[This post has been authored by Bhavik Shukla, a 5th year student at NLIU, Bhopal]

Topical Highlight

Last week, we received an anonymous post on the recent judgment of the Delhi HC in Astrazeneca v. Emcure and Astrazeneca v. MSN. Through this order, the Court held that a species patent can be granted and is enforceable even when an already existing product is covered by a genus patent. The author is of the opinion that this decision suffers from certain serious flaws. First, the author notes that Supreme Court’s finding on “artful drafting” in the Novartis case conveys that a patentee cannot claim its patent to not disclose a product by relying on his astute drafting, when that product is actually covered by the patent. Second, the author opines that a holding which permitted genus patent and species patent to be granted simultaneously would be bad law, except in certain specific cases. Third, the author notes that the factual holding of the court is ‘cryptic’ and ‘irreconcilable’ with the law laid down in the Novartis decision, as the Supreme Court arrived at the Novartis decision due to its peculiar facts. Rather, the author suggests that courts should focus on a plaintiff’s statements and its conduct and legal effect. Subsequently, the author paves the way to conclude that the Plaintiff’s patented invention was actually disclosed by the genus patent. In conclusion, the author states that if a patent protects a compound which enables the patentee to restrain a third party from making it, the compound should be considered to have been disclosed through the patent granted.

Thematic Highlight                                                                         

In an interesting piece, Sunanda wrote about the art of making kathputlis, a kind of puppet made by the Bhaat community of Rajasthan. Through this piece, she expounds on the IP framework which protects kathputlis. She observes that kathputlis are currently protected as Geographical Indication (‘GI’), but is at risk because it is not an economically rewarding endeavour anymore. In light of this, she examines the status of automatic protection of kathputlis under the Copyright Act, 1957. In the concluding part, she admits that the intention of the post was to highlight the interaction between IP and puppets, and she earnestly hopes that the Entrepreneurship Development Institute of India engulfs the art of kathputlis within its fold.

Other Posts

In a recent post, Latha covered the decision of the Bombay HC in the case of Marico Limited v. Abhijeet Bhansali. She begins by explaining the two variants of coconut oil, an understanding of which is extremely essential to the complete understanding of the decision. First, she quotes the defendant’s video to note that “coconut oil” and “organic coconut oil” (the name of which was undisclosed in the video) with which the “freeze test” was performed are two separate and incomparable categories. Second, she notes that apart from the colour of the oils, the defendant failed to analyse any of their characteristics. She highlighted the arguments of the parties, and subsequently recounts the court’s finding in respect of misrepresentation, responsibility of “social media influencers”, and the disparagement and special damages suffered by Marico. Finally, referring to the appeal filed before the Division Bench by the Defendant, she hopes that the Division Bench rules in favour of the plaintiff, in line with the decision of the Single Judge.

SpicyIP Announcements      

Pankhuri informed us about Gridlogics’ 9^th edition of its IP symposium, PatSight to be held on February 28, 2020 at Hotel Orchid, Mumbai. The symposium was a full-day event with lectures and panel discussions interspersed with breaks. Attendance to the symposium was free and was on basis of filling a registration form.

Other Developments

Indian

Judgments

TTK Prestige Limited v. Mr. Ayyavu – Madras High Court [January 13, 2020]

The Court granted a permanent injunction restraining the Defendant from infringing and passing of the Plaintiff’s mark “STRAINO” by using an identical mark in respect of pressure cookers. The Court observed that the Defendant had already submitted that it would not carry on any business under the Plaintiff’s mark, and accordingly did not grant any decree on damages.

Avenue Supermarts Limited v. K. Eswar Rao – Bombay High Court [January 20, 2020]

The Court granted an ex parte interim injunction restraining the Defendant from infringing and passing off the Plaintiff’s mark “D MART” by using a deceptively similar mark “D MAART” in respect of running department stores. The Court observed that the Defendant refused to accept service of the application sought and granted an injunction in favour of the Plaintiff.

Imagine Marketing Private Limited v. Exotic Mile – Delhi High Court [January 21, 2020]

The Court granted an interim injunction restraining the Defendant from passing off the Plaintiff’s mark “BOAT” by using a deceptively similar mark “BOULT” in respect of electronic gadgets. The Court had affirmed the previously granted interim injunction in favour of the Plaintiff, and observed that the Defendant was aware of the Plaintiff’s mark at the time of adoption of its mark “BOULT”. Moreover, the Court noted that there is phonetic similarity between the marks, considering that the first two and last alphabet of the two words being the same. The Court further observed that the logos of both the companies were similar and their taglines used the common word “UNPLUG”. Considering that the Defendant was the registered proprietor of the mark “BOULT”, only actions of passing off and infringement of copyright lay against it.

Boehringer Ingelheim Pharma GmbH & Co. and Another v. Tanmed Pharma India Private Limited – Madras High Court [January 21, 2020]

The Court rejected an application for an interim injunction restraining the Defendant from infringing the Plaintiffs’ patent in the drug “Linagliptin”. In arriving at this decision, the Court noted that the Defendant had never manufactured the drug, and had already submitted an undertaking stating that it would not manufacture the drug in the future.

Nike Innovate CV v. M/s. GB Shoe and Others – Delhi District Court [January 22, 2020]

The Court granted a decree of permanent injunction restraining the Defendants from infringing and passing off the Plaintiff’s trademark in its mark “NIKE”, and the “SWOOSH” device by using an identical mark on its footwear. In arriving at this decision, the Court noted that the Defendants had no right to use the mark, and its use by the Defendant would create confusion and deception in the minds of its customers. The Court also considered it appropriate to grant nominal damages to the tune of Rupees 1.5 lakh from the three Defendants in light of the reputational and goodwill loss suffered by the Plaintiff.

Bristol Myers Squibb Holdings Ireland v. Natco Pharma – Delhi High Court [January 23, 2020]
The dispute between the Parties arose on account of the Defendant’s alleged infringement of the
Plaintiff’s patent in “APIXABAN”. The Defendant initially filed a civil suit before the City Civil
Court at Hyderabad for declaration that manufacture of “APIXABAN” by a member of the public was
justified along with a permanent injunction restraining the Plaintiff from threatening and hampering
its business. Accordingly, the Defendant requested the Court to not try the infringement matter before
it as it was already pending before the court in Hyderabad. However, the Court rejected this
application of the Defendant, and stated that Section 10 of the Civil Procedure Code would only be
applicable to Courts of concurrent jurisdiction to prevent them from simultaneously trying two
parallel suits in respect of the same matter. As the reliefs to be offered in both cases were different,
the Court held Section 10 to be inapplicable to the facts of the case. Moreover, the Court noted that
the mere existence of an ulterior motive to pre-empt a suit was enough to refuse reliance on the
principle of lis pendens. The Court also noted that the reliefs of non-infringement and threat of
infringement claimed by the Defendant under the Specific Relief Act should have been alternatively
claimed under the Patents Act.

Andhra Hosiery Mens Garments v. Mr. Laksham Das and Others – Telangana High Court [January 24, 2020]

The dispute between the parties arose on account of the Respondents’ alleged passing off of the Appellant’s mark “ANDHRA HOSIERY” by using a deceptively similar mark “NEW ANDHRA HOSIERY EXCLUSIVE”. The interlocutory application of the Appellant was dismissed on the ground that it had failed to mention the suffix “EXCLUSIVE” in the name of the Respondents. Accordingly, no relief was granted in its favour. However, the Court during the pendency of this miscellaneous application before it, had granted an interim injunction in the Appellant’s favour. During the final hearing of the miscellaneous application, the Court noted that the Appellant had merely based its plea on passing off and accordingly, it was not required that its mark should have been registered in contradiction to the Respondents’ claim. Moreover, the Court noted that the matter was previously dismissed in the interlocutory application only on the ground that the prayer was defective and not on merits. Accordingly, it noted that the impugned order on the interlocutory application could not be sustained and directed the Chief Judge, City Civil Court to decide the matter within 4 weeks.

M/s. Cluett, Peabody Co. Inc. v. M/s. S.R. Traders – Delhi District Court [January 24, 2020]

The Court granted a permanent injunction restraining the Defendant from using the mark “ARROW” in infringing and passing off the Plaintiff’s identical mark in respect of garments and other allied goods. In arriving at this decision, the Court noted that the Local Commissioner appointed in the matter had found counterfeiting goods in the Defendant’s premises. Accordingly, the Court noted that the Plaintiff had been successful in establishing its use of the mark “ARROW” and its infringement by the Defendant. The Court subsequently noted that the Defendant had no right to use the Plaintiff’s mark as it would mislead the consumers and allow the Defendant to enrich itself at the cost of the Plaintiff. The Court granted the Plaintiff nominal damages of Rupees 50,000 in light of continuous infringement of its mark and the loss of reputation suffered by it.

M/s. Century Plyboards India Limited v. M/s. New Rakesh and Company – Delhi District Court [January 25, 2020]

The Court granted an interim injunction restraining the Defendant from infringing and passing off the Plaintiff’s mark “CENTURYPLY” along with its family marks containing the mark “CENTURY” as a prefix, by adopting a deceptively similar mark “CENTURYPLY”. The Court observed that the Plaintiff was the proprietor of the mark and also had a registered copyright in its logo. Accordingly, the Court noted that there was prima facie reason to believe that the trade mark of the Defendant was deceptively similar to the Plaintiff’s mark and its use would lead to loss of revenue and reputation to the Plaintiff. The Court also appointed a Local Commissioner to prepare inventory of goods and material seized from the Defendant’s premises within 15 days of the order.

M/s. Sentinels Security Private Limited v. M/s. Sentinel Consultants Private Limited – Delhi District Court [January 27, 2020]

The Court rejected an application for an interim injunction restraining the Defendant from passing off the Plaintiffs’ mark “SENTINEL” by using an identical mark “SENTINEL”. The Court noted that the Plaintiff had the burden to prove that it was the prior user of the mark “SENTINEL”, considering that both parties were indulged in identical activities. However, the Court noted that the Plaintiff failed to show that it was using the mark when it was incorporated in 1982 or through any of its advertisements, or through the copies of the balance sheets filed by it.

Novex Communications Private Limited v. Ceres Hotels Private Limited – Bombay High Court [January 28, 2020]

The Court granted an interim injunction restraining the Defendant from infringing the Plaintiff’s copyright in its sound recording by performing it on several occasions. The Court observed that the Defendant was aware of the Plaintiff’s copyright in its sound recordings and had failed to reply to the cease and desist notices served on it. Accordingly, the subsequent deliberate use of the recording without obtaining a licence amounted to a prima facie case of copyright infringement.

Amazon Seller Services Private Limited and Others v. Amway India Enterprises Private Limited and Others – Delhi High Court [January 31, 2020]

The Appellants in the present case have filed appeals against the order of the Single Judge which injuncted the Appellants from selling the goods of the Respondents. The Court elaborately discussed the decision of the Single Judge before undertaking an examination of the issues on which the Single Judge had given its decision. On the first issue relating to the Direct Selling Guidelines (‘DSG’) being law, the Court observed that the Single Judge had erred in deciding that DSG was law as they were merely a mechanism of formulating rules under the Consumer Protection Act, 2019. With the Act itself not being notified, the Court observed that the DSG formed under it could not be considered to have a character of binding rules only because they were published in the Gazette. Considering the trademark issues, the Court observed at the onset that the Single Judge was in error in observing that the Respondents were the owners of their respective trademarks and there was no dispute on their ownership. Accordingly, the Respondents could not initiate any actions pertaining to infringement or passing off. The Court further noted that the Local Commissioners’ reports being relied upon by the Single Judge could not lead to the sweeping conclusion that the Appellants were tampering with the products, as the Court found certain omissions in the reports. The Court also noted that the Single Judge had reached broad conclusions through its decision without distinguishing that specific reports of the Local Commissioners covered only specific online platforms, and not all the Appellants. In respect of the issue relating to the intermediary status of the Appellants, the Court noted that such a decision could only be arrived at the conclusion of the trial. Moreover, the Court noted that the Appellants had not received any court order from the Respondents through which they were expected to take material down. Accordingly, the Court observed that the Appellants were not required to meet with the diligence requirement of an intermediary. The Court finally noted that the Respondents had failed to establish any of the three grounds for the grant of an interim injunction, and therefore, set aside the order of the Single Judge.

M/s. Laboratoire Garnier and Cie v. Sh. Dharampal Sabunwala and Another – Delhi District Court [January 31, 2020]

The Court rejected an application for permanent injunction restraining Defendant No. 2 from infringing and passing off the Plaintiff’s mark “GARNIER” by using an identical mark. The Court observed that the Plaintiff had failed to prove by leading cogent and convincing evidence that the Defendant No. 2 was involved in infringement of its mark “GARNIER” or the copyright pertaining thereto. Moreover, the Court noted that the Plaintiff’s employees had not certified that the seized goods were fake in nature. The Court also noted that the seized items were never produced before it.

Satish Kumar Gandhi v. State of Uttar Pradesh and Others – Allahabad High Court [January 31, 2020]

The Court refused to quash the charge sheet filed against the accused which levelled charges under Section 420 of the Indian Penal Code, 1860 as well as Section 63 of the Copyright Act, 1957. In arriving at this decision, the Court noted that the Applicant failed to establish the source of the disputed product recovered from him or produce bills pertaining to the same. Accordingly, the Court dismissed the accused’s application as the Court had jurisdiction in the matter and the proceedings were maintainable before it.

News

• Indian activists mount pressure over Sanofi for withdrawal of patent applications from Indonesia and European offices for a drug which could adversely affect the treatment of tuberculosis patients in India.
• Trade Marks Registry publishes the list of Grievance Redressal Officers for all its branch, along with the publication of a Supervisory Grievance Redressal Officer at Mumbai.
• The proposed relocation of IPAB from Chennai invites criticism from the DMK. The Bar Council of Tamil Nadu and Puducherry adopt a resolution against the proposal.
• Union Budget 2020: Government intends to promote a digital platform for intellectual property rights.
• Yash Raj Films approaches  Bombay HC against IPRS in relation to a royalty dispute to the tune of Rupees 100 crore.
• The Khadi and Village Industries Commission seek registration of the mark ‘Khadi’ under classes 20, 29 and 33 to prevent it from being used for items seen at odds with the Gandhian philosophy.
• Delhi HC temporarily restrains Lex Sportel Vision from using Discovery Communications India’s ‘DSport’ in any manner, due to public confusion on the ownership of the channel.
• Delhi HC temporarily restrains Campus from selling its shoe range which had a similar sole to Puma’s running shoes.
• Aparna Bhat, the lawyer who represented Laxmi Agarwal, decides to drop contempt petition against Chhapaak filmmakers as they agree to give her credit in the film screened abroad as well.
• Calcutta HC grants interim relief to Republic TV in a passing off suit against the Defendant, who ran an internet portal.
• Delhi HC rules that the Office of the Controller General of Patents, Designs and Trade Marks is an ‘industry’ under the Industrial Disputes Act, 1947.
• Department of Promotion of Industry and Internal Trade (DPIIT) convenes a stakeholder meeting to review existing IP Acts in India, where invitation had been extended to foreign industries as well as law firms.
• Shemaroo Entertainment accused of violating trademark law by using name of the stage show and launching a Marathi TV channel.
• National Pharma Pricing Authority (NPPA) seeks clarification on Gilead’s drug pricing plea.
• Patent Office is likely to conduct Patent Agent Examination in June this year.

International

• The United Kingdom decides to not implement EU’s controversial Copyright Directive after the Brexit.
• CJEU rules that pay-for-delay agreements between the patent holder and the generic manufacturers violate competition law where reverse payments occur without justifiable explanation.
• The Pakistani Senate Committee clears the Geographical Indications Bill, which shall now be presented before the Upper House of the Parliament for its consent.
• Scientists share coronavirus data in unprecedented way to contain, treat disease.

Image from here

Last week, a Division Bench (DB) of the Delhi High Court set aside a common judgment passed by a Single Judge thereof in July last year in Amway India Enterprises Pvt. Ltd. v. 1Mg Technologies Pvt. Ltd. & Anr. The common judgment addressed the interlocutory applications filed in seven suits by Direct Selling Entities (the DSEs), Amway, Modicare and Oriflame against e-commerce platforms including Amazon, Snapdeal and Flipkart (the defendants).

The DSEs engage direct sellers of their products to sell, distribute and market their products under a contract.  In short, the DSEs claimed in the suit that the Direct Selling Guidelines, 2016 (DSG) issued by the Government of India was to regulate the direct selling business in the interest of consumers. It was the case of the DSEs that the defendants violated the DSG by offering the products of the DSEs for sale on their respective platforms without the consent of the DSEs. The common judgment, in short, injuncted the defendants from selling the goods of the DSEs on their online platforms without their consent.

The Single Judge’s findings in summary were as follows:

• The DSGs, issued and notified in terms of the Article 77 of the Constitution of India, regulate the business of Direct Selling. These are binding in law;
• The defendants were aware that they were bound to enforce the DSGs and yet they chose to defend their actions based on the alleged illegality and non-binding nature of the DSGs;
• The defendants were guilty of infringement of the DSEs’ trademarks, dilution, passing off, and misrepresentation;
• The defendants were not merely passive players but massive facilitators inasmuch as they were providing warehousing, logistical support, packaging and delivery services. To be eligible for the exemption under Section 79(2)(c) of the Information Technology Act, 2000 (IT Act), the defendants must observe due diligence required under Section 79(2)(c);
• The continued sale of the DSEs’ products on the defendants’ e-commerce platforms without the consent of the DSEs, results in inducement of breach of contract, and tortious interference with DSEs’ contractual relationships with their distributors; and
• The balance of convenience lies in the favour of the DSEs as the defendants could not establish that the products of DSEs sold thereon were genuine and not tampered with.

The defendants in six out of the seven suits appealed the common judgment.  In an incisive order issued on January 31, 2020, the DB set aside the above findings in the common judgment. The DB prefaced its findings with the following observations, which would come as a revelation to those who have read the very convincing order of the Single Judge:

• The suits were not filed for passing-off or infringement under the Trade Marks Act, 1999 and as such were not commercial suits;
• There was no prayer in any of the suits seeking a declaration that the DSGs are binding and enforceable in law;
• There was no prayer for a declaration that Amazon and Snapdeal were not intermediaries under Section 79 of the IT Act; and
• Yet, the Single Judge returned specific findings on these points, which run contrary to the structure and frame of the suits themselves.

The DB then went on to hold that:

• The DSGs are not law. These are only advisory in nature and are yet to be enacted into law, pending adoption of a new Consumer Protection Act, 2019 (CPA) and the draft Rules thereunder. The Single Judge lost sight of the distinction between ‘rules’ made under a statute and mere ‘guidelines’;

• The DSEs jumped the gun in not waiting for the law to be formally made and enforced. Once enacted as law, the Direct Selling Rules under the CPA would be open for challenge by the e-commerce platforms under various statutes including the Trade Marks Act (Section 30);

• The suits filed by the DSEs were not framed as traditional trade mark infringement and passing-off actions. The plaintiffs neither asserted nor mentioned anything about trade mark registrations. The marks “AMWAY” or “ORIFLAME” were owned by entities which were not even parties to the suits. Besides being violative of the exhaustion principles (in aid of traders’ freedom to trade lawfully and acquire goods), Clause 7(6) of the DSGs (which prohibits a buyer from reselling the product online) cannot be enforceable vis-à-vis third parties as there is no privity of contract between the DSEs and the defendants;

• Section 79 of the IT Act is a safe-harbour for online marketplaces, limiting their liability for third party information posted on their platforms. The safe-harbour provisions do not make any distinction between passive and active intermediaries. The value added services provided by the defendants (such as warehousing, packaging, delivery, etc.) do not dilute the safe-harbour granted to them under Sec. 79 of the IT Act coupled with the definition of “intermediary” under the said Act and the clarification provided by the Government of India with regard to such online marketplaces;

• There was no basis for a finding of inducement to breach of contract and tortious interference. To invoke the tort of inducement to breach of contract presupposes a contract between the online platforms and the DSEs, which does not exist. The mere fact that the online platforms may have knowledge of the Code of Ethics of the DSEs and the contractual stipulations imposed by such DSEs, is insufficient to lay a claim of tortious interference;

• Regarding the finding on the tampering of the products, the DB found many holes in the reports of the Local Commissioners and held that this issue is a matter of evidence and can be concluded only after trial. It found that the facts revealed in these reports were insufficient to make any specific conclusions regarding the impairment of the products vis-à-vis the appellant defendants.

