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We’re pleased to bring to you another post by our intern, Bhavik Shukla, discussing whether the offence of copyright infringement under section 63 of the Copyright Act is cognizable or not. Through the post, he notes the impact of the classification of the offence on creativity and free speech. Bhavik is a 5th year student at NLIU, Bhopal.

Offence of Copyright Infringement Cognizable or Not? : Still a Catch 22 Situation!

Bhavik Shukla

Recently, in a decision which has evoked uncertainty, the Rajasthan High Court has referred the question concerning the classification of the offences under, inter alia, section 63 of the Copyright Act, 1957 (‘Copyright Act’) to a larger bench for resolution. Section 63 relates to the offence of infringement of copyright, and imposes a punishment ‘not less than six months but which may extend to three years’ along with a fine. The question of classification of the offence as cognizable or non-cognizable has been at the centre of debate since long, with several High Courts (‘HC’) across the country having engaged in a relentless oscillation over the two positions.

Dispute regarding the classification of the offence

The guidance for classification of an offence, irrespective of the Act prescribing the term of punishment, is derived from the Criminal Procedure Code, 1973 (‘CrPC’). Part II of the First Schedule divides punishments into three categories, covering the possible range of punishments: from nil to a death sentence. Such a division decides the classification of offences as ‘cognizable’ or ‘non-cognizable’. Essentially, a ‘cognizable offence’ is one for which a police officer may arrest without a warrant, while a ‘non-cognizable offence’ necessarily requires a police officer to have secured a warrant prior to the arrest of an accused. At the risk of over-simplification, non-cognizable offences have longer sentences as they are considered to be more serious offences.

The problem of classification in respect of section 63 of the Copyright Act arises due to the absence of its subscription to any particular classification in the First Schedule. Certain courts (Kerala HC, Assam HC) have held that the offence envisaged by section 63 falls within Classification II of Part II of the First Schedule and is cognizable, due to its maximum term of punishment being imprisonment for 3 years. Contrarily, other courts (erstwhile Andhra HC, Delhi HC, Rajasthan HC) have found that the offence covered by section 63 falls within Classification III of Part II of the First Schedule and is non-cognizable, as the term of punishment for the offence may not always be the maximum stipulated term of 3 years.

Delhi HC sees the light at the end of the tunnel?

It seems the Delhi HC may have found a solution to the recurrent conflict of classification of section 63 of the Copyright Act through two of its recent decisions.

In NCT of Delhi v. Naresh Kumar Garg, the Delhi HC applied the Supreme Court’s (‘SC’) classification of an offence under the Customs Act, 1962 in Avinash Bhosale v. UoI, to section 63 of the Copyright Act. The application of such classification was made possible by the similar wording of the punishment term under the Customs Act, 1962, which read: ‘with imprisonment for a term which may extend to three years’. The application of the SC’s interpretation as a precedent by the Delhi HC has elevated it to the status of a gospel truth.

To such an extent is the position accorded to be a binding precedent that in the recent decision of Anurag Sanghi v. State, the Single Judge has followed the SC’s interpretation in spite of being in clear disagreement with it. The Single Judge was of the opinion that the offence under section 63 should be classified as cognizable, as the maximum term of punishment prescribed for it is 3 years. However, the Delhi HC followed the SC’s interpretation while observing: “Although, in Re: Avinash Bhosale, the Supreme Court has not indicated any reasons for its conclusion/observation; it had granted leave and its decision is binding on this Court.” Therefore, the will of the precedent prevailed and the offence was classified as non-cognizable.

Well, it is often joked that light at the end of the tunnel is actually light from an oncoming train. This fairly describes the situation which the Delhi HC has found itself in. It is true that the SC’s decision serves as the ‘law of the land’, thereby giving the Delhi HC little say in the matter. However, such regimented following of precedents without knowing the ‘reasoning’ of the higher courts sets a dangerous course for future decisions on the matter.

Rajasthan HC and its rendezvous with section 63 

We had reported on the decision of the Rajasthan HC, where the Single Judge had held that the offence under section 63 of the Copyright Act is non-cognizable. This decision was arrived at in complete alignment with the decision of the erstwhile Andhra HC. Recently, the Rajasthan HC referred the decision of classification of the offences under section 63 of the Copyright Act and section 91(6)(a) of the Rajasthan Land Revenue Act, 1956 to a larger bench. Both these provisions contain an identical phraseology in respect of punishment: ‘which may extend to three years’, and hence their equation for purposes of interpretation (As many readers might know, most cases involving section 63 of the Copyright Act, derive their reasoning for classification from cases under other Acts). The need for a re-visit arose as the Court was of the opinion that its previous decision did not appear to be laying down a correct proposition of law.

In arriving at this conclusion, the Rajasthan HC observed with reference to section 91(6)(a) of the Rajasthan Land Revenue Act that the legislative intent was to make the offence covered by it a cognizable one, as it permitted an ‘investigation’ to be made. It was further noted that an investigation could only be made with respect to a cognizable offence, as only an inquiry is permissible into a non-cognizable offence. Accordingly, the Court observed that the classification of section 91(6)(a) as well as section 63 needed to be determined as cognizable or non-cognizable by a larger bench.

The reason for re-determination of classification of section 63 of the Copyright Act is not clearly adduced by the judgment. It merely makes a bare statement with respect to the correct position of law not being laid down. It might very well be that the inclination for re-visiting the classification of section 63 arrives from the wording of section 64 of the Copyright Act, which enables a ‘police officer, not below the rank of a sub-inspector’ to seize infringing works ‘without warrant’. In some sense, this provision may lead to the conclusion that the offence under section 63 is cognizable though the Delhi HC has rejected the argument.

It appears as if courts are currently navigating the muddy waters surrounding the issue of classification of the offence contained within section 63 of the Copyright Act. Regardless of the certainty introduced by the Delhi HC’s decisions on the subject-matter, its downsides persist. In that light, Rajasthan HC’s pursuit to discover a definite answer to the protracted conflict is a welcome move. However, it will serve all courts to bear in mind that the main purpose of copyright is to provide a fillip to creativity and original expressions. Determining the offence to be cognizable may lead to a chilling effect on free speech and expressions. This chilling effect may work in two ways: first, it may lead to creative endeavours being stifled before even embarking on them; and second, a punitive approach may serve a retributive purpose by deterring further creativity. Such a scenario is readily fathomable in respect of the ‘scapegoats’ of digital content: memes and parodies. The fear of an arrest coupled with the non-bailable nature of such arrest may certainly sound a death knell for most creators. A related concern is the uncertainty that follows when a work is similar to a prior work but does not constitute its reproduction. Will the creator be arrested merely on the basis of an allegation made by a copyright owner? What if the act of copying does not actually constitute an offence on further prosecution? Such decisions should appropriately be taken by the courts, and classifying the offence under section 63 as cognizable may end up giving unbridled powers to the police. It can only be hoped that the judiciary pays heed to the purpose of the Copyright Act as much as it does to its language, to ensure that creativity is not stifled.

Thanks to Kruttika Vijay for her helpful inputs on this post!

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I am compelled to draft a reply to Prashant’s response to my post (which in turn was a response to the initial post by him and Prannv arguing for the shutdown of IPAB).

The bulk of my ire is against the allegation that I have written my last post only because I make a living off the IPAB. I must state that the courts, especially the High Courts are substantially the means of my daily subsistence. Therefore, my views against transferring matters to the High Courts are strictly personal. Such manner of personal imputation towards other authors is entirely uncalled for and not in keeping with the spirit of this website.

Prashant relies on an article by Hon’ble Justice Prabha Sridevan which laments the lack of due process in appointments, which is a grievance espoused by all stakeholders. This is a rather old article written in 2011, subsequent to which the trend of specialized tribunals stands advanced irrevocably. This is best confirmed in an interview given by Hon’ble Justice Prabha Sridevan herself to this website in 2018, in which she says “I have said before and I say it to you now the IPAB is the most important tribunal from a global perspective”. The issue with appointments cannot be a cause to scrap an institution of such considerable international standing. In any event, the thrust of my earlier article was only to point out that the faults in appointments cannot be laid on the IPAB, which has been a victim of methodical bureaucratic red-tapism.

As for Prashant’s views on first generation lawyers and lawyers from Mumbai being in favor of scrapping the IPAB, such views apart from being unsubstantiated and unnamed, cannot be the basis to wish away an institution that has become a part of the IP jurisprudence framework. As for Prashant’s views on how the IPAB “mucked” up the Novartis order, it is rather futile to reiterate that any judgment subject to international scrutiny will have hard-hitting criticisms, and that is inevitable in an adversarial system.

As for allegations on me trying to score brownie points with the IPAB or the Chairperson, these are again entirely misplaced. The point I made was that transferring matters back to High Courts from the IPAB which is headed by former Judges of the High Court does not make sense. The 2015 judgment of the Madras High Court has confirmed the primacy of the judiciary in heading the IPAB Benches. The burden on High Courts is undoubted, and the delay in disposing matters is also undoubted. To suggest that transferring matters to the High Courts would alleviate all issues with the IPAB is to simplistically view a rather complex issue with rose-tinted glasses. Whilst I do agree with Prashant that a High Court would never be non-functional due to the lack of judges, I fail to see why such a moving roster of judges and members cannot be created for the IPAB as well. This has been done with considerable success in Tribunals such as the NCLT, which sees numerous appointments pan-India as per requirements. My grouse is with the step-motherly treatment extended to the IPAB which is one of the few central Tribunals outside of Delhi.

The demand to scrap the IPAB would also create very complex issues, as the statutory framework and numerous decisions of the Supreme Court are predicated on the existence of the IPAB. Also, it must be remembered that the natural forum for IP disputes are District Courts, with only a few High Courts having original jurisdiction. To expect the district judiciary to deal with the issues before the IPAB seems contrarian to general prevailing consensus on having Benches with specialized IP knowledge.

As for the IPAB operating out of a “ramshackle” government building, the basis of comparison is rather unfair. The new block of the Delhi High Court is an ideal representation of the standards of judicial buildings. I do hope the IPAB does one day have premises of such standard, but for now, we can rest easy due to the new premises earmarked at Chennai. While it may not be a sparkling “T3” as demanded by Prashant, it would at least be a nicely functional T1.

As with all endeavors of the members of this website, I wish Prashant good luck with his proposed petition, and of course relish the opportunity to comment on it. I feel the primacy of efforts needs to advance appointments at the earliest, with Judges having commercial law exposure and technical members who will bring specialized knowledge to the table. This is an entirely plausible and immediate solution, which would put to rest this controversy. I am also not going to be commenting any further on this issue, as the efforts on this issue clearly need to be expended elsewhere.

On a side note, I must highlight something Shamnad said in one of my earlier posts:

“At this point, I should mention – despite differences of opinion on the matter, it’s extremely refreshing to see pleasant, polite and mature communication from all sides, leading towards an active debate on the matter rather than attempts to silence or censor like we’ve had in the past”

Let’s never lose that spirit.

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Last month, I had blogged about the feasibility of a sub-license under the Indian copyright law. In this blog post, I will examine the issue whether the Indian Trade Marks Act, 1999 (“the TM Act”) permits sub-licensing of trademarks. An oft-discussed issue while working on corporate deals which involve IP licensing is the insistence by a licensee that its “right to sub-license” the mark must be provided for in the agreement. In my opinion, it is not permissible under the TM Act. My reasons are discussed below.

Relevant provisions of the TM Act

The relevant provisions of the TM Act for this discussion are as follows:

Section 2(1)(r)

“Permitted use”, in relation to a registered trademark, means the use of trademark-

(i) by a registered user of the trademark in relation to goods or services-

(a) with which he is connected in the course of trade; and

(b) in respect of which the trademark remains registered for the time being; and

(c) for which he is registered as registered user; and

(d) which complies with any conditions or limitations to which the registration of registered user is subject; or

(ii) by a person other than the registered proprietor and registered user in relation to goods or services-

(a) with which he is connected in the course of trade; and

(b) in respect of which the trademark remains registered for the time being; and

(c) by consent of such registered proprietor in a written agreement; and

(d) which complies with any conditions or limitations to which such user is subject and to which the registration of the trademark is subject;

Section 48(2)

The permitted use of a trademark shall be deemed to be used by the proprietor thereof, and shall be deemed not to be used by a person other than the proprietor, for the purposes of section 47 or for any other purpose for which such use is material under this Act or any other law.

Section 49(1)

49.- (1) Where it is proposed that a person should be registered as a registered user of a trademark, the registered proprietor and the proposed registered user shall jointly apply in writing to the Registrar in the prescribed manner, and every such application shall be accompanied by-

(a) the agreement in writing or a duly authenticated copy thereof, entered into between the registered proprietor and the proposed registered user with respect to the permitted use of the trademark; and

(b) an affidavit made by the registered proprietor or by some person authorised to the satisfaction of the Registrar to act on his behalf,-

(i) giving particulars of the relationship, existing or proposed, between the registered proprietor and the proposed registered user, including particulars showing the degree of control by the proprietor over the permitted use which their relationship will confer and whether it is a term of their relationship that the proposed registered user shall be the sole registered user or that there shall be any other restriction as to persons for whose registration as registered users application may be made;

(ii) stating the goods or services in respect of which registration is proposed;

(iii) stating the conditions or restrictions, if any, proposed with respect to the characteristics of the goods or services, to the mode or place of permitted use, or to any other matter;

 (iv) stating whether the permitted use is to be for a period or without limit of period, and, if for a period, the duration thereof, and

(c) such further documents or other evidence as may be required by the Registrar or as may be prescribed.

