Tag Archives: Intellectual Property

IP Rights Encompassing Comic Books

Comic book characters like Superman, Batman, Spiderman, Iron Man, Harry Potter etc. have become part of our daily lives ever since they were created via comic books and later incorporated through television shows, merchandise and more recently movies. From soft toys, video games to movies all such methods provide various avenues to the owners and creators of such characters to earn money and goodwill in this fiercely competitive market.

The artists behind such characters use their imagination, intellect and imagination and provide such characters with certain specific and unique attributes such as, costume, alter ego, superpowers, backstory etc. with which they are uniquely identified with when the consumers read about them or watch a TV show or a movie based on such characters. These unique attributes also give the idea of the artist an expression. It is due to these reasons that the creator/artist to protect such character to avoid infringement, copying, and misappropriation by third parties.

The production companies, advertisers, licensees and business houses, who invest a substantial amount of money to obtain rights of such characters for using such characters through various media like TV, movies, radio, merchandising, shall also have a genuine concern over infringement of their rights over such characters by any third party. It is due to these reasons that it becomes very important that such comic book characters are also included in the ambit of Intellectual Property Rights.

It is very important to understand that when do such comic book characters come under the ambit of copyright and trademark related legal protection and what happens to characters which are already in public domain but may be used subsequently in new copyrighted work.

Characters may be differentiated into two categories: graphic, and fictional. Where a graphic character can be depicted simply by a cartoon, or another form of graphic representation with its physical representation and characterization being visually obvious for the readers, a fictional character is a word portrait of which the physical appearance and characterization reside in the mind of the reader. Since images are more easily identifiable, retained in the memory of the readers and characterized than literary descriptions, it is are easier to afford them legal protection. David B. Feldman goes as far as to opine that fictional characters’ are the second-class citizens in the world of intellectual property.

Graphic characters

Copyright protection under the ambit of ‘artistic work’ can’t be afforded to such graphical characters since such characters and their personalities evolve from various episodes which the artist/creator creates, as it can’t be visually expressed and can only be perceived by the human mind. The copyright law though can protect such expressions of the character which can be graphically represented through drawings, colors, art, storyboard etc.

In the case of Hill vs. Whalen Mortell, 220 F 359 (S D NY, 1914), in which the court had held that the stage characters of Nutt and Giff were copies of plaintiff’s characters Mutt and Jeff since everybody viewing these characters was able to make the connection.

In another such case of protection to graphic characters, the case of Detective Comics vs. Bruns Publication, 111 F 2d 432 (2d Cir, 1940) comes to mind. In this case, the defendants had created a character called ‘Wonderman’ which had the same physical and emotional attributes as the Plaintiff’s popular comic character ‘Superman’. It was held by the court that the defendant’s had also copied the Plaintiff’s character’s pictorial and literary details. The court said that protection to characters can be given only if they have been portrayed in detail and they have been converted from an idea into a visual expression. In the present case, the idea of ‘superhuman powers’ can be used by anyone but the character must have different personality than an already existing one.

In another landmark judgment of Walt Disney vs. Air Pirates, 581 F.2d 751 (9th Cir, 1978), cert. denied, 439 U.S. 1132 (1979), the court had held that a two step test needed to be carried out to determine if copyright infringement has taken place. Firstly the visual similarities of the characters are analyzed and in the second step the personalities of the cartoon characters.

The second step is to be done through the ‘character delineation’ test which was developed in the case of Nichols vs. Universal Pictures, 45 F 2d 119 (2d Cir 1930), cert denied, 282 US, 902 (1931), this test is used to determine if the character in question is distinct and unique from other characters in such a way that it warrants copyright and trademark protection. It means that this is a penalty on authors and creators who do not put in effort or intellect on making their characters distinct from others.

In the Indian case of Malayala Manorama vs. V T Thomas, AIR 1989 Ker 49, the court had held that V T Thomas could continue drawing the characters of ‘Boban’ and ‘Molly’ despite leaving MalayalaManorama’s employment, since the characters had been created by Mr. Thomas before entering into employment with Manorama and the publishing house did not create or use their artistic imagination or intellect to create the aforementioned characters so their copyright will only be limited to the extent of the drawings made using the character, but the copyright over the character would remain with Mr. Thomas.

Fictional characters

While fictional characters are generally associated with copyright protection, increasing commercialization has meant that the intellectual property in these characters is no longer limited to the artistic works that created them, but has also extended to associated goods and services, which has benefited tremendously from the immense appeal and popularity of these fictional characters. This is known as character merchandising. The obvious consequence of the fact that the goodwill of these characters perform both, source-identifying as well as promotional functions meant that in most cases, they have been protected with trademarks.

Fictional characters have three significant components: name, physical or visual appearance, physical attributes, personality traits or characterization. In the case of Anderson vs. Stallone, 11 USP Q 2d 1161 (C.D. Calif. 1989), the court had held that the ‘Physical’ and ‘Emotional’ characterization of the character ‘Rocky’ were set in such detail that they were highly delineated, distinguishable and unique and imprinted in the mind of the viewers.

However in the case of Warner Brothers Pictures vs. Columbia Broadcasting Systems, 216 F 2d 945, 104 US P Q 103 (9th Cir. 1954), cert. denied, 348 US 971, 99 L Ed 756, 75 S. Ct. 532 (1955), the test of ‘story being told’ was applied. In this case, the court had held that the copyright protection would only be applied to the characters only if the story revolves around the particular character.