Each of the appellants (defendants) was awarded costs of INR 50,000 which the DSEs are required pay within four weeks of the judgment.

Image from here

We’re pleased to bring to you an interesting and insightful post by Mohd Shadab Danish on the long-debated relationship between patents, innovation and economic growth. Shadab is a PhD scholar (Economics) at IIT Indore.

The post is particularly timely and relevant in the backdrop of PM Modi’s recent speech wherein he urged the young scientists of the country to “Innovate, Patent, Produce and Prosper”, (seemingly) on the assumption that any and all innovation and patenting by them will make our production smoother and people more prosperous.

Reflecting Upon Innovation Quality and Future Roadmap in India

Mohd Shadab Danish

In the last couple of decades, India has witnessed an increase in the patenting activities (from 3720 in 1993 to 46582 in 2017 WIPO). This figure itself narrates the innovation growth story in India in the last 20 years. The increasing trend of patent filing in India is encouraging but it is not sufficient information to understand the quality of knowledge creation. Thus, in order to capture on the quality and value aspects of patents, scholars have tried different measures and methodologies (Schankerman and Pakes, 1984; Danish et al, 2019 (paywalled)). Some scholars argue that patent may be an ideal indicator of innovation for some industries, the new-product indicator might be more appropriate to others (Jin, Gracia, and Salomon, 2019). The reason for utilizing patent as a proxy for innovation is that it contains a large amount of information about the assignee, inventors, claims and so on, which in case of R&D is not possible. On the other hand, new product information is not easily available in all industries. Therefore, researchers rely on in-depth information of patent to estimate patent value. Understanding of innovation must not be concluded from the patent count but the value of each patent. The measurement of innovation in 2020 needs different approaches where conventional understanding is replaced at least to the extent where innovation is not seen as a static concept. Innovation is an outcome of collaborative efforts among government, firms, and individuals in a given economic situation.

The word ‘innovation’ simply suggests bringing the newness to the work, product, or in other activities of the life which enhances efficiency and attracts larger attention across economic agents. Innovation can be of different scales depending upon the need and the setup of the organization. However, the objective of bringing innovations to the marketplace is more or less the same which is to earn economic benefit from the investment. We know from economic theory that innovation of the country and its growth are intricately related and one drives the other. Scholars working in the area of economics of innovation have found that patenting activities led the foundation of better firm performance. However, in many cases, the results of simple patent count on the firm performance in a defined functional form has been found to be inconclusive or negatively associated with the same. Nevertheless, the importance of patenting activities has given larger space when it comes to analyzing firms’ innovativeness across sectors particularly in high-tech industries. In today’s competitive markets, intellectual assets particularly patents are predominantly used by firms to capture the market. The growth in the number of patent applications worldwide reflects its strategic and commercial importance. In this way, it will not be wrong to say that intellectual assets, majorly patents, have become an important currency that allows for knowledge to be traded to an extent that has not been practiced previously (Arora and Gamberdella, 2011).

Quality of Innovation and Value of Patents

The debate on the quality of innovation will not be complete without analyzing the value of innovative outcomes. The concept of value of patent is not found in absolute and abstract terms but it depends upon the specific context of the valuation, in terms of focus, time, purposes and interested parties. In economics “the private value of patent refers to the economic rewards the patent holder is able to obtain from the patent, either by directly excluding competitors from the market, or by licensing/selling the patent to third parties, or combination of these options” (Munari & Sobrero, 2011(paywalled)).

Estimation of Patent Value by its Renewal Information

The following Pakes and Schankerman (1984) study uses patent renewal information to estimate the patent value. This study assumes that patent owners renew their patent only when it is valuable for them otherwise they allow their patents to lapse. For every granted patent, there is a renewal fee which is to be compulsorily paid if the patentee wants to maintain its enforceablity. Sequence of renewal fee increase monotonically with age and is denoted by C_it. Patentee who pays renewal fee earn the implicit return from the patent protection during the active life of the patent, r_it. Patentee will renew their patent only if  r_it > C_it and sequence of return (r_it)  is the function of initial return (r_i (0)) and the rate of depreciation (d_it), that is

r_i(t) = f(r_i(0), d_ti)                        (1)

where d is depreciation rate and r_i(0) is initial return. Patents value is also function of observable characteristics of patents and patent’s owner. Such characteristics, namely, number of claims, family size of the patent, nationality, number of inventor and technology, are included in this study. Let X_i be the different characteristics of patents and its owner with the assumption of lognormal distribution:

lnr_i (0) =  β.X_i + ε_i                       (2)

Using Monte Carlo simulation (to indicate probability of different outcomes), we estimate the initial return ri(0) of the patent, thus ri(t) value is calculated using fixed depreciation rate, as demonstrated in studies by Bessen (2008)[1] (pre-print version here).

Patents in Some Sectors (e.g. Pharma and Chemical) Less Valuable than Those in Others

A study conducted by Danish et al., (2019) finds that patents are not equally valuable in all sectors. In some technological sectors – (defined based on international patent classification (IPC)) – patents are found to be more valuable than those in other sectors, which have very less or negligible value. For example, patents in instruments, mechanical, and electrical sectors are comparatively more valuable than those in chemical and pharmaceutical sectors. The study also finds that the distribution of patent value is highly asymmetric across technology and ownership groups (foreign and domestic assignee). Valuable patents are assumed to be renewed for a longer time, whereas patents with lower value seem to be lapsed at a very early stage. It is a well-established fact that a patent renewed for an additional year implies a higher value of the patent (Schankerman and Pakes, 1984). Contrary to common understanding, a large number of patents (24.67%) are not renewed even at a small renewal fees, and only 33% patents are maintained over the age of 10. This indicates that a large numbers of patents are actually of low value. The study also finds that patents filed with the Indian Patent Office (IPO) by Indian assignee depreciate faster than developed nation patents.

Nevertheless, the average renewal life of an Indian patent is more than many developing and developed nations. For example, average Chinese patent life ranges from 3.29 to 5.94, however Indian patents’ average length is 8 to 11 years (Danish et al., 2019). In other countries like Germany, around 30 percent of patents lapse at the age of 10. The patent survival length decline continually reaches to 50 percent by the age of 14. In Austria and Belgium, the average patent length is 11 years. Also, the average renewal length of the patent varies by technology group in India. The mechanical and instruments group top the chart in terms of renewal. Surprisingly, patents belonging to chemicals and drugs group have a shorter life span. This indicates that pharmaceutical patents coming from India filed at the IPO are of lower value. One possibility for this is that patents are granted with relative laxity, by the IPO, leading to low-value patents. Sometimes, lower inventive steps in a patent lead to lower quality of patent, hence such patents are not renewed for the maximum length. It is also observed that many times, inventors file patents just to increase their portfolio of patents. Therefore, a large number of patents get dropped at a very early stage. The other reason could be appropriated to the low technology cycle. In some areas technologies are fast-changing and therefore, patents associated with those technologies become irrelevant for owners.

Need for Encouragement of Overall R&D Investment

India’s position in the 2019 Global Innovation Index has improved from 76 in the year 2014 to 57 in 2018. This is a remarkable achievement. However, there is a need to address some other challenges related to innovation in order to build an efficient innovation network. Innovation can never be optimal if it is not giving a return to the investors. At the same time, an economy can never get benefited from the innovation if it does not reduce the cost or create employment or solve the problem of a certain kind. There is a need to encourage overall R&D investment which is stagnant between 0.6 and 0.7 percent of total GDP over the past two decades[2] (part of this study is available as a PDF here). The continuous decline of growth rate (IMF slashed India’s economic growth for FY20 4.8 percent) poses a serious concern for the fresh R&D investment and other innovative activities. India’s dream to become a world power in the innovation field can be fulfilled only if the overall policies related to higher education, tax credit on R&D (restoring earlier 200 percent tax credit on R&D) and special policies are designed for the laggard states in innovation. It is also necessary to promote small inventors of remote areas to reduce technological inequality in India. The long-term objective of the policymakers should be to bring balance between innovation, productivity and distribution. This could only be possible when the labor and capital income gap is reduced significantly. India’s future innovation can also be measured in terms of their employment capabilities.

References

Arora, A., Fosfuri, A., & Gambardella, A. (2001). Markets for technology and their implications for corporate strategy. Industrial and corporate change, 10(2), 419-451.

Bessen, J. (2008). The value of US patents by owner and patent characteristics. Research Policy, 37(5), 932-945.

Danish, M. S., Ranjan, P., & Sharma, R. (2019). Valuation of patents in emerging economies: a renewal model-based study of Indian patents. Technology Analysis & Strategic Management, 1-17.

Jin, B., García, F., & Salomon, R. (2019). Inward foreign direct investment and local firm innovation: The moderating role of technological capabilities. Journal of International Business Studies, 50(5), 847-855.

Lanjouw, J. O. (1998). Patent protection in the shadow of infringement: Simulation estimations of patent value. The Review of Economic Studies, 65(4), 671-710.

Munari, F., & Oriani, R. (Eds.). (2011). The economic valuation of patents: methods and applications. Edward Elgar Publishing.

Pakes, A., & Schankerman, M. (1984). The rate of obsolescence of patents, research gestation lags, and the private rate of return to research resources. In R&D, patents, and productivity (pp. 73-88). University of Chicago Press.

IMF Cuts India’s FY20 GDP Growth Projection by 130 bps to 4.8%, CNBC (January 21, 2020), https://www.cnbctv18.com/economy/imf-cuts-indias-fy20-gdp-growth-projection-by-130-bps-to-48-5091401.htm.

WIPO IP Statistics Data Center (October 2019), https://www3.wipo.int/ipstats/index.htm?tab=patent.

[1] Details of the methodology have been given in the Danish et al (2019). It will also be given on request.

[2] FDI in R&D and Development of National Innovation Capabilities: A Case Study of India funded by Indian Council of Social Science Research (ICSSR), Ministry of Human Resource Development, Government of India. Part of this study is published as a working paper of ISID titled FDI in R&D in India: An Analysis of Recent Trends.

We’re pleased to bring to you a guest post by Eashan Ghosh on the recent Delhi High Court Division Bench’s decision that set aside the Single Judge’s order restraining various e-commerce platforms (including Amazon, Flipkart and Snapdeal) from enabling sale of products of ‘direct selling’ companies without their consent.

Eashan has practicing as an intellectual property advocate and consultant in New Delhi since 2011, and teaches a seminar on intellectual property law at National Law University, Delhi. Eashan writes about Indian intellectual property law, including a monthly review of Delhi High Court judgments, on his Medium page. He has written several guest posts for us in the past as well (see here, here, here, here, here, here, here and here).

Amazon v. Amway: A Growing Appellate Scrutiny Problem

Eashan Ghosh

In this post, I discuss some trade mark issues arising from Delhi High Court’s recent appeals judgment in Amazon Seller Services v. Amway India Enterprises. The case more centrally concerns the applicability of the 2016 Direct Selling Guidelines, Section 79 of the Information Technology Act, and contentions regarding inducement of breach of contract and tortious interference. Latha’s post on the judgment offers an excellent summary of these issues.

Negative Actions

Reversing the first court’s positive finding of trade mark infringement, the appeals court finds in favour of the Defendant-Appellants. It does so by attacking the negative actions of the Defendants (in their capacity as e-commerce platforms) which the first court found to be consistent with trade mark infringement viz., product tampering and failing to furnish full details of the sellers. These activities had supplied the first set of reasons for the first court to rule in favour of the Claimant-Respondents (in their capacity as direct sellers) against the Defendants.

The approach adopted by the appeals court here is critical. It is restricted to rebutting the first court’s conclusions by diverting the discussion either to facts not considered or adjudicated differently by the first court. At least five categories of materials answer to this description. These are:

• Insufficiency of material in Local Commissioner reports to sustain a finding of product tampering by the Defendants;
• Accuracy of MRP listings on products sold by the Defendants;
• Accessibility of seller information by consumers on products sold by the Defendants;
• Instances of the Claimants’ own discounts being passed onto consumers; and
• Withholding of buyer information from sellers until the conclusion of the sale.

The appeals court does not, therefore, ask whether, on the material before it, the first court could reasonably have come to its conclusion. It asks, instead, whether, in view of existing material either not considered by the first court or capable of different interpretation, the first court’s opinion ought to be revised.

This is supported by the appeals court’s view that the first court was in error in its reading of precedent to find that the Defendants’ actions would not be saved under the second sale exception to trade mark infringement under sub-sections (3) and (4) to Sections 30 of the Trade Marks Act.

Performative Actions

The first court’s trade mark infringement case against the Defendants, however, ran deeper. The first court had found that the platforms of the Defendants offer several routes of facilitating second sales: by running advertisements, offering their own guarantees, endorsing and name associating themselves with the Claimants, and instituting their own refund and return policies. These are what I referred to last July as the performative actions of the Defendants that are consistent with trade mark infringement. Had the intention of the appeals court been to nullify the ruling of the first court, these points surely ought to have been answered.

They are not. Instead, based on its own review of the materials available to the first court, the appeals court overrules the first court’s factual finding that the Defendants were tampering with the Claimants’ products. On the material before it, concludes the appeals court, a positive finding of product tampering against the Defendants “was too sweeping a conclusion to arrive at.”

Even so, the appeals court is forced to admit that this is, almost to a fault, a factual question. It can, therefore, only be settled through evidence. To be clear, its conclusion that it was premature for the first court to rule that there was positive evidence of product tampering is not without merit. However, once again, this turns on what the appropriate standard for appellate scrutiny of factual findings should be. Was there a good faith basis for the first court to believe that there had been product tampering? Was there enough material on record to suggest that a de novo consideration would point away from a conclusion of product tampering? The answer to both questions could well be in the affirmative, and the absence of a disciplined and repeatable basis for its appellate scrutiny certainly damages the appeals court’s ruling.

“Outside the Purview”

The trade mark discussion is also book-ended by the appeals court’s conclusion that there is no case to answer on trade mark infringement or passing off at all. This is because, in their view, there has been no assertion of trade mark claims by the Claimants and that any case for relief on this basis is “outside the purview and scope of the pleadings in the suits.”

If this is to be taken at face value, all other discussion on the trade mark issue is moot. However, applying the same standard to the appeals court, upwards of 4,000 words of its own judgment has no significance, by its own admission. To set it out “in any event”, as the appeals court does here, is unsatisfactory.

The first court’s ruling in July 2019 had been a mixed one: it had set out a factual yardstick for assessing trade mark dilution claims in online sales cases but had obscured the foundation of those very claims. Now, the appeals court in January 2020 presents another a mixed ruling for reasons that are neatly aligned: it overwrites the factual yardsticks for the assessment of trade mark dilution claims in such cases but denies that the foundation of those claims exist at all.

Image from here.

The Madras High Court, in its judgement in Adithya Modi v Union of India and Ors., has refused to mandate Prasar Bharati to stream sports broadcasts shared under the Sports Broadcasting Signals (Mandatory Sharing With Prasar Bharati) Act, 2007 (“Sports Broadcasts Act”) over the internet. Instead, the Court has ‘directed’ the respondents (Ministry of Information, Ministry of Sports and Prasar Bharati) to consider the matter and make appropriate policy recommendations.

Background and the Saga of Sports Broadcasting in India

The tale of sports broadcasting in India goes long back, but it’s pertinent for this case to start with the enactment of the Sports Broadcasts Act in 2007. Section 3(1) of this legislation obliges any entity broadcasting signals of sporting events of national importance, to share the signal with Prasar Bharati to enable them to retransmit the same through their own terrestrial networks and direct-to-home (DD FreeDish) networks. So began a long and bitter battle over the control of (primarily) cricket broadcasts, including Prasar Bharati going over and beyond the scope of Section 3(1) to transmit the shared signal over cable and satellite.

The Act, predictably, was a thorn in the revenues of broadcasting organisations and entities like the BCCI which rely upon them. However, in 2017, BCCI v Union of India, the Supreme Court strictly interpreted the Act as a ‘expropriatory legislation’ and limited the practice of cable networks carrying Prasar Bharati (or Doordarshan’s) feeds. (We’ve covered this judgement here).

Cut to 2018. The Ministry of Information and Broadcasting floats an amendment to the Sports Broadcasting Act to circumvent the Supreme Court’s restrictions and allow private cable / DTH or IPTV broadcasters to relay the ‘clean’ (ad-free) signals shared with Prasar Bharati. The reasons were apparent – DD’s own shares in terrestrial and DTH broadcasting fell far short of other provider’s, potentially defeating the policy intent of the Act (although some private reports pegged FreeDish’s market share at 40%). The industry is up in arms once again. The amendment is shelved.

In the meanwhile, Public Interest Litigations were filed in various High Courts, including in Delhi, Punjab & Haryana and Madras HC, seeking to expand the scope of mandatory sharing of sports broadcasts in light of the increase in the mobile internet usage and the shift from terrestrial broadcasting to online streaming of sports. The petitioner in the Madras HC has for the restrictions on the form of broadcasts under Section 3(1) to be deemed unconstitutional and contrary to Article 19(1)(a), and also arbitrary and violative of Article 14, and to allow OTT and third-party platforms to rebroadcast on a free-to-air basis the signals for sports broadcasts under the Act.

Gone for a Toss: No Right to Receive Sports Broadcasts Over the Internet

The Madras High Court did not accept the petitioner’s contentions. The Court held that the Sport Broadcasts Act did not impose any restriction on the right to access information to deprive any citizen of information, as it was not ‘essential or necessary’ for an individual to have access to such services freely through the internet. Looking into the text of the Sports Broadcasting Act and its statement of objects and reasons, the Court held that the limitation of modes of retransmission under the Act were policy considerations and could not be struck down on the basis that there were more viable technologies for rebroadcasting. Further, the Court also held that the statute did not display manifest arbitrariness, without however noting the reasons for this conclusion.

The Court’s ultimate conclusion on the Sports Broadcasting Act is fairly reasonable. Acceding to the petitioner’s prayer would have meant interpreting Article 19(1)(a) obligations as an expansive positive mandate of the state to enable certain forms of information to be made available in a specific manner, which goes against the prevailing jurisprudence on the scope of Article 19(1)(a). This would be in line with the strict and textual interpretation of Section 3(1) of the Sports Broadcasting Act by the Supreme Court. However, the Court did not supply reasons as to why limiting broadcasts to terrestrial and DTH operations did not display ‘manifest arbitrariness’ in the law, which could have provided some strength to the argument that the restriction on internet broadcasts was irrational or had no clear determinative principle.

The Court’s final direction is incredibly vague. The Court holds that it is ‘open to be assessed’ by the Government whether ‘unrestricted open accessibility to the viewing of sports and entertainment channels through Prasar Bharati’ would be feasible. It further directed the MIB and Prasar Bharati to take an ‘appropriate decision’ within 3 months. Such directions are probably entirely meaningless and it is difficult to see what the High Court intends to achieve from it apart from perhaps reinvigorating government efforts towards amending the Sports Broadcasting Act. In the meanwhile, the sports broadcasting industry and BCCI can probably sit back and enjoy the upcoming T20 World Cup in peace.