Section 54

Nothing in this Act shall confer on a registered user of a trademark any assignable or transmissible right to the use thereof.

It is also relevant for this discussion to note that the predecessor of the TM Act, the Trade and Merchandise Marks Act, 1958 (“the TMM Act”) did not provide (see sections 48 & 49) for unrecorded licenses within the purview of permitted use.

Indian law does not permit trademark sub-licensing

From a reading of the above sections, my conclusion is that sub-licensing is not provided for under the TM Act. My detailed reasons are below:

a) Section 2(1)(r) of the TM Act provides for two kinds of licenses or “permitted uses” of a registered trademark. The first one is by a “registered user” of a mark, namely, by a licensee whose title as such is recorded with the Registrar of Trade Marks. The second one is by an unrecorded or common law licensee, who is permitted to use such registered trademark by consent of the proprietor through a written agreement. Read with section 49(1)(a), section 2(1)(r)(i) (recorded license) and section 2(1)(r)(ii)(c) (unrecorded license) indicate that a trademark license must be in writing by the proprietor to the licensee. Nowhere do sections 2(1)(r) or 49 contemplate a licensee to further license such rights.

b) One of the requirements to record a licensee with the Registrar of Trademarks under section 49 of the TM Act as a “Registered User” is an affidavit, in which, among others, the proprietor of the mark is to furnish proof of the degree of control by the proprietor over the permitted use. Since the provisions of the TMM Act, including the ones cited above, do not envisage naked licensing situations, it is important for a proprietor to demonstrate that there is quality control exercised by the proprietor in any license. Since the provisions of the Act envisage quality control by the proprietor (and not the licensee), sub-licensing is not possible in the Indian scenario. A Division Bench of the Delhi High Court in Rob Mathys India Private Limited v. Synthes AG Chur held that the object of the TMM Act is to prevent trafficking in trademarks and in view of the limited and restricted meaning of “permitted use” under that Act, it would not appear plausible to accept user by a sub-licensee as user by the proprietor of the trademark. The Court’s observation suggests that sub-licensing is not envisaged under the Indian trademark law. The same principle would apply under the TM Act which now includes even common law / unrecorded licenses within the purview of permitted use.

c) Section 54 of the TM Act stipulates that a registered user of a trademark cannot assign or transmit the right to the use mark. So the rights of a licensee to further license or transmit the rights is curtailed.

d) Under Section 48(2) of the TM Act, permitted use of a trademark by a licensee is deemed to be use by the proprietor for any purpose material under the TM Act or any other law. The language of the section does not speculate any use by a sub-licensee.

In my post regarding copyright sub-licensing, I had concluded that it is possible for an “exclusive licensee” under the Copyright Act, 1957 to further sub-license the rights granted, provided such exclusive licensee has been granted such right by the licensor in the agreement. However, unlike the Copyright Act, there is no ‘exclusive license’ envisaged under the TM Act or its predecessor, the TMM Act. Even if an agreement were to permit a licensee to further sub-license the use of the mark, it would be an agreement that would be contrary to the TM Act and hence, unenforceable as a contract.

From my research and inquiries, it appears that India may be one the rare countries where it is not possible for a trademark licensee to further license the marks.

We’re pleased to bring to you a guest post by Justice (Retd.) Prabha Sridevan on the shutting down of IPAB (our recent series of posts on which can be viewed here). Justice Sridevan needs no introduction – she served as a judge of the Madras High Court from 2000 to 2010 and as the Chairperson of the IPAB from 2011 to 2013 and her stint as both resulted in a number of significant IP developments, which we have covered here, here, here and here. A more elaborate profile and Prof. Basheer’s interview of her published on the blog in 2018 can be viewed here and here. She has previously also written a guest post for us, which can be viewed here.

Regarding the Scrapping of the IPAB

Justice (Retd.) Prabha Sridevan

I have read the post for closing the IPAB and the counter to keep it open, and the rejoinder to it and the reply. I do not intend to weigh in the two views and give a “judgment”, nor to enter the fray.

I have long held the opinion that the IP jurisdiction should be restored to the High Court. Please see “Whose Tribunal is it anyway“, so this is just a reiteration. Since it is an opinion I have passionately held to, I feel I must speak.

The IPAB was formed really unformed. It managed to survive miraculously, but it is time we transplant the core jurisprudence back to the High Courts and allow it to beat heartily. I do not think it was ever meant to be really enabled or empowered. I will mention just two points inter alia many hard facts; the infrastructure is inadequate and I am polite. Appointments to the posts of Chairman, and Vice Chairmen and Technical members are delayed. Please see my report filed in the Madras High Court.

I have consistently held that ‘public interest’ is inextricably twined with Intellectual Property (please see my speech Life of P.I.). Therefore, only Constitutional Courts have the jurisdictional space and power to factor that in. I believe that the jurisprudence cannot be based merely on an adversarial mode but must partake of the inquisitorial mode. This ability, a writ court has, but not a tribunal created under an ordinary Act. The orders of the IPAB, even an order to adjourn a matter (for instance the Pegasys) drew the eyeballs of the media abroad. Such being the case, the jurisdiction should go back to the High Courts. Granting injunctions, vacating wrongly granted injunctions, revoking patents and considering counter-claims can all be heard by the same authority, i.e. the High Court, who can summon the records from itself, give directions to the Government, appoint amici and experts, expand the locus, do everything to ensure the protection of rights enshrined in Part III of the Constitution and realisation of the principles spelt in Part IV.

In the paper ‘Swine Flu, Bird Flu, SARS, Oh My! Applying the Precautionary Principle to Compulsory licensing of Pharmaceuticals under Art 31 of TRIPS‘ by Jennifer R. Andrew, we were asked to visualise a scenario in 2015 when a superbug, the likes of which we have never seen is spreading and asks if it would be alright to issue a preventive compulsory license when the patentee pharmaceutical company is sitting tight on it. This scenario is upon us a few years later and a superbug the likes of which we have never seen is spreading, it makes wimps of all the brave warriors in our system.

In an op-ed (‘Patents and protecting public health‘) written by Dr. Srividhya Ragavan and I, we referred to Kaushik Sunder Rajan’s book ‘Pharmocracy‘ where he said “that in a world in which the structure of monopolistic drug development is the norm, there are consequences for both health and democracy, since the initial rationale of patents as a purely instrumental monopoly in public interest is subverted and forgotten. The patent system is misconstrued as serving the patent owner. Similarly, there is wide misconception by trade lobbyists that trade obligations are subservient to sovereign rights. Neither of these propositions is correct. That is why the question raised in the petition filed by Prof. Basheer is not to be lightly taken. It is not only about the right to health but also about the state’s sovereign right to preserve public health and duty to fulfill a Constitutional mandate.” The petition referred to is the PIL filed by Professor Basheer regarding Form 27. Today with a dark cloud looming over me, I will feel safer if this duty is solely vested with the High Courts and not in piece with a tribunal that has been sitting “as and when”. What do you think?

This is just a repetition of what I have said or spoken or written in these many years. Prof. Basheer will be truly happy if someone rolls up their sleeves and acts.

We’re pleased to inform you that Sagacious IP is organizing a virtual conference on the occasion of World IP Day on ‘How MSMEs can Innovate and Lead into a Green Future’. The Conference is scheduled to be held on April 28, 2020. For further details, please read the announcement below:

Virtual Conference on ‘How MSMEs can Innovate and Lead into a Green Future’ on the Occasion of World IP Day [April 28]

To mark the occasion of World IP Day, Sagacious IP, with support from M/o MSME, Govt. of India, National Research Development Corporation (NRDC) and partnership with YourStory, European Business Technology Centre (EBTC), Taxmantra, Unicorn India Ventures, GoodWorks CoWork and Startkom is organizing a virtual conference on ‘How MSMEs can innovate and lead India into a green future?’.

The conference also calls upon Green Technology Startups to nominate and win a chance to present their pitch to the esteemed investors during the Virtual Conference.

Issues to be addressed by speakers

• Ways MSME’s can adopt to innovate for green future
• IP strategies to foster green innovation
• How to boost R&D in green technology domain
• Learning from renowned green tech companies
• Challenges and opportunities the in green technology space

Who should attend?

• MSMES
• Startups
• Inventors
• Green tech investors
• R&D companies
• In-house IP counsels

Speakers

• Mandeep Kaur, IAS, Joint Development Commissioner, M/o MSME, Govt. of India
• H. Purushotham, Chairman & MD, National Research Development Corporation (NRDC)
• Vivek Singh, Head – IP Drafting, Filing & Prosecution, Sagacious IP
• Joel Fernandes, Project Lead, Europe, Business Support to the EU-India Policy Dialogues
• Faiz Wahid, Regional Head – Europe, Sagacious IP
• Alok Patnia, Managing Partner & Founder, Taxmantra
• Anil Joshi, Founder and Managing Partner, Unicorn India Ventures

When?

April 28, 2020 | 2 PM – 5 PM PM IST

Registration

Please click here to register for the event. There is no fee charged for the registration or participation in the event.

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Last month, the US Supreme Court issued its judgement in an interesting case involving sovereign immunity for copyright infringement. This was the case of Frederick L Allen v. Roy A. Cooper, III, Gov of North Carolina et al. The copyrighted work in question involved the videos and photos taken by the plaintiff concerning the shipwreck of the Queen Anne’s revenge. The plaintiffs sued the State of North Carolina when it published some of these videos and photos online and the State of North Carolina moved to dismiss the suit claiming sovereign immunity. The district court agreed with the plaintiff, whereas the Court of Appeals for the Fourth Circuit reversed this decision. The US Supreme Court agreed with the Court of Appeals for the Fourth Circuit.

More than IP, this case involves constitutional law and what is perhaps, a unique situation in the US. As some readers may already be aware, in the US system, each State government is considered a sovereign entity within the Federal structure. Under the US Federal Structure, more power is conferred on the States that at the Federal level and therefore, the Federal Government has limited subjects on which it can make laws. It is an accepted principle dating back to the Federalist Papers that despite consenting to the formation of a federation called the United States of America, the States cannot be sued absent consent. However, precedents (pgs. 4-5 of Frederick L Allen v. Roy A. Cooper, III, Gov of North Carolina et al) suggest that where Congress (the Federal government) enacts unequivocal statutory language to abrogate said sovereign immunity and the law is justified under a constitutional provision, then State governments may be sued even without its consent.

The crux of the matter was whether a legislation passed by the Federal government in the copyright context validly abrogates the sovereign immunity enjoyed by State governments. The Federal statute in this case was the Copyright Remedy Clarification Act of 1990 (‘CRCA’). The relevant provision is contained in 17 U.S.C. §511. In summary, this provision states that any State, any instrumentality of a State, and any officer or employee of a State or instrumentality of a State acting in his or her official capacity, shall not be immune from suit in Federal court for copyright infringement. It also clarifies that the remedies available against any private or public party would equally apply here as well.

Unfortunately for the plaintiff, the US Supreme Court effectively held that its conclusion was foreclosed by a precedent set by the court in the patent context, in the case of Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank 527 U.S. 627 (1999). In that case, an almost identical provision under the patent law was held invalid to the extent it abrogated the sovereign immunity of States. The Court had very clearly held that the powers under the Intellectual Property Clause (Article I, §8, cl. 8) that authorize the Congress to enact IP laws, cannot be used by the Federal government to abrogate sovereign immunity. The US Supreme Court in the present case decided that it will stick by this precedent.

The alternative argument was that such a law is authorized by the 14^th Amendment. Section 1 of the 14th Amendment, among others, prohibits the States from “depriving any person of life, liberty, or property, without due process of law”. Section 5 of the 14th Amendment authorises the Congress (Federal government) to enforce the provisions of the 14th Amendment through appropriate legislations. Even after acknowledging that copyright was a form of “property”, the Court held that not all copyright infringements by the State would automatically violate the due process requirements. The Court held that for a due process violation to occur in the context of State action, the alleged infringement must be “intentional, or at least reckless“, without there being an adequate remedy for such infringement. The evidence before the Court pointed to the fact that there have not been any significant number of copyright violations by States and in any event, most of such past occurrences constituted in an honest misunderstanding rather than “wilful infringement” in any sense.

So, even today, in the US, State Governments can get away with copyright and patent infringements since their sovereign immunity stands. I wonder if this immunity has been taken advantage of in the past or even in today’s context with the COVID-19 scare. The answer is in the negative to the best of my knowledge (I am open to correction). It may be worth contemplating why this is the case.

Is US in violation of its international obligations?