In another case of Silverman vs. Columbia Broadcasting Systems, the concept of ‘characters entering public domain and later acquiring new copyrighted work’ came into question. In this case it was held that the character will be entitled to protection once it enters the public domain unless new traits or characterizations have been added to it in subsequent works.

Conclusion

In conclusion I would like to say that it is clear from the various judgments discussed here that in case of graphic characters courts have had a lenient approach in granting protection because of their visual impact, as opposed to fictional characters where protection has been granted only if it is proved beyond doubt that they are distinct and distinguishable. Another aspect is that under Indian law ‘character’ has not been included in the definition of ‘artistic work’ and similarly under the definition of ‘literary work’ the work to be protected must be written down. It is hoped that the ambit of artistic and literary work is expanded to include characters as well.

References:

[1]https://www.americanbar.org/publications/landslide/2013-14/march_april/ip_and_comic_book_superhero.html

[2]https://spicyip.com/2016/04/giving-due-protection-to-fictional-characters-the-possibility-of-copymark.html

[3]https://theconversation.com/who-owns-superman-the-man-of-steel-fights-trademark-law-14625

About the Author: Aditya Vardhan, Trademark Associate, Khurana and Khurana Advocates and IP Attorneys, aditya@khuranaandkhurana.com

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Initial Coin Offering (ICO) and its Intellectual Property (IP) Interface

With growing importance and widespread adoption of Cryptocurrencies such as Bitcoin, Litecoin, Ethereum, Ripple among many others, Initial Coin Offerings (ICO) have become very popular over the last few years. In brief, an ICO is an unregulated means by which funds are raised for a new cryptocurrency venture or even by a technology company that integrates its offerings/products with issuance and/or transactions of cryptocurrencies. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists (VCs) or banks, wherein in an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other Cryptocurrencies as mentioned above. More information on ICO’s can be seen herehere, and here.

Having been an active part of ICOs since 2016, and have drafted over 5 ICO offering documents, and 10 white papers, we have closely observed that there has been a strong and growing correlation between subscription levels for an ICO during the initial offering and the manner in which they depict/demonstrate their Intellectual Property (IP), especially their Patent portfolio. A clear mapping between ICO entity’s product commercialization, coin offering strategy, basis of product differentiation, and how they harness the blockchain technology with respect to their Patent/IP portfolio is a strong indicator of how they create entry barriers. Investors too are gaining maturity by doing thorough due-diligence on the IP that the ICO-entity holds before they invest in the ICO through comprehensive assessment of how broad the claims are, how the claimed subject matter integrates with the blockchain platform for issuance or transaction of newly issued currencies/coins, whether claim charts have been prepared, assignment/ownership issues if any, litigation/pre-litigation outcomes, validity challenges, competitive analysis, market landscape, white-space analysis, among other common IP due-diligence parameters.

Most ICO white papers therefore pay significant attention to how they present their Patent portfolio with respect to the manner in which each feature of their blockchain based implementation would be executed such as, for instance, how digital contracts would be managed, for an IoT architecture based entity: how blockchain would enable optimization of IoT device monitoring, and for an analytics company: how data analytics can be configured to associate with blockchain network tokens. Some white papers go further to even map their patent claims with the cryptocurrency interfacing mechanisms. Although most ICOs focus on their US Patent Portfolio, companies in other major startup communities such as in Israel, UK, Germany, and Singapore are also engaging strongly in how they uniquely position their offerings to gain competitive advantage through presentation of their IP. Most white papers intend explaining what their tokens are, how they are acquired, released/spent, along with their token generation events, and IP’s that interface with each of these steps can be integrated into the relevant portion of the white paper so as to demonstrate the extent of coverage and protection that the entity has done, which is also reflective of their IP strategy.

It is therefore, in sum, crucial to develop a robust IP strategy before launching an ICO to instill higher confidence in potential investors and create a differentiator in the market.

 

Author: Tarun Khurana, Partner and Patent Attorney at Khurana & Khurana (K&K) and IIPRD can be reached at Tarun@khuranaandkhurana.com

Emerging Trends in IP

Intellectual Property has seen numerous modifications. Different Intellectual Properties have come about to exist, which some would say is the impact of IP Maximalism and some would regard them as a matter of necessity of changing times, which reminds me of Victor Hugo, he spoke in a speech and I quote, “no power on earth can stop an idea whose time has come.” This is very well the era IP evolution. Where software is expressly ousted from patent protection, CRIs come to their rescue. New types of intellectual property rights are on the rise, for example, Data Exclusivity, Orphan Drug Exclusivity, Standard Essential Patents etc. India lags behind in several of these emerging trends, partly because of the lack of legislature in several issues and partly because of its mixed priorities. Legal framework needs to substantiate these issues more coherently, while maintaining India’s pro public-benefit approach towards IP.

Invention in softwares

While identifying what kind of protection is to be granted to an IP, one needs to identify on what is the “intellectual” in that property, is it an invention or a literary work?Software i.e. computer programme has found its mode of protection in the Indian Copyright Act, 1957. S2(ffc) defines computer programme as “a set of instructions expressed in words, codes, schemes or in any other form, including a machine readable medium, capable of causing a computer to perform a particular task or achieve a particular result”. These are as such included in “literary work” defined in S.2 (o) of the Act, “literary work includes computer programmes, tables, and compilations including computer literary databases.”

