction irrespective of its classification. It is pertinent to note that GST would be applicable on supply of goods or services[5] as against the previous concept of tax on the manufacture of goods or on sale of goods or on provision of services.

The GST to be levied for intra-state supply of goods and services by the Centre would be called Central GST (CGST) and that to be levied by the States [including Union territories with legislature] would be called State GST (SGST). On inter-state supply of goods and services, Integrated GST (IGST) is to be collected by the Centre.[6] IGST would also be applicable on imports.[7] GST is a destination based consumption tax, that is, the tax is received by the state in which the goods or services are consumed and not by the state in which such goods are manufactured.

 

  1. Rates in relation to Intellectual Property

Section 9 of the CGST, 2017 [corresponding section 9 of SGST] states that the CGST (or SGST as the case may be) shall be levied on the transaction value[8] or the price actually paid or payable for the said supply of goods and/or services and at such rate to be notified on the recommendations of the GST Council. Subsequently, the rates have been notified as follows[9]:

Under Sl. No. 17, Heading 9973-

  • Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology software at the rate of 12% (6% CGST and 6% SGST).
  • Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of Information Technology software at the rate of 18% (9% CGST and 9% SGST).

“Information Technology software” means[10] any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment.

  • Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration at the same rate of central tax as on supply of like goods involving transfer of title in goods.
  • Any transfer of right in goods or of undivided share in goods without the transfer of title thereof at the same rate of central tax as on supply of like goods involving transfer of title in goods.
  1. Brief Analysis

It is pertinent to note that under the GST regime, permanent transfer/sale of a particular intellectual property right would be considered as supply of service and a 12% tax (6% CGST and 6% SGST) would be levied on the transaction price provided such IPR is not in respect of software. Temporary transfer or permission to use or enjoy (license or assignment) any IPR would also be taxable at the same rate provided it is not relating to IT software.

Earlier, permanent transfer was not considered as declared service and hence not exigible under service tax. It is also to be noted that earlier the exclusivity test (whether transfer/assignment/license is exclusive to the transferee) as laid down in the BSNL judgment[11] was the standard for determining whether the transfer would amount tosale (and hence, subject to sales tax) or license (and hence, subject to service tax). Under the GST it is immaterial for the purpose of taxation whether the said transfer is exclusive or for that matter temporary since it will be subjected to the same concurrent tax.

It is also pertinent to note that sale or licensing of intellectual property pertaining to software would be charged 18% tax (9% CGST and 9% SGST). Even though GST has done away with the need to classify transactions in respect of goods and services, the Centre has in a way reversed the TCS judgment[12] which had held that transactions relating to shrink wrapped software (software bound with product) was to be considered as transfer of the right to use such software goods (and hence deemed sale of goods[13]) while the same is to be treated as service due to the notification.[14]

It may also be noted that the Constitution (One Hundred and First Amendment) Act, 2016 [by which the GST was introduced in the constitutional framework] did not amend Article 366(29A)(d) which specifies that the transfer of the right to use any goods is to be deemed as a sale of those goods. However with the aforesaid notification[15], the Centre while notifying the taxation rate, has in a way classified the transfer of the right to use any goods to be treated as service.

  1. Reverse Charge on Copyright

GST is to be levied on the person supplying the goods and/or services. However, Section 9(3) of the CGST Act, 2017 states that the Centre may specify certain categories of supply of goods andservices on which the tax is to be paid on reverse charge basis by the recipient of the supply. Therefore, as per notification[16], the tax on the supply of services by an author, music composer, photographer, artist, etc. by way of transfer or permitting the use or enjoyment of a copyright relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer etc., shall be borne by the said publisher, music company or producer.

  1. “Registered Brand Name” in the context of GST

It is to be noted that the supply of certain goods, such as chena or paneer, natural honey, wheat, rice and other cereals, pulses, flour of cereals and pulses, other than those packed in unit container and bearing a registered brand name, is exempted from CGST[17]. Supply of such goods, when put up in unit container and bearing a registered brand name attracts 2.5% CGST rate[18].

Subsequently, doubts were being raised as to the meaning of “registered brand name”. On July 5, 2017, the Finance Ministry issued a press release[19] clarifying the same. The statement noted that “registered brand name” has been defined in the notifications[20] and the same would mean brand name or trade name which is registered under the Trade Marks Act, 1999. In this regard, registered trade mark means a trade mark which is actually on the register and remaining in force[21].

Thus, unless the brand name or trade name is actually on the Register of Trade Marks and is in force under the Trade Marks Act, 1999, GST rate of 5% (2.5% CGST and 2.5% SGST) will not be applicable on the supply of such goods.[22] It is pertinent to note that this may lead up to a situation wherein a particular company selling, say, cereals in unit containers bearing a brand name but such brand name is not on the Trade Mark Register and hence not in force, would be exempted from GST. Such situation would also extend to new players in the cereals (or other exempted goods) industry who have applied for trademarks and whose marks have not been registered. The relevant question posited by this clarification is that whether smaller players would now be discouraged from filing for trademark registration due to availing tax exemption which in turn would reduce their costs? This might go against the objective of the National IPR Policy 2016, which encourages commercialization of IP at the grass-root level. Still considering the importance of Intellectual Property, such manufacturers need to understand the gravity of the matter that non registering of Trade Mark is not favourable to them considering the market for their products which is ultimately identified by their brand name and hence they cannot afford to not protect their brand name only to save some minor percent of GST. Thus, importance/benefits of Trade Mark Registration when compared to the applicable GST for products under Trade Mark which is not on register, it is indeed crystal clear that manufacturers should protect their IP which in all circumstances should be of paramount interest which help reap profits by leaps and bounds.