Patents for Computer Related Inventions (CRIs) or “Software Patents” have, unfortunately, been an evergreen issue in India, with much confusion, lobbying, changes, misunderstandings, and anything else one could imagine, playing its role at some point or the other. As Shamnad had once written – its indeed confusingly confounding! Readers may recall a recent post which discussed the Ferid Allani order. As Sandeep Rathod helpfully pointed out in the comments on that post – that patent application has once again been rejected by the Patent Office. I had intended on writing a follow up post, but in the course of researching on that, I was diverted when I noticed that there doesn’t seem to be a single source that I could find, outlining the rickety road that CRIs have taken in India. So, here is my attempt at outlining the major pit-stops and potholes that CRIs have had the misfortune of bumbling along, in India. Wherever possible, I’ve tried providing a copy of the relevant documents as well. Comments and corrections, if any, are welcome. (At almost 3000 words, this is double the length of our usual posts. However splitting it into two parts didn’t seem to make sense, given that this is an attempt to put all this information in one place)

Among other factors, the ability of ping-pong players to effectively spin, is crucial!

The Patent (Second Amendment) Act, 2002 – introduction of “computer programmes per se” to the Act

After India’s signing of the WTO TRIPS Agreement, there were a set of amendments required to bring the 1970 Patent Act in line with the requirement of certain TRIPS standards. “Computer Programs” were mentioned explicitly for the first time in The Patents (Second Amendment) Bill, 1999, when it listed in its exclusions: “a mathematical or business method or a computer program or algorithms”. This bill was referred to a Joint Parliamentary Committee, who then presented their Report on 21 Dec 2001. (PDF here). The JPC Report recommended adding “per se” to “Computer Programmes” with the following reasons (emphasis, my own) :-

“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 developed thereon. The intention here is 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.”

This bill was passed as the Patents (Second Amendment) Act, 2002 (PDF here) implying an agreement with the rationale behind its inclusion. The resultant provision:

“a mathematical or business method or a computer programme per se or algorithms;”

The 2004 Patents (Amendment) Ordinance and its repeal – Rejecting the dilution of S.3(k) exclusion

Dec 27, 2004 saw the promulgation of an ordinance (PDF here) to amend the Patent Act. The ordinance proposed splitting 3(k) into two sub-sections, which would’ve effectively diluted the exclusion:

“(k) a computer programme per se other than its technical application to industry or a combination with hardware;
(ka) a mathematical method or a business method or algorithms;”

The same day, the then Union Minister of Commerce and Industry, Mr Kamal Nath, issued what seems to be an official statement (PDF here) saying, “In IT, the trend is to have software in combination with or embedded in hardware – such as in computers or cell phones or a variety of other gadgets. Software as such has no patent protection (the protection available is by way of copyright); but the changing technological environment has made it necessary to provide for patents when software has technical applications in industry in combination with hardware. This has been a demand of NASSCOM.”  ….(and later)…  “We have introduced a provision for patenting of software that is embedded in hardware”

A plain reading of the ordinance, along with the explanatory statement by the Minister, seems to indicate that there is already a split in understanding the proposed provision. On one hand, the language of the proposed amendment essentially says, there are to be no patents for computer programes as such, but patents can be granted if the subject matter is a computer programme’s technical application to industry, or a combination of software and hardware. Whereas the Minister’s statement indicates that patents can only be provided when there is technical application in combination with hardware. The minister also indicates that NASSCOM had asked for this.

The phrases ‘in combination with hardware‘ and ‘embedded in hardware‘ seem straightforward – i.e., software alone is not patentable, but software in combination with hardware, or software embedded in hardware would be patentable (subject to the usual novelty, non-obviousness and utility standards). Certainly the drawing of specific boundaries may be a bit more difficult, but conceptually the idea seems clear. However, the meaning of the phrase ‘technical application to industry‘ seems unclear. Personally, I would imagine that any computer programme is capable of being described as having technical application. Or to phrase it in the negative: are there any computer programmes that can be posited to have absolutely no technical application to industry? I guess it would be possible if one were to narrowly construe the words ‘technical’, ‘application’, and ‘industry’.

In any case – this ordinance was repealed a few months later, on 4th April, 2005, by the Patents (Amendment) Act, 2005. Therefore the language of S.3(k) went back to “a mathematical or business method or a computer programme per se or algorithms;”. Further, Lok Sabha and Rajya Sabha debate records show that the discussions were held on the topic of disapproval of the 2004 Ordinance, in combination with the discussions on the Amendment Act 2005. This, along with a return to the previous language, would indicate a clear intention of the Parliament to prevent this type of dilution of the Section 3(k) exclusion. Interestingly, in his Press note on the Patent Amendment Bill (just before it was passed as an Act), Mr Kamal Nath stated, “It is proposed to omit the clarification relating to patenting of software related inventions introduced by the Ordinance as Section 3(k) and 3 (ka). The clarification was objected to on the ground that this may give rise to monopoly of multinationals.”

The Draft(ed) Manuals on Patent Practice and Procedure

There was a 2005 draft Manual on Patent Practice and Procedure (PDF here) that seems to have been prepared just prior to the repealing of the 2004 Patent Ordinance. The manual included a 14 page annexure on Computer Related Inventions, outlining examples, definitions and relevant jurisprudence. Unfortunately, given that it was only a draft manual, and based on the repealed ordinance, it is of questionable utility. It does however provide the first definition of “Computer Programme Product”:

“computer program product is claimed as “A computer program product in computer readable medium”, “A computer-readable storage medium having a program recorded thereon”, etc. In such cases the claims are treated as relating to software per se, irrespective of the medium of its storage and are not held patentable.”

Further, they also describe certain examples and then state: “These are the programs solely intellectual in its context and hence not allowable.”

They also explain ‘technical effect’ for the first time, as: “The method claim should clearly define the steps involved in carrying out the invention. It should have a technical effect. In other words, it should solve a technical problem.”

Once again – the draft 2005 Manual was prepared when the 2004 ordinance was in place, and therefore is of limited utility.

Fast forward to around March 2008, and the DIPP issued another Draft Manual of Patent Practice and Procedure. By this time, despite the explicit exclusion of Section 3(k), the Patent office had already started granting ‘software patents’. Therefore, when the draft manual once again used diluting language (i.e., narrowing the exclusion), it caused a great stir. I’m now unable to find a copy of this draft manual anywhere, however as per our old post here, in the manual “Section 4.11.6 seeks to draw a distinction between “software per se” and “software having its technical application in the industry””. Prashant had also written a post around it, here. The remainder of the year saw several rounds of consultation on the draft manual. Shamnad reported that in one of these rounds, the chair of the stakeholder’s meeting, the then Joint Secretary of the Dept of Industrial Policy and Promotion, Mr NN Prasad, is reported to have specifically instructed his drafting committee team to remove certain statements in the manual, including the word ‘technical’.

Separately, in Oct 2008, there was also a Parliamentary Standing Committee Report (88th Report on Patents and Trade Marks Systems in India – PDF here) which stated that ” the domain of “per se” in the definition needs to be clearly defined.” [On a complete tangential note – in the same Report, Justice Krishna Iyer makes a note about how the Patent Office seems to have provided contradictory interpretations in the draft Manual vis-a-vis what the Act allows, and that this manual should be done away with altogether in favour of a Patent Handbook. However, he says this in reference to how the manual discusses Section 3(d). You can view his 1 page note in the above Report, or his 8 page letter mincing no words in PDF here]

In late 2010, there seems to have been a Revised Draft Manual of Patent Practice and Procedure, as Rajiv had written here. Unfortunately, I’m not able to find a copy of this anywhere. CIS has a blog post going through some of its provisions here.

2011 Manual on Patent Practice and Procedure

In March, 2011, version 1.11 of a Manual on Patent Practice and Procedure was published – PDF here. It stated that it was the result of stakeholder feedback on the earlier draft (though, I believe it mistakenly refers to a non-existent 2009 draft, instead of the 2008 draft), and that it would be updated from time to time. It mentioned that it did not have the force of law, and was just meant to help as a guide. A reading of the short paragraph it included on Section 3(k), would lend one to understanding that the exclusion under Section 3(k) is a broad one, and that a computer programme related subject matter would be patentable only if it had a non computer-programme related claim or claims that were essential to the subject matter. The relevant text is:

If the claimed subject matter in a patent application is only a computer programme, it is considered as a computer programme  per se and hence not patentable. Claims directed at ‘computer programme products’ are computer programmes per se stored in a computer readable medium and as such are not allowable. Even if the claims, inter alia, contain a subject matter which is not a computer programme, it is examined whether such subject matter is sufficiently disclosed in the specification and forms an essential part of the invention.

These guidelines, perhaps, could have further discussed this with examples, as it did not seem to stem the confusion as to the exact scope of the Section 3(k) exclusion.

The IPAB’s decision in the Yahoo v Controller case also came soon after this (Dec 2011), and its pronouncement is worth noting: That if the claimed subject matter is excluded under Section 3(k), then there is no need to look at whether novelty, non-obviousness, and utility are satisfied, as it is non-patentable regardless.

2013 Draft Guidelines on Computer Related Inventions 

On June 28th, 2013, the Patent Office came up with Draft Guidelines on Examination  Computer Related Inventions (PDF here). These draft guidelines acknowledge the rejection of the language in the 2002 Patent Amendment Ordinance as legislative intent to maintain the original scope of Section 3(k). They also provide several definitions. Two parts in particular are worth noting: First, 3.15+3.16 mention that not all ‘technical effects’ will amount to ‘technical advancement’. Then,  5.4.5+5.4.6 attempt to explain the role of hardware in determination of patentability of a CRI, by indicating that a general purpose machine would place it within Section 3(k)’s ambit, but then also mentioning that new or novel hardware with computer programmes could be patentable.

As expected, there was some stiff opposition to this requirement of novel hardware. However, as Aparajita noted in her post examining the stakeholder feedback on these Guidelines – though unpopular, this interpretation by the Guidelines seemed to be in line with the law as it existed, and to remove the novel hardware requirement would be to ignore the legislative intent in drafting the text of “computer programmes per se” (i.e., the 2004-2005 events regarding the Patent Amendments).

Never, it seems! (Pic from here)

2015-16-17 (!) : Guidelines for Examination of Computer Related Inventions 

Till here, it had seemed like there was a fair attempt at explaining and interpreting Section 3(k). However, the 2015 Guidelines seem to have gone well beyond what the explicit language of the section allowed for (see my earlier post here) – as it suddenly opened the door to not just making computer programmes patentable, but also business methods and mathematical models – which had a blanket exclusion under Section 3(k). As I had mentioned in that post, these Guidelines were guiding patent examiners towards making decisions that the law explicitly disallowed. As could be expected, this met with fierce criticism and protest from several stakeholders from civil society, open source movements, etc. And also as expected, it received a warm welcome from industry bodies and law firms / lawyers.

The Guidelines, which had been notified on 21st August 2015, were then ordered to be kept in abeyance, via a 14th December 2015 order (PDF here) by the then Controller General, Mr Om Prakash Gupta, until contentious issues were resolved. In the mean time, Chapter 08.03.05.10 of the 2011 Patent Manual was to be used.

As a side note that may be relevant to interested readers: the Delhi High Court decided Ericsson vs Intex in early 2015, wherein it stated, ““thus, it […] appears to me prima facie that any invention which has a technical contribution or has a technical effect and is not merely a computer program per se […] and […] is patentable”. See Kartik’s 2 part post here and here for more.

19th February, 2016 saw a new set of Guidelines on Examination of Computer Related Inventions (PDF here). These Guidelines took a u-turn, and once again broadened the exclusion under Section 3(k). It introduced a 3-step test to checking for patentability of CRIs – which included (i) properly identifying the actual contribution, (ii) denying outright if the contribution was a mathematical or business model or algorithm, (iii) requirement of novel hardware, or contribution to be in both the computer programme as well as hardware before proceeding to other steps of patentability. Rajiv did a two part post examining these guidelines here and here. (Don’t miss the 47-comment long comment thread on part 1 of those posts!). I would argue that in light of the lack of clarifying interpretations from a Court or Parliamentary proceedings, these guidelines provided the best policy interpretation of Section 3(k), as well as the most clarity in how to go about examining such applications.

The 2017 Revised Guidelines for Examination of Computer Related Inventions

The novel hardware requirement in the 2016 Guidelines immediately threw up objections from the pro-‘software patent’ camp. And soon enough, on 30th June 2017, the Revised Guidelines for Examination of Computer Related Inventions, 2017 (PDF here) were issued via an Order from the Controller General. Balaji did a wonderful post on the basis of RTI findings on the question-filled circumstances that led to the issuance of the 2017 Guidelines. Amongst other things, he’s noted that the Controller General was omitted from some of the exchanges, that Deity conducted its own stakeholder meeting separately, and that for some reason, the DoT was also brought in to review the Expert Committee’s recommendations to the Controller General. The post is definitely worth reading if one is interested in trying to understand this ping-ponging of policy positions.

Pictured: Funny pic of Bill Gates playing ping pong with a bat that’s too large to miss. (Pic from here)

In any case, if readers haven’t guessed already, there was yet another reversal of position, with the three step test, along with the ‘novel hardware’ requirement was removed. All the examples, describing patent-ineligible applications, from the earlier guidelines were also removed. You can read more on our earlier post here. Significantly, it now includes a further dilution as can be seen in clause 4.5 of the Guidelines:

“…it is important to ascertain from the nature of the claimed Computer-related invention whether it is of a technical nature involving technical advancement as compared to the existing knowledge or having economic significance or both, and is not subject to exclusion under Section 3 of the Patents Act.”

Given that this seems to once again raise more questions than it answers, especially with the lack of any examples – it wouldn’t be a surprise if there is yet another Guideline framing exercise coming up soon.

The 2019 Manual of Patent Office Practice and Procedure

On March 1st, 2019, a Draft Manual of Patent Office Practice and Procedure (PDF here) was released along with a call for comments on it. Compared to the 2011 Manual, the 2019 Draft Manual doesn’t seem to substantively change much, but does remove language regarding what types of CRIs would not be patentable – thus in effect not really clarifying the scope of Section 3(k) here either. Later in the year, the Controller General’s office released the 2019 Manual of Patent Office Practice and Procedure (PDF here), as being in effect from Nov 26th, 2019, superseding the 2011 Manual. From a quick glance, the only difference between the Draft and the Final version (with regard to Section 3(k)) is the introduction of a line stating “For the purpose of this clause, refer the Revised Guidelines for Examination of Computer-related Inventions (CRIs), 2017.”

After all this back and forth – the question remains though – where does all of this leave us? Perhaps simply more confused than when we started off on this, and without really having an idea of when this will be clarified!

PS 1 – For additional reading, do check SFLC’s page on software patents here. Having regularly contributed to the debate in India, they have a lot of first hand information as well.

PS 2 – For some posts on how Controllers have dealt with Section 3(k) issues, you can scroll through Rajiv’s posts from this link

(This post has been authored by Bhavik Shukla, a 5th year student at NLIU, Bhopal)

Topical Highlight

Last week, Eashan wrote a post on the judgment of the Delhi HC in Amazon Seller Services v. Amway India Enterprises. Through this judgment, the Court set aside the Single Judge’s order which had restrained various e-commerce platforms from selling products of ‘direct selling’ companies without their consent. In the post, he critically discusses the appellate court’s approach in reversing the findings of the first court on trademark issues. He notes that the appellate court relied upon material not considered by the first court, rather than rebut their findings on the facts it did acknowledge.  Further, he notes that the appellate court also failed to engage with the findings that the first court made. He questions whether this is an appropriate standard of appellate scrutiny. Finally, he notes that the appellate court’s acknowledgement that the trademark issues fall outside the purview of the appeal is disappointing since it spends a large amount of time on them.

Thematic Highlight                                                                          

In his piece, Swaraj traced the journey of Computer Related Inventions (‘CRIs’) in India. He starts his enquiry with the Patent (Amendment) Act, 2002, wherein “computer programmes per se” were excluded from patentability for the first time. Going forward, he notes the proposed dilution of S. 3(k) through the Patent (Amendment) Act, 2004, and reveals that this ordinance was eventually repealed. He discusses the oscillating positions in the subsequent Manuals, before noting that the 2016 Guidelines on Examination of CRIs introduced an important 3-step test to check their patentability. However, he notes that even this test was also done away with by the 2017 Revised Guidelines which shortly followed. Referring to the 2019 Patent Manual, he observes that there has been no substantial change with respect to the guidelines for patentability of CRIs since the 2011 Patent Manual, before concluding that the position on CRIs is confusing till date.

Other Posts

In his post, Divij covered the decision of the Madras HC in the case of Adithya Modi v. Union of India, where the court refused to order Prasar Bharati to stream sports broadcasts over the internet. He begins with an overview of the Sports Broadcast Act, 2007 (‘Act’) which requires Prasar Bharati to re-transmit a broadcasting signal concerning sporting events of national importance. He subsequently focuses on petitions filed before various courts, aimed at expanding the scope of coverage from terrestrial broadcasting to online streaming. Dealing with the specific decision of the Madras HC on the aforementioned issue, he notes that the court’s conclusion is in line with the Act, and it correctly interprets the scope of Article 19(1) (a) of the Constitution. In spite of these observations, the court noted that the government should decide on the feasibility of such broadcasting and make a decision within 3 months. In conclusion, he suggests that the decision of the court is extremely vague and appears to set the government in motion to amend the Act.

In a guest post, Mohd Shadab Danish discussed the relationship between patents, innovation and economic growth. He suggests that innovation has to be seen as a dynamic concept, being the outcome of collaborative efforts of various participants in the economy. Furthermore, he notes that innovation in this competitive age is fairly represented by the number of patent applications filed. In order to ascertain the quality of innovation, he undertakes an analysis of the value of patents. He does so by: first, estimating the value of a patent based on its renewal information, and second, by noting that patents in some sectors are more valuable than those in other sectors. He presents his reasoning under both the aforementioned points to arrive at the understanding that patents filed at the Indian Patent Office are of a lower value, before giving possible explanations for the same. In conclusion, he observes that improvement in R&D investment is the dire need of the hour in India.

Latha reported on the Delhi HC’s decision in the case of Amazon Seller Services v. Amway India Enterprises. She notes that the primary issue before the court concerned the selling of products by e-commerce sites, which was in alleged violation of the Direct Selling Guidelines, 2016 (‘DSG’). Further, she summarizes the Single Judge’s findings in the order which was passed in July 2019. Dealing with the Division Bench’s decision, she notes that the court held that DSG was not law (i); that the suits were not filed as traditional trademark infringement or passing off actions (ii); that there was no distinction between ‘active’ and ‘passive’ intermediaries under the IT Act (iii); and finally that there was no proof of tampering of products (iv).

Other Developments

Indian

Judgments

Sun Pharma Laboratories Limited v. Intas Pharmaceuticals Limited – Delhi High Court [January 9, 2020]

The dispute between the Parties arose on account of the Respondent’s alleged infringement and passing off of the Appellant’s mark “BEVETEX” by using a deceptively similar mark “BEVATAS” in respect of a pharmaceutical drug. The Trial Court observed that the rival trademarks of the Parties were not in respect of the same molecule/ product/ salt, and were entirely different and distinct, structurally, phonetically and visually. The Court affirmed the order of the Trial Court and observed that there is no ocular similarity between the rival marks. Furthermore, the Court noted that the rival marks when pronounced as a whole are phonetically dissimilar and do not rhyme with each other. The Court also stated that both the drugs are schedule ‘H’ drugs and could not be self-administered, and not available over the counter. In respect of the consumers and customers of both the drugs, the Court noted that they are highly specialized oncologists and specialized medical staff, and there could be no likelihood of any confusion. The Court noted that the Respondent’s use of the suffix “BEVE” in relation to the compound Paciltaxel, and the prefix “TAS” as a part of its company’s name Intas is entirely justified. Accordingly, the Court found no merit in the appeal and dismissed it.