On the other hand, the Indian Patents Act, 1970 expressly excludes computer programmes from the ambit of patentable subject- matter, visavis including it in Section 3 what are not inventions, S. 3 (k) a mathematical or business method or a computer programs  per se or algorithms; and S.3 (m) a mere scheme or rule or method of performing mental act or method of playing game; expressly excludes computer programs from patentable subject matter.[1]

However, the Patent Office prescribes guidelines to outline various regulations and explanations regarding patentability of computer related inventions (CRIs), last updated on 30 June, 2017.[2]

The legislative intent to attach the suffix per se to computer programme is evident by the following view expressed by Joint Parliamentary Committee while introducing Patents (Amendment) Act, 2002:

“In the new proposed clause (k) the words “per se” have been inserted. This change has been proposed because sometimes the computer programme may include certain other things, ancillary thereto or development thereon. The intention here in not to reject them for grant of patent if they are inventions. However, the computer programmes as such are not intended to be granted patent. This amendment has been proposed to clarify the purpose”.[3]

Example:

1. In re Accenture Global Service GMBH Vs. The Assistant Controller Of Patents & Designs[4], relates to Indian patent application number 1398/DELNP/2003, which is now a granted patent as patent number 256171, whose present legal status at the patent office database is, “Enforce with Due date of next renewal as 21/02/2017”. This patent application was initially refused for patent registration by patent office under the provisions of Section 3(k) of the Indian patents act.

However, the patent applicant appealed before the IPAB and as per the Controller’s decision, it was held that the instant invention as claimed is not software per se but, a system is claimed which is having the improvement in web services and software. Accordingly, it was held that the invention since not falling in the category of section 3(k), viz software per se, corresponding objection was waived and the patent was granted.

2. Nissan Motor filed a series of patent applications in 2017 with respect to the computer softwares inter alia a travel control device and method for vehicle[5] comprising: a target acquisition means for acquiring target information which includes the location of an avoidance target that exists near a vehicle, a vehicle information acquisition function for acquiring information which includes the location of a vehicle, and drive assist device[6] which is a driving assistance device for assisting driving when a host vehicle is changing lanes wherein the device is provided with; a position measurement means for measuring the position of the host vehicle; a detection means provided to the host vehicle the detection means detecting the conditions around the host vehicle; a database for recording map information.

The aforementioned claims of Nissan Motor are claims concerning Computer Related Inventions (CRIs) which mean to perform the function as mentioned above and hence are termed as means + functions defined in the Guidelines for Examination of Computer Related Inventions.[7]

In light of the guidelines published by the Indian patent office for examination of software patents / computer related inventions (CRIs), software patents can be applied in India by way of combination of hardware and software features, which are novel, inventive and possess industrial applications. It may be categorized as Hardware based inventions: apparatus/ system/ device, Method/process based, Computer program product/ computer readable medium. Unless the software is a computer program per se, it may be granted a patent in India, and hence Nissan stands a fair chance to be granted the aforementioned patents. However, in the case of any conflict between The Indian patents Act and the said Guidelines, the Act is to prevail and for such instances, it is essential to have rules with the effect of laws incorporating CRIs in patentable subject matter.

On the same lines European Patent Convention expressly excludes computer programs, per se, from the purview of patentable subject matter.

Whereas in USA, there is no specific exclusion of software or business methods from patentable subject matter.  The law states that the subject matter, to be patentable, must be a useful process, machine, manufacture or composition of matter. According to the US Supreme Court, the Congress intended the statutory patentable subject matter to include “anything under the sun made by man,” but the laws of nature, natural phenomena and abstract ideas are three specific areas which are not patentable.[8]

Emerging new IPs

SEPs and FRAND Licensing

A patent that protects technology essential to a standard is called a standard-essential patent.[9] A standard is a document that sets out requirements for a specific item, material, component, system or service, or describes in detail a particular method or procedure.[10] For example, a modern laptop computer implements around 251 interoperability standards.[11]

The concept of SEPs evolved in India when Ericson in 2011 objected to the importation of handsets by Kingtech Electronics (India), claiming that the handsets infringed several of their SEPs in AMR Codec (Adaptive Multi-Rate) technology. The Indian Patents Act, 1970 does not contain any special provision for SEPs. Although, the same have been recognized by the jurisprudence, SEP is defined as …for a technology that forms a part of a standard, the patent is regarded as an essential patent for such standard.An essential patent can be said to be a patent that corresponds to an industry standard. The same standard is mutually agreed by various service providers, equipment manufacturers etc to be mandatorily implemented for a particular technology (such standards are recognized and implemented by the concerned government authority as well). It is meant to ensure that complete compatibility is achieved. It is impossible to claim compatibility with a technology (as defined by the concerned standards) without actually infringing the specific patent (and hence the requirement to obtain a license).[12]

 Following cases in India,

  1. Ericsson and Micromax case,
  2. Ericsson and Intex case
  3. Ericsson and Best It World (India)
  4. Ericsson and Xiaomi Technology
  5. Ericsson and Lava International Private Limited
  6. Telefonaktiebolaget lm Ericsson (publ) v.Competition Commission of India and another,

have established clearly that the necessary steps to be taken by any company/ legal entity, intending to incorporate any technology in its product that is standardized by any SSO (Standard Setting Organisation). It has to,

1.Incorporate the patent which is essential to obtain that standard.