To a large extent, the judgement may not be highly relevant to the Indian context because the doctrine is practically meaningless here and our Constitution also does not contain such unique provisions/limitations as were confronted by the US Supreme Court. States can be sued for IP infringement claims in India though they may claim any of the recognized defences contained within the relevant statute (e.g. Section 47(1),(2),(4) of the Patents Act; Section 52(1)(d),(e),(za) of Copyright Act).

However, in my opinion, it does raise the question of US’ international obligations. In public international law, the Federal/Central Government is held responsible for a breach of international law even by a sub-unit or even the judiciary. “State Responsibility” extends to acts of sub-units of the Federal Government, local bodies and even the judiciary. In my reading of the TRIPS Agreement (which also incorporates other IP treaties such as the Berne Convention, Paris Convention etc.), it does not permit for any carte blanche immunity for governments or instrumentalities thereof from being sued for infringement. The TRIPS Agreement does, however, permit narrow and limited exceptions to be created. This can be seen in Article 13, for instance, in the context of patents; Article 26(2) in the context of industrial designs; and Article 30 in the context of patents. All three provisions are identically worded and allow for exceptions that “do not unreasonably conflict with the normal exploitation of [IP right in question] and do not unreasonably prejudice the legitimate interests of the owner of the [IP right in question], taking account of the legitimate interests of third parties.” There is some jurisprudence on such provisions, being the Panel Report in US — Section 110(5) Copyright Act and the Panel Report in Canada — Pharmaceutical Patents. The three cumulative tests in the provisions are pretty subjective and I do not intend to get into a detailed discussion on the subject. Nevertheless, I do believe the question is legitimate and requires further exploration.

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Recently, the Cancer Patients Aid Association (CPAA) wrote to the Health Ministry and the Pharma Ministry urging them to revoke the Indian patent granted to Gilead’s Remdesivir, an anti-viral drug that is being tested as a potential cure for COVID-19.  With Remdesivir being granted a patent as recently as February 2020, CPAA has sought its revocation immediately under Section 66 of the Patents Act, 1970 on the ground of public interest and Section 64 of the Act on the ground of non-patentability of the drug.

Background

On 9^th April 2020 CPAA wrote to the Ministry of Health urging them to revoke the patent granted to Remdesivir (the letter can be accessed here). Remdesivir is a drug produced by Gilead Sciences Inc., for treating ‘filoviridae virus infections’ and can be used for treating Ebola virus, Cueva Virus and Marburg virus. The coronaviruses too belong to the filoviridae family. Initially, Remdesivir was produced by Gilead with major support from the US government, as a possible cure for the Ebola virus epidemic. However, clinical trials showed that the drug was not very effective for treating Ebola and the trials were abandoned (You can read more about the Remdesivir patent politics here). After modifications, Gilead made a patent application in India in 2015 and Remdesivir was granted a patent on 18^th February 2020. Currently, it is in its clinical trial stage and has not yet received marketing approval.

With the coronavirus pandemic, Remdesivir came back into the limelight when it was named as one of the most promising elements of the World Health Organization’s unprecedented global drug trial for finding a treatment for COVID-19, along with chloroquine and hydroxychloroquine, and a combination of Lopinavir and Ritonavir (two HIV drugs). Right now, Remdesivir’s importance has grown exponentially and it is being touted as essential for patients with co-morbidities such as cancer or diabetes. After recognizing the same, CPAA, an organization that works to create healthcare access for socio-economically underprivileged cancer patients, sought the revocation of Remdesivir’s recently granted patent to ensure that the drug is available to those in need at affordable prices and also for the generic alternatives of the same to be produced. It should be noted that CPAA has currently made only a representation to the Health Ministry and no legal recourse has been sought out yet.

The Patentability Test

Section 2(j) defines an ‘invention’ as “a new product or process involving an inventive step and capable of industrial application and Section 2(ja) defines an ‘inventive step’ to be a technical advance that is not obvious to a person skilled in the art. Section 3 lists out items that are not inventions for the purposes of the Act. This gives the basic criteria for patentability in India, which is a 3-step formulation that says any invention must have novelty, be non-obvious and have industrial application. Only when the patentability of the subject matter and novelty come together to form a synergistic product, a patent can be granted.

The plea put forth by CPAA aims to establish that the Remdesivir patent application was only for a salt of a known compound, therefore lacking patentability and barred by Section 3(d) of the Patents Act which says that a new form (such as salts, esters etc.,) of a known substance that does not result in increased efficacy cannot be patented. Further, it claimed that novelty and an inventive step are lacking as the present patent has been granted for anticipated modifications of the compounds already disclosed in Remdesivir’s PCT applications and these are obvious to a person skilled in the art. With these two contentions in place, CPAA is attacking the basis of the patent granted. The plea also brings to question the Patent Office’s ability to appreciate prior art documentation in the grant of patents. We have written much about the Patent Office on our blog and a recurring theme has been the administrative shortcomings that plague the functioning of the Office and concerns regarding their examination of patents  (see posts here, here and here).

Novelty and Inventive Step: Nothing New Here?

While the public interest argument is the key contention of CPAA’s appeal, a perusal of the letter would show that there is an elaboration of why Gilead’s Remdesivir is not patentable in India and hence the granted patent must be revoked as per Sections 64(1)(d), (e), (f) and (k). Section 64 concerns the revocation of patents. 64(1)(d) holds that a patent can be revoked for any claim that is not an invention within the meaning of the Patents Act; 64(1)(e) puts in the novelty requirement for patentability; 64(1)(f) is the non-obviousness requirement and 64(1)(k) holds that a patent can be revoked when the claim is not patentable under the Act. The idea behind this section is that the patents granted by the Indian Patent Office do not have a presumption of validity and thus, allowing petitions against the same and shifting the burden of proof on the patentee to prove otherwise works as an effective counter-balance.

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CPAA claims that application WO 2012/012776,  PCT/US2011/045102 and PCT/US2015/057933 filed by Gilead Sciences in 2012 and 2015 respectively under the Patent Cooperation Treaty (PCT) are proof of the prior art available for the current Patent No. 332280 (with Application No. 201727012821) for Remdesivir in India.

However, from the letter it is not clear if there is any expert evidence backing the claims of novelty and obviousness and the section 3(d) argument. A normal practice in patent revocation petitions (in the IPAB) is to file the claim with affidavits of an expert witness as evidence that supports the arguments on novelty and obviousness. This evidence is necessary to prevent any hindsight bias that would arise and make inventions seem obvious, even if it were not so. The use of the Section 3(d) argument too must show how the derived compound does not meet the efficacy criteria. Until there is expert evidence on the matter, it is best to not reach any conclusions regarding the validity of the patent. The contestation of Remdesivir’s patentability should ideally take place either in the form of a post-grant opposition as per Section 25(2) of the Act or through a revocation petition in the IPAB under Section 64 itself, although this may be delayed as the IPAB currently does not have a technical member for patents to scrutinize this claim. It must be noted here that patient groups have successfully filed post-grant oppositions in the past and this particular group had filed a successful pre-grant opposition against Glivec in 2006. The compulsory licensing (CL) option under Section 84 of the Act, that often comes up in the context of pharma patents, is not available in this instance as, for CL to apply three years must have passed from the date of grant of patent and Remdesivir’s patent was granted only a couple of months back.

Public Interest and Patents

CPAA using Section 66 of the Patents Act for the revocation of Remdesivir’s patent may be particularly forceful right now if the drug’s potential to treat COVID-19 is actualized. Relying on the fact that the Right to Life under Article 21 of the Indian Constitution also encompasses the Right to Health, CPAA is focusing on the need for affordability of Remdesivir and production of generic alternatives for the same.

While we have already discussed the policy choices and the Right to Health push to address patent law that may come in the way of effective responses to the pandemic, the Section 66 argument provides for another option to be pursued. Section 66 reads –

Revocation of patent in public interest —Where the Central Government is of opinion that a patent or the mode in which it is exercised is mischievous to the State or generally prejudicial to the public, it may, after giving the patentee an opportunity to be heard, make a declaration to that effect in the Official Gazette and thereupon the patent shall be deemed to be revoked.

Since its inception, public interest as a ground for revocation of patents has been used twice in India in 1994 and 2012. In 1994, a process patent for producing cotton cells granted to a US Company Agracetus was revoked in order to preserve farmers’ rights and to prevent a subsequent negative impact on the Indian economy. In 2012, a controversial Avesthagen patent for treating diabetes was revoked for being prejudicial to the public. Given this precedent, the public interest claim does have a strong backing to push for the revocation of Remdesivir’s patent, given the extraordinary circumstances. Further, with many petitions across the world seeking compulsory licensing and change in the working mechanism of patent law for potential treatments for COVID-19 (for instance, see here, here and here), CPAA’s plea may only gain more traction.

If it happens, the invocation of Section 66 will be an exercise of the executive power thus overcoming the procedural and evidentiary hurdles in exchange for expediency. However, the Central Government must then be prepared for a significant backlash and retaliation from India’s trading partners, particularly the US and Big Pharma despite the circumstances and hence must treat it as a last resort option.

Finally, with the Indian pharma industry’s potential to produce affordable generic alternatives, the recently granted patent may come in the way of crucial efforts in the search for cheaper, more affordable treatments. For instance, there were media reports that Dr. Reddy’s Laboratories was in the works of creating a generic version of Remdesivir, which the pharma company has now denied. While there may be a plethora of reasons behind this denial, the concern over a possible patent infringement suit cannot be overlooked. To deal with such concerns effectively, there is an urgent need to address any possible barriers held up by patent law with due forethought to the consequences of policy changes.

Please click here to view our other posts related to COVID-19 and here to view other important IP developments related to it.

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Every year, April 26^th is celebrated as World IP Day. WIPO’s website states that the aim of the celebration is to “learn about the role that IP rights play in encouraging innovation and creativity”. A less remembered and celebrated fact though is how fair use provisions play an equal, if not larger role, in fostering creativity and innovation.

Such a skewed view often results in people being less aware/prevented from availing the benefits of fair use provisions. I was recently (well, after the lockdown, it seems like ages) privy to one such instance where a students’ club was served with a copyright infringement notice for screening a documentary without a licence. Other than students and faculty members, the screening was attended by an external panelist who led the post-screening discussion. The screening was not open to the general public and was conducted within the premises of the campus.

Will a screening conducted under such circumstances be said to constitute infringement? Or is it covered under any of the fair use clauses?

Section 52(1)(j) and screening by students – Uses and audience

The Copyright Act, 1957 provides that film screening in educational settings is fair use. Section 52(1)(j) lays down that the performance of a literary, dramatic, musical work or a cinematograph film or sound recording in an educational setting will not fall foul of the Act if:

• it is in the course of the activities of an educational institution;
• it is done by staff and students of the institution; and
• the audience is limited to such staff and students, parents and guardians of the students and persons connected with the activities of the institution

To be clear, in the case of cinematograph films and sound recording, the benefit of the provision extends to ‘communication’ of such work too and not just their performance.

It should be clear from above that Section 52(1)(j) is couched in broad terms. For instance, the use of these works is not limited to course of instruction. Instead, as long as it is in the ‘course of the activities’ of an educational institution, it is fair use. Thus, screening of films by a students’ club is very well within the protective cover of this provision.

Similarly, the audience may include not just staff, students, parents and guardians but also ‘persons connected with the activities of the institution’. This too is indicative of the broad based scope of the provision and should take care of the presence of panelists and other people who may take part in such screenings.

Interestingly, this is one of the rare fair use provisions in relation to cinematograph films.

Nature of the copy used

A question which may then pop up is whether the copy from which the movie is screened should have been validly obtained. Section 52(1)(j)only exempts the performance or communication of these works and does not provide any immunity to the act of piracy itself. Thus, if a pirated copy is used to screen the movie, consequences for it should follow separately.

The US law though on this is quite clear. It provides that display of a motion picture for the purpose of classroom teaching shall not be considered infringement, unless its display was from an illegally made copy. Moreover, the US position is narrower on the type of educational activities covered. It is the display of motion pictures in the course of face-to-face teaching activities which is covered rather than the whole gamut of educational activities like in India.

This brings us to the next question of whether Section 52(1)(j) will even cover online teaching, especially given that a big chunk of post-pandemic era teaching happens online.

What about screening during online classes?

A week back, Namratha had published an excellent post on how far fair use provisions in relation to education will apply to online teaching. Although she did not specifically discuss the Section 52(1)(j) scenario, most of the points she had made apply equally to this context also. Two points in particular stand out: 1) in the DU photocopy case, the Court had given an expansive interpretation to the expression ‘in the course of instruction’ to cover even activities outside mere classroom lecturing, 2) fairness of use in Section 52 is to be determined by the language of the provisions.

As mentioned in the beginning, the language used in Section 52(1)(j) is expansive and is, in fact, wider than Section 52(1)(i). Thus, not only is performance or display of work allowed ‘in the course of instruction’ but is also accepted ‘in the course of activities of an educational institution’. In the absence of any prohibitions, it will have to be said that the reach of Section 52(1)(j) extends to even online teaching.

Conclusion

Despite the existence of specific fair uses under Section 52, it is not unusual for copyright holders to discourage such uses by sending take down and infringement notices. This is to discourage more people from availing the benefit of these fair use provisions or simply out of ignorance. Rather than getting cowed down, it is imperative that everyone, especially students, is made aware of the specific protections that the Copyright Act provides for.