Fox Star Studios v. Aparna Bhat and Others – Delhi High Court [January 11, 2020]

The dispute between the Parties arose on account of the Defendant’s failure to acknowledge the Plaintiff’s role in the making of the film “Chhapaak”. The Trial Court directed the Defendants to include an acknowledgement in favour of the Plaintiff, and found that the Plaintiff had been successful in proving the three elements for the grant of an injunction. The Court examined various communications between the Parties to note that the initial representation was to acknowledge the contribution of the Plaintiff. The Court observed that even after the first screening of the film, Defendant No. 1 acknowledged the contribution of the Plaintiff by an electronic mail. The Court recognized that the Plaintiff had tremendously contributed to the film, and her effort could not be undermined specifically when a representation of acknowledgement was repeatedly made to her. The Court observed that the Plaintiff could not be left remediless only because she did not have a formal contract signed with Defendant No. 1. Moreover, the Court noted that there is no requirement for a written contract in order to recognize paternity rights of a person in a work. Accordingly, the Court directed that the Defendants should release the film on various electronic mediums only with an acknowledgement in favour of the Plaintiff, and the same should also be included in the film being exhibited in theatres with effect from January 15, 2020.

Ashok Leyland Limited v. Captain Tractors Private Limited – Madras High Court [January 24, 2020]

The Court refused to grant an injunction restraining the Respondent from passing off the Appellant’s mark “CAPTAIN” due to the absence of the existence of a cause of action. In arriving at this decision, the Court observed that the Respondent had registered the mark “CAPTAIN” for mini-tractors and did not manufacture heavy vehicles under the mark. Accordingly, no cause of action had arisen in the matter.

Lyft, Incorporation v. Goer Techno Infra Private Limited – Delhi High Court [January 28, 2020]

The Defendant filed an application under Order VII Rule 10 on the ground that the Court did not have the jurisdiction to entertain the case filed by the Plaintiff in Delhi based on a perceived threat of infringement. The Court rejected this application, and noted that the Plaintiff’s case was justified by the credibility of the perceived threat by reference to three documents, including a newspaper report, a response to user comment on Google Play to the extent that the Defendant shall serve other cities near Lucknow soon and the counter-statement of the Defendant where it claimed to have used its trademark “throughout the length and breadth of the country.” The Court further noted that the plaint could not be returned for want of jurisdiction, but it would be open for the Defendant to argue the ground relating to territorial jurisdiction.

Hindustan Unilever Limited v. M/s. Maharani Laghu Udyog Kendra – Calcutta High Court [January 28, 2020]

The Court granted an interim injunction restraining the Defendant from infringing the Plaintiff’s copyright in its artistic work “SPLAT” by using a deceptively similar artistic work on its package. The Court also observed that the Parties were trading in the same field, being detergent.

Nandagopal Chetty and Another v. Sunil and Others – Madras High Court [February 5, 2020]

The Court granted an ex parte permanent injunction restraining the Defendants from infringing the Plaintiffs’ copyright in its cinematograph film “POONILAMAZHA” by exhibiting it on its television channel. In arriving at this decision, the Court noted that the Plaintiffs had sent across a notice to the Defendants to desist them from telecasting the movie. However, the Defendants did not reply to this letter of the Plaintiffs. The Court restricted the damages granted to the Plaintiffs to Rupees 50,000, stating that the assignment cost of the movie was in itself limited to Rupees 50,000 and damages in excess of it could not have been sought.

M/s. Sulson Overseas Private Limited v. Shiv Shakti Inter Globe Exports Private Limited – Delhi District Court [February 7, 2020]

The Court granted an injunction restraining the Defendant from infringing the Plaintiff’s copyright in its artistic work appearing on its packaging of rice by using a deceptively similar artistic work on its packaging. The Court noted at the outset that the Parties had a different style of writing their brand names, even though they were written in golden colour. In respect of the artistic work of the Plaintiff containing a “golden label with blue colour body with light blue silver fern leaves”, the Court observed that the Defendant had adopted packaging which was very similar to that of the Plaintiff. Additionally, the Court noted that the Defendant was using the design clandestinely without making its full details available on the packaging.

Escorts Limited v. Mr. RS Bhalla and Others – Delhi District Court [February 7, 2020]

The Court granted a permanent injunction in favour of the Plaintiff restraining Defendant No. 2 from infringing and passing off the Plaintiff’s marks, “FARMTRAC”, “POWERTRAC”, “ESCORT”, “ESCORTS” and “E Device” by using identical or deceptively similar marks. At the outset, the Court noted that the Plaintiff’s case could not be defeated on the ground that a competent person had not filed it, considering that a substantive right could not be defeated on account of procedural irregularity. Similarly, the Court observed that it had jurisdiction over the matter as the Defendant had a shop in New Delhi. With respect to the substantive issue of infringement, the Court stated that the Local Commissioner seized various infringing goods stored at the Defendant’s premises. Moreover, the Court noted that the Defendant had no right to use the trademark and its use would certainly mislead the public by creating confusion and deception in their minds. The Court granted nominal damages of Rupees 1 lakh in favour of the Plaintiff, as the Defendant had failed to explain the custody of infringing goods or show account books for the purchase of the goods.

State v. Kulbir Singh and Others – Delhi District Court [February 7, 2020]

The accused in this case were charged with engaging in the business of manufacturing and sale of infringing records, audio cassettes and compact disks. The Court noted that the prosecution had to show that the accused was found in possession of articles in which copyright subsisted. However, it was subsequently noted by the Court that the prosecution had failed to prove the recovery and identity of the articles seized as well as to show the relation of the accused with the factory from which articles were recovered. It was noted in the findings of the Court that the prosecution had failed to produce the infringing CD before the Court and accordingly, Section 64 of the Copyright Act, 1957 which mandated production of seized material before the Court had not been complied with. In light of these lapses, the Court observed that the prosecution had failed to prove the case beyond reasonable doubt and the accused was acquitted.

Burberry Limited v. Sh. Harsh Kumar – Delhi District Court [February 10, 2020]

The Court refused an injunction restraining the Defendants from infringing and passing off the Plaintiff’s mark “BURBERRY” in respect of apparels. In arriving at this decision, the Court noted that the Plaintiff had not led any evidence against the Defendants to prove that they had engaged in infringement of the mark. Accordingly, the Court held that the Plaintiff was not entitled to any relief, and subsequently dismissed the case.

Puma S.E. v. Mr. Krishnan Prasad Mishra and Others – Delhi District Court [February 12, 2020]

The Court granted a permanent injunction restraining Defendant No. 2 from infringing and passing off the Plaintiff’s mark “PUMA” by using an identical mark in respect of apparel and footwear. The Court observed that the Local Commissioner had seized certain infringing material from the premises of the Defendant. Additionally, the Court noted that the Defendant had no right to use the mark, considering that it would mislead customers and lead to the Defendant’s undue enrichment. Accordingly, the Court granted damages to the tune of Rupees 50,000 in favour of the Plaintiff, considering the continuous violation of the Plaintiff’s trademark rights.

Lacoste S.A. v. Shri Suresh Kumar Sharma – Delhi District Court [February 13, 2020]

The Court granted a permanent injunction restraining the Defendant from infringing and passing off the Plaintiff’s mark “LACOSTE” by using an identical mark in respect of clothing and readymade garments. In arriving at this decision, the Court observed that the Plaintiff had been able to establish the use of the mark, and that the Defendant had no right to use it. Moreover, the Court noted that the Defendant’s use of the mark was to create confusion and deception in trade and the minds of customers. Accordingly, the Court granted damages to the tune of Rupees 50,000 in favour of the Plaintiff, considering the misuse of the mark by the Defendant and the loss of Plaintiff’s reputation.

News

• Britannia sues Future Group over adopting deceptively similar packaging for the sale of its ‘Tasty Treat’ biscuits.
• Medecins Sans Frontieres urges India to be careful in negotiations with the U.S. on policies aimed at changing the country’s pro-access intellectual property laws.
• India ranks 40^th out of 53 countries in the International Intellectual Property Index, while the U.S., the U.K., Sweden, France and Germany retain top five spots.
• Delhi HC issues notice on a petition challenging the Drug (Prices Control) Amendment, which aims at exempting new patented drugs from price control for five years from the date of marketing.
• SC: Chennai does not seem to be a “suitable place” for the principal bench of the IPAB, as nobody wanted to go there.
• India is set to review IP laws by drawing up a list of required amendments, ahead of Donald Trump’s visit.
• Panjab University hosts a global summit on ‘next-gen paradigms in healthcare’, covering various IP issues.

International

• Google mulls licensing deals with news media as per industry sources.
• The EPO and China National Intellectual Property Administration announce a pilot programme to enhance PCT co-operation.
• Qatar claims that it is developing a National Intellectual Property Strategy with support from the WIPO.
• China clashes with the U.S. over new Huawei accusations of IP theft and North Korea dealings.
• International IP treaty under the TRIPS Agreement promotes global co-operation against coronavirus.
• WIPO closes comments for its Public Consultation Process on AI and IP policy on February 14, 2020.
• U.S. International Trade Commission investigates Google speakers after Sonos complaint on patent infringement.
• International Trademark Association calls off Singapore meeting, proposes the U.S. instead.
• Philips sues TCL over its 4K television sets, accusing TCL infringement of patents.

The Indian Performing Rights Society (IPRS), India’s only copyright society with statutory sanction to collect royalties on behalf of authors, composers and producers of music, is going after Yash Raj Films (YRF) for misappropriating royalties of its members.

Last November, an FIR was filed against YRF in Mumbai under Sections 409 and Section 34 of the Indian Penal Code, as well as Section 63 of the Copyright Act, alleging that YRF has committed a criminal breach of trust (CBT) and violated the Copyright Act by appropriating Rs. 100 crores of royalties that belong to IPRS’ members. According to reports, the FIR accuses YRF of using their superior bargaining power to force artists into contracts that prevented them from collecting royalties which belonged to them. However, before the Economic Offences Wing of the Mumbai police could look into YRF’s books, YRF successfully obtained a stay on the investigations from the Bombay HC.

The Case Against YRF

Broadly, the FIR against YRF has been filed on two grounds. First, under the Indian Penal Code, IPRS has alleged that YRF has committed criminal breach of trust. CBT has three major elements: (i) an entrustment; (ii) misappropriation or conversion to one’s own use or use in violation of a legal direction or of any legal contract; and (iii) the misappropriation or conversion or disposal must be with a dishonest intention.

Now, the entrustment, which entails some kind of relationship between the parties, must be between the members of IPRS and YRF. This is because IPRS do not have any legal relationship with YRF on the basis of which they can establish CBT. Rather, IPRS is suing on behalf of its members who have worked with YRF and not received their dues (a right assigned to IPRS on becoming a member). One would imagine that the second requirement, of misappropriation for one’s own use, would be met on the basis of evidence produced and the requirement of dishonest appropriation follows since YRF would wrongfully gain through the misappropriation.

The second ground for the FIR comes from the Copyright Act. Section 63 of the Copyright Act makes the infringement of any right under the legislation (except the resale share right in original copies under Section 53A) a criminal offence with imprisonment of up to 3 years and fine up to Rs 2 lakhs. In this case, the allegation would be that of infringing the right under the proviso to Section 18(1) of the Copyright Act, which grants the author the right to receive royalties for their work on an equal basis. Further, the proviso also states that this right cannot be assigned to anyone except the legal heirs of the artist or a registered copyright society, ie. the IPRS.

YRF’s Response 

YRF has allegedly responded by arguing that the revenue it collects is in the capacity of copyright owners, rather than an agent or assignee. It seems to me that the argument is this: the proviso to Section 18(1) applies only if the authors still own the copyright over their work. Once that has been assigned to a third party, their right to receive royalty, like other rights under Section 14, is extinguished.

This argument, in my opinion, is incorrect. While it is true that the proviso to Section 18(1) does not prohibit the assignment of copyright itself, it envisages a distinct right to receive royalty on an equal basis, which is assignable only to legal heirs and collecting societies.  As per Section 18(1), this right to receive royalty belongs to the author, and not the owner of the copyright.

The distinction between author and owner is crucial here: the owner of a work may change through the assignment of the copyright, but the author always remains the same and is not included within the meaning ‘owner’ of the work. According to Section 2(d) of the Copyright Act, ‘author’ includes authors of literary and dramatic work, composers of musical work, artists, photographers, and producers of sound recordings and cinematograph films. The author of a musical work and lyrics is the composer and songwriter, and not the production house that engages them. Thus, even if YRF successfully establish themselves as the owner of the works for which they receive royalties, they do not possess the author’s right to receive royalty on an equal basis.

To be thorough, YRF may claim ownership over the ‘sound recordings’ of the music created by members of the IPRS. However, Section 13(4) of the Copyright Act clarifies that copyright over sound recordings do not affect the separate copyright over the underlying work itself – over which authorship continues to lie with the members of IPRS.

Thus, according to YRF, their activities neither constitute CBT, nor violate Section 63 of the Copyright Act.

Application to Quash Under Section 482 of the Criminal Procedure Code

YRF has approached the Bombay HC under Section 482 of the Criminal Procedure Code to quash the FIR against them. Until this petition is decided, the court has passed an interim order that prohibits the Mumbai Police from requiring YRF to submit information and documents in furtherance of the FIR.

Under Section 482, the Bombay HC has the power to quash the FIR if a prima facie case establishing a crime has not been made out in the FIR. If a prima facie case exists, then the FIR cannot be quashed and vice versa.

A prima facie case is established if, assuming all allegations to be true, an offence is made out against the accused. From our discussion above, it would seem that a prima facie case exists on at least one of the two grounds for filing the FIR (CBT and Section 63 of the Copyright Act).

An FIR may also be quashed if it is filed maliciously or for an ulterior motive. However, the existence of malice is not sufficient to quash an FIR, if a prima facie case is made out in the FIR. Thus, even though YRF have asserted that the FIR has been filed on malicious grounds, the existence of a prima facie case renders this fact irrelevant. Further, if investigations are at a preliminary stage, as they are in this case, FIRs are typically not quashed.

Conclusion

What can we expect from this litigation from an IP perspective? It is possible that the judgment will only superficially analyse the allegations in the FIR, and then leave it to the Mumbai Police to investigate the matter. It is, however, possible that the judgment will explicitly or implicitly comment on the proviso to Section 18(1) while determining the existence of a prima facie case. In any case, if the FIR is taken to its proper conclusion, we may finally see the vision behind the Copyright (Amendment) Act, 2012, coming to fruition.

I would like to thank Prashant Reddy for helpful comments and suggestions. All errors remain my own.

Image from here.

(This post has been co-authored with Bhavik Shukla)

Recently, the Global Innovation Policy Center (“GIPC”) released the 2020 edition of its international IP Index. Titled “Art of the Possible”, the report lays emphasis on a strong IP ecosystem to make the art of transformation of economies to 21^st century knowledge-based economies possible. It has unfortunately continued with the same flawed indicators from the previous years. In the past, one of the authors of this post and Kartik have elaborately discussed the defective methodology used by the GIPC rank countries.

It is sad to note that the spectre of ‘press release journalism’ continues to haunt us, even as we have progressed into the 8^th edition of the index. Prashant has previously written on this issue concerning the GIPC index. This year as well there appears to be a similar trend, with most newspapers considering the index to represent the naked truth, with very little expert commentary on the report’s press release and findings.

This post will highlight the issues which have been raised in the previous years, and subsequently add to them.

The Indian Connection

From the index rankings in 2014 when India was placed last among 25 countries, its ranking has marginally improved in 2020 to 40 out of 53 countries. While it has been very critical of India in the earlier editions, it seems to have slightly toned down its criticism in the last couple of editions. The report in fact praises India on a few counts, including calling India a “Global leader on targeted administrative incentives for the creation and use of IP assets for SMEs”

Regardless of these (supposed) positives for India, it cannot be ignored that the index continues to mistake IP for innovation, while boasting problematic indicators and baselines. More problematic is the aspect that inquiry conducted within the realm of the fixed indicators does not appear thorough. For instance, an obvious weak point in India’s case could have been the dysfunctional nature of the IPAB in 2019, which clearly falls within the indicator ‘civil and procedural remedies’, but has not been considered.

Specifically in the relation to India the index consistently points at the performance of its courts for improvement in its ranking. Aside from the fact that India is marked merely 1.67 out of a total 7 points available under the category of ‘Enforcement’, which covers courts and remedies, this rhetoric about judging India’s rank on the basis of court decisions is problematic from other angles as well. The report refers to recent cases of the Delhi High Court, specifically the case issuing the first dynamic injunction and the one on liability of online marketplaces, on the basis of which the index praised the improvement of the IP framework in India. However, both these cases have attracted their fair share of criticism. While Divij wrote about the increment in website blocking through dynamic injunction disturbing the balanced standard on blocking of only infringing websites, the Amway case was set aside by the Delhi High Court recently. Accordingly, the ascertainment of decisions on which India’s ranking was determined is questionable. Irrespective of that point, strong reliance on court orders to rank a country’s IP regime seems misplaced. Since courts interpret the existing legislation, it should mean that the legislation is good. By suggesting that the courts have done well but also by not ‘positively appreciating’ India’s legislation that enabled these judgments, the report seems to be implying that the courts acted beyond the legislation. This being the case, it appears that the index encourages and incentivizes judicial activism by granting scores for it.

An Axe to Grind: GIPC and the American Industry

It is vital to understand that GIPC is an affiliate of the US Chamber of Commerce, and effectively serves as a lobbying group for the American industry, a point made by Prashant in the past. This has no doubt influenced its choice of indicators across categories. Most prominent example of this appears to be in respect of the category termed ‘Patents, Related Rights and Limitations’. Out of the 9 indicators present therein, 4 indicators can be exclusively used in respect of pharmaceutical products. While the category should ideally serve all patentable inventions equitably, such a consistent pharma-heavy approach confirms suspicions about lobbying. It is ironical how the country (the U.S.) with the highest drug prices in the world has casually brushed aside concerns of access and price, while discussing the growing interest in compulsory licences even within the US, by saying “the cost of drugs is a complex subject that does not lend itself to generalizing” (page 48). One would imagine that it wouldn’t be too hard to understand that this same nuance is the reason why many of their indicators are problematic to start with!

Another such instance:- “At least one post-TRIPS FTA with substantive IP provisions and chapters in line with international best practices” under the category of ‘Membership and Ratification of International treaties’.  Though the inclusion of the category is redundant in itself (point to be discussed later), and that the ‘international best practice’ standards seem to be arbitrary, the consideration of the indicator goes a long way in showing that GIPC intends countries to implement the U.S. standards of TRIPS-plus IP protection, regardless of what standards actually benefit countries.

Look before You Leap Once Again: An Index Fraught with Problems

Several of the issues are repeats from earlier editions, and have been discussed in more detail in our earlier posts, linked above. The recurring issues since the second edition of the index are as follows:

Compulsory Licenses: The four criteria regarding compulsory licenses still exists (p. 270 of the index). A country which fails to fulfill even one criterion gets a straight 0, considering that the scoring methodology is binary.

On another note, GIPC’s arguments against compulsory licensing have been extremely monotonous. The only aspect of the equation it really seems to care about is the maintenance of strong patent rights for its companies. Accordingly, it advocates the non-grant of a compulsory licence on the ground of drug prices, when in reality the TRIPS Agreement offers Member States the flexibility to decide the grounds for such grant. At the least, it would be more interesting if the GIPC came up with more intellectually stimulating arguments against compulsory licences!

Extent of Copyright Protection: The index declares a period of copyright protection of 95 years as the baseline, instead of the TRIPS mandated life of author plus 50 years.

This flaw still continues, with GIPC justifying it being based on the legislative model of the U.S. (page 266). May be for the want of information or otherwise, GIPC has still not realized that the term of copyright protection in the U.S. is ordinarily 70 years plus life of author, and 95 years for only ‘works for hire’. (Not to mention the mathematical problem with choosing a method that can also give a score of higher than 100%)

Membership and ratification of International treaties: As pointed out in earlier posts, having a ground relating to a country’s signing and enforcement of a post-TRIPS FTA becomes duplicative in the face of other indicators already measuring what changes any such FTA would bring about in a country’s IP regime. Irrespective, the index has continued with the indicator, titled: “At least one post-TRIPS FTA with substantive IP provisions and chapters in line with international best practices”.