2. To enable themselves of the use of aforesaid patent, without infringing it, they require obtaining a license from the holder of the aforesaid patent.
However, such a situation can have an obvious monopolistic outcome in the hands of the patent holder, and to curb such a situation before-hand, the patent holder has its commitments as a member of the SSOs, these commitments are known as FRAND commitments. Whereas the question remains as to what are the clear boundaries of fair, reasonable and non-discriminatory license terms, is to be determined by the consensus reached by the parties, and if the parties are unable to reach such consensus, they may appoint a mediator for the purpose, and yet if the party seeking the license considers the license terms to be abusive of the dominant powers of the patentee, the CCI holds proper jurisdiction to inquire and investigate into the same.

Data Exclusivity

Data Exclusivity is a TRIPs Plus element that is much debated in India. It arises from the interpretation of the Article 39 of the TRIPs agreement, “Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use [13]wherein the big Pharmaceuticals and countries like USA interpret, “protection against unfair commercial use” to obviously mean, “protection of clinical data required to be submitted to a regulatory agency to prove safety and efficacy of a new drug, and prevention of generic drug manufacturers from relying on this data in their own applications.” USTR (United States Trade Representative) has been negotiating bilateral agreements enforcing the said interpretation of TRIPs, which is beyond the actual agreement and is thus referred to as a TRIPs Plus clause, with India. The Drugs and Cosmetics Act, 1940 provides for data exclusivity for a “new drug” under section122E for a total period of 4 years from the date of approval. There were considerations in November, 2016 that this period of four years to be increased to ten years.[14] Such exclusivity is itself a protection and does not depend upon the validity of the patent associated to the same drug, so even if the patent associated to the drug stands invalidated, the exclusivity stands unaffected and the drug remains out of the reach of the generic producers. There is no evidence that the four years of protection, already provided, was insufficient, and neither is there any protocol necessitating India to increase the said period. Such provision would delay market access of drugs at reasonable prices to the common people. Although, USA itself provides for 7 years of data exclusivity but the economic and developmental status of India, would suffer with such an amendment to the section.

Orphan Drug Exclusivity

An orphan drug is a pharmaceutical agent that has been developed specifically to treat a rare medical condition. India currently has no regulations for orphan drug manufacturing or selling. Treating rare or orphan diseases is important to India but very costly, which increases the patient burden. In India, 72,611,605 people are suffering from rare diseases, and 6,000–8,000 rare diseases can be found, including LeishmaniasisNorrie disease,ArthrogryposisCystic FibrosisWilson Disease, etc., many of which still do not have any cure and are mostly genetic in nature.[15]

Many countries have different definitions and regulations of orphan drugs,

USA under its The Orphan Drugs Act (ODA) is a federal law concerning rare diseases that affect fewer than 200,000 people or are of low prevalence, oraffects more than 200,000 in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will recovered from sales in the United States of such drug. Determinations under the preceding sentence with respect to any drug shall be made on the basis of the facts and circumstances as of the date the request for designation of the drug under this subsection is made.[16]

According to the Orphan Drug Regulation in Europe, an orphan disease is a disease or disorder that affects fewer than 5 in 10,000 citizens.[17]

In Australia, RareDiseases are defined as a condition, syndrome or disorder that affects 1 in 10,000 people or less (The Australian Therapeutic Goods Authority).[18]

The lack of regulation in India increases the burden on the patients but also negatively impacts the economic success of India’s pharmaceutical industry. Orphan drugs may help pharmaceutical companies reduce the impact of revenue loss by patent expiration of blockbuster drugs. Although there may still be challenges ahead for the industry, orphan drugs seem to offer the key to recovery and stability within the market. Governments of various countries have proactively implemented special incentives for the manufacturers of orphan drugs. For example, regulations include accelerated marketing procedures, marketing exclusivity, tax credit grants for research, reconsideration of applications for orphan designation, and technical assistance for elaboration of the application file.

Intellectual Property Rights came into existence with the primary objective of promoting the progress of science. Patents are the rights that grant exclusivity to the patent holders, where they can exclude others from exploiting their invention which they have spent their R&D upon. This creates a monopoly in the hand of the right holder; this monopoly was intended to serve as an incentive for creation.
What we can observe with the emerging trend of IP is that the protection is shifting its focus from promoting innovation in every field to reserving exclusivity. Pharmaceuticals have been trying to evergreen their patents on blockbuster drugs by merely changing the form of the drug, which when restricted by the Indian Courts by the mandate of S.3(d) of the Indian Patents Act, the validity of which section was found to be challenged in the Supreme Court. The Supreme Court held the section to be constitutionally valid, thereby striking down Bayer’s contentions[19], leading to many disappointed Pharmaceutical Companies. Data exclusivity is yet another tool aiming at the same monopolistic outcome, protecting the clinical data of any “new drug” for an absurd period of time. A “new drug” is not defined as a patented drug but simply a drug which has not been used in the country to any significant extent under the Drugs and the Cosmetics Act[20].

In re Ericsson v. CCI, it was alleged that Ericsson had added a covenant subjecting all disputes relating to matters under their FRAND license to the jurisdiction of Swedish Courts, thereby causing unnecessary costs for Indian mobile phone companies.[21] There are no specific guidelines as to what is fair, reasonable and non- discriminatory, due to which big fishes in the market construe the terms in their own brackets of convenience. Considering the economic condition of the Indian market, such licensing terms can lead to winding up of small and medium enterprises which is to be further evaluated by the Competition Commission of India.