We have for our readers today an invited guest post from Neha Mishra, currently a post-doctoral fellow at the Centre for International Law, National University of Singapore. Neha earned her BA.LLB degree from NLS Bangalore several years ago (where we were classmates) after which she practised law briefly in London and India. She then went on to collect degrees in law and public policy from the London School of Economics, National University of Singapore and finally a PhD from Melbourne University on how international trade law and internet policy can be better aligned with cross border data flows.

Neha’s PhD thesis which can be accessed over here, won the Harrold Luntz Graduate Research Prize for the best thesis by a graduate student at the Melbourne Law School. Her research comes at an interesting time for India which is currently in the process of creating its own data protection regime. At some point of time in the near future, the world will have to decide on an international regulatory framework for cross-border data flows failing which we are going to see increased trade tensions on issues such as data localisation. India is already facing heat on this aspect from the United States.

In this post, Neha provides us with a snapshot of one of the areas of her research. It is an abridged version of her article Building Bridges: International Trade Law, Internet Governance and the Regulation of Data Flows, which was published in the Vanderbilt Journal of Transnational Law 2019. While she has taken pains to point out to me that it is not related to intellectual property, I did pester her for this piece because as an IP blog we do end up covering data protection issues quite often and the issues raised in her thesis are likely to end up influencing some aspects of IP policy in the near future.

Cross-Border Data Flows in WTO Law: Moving Towards an Open, Secure and Privacy-Compliant Data Governance Framework

By

Neha Mishra

The digitalisation of the economy and the heavy dependence on cross-border data flows raises complex questions regarding the potential role of international trade agreements in data governance and digital regulation. As concerns around cybersecurity protection, privacy and data protection, and online censorship increase, governments across the world are struggling to strike a balance between digital openness/innovation and safeguarding legitimate internet public policy concerns. Consequently, governments increasingly impose restrictions on cross-border data flows such as data localisation laws and stringent compliance requirements in domestic censorship, privacy, and cybersecurity laws. These restrictions directly restrict cross-border flows of services, and thus may violate rules contained in international trade agreements such as the General Agreement on Trade in Services (‘GATS’) of the World Trade Organization (‘WTO’). This interface of international trade rules (such as those contained in WTO treaties) and internet public policy raises complex and interesting questions regarding how international trade law regulates or can regulate cross-border data flows.

The GATS does not completely restrict government restrictions on cross-border data flows. Under the GATS, WTO Members are permitted to take measures necessary to achieve specific policy objectives (referred as the “necessity test”) listed in various exceptions including protecting public morals/order (GATS art XIV(a)), achieving compliance with domestic laws (GATS art XIV(c)) and national security (GATS art XIVbis). Read in an evolutionary manner, these exceptions arguably cover different internet-related policy objectives advocated by governments including online censorship, privacy/data protection, and cybersecurity protection. Consequently, applying the necessity test to trade-restrictive measures pertaining to cross-border data flows entails a complex balancing of the principles of trade liberalisation enshrined in international trade agreements and domestic laws and regulations on internet and data regulation.

Balancing trade and internet policy objectives necessitates re-orientation of international trade rules to address policy challenges of a data-driven world. This exercise involves examining how the GATS obligations (such as non-discrimination (GATS art II; GATS art XVII), market access (GATS art XVI), rules on domestic regulation (GATS art VI)) and exceptions (art XIV; art XIVbis) apply to measures restricting cross-border data flows. In conducting this legal analysis, I propose a theoretical framework based on the three fundamental principles of internet governance applicable to cross-border data flows, namely internet openness, internet privacy, and internet security. Internet openness implies the free flow of data across the internet without unnecessary disruptions or controls, thereby promoting interoperability and integrity of the internet as well as internet-driven technologies and services. Internet privacy refers to protecting the privacy or information/data related to personal lives of internet users including preventing unauthorised use, collection, and disclosure of such data. Internet security means ensuring confidentiality, availability, and integrity of data. Internet openness, privacy and security are mutually complementing and supportive principles; in other words, internet privacy and security are enablers of digital trust and thus preconditions of internet openness. In practice, however, several governments fail to adequately balance internet openness, privacy and security.

In assessing internet policy-related restrictions on cross-border data flows under the GATS, WTO tribunals can and should make an effort to align GATS rules with the principles of internet openness, privacy and security. For example, market access and national treatment commitments of WTO Members in different service sectors, if interpreted in a technologically neutral manner, can facilitate both trade liberalisation and internet openness. Similarly, GATS obligations on non-discrimination, domestic regulation, and market access (subject to Members’ relevant commitments and exemptions) generally facilitate an open market for cross-border data flows, thereby supporting internet openness. Further, under the necessity tests, WTO tribunals can draw a rational distinction between protectionist measures disguised as cybersecurity or privacy measures and measures genuinely necessary to achieve these objectives, thus striking the necessary balance between internet openness, privacy, and security. A holistic assessment of such measures under GATS (i.e. understanding the implications of the measure on not only trade but also internet openness, privacy and security) requires looking at both the legal and technological implications of data restrictions. Understanding the technological implications of data restrictions falls outside the expertise of the WTO. While consulting internet technical experts (e.g., internet technical bodies such as the Internet Engineering Task Force) is a potential solution, the multistakeholder and dispersed nature of internet governance limits meaningful collaboration between the WTO and internet technical and policy bodies.

The alignment of GATS with the principles of internet openness, privacy and security is also constrained by the lack of multilateral consensus on internet policy issues and the somewhat outdated architecture of GATS. To address these deficiencies, the WTO must consider multi-pronged reforms consisting of: (i) internal reforms at the WTO to facilitate better use of transparency mechanisms (GATS art III) and mutual recognition provisions (GATS art VII) (especially in the case of data certification and data transfer mechanisms); (ii) substantive reforms to develop new disciplines on cross-border data flows and related areas.  In that regard, the WTO may also consider developing a non-binding declaration on data flows (without prescribing standards or principles on privacy or cybersecurity, which are much better suited for other international/transnational fora) as well as increasing avenues for meaningful regulatory cooperation among WTO Members; (iii) external engagement outside the traditional multilateral/intergovernmental mechanisms by collaborating with relevant transnational and multistakeholder internet governance bodies. While engaging with these bodies during the negotiation of trade agreements is difficult, the expertise of the internet technical and community can be relevant both during the pre-negotiation stage (i.e. when countries formulate their trade strategies) and post-negotiation stage (in implementing the trade agreement as well as resolving digital trade disputes).

Most international trade agreements, especially the WTO treaties, were not designed to address issues of the data-driven world. While it remains possible to interpret international trade agreements, such as the GATS, flexibly and creatively to support internet openness, reduce data protectionist measures, and promote good internet policy, there are inherent limitations. Although the reform agenda proposed above appears to be ambitious and politically difficult to attain in the short run, all countries have strong incentives to derive the economic benefits from the digital economy. International trade agreements will remain as important instruments in the near future in helping countries integrate with the global digital economy; thus, countries must engage in negotiations in good faith at the WTO and other trade fora to reduce trade restrictions in data-driven sectors as well as promote coherence in global data governance.

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

Topical Highlight

Namratha wrote about Cancer Patients Aid Association’s (‘CPAA’) call for revocation of Gilead’s Remdesivir, a drug being tested as a probable cure for COVID-19. She states that Remdesivir was granted a patent in India in February 2020, and that it has been touted as ‘essential’ for treatment of COVID-19 patients suffering from other serious health conditions simultaneously. She further notes that CPAA’s plea maintains that Remdesivir is hit by section 3(d) of the Patents Act and that its claims are obvious to a person skilled in the art. She examines the grounds of revocation put forth in CPAA’s letter, and observes that the claims in the letter lack the backing of expert evidence. Giving an overview of revocation of patents in public interest, she states that the setting is ideal in light of the COVID-19 pandemic, for the government to exercise its executive powers. However, she warns that such a move may spark off retaliation from India’s trading partners.

Thematic Highlight

I wrote a post discussing the conundrum surrounding the classification of the offence under section 63 of the Copyright Act as cognizable or not. I begin with highlighting the protracted nature of the debate concerning the classification of the offence contained in section 63. I emphasize upon the fact that the Delhi HC has found a solution through its reliance upon the Supreme Court’s decision, but that such an approach lacks sound legal reasoning. Subsequently, I refer to the recent decision of the Rajasthan HC in Nathu Ram v. State of Rajasthan, where the HC observed that the matter of classification required to be determined by a larger bench. I link this discussion on the classification of the offence to its implications on freedom of speech and expression. Accordingly, I state that the classification of the offence under section 63 as ‘cognizable’ would grant unbridled powers to the police, while also preventing creative endeavours from being undertaken due to the fear of an arrest.

Other Posts

The last week saw Prashant and Arun continue their debate on whether IPAB needs to be shut down. In Prashant’s rejoinder to Arun’s counter, he notes that the former Chairperson of the IPAB, Justice Prabha Sridevan along with first generation IP lawyers and IP lawyers from Bombay support the move to shut down the IPAB and transfer its functions back to the High Courts. He contends that Arun avoided engaging with a number of issues previously raised on the blog regarding the ‘quality of appointments’ to the IPAB. He further points out cases where the IPAB arrived at faulty decisions. With respect to Arun’s point concerning Justice Manmohan Singh, Prashant notes that he has, on many occasions in the past, criticized his faulty legal reasoning on the blog. Subsequently, he observes that the infrastructure at the IPAB has been stagnant, in spite of promises of improvement. Finally, he notes that shutting down of the IPAB and transferring its functions back to the HCs is prudent as: first, the HC does not have ‘technical members’, and second, it will not be non-functional for long periods of time.

Arun begins his reply to Prashant’s rejoinder by stating that in a recent interview by Justice Prabha Sridevan, she emphasized upon the importance of the IPAB as a tribunal. He notes that Prashant’s argument on certain lawyers being in favour of scrapping the IPAB is ‘unsubstantiated and unnamed’. Arun does not agree with transferring matters pending before the IPAB back to the HCs due to the existing burden on them and the delay involved in disposing cases. He further suggests that a moving roster of judges and members as has been successfully implemented at the NCLT, can be created for the IPAB as well. Subsequently, he notes that scrapping of the IPAB will give rise to new issues, as the existing statutory regime as well as numerous decisions of the Supreme Court are predicated on the existence of IPAB. Moreover, he also expresses concerns that district courts, which are the natural forums for IP disputes, may be ill-equipped to deal with IP matters for want of specialized knowledge.

Through an insightful post, Justice Prabha Sridevan opines that IP jurisdiction should be firmly restored to the High Courts. She states that the IPAB was never meant to be empowered, and notes the delay in its appointments and inadequate infrastructure as a testament to the same. Further, she observes that IP is intertwined with the concept of ‘public interest’, and accordingly favours the reversion of IPAB matters to constitutional courts. She states that all the functions of the IPAB can be smoothly and efficiently subsumed by the HCs. Referring to the COVID-19 crisis, Justice Sridevan argues that the duty in respect of IP rights should be ‘solely’ vested with HCs and not with the IPAB, which sits irregularly.

Latha examined whether the Trade Marks Act permits sub-licensing of trademarks. She observes that sub-licensing is not permitted under the Act for various reasons. First, the reading of provisions related to ‘permitted use’, namely, sections 2(1)(r) and 49 indicate that the permitted use agreements are by the proprietor in writing to the user, thereby barring the licensee from entering into agreements to further license such rights. Second, she notes that the Act mandates quality control to be exercised by the proprietor alone, which again bars a licensee from sub-licensing. Third, she notes that section 54 of the Act explicitly prevents a registered user from further licensing or transmitting the mark. Fourth, she notes that section 48(2) of the Act concerning permitted use does not envisage sub-licensing of the mark. She notes that the Act does not envisage an exclusive license in respect of trademarks, before concluding that India may be one of the few countries which does not provide for sub-licensing of marks.

Adarsh wrote a post on the US Supreme Court’s decision in Frederick L Allen v. Roy A. Cooper, III, Gov of North Carolina. Through the judgment, the Court held that a State was immune from claims of copyright infringement on the principle of sovereign immunity. He notes that in spite of an explicit provision stripping the State’s immunity in respect of copyright infringements, the SC relied upon a precedent which held a similarly-worded law to be invalid as it abrogated sovereign immunity of the States. He further points out that the SC did not accept the argument based on the ‘due process’ clause, as it considered States to be victims of an ‘honest misunderstanding’, and not guilty of ‘wilful infringement’ of copyright. He concludes by pointing out the potential violation of US’s international obligations under the TRIPS Agreement, as it does not offer a blanket immunity from copyright infringement to governments or any of its instrumentalities.

On the occasion of the World IP Day, Balu wrote about realizing the potential of the fair use provisions in supporting creativity and innovation through reference to section 52(1)(j) of the Copyright Act. First, he notes the wide ambit of section 52(1)(j), clarifying the permissible activities and the audience covered by it in respect of film screenings by educational institutions. Second, he states that section 52(1)(j), similar to its American counterpart does not provide immunity against piracy, and further notes the narrower scope of the fair use provision concerning educational activities under the American law. Third, he emphasizes upon the wide scope of section 52(1)(j), and claims that it may even extend to online teaching.