Additionally, this year, GIPC has added 5 new treaties as separate indicators under the aforementioned category. The consequence of such inclusion is two-fold. First, it puts lower-middle income countries directly at a disadvantage in terms of ranking. Second, it sets a desirable standard of the U.S., meaning thereby that countries are indirectly coerced to seek membership and enforce the treaties mentioned as indicators.

Term of Protection for Industrial Designs: In deciding the term of protection for industrial design, the index sets the baseline term as 25 years. The justification for this term is that it has been modeled on the maximum term of protection afforded.

Once again, the index uses maximum standards as ‘baselines’. One wonders how this is an acceptable standard, when the TRIPS Agreement states that the term for an industrial design should not be less than 10 years. Anything beyond 10 years, in that case is the sole discretion of a Member State, but does not create an obligation on other Member States. Accordingly, the index should recognize this fact, and seek re-modelling of the baseline

Conclusion

In spite of the presence of these flaws, the index continues to garner a considerable amount of discussion and traction. The index has been expanded to cover 53 countries this year, as opposed to the 25 countries it covered in 2014. It is only a matter of time before it further expands and gains legitimacy as a major IP index. In some sense, it has already gained such a reputation. Unfortunately, it would appear that neither the US Chamber of Commerce nor the authors of GIPC, see problems with either the indicators or baselines, or their definitions. It is highly unlikely that these aspects will be rectified in the future. It seems readily apparent that the discourse on IP, especially where patent or latent commercial interests are involved should be taken with a pinch of salt. Accordingly, an average student, an average reader and an average citizen should be cautious, and avoid taking the content included in the index at face value.

Image from here

Yesterday evening, Reuters sent out a short report titled “India clears accord on intellectual property rights with U.S.” It contained the following three lines:

NEW DELHI (Reuters) – India’s cabinet on Wednesday approved a plan to sign an initial pact on intellectual property rights with the United States, a government minister said, days ahead of a visit by U.S. President Donald Trump.

The United States has long urged India to strengthen protection for intellectual property and that has been a cause of friction on top of trade disputes between the two countries.

Information and Broadcasting Minister Prakash Javadekar said approval for an MoU with the United States was secured at a cabinet meeting presided over by Prime Minister Narendra Modi.

Meanwhile, given the lack of any official notice from the Indian ministries, it doesn’t appear there is any official word on what exactly is transpiring here. It’s no secret that the United States Trade Representative (USTR)  has long been pressuring India for India’s usage of TRIPS Flexibilities like Section 3(d) and also created a furore over India’s (bare minimal) usage of Compulsory Licensing mechanisms. Readers may also be aware that earlier this year, the Department of Promotion of Industry and Internal Trade (DPIIT) conducted a meeting to review existing IP Acts, where apparently foreign stakeholders and law firms that represent them were invited as well (check here for source).  As I can’t find any official word about the meeting, its not clear who else was invited or what exactly was discussed.

One wonders why all of this is being done in an almost clandestine manner. Given the lack of any official word on all of this, perhaps we need to just wait for Trump to tweet about it?!

Please let him tweet something like this about it! (Original tweet viewable here)

While we’re waiting in the dark, its worth noting some of the word going around about it.

James Love tweeted earlier today, that it is a USPTO agreement and as of now, unsigned.

It is my understanding it is a USPTO agreement, that is fairly general. And that as of today, it has not been signed by both parties.

— James Love (@jamie_love) February 20, 2020

If it is indeed a USPTO Agreement, it seems a bit less worrisome than some agreement to review India’s patent laws, for example. Rather than being concerned about full fledged removal of public interest provisions, now we only need to be concerned about indoctrination from USPTO. (Lol).

The Economic Times has an article today, quoting a few officials anonymously, which seems to suggest this as well. ”

““It is about active cooperation between India and the US to enrich the IPR systems between the two sides. We’ve done such MoUs with a few other countries also but looking at the importance of overall relationships between these two countries, this is important,” said a senior official.” …

“According to another official, the MoU is a learning exercise and the agreement spans across the entire IPR regime including patents and copyrights and is not specific to any sector. “It doesn’t involve any implementation of laws. There would be training sessions and experts, and officials would travel to each other’s country to study the IPR systems,” said the official.”

In a fantasy idealistic world, one might hope that this would indicate that perhaps the US is looking to learn from India’s public interest provisions, and try to implement its own version of Section 3(d), as well as move away from “executive styled’ compulsory licenses (and threats of compulsory licences) to legislatively provided ones. (See here or box 6 here for example). However, we’re not in a fantasy world, and it will surprise no one if the “knowledge sharing” is more of one side telling the other, “This is what you’re supposed to do, and how to do it, it hardly matters if your law and legislative intent are different from what we’re saying”.

The ET article also notes the obvious power dynamics at play, and mentions that this comes on the back of the recent GIPC Rankings (that we wrote about earlier today) as well as India’s positioning on the “Priority Watch List” of USTR’s unilateral Special 301 Process (which we’ve regularly written about here), the two notoriously well known and widely criticised reports that are now published annually. It’s worth noting that the USTR has often used the Special 301 Reports as a basis for threatening to ‘review’ India’s eligibility for GSP subsidies – essentially threatening the removal of the duty-free benefits of certain products for eligible developing countries. The USTR finally did remove India from the list of eligible developing countries – but not through this mechanism. Instead, they stated that if a country has 0.5% of world trade (lowered from the earlier baseline of 2%), then it is no longer eligible to be a developing country, even if they do not meet the World Bank’s standard for high income country (another factor that was earlier taken into account). So now, India is a developed country! As per USTR’s books at least. (Federal Register Notice PDF here).

Anyhow, developed/developing status aside – this is all speculation till we hear some official word about what is going on!

We’re pleased to bring to you a guest post by Sushant Shekhar Singh on arbitrability of disputes related to standard essential patents in India. Sushant is a 4^th year student at NUJS, Kolkata.

Synthesising Arbitrability of Standard Essential Patents Disputes in India

Sushant Shekhar

Today, one of the crucial catalysts of technological growth is the interoperability and convergence of technology. Such digital transformation can be observed in patents corresponding to a technical specification determined by the Standard Setting Organisation (SSOs). Such patents are recognised as essential to a ubiquitous industry standard and are therefore termed as Standard Essential Patents (SEPs). As a means of ensuring digital compatibility, the SSOs mandate disclosure and licensing of SEPs to third parties at Fair, Reasonable and Non-Discriminatory (FRAND) rates while adopting an industry standard. The object is to bridge the lacuna between incentivisation and accessibility. It is of peculiar relevance in light of the reluctance of SEP holders and implementers to reconcile their respective interests in order to agree on FRAND licensing terms which has given rise to a number of litigations.

SEP arbitration is not a recent phenomenon. This is evident from the fact that parties across the globe have resorted to SEP arbitration including several major companies such as Nokia, Samsung Electronics, Huawei, Inter Digital, LG Electronics etc. From an Indian viewpoint, the constantly evolving SEP jurisprudence and the lack of literature on the subject matter has led to obscurity on various legal issues. The judicial approaches in India have been criticised for lack of sound economic reasoning and greater volatility on core issues. Thus, matters pertaining to the ascertainment of royalty and determination of essentiality of patents inter alia have largely been kept in the loop. The patent-race on new technologies such as 5G, smart grids etc. has further unraveled controversies in implementing SEPs. As a consequence, consistency in dispute resolution is harped on which has called for adopting arbitration as a mechanism in grappling with issues concerning SEPs.

Justifications for Arbitration as an Alternative to SEP Disputes

The prospect of employing arbitration as an effective alternative to courts is vindicated based on the following grounds. Firstly, it tackles the limitations of court in having the expertise to deal with technically intricate SEP disputes. Under arbitration, the arbitrators can be elected by the parties in possession of expertise to deal with complex economic and technical nature of SEPs disputes such as royalty determination. Secondly, the issues related to territorial jurisdiction do not create an impediment based on multiple jurisdictions as the jurisdiction is determined by the parties. This is distinguishable from courts where SEP-related disputes in two different jurisdictions require two independent proceedings. This is particularly beneficial for small companies with limited resources by enabling them to resort to single arbitration proceeding pre-determined by the parties.

Arbitration provides confidentiality, a matter much desired by the parties to the dispute due to business considerations. From a business perspective, allowing parties to cordially settle dispute dodges the threat of injunction via court-order which is weaponised by the SEP holders to use against SEP implementers for exerting dominance. Arbitration seems to mitigate the imbalance of power between holders and implementers of SEPs and arrive at an equilibrium keeping in view the interests of both the parties. The resultant cooperation permeated through the process of arbitration and the binding nature of arbitral award legitimises the process. Lastly, the cost and time effectiveness under arbitration coupled with the finality and enforceability of arbitral awards have fostered an affirmative outlook amongst judicial and administrative bodies such as the US Federal Trade Commission and the European Union espousing for arbitrating SEPs.

The Extent of Arbitrability of SEPs in the Indian Context

Notwithstanding the need to employ arbitration, it is equally relevant to consider whether SEPs are arbitrable in India given the intricacies involved in arbitrating patent-related disputes. As per the Booz Allen case, where the rights were in personem as against in rem, the arbitrability of patents was allowed by the court. However, even in the given case, the Supreme Court acknowledged that rights in personem arising out of and subordinate to rights in rem are subject to arbitration. This view was further expanded in the Eros case where the court stated that dispute concerning a commercial contract under the rights relating to copyright or trademark infringement can be actionable before an arbitral tribunal if it involves a right in personem. In these cases, the courts have grounded arbitrability on the nature of claims. An exception to aforementioned rulings is the IPRS v. Entertainment Network case. This is primarily a copyright infringement dispute where the court recognised that right as licensor in the given case to communicate sound recording is against the world at large (principally in rem) and hence non-arbitrable. However, this ruling should not be construed to mean (as laid down in Eros case) that IPR-related disputes are inherently non-arbitrable. Such an interpretation goes against the arbitration law and creates ambiguity in resolving commercial disputes involving IPRs given the fact that various jurisdiction have incorporated SEP related disputes under the ambit of arbitration.

The rationale for disallowing arbitration of rights in rem is that the award might affect persons who are not a party to the dispute. It is argued that in SEP-related disputes, the parties do not seek to enforce in rem rights and therefore, the question of determination of the validity/infringement of the patent is restricted only to the parties to the dispute. The arbitral award will not have any effect on any implementer or SEPs holder outside the dispute. This has been viewed to be problematic as delineated by the Advisory Committee of WIPO in the sense that such a construction of arbitral award is “unrealistically narrow”. Keeping in view this criticism, it is of equal relevance to note that the award directly affects the commercial interests of parties to the disputes and confidentiality lies at the core for the parties seeking arbitration.  The aforementioned cases justify this viewpoint by stating that such disputes arise purely out of contracts where one party will seek a specified and individual relief.

Where the dispute is pertaining to an existing license, the arbitration will be an effective mechanism, especially in cases of royalty-related and multi-jurisdictional disputes. The avenue of arbitration can be explored particularly for disputes involving minor issues where parties view prospective association. The arbitrators appointed by the parties should be well-versed with the conflict between the parties which paves the way for a neutral determination of royalty. As far as the choice of selecting apt arbitrators is concerned, given the nuanced technical nature of dispute the parties should resort to specialised arbitrators having technical expertise in SEP/FRAND disputes. Certain other procedural rules also required to be addressed such as the appropriate arbitral forum, the arbitral rules to be applied, and how many arbitrators will form the arbitral panel. Regarding the number of arbitrators, the practice is to appoint usually one or three arbitrators.

Notably there needs to be a mechanism that can enhance greater negotiation between parties and help them arrive at a middle path much before they resort to dispute resolution mechanisms. Such a mechanism can be deduced from the guidelines provided by the Court of Justice of the European Union in Huawei v. ZTE. It has laid down pragmatic steps that can be taken by SEP holders to avoid injunction as an abuse of dominance. These include:- (a) SEP holder must give notice in writing to the implementer regarding the basis of alleged infringement; (b) implementer must communicate his/her willingness to conclude a licensing agreement on FRAND terms (c) SEP holder must give a precise offer for license on FRAND terms stating the amount of royalty and basis of calculating it; (d) The implementer must communicate the acceptance to the offer in clear and unequivocal terms and for any use of SEP prior to conclusion of license agreement the implementer must provide security such as a bank guarantee; (e) where parties have failed to arrive at agreement, the determination of royalty should be through an independent third party; (f) adequate opportunity should be given to implementer to challenge the validity of SEP. although the judgement seeks to take away the discretion of SEP holder regarding determination of royalty it enhances transparency and harmony and can be a major step forward in reducing conflicts based on licensing of SEPs. This fosters an ex ante approach that lowers resorting to premature dispute resolution proceedings.

Key Challenges Ahead

While considering the arbitration of SEP-related disputes, certain aspects need to be kept in view. Ad hoc arbitration should not be resorted to because of the complex nature of such disputes and the challenges in appointing arbitrators. Another aspect which needs to be considered is the requirement of the pre-existing agreement for arbitration for the purpose of establishing consensus amongst parties to employ arbitration mechanism. This requirement emanates from the nature of dispute which primarily circumvents around licensing agreements and the efficacy of adopting arbitration arises from the agreement itself. Therefore, for the disputes where there is no contract, pushing for SEPs arbitration is not an effective mechanism. Lastly, the underlying problem with arbitrating in personem is that it condones the impact of the award on parties outside the purview of a dispute resulting in a multiplicity of challenges on the same subject-matter. The existing law fails to address this.

To conclude, arbitration might not be a categorical solution to SEP-related disputes, nevertheless, effective alternative to litigation. In the Indian context, where the determination of royalty by the Indian judiciary has been subject to criticism arbitration might provide an effective means for resolving disputes related to royalty-determination because it will bring collective enterprise of disputing parties along with requisite technical and economic expertise. The guidelines provided in Huawei v. ZTE case can be of reference to resolve these issues. However, it must be noted that there are several grey areas in SEPs arbitration in India that follow UNCITRAL model law pertaining to the choice of law and the enforceability of awards. Nonetheless, with the ever-growing technological advancement leading to an increase in deployment of SEPs and recognition of arbitrating SEP-related matters across jurisdictions, India might as well have to enter into the SEPs arbitration landscape. It is high time we recognise the utility and pragmatic applicability of arbitrating the SEP-related disputes as an effective mechanism to deal with core patent and anti-trust law issues.

Image from here

Last month, I had blogged about Marico v. Abhijeet Bhansali where a Single Judge of the Bombay High Court directed the defendant, Abhijeet Bhansali (‘Bhansali’) to take down (in the interim) an offending video because he prima facie made false and reckless statements about Marico’s coconut oil branded, “Parachute”.

On February 14, a Division Bench (DB) of the Court lifted the injunction and permitted Bhansali (aka ‘Bearded Chokra’) to post the video subject to replacement of one line in the video and deletion of several others. I have listed at the end of the blog, the relevant parts from the transcript of the video which the Court ordered to replace and delete.

The DB’s reasoning appears faulty as it has made certain incorrect factual assumptions, which I have summarised below with my reasons for saying so.

1. The DB starts its reasoning by stating, “A clear statement of the value premise and the normative framework helps others obtain a better and more truthful view of the author’s angle of perception, the tools of analysis employed and the moulds of thinking. The appellant has done so”. But has he? Bhansali, the appellant here, in his video, was comparing virgin coconut oil with ordinary coconut oil sold by Marico. Virgin coconut oil is obviously clearer and whiter than ordinary coconut oil and is listed even under FSSAI Regulations as a separate category of goods. So, where was “a clear statement of the value premise” or “truthful view of the author’s angle of perception” in an unfair and dishonest comparison?

2. In paragraph 33 of the order, the Court notes that Marico has admitted that its coconut oil is not extracted from fresh coconuts, but from dried coconuts, and that this explains the yellowish tint and the strong coconut odour in its oil. The Court then states that, “Thus the stand of the respondent accepts the statements of facts made by the appellant in the Video that the claim of the respondent projected by displaying a fresh coconut split into two with water dropping, obviously suggestive of the coconut oil being extracted from fresh coconut, is false”. This is an erroneous finding, because Bhansali’s video, though shows the bottle bearing Marico’s label, not even once refers to the said label displaying a fresh coconut, split into two and splashing water being suggestive of coconut oil being extracted from fresh coconuts. The transcript of the video extracted in the DB’s order bears this out. The DB cannot attribute such a suggestion merely because Marico’s bottle was displayed by Bhansali in the video especially since the argument about virgin coconut oil appears to be an afterthought by Bhansali before the Court to fortify his defence. DB has, therefore, clearly confused Bhansali‘s defence in the suit as a claim in the video and proceeded to conclude in favour of Bhansali.

3. In fact, in the video, Bhansali states, “Toh agar hum ingredients ke taraf chalengey, description dekhengein toh iske undher likha hai 100% pure coconut oil from the finest coconuts” –not ‘freshest’ coconuts! Even the reference to virgin coconut oil in the video is not in the context of the oil he used for comparing Marico’s product, but by way of extra information to his viewers.

4. When Marico’s counsel sought to clarify Bhansali’s claim that the picture on its label suggested virgin coconut oil by arguing that it is justified in puffing, the Court found that Bhansali is also entitled to call the bluff. While the Court is right that Bhansali, or anyone for that matter, is entitled to call a trader’s bluff, it missed two important aspects in the current factual matrix:

– First aspect is the unfair manner in which Bhansali is calling Marico’s so-called ‘bluff’. To “prove” the inferiority of Parachute branded oil, Bhansali was comparing two different types of coconut oil, namely, regular coconut oil of Marico and virgin coconut oil that he had with him – though under the claim that it is “organic coconut oil”. The comparison is unfair because virgin coconut oil is colourless in liquid form and snow white in frozen form whereas ordinary coconut oil is yellowish in both forms.  Using a colourless clear oil to compare a yellowish, not-so-clear oil and then saying that he could see impurities in the yellowish oil, does create a strong impression in the minds of a gullible viewer – especially since general public would not have in-depth knowledge of the kinds and types of coconut oils in the market.  The Court has failed to consider this unfairness and malicious comparison to come to his “verdict” that “it is not as good as you think”!

– Second, the Court missed considering the Food Safety and Standards (Food Products Standards and Food Additives) Fourteenth Amendment Regulations, 2017 which introduced an entry for ‘Virgin Coconut Oil’. With this amendment, traders are required to specifically mention on the packaging of all virgin coconut oils that it is ‘Virgin Coconut Oil’. Absent such labelling, the product is assumed to be ordinary coconut oil. Marico never described its oil as virgin coconut oil on its packet nor could it have been faulted for using the label, which was anyway its registered trademark!

5. Lastly, the Court missed the fact that Bhansali’s business model survives on viewership. From the facts, it appears that this patently unfair comparison was used to generate more sensation and thereby attract more eyeballs. The Court should have examined the comments section of this video to gather how several gullible viewers of the video fell for Bhansali’s video trick.

It would not be a surprise if the matter reaches the Supreme Court or is sent for a review to the DB by Marico as there are factual errors.

The parts required by the DB’s order to be replaced and deleted are listed below:

1. Replace: “It’s not as good as you think” by “it’s not worth the price you pay”;
2. Delete:

• “and the cap is too flimsy. Aadhi se jyaada baar toh who toot jaati hein”
• “or rotten”
• “is made from poor quality coconuts or it is”
• “Done reasons ho sakte hein for a strong coconut flavour”
• “So guys, this was an extensive review of parachute coconut oil with the tests and proof proving that it is of an inferior quality than an organic cold pressed coconut oil”.