This prevailing trend is untimely exclusivity masked in the disguise of evolution. However, exclusivity is an innate part of evolution, provided, used in the solution of overlooked issues such as orphan care drugs. Exclusivity is indeed very appealing for pharmaceutical companies to invest their R&D in the production of orphan drugs. It curbs their fear of negative commerce which appears to be an obvious result of producing any product with low commercial demand. With regulations such as a fixed exclusivity period over their drug and royalty standards, a profit margin can be achieved in addition to the recovery of production costs in the aforesaid duration.The shifting trend towards exclusivity can positively shape the Indian IP regime, if given the right direction.

About the Author: Namisha Jain, ILS law college, Intern  at Khurana and Khurana Advocates and IP Attorneys and can be reached at info@khuranaandkhurana.com

[1]  Indian Patents Act, 1970

[2] www.ipindia.nic.in/writeraddata/Portal/Images/pdf/Revised_Guidelines_

for_Examination_of_Computer-related_Inventions_CRI.pdf

[3] Report of the Joint Committee presented to the Rajya Sabha on 19th December, 2001 and laid on the table of Lok Sabha on 19th December 2001.

[4]  http://www.ipabindia.in/Pdfs/Order-283-2012-OA-22-2009-PT-DEL%20(Final).pdf

[5] Application No. 201747007327 A; www.Ipindia.nic.in/writeaddata/Portal/IPOJournal/1_471_1/Part-2.pdf

[6]  Application No. 201747015385;www. Ipindia.nic.in/writeaddata/Portal/IPOJournal/1_471_1/Part-2.pdf

[7] http://www.ipindia.nic.in/writeraddata/Portal/Images/pdf/Revised_Guidelines_for

_Examination_of_Computer-related_Inventions_CRI.pdf

[8] Bilski v. Kappos

[9]  http://ec.europa.eu/competition/publications/cpb/2014/008_en.pdf

[10]  http://www.cencenelec.eu/standards/DefEN/Pages/default.aspx

[11]  http://www.standardslaw.org/How_Many_Standards.pdf

[12]  In re Telefonaktiebolaget lm Ericsson (publ) v. Intex Technologies (India) Limited I.A. No. 6735/2014 in CS(OS) No.1045/ 2014

[13]  https://www.wto.org/english/docs_e/legal_e/27-trips.pdf

[14] https://www.ip-watch.org/2016/11/06/indian-generic-pharma-warns-government-caving-us-pressure-data-exclusivity/

[15] Adapted from the Rare Diseases List provided by the Foundation for Research on Rare Diseases and Disorders (accessed May 7, 2015)

 [16] https://www.fda.gov/forindustry/developingproductsforrarediseasesconditions

/howtoapplyfororphanproductdesignation/ucm364750.htm

[17] http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2000:018:0001:0005:en:PDF

[18] http://www.rarediseasedayaustralia.com.au/what-is-a-rare-disease/

[19]  Novartis AG v. Union of India CIVIL APPEAL Nos. 2706-2716 OF 2013 (ARISING OUT OF SLP(C) Nos. 20539-20549 OF 2009)

[20] Rule 122E of the Drugs and Cosmetics Act, 1945- Directorate General of Health Services. The Drugs and Cosmetics Act and Rules. D&C Rule’s 1945- 122E:2005. Delhi: D&C; 2005. p. 134.

[21]  Ericsson v. CCI W.P.(C) 464/2014 & CM Nos.911/2014 & 915/2014

Japanese Patent fund IP Bridge to raise $50m “Intellectual property and innovation” fund in Malaysia

On October 19, 2017 Japanese private equity fund “IP Bridge” disclosed its plan of launching a $50 million fund as a continuation of ASEAN push for “Intellectual property and innovation” and signed an agreement with Malaysian local, Leonie Hill Capital (LCH) [1]. The agreement aims at investing in “IP rich or to-be-rich”, national and regional enterprises in Malaysia and particularly targeting towards technology areas like Internet of Things (IoT), wearable, robotics etc. The agreement is a step towards accelerating the growth of startup companies in Southeast Asia.

This partnership between IP Bridge and LCH makes Malaysia the base of the first intellectual property innovation fund in Southeast Asia. As per the agreement, the two partners will focus their investments on technical companies that have substantial Intellectual Property or worthy enough to develop IP in future and are working in IoT sensors, Robotics, Agri-tech etc.

Further, the ManGo Factory program endorsed by the partnership provides support to venture companies for their overseas expansion. The partnership will “re-domicile more than 10 South East Asian and Japanese start-ups in Malaysia, providing them with facilities, access and market opportunities”. The partnership will provide wide support to the Start-up companies from commercialization, partnership/alliance and access methods to the world market and IP bridge can provide intellectual property utilization strategy and advice related to it. This collaboration of two companies will contribute the development of Malaysian technology companies.

The Prime Minister of Malaysia, Najib Razak, said that since Malaysia is geographically located in the center of ASIAN countries and has an appropriate ecosystem for the growth of start-up companies around the world; it is an appropriate place for start-up companies in Southeast Asia and Japan to procure funds more smoothly. At this, CEO of IP Bridge, Shigeharu Yoshii said “an appropriate ecosystem is required for start-up companies so that delicious rice will not grow without rich soil, clean water, adequate sunlight, insects, frogs, etc.” and its a great honor for them to function as part of Malaysia’s innovation ecosystem to support startup companies.