SpicyIP Announcements

We informed the readers about Sagacious IP’s virtual conference on ‘How MSMEs can Innovate and Lead into a Green Future’. The Conference is scheduled to be held tomorrow (April 28, 2020) between 2 PM to 5 PM IST. Further information on the issues to be addressed by the speakers, the roster of speakers and the process for registration (which is free) is mentioned in the post.

Other Developments

India

Judgments

Jai Bhagwan Gupta v. Registrar of Trade Marks and Others – Delhi High Court [March 3, 2020]

The Petitioner had registered marks ‘JEERA PUJARI’ and ‘JAI PUJARI BRAND’ in respect of jeera and sauff since 1980. In spite of its registrations, the Petitioner noted that the Registrar of Trademarks was advertising various trademarks consisting of the word ‘PUJARI’. The Court set out the relevant provisions in respect of application and acceptance of trademarks, and noted that in recent times all trademarks were being advertised before acceptance without examining if they were fit for registration. The Court also stated that an order was required to be passed recording the reason for the acceptance of a trademark. Accordingly, the Court directed the Registrar of Trademarks to ensure that an order is passed in respect of marks which proceed to advertisement, and that such acceptance of marks should not be without the application of mind.

Creative Travel India Private Limited v. Creative Tours and Travels and Another – Delhi High Court [April 21, 2020]

The dispute between the Parties arose on account of the Defendants’ alleged infringement of the Plaintiff’s mark ‘CREATIVE TRAVEL’ by using a deceptively similar mark ‘CREATIVE TRAVEL AND TOURS’ in respect of the travel industry. The Court granted an ex-parte interim injunction in favour of the Plaintiff, which was subsequently vacated. In the meantime, the IPAB ordered Defendant No. 1’s registration of the mark ‘CREATIVE TRAVEL AND TOURS’ to be expunged. The Court noted that the mark of Defendant No. 1 continued to be on the Register of Trade Marks only because of the interim order of the Bombay High Court which stayed the IPAB’s order. The Court observed that Defendant No. 1’s name resembled the Plaintiff company’s name, and both provided identical services. Moreover, the Court observed that confusion between the marks was implicit as the ‘prominent and distinguishing’ parts of both the names was ‘CREATIVE’. Rejecting the Defendants’ plea that the word ‘CREATIVE’ is generic, the Court noted that Defendant No. 1 had itself registered the mark and could not adopt such a plea. Regardless, the Court noted that the adoption of the mark ‘CREATIVE’ in respect of travel and tourism would not be generic to the trade. Considering Defendant No. 1’s appeal to the Supreme Court against the IPAB’s order, the Court noted that in case the appeal succeeds, the Plaintiff would be eligible to the reliefs on the grounds of infringement and passing off, and otherwise, only the ground of passing off. The Court also noted that a case of delay in bringing forth the action could not be made out against the Plaintiff, as the Defendants had failed to prove knowledge on the part of the Plaintiff. In light of the Plaintiff’s stance, the Court noted that its decree would not serve as a hindrance for the Defendant No. 1 to change its name to ‘CREATIVE ENTERPRISES’.

Reckitt Benckiser (India) Private Limited v. Hindustan Unilever Limited – Delhi High Court [April 22, 2020]

The dispute between the Parties arose on account of the Defendant’s advertisement for its mark “LIFEBUOY” which was allegedly disparaging and injurious to the goodwill and reputation of the Plaintiff’s mark “DETTOL”. The Court noted that the Defendant’s advertisement in respect of which allegations were made was last aired in 2018. The Court stated that there were previous orders of the Calcutta High Court which had restrained the Defendant from comparing its product with that of the Plaintiff. With respect to the Defendant’s argument that in a previous decision the Court had held differently from the decisions of the Calcutta HC, the Court observed that there was nothing in its previous order to effect such a reading. Moreover, the Court observed that the Plaintiff had made out a prima facie case of disparagement, as the Defendant’s advertisement was motivated by malice. Accordingly, the Court granted an interim injunction restraining the Defendant from airing the advertisement till the final decision in the suit.

News

• The Patent Office, Delhi directs all officers of the rank of Deputy Controller and above to attend office on all working days.
• Anna University files patent for its enhanced sanitizer which claims to eliminate not only the outer envelope of the Coronavirus, but also its genetic material.
• Indian pharmaceutical companies, namely Cipla, Glenmark and Dr. Reddy’s Laboratories reported to have apparently started working on the development of Gilead’s patented drug Remdesivir, considering its promising results in trials.
• Publishers of Assamese classics warn members of the public of copyright infringement action for transmitting unauthorized PDF versions of the books.
• A report by NASSCOM states that 1338 patents were filed by India-domiciled companies in the US in 2018-19.
• Justice Pratibha Singh of the Delhi HC, in a piece in the Times of India, argues for the creation of a public platform of all stakeholders to share their research and communicate, in addition to facilitating filing of patents and providing information concerning on-going research in the field.

International

• US grants a patent to Israeli Professor, Jonathan Gershoni’s technology which aims to strengthen the human immune system to block the Coronavirus.
• Knowledge Transfer Ireland announces a dedicated COVID-19 non-exclusive, royalty-free licence in order to aid national response to the COVID-19 pandemic.
• Amazon, IBM, Microsoft and Sandia National Laboratories join the ‘Open COVID Pledge’ by making their patents freely available for the fight against COVID-19. We have reported on the Open COVID Pledge here.
• New York photographer Steve Sands sues Jennifer Lopez for copyright infringement over use of her own photograph on Instagram, without taking any permission or paying any compensation.
• Cyprus regains its UK certification trade mark rights for its famous cheese, ‘halloumi’ following an administrative fault which caused the loss of those rights.
• A piece in Bloomberg Law argues that the COVID-19 pandemic has called for a focus on voluntary methods of sharing intellectual property.
• A piece in Qrius argues that the moral underpinnings of IP rights should be honoured in light of the COVID-19 pandemic, and companies should forfeit their patent rights in favour of public interest.
• A piece in JDSupra argues for a new approach to be adopted by courts to grant patent damages for “public interest infringement” while developing products to fight COVID-19.

The British Museum Reading Room (Image from Wikimedia Commons)

Quarantine and lockdown in the midst of the CoViD-19 pandemic has left entire populations without physical access to schools, colleges and public libraries. Even more than before, this has shone a spotlight on the digital access to cultural and educational resources. Taking a cue from Namratha’s insightful post on the responses of copyright law in such a situation, in this post I explore the many legal contentions around the ‘digital’ access to libraries, particularly in the present moment.

This is not merely a theoretical exercise – in March, the Internet Archive launched a ‘National Emergency Library’ in response to the closure of all public libraries in the USA. The National Emergency Library expands the Internet Archive’s existing program of ‘controlled digital lending’ (CDL), to allow the simultaneous but time-limited ‘borrowing’ of close to 1.4 million digital literary works. A ‘whitepaper’ on Controlled Digital Lending, relied on by the Internet Archive, states as follows:

“Essentially, CDL must maintain an “owned to loaned” ratio. Circulation in any format is controlled so that only one user can use any given copy at a time, for a limited time. Further, CDL systems generally employ appropriate technical measures to prevent users from retaining a permanent copy or distributing additional copies.”

This has generated a contentious debate in the US about the limits of copyright law in an emergency. Another mass digitization repository, HathiTrust, has also made emergency provisions for libraries to provide digital access to their collections, through its Emergency Temporary Access Programme. The National Digital Library of India, a project of the Ministry of Human Resources, according to press releases, has also ‘opened up’ close to 7 million copyrighted books and articles for students, apparently released under a ‘national license’ (what this license may entail is unclear to me).

Digital works have posed major challenges to copyright which remain unresolved even after decades, particularly under Indian law. The digitization and sharing of literary works and books has, unsurprisingly, generated its fair share of controversy. The legality of book-lending efforts like Controlled Digital Lending has not been determined in India or in the US. We can, however, speculate on the legal basis for these efforts in India. Any defence against copyright infringement for the purpose of digital lending would primarily rely on two defences – first, that the ‘lending’ of a lawfully possessed copy of a literary work does not infringe copyright as defined under Section 14 of the Copyright Act; and second, that the use is, in any event, fair dealing, protected under Section 52 of the Copyright Act.

Digital Lending and Copyright Exhaustion

The doctrine of copyright exhaustion or the ‘first sale’ doctrine is a part of Indian law, flowing from Section 14(ii) of the Copyright Act, which grants the exclusive right to the owner of copyright to ‘issue copies of a work, not being copies already in circulation’. The language of the Act allows copies which have already been sold or legally distributed to be redistributed by an authorised buyer or owner of a copy, and such resale or redistribution would not be an infringement of copyright. The exhaustion doctrine is relied upon both for the resale of second-hand books or the lending of books by libraries. However, the nature of digital works and the ease of their reproduction has made this doctrine difficult to translate into the digital world. Digital works are copied in almost every computing or networking transaction, whether within a computer or through a network. How, then, should copyright law deal with the notion of ‘digital’ redistribution?

A US court, in the case of Capitol Records v ReDigi, held that the first sale doctrine does not protect a digital music ‘resale’ service which attempted to ensure that only one copy of a work existed at a time, by deleting, bit-by-bit, the ‘original copy’ of the reseller. The court stuck to a textualist interpretation of the copyright owners’ right to issue copies, holding that the music resale service still implied the creation of unauthorized copies of a copyrighted work, both in the service of the intermediary (ReDigi) as well as the ultimate buyer of the resold song.

The CJEU, on the other hand, permitted a Dutch library to continue its ‘ebook lending’ program which provided only one validly purchased copy to one subscribed user, applying a more purposive interpretation of the right to issue copies for digital works. Essentially, the CJEU held that the lending of a digital copy of a book will be held to the same standard as the lending of a physical copy. However, this was in the context of specific legislation introduced in the EU, namely, the Rental and Lending Directive.

In the absence of similar legislation or any judicial precedent on the scope of digital exhaustion in India, it remains unclear how courts would consider the scope of ‘copies already in circulation’ for the purpose of digital works. Ultimately, it may depend on the model adopted by a library or lending service – if sufficient efforts are taken to ensure that the ‘lending’ of books creates artificial scarcity, such as in a ‘one-to-one’ lending model, such an interpretation may serve the purpose of allowing digital access to libraries while maintaining the prevailing incentive model of copyright law.

Fair Dealing or Education Exceptions

Libraries intending to engage in ‘digital lending’ can also potentially argue that such lending falls under one of the exemptions to copyright under Section 52. Three exemptions could potentially apply in this situation. First, the libraries may argue that the digitisation and sharing of books constitutes ‘private or personal use, for research’ which is exempted under Section 52(1)(a)(i). In the landmark judgement in CCH v Law Society of Upper Canada, the Supreme Court of Canada gave a broad interpretation to the term personal use and research, in the context of a public library sending copies of copyrighted works to its patrons.

Whether an activity constitutes fair dealing is a contextual question to be decided on the facts of each case, taking into account a number of factors, including available alternatives and the nature of the dealing (commercial or non-commercial). This makes it an important right to rely upon in times of emergency as the present, where one of the few possible alternatives to schools libraries is digital access. Controlled Digital Lending, properly implemented, can likely rely upon this exemption, particularly in the state of exception that we are currently in.

Another potential provision which may be relied upon in the context of educational institutions and their patrons is under Section 52(1)(i), which allows for reproduction of a work ‘in the course of instruction’. This was broadly interpreted in the DU Photocopy case by the Delhi High Court, which upheld the photocopying of copyrighted material for distribution of ‘course packs’ and held that “So long as the copying forms part of and arises out of the course of instruction it would normally be in the course of instruction”.

This expansive reading of Section 52(1)(i), in my opinion, provides ample ground for university and school libraries to provide digitised versions of course packs, as well as other library collections to their students through a version of Controlled Digital Lending.

That said, creating the infrastructure for digital learning requires more than just a sound legal basis or innovative licensing terms for digital works. The public library system in India has been neglected for decades, and for all the hype around ‘Digital India’, little effort has been put into accessible remote education through the internet. The NDLI itself has repeatedly run into hurdles, and while it has an ambitious mission statement, it barely compares to efforts like HathiTrust or the Internet Archive. It shouldn’t take a crisis to realise that our laws and our public educational institutions are in dire need of reform.

Please click here to view our other posts related to COVID-19 and here to view other important IP developments related to it.

We’re pleased to bring to you a guest post by Kapil Wadhwa on the issue of permissibility of sub-licensing of trademarks in India. Last week, Latha had discussed this issue on the blog, arguing that sub-licensing is not permitted under Trade Marks Act. In this post, Kapil provides a different interpretation of the statutory provisions and argues that the Indian law does permit sub-licensing of trademarks.