The Delhi High Court recently issued notice on a petition by All India Drug Action Network (AIDAN) that challenged the Drug (Prices Control) Order 2013 and Drug (Prices Control) Amendment Order, 2019. The specific averments were concerning Paragraph 32, which is the list of exemptions, of DPCO 2013 and the amendment to it by the 2019 Order. Para. 32 of DPCO 2013 creates an exemption from price control for new drugs patented under the India Patents Act, 1970, thereby creating an unprecedented link between the Patents Act and drug prices. This post summarizes the petition and discusses the impact of price control mechanisms for patented drugs.

Tracing Origins

The DPCO finds its root in Section 3 of the Essential Commodities Act, 1955 which was enacted to ensure equitable distribution and fair prices for commodities deemed essential by the government. With the idea of working towards universal healthcare access at affordable prices, the Drug (Prices Control) Order, 1970 was introduced. There was subsequent revision and overhauling of the same in 1979, 1987, 1995, 2013 and 2019. Alongside, in 1996, the Ministry of Health and Family Welfare introduced the National List of Essential Medicines (NLEM). The NLEM forms Schedule I of the DPCO and is revised from time-to-time to include drugs that have a price ceiling. (You can read about how this works or rather has not worked here, here and here.)

Exemptions from price control have been a part of the DPCO since its inception. DPCO 2013 contains its list of exemptions in Paragraph 32. With the requirement of patenting a ‘new drug’ under the Patent Act, 1970 and indigenous research and development (R&D) in place, it creates 3 exemptions for (i) a product patent; (ii) a process patent; and (iii) a new drug involving a new delivery system. The 2019 Amendment Order further broadens the first exemption by removing the requirement of indigenous R&D.

Reconciling Motives

The 2019 DPCO amendments were made based on the recommendations of the NITI Aayog. While the exact mandate of the NITI Aayog as a policy think tank continues to remain unclear, its recommendations throw off the scales of balance between industrial growth and healthcare access while purporting to strike just the right balance. Additionally, the setting up of the Standing Committee on Affordable Medicines and Health Products (SCAMHP) further dilutes the NPPA’s authority to regulate drug prices, with the DPCO already biting into its powers.

AIDAN Challenges Drug Pricing Orders

The AIDAN petition highlights the departure of DPCO 2013 from earlier Orders. The principal contentions of the petition are as follows –

1. The linking of the Patents Act, 1970 and the Essential Commodities Act, 1955 lacks historical, statutory and rational basis and hence is arbitrary and unreasonable;
2. The objectives of the DPCO, NLEM and National Pharmaceutical Pricing Policy (NPPP) are undercut by DPCO 2013 and 2019;
3. The right to life under Article 21 of the Constitution is affected as these changes alter the affordability and availability of essential and life-saving medicines.

The ‘New Drug’ Exemption

Per the petition, under DPCO 2019, a ‘new drug’ is given an exemption from price control for 5 years “from the date of commencement of its commercial marketing”. For this, a ‘new drug’ has the same meaning as under Rule 122E of the Drugs and Cosmetics Rules, 1945, which says “a new drug shall continue to be considered as new drug for a period of four years from the date of its first approval…”. A contradiction in the language of the two clauses becomes immediately apparent. Additionally, the 2019 Order only changes Paragraph 32(i) of DPCO 2013, while leaving 32(ii) (new process)  and 32(iii)’s (new delivery system) exemption to start from the “date of commencement of its commercial production in the country” and “the date of its market approval in India” respectively.

Addressing the confusion amongst the said clauses, the petition shows, it is possible to see that the difference between “the date of its first approval” (Rule 122E) and “the commencement of its commercial marketing” (Para. 32 (i) DPCO 2019) can be used to extend the benefit of a ‘new drug’ tag for anywhere between 1 to 9 years. If the date of approval and commercial marketing are the same, then DPCO 2019’s 5-year protection is one year more than Rule 122E’s 4-year consideration. If a manufacturer decides to commercially market a ‘new drug’ after the 4-year period under Rule 122E is over, then DPCO 2019’s 5-year exemption would start after this period, thereby extending the ‘new drug’ tag to a total of 9 years.

What the change means? The latest List of ‘new drugs’ for the year 2019 has as many as 26 exemptions, the 2018 list too has the same number and the 2014 list has a whopping 63 exemptions. On average, since DPCO 2013 at least 26 exemptions have been given each year for drugs meant to treat an array of ailments from conjunctivitis to arthritis.

DPCO 2019 removes the term ‘product patent’ from Para. 32(i) of DPCO 2013. This change extends the exemption to ‘a new drug patented’ under Patents Act 1970. The language of this is broad enough to include any kind of patent including devices, dosages, forms, compositions and process patents as long as it relates to a new drug. Given the Indian Patent Office’s high error rate in granting pharmaceutical patents, automatic exemptions for registered patents must be seen as detrimental as it could very well lead to the ever-greening of patents and continuous extension of the exemption.

The policy push for promotion of indigenous research and production is undone by the removal of this exact requirement from Para. 32(i). Even drugs produced aboard can now avail the exemption by registering a patent in India. Further, to extend the exemption, the ‘commercial marketing’ of such a drug can take place in India much after it has been sold in other markets.

Further, given the lack of substantial definitions and guidelines regarding the terms ‘commercial marketing’ and ‘commercial production’, the ambiguity is exacerbated. The difference amongst clauses (i), (ii) and (iii) of Para 32, post DPCO 2019, is termed as discriminatory, arbitrary and unreasonable in the petition.

DPCO and the Patent Act

Apart from the contradiction amongst these clauses, the petition shows that it is not clear from the limited language of DPCO 2013 and 2019 as to how this exemption interacts with the 20-year patent term granted by Section 53 of the Patent Act, 1970 or why a nexus was established between the two at all. While earlier DPCO’s have had limited exemptions and the government has retained its power to grant these exemptions, the 2013 and 2019 Orders lack any indication of this.

It is averred in the petition that there is no rationale behind the linking of the Patent Act and DPCO. This connection is made without precedent and is against the policy directives of the DPCO, NLEM, and NPPP.

Against intended policy? The ostensible connection between the exemption and innovation remains open to challenge as this almost seems anachronistic in a robust and highly competitive drug market such as India. Amongst these 3 policies, only the NPPP refers to competitive pricing of drugs in order to expand opportunities and promote innovation. However, even this fails to explain the link between the Patents Act and DPCO.

However, with the National Pharmaceutical Pricing Authority (NPPA) recently checking instances of self-invocation by pharma companies of Para. 32 of DCPO 2013, it needs to be seen what further regulatory guidelines will be issued.

Orphan Drugs

Next, the petition disputes the exemption granted to orphan drugs. Orphan Drugs are medicines used for the treatment of rare diseases, that is, those diseases that affect a very small percentage of the population in a country. This change, the petition avers is in direct conflict with the objectives of both the DPCO and the Essential Commodities Act as it restricts access to life-saving drugs at affordable prices.

Was this change necessary? By comparing the benefits given to Orphan Drugs in the EU and the US with that of India, the price exemption seems like a move that could have had better alternatives. The price exemption for Orphan Drugs does not create a direct benefit for pharma companies to choose to invest in the R&D of the same as the market for it would still remain extremely limited despite no cap on the drug price.

Public Health Concern

Lastly, the petition highlights how price control exemptions go against the public health objective set out in Section 83 of the Patents Act.  Price control is a vital tool for safeguarding public health as it ensures affordable access, the foreclosure of the same by the exemption, defeats the section’s purpose. Similarly, the exemption forecloses the Compulsory Licensing (CL) provision granted under Section 84 of the Act as there can validly be no cap on the price of the exempted drugs to introduce CL. Thereby, making consumer access to the same weaker and thus, affecting the right guaranteed under Article 21.

Price Control or Compulsory Licensing or Letting the Market Win?

Price control has always been a popular choice with governments when trying to increase access to products. However, stricter control tends to lead to a restricted market as the seller can simply choose other markets. Very often, price control fails to account for the cost of production and margin adequately (DPCO 2013 allows a 16% margin (Para. 4)) leaving the producers, in this case, pharma companies capital starved.

For drugs, Compulsory Licensing (CL) provides an alternative. Article 31 of TRIPS allows countries to have reasonable discretion to use CL. While this has not been frequently used, the threat of the same promotes some amount of self-regulation by companies to keep prices low. However, with CL, issues concerning the quality and efficacy of drugs persist.[1]

The exemption granted under Para.32, then brings us to consider if patented drugs should be price-regulated at all? While the government’s view on this, of saying yes, has been rather simplistic, the policy tools it has chosen do not actually progress towards the same. Case studies[2] show that, given the market mechanism, price control is not particularly helpful when an effective substitute cannot be found if the patent-holding seller leaves the market. Further, the few instances where there has been compulsory licensing, such as in the case of Brazil and Thailand, there has been sub-par quality production of drugs.[3] In both scenarios, the country ends up spending almost the same resources (money and time) on healthcare access as it would have had to without price controls/CL.[4] The non-availability of data analyzing the correlation between price control and CL and healthcare access largely restricts our search for alternatives.

[1] Eric Bond, Kamal Saggi (2012). “Compulsory licensing, price controls, and access to patented foreign products,” Vanderbilt University Department of Economics Working Papers 12-00006, Vanderbilt University Department of Economics. [Last accessed on 2020 Feb 12]. Available from: https://www.wipo.int/edocs/mdocs/mdocs/en/wipo_ip_econ_ge_4_12/wipo_ip_econ_ge_4_12_ref_saggi.pdf.

[2] Id.

[3] Id.

[4] Fiona M Scott Morton (2001). “The Problems of Price Controls,” Regulation, Spring 2001 Vol. 24 No. 1. [Last accessed on 2020 Feb 17] Available from: https://www.cato.org/sites/cato.org/files/serials/files/regulation/2001/4/morton.pdf

Image from here.

Over the last decade, after witnessing Shamnad getting sued for alleged defamation by a pharmaceutical company and Aparajita Lath getting a legal notice for alleged defamation from a leading media house (Shamnad’s brilliant response is over here), I have developed quite a fondness for the fundamental right to free speech and defendants in defamation cases filed by corporations. In this backdrop, I feel compelled to reply to Latha’s spirited defense of Marico’s legal strategy in its lawsuit against ‘Bearded Chokra’ a.k.a Abhijeet Bhansali, a YouTube ‘influencer’ who reviews products apart from offering all kinds of gyan to his 156,000 followers.

To briefly recap the fact, ‘Bearded Chokra’ reviewed Marico’s famed ‘Parachute Coconut Oil’, which is quite easily the company most recognized brand. If you were brought up in a South Indian household, as yours truly was, chances are your head was regularly doused with ‘Parachute’ in the hope of luscious hair growth that would compete with the Amazonian forests. As some of us have learnt the hard way, no amount of ‘Parachute Oil’ can undo centuries of bad hair genes.

The Bearded Chokra’s review can be viewed over here on YouTube. He presents a comparison of ‘Parachute Coconut Oil’ with organic coconut oil and concludes that the latter (Corrected after publication) is superior to the latter and recommends cold pressed coconut oil. He does on the basis of a scientific reasoning. Basically he argues that unlike cold pressed oil which is never heated more than 50 to 60 degrees Celsius, expeller pressed coconut oil is heated at around 100 degrees Celsius, leading to the loss of nutrients. Prima facie that makes sense. As a result of loss of nutrients, he argues that it is not suitable to use such oil on the hair or skin and at best it can be used for oil, if it is the edible version. Apart from the scientific criteria he also does chose some rather random criteria. For e.g. he conducts a comparison of the frozen version of the organic coconut oil and ‘Parachute Coconut Oil’, where only the latter allegedly showed impurities. In his defense he does not really mention the consequences of the impurities and the manner in which it ties into his larger argument of how cold-pressed oil is superior to expeller pressed coconut oil.

Over the last year, this particular video racked up 246,948 views and earned the appreciation of the ‘Bearded Chokra’s’ viewers with comments such as the following:

• “Bhai Shukriya bachpan se parachute coconut oil use karta that aaj se nai”; (sic)
• “Bro have you ever wondered how valuable you tuber yo are for us. You really have helped us a lot then any other youtuber(IMO). Love you man. I will also be sharing your this particular video to all my friends who always trolled me that all oils and products are the same but in reality it isn’t. Thanks for the time and video”; (sic)
• “I make coconut oil from the 11 coconut trees in my house plot the purest. Kerala”’ (sic)
• “Beard bhut buri hai yaar… Man naa kr rha dekhne kaa….jb buri hai to halki rakho na” (sic)
• “Yeh chokra kuch bhi fenk raha hai , mujhe Baal jhadne ki problem ho rahi Jo sirf 1 week mei band hui kyu parachute coconut oil ki wajah se, aur thode safed baalo ki problem thi woh dheere dheere Kam ho rahi hai, so don’t take this video too seriously. :)” (sic)
• “O really wtf u think u review things without hvng a propr qualification bro u r jst makin ur own test n tryin n foolin” (sic)

 For reasons that I still cannot fathom, the video got Marico so riled up that it hired one of the most expensive Senior Advocate’s and law firms in Bombay, to sue ‘Chokra’ before the Bombay High Court, leading to the Streisand effect, wherein more people went to view his video after reading in the news about Justice Kathawala’s injunction directing the removal of the impugned video. On appeal, a Division Bench of the High Court, headed by Chief Justice Nandrajog gave Marico a legal drubbing by setting aside the injunction issued by Justice Kathawala on the grounds of both factual and legal inaccuracies in the latter’s judgment.

When it comes to defamation or disparagement actions, the first test is to separate statements of fact from opinions. Now opinions, no matter how terribly rude, cannot form the legal basis of a defamation or disparagement lawsuit. For example, you could describe a product as absolutely disgusting compared to another because of your personal predilections – that is your opinion. However, if you were to state that a particular product has poison that could kill people on consumption, you are stating a fact. As pointed out by Chief Justice Nandrajog most of what is stated in ‘Chokra’s’ video was opinion and not fact. But according to him, even with regard to the one factual error in the video, it was too trivial to form the basis of a legal action.

Since Chief Justice Nandrajog’s judgment is entirely lacking in any reference to case law, it is necessary to take a step back and explain the evolution of defamation law in light of the fundamental right to free speech. The historical standard for defamation used to be quite low. Simply being able to prove that the facts stated were false, combined with some evidence that damage was caused because of the falsehood, was sufficient to prove defamation and the remedies would follow. The intent behind the utterance of the falsehood, even a genuine error on part of the person being sued for defamation, would make no difference to a finding of defamation.

That standard however changed as courts began to ‘constitutionalise’ the tort of defamation. Simply put, the courts recognized that for the fundamental right of free speech to actually have any meaning against the state, the standards for defamation action would have to be reversed in cases involving the state or any other public figure (that would include corporations). To establish defamation, in such cases, the burden would be on the public figure to establish that the person whom they were suing acted with “actual malice” i.e. the person acted recklessly, with full knowledge that their statement was false and with utter disregard for the truth. It is a high standard to meet and truth be told, it is rarely ever met. While this standard evolved in the United States, it has been adopted by the Supreme Court in the R. Rajagopal case and also by the Bombay High Court in a judgment by Justice Gautam Patel where he came down like a ton of bricks on the National Stock Exchange (NSE) for a defamation action against MoneyLife, a news portal. That disaster ended with NSE paying a sum of Rs. 50 lakhs to MoneyLife!

Going by the above standard, there is simply no way that Marico could ever establish that ‘Bearded Chokra’ acted with malice. Justice Kathawala’s order, against ‘Bearded Chokra’, while very detailed is incorrect on several counts. To begin with he appears to have not made the distinction between fact and opinion. If he had done so, he would have likely kicked out the lawsuit at the outset. Justice Kathawala then appears to have applied the ‘actual malice’ test incorrectly. Rather than ask Marico to establish that the ‘Bearded Chokra’ acted with actual malice (i.e with reckless disregard to the truth) he places a significant burden on the ‘Bearded Chokra’ to demonstrate that he did enough research to establish the veracity of his statement. He states in pertinent part the following: “In order to ascertain whether the statements made by Defendant were malicious or reckless, it is important to consider the research done and the caution exercised by the Defendant BEFORE making the Impugned Video.” This is an incorrect application of the “actual malice” standard. The burden should have been on Marico to demonstrate how these tests were a reckless disregard of the truth. At most, the ‘Bearded Chokra’ may have been guilty of hyperbole, but like puffery which is allowed, it is hardly ‘actual malice’.

Image from here

Last year, the Directive on Copyright and Related Rights in the Digital Single Market was adopted in the EU (text available here). The IPKat blog carries a series of posts on it starting here, for those who are uninitiated on the subject.

I only intend to discuss a limited point from this new Directive – its impact on “information society service providers” publishing “press publications” online. This impact arises from an entirely new class of right being granted for press publishers, extracted below:

Article 15: Protection of press publications concerning online uses

1. Member States shall provide publishers of press publications established in a Member State with the rights provided for in Article 2 and Article 3(2) of Directive 2001/29/EC for the online use of their press publications by information society service providers.

The rights provided for in the first subparagraph shall not apply to private or non-commercial uses of press publications by individual users.

The protection granted under the first subparagraph shall not apply to acts of hyperlinking.

The rights provided for in the first subparagraph shall not apply in respect of the use of individual words or very short extracts of a press publication.

2. The rights provided for in paragraph 1 shall leave intact and shall in no way affect any rights provided for in Union law to authors and other rightholders, in respect of the works and other subject matter incorporated in a press publication. The rights provided for in paragraph 1 shall not be invoked against those authors and other rightholders and, in particular, shall not deprive them of their right to exploit their works and other subject matter independently from the press publication in which they are incorporated.

When a work or other subject matter is incorporated in a press publication on the basis of a non-exclusive licence, the rights provided for in paragraph 1 shall not be invoked to prohibit the use by other authorised users. The rights provided for in paragraph 1 shall not be invoked to prohibit the use of works or other subject matter for which protection has expired.

3. Articles 5 to 8 of Directive 2001/29/EC, Directive 2012/28/EU and Directive (EU) 2017/1564 of the European Parliament of the Council ( 19) shall apply mutatis mutandis in respect of the rights provided for in paragraph 1 of this Article.

4. The rights provided for in paragraph 1 shall expire two years after the press publication is published. That term shall be calculated from 1 January of the year following the date on which that press publication is published. Paragraph 1 shall not apply to press publications first published before 6 June 2019.

5. Member States shall provide that authors of works incorporated in a press publication receive an appropriate share of the revenues that press publishers receive for the use of their press publications by information society service providers.”

According to recent press reports, among others, Google News is already in talks with French Publishers (France being the first Government to implement the Directive) to pay royalties based on this new Directive. Technically, this directive is applicable to all “information society service providers”, which, going by some Directives (Directive 98/34/EC as amended by Directive 98/48/EC) covers any service provider offering a service, at a distance, by electronic means and at the individual request of a recipient of services. News aggregators and even social media sites are directly covered.

As per this new class of right, publishers of press publications are vested with rights under Article 2 and Article 3(2) of Directive 2001/29/EC for the online use of their press publications by “information society service providers”. This would include the exclusive right to reproduce and the exclusive right to “communicate to the public”. This right is limited to a 2-year period and is only prospective in nature. Various Recitals to this directive provide the policy reason towards such a special right (see, Recitals 54-59) – the concern is that without some additional protection/exclusivity online, press publications are finding it difficult to recoup their investments given the complexity of the issues (and the consequent inefficiency in resolving them) involved in the digital arena.

The term “Press publications”, which is the subject matter of protection under this new right, is defined in Article 1(4) of this new Directive:

“(4) ‘press publication’ means a collection composed mainly of literary works of a journalistic nature, but which can also include other works or other subject matter, and which:

(a) constitutes an individual item within a periodical or regularly updated publication under a single title, such as a newspaper or a general or special interest magazine;

(b) has the purpose of providing the general public with information related to news or other topics; and

(c) is published in any media under the initiative, editorial responsibility and control of a service provider.