  1. Conclusion

With the introduction of GST at nascent stage, it is still to be seen as to how the implementation is carried forward. At the very least, the GST has brought about a positive change by doing away with the need to classify transactions as either relating to goods or services since all transactions would now be concurrently levied tax by both the Centre and the States (provided transaction is intra-state supply; inter-state to be levied exclusively by Centre). The GST has also subsumed numerous central, state and municipal taxes and by doing so, will ensure that indirect tax rates and structures are common across the country thereby increasing certainty and ease of doing business.

About the Author: Pratik Das, Legal Intern at Khurana and Khurana, Advocates and IP Attorneys and can be reached at abhijeet@khuranaandkhurana.com

References :

[1] Intellectual Property Service meant the temporary transfer or permission to use or enjoy any intellectual property right.

[2] Article 366 (29A) (d) of the Constitution specifies that the transfer of the right to use any goods to be deemed as a sale of those goods.

[3] Supreme Court in Tata Consultancy Services v. State of Andhra Pradesh,  (2005) 1 SCC 308 held that the term “goods” under Article 366 (12) of the Constitution includes intangible/incorporeal property which is capable of abstraction, consumption and use, and which can be transmitted, transferred, delivered, stored, possessed, etc.

[4]Article 246A, Constitution (One Hundred and First Amendment) Act, 2016.

[5]Articles 366(12A), 286(1A), 286(1B), 286(2), Constitution (One Hundred and First Amendment) Act, 2016.

[6]Article 269A, Constitution (One Hundred and First Amendment) Act, 2016.

[7]Ibid.

[8]Section 15, CGST, 2017.

[9] Notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017 [which notify the rates for supply of services under CGST Act].

[10]Ibid at Explanation (v).

[11]Bharat Sanchar Nigam Ltd. v. Union of India, (2006) 3 SCC 1.

[12]Supra at 3.

[13]Supra at 2.

[14]Supra at 9.

[15]Ibid.

[16]Notification No. 13/2017-Central Tax (Rate), dated 28th June, 2017 [which notify the categories of services on which tax will be payable under reverse charge mechanism under CGST Act].

[17] Notification No. 2/2017-Central Tax (Rate), dated 28th June, 2017 [which exempts intra-state supply of the specified goods from CGST].

[18] Notification No. 1/2017-Central Tax (Rate), dated 28th June, 2017 [which notifies the CGST rates of intra-state supply of goods].

[19]Available at http://pib.nic.in/newsite/PrintRelease.aspx?relid=167146.

[20]Supra at 17, 18.

[21]Section 2(w), Trademarks Act, 1999.

[22]Supra at 19.

Google AdWords Giving a Good Wallop to Trademark Law

Introduction

In this era of globalization, we use Internet on a regular basis in our daily lives. People are continuously trying to gain more profits and for this they sometimes adopt illegal practices for promotion of their goods and services. These practices include unauthorized use of a registered name or mark owned by their competitor. This misuse leads to infringement of rights of legitimate owner of the name or mark. A specific kind of software is generally used by search engines, called spider or crawler to gather information of web pages available on the Internet. In order to attract customers towards their websites, owners are continuously making use of “Google AdWords”, “Meta-Tags”, “Hyper- Linking”, “Deep- Linking”, etc.

The present article outlines relation between “Use of Google AdWords” and “Trademark Infringement”. Basically, Google AdWords are keywords to search for a particular category of goods and/or services required by a person. When a person types a particular keyword on a search engine, the search engine matches the keyword entered by the person with the Google AdWords of various web-pages, and accordingly displays the most prominent results. By using the competitors name and/or mark with various permutations and combinations, search engine results are effortlessly manipulated to lure the visitors to one’s website. Google AdWords are used to set the web links in a prioritized manner based on the queries of user. They act as a code for providing information about the web page, which helps in diverting Internet traffic to their websites, causing considerable commercial loss to the legitimate registered owner.

 

What is a Google Ad-Word?

Google AdWord is a successful and client capturing advertisement option that is also a misleading source with respect to the Trade Mark rights of a trademark owner. Google AdWords are basically keywords that are used by an advertiser of certain goods and services to advertise their products, wherein when a specified keyword is searched for, the search engine shows the advertisements/websites of various advertisers. Hence, in this way, Google AdWords are used to divert Internet traffic towards a particular advertisement/website. The keywords used, generally denote someone’s area of business. It is an intelligent system that highlights ads/website depending on the keyword search. Its use is very simple and Google is paid by the website owner for each and every click on their website. AdWords is a paid referencing service started by Google for business promotion.