Kapil is an intellectual property law practitioner based out of New Delhi and a Partner at Wadhwa Law Chambers. He graduated with an LL.M. in Law, Science & Technology in 2013 from Stanford Law School. He is the editor of Venkateswaran on Trade Marks & Passing Off (5th edition, 2010, LexisNexis).

Is Sub-Licensing of Trademarks Permitted under Indian Law? : An Alternate Interpretation

Kapil Wadhwa

I recently came across an interesting post on the blog on whether sub-licensing of trademarks is permitted under the Trade Marks Act, 1999 (Act) and wish to add to the discussion putting forth a different interpretation of the statutory provisions.

An owner of the brand/ registered proprietor (‘RP’) himself usually undertakes the manufacturing/ marketing and thus directly controls the use of the mark in print or other visual representation. However, quite often the owner does not have the capacity to undertake all brand-related activities on his own. And therefore they might wish to outsource the manufacturing to another entity, while at the same time ensuring that the quality/ specifications of the outsourced product matches with the quality of the owner’s original products. License agreements typically detail the dos and don’ts with conditions regarding quality control, royalties, geographical restrictions etc. Such use of a mark by a third party under a license/ agreement under the relevant circumstances is recognised as permitted use and any goodwill accrued from such permitted use is deemed to be accrued to the RP. In today’s day and age licensing has become a prevalent practice adopted by brand owners to expand their footprint across the world.

Several international brands have also adopted sub-licensing/ franchising as a business model, having created one entity that owns the intellectual property, and further licenses it through subsidiaries in each country. The subsidiary licensee in such transactions enters into sub-licensing agreements with local manufacturers/ suppliers or appoints a franchise. Below I will assess whether the use of the mark by a sub-licensee (SL) is permitted use or not.

As I see it, trademark licensing/ permitted use can be of both (1) registered trademarks & (2) unregistered trademarks. I will deal with registered trademarks first.

Permitted Use of Registered Trademarks

Section 2(2)(b) of the Act lays down that any reference to the ‘Use of a Mark’ shall be construed as a reference to the use of printed or other visual representation of the mark. The definition of “Permitted Use” under section 2(1)(r) relates to registered trademarks only. The section is further sub-divided based on use by (i) a registered user  (RU) or by (ii) person other than the RP or the RU. The considerations laid down in in sections 2(1)(r)(i) & 2(1)(r)(ii) are quite clear and some relevant considerations are underlined below:

Section 2(1)(r) “permitted use”, in relation to a registered trade mark, means the use of trade mark –

(i) by a registered user of the trade mark in relation to goods or services

1. with which he is connected in the course of trade; and
2. in respect of which in the trade mark remains registered for the time being; and
3. for which he is registered as registered user; and
4. which complies with any conditions or limitation to which the registration of registered user is subject; or

(ii) by a person other than the registered proprietor and Registered User in relation to goods or services.

1. with which he is connected in the course of trade; and
2. in respect of which the trade mark remains registered for the time being; and
3. by consent of such registered proprietor in a written agreement; and
4. which complies with any conditions or limitation to which such user is subject and to which the registration of the trade mark is subject;

Section 2(1)(r)(i)

It is not mandatory to record a license agreement with a permitted user with the Trade Marks Registry, however doing so comes with a few benefits such as a RU has a right to institute proceedings for infringement in his own name as if he were the RP.

It is pertinent to note that there is no use of the word license/ sub-license/ Franchise or any other reference to a particular kind of ‘use’ which would qualify as permitted use. For registering as a RU, the requirements of section 49 have to be satisfied:

Section 49 Registrations as registered user –

(1) Where it is proposed that a person should be registered as a registered user of a trade mark, the registered proprietor and the proposed registered user shall jointly apply in writing to the Registrar in the prescribed manner, and every such application shall be accompanied by

1. the agreement in writing or a duly authenticated copy thereof, entered into between the registered proprietor and the proposed registered user with respect to the permitted use of the trade mark; and
2. an affidavit made by the registered proprietor or by some person authorised to the satisfaction of the Registrar to act on his behalf—
3. giving particulars of the relationship, existing or proposed, between the registered proprietor and the proposed registered user, including particulars showing the degree of control by the proprietor over the permitted use which their relationship will confer and whether it is a term of their relationship that the proposed registered user shall be the sole registered user or that there shall be any other restrictions as to persons for whose registration as registered users application may be made;
4. stating the goods or services in respect of which registration is proposed;

• stating the conditions or restrictions, if any, proposed with respect to the characteristics of the goods or services, to the mode or place of permitted use, or to any other matter;

1. stating whether the permitted use is to be for a period or without limit of period, and, if for a period the duration thereof; and
2. such further documents or other evidence as may be required by the Registrar or as may be prescribed.

(2) ……..

(3) The Registrar shall issue, notice in the prescribed manner of the registration of a person as a registered user, to other registered users of the trade mark, if any

(4) …….

The primary requirement is for a RP and a proposed RU to jointly apply by filing a written agreement specifically executed between RP & RU, along with an affidavit by RP as per section 49(1)(b). The Act does not give a specific format for such an agreement between RP & RU. Nor does the Act provide any restrictions for such an agreement to provide for a sub-licensee. As to the degree of control to be exercised by RP, the same can be detailed in the SL agreement between RU & SL or even mentioned in the agreement between RP & RU. Such a SL can be argued to be a valid permitted user under section 2(1)(r)(ii). The agreement between RP & RU allowing for sub-licensing can also amount to ‘consent’ of the RP as required for permitted use under section 2(1)(r)(ii)(c). The affidavit requirements also contemplate the existence of more than one RUs in section 49(1)(b)(i), therefore such sub-licensing can be formalised as another RU by complying with section 49.

Unregistered licenses by way of ‘consent’

Use of a trademark by any person other than the RP or the RU can also amount to permitted use. Such use is commonly referred to as an unregistered license which as per section 2(1)(r)(ii)(c) requires the ‘consent’ of the RP in a written agreement. The word ‘consent’ has a much broader meaning than a ‘license’ and therefore consent given to the licensee for a SL to use the trademark can suffice for a SL’s use to amount to a ‘Permitted Use’. The language does not specifically require that an agreement be signed directly between the owner and the SL. Therefore, as long as A (licensee) has been permitted by C (owner) to sub-licence the brand X, A can sub-license the Brand X to B (SL). The consent given to A by way of an agreement with C should be enough to satisfy the requirements of Section 2(1)(r)(ii)(c). As to the degree of control to be exercised by RP, it is possible that RP would have to directly ensure that quality control is maintained by the SL as well. However, quality control could arguably be contracted out by the owner to A.

It is pertinent to note that the statutory language for a RU under section 2(1)(r)(i) r/w section 49(1)(a) is not as broad as section 2(1)(r)(ii)(c), as the former specifically requires that the written agreement qua the permitted use is entered into between RP & RU. Therefore, in view of the stark contrast in the provisions, the stipulations for an RU cannot automatically be applied to an unregistered license.

Permitted Use of Unregistered Trademarks

The Act does not contain any provision prohibiting the licensing of an unregistered trademark. The Act does allow assignment of an unregistered trademark under section 39 which states:

Section 39. Assignability and transmissibility of unregistered trade marks:

An unregistered trade mark may be assigned or transmitted with or without the goodwill of the business concerned.

Therefore, in the absence of an express bar against licensing of an unregistered trademark, the same would be governed by common law. The terms of a written agreement would operate between the licensor & the licensee and such an agreement could also provide for a sub-license to be granted. Such agreements would have to be carefully drafted to restrict the licensee/ SL from claiming any rights in the goodwill in the business along with stringent quality control mechanisms to be exercised by the licensor.

If common law licensing is not recognised, the owner of the mark would not be able to claim goodwill arising out of use by a licensee, and this would lead to a precarious situation whereby a brand owner would not be able to licence/ exploit its brand until a trademark registrations is granted. This could also be misused by a licensee of a foreign company not present in India who can apply for and obtain a trademark registration in its own name and claim to be the owner of the goodwill in India. In such instances the agreement between a licensor and a licensee/ SL ought to be treated as a valid license and any goodwill in respect of business carried out by the licensee/ SL should accrue to the licensor. Indian courts have been privy to some instances where brand owners have sued for passing off against a licensee who is also a registered trademark holder. They’ve have so far come to the aid of the foreign brand owners.

Conclusion

Therefore, in my opinion a sub-license can exist for a registered and an unregistered trademark in India. Such licenses/ sub-licenses should be drafted with utmost care with safeguards incorporated therein for a licensor to maintain its trademark rights and not to result in naked licensing.

Featured Image from here

As readers may know, the Special 301 Review is an effort by the US Trade Representative (USTR) to identify countries whose IP regimes are not conducive to US persons’ IP interests, with the stated goal of increasing bilateral attention on ‘problem areas’. This has most frequently been done through the threat of unilateral sanctions (see our posts on earlier editions of the Special 301 review here). This year’s report has come out as well – with India once again being placed on the Priority Watch List – we will have a detailed post covering that soon. This year, the report may have strategic significance due to the US-India trade deal that may be in the offing (and in fact, the AFTI specifically mentions this point in the Hearings that took place earlier this year, see page 67 of the transcript here).

Readers may have noticed that we have been doing quick takes on several of the India-specific issues mentioned in the Hearing submissions for the 2020 USTR’s Special 301 Review. Our quick takes have included:

1. Prashant’s post: An overview of the lobbying against Indian IP law before the USTR (The intro of this post also has a general introduction to the 301 Review)
2. Divij’s post: Piracy, Privacy and Procurement: What Internet and Software Associations Had to Say About India to the USTR
3. Mathews’ posts: Global Trademark Report Card, 2019 (Special 301 Submission) – I &
   Global Trademark Report Card, 2019 (Special 301 Submission) – II

In this post, I intend to take a look at submissions from 1. Intellectual Property Owners Association (IPO), 2. Pharmaceutical Research and Manufacturers of America (PhRMA) and 3. Biotechnology Innovation Organization (BIO). The Indian Pharmaceutical Alliance‘s submission is also linked to at the end. I don’t intend to analyze or comment on these submissions here, but merely point out what they’re focusing on, along with any other points of interest that are to be found.

1. The Intellectual Property Owners Association (IPO)

The IPO, as is to be expected, advocates for more pro-IP rights holders reforms. Interestingly, of their 30 page submission, more than half are dedicated to China and India alone (9.5 pages to China, and 6.5 pages to India). The thrust of their submission seems to focus on compulsory licensing and related areas like local working requirement and disclosure of foreign filings through Section 8 of the Patents Act. They also touch upon need to upgrade trade secret regime, desire to introduce patent linkage, IPAB issues, need for regulatory data protection, removal of price controls on drugs, and inconsistency in patent examinations. Most of these issues have been discussed to death on this blog and elsewhere, however there are two points in their document that IP researchers may find of interest.
First, they point out that there are Indian policies that encourage compulsory licensing (page 21 of their submission):

Section 4.4 of India’s National Manufacturing Policy discusses the use of compulsory licensing to help domestic companies “access the latest patented green technology.”42 This section creates the “Technology Acquisition and Development Fund” (TADF) to help in situations when a patent holder is unwilling to license, either at all or “at reasonable rates,” or when an invention is not being “worked” within India. TADF is empowered to request compulsory licensing from the Government of India.
Similarly, India’s National Competition Policy requires IP owners to grant access to “essential
facilities” on “agreed and nondiscriminatory terms” without reservation. The concept of
essential facilities appears to cover a broad range of technologies including at least “electricity, communications, gas pipelines, railway tracks, ports, [and] IT equipment.” The unconditional application of the essential facilities doctrine to such a broad technology landscape substantially decreases the value of the underlying IP and can undermine incentives for innovation.
Although other motives might be at play, the impetus to use compulsory licensing appears
directly tied to industrial policy. Even though not adopted, a 2011 discussion paper produced
by the Ministry of Commerce provides some insights. It explains that “compulsory licensing
has a strong and persistent positive effect on domestic invention.” The objective of the paper was “to develop a predicable environment” for compulsory licensing to be used.

I haven’t looked into these other policies myself, nor do I consider their presence irregular – but I would think it would certainly be interesting to look more into these provisions, whether they’ve been used, how they made their way into these documents, etc.

The other point of interest they bring up is in regard to inconsistencies in patent examinations.

“Additionally, the Indian Patent Office has reduced application pendency by, among other
measures, hiring additional patent examiners. Given its rapid hiring rate, however, the average patent examiner now only has 3.8 years of experience, which has anecdotally had a negative impact on examination consistency. “

They source this from the 2019 WIPO World Intellectual Property Indicators Report (page 51 here) where Indian examiners have the 2nd lowest average years of experience from a select group of countries. It doesn’t appear like this is stated as a criticism, so much as just an unfortunate fact. It however would be an interesting point of study, for a researcher to actually look into correlations between experience and inconsistencies (along with other relevant factors).
Finally, and given the increased importance that bilateral methods have been taking in international IP norm setting, I thought it was interesting that the Intellectual Property Owners Association (IPOA) also advocates that the US take a stronger role in multilateral fora (“member driven” organizations, as they call them) where they see IP rights as being increasingly weakened by countries, which they state, are making efforts to align IP norms with their industrial strategies. (I’m not sure if the irony is lost on them).