Periodicals that are published for scientific or academic purposes, such as scientific journals, are not press publications for the purposes of this Directive;”

Article 15(1) of this new Directive gives three clear exceptions to this additional right:

1. It does not apply to private or non-commercial uses of press publications by individual users.
2. It does not apply to hyperlinking.
3. It does not apply to the use of individual words or very short extracts of a press publication.

Obviously, this issue has arisen in the EU because of the new law/new right, which obviously does not exist in India. This new EU law seems to state that “In the absence of recognition of publishers of press publications as rightholders, licensing and enforcement of rights in press publications regarding online uses by information society service providers in the digital environment are often complex and inefficient.” At a minimum, this seems to be an admission that but for this new right created, there is no clear answer to whether services offered by news aggregators amounts to infringement under existing principles of copyright law.

What then of countries like India that do not have this special right created in India? Under traditional copyright law analysis, do news aggregators violate the copyright in literary works of news agencies? Usually, news aggregators tend to provide a snapshot/snippet/summary of the news content with a hyperlink to the original content. Does the length or content of their snapshot/summary matter? Would just use of the headlines amount to infringement? Does it matter whether they are hyperlinking to the original content?

There is at least one judgment in the UK dealing with some of these issues, which was ultimately referred to the ECJ on certain questions of law. The issue came up before the English Court of Appeal in the case of the Newspaper Licensing Agency Ltd. v. Meltwater Holding BV ([2012] R.P.C. 1). Meltwater provided a commercial media monitoring service, wherein a curated report of every article published online on a wide range of websites was issued to each customer of Meltwater, based on the particular search terms relevant to the customer. The report would typically contain the headline of the article, a hyperlink to the original website of the article, the opening text in the article following the headline and a short extract of the article itself. The question was whether this would amount to Copyright infringement without a specific license agreement. The court of first instance held in favour of the news agency. The Court of Appeal dismissed the appeal filed against this decision.

It appears the Court was only seized with assessing the issue on a prima facie basis, on the balance of probabilities. The English Court of Appeal concluded that that there was no per se rule against granting copyright protection to headlines (Para 21, 22). The court also felt that there was a significant probability that reproducing the headline and an extract could constitute a copy of substantial part of the original work and therefore, the activities were sufficiently likely to constitute prime facie the infringement of Copyright (Para 28 – 29). Interestingly, the Court of first instance cited an earlier judgement (Infopaq, Case C–5/08), where it was held that even a mere 11 word extract could be sufficient for it to be considered a substantial reproduction, so long as it includes an expression of the intellectual creation of the author. The challenge against this specific finding was rejected by the Court of Appeal.

This matter was taken on appeal to the Supreme Court of the United Kingdom, which referred the following preliminary questions of law to the ECJ:

“In circumstances where:

• An end-user views a web-page without downloading, printing or otherwise setting out to make a copy of it;
• Copies of that web-page are automatically made on screen and in the internet “cache” on the end-user’s [computer] hard disk;
• The creation of those copies is indispensable to the technical processes involved in correct and efficient internet browsing;
• The screen copy remains on screen until the end-user moves away from the relevant web-page, when it is automatically deleted by the normal operation of the computer;
• The cached copy remains in the cache until it is overwritten by other material as the end-user views further web-pages, when it is automatically deleted by the normal operation of the computer; and
• The copies are retained for no longer than the ordinary processes associated with internet use referred to [in the fourth and fifth indents] continue;

are such copies (i) temporary, (ii) transient or incidental and (iii) and integral and essential part of the technological process within the meaning of Article 5(1) of Directive 2001/29/EC?”

The issue, therefore, became narrower in that the alleged infringing content was now made available/restricted only to the website. The focus then turned to whether such access on the website would be exempt under Article 5(1) of Directive 2001/29. This exception was meant for temporary or transient reproduction of Copyright protected work as part of a technological process to enable transmission across a network. Applying the settled principles of interpretation of Article 5(1) to the facts of the case, the ECJ concluded it was indeed covered by the exception and held the following:

1. On–screen copies and cached copies must be regarded as an integral part of the technological process (i.e. browsing);
2. The process in question cannot function correctly and efficiently without such on-screen and cached copies;
3. The on-screen copies are transient because they are automatically deleted by the computer when the user moves of a from that website concerned;
4. The cached copies are incidental to the technological process at issue and neither exist independently of, nor have a purpose independent of, such technical process;
5. This was a special case which does not conflict with the normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the rights holder, primarily because the content in question has already been made available to Internet users and requiring internet users to seek another authorisation to view the same communication, has no justification.

A similar exception is incorporated in Section 52(1)(b) and (c) of the Copyright Act. In particular, Section 52(1)(b) states that the transient or incidental storage of a work purely in the technical process of electronic transmission or communication to the public shall not constitute an infringement of Copyright. The phraseology used in the Indian provision is pari materia with some of the ingredients in the above-noted Article 5(1) of the EU Directive (the EU Directive has additional requirements to fulfil). If we apply the aforesaid ECJ judgement, for a news aggregator or social media platform, or any website for that matter, to display hyperlinks (with or without headlines and/or extracts) to articles/press publications on other websites, would not amount to infringement. The nature of the exception is such that one need not necessarily assess whether the headline and/or extract amounts to a substantial reproduction, on a case-to-case basis.

Therefore, prima facie, it appears that barring the creation of a new class of rights for press publications like in the EU, it may not be automatically possible to injunct news aggregators in India. However, I think this applies only in the context of freely available articles and the answer could be different if the website placing the original content has restrictions on access.

Image from here

This is a rejoinder to Prashant’s recent post, replying to my post on the order of the Division Bench (DB) of the Bombay High Court in the Marico disparagement case. My post was primarily to point out the factual errors committed by the DB in arriving at its conclusions – not on Marico’s legal strategy, as Prashant has stated in his post. Now that Prashant has raised the important point of free speech, let me express my views on that in the context of this case.

I too believe in free speech (like my late friend Shamnad) and I reiterate that Abhijeet Bhansali (Chokra), or anyone for that matter, is entitled to call a trader’s bluff. But one should not call another’s bluff based on falsehoods, lest calling the bluff becomes another bluff.

Prashant rightly says in his post that when it comes to defamation or disparagement actions, the first test is to separate statements of fact from opinions and, he refers to the DB’s observation that most of what is stated in Chokra’s video was opinion and not fact. He also notes that, with regard to “the one factual error” in the video, the DB found it too trivial to form the basis of a legal action. That “one factual error” is the comparison of two different products, which he projected to his viewers as if he is comparing the same product. I reproduce that part of the DB’s order below:

“The only error committed by the appellant is to refer to the exemplar oil as organic coconut oil because the reference is to virgin coconut oil, but this is a trivial error and does not mislead the viewer who would clearly understand that the signature tune of the presentation is that Parachute coconut oil is not extracted from fresh coconuts and that the expeller pressed process is used to extract the oil from Copra and due to this reason the oil gets heated and loses its nutrients thereby rendering it money ill spent for external application on the body or for garnishing.”

The “trivial error” committed by Chokra, which I believe is not so trivial, is as follows:

• First, I would like the readers to refer to my post of January 30, where I distinguished virgin coconut oil from regular coconut oil. To reiterate, ordinary coconut oil, whether or not organic, is yellowish in colour, whereas virgin coconut oil, an entirely different category of goods, is snow white in colour when frozen and clear when it is a liquid, whether or not organic;
• Chokra uses virgin coconut oil by referring to it as organic coconut oil to his viewers and conducts a self-certified freeze test for checking the quality of coconut oil by comparing it with Parachute’s ordinary coconut oil; and
• Based on the test results, he says Parachute’s oil has impurities because of its yellow colour as compared to the snow white colour of the virgin coconut oil.

So, taking Prashant’s analogy of making a statement regarding poison in a product being a fact, if Chokra is to state, based on the above test, that Parachute coconut oil has impurities in it because the test he conducted reveals yellow colour, is he still stating a fact or a falsehood? As far as I can see, it is a malicious falsehood and not a fact. I say this because he presented a falsehood to his viewers. In essence, the DB shut its eyes to the comparison of false equivalents, namely, organic coconut oil with virgin coconut oil. Going by the logic of the DB, even the spreading of fake news would be legitimised on account of free speech by deeming falsehoods to be “trivial”.

Talking about “actual malice” discussed by Prashant, let’s say Chokra actually applied his self-certified test for assessing the quality of coconut oil on Parachute coconut oil by comparing it with regular coconut oil. Upon freezing, both the oil samples would look yellow in such a case.  Naturally, that result would deprive Chokra of offering wise comments to his viewers on the impurities in Parachute’s oil because the colour of both samples would be the same. To make himself credible, he had to use virgin coconut oil which gave a pure white colour, when frozen or clear look when in liquid form. This fact was revealed through the affidavit filed by him in the suit proceedings. If the videos showing self-proclaimed expertise in everything under the sun are his only source of livelihood, it is not difficult to understand the malice behind it and why he did what he did.

(This post has been authored by Bhavik Shukla, a 5th year student at NLIU, Bhopal)

Topical Highlight

Namratha, our new Student Fellow, discussed the notice issued by the Delhi HC on a petition challenging the Drug (Prices Control) Order, 2013 (‘DPCO’) and its amendment in 2019. She traces the origin of the DPCO to the Essential Commodities Act, 1955, and discusses grounds of the petition filed by the All India Drug Action Network (‘AIDAN’). First, she points out to the discrepancy in the ‘new drug’ exemption under DPCO 2019, as compared to the Drugs and Cosmetics Rules, 1945, stating that the inconsistency in the language enables a drug to seek exemption from 1-9 years. Second, she supports AIDAN’s point that there is no rationale between linking of the Patent Act and DPCO, as the two are not related, either historically or on the basis of policy. Third, she discusses the ground of AIDAN’s opposition relating to exemptions to be granted in respect of orphan drugs, noting that a better alternative in respect of the same could be sought. Finally, she deals with the petition’s opposition on the ground of public health, noting that price control ensures affordable access to drugs. In view of the aforementioned, she comments on the availability of recourse to price control and compulsory licensing, and concludes that the use of either may not ideally serve to increase access to drugs.

Thematic Highlight                                                                         

In a co-authored post, Swaraj and I discussed the persistence of flawed indicators in the 2020 edition of the GIPC IP Index. Drawing attention to the incorrect analysis of the intellectual property situation in the Indian jurisdiction, the post mentions that inquiry under specific indicators is not thorough. Furthermore, the post notes that GIPC serves as a lobbying group for the American industry, considering its pharma-heavy approach and its attempt at globalizing American standards of IP protection. The post goes on to mention the faulty set of indicators which continue to plague the Index from its previous editions, namely, compulsory licence, extent of copyright protection, membership and ratification of international treaties, and term of protection for industrial designs. We conclude by stating that though the Index has become well-recognized, readers should avoid taking its content at face value.

Other Posts

In his post, Rishabh wrote about Yash Raj Films’ (‘YRF’) alleged misappropriation of royalties that belong to members of the Indian Performing Rights Society’s (‘IPRS’). He notes that IPRS filed an FIR against YRF on behalf of its members, and YRF subsequently obtained a stay on any investigations  ensuing from the same.He explains that the case against YRF has been filed on two grounds: criminal breach of trust under the Indian Penal Code and infringement of a right under the Copyright Act, 1957. Further, he points out the flaw in YRF’s reliance on it being the owner of copyrighted works, by noting that this ground cannot be used to deprive authors from receiving their entitled royalty. He notes that YRF’s application to quash the FIR before the Bombay HC shall not hold, if a prima facie case is made out against it. In his view, a prima facie case shall be made out against YRF on the two grounds mentioned above. In conclusion, he states that determination of the application by the Bombay HC may reveal the true nature of the Copyright (Amendment) Act, 2012.

Swaraj reported on the possible review of the IP Acts in India before Trump’s visit. He notes based on public information that the review appears to be a USPTO Agreement. Though the content of the Agreement has not been made available, he comments that it might well be possible that the USPTO intends to indoctrinate its Indian counterpart. Further, he notes that this Agreement comes in light of the GIPC Rankings and USTR’s Special 301 Process, and suspects such timing to be aimed at coercing India into adopting certain measures. However, he states that all this is just speculation,and one should wait for solid news to surface on the subject.

In a guest post, Sushant discussed arbitrability of disputes in respect of Standard Essential Patents (‘SEPs’). He espouses arbitration in respect of SEPs as it ensures technical expertise of the panel,  almost no jurisdictional issues, confidentiality of the matter, and enforceability of the arbitral award. Going further, he notes that Indian courts allow rights in personam to be subject to arbitration. He claims that SEP arbitration usually involves these rights, but there might be cases where they might affect rights in rem. In light thereof, he states that arbitration can be resorted to for cases which arise out of an existing licence between the parties. Referring to the CJEU’s jurisprudence, he notes that there is a requirement for a mechanism which involves arbitration, before resort can be had to a dispute resolution mechanism. He raises a caution with respect to certain aspects of SEP-related arbitration, before concluding that arbitration offers an effective mechanism to deal with core patent and anti-trust law issues.

Latha wrote a post on the judgment of the Division Bench (‘DB’) of the Bombay HC in Abhijeet Bhansali v. Marico Limited. Through this judgment, the Court set aside the Single Judge’s order which had directed the Appellant to take down the video related to the Respondent’s coconut oil, “Parachute”. In the post, she critically discusses the DB’s order for making incorrect factual assumptions. First, she refutes the DB’s statement that the Appellant had made a fair and honest comparison between ordinary and virgin coconut oil; second, she observes that the court mistakenly relied on the unclaimed fact in the video: that the Respondent’s coconut oil was made from fresh coconuts, third, she states that the use of virgin coconut oil in the video was not for comparing with the Respondent’s product, but for the purpose of providing extra information; fourth, she notes that the court erroneously relied on the statements of the Appellant, without actually distinguishing between the characteristics of ordinary coconut oil and virgin coconut oil; and finally, she observes that considering the Appellant’s business survives on viewership, the video aimed to merely attract viewership.

Prashant wrote a post in response to Latha’s post. He notes that the video compares ‘Parachute’ coconut oil and organic coconut oil, to arrive at the conclusion that the latter is superior. In respect of disparagement cases, he notes that opinions have to be separated from facts, as opinions cannot form a legal basis for disparagement. To substantiate his point, he traces the origin of defamation actions to note that the threshold to prove defamation was very low historically, but began rising with courts taking into account constitutional principles in respect of defamation. In this context, he observes that the YouTuber cannot have acted with malice, as the Single Judge failed to make a distinction between fact and opinion and the burden to prove absence of actual malice was imposed on him, instead of Marico company.

Lastly, Adarsh discussed the impact of the EU Copyright Directive on “information society service providers” (ISSPs) publishing “press publications” online. He notes that the 2-year period of exclusivity to publishers has been granted in order to ensure that they derive monetary benefits for publications in the digital arena. He discusses the position of other countries in this respect, and draws attention to a case in the United Kingdom, where reproduction of headlines as well as an extract was ruled to be infringement of copyright. On reference to the ECJ, he notes that the question was narrowed and only considered in respect of a website, where the ECJ noted that such temporary reproduction would be exempted under Article 5(1) of the Directive 2001/29. Pointing towards sections 52(1)(b) and (c) of the Indian Copyright Act, he notes that a similar interpretation can be arrived at in India. Finally, he states that right of publishers can only be said to exist in the EU, and will not automatically lead to an injunction in India.

Other Developments

Indian

Judgments

Maya Appliances Private Limited v. Preethi Kitchen Appliances Private Limited and Another– Supreme Court of India [February 11, 2020]

The dispute between the Parties concerned alleged infringement by the Appellant of the Respondents’ design in respect of a base unit of a mixer grinder. Additionally, the Respondents filed a suit against the Appellant claiming infringement and passing off of the design registration. In response to this, the Appellant also filed a cancellation petition against the Respondents’ design. The Court noted in light of these facts that the two cancellation petitions as well as the Respondents’ case were pending in nature. Accordingly, it directed the Controller of Designs to transfer the cancellation petitions to the Madras High Court within two weeks of the order.

Puma SE v. TarsemLal and Another– Delhi District Court [February 13, 2020]

The Court granted a permanent injunction restraining Defendant No. 2 from infringing and passing off the Plaintiff’s mark “PUMA” by using an identical mark in respect of apparel and footwear. In arriving at this decision, the Court observed that the Local Commissioner’s report on seizure of goods from the shop of Defendant No. 2 had been unchallenged. Moreover, the Court also stated that a previous interim injunction had already been granted in favour of the Plaintiff. The Court also granted nominal damages to the tune of INR 50,000 in favour of the Plaintiff on the ground that infringing goods were seized from the shop of Defendant No. 2.

Central Park Estates Private Limited and Others v. Provident Housing Limited – Delhi High Court [February 17, 2020]

The Court granted an ex parte ad interim injunction restraining the Defendant from infringing and passing off the Plaintiffs’ mark “CENTRAL PARK” by using a deceptively similar mark “PROVIDENT CENTRAL PARK” in respect of real estate development. The Court drew reference to a previous case which was ruled on similar facts to note that the marks had a similar essential feature, and accordingly restrained the Defendant from adopting the mark in respect of real estate projects.

Steelbird Hi-Tech India Limited v. Asia Fibre Glass Products and Another– Delhi High Court [February 17, 2020]

The Court granted an ex parte permanent injunction restraining the Defendants from infringing the Plaintiff’s design in its helmet by using an identical design. In arriving at this decision, the Court noted that the Defendants had failed to discharge the onus in respect of infringement, as they did not file any evidence. The Court also granted damages to the tune of Rupees 96 lakhs on the basis of the ex parte unrebutted evidence of the Plaintiff.

HT Media Limited and Another v. www.theworldnews.net and Others – Delhi High Court [February 17, 2020]

The Court granted a permanent injunction restraining the Defendants’ from reproducing and communicating the Plaintiffs’ news articles on its website, and from using the Plaintiffs’ mark “HINDUSTAN TIMES”. The Court noted at the outset that the Defendants had engaged in a blatant violation of the rights of the Plaintiffs by reproducing their copyrighted content, and further claiming copyright on such matter. The Court noted that the whereabouts of Defendant No. 1 could not be ascertained, but the website was used to target Indian customers specifically. With respect to the determination of the website as a “rogue website”, the Court observed that the primary purpose of the Defendants was to aggregate news articles and make them available to the public. In doing so, the Court noted that it infringed upon the Plaintiffs’ intellectual property rights, namely copyright and trademark. Accordingly, the Court noted that the Defendants’ website could be termed as a “rogue website” in terms of the UTV Software order.

Chaurang and Others v. Shemaroo Entertainment Limited and Others – Bombay High Court [February 18, 2020]

The dispute between the Parties arose on account of the Defendants’ alleged infringement and passing off of the Plaintiffs’ mark “MARATHI BANA” through adoption of a deceptively similar mark “SHEMAROO MARATHI BANA” in respect of a television show. The Court noted that the outset that the Plaintiffs had incorrectly represented their sales figure to be Rupees 55.17 crores in respect of the sole show, Marathi Bana. Further, the Court observed that the mark “MARATHI BANA” was a very common expression used widely in the Marathi language, and could not be said to be distinctive in nature. Accordingly, the Court noted that the Plaintiffs had failed to make out a prima facie case for the grant of an interim injunction.

Hatsun Agro Product Limited v. Kamadenu Dairy Farms – Madras High Court [February 19, 2020]

The Court granted an ex parte permanent injunction restraining the Defendant from infringing and passing off the Plaintiff’s mark “AROKYA” by using a deceptively similar mark “AROGIYAM” in respect of milk. In arriving at this decision, the Court noted that the Plaintiff was involved in manufacturing various dairy products, and had undertaken substantial promotional expenses in respect of its products. Moreover, the Court observed that the Defendant adopted a phonetically similar mark to that of the Plaintiff in respect of the same goods.