Najib Razak also added that the startups raised through this fund will generate employment in future and will also provide Malaysia with economic and social opportunities. The CEO of Malaysian Digital Economy Corporation (MDEC), Yasmin Mamoudo said that this Malaysia based innovation fund is a clear indication of growth of Malaysian digital economy. This agreement which launches fund for innovation will keep Malaysia in the conversation as a regional IP centre and further will boost up the relationship with an IP aggregation and monetization firm that is putting together a fairly good track record.

The fund raised by IP Bridge, is the biggest one among Asia’s largest and most active IP funds. For a non-practicing entity to move into the start-up investment space is certainly not a new tactic. This type of fund motivates the companies that are seeking to show a skeptical domestic constituency that IP monetization can be part of a sustainable business model.

On April 26, 2017 in a press release on Intellectual Property Office of Singapore (IPOS) online portal, it was published that IPOS announced a similar type of innovation fund named as “Makara Innovation Fund” [2]. The Makara Innovation Fund was supposed to invest one billion Singapore dollars in highly growing companies which encompass a strong IP and convincing business models. According to government officials in Singapore, the money in that fund will be used to bolster the country’s IP ecosystem and will target high-growth companies with strong IP and proven business models, leveraging Singapore as a base for their growth and expansion into world markets. This was announced by IPOS and Ministry of Law, along with updates to the IP Hub Master Plan.

Author: Shilpi Saxena, Jr. Patent Associate at Khurana & Khurana Advocates and IP Attorneys can be reached at shilpi@iiprd.com.

 References:

[1] IP Bridge concluded basic agreement with ASEAN-based PE fund under the support of the Malaysian government

[2]https://www.ipos.gov.sg/media-events/press-releases/ViewDetails/one-billion-dollar-innovation-fund-launched-in-singapore-to-drive-enterprise-growth-for-our-future-economy/

Intellectual Property of Singapore: Patents legislative amendments

In continuation of IPOS’s efforts to strengthen the patent regime and make Singapore’s Intellectual Property one of the best in the world also supporting inventive individual and businesses [1], Patents (Amendments) Act, 2017 and Patents (Amendment no.2 ) shall come into force on October 30, 2017 [2].

IPOS’ Patents legislative amendments

In IPOS’ efforts of delivering a well-equipped and a well-suited legal framework as well as a policy framework to individual patent applicants and corporate business houses, the Patents (Amendment) Act 2017 and the Patents (Amendment No.2) Rules 2017 will enter into force on 30 Oct 2017 [2]. The October version of the revised examination guidelines for Patent Applications at IPOS will also get published on the same date on the online website of IPOS (https://www.ipos.gov.sg/). Below are the key highlights of these amendments as released in the Patents Circular No.7/2017 [3] on IPOS website.

 Broadening of Grace Period

As effective from 30th October 2017, under the broadened grace period all the applicants will now be able to apply for patent protection for their invention notwithstanding that their invention has been disclosed prior to the filing of the patent application. In instances where the inventors have publicly disclosed their inventions prior to filing a patent application for the same, the broadened grace period will act as a safety cover for the entity in obtaining the Singapore patent rights. However, an important thing to note for the applicants is that not all jurisdictions have a provision for similarly broadened grace period, therefore, all the applicants are strongly encouraged to avoid or exercise prudence and caution before disclosing their inventions to third parties before applying for a patent.

Further as per the new provision, the applicants who require or ‘wish for’ their invention disclosure to be graced may inform the registrar when making:

  1. a request for search and examination;
  2. a request for examination;
  3. a response to written opinion; and
  4. a request for a review of an examination report or of a search and examination report.

The above requests must be accompanied by written evidence in the form of a statutory declaration or affidavit that complies with the requirements of the new Rule 8 of the Patents Rules.

 Changes to Supplementary Examination

As per the rules, supplementary examination route will become unavailable for patent applications filed on or after Jan 1, 2020 [3] i.e.

–  for Singapore national applications having a date of filing on or after Jan 1, 2020,

– for International applications entering national phase having a date of filing on or after 1 Jan 2020, and

– for Divisional applications having an initiation date on or after Jan 1, 2020.

However, patent applications filed before 1 January 2020 will continue to use the supplementary examination route. This means that with the unavailability of the supplementary examination route, all patent applications filed on or after 1 January 2020 will undergo full examination by IPOS examiners.  Given that, the entire process of examination is going to be carried out in Singapore, the quality and consistency of patents granted in Singapore is expected to improve. This will also align Singapore’s patent system with that of major jurisdictions, such as those of the US, Japan, and Europe, that perform a full examination of the patent applications that they receive. A period of 3 (three) years has been granted as grace period for the community to adjust as the change shall be effective from 30th October 2017 but shall come into operation from January 2020

Further,  as per the amendment,  the scope of supplementary examination has expanded by allowing an examiner to raise an objection relating to patentable subject matter to ensure consistency in the assessment of patentable subject matter across all the routes of examination.

Amendments to the Guidelines on Isolated Products from Nature

The Guidelines have been revised to clarify the distinction between inventions and discoveries as applicable to the issue of isolated products from nature. As per the new guidelines, a material or microorganism already existing in nature represents a discovery and therefore an isolated or purified material or microorganism from nature is not an invention. However, if a new use of the isolated or purified material or microorganism is found, then the new use can be claimed. The revised Guidelines will take effect on 30 October 2017.