2. Pharmaceutical Research and Manufacturers of America (PhRMA)

PhRMA, perhaps the most well known Pharma trade group/lobby, has listed out their comments regarding India on pages 103-116 of their submission. They positively acknowledge the National IPR Policy, the Make-in-India initiative, the 2017 National Health Policy, and the Ayushman Bharath Scheme, while also pointing out that at a mere 1.5% of the GDP, India’s government spending on healthcare is one of the lowest in the world. They also point towards shortage of doctors, inadequate medical facilities, and inadequate insurance based health-care financing – though I’m unclear what this has to do with their IP concerns. Their IP concerns seem to be their usual ones:- Compulsory Licensing (which they, ironically, even call  “contrary to the spirit of the TRIPS Agreement” – p.109), Section 3(d) and pre- and post-grant oppositions as being restrictive, regulatory data protection, patent linkage (though they refer to it as: lack of transparency regarding patent status), high tariffs and taxes on medicines, and ‘discriminatory and non-transparent pharmaceutical pricing policies’ (again I’m not sure if they see the irony in that last complaint).  They also call for clarity on the ‘New Drugs and Clinical Trials Rules, 2019’ calling them discriminatory and ambigious. PhRMA makes positive notes about the 2019 Manual of Patent Office Practice and Procedure and the adoption of Patent Prosecution Highway (PPH) with Japan’s Patent Office.

3. Biotechnology Innovation Organization (BIO)

BIO discusses India in pages 34 – 38 of their submission, and appear to be a bit more aggressive than others, with their recommendation that India be placed not just on the Priority watch list, but also with an Out-of-Cycle Review. Their IP concerns are nearly identical to that of PhRMA’s, with the additions of wanting patents for plants (asking for an amendment to Section 3(j) of the Patents Act), and referring to concerns regarding counterfeit drugs, claiming that significant numbers are entering from Bangladesh and Sri Lanka.

Concluding thoughts

The Indian Pharmaceutical Alliance’s 25 page submission, effectively serves as a defense of the Indian IP regime and responds to several of the above criticisms. It is available here.

While the Special 301 Review comes out year after year, much like the GIPC reports, little seems to actually happen as a result of it – at least with regard to India. As mentioned above, this year’s report has the potential to have some effect due to a potential US-India bilateral trade agreement. At the same time, the current pandemic seems to have majorly shaken up views on patent-flexibilities and their necessities, with several calls around the world, including within the US, for more attention to be given to compulsory licenses, patent pools, and other less restrictive IP mechanisms.

Will this be a repeat of the Anthrax / Doha Declaration situation? There- the US had been pushing hard against a reading of TRIPS flexibilities which would allow African countries to use Compulsory Licences to deal with the AIDS epidemic (for eg, in South Africa, 1 in 5 people were estimated to be infected at the time US was putting enormous pressure on South Africa to repeal their Medicines Bill allowing compulsory licences). However, when the Anthrax scare hit US in 2001 (less than perhaps a dozen people were affected), it didn’t take them long to threaten Bayer AG with a compulsory licence-esque order. Naturally, this greatly affected US’ credibility on the international stage, and when the fourth WTO Ministerial Conference took place at Doha later that year, the Doha Declaration was signed. It explicitly acknowledged Member states’ rights to interpret the TRIPS Agreement in a manner conducive to their public health concerns. Will we now similarly see a more potent revival of public-health concerns vis-a-vis IP maximization attempts, due to the on-going pandemic? We can only wait and see.

Image from here

We are delighted to bring to our readers an insightful post by Dr. Arul George Scaria on the US Supreme Court’s recent decision in Georgia et al., v. Public.Resource.Org holding that annotations to the official code of Georgia are not copyrightable. In this post, he makes a case for the adoption of the government edicts doctrine by Indian courts to foster greater ‘access to law’ in India.

Dr. Scaria is an Assistant Professor of Law and Co-Director of the Centre for Innovation, Intellectual Property and Competition (CIIPC) at National Law University, Delhi. He did his doctoral research (2008 – 2011) at the International Max Planck Research School for Competition and Innovation, Germany, and post-doctoral research (2012 to 2014) at the Catholic University of Louvain (UCL), Belgium. His key areas of interest and specialisation are science and technology policies, open movements, intellectual property law, and competition law. He has two single authored books to his credit, Ambush Marketing: Game within a Game (2008) and Piracy in the Indian Film Industry: Copyright and Cultural Consonance (2014). Dr. Scaria has previously written guest posts for us here, here and here.

US Supreme Court’s Decision on Copyrightability of Annotations to Official Code of Georgia: Can it Inspire the Access to Law Movement in India?

Dr. Arul George Scaria

In a landmark decision that can inspire access to law movements across the globe, the Supreme Court of the United States (SCOTUS) has recently held in Georgia et al., v. public.resource.org that annotations to the official code of Georgia are not copyrightable. This post is intended to discuss the relevance of this decision and some of the lessons it might have for re-imagining copyright jurisprudence in India.

Facts

The Official Code of Georgia Annotated (OCGA) contains every statute currently in force in the state of Georgia, along with various annotations to the provisions in those statutes. The annotations to the statutory provisions generally include summaries of relevant case-laws relating to those statutory provisions, opinions of the state attorney general, list of relevant law review articles, and notes from editors regarding the historical origins of those statutory provisions. The annotations are non-binding in character and this aspect is explicitly mentioned in OCGA. This document is compiled under the supervision of the Code Revision Commission (Commission), a state entity which comprises primarily of the members of Georgia Senate or House of Representatives. In furtherance to a work-for-hire agreement with the Commission, OCGA is currently produced by Matthew Bender & Co. Inc., a division of the LexisNexis Group. As per the agreement, the copyright in the OCGA is retained by the State of Georgia acting through the Commission. Lexis Nexis, which has the exclusive right to publish, distribute and sell OCGA is currently selling the print version of OCGA for $412.

The respondent, Public.Resource.Org (PRO), is a renowned non-profit organisation working towards making government information more accessible. PRO has been sharing digital versions of OCGA through various websites and it has also distributed copies of OCGA to various organisations and Georgia officials. The Commission sent cease-and-desist letters to PRO claiming that PRO was infringing the copyright in OCGA and it initiated a copyright infringement suit when it noticed that PRO was continuing the dissemination activities.  PRO filed a counter-claim seeking a declaratory judgment that the entire OCGA, including the annotations, are not copyrightable.

Decision of the District Court and the Eleventh Circuit

The District Court ruled in favour of the Commission, primarily on the ground that that the annotations were “not enacted into law” and therefore those annotations are copyrightable. When PRO filed an appeal before the Court of Appeals for the Eleventh Circuit (CA11), it reversed the order of the District Court under the government edicts doctrine. This doctrine, which is not explicitly mentioned anywhere in the US copyright statue, was endorsed by the SCOTUS through a series of decisions in the 19^th century and it is supported by some of the fundamental principles expressly embodied in the US copyright statute.[i] In a well-articulated judgement, CA11 held that “the people” are the constructive authors of the law in a democracy and the judges and the legislators are draftsmen who are just exercising delegated authority. By looking at three important factors which are relevant in determining whether a work is attributable to the constructive authorship of the People (identity of the public official who created the work; nature of the work; and the process by which the work was produced), CA11 reached the conclusion that annotations in OCGA are government edicts authored by the People and therefore not copyrightable.[ii] The Commission appealed before the SCOTUS and it was granted certiorari.

Decision of the Supreme Court

In what many commentators have described as an “unusual lineup” of conservative and liberal judges in a 5:4 judgement (some commentators also notice that it could be seen as younger generation of judges v. older generation of judges!), the majority has agreed with CA11 that the annotations in OCGA are ineligible for copyright protection under the government edicts doctrine. But the reasoning used by the majority in reaching that conclusion is different from those relied on by CA11. The majority held that, as per the precedents that explain the government edicts doctrine, the focus of inquiry in analysing the applicability of government edicts doctrine should be on who authored the work (whether the work was created by judges or legislators) and whether it was created in the course of their official duties (judicial or legislative duties). The majority observed that under the government edicts doctrine, judges and legislators cannot be considered as the “authors” of the work they produce in the course of their official duties. The majority held that this principle should apply irrespective of whether the work in question had the force of law or not.

When applying this principle to the facts of the case, the majority noted that the government edicts doctrine would be applicable to the annotations in question, as they were authored by the Commission, which is an arm of the legislature, in the course of its official duties. The court looked at different factors including the funding of the Commission, the staff of the Commission, and the process through which the annotations gets merged with the statutory text while determining whether the Commission functions as an arm of the legislature during the creation of those annotations. The majority also noted that the Commission is discharging “legislative duties” when they publish those annotations alongside the statutory provisions. The dissenting opinions written by Justice Thomas (pages 22-38) and Justice Ginsburg (pages 39-42) disagreed with the views of the majority and they are certainly worth reading for getting the counter perspectives on the majority’s interpretation of the doctrine.

Potential Insights for India

To the best of my knowledge, no courts in India have so far explicitly used the government edicts doctrine in any of the copyright cases. The ways in which CA11 and the majority of the SCOTUS have interpreted this doctrine to invalidate the copyright claims over annotations illustrate the scope of using such a doctrine in making law more accessible to all. This doctrine can be helpful in addressing some of the long-standing challenges in Indian copyright law and let me share three examples in this regard.

The first is with regard to the question of copyrightability of statutes in India. Some years back, I had written a post about the copyrightability of statutes in India and explored the question of why we should liberate statutes from the clutches of copyright law. As I tried to illustrate in that post, statutes can be considered as literary works under copyright law and the government could enforce copyright protection over statutes, as they are “government works” under Indian copyright law (see section 2(k)). While that post had argued that India requires a broader exception for reproduction or publication of an Act of a legislature, and that section 52(1)(q) of the Copyright Act may be amended in this regard to enable better access to law and legal information, we haven’t seen any steps from the side of the legislature so far. The SCOTUS decision may be showing us an alternate path. If the Indian judiciary adopts the government edicts doctrine, it may very well reach the conclusion that statutes (and any annotations to the official versions of the statutes or compilations of statutes) are not copyrightable. It is important in this context to observe that annotations can play a major role in making law accessible beyond legal audience and access to law is an integral component of rule of law.

The second is with regard to re-visiting the decision of the Supreme Court of India in Eastern Book Company v. D B Modak. While the EBC judgement is remarkable for clarifying that there cannot be any copyright over raw text of judgments, the decision had unfortunately reached the conclusion that acts like segregating the existing paragraphs in the original texts by breaking them into separate paragraphs, adding internal paragraph numbers, and indicating which judges have dissented or concurred by introducing the phrases like “concurring”, “partly concurring”, “dissenting” etc. might qualify for copyright protection (para 41). Such an interpretation was against the merger doctrine in copyright law, which clarifies that when there is only one or limited number of ways to express an idea, copyright law shall not protect the expression, as the expression has “merged” with the idea. As one can imagine, there are not many different ways for expressing things like dissenting, concurring etc. As some of my in-class experiments have shown, there are also only limited options for making paragraphs in the original text of a judgement, as most of our judges generally tend to create paragraphs in a logical manner. So such acts should have never qualified for copyright protection under the merger doctrine. However, it is astonishing that this part of the judgment hasn’t been overruled yet. If our judges show the courage to adopt the government edicts doctrine in the same spirit the CA11 or the majority of SCOTUS have done in the Georgia case, any edits or annotations made to the judgements (for example, adding reference materials to judgements in official databases) would immediately fall outside the purview of copyright protection. This would have enormous positive implications for increasing accessibility of judgements for the public and preventing the monopolisation attempts of the publishers.

Finally, the SCOTUS decision can also have implications for a better decision-making in the public interest litigation currently pending before the Delhi High Court regarding copyrightability of BIS standards. Prashant had covered this litigation extensively here and I don’t wish to repeat those aspects.  For the purpose of our discussion, it is just important to note that BIS is a statutory body and many of their standards have to be compulsorily followed by the industry. Yet BIS does not make standards freely accessible for the public and it charges a hefty sum for access. The Delhi High Court may use the government edicts doctrine to declare that such standards are not copyrightable.

Conclusion

The decision of the majority in Georgia et al. v. PRO is bound to challenge and change the business models of law publishers like Lexis Nexis. However this is an inevitable and desirable change from an access to law perspective. Even though the Indian courts may not have explicitly endorsed the government edicts doctrine so far, there is nothing that prevents our courts from adopting this doctrine in future cases. After all, the Preamble of our Constitution embodies the spirit of this important doctrine!

[i] Shyamkrishna Balganesh and Peter Menell, ‘The Uncopyrightability of Edicts of Government’ (Amicus brief filed in Georgia etal. v.Public.Resource.Org, dated October 16, 2019), https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=3113&context=faculty_scholarship, 1-2.

[ii] Code Revision Commission for General Assembly of Georgia v. Public.Resource.Org, 906 F.3d 1229 (CA11), 1242-1243.