Novartis AG and Another v. Sun Pharmaceutical Industries Limited – Delhi High Court [February 20, 2020]

The Court granted an ad interim injunction restraining the Defendant from infringing the Plaintiffs’ patent in the product compound “NILOTINIB”. In arriving at this decision, the Court noted that the Plaintiffs were the owner of the suit patent, and the launch of a drug in such case would result in an infringement of the patent. The Court also noted that all the three elements for the grant of an injunction had been made out by the Plaintiffs.

Endemol Shine Nederland Producties B.V. and Others v. Andaman Xtasea Events Private Limited and Others – Bombay High Court [February 21, 2020]

The Court granted an ad interim injunction restraining the Defendants from infringing and passing off the Plaintiffs’ marks “BIGG BOSS”, “BIG BROTHER”, device of eye, and the tagline “INDIA ISSE APNA HI GHAR SAMJHO”, by using deceptively similar marks in respect of a television show. The Court noted that the adoption of such deceptively similar marks could not be mere co-incidence, and the Defendants’ attempt was to associate with the Plaintiffs’ show in order to deceive the public. The Court observed that such representation by the Defendants’ would result in misleading not only the viewers, but also the contestants in the show. In that light, the Court noted that the Plaintiffs had made out all the three elements for the grant of an interim injunction.

Roche Products (India) Private Limited and Others v. Cadila Healthcare Limited and Others – Delhi High Court [February 24, 2020]

The dispute between the Parties arose on account of the Defendants’ alleged infringement of the Plaintiffs’ patent in “TRASTUZUMAB”. In this respect, the primary question which arose before the Court related to the maintainability of the suit on the ground that the approval granted by the DCGI and DoB was appealable under Rule 122DC of the Drugs Rules. Elaborate discussions ensued on this provision, and the Court noted that the new rules under the Drugs Rules clearly restricted the persons to whom the appeal was available. Accordingly, the Court stated that the Plaintiffs could not appeal as it had been limited only to an “applicant who is aggrieved”. In conclusion, the Court observed that in light of the deletion of the provision of appeal under Rule 122DC itself, the challenge to the maintainability of the suit had become inapplicable.

CDE Asia Limited v. JaideepShekhar and Another– Delhi High Court [February 24, 2020]

The dispute between the Parties arose on account of the Defendants’ alleged infringement of the patent and design of the Plaintiff in its device “FM 120 CONEXUS”, used to classify various materials. The Defendant No. 2 argued in light of Section 25(2) of the Patents Act, 1970 that the right of the patentee could only be crystallized after the expiration of a year provided for giving the notice of a post-grant opposition. However, the Court noted that the Supreme Court of India in the decision of AloysWobben did not hold that a suit for infringement within one year of grant of the patent would be unmaintainable. Furthermore, the Court observed that a patentee could rely on its granted patent in order to file an action for infringement. With respect to the argument on territorial jurisdiction, the Court observed that the products were offered by the Defendants for sale in Delhi, and were carrying on business within the Court’s jurisdiction. In light of the aforementioned facts the Court observed that it had jurisdiction in the matter.

Sony Kabushiki Kaisha v. Mahaluxmi Textile Mills– Calcutta High Court [February 27, 2020]

The dispute between the Parties arose on account of the Respondent’s alleged use of the Petitioner’s mark “SONY” in respect of hosiery products. At the time of filing the suit, the Petitioner merely claimed for a passing off action, as its application for trademark had not been granted by the Registry. The Court noted at the outset that though a case had to be decided on rights of the parties at the date of filing the suit, a diversion could be made from this position if a fact arising thereafter had a fundamental impact on the relief prayed for. In that light, the Court permitted the Petitioner to amend its plaint to include an action for infringement of the mark “SONY”, in addition to the already existing action of passing off. Accordingly, the order of the Single Judge was set aside, and the application for amendment of plaint was allowed.

Lupin Limited v. Union of India and Others – Delhi High Court [February 27, 2020]

The Petitioner was granted a product patent in respect of a drug, but the National Pharmaceutical Pricing Authority (‘NPPA’) stated that it had not applied for an exemption under Para. 32(i) of the amended Drug Price Control Order, 2013. In this respect, the Court observed that the primary question before it was whether a prior approval was required from the NPPA before the launch of a drug or was a mere intimation to the NPPA enough. In order to determine this question, the Court granted NPPA time to file its stance, while noting that no coercive measures shall be taken against the Petitioner in the meantime.

Saregama India Limited v. Sky B (Bangla) Private Limited– Calcutta High Court [February 28, 2020]

The dispute between the Parties arose on account of the Defendant’s alleged infringement of the Plaintiff’s copyright in its sound recordings, lyrics and music in the songs. The Defendant disputed the Plaintiff’s ownership of copyright over the sound recordings. In response, the Plaintiff presented sample deeds to show ownership, and the Defendant argued that the clauses of such deeds could not constitute assignment of ownership of copyright. The Court referred to a previous case, and noted that in the present case it could not be stated that the Plaintiff would not succeed at trial or that the Plaintiff was not the owner of copyright. Accordingly, the Court concluded that the Plaintiff made out a prima facie case along with a balance of convenience in its favour for the grant of an interim injunction.

News

• Trade Marks Registry publishes response to stakeholders’ comments/suggestions received in light of the public notice dated December 12, 2019.
• Bengaluru city court issues non-bailable warrants against Kannada film actor and director, Rakshit Shetty and music director, Ajaneesh Loknath for allegedly copying a song.
• Shashwat Gautam, a former national coordinator in the Congress Party’s data analytics accuses Prashant Kishor of stealing a campaign slogan, logo and data.
• India and U.S. sign a knowledge-sharing agreement on IPR ahead of U.S. President Donald Trump’s visit; Civil society expresses concerns (see here and here).
• Rejecting opposition, Patent Office grants U.S. firm Gilead patent for HIV drug, Cobicistat.
• Patent Office invites online applications for Patent Agent Examination, 2020 likely to be held on June 28, 2020.
• Delhi HC states that an owner of a registered trade mark cannot be changed in a mechanical manner upon filing of a Form (see order here).
• India TV alleged of stealing an animation artist’s exclusive 3D video of the Ram Mandir.
• New facilitators for patents, designs and trade marks added under the Start-Ups Intellectual Property Protection (SIPP) scheme.
• A copyright agent in Gujarat alleged of extorting traders by scaring them of trademark violations in branded products.
• Music composer, A.R. Rahman challenges notice demanding service tax for transfer of copyright in music composed for films to film producers; Madras HC stays operation of notice.
• Patent Office rejects Google’s application on wearable electronic devices as they lack inventive steps.
• Director of film Mr. India, Shekhar Kapur raises question of director’s creative rights amidst talks of its re-make.
• DPIIT holds stakeholders’ meeting to discuss copyright issues and the provisions under the Copyright Act and Rules.
• Patent Office to start accepting more requests for expedited examination under the bilateral Patent Prosecution Highway pilot program commenced with JPO.
• UK Artist TroyBoi accuses the makers of ‘Baaghi 3’ for recreating his song ‘Do You’.

International

• Geneva Act of WIPO’s Lisbon Agreement on Appellations of Origin and Geographical Indications enters into force.
• United Kingdom won’t be seeking involvement in the Unified Patent Court despite its ratification of the underlying agreement in April, 2018.
• China hits back at the United States’ efforts to ‘block’ its WIPO candidate.
• Amanda Solloway confirmed as the United Kingdom’s minister for IP.
• The United Kingdom confirms that it has no intention of implementing the EU Copyright Directive, 2019.
• Oscar winning film, Parasite alleged of being a plagiarized version of the Tamil film, MinsaraKanna.

We’re pleased to bring to you an insightful guest post by Dr. Vikas Kathuria on the new section 4A proposed by the Draft Competition (Amendment) Bill, 2020, which would extend the IP related exception to abuse of dominance cases also. Dr. Kathuria is a Senior Research Fellow at the Max Planck Institute for Innovation and Competition, Munich and was formerly a faculty member at School of Law, Benett University. He has many publications to his credit and he is a regular contributor to policy discussions at the interface of IP and competition law.

The Ministry of Corporate Affairs has invited public comments on the draft Bill and we would encourage our readers to submit their comments before the specified deadline i.e. March 6, 2020 as some of the provisions, including Section 4A, may have serious consequences on competition in India.

The Proposed Section 4A of the Competition Act: Protection to Holders of Intellectual Property Rights

Dr. Vikas Kathuria

Last month, the Ministry of Corporate affairs came up with the draft Competition (Amendment) Bill, 2020, pursuant to the recommendations of Competition Law Review Committee. Among several other new provisions, the Bill proposes a new Section 4A that reads as follows.

“Nothing contained in section 3 or section 4 shall restrict the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred under…(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);…”

Section 4A is not a brand new addition as such, as it extends the similar provision to Abuse of Dominance (AoD) cases that was hitherto applicable to anti-competitive agreements in the form of Section 3(5) as a ‘balancing’ provision. A closer look at the existing Section 3(5) or at the newly proposed Section 4A clarifies that it is not a blanket exemption to IP rights from the application of competition law as such, rather it is a declaration to affirm the right of an IP holder to safeguard her intellectual property. This seemingly benign declaration, however, may create new problems in the AoD cases related to intellectual property.

The Relationship between IP and Competition Law

The protection of IP rights is the domain of IP statutes. Competition law is concerned with the ex post exercise of this right that may be detrimental to consumers welfare. The Court of Justice of the European Union (CJEU) has made it clear that competition law is applicable against IP rights only in ‘exceptional circumstances’ (see here and here), and not with the ‘normal exercise’ of IP rights. For instance, if a refusal to license deters follow-on innovation, competition law may step in through the provision of compulsory licensing. This way IP law and competition law have a complementary function— competition law may curtail the exercise of exclusivity provided by IP laws if the same is detrimental to innovation. Once again, if an IP right leads to exploitatively high prices, competition law may step in to deter loss to consumer welfare. This is because in such a case the IP right-holder stretches the legal exclusivity beyond incentivizing innovation to reaping supranormal rents.  Thus, competition law acts as a second layer of regulation over and above the inherent mechanism in the IP law to ensure competition. The patent exception cases and copyright fair use are examples of IP-inherent competition provisions.

Does the Existing Section 3(5) Serve Any Purpose, If at All?

An IP holder requires some degree of protection and autonomy in a licensing agreement. Thus, it seems that Section 3(5) serves as an assurance to the IP owners against the arbitrary use of competition law in any licensing agreement. In one particular cases, K Sera Sera Digital Cinemas Limited v. Pen India Ltd. and Others, where the allegation was that the licensor engaged in a selective distribution agreement, the CCI relied upon Section 3(5), to justify the right of a copyright holder to deny distribution of its product to those who had a history of infringing IP. A closer look at the factual matrix makes it clear that the right-holder could not have been asked to license its product to the delinquent firm even without having recourse to Section 3(5). In a selective distribution agreement, an upstream firm can devise the objective criteria to choose its downstream partners. It is an objectively valid criterion to not license its product to firms that have a reputation of infringing licensor’s IP. In such cases, there is no harm to consumer welfare.

Aside from the cases of outright denial to license IP, even for the assessment of the reasonableness of conditions imposed on licensees, the competitive assessment does not have to necessarily reach out to section 3(5). For instance, in a franchise agreement, a franchisor may require a franchisee to buy the machines and other components, used for the production of a particular product, from the franchisor itself to maintain the quality and protect the trademark. This restraint can very easily be accommodated while assessing Appreciable Adverse Effect on Competition (AAEC) as per the conditions set out in Section 19(3). In particular, such a condition leads to “improvements in production or distribution of goods or provision of services” in the language of Section 19(3)(e). Therefore, in my view, Section 3(5) serves no meaningful purpose at all.

Problems in Abuse of Dominance Cases

While Section 3(5) may not have caused any troubles so far, the extension of a similar provision will lead to enforcement problems. The CCI has followed a rule of reason approach to AoD cases, and unlike Section 19(3) for anti-competitive agreements, Section 4 gives a broader scope to the CCI to assess the anti-competitive effects of an impugned practice. Section 4 allows a party to plead any reasons that may jeopardize his IP right. Thus, any form of ‘balancing’ can be done at the stage of Section 4 itself. Effectively, Section 4A will bifurcate the analysis of AoD assessment between Section 4 and Section 4A.  In almost all cases, the dominant firm will resort to Section 4A to justify denial of an IP right or imposition of an unreasonable condition.

For example consider essential facilities cases, where a dominant firm’s IP right has been determined to be an essential facility. A mandatory sharing of that right, in principle, is an infringement of the legal monopoly. Therefore, in such cases, a dominant firm will invariably resort to Section 4A.

Problems seem even bigger for the Standard Essential Patent (SEP) licensing cases. In SEP licensing cases, a patentee can approach a court asking for an injunction to arm-twist a willing licensee to accept unfavorable terms—a hold-up situation and thus also abuse of dominance. In order to strike a balance between the right of a patentee and the right of a licensee, courts have drawn a chronology of acts that the parties must engage in (in the Indian context, see here). If this framework is not adhered to by the defendant (implementer), it can be termed as an ‘unwilling licensee’, resulting in an injunction. Conversely, if the patentee does not adhere to these steps and proceeds with injunction proceedings, its behaviour can be an abuse of dominant position. The proposed Section 4A destroys this rather hard-earned balance and allows the patentee to circumvent the sequence and reach the court for an injunction, facilitating hold-up.

Summing Up

I have shown through limited examples how replicating Section 3(5) for AoD cases will lead to enforcement problems. There can be several other instances where Section 4A will not only distort the analysis but will also lead to enforcement delays. Ironically, CCI is a relatively young regulator tasked to ensure optimal competition in a significantly lucrative market. The effort, therefore, should rather be to simplify the analysis to ensure speedy yet effective enforcement.

It is noteworthy that the EU does not have any similar ‘balancing’ provision with respect to either anti-competitive agreements or abuse of dominance. The absence of such riders has given the European Commission enough scope to develop its analysis and ensure consumer welfare in novel cases involving intellectual property. It is by now known that law should leave sufficient scope to catch novel delinquent behavior made possible by the changes in business models and technology. For all these reasons, Section 4A should be dropped from the proposed Amendment Bill.

I read with interest Latha’s post published yesterday on why the ‘Bearded Chokra’ would be liable for disparagement even under the ‘actual malice’ standard. Needless to say, I disagree because it is an incorrect understanding of the ‘actual malice’ standard that undermines the essence of the fundamental right to free speech under Article 19(1)(a) and goes against one of the core values that have sustained SpicyIP since its inception. I am yet to find an instance in our young history where we supported behemoth corporations in their quest to legally pummel citizens for exercising their fundamental right to free speech. That is because the right to free speech and a commitment to transparency have been the only values that have unified the contributors of this blog. We do not agree on anything related to the theory and practice of IP and therein lies the masala that has sustained this blog. Now that I have finished grandstanding, let me get back to debating the law with Latha.

The core of our disagreement appears to be around the issue of ‘actual malice’. As per my understanding of the law, whether or not a particular statement is uttered with ‘actual malice’ depends on the intent with which it has been uttered. The burden of proving such intent is on the person claiming to be defamed and because proving the ‘intent’ behind a statement is so difficult, it is quite rare for a person to be held liable under this standard. Merely because a person profited out of the publication or through advertisements, is entirely inconsequential to the analysis of malice. The ‘actual malice’ standard can be met only if it can be established that the statement was uttered with reckless disregard of the truth and knowledge that it was false. Mere unintentional errors do not meet this standard. If ‘actual malice’ can be proved, a defendant can be held liable for defamation even if he does not profit from the speech.

Perhaps a quick recap of the U.S. Supreme Court’s judgment in the landmark case of NYT v. Sullivan may help clarify this position of law. The venerable New York Times (NYT) was sued by a public official because of certain factual errors in an advertisement published in the paper (photo left) on behalf of the Committee to Defend Martin Luther King. The great civil rights activist was being prosecuted in Alabama for alleged perjury and the advertisement had made certain factual errors regarding the number of times the state had arrested Martin Luther King as well as the manner of the arrest. The Public Safety Commissioner of Alabama sued the NYT claiming damages for defamation because of the factual errors. The courts of first instance found NYT liable for damages. However when the case reached the Supreme Court of the United States, the court overturned the existing law on defamation, under which the NYT would have been liable, to conclude that public officials would have to prove that the media acted with actual malice in order to succeed in a defamation action. The judgment basically protected inaccurate speech that contained mere factual errors. This clear shift away from the old standard where even factual errors would have led to liability was key to invigorating the First Amendment in the United States. As a result of its contribution to bolstering free speech this judgment has been voted as one of the most influential judgments of the US Supreme Court in its history. With time, this standard was applied to all public persons and corporations and is one of the reasons that the #metoo movement succeeded in the United States unlike European countries which have far more stringent defamation laws..

That the ‘actual malice’ standard has been accepted in India, is obvious from the fact that it was applied in the Parachute case by Justice Kathawala, albeit incorrectly as I explained in the previous post. Instead of asking Marico to establish the malicious intent, Justice Kathawala asked the ‘Bearded Chokra’ to prove that he did not act with malice.

With regard to Latha’s argument, she presumes malice on part of the ‘Bearded Chokra’ because although he claims to have used organic coconut oil in his video, he allegedly states in his affidavit that he used virgin coconut oil. The Division Bench dismissed this as a trivial error and Latha disagrees on the grounds that the ‘Bearded Chokra’ would not have been able to illustrate his claims regard impurities if organic coconut oil had actually been used. The fact that these videos are the source of his livelihood, according to Latha, adds to the case that he acted with malicious intent.

While she presents an interesting hypothesis, the fact of the matter is that Justice Kathawala failed to apply the test correctly by directing Marico to lead evidence that the ‘Bearded Chokra’ acted with ‘actual malice’ and had not committed a trivial error. The burden of proof was not on the ‘Bearded Chokra’ as claimed by Justice Kathawala. For Marico to have been able to prove that the ‘Bearded Chokra’ deliberately (rather than mistakenly) used one oil, instead of the other, would have been close to impossible. Short of smoking gun evidence that the defendant had entered into a conspiracy with Marico’s competitors to defame its Parachute oil, it would have been impossible for Marico to meet the ‘actual malice’ standard.

Unlike the many trademark lawyers who are likely seething at this judgment, I take special comfort in the outcome of this case because it enables free speech and holds the powerful accountable. The world would have been a far more boring place without the “actual malice” standard.

Image from here

We’re pleased to inform you that the Inter University Centre for Intellectual Property Rights Studies (IUCIPRS), CUSAT is offering two Summer Fellowships under ‘IUCIPRS Justice Rajagopala Ayyangar Summer Fellowship’ program during April to June 2020. The deadline for applications is March 16, 2020. The norms for the award of the fellowships can be accessed here and application form here. For further details, please read the announcement below:

Announcement of IUCIPRS Justice Rajagopala Ayyangar Summer Fellowship 2020

Instituted by

INTER UNIVERSITY CENTRE FOR INTELLECTUAL PROPERTY RIGHTS STUDIES

Cochin University of Science and Technology

Inter University Centre for Intellectual Property Rights Studies (IUCIPRS), CUSAT is pleased to announce two Summer Fellowships under ‘IUCIPRS Justice Rajagopala Ayyangar Summer Fellowship’ program during April to June 2020. IUCIPRS has instituted this Fellowship to encourage teachers interested in IP research in India to spend minimum of two months during summer (April to June) at IUCIPRS undertaking research work in IP.

Eligibility: Applicants shall be a teacher in any University/College in India for less than 10 years. Preference shall be given to teachers with less than 5 years of teaching experience.

Duration of Fellowship: Two months, extendable up to three months.

Fellowship Amount: Rupees 25,000 per month.

How to Apply: Application form and Norms can be downloaded from the website http://ciprs.cusat.ac.in/. The duly completed and signed application form along with the detailed research proposal in IP related area should reach the Director, IUCIPRS, CUSAT, Cochin University P.O. Cochin – 682022.

Last Date: The application should reach the Director on or before March 16, 2020.