The overall objective of this amendment is to facilitate innovation by allowing others to develop applications relating to the discovery and to monetize or earn rewards for translational research and development.

Author: Shilpi Saxena, Jr. Patent Associate at Khurana & Khurana Advocates and IP Attorneys can be reached at shilpi@iiprd.com.

Citing Sources

[1] https://www.ipos.gov.sg/about-ipos/singapore-ip-ranking

[2]https://www.ipos.gov.sg/media-events/happenings/ViewDetails/patents-and-designs-legislative-amendments-to-enter-into-force-on-30-oct-2017/

[3]https://www.ipos.gov.sg/docs/default-source/resources-library/patents/circulars/(2017)-circular-no-7—amendment-to-patents-act-and-rules-to-enter-into-force-on-30-october-2017.pdf

IPOS: Launch of Patents Formalities Manual

Recently, Singapore’s IP regime has seen a rapid growth and is gradually becoming Intellectual Property centre/hub in entire Asia.  To strengthen its Patent regime, few days back,  [3] the Intellectual Property Office of Singapore (IPOS),   on 24 Jul 2017 launched a ‘Patents Open Dossier” [1] to provide a single point of access for innovators enabling them to access published patent documents. The POD provides easy access to the applicant as well as the third party to keep track of patent applications, amongst other services.

Further, on 1 August 2017 IPOS [2] launched an online “Patents Formalities Manual” as part of their ongoing efforts to update their practices for helping inventors/innovators on their patent applications and improve on the turnaround time for the application process. This manual can be accessed by general public through the online portal of IPOS https://www.ipos.gov.sg/ [4]. This manual provides set of guidelines detailing the Registry’s practices, procedures and requirements for Patent applications and national phase entry for International applications, in Singapore. The “Patents Formalities Manual” is designed to provide the applicants with a better understanding of the procedures for applying a patent application under the Singapore patents act & rules as well as the procedure for applying as a national phase entry of the Patent Co-operation Treaty (PCT).

Out of many others, the “Patents Formalities Manual” is the most recent step taken by IPOS in enhancing the user experience for their applicants or other stakeholders by aiming to improving the filing accuracy in their patent applications with the IP office and address issues encountered during patent application process.

Patent applicants can refer to the manual on ‘https://www.ipos.gov.sg/resources/patent’ [5] for the most current practices. On this page, the applicants can access all the necessary & relevant documents which are related to filing for a patent in Singapore. The applicants may also refer to the manual to help in their filing process. Some of the documents are:

  • Forms & Fees For Filing In Singapore
  • PCT Forms & Fees
  • Guidelines and Useful Information
  • Circulars
  • Practice Directions

 

References:

[1]https://www.ipos.gov.sg/media-events/happenings/ViewDetails/launch-of-patents-open-dossier/

[2]https://www.ipos.gov.sg/media-events/happenings/ViewDetails/launch-of-patents-formalities-manual/

[3]https://www.ipos.gov.sg/docs/default-source/about-ipos-doc/full-report_update-to-ip-hub-master-plan_final.pdf?sfvrsn=2

[4]https://www.ipos.gov.sg/

[5] https://www.ipos.gov.sg/resources/patent

Author: ShilpiSaxena, Jr. Patent Associate at Khurana & Khurana Advocates and IP Attorneys can be reached at shilpi@iiprd.com.

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.

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.

THE EXCLUSIVITY OF BRAND TAGLINES

Brand taglines are catch phrases which serve to draw a connection for consumers with the business’ products and services, and the concerned brand in general. A particular sequence of words repetitively used in the promotion of a brand or business in relation to its products and services often finds a place in the associative memory of the public. For example, when coming across the catch phrase “Finger lookin’ good”, one is instantly reminded of KFC’s sumptuous range of food products.Similarly, the tagline “Just Do It” is commonly associated with the brand NIKE and the phrase, “There are some things money can’t buy. For everything else, there’s MasterCard” connotes a connection with Mastercard.

Taglines are primarily used for advertising as they are memorable, differentiate the brand and impart certain emotions regarding the brand. The said exclusive association also flows from the mere mention of the brand, for example when one refers to Mc’donalds, the phrase “I’m Lovin’ It” automatically comes to mind, thereby indicating that some sort of intangible ownership of the particular phrase exists. This short note will attempt to elucidate upon whether and if so, what type of intellectual property protection is accorded to taglines or trade slogans with specific reference to the Indian context.

Scope of Brand Taglines as Trademarks

Section 2(m) of the Trademarks Act, 1999 defines “mark” as including a device, brand, heading, label, ticket, name, signature, word, letter, numeral, shape of goods, packaging or combination of colours or any combination thereof. It is seen that the legislation provides for a tagline or combination of words to be included within the ambit of the definition of mark.

Trademark is defined under the Act as a mark capable of being represented graphically and of being able to distinguish the goods or services of one person from those of others in the course of trade.[1] Therefore, it is seen that a brand tagline is capable of being reduced to two-dimensional representation on paper. It is submitted that the distinctiveness criterion has a close nexus with Section 9(1) of the Trademarks Act under absolute grounds for refusal of registration.

In order for a brand tagline to qualify as a trademark, it must be distinctive,by acquiring secondary meaning and goodwill,and must not be descriptive of thefeatures of the products and services in respect of which it is used. The brand tagline by itself also must not indicate anything which has become customary in the established trade practices of that particular business.