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

Topical Highlight

Divij covered the legal aspects surrounding digital access to libraries with reference to the COVID-19 lockdown. He notes that the legality of digital book-lending efforts have posed unresolved challenges to the copyright law in India. He notes that Indian copyright law incorporates the first sale doctrine, but the same has not been extended to the digital medium due to the ease of a work’s reproduction in such medium. He suggests that the lending model adopted by libraries will play a major role in deciding the question of digital copyright exhaustion under Indian law. In respect of the fair use defence under section 52, he notes: first, that libraries lending digitally may rely on section 52(1)(a)(i) which permits ‘private or personal use, for research’. Second, he states that the determination of fair use is dependent upon numerous factors, which enables reliance on the argument of ‘digital access’ in times of such emergency. Third, he argues that educational institutions may rely upon section 52(1)(i) to reproduce works ‘in the course of instruction’.

Thematic Highlight

Dr. Arul George Scaria discussed the US Supreme Court’s decision in the case of Georgia et al. v. Public.Resource.Org, where it was held that annotations to the official code of Georgia are not copyrightable. He states that the majority of the Court agreed with the application of the government edicts doctrine, noting that judges and legislators could not be considered as ‘authors’ of works produced in course of their official duties. Subsequently, he proposes the extension of the doctrine to facilitate ‘access to law’ in India. First, he notes that the adoption of the doctrine by the judiciary may enable free access to statutes. Second, he states that the doctrine may be used to conclude that any edits or annotations to judgments are not copyrightable. Third, he notes that the adoption of the doctrine may enable free access to legal standards in India.

Other Posts

In a guest post, Neha Mishra wrote about cross-border data flows under WTO law. She states that specific policy objectives enshrined in the WTO law enable governments to restrict cross-border data flows, but require balancing of the principles of trade liberalization and domestic laws concerning internet. However, she observes that such balancing requires a re-orientation of the existing international trade rules, keeping central the principles of ‘internet openness’, ‘internet privacy’ and ‘internet security’. She further suggests that the WTO tribunals should attempt at aligning GATS rules with the three aforementioned principles, while attempting to distinguish specific policy objectives from those which are merely protectionist measures. She warns that such alignment may be stilted due to the general lack of consensus on internet policy issues and the outdated architecture of GATS, and she subsequently suggests certain measures to address these inadequacies. She concludes by noting that it is imperative for countries to hold negotiations to ensure reduction of trade restrictions in data-driven sectors.

A guest post by Kapil Wadhwa espoused a different statutory interpretation to the provisions on sub-licensing of trademarks. First, he deals with permitted use of a registered trademark, under which he observes that it is not compulsory for the parties to record a licence agreement with the Trade Marks Registry. Noting the requirements to be fulfilled for registration of a registered user, he observes that neither the Act provides for a format of such an agreement, nor does it restrict the inclusion of a sub-licensee in the agreement. He further explains that sub-licensing of a mark is also possible by way of ‘consent’ granted to a third party through an unregistered licence. Second, he notes that permitted use of an unregistered trademark is not prohibited by the Act, and accordingly common law licensing may also include a sub-licensee. He states that the recognition of common law licensing in India prevents the unfair misuse or exploitation of the licensor’s mark by either the licensee or the sub-licensing.

Swaraj reported on the submissions made by certain organizations to the USTR for the Special 301 Report. First, he covers the submission of the Intellectual Property Owners Association (IPO), where it claims Indian policies to stimulate compulsory licensing. Further, he notes that the IPO’s submission also points out the inconsistencies in patent examinations in India, drawing a correlation between the experience of examiners and inconsistencies in examinations. Second, he covers the submission of the Pharmaceutical Research and Manufacturers of America (PhRMA), wherein he states that the IP concerns raised by them are the usual ones raised annually, relating to compulsory licensing, section 3(d), patent linkage etc. Third, he briefly covers the submission of Biotechnology Innovation Organization (BIO), which aggressively claims India to be classified as ‘Out-of-Cycle Review’. He further notes that BIO’s submission claims for patenting of plants, and raises concerns in respect of counterfeit drugs. He concludes by noting that the current pandemic has the potential to offer public-health concerns a centre stage vis-à-vis IP rights.

Other Developments

India

Judgments

Jaju Tobacco Company and Another v. R.K. Patel and Company and Others – Bombay High Court [April 30, 2020]

The dispute between the Parties arose on account of the Appellants’ alleged infringement of the Respondents’ yellow coloured packaging by adopting an identical colour scheme. The Trial Court granted an interim injunction restraining the Appellants’ from using the yellow coloured packaging for its products. In the appeal, the Court examined the packaging of the Parties and noted that the pouches were of the same size, and contained similar colour scheme and design. Moreover, the Court observed that there was a strong likelihood of confusion as the class of consumers of raw tobacco mostly purchase it based on the combination of colours on the packaging. The Court stated that all the three elements in respect of the grant of an injunction were fulfilled as the Appellants used the essential features of the Respondents’ packaging, and due to the existence of a strong likelihood of confusion among the consumers. In light of the aforementioned discussion, the Court noted that there was no reason to interfere with the Trial Court’s order and accordingly dismissed the appeal.

News

• Researchers from Shiv Nadar University in Uttar Pradesh file for a patent for new chemical entities having potential to cure acute respiratory distress syndrome (ARDS) caused by coronavirus infection.
• Professor Kamal Jain of IIT Roorkee files for a patent for a software which detects the presence of COVID-19 in patients through an X-ray.
• MRPA Corporation files for a patent for an injection which aims to strengthen the immune system of COVID-19 patients.
• Jawaharlal Nehru Tropical Botanical Garden and Research Institute files for a patent for a plant extraction’s effective anti-virus property, which is dubbed to fight COVID-19.
• BananaIP announces that it will file free patent applications for inventors who adopt the Open COVID pledge.
• Government plans to not compulsorily licence Remdesivir; hopes for voluntary licensing by Gilead.
• Justice Pratibha Singh of the Delhi HC, in a piece in The Hindu, argues for the urgent need for creation of a patent pool to tackle COVID-19.
• The IP Office announces a three year extension of the Scheme for Facilitating Start-ups Intellectual Property Protection till 31 March 2023.

International

• Israeli Patent Commissioner announces accelerated examination of patent applications concerned with tackling COVID-19.
• The South Korean Intellectual Property Office offers COVID-19 related patent information uploaded on its website in English.
• Tiziana Life Sciences files for a patent for a combination of an antiviral drug and an anti-inflammatory agent believed to provide immediate relief to patients suffering from a severe case of COVID-19.
• United Arab Emirates grants a patent for an innovative process to cure COVID-19, which involves extraction and re-introduction of patient’s stem cells through lungs.
• USPTO rules that Artificial Intelligence cannot be inventors; only ‘natural persons’ are eligible for a patent.
• US Navy Lab offers royalty-free patent licence agreements to companies intending to battle COVID-19.
• USPTO issues a patent to Enzo Biochem, Incorporation for its compound which prevents inflammation in COVID-19 patients.
• Gilead claims that it is ready to collaborate with governments and pharma companies, and ready to even consider proposals of pooling its patent to provide access to its patented drug, Remdesivir touted to treat COVID-19.
• The Beijing Treaty on Audio-visual Performances comes into force in China, and aims to increase performance-related rights of artists.
• English High Court holds Sky plc’s trademarks partly invalid on the ground of bad faith.

Image from here

Last week, Kapil had written a guest post giving an alternate interpretation to the arguments in my post on the impermissibility of sub-licensing arrangements under the Trade Marks Act, 1999 (‘the TM Act’). The main counter points by Kapil against my argument that the TM Act does not permit sub-licensing, as I understand, are listed below:

1. The TM Act does not explicitly restrict the provision of sub-licensing clauses in an agreement between a proprietor and a user.
2. Section 2(1)(r)(i) read with section 49(1)(a) requires a written agreement specifically between the proprietor and the user. In comparison, the language of section 2(1)(r)(ii)(c) is broader because in any agreement between a proprietor and a user under this section, the proprietor can provide consent to the user to further sub-license the mark. The language of the section does not specifically require that an agreement be signed directly between the proprietor and a user.  The same principle can be extended to sub-licensing involving unregistered marks where the agreement can provide consent to the licensee to enter into sub-licenses.
3. As for quality control, the same can be provided in the agreement between the user and the sub-licensee or even in the agreement between a proprietor and a user.

I disagree with Kapil on all of the above points for the reasons I explain below:

Historical Perspective

It is important to look at the history of the trademark statutes in India while debating this issue. The first trademark statute in India, namely, the Trade Marks Act, 1940 was based on the UK Trade Marks Act, 1938. Post-independence, India repealed the 1940 Act and enacted the Trade & Merchandise Marks Act, 1958 (“the TMM Act”). Section 28(4) of the UK Trade Marks Act, 1994, which superseded their 1938 Act, provides for the option of a sub-licence in a manner similar to Kapil’s interpretation of “consent” under 2(1)(r)(ii)(c).

The TMM Act was repealed in 1999 by the TM Act (notified into effect in 2003), four years after the 1994 UK statute was enacted.  Kapil very rightly points out that the TM Act does not use the term ‘license’. Even its predecessor, the TMM Act, did not use that term. Instead, the term used is ‘permitted use’, which was borrowed from the 1938 Act of the UK into the 1940 Act of India and passed on to the successive statutes. While the UK, in its 1994 Act, has since replaced ‘permitted use’ with the expression, ‘license’ (see section 28) in its 1994 Act, the remnants of this historical connection with the UK law continues in the Indian Act of 1999 which still sticks to ‘permitted use’.

More importantly, in the TM Act, the meaning of ‘permitted use’ has been expanded to include unrecorded licenses. Considering that this was a big statutory shift from the past as far as ‘permitted use’ is concerned, if the legislators were so minded, a provision similar to Section 28(4) of the 1994 UK Act could also have been added through specific language. But this was not done. Given this background, the limits of interpretation are conveniently, but wrongly stretched, when the provision for a sub-license is suggested to be read into the provisions of the TM Act.

Judicial Interpretations to Sub-License and Permitted Use

While analysing the provisions regarding ‘permitted use’ under the TM Act, it is also imperative to bear in mind the case law jurisprudence in India on permitted use. I did not see any discussion by Kapil on the observation by the Delhi High Court in Rob Mathys India Pvt. Ltd. v. Synthes Ag Chur which specifically rejected user by a sub-licensee.

The TMM Act recognized only recorded licensees.  However, three years prior to the enactment of the TM Act in 1999, which repealed the TMM Act, the Supreme Court of India issued an order in Cycle Corporation of India Ltd. v.  T. I. Raleigh Industries Pvt. Ltd. and Ors. One of the issues in that case was whether the bona fide use by an unregistered licensee could be considered use for the purposes of section 46(1) (non-use cancellation) of the TMM Act. The Supreme Court found that the legislature did not intend the owner to be deprived of his property at the instance of a person who has been authorised to use the mark by the owner himself merely because the user is not registered. A quote from the order is below:

“13. In K.R. Beri & Co. v. The Metal Goods Mfg. Co. Pvt. Ltd. and Anr. MANU/DE/0324/1980, the Division Bench construed Section 48(2) and held that an unregistered user of the trade mark even with the consent of the proprietor cannot be construed to be a registered user under Section 48(1) and such construction renders Sub-section (2) of Section 48 surplusage or otiose, which is impermissible by statutory construction. We have given anxious consideration to the reasoning therein. On strict interpretation, the view of the Division Bench may be correct but it is not correct to hold that a bona fide user of an unregistered user when connection between the proprietor of the trade mark and the permitted user in relation to passing off of the goods under the trade mark are proved, renders Sub- section (2) of Section 48 surplusage or otiose.”

This order of the Supreme Court, which recognized the use by an unrecorded licensee appears to have heralded the inclusion of section 2(1)(r)(ii) to the TM Act. The only difference in the language of the respective subsections (i) and (ii) to section 2 (1)(r) is that while subsection (i) requires the agreement to be recorded with the Registry, (ii) does away with such a requirement and accepts an unrecorded agreement from the proprietor in writing. The points that are common to both the subsections are that: (i) the user and the goods/ services in respect of which the mark is used must be connected in the course of trade with the proprietor, (ii) that the mark must be a registered mark; and (iii) that the use must comply with the conditions of registration.  In view of the above, 2(1)(r)(ii) was introduced into the TM Act to provide recognition to unrecorded licenses.  As such, I believe that there is no room to accept an interpretation that the language of 2(1)(r)(ii)(c) is broad enough to include sub-licensing, especially in the absence of express language.

Need for a Connection in the Course of Trade

Another problem with interpreting a sub-licensing provision into the language of the statute, in my view, is that it does not address the issue of a connection of the owner of the mark in the course of trade with the relevant goods or services in the context of a sub-licensing arrangement.

For a valid trademark license, there must be a connection in the course of trade between the proprietor and the goods which he puts into the market.  Such a connection is established through quality control exercised by the proprietor. In the case of a license under section 2(1)(r)(i), the agreement that is recorded with the TM Office requires explicit provisions for demonstrating that there is quality control by the ‘proprietor’. I disagree with Kapil’s argument that quality control can be contracted out. It has been held by the Indian courts [the Supreme Court in American Home Products Corporation v. Mac