 

Misuse of Google AdWords leads to Trade Mark Infringement

This is a very important question as to how the use of Google AdWords may lead to Trade Mark infringement. If a person selects any word to be used as an AdWord, which is either similar or identical to a third party’s trademark, does the person infringe the rights of the trademark owner?  It was held in the very famous Consim- Google AdWords controversy[1] that if these AdWords are used by the person which is similar or identical to the third party’s trademark, then this amount to diluting/tarnishing the goodwill or reputation of the third party as this creates confusion in the mind of the customers of the person whose trademark is allegedly infringed. Therefore, this should not be allowed and becomes a case of trademark infringement.

Let us understand this with the help of an illustration: Suppose ‘A’ is the registered trademark owner of certain brand. Now ‘B’ is using AdWords which is in competition to the business owned by ‘A’, and uses Trade Mark of A as one of the paid keywords in the Google Adwords. ‘B’ is therefore diverting the internet traffic towards his own advertisement by using Trade Mark of A such that when users search for A, advertisement of B would also be shown, thereby causing damage to the goodwill/reputation owned by ‘A’, which is not allowed under Trade Marks Law. Hence, selection of Google AdWords becomes very relevant in the eyes of Trademark Law.

A case, Matrix Cellular (International) Services Limited v TSIM Communication Services Private Limitedand IP Attorneys, which represents the plaintiff in the Delhi High Court, wherein the Plaintiff, Matrix Cellular (International) Services Limited, is the proprietor/ owner of the trademark MATRIX since 1995 in respect of ‘International roaming Sim cards’. The defendant is accused of dishonestly using plaintiff’s trade mark i.e. MATRIX as Google AdWords to divert the users to their website by creating a confusion in their minds. The Court recognized that the defendant has engaged in dishonestly using Plaintiff’s trademark to gain profits and the same has resulted in infringement of Plaintiff’s trademark, as a result of which the Court was pleased to grant an interim injunction in the favor of the Plaintiff.

 

Exemplary Landmark Cases

  1. Consim Info Pvt. Ltd. vs. Google India Pvt. Ltd. & Ors. [2]

In this case, Appellant was a private limited company that provided online matrimonial services. In the course of its business, it had adopted several trademarks including Bharat Matrimony, Tamil Matrimony, Telugu Matrimony, Assamese Matrimony, etc. It had registered several domain names with these word marks. The respondents, Google India and its parent company were in the business of offering an advertisement program called AdWords. It generates ‘Sponsored Links’ on the right-hand side of any organic search results produced by Google, closely corresponding to the term searched for.

Google allows the Key Word to appear as a part of the advertisement as well. Therefore, the more the term is searched for, more the chances that it is a heavily demanded Key Word. The competitors would thus bid for the Key Words of other players in their business to catch the attention of user and thereby divert the business meant for such other players. The appellant filed a suit for permanent injunction restraining Google from infringing their trademarks by using them in the AdWords Program and Key Word suggestion Tool. It also restricted Google from passing off their services using the appellant’s trademarks and their closely resembling variants. The issue in question was whether such use of appellant’s trademark by Google’s Ad program amounted to trademark infringement.

Madras High Court thus concluded that the appellant had made a prima facie case and the balance of convenience lied in its favor and thus eventually granted an injunction.

  1. Rescuecom Corp. v. Google Inc. [3]

This is a very interesting case where the main question before the court was whether the use of trademark as keywords amount to Trademark infringement. The US Court of Appeal held that the use of trademark as keywords can be equated to the use of trademark as Meta –Tags. Therefore, Google was held liable for using the trademarked words in its Keyword Suggestion Tool. [4]

Conclusion

Thus, summarizing, use of Trademarks as a Google AdWords can be allowed if it comes under fair use, otherwise the same is restricted. Google is everywhere and it is estimated that approximately 80-85% of the world’s population uses it. If a person wants to mislead someone from the actual website of the proprietor to the impugned one it is the best platform available. Thus, customers are lured and are often misguided by the person violating by increasing the traffic and demand towards his/their website. The use of such Google AdWords is entirely dependent upon the facts and circumstances of case. Google AdWords being special keywords are embedded in web-pages and are often used by search engines in deciding the relevant websites to show in a search result. Therefore, the unfair and illegal use of the Google AdWords with respect to the Trade Marks leads to the Trademark infringement and irreparable damage to the legitimate owner. Choice of keywords becomes very important in this regard otherwise it would lead to infringement of other person’s rights. The concept of Google AdWords in relation to Intellectual Property should be understood and their misuse should be prevented.

About the Author: Ms. Yogita Agrawal, Legal Intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at abhijeet@khuranaandkhurana.com

 

References

  1. Consim Info Pvt. Ltd. vs. Google India Pvt. Ltd. & Ors. 2013 54 PTC 578 (Mad).
  2. 2013 54 PTC 578 (Mad).
  3. 562 F.3d 123 (2nd Cir. 2009).
  4. Mattel Inc. and Others vs. Jayant Agarwalla and Others 2008 (38) PTC 416; Samsung Electronics Company Limited & Anr. vs. Kapil Wadhwa & Ors. C.S. (OS) No.1155/2011.