Distinctiveness of the Generic

The Karnataka High Court in Reebok India Company v. Gomzi Active[2] has held that the person claiming the benefit of distinctive usage has to establish that over a period of time the concerned trade slogan has developed a secondary meaning and goodwill.[3] The Court accepted Reebok’s (Defendant) contention that the phrase “I AM WHAT I AM” is generic in nature and has not any acquired distinctive character in relation to the goods produced by Gomzi Active.[4]It was further held that both parties were operating under different and distinct trade names and by the mere use of the common phrase and expression “I AM WHAT I AM” it cannot be said that a customer with reasonable prudence would be misled to purchase the products manufactured by Reebok mistaking them for the products manufactured by Gomzi Active.[5] It is submitted that extensive advertisement through various modes and subsequent inherent association by consumers of the brand tagline with brand’s products and services would satisfy the test of distinctiveness even if concerned tagline is a common and generic phrase.

Descriptiveness and Commercial Features

The Hon’ble Supreme Court in a petition for special leave to appeal[6] upheld a Division Bench decision of the Delhi High Court in Procter & Gamble Manufacturing (Tianjin) Co. Ltd. &Ors. v. Anchor Health & Beauty Care Pvt. Ltd.[7], wherein the issue of distinctiveness and descriptiveness of brand taglines was discussed and elaborated.[8]The Court held that

  • The expression “ALLROUND PROTECTION” in Anchor’s advertisements and on its product is covered within the meaning of Section 2(m) & (zb) of the Act.

  • There is a difference between specific descriptiveness and generic descriptiveness.Forexample,a particular tagline may be descriptive of such features that are unique to the brand’s products but not generic features of the said products. (It is pertinent to note that Anchor was the first in the industry to use “ALLROUND PROTECTION”)

It is submitted that the Court in a way has interpreted a brand’s tagline or its“communicated commercial essence”tobe considered as a unique feature of its products and services, while deciding that is not a descriptive tagline.

Expressions of Customary Trade Practice

In Stokely Van Camp Inc v. Heinz India Pvt Ltd.[9], the Delhi High Court Division bench held that the trade slogan “Rehydrate Replenish Refuel” used in respect of Gatorade, even though a registered slogan mark, cannot be granted protection since in the energy drink market it has become customary and in fact necessary to describe products as such. Therefore, the Court held the defendant’s use of the expression “Rehydrates fluids, Replenishes vital salts, Recharges glucose” will fall within the ambit of Section 30 (2)(a) of the Trademarks Act, wherein a registered trademark is not infringed when the alleged infringing mark/expression is used to indicate features and characteristics of the products in respect of which it is used.

Therefore, it is seen that brand taglines have been recognised as trademarks in India provided they have acquired distinctiveness through goodwill and secondary meaning. It is also seen that trade slogans can be used to describe particular unique commercial features of the brand’s products and services.

Scope of Brand Taglines as Copyrights

Copyright subsists in original literary, dramatic, musical and artistic works, cinematographic films and sound recordings.[10]The Delhi High Court in Pepsi Co. Inc. and Anrv. Hindustan Coca Cola and Ors.,held that advertising slogans are not to be accorded protection under the Copyright Act and they may be protected under the law of passing off.[11] The Court also opined that although the task of devising advertising slogans often requires a high level of skill and judgment but they will usually not qualify as original literary works.Law of passing off is not limited to names but is wide enough to encompass other descriptive materials including slogans, as part of goodwill built by extensive advertisement.[12]

Further, in Godfrey Phillips India Ltd. v DharampalSatyapal Ltd. & Another[13], the Delhi High Court followed the ratio of Pepsi Co and held that the advertising slogan “ShauqBadiCheezHain” is a mere combination of common words and hence cannot be granted protection as a literary or artistic work under the Copyright Act since they are as such not an outcome of great skill, and at best can be given protection under the law of passing off provided the requisite case is made out for passing off.

It is submitted that the reason as to why advertising slogans or brand taglines are usually not granted copyright protection is due to the generic use of words in such taglines. Brand taglines are often arrived at after much deliberation and exercise of intellectual activity and hence it may be argued to come under the ambit of originality and creativity in order to be treated as literary or artistic works.

Conclusion

In conclusion, it is submitted that a particular brand tagline may be accorded protection as a trademark if it satisfies the distinctiveness and non-descriptiveness criteria. In case of Tagline comprising of common words or generic phrase, it is through extensive use, advertising and campaigning that a tagline or slogan acquires secondary meaning to the extent consumers and the general public start associating it exclusively with the concerned brand or business. Therefore, proper documentation and detailed records regarding the use and advertising of brand taglines are essential for the purpose of preventing the dilution of goodwill created with the public.

It is also to be noted that brand taglines are usually not granted copyright protection due to the use of generic common-place words and the Courts are reluctant in considering them to be original literary or artistic works.

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] Section 2(zb), Trademarks Act, 1999

[2] 2007 (34) PTC 164 (Karn)

[3]Ibid at paragraph 11

[4]Ibid at paragraph 12

[5]Ibid at paragraph 16

[6]C. Nos. 15928-15929/2014

[7]2014 (59) PTC 421 (Del)

[8]Ibid at paragraph 10

[9]MIPR 2010 (3) 273 at paragraph 9

[10] Section 13(1)(a), Copyright Act, 1957

[11] 94(2001)DLT 30 at paragraph 70

[12]Ibid at paragraph 68

[13] 2012 (51) PTC 251 (Del) at paragraph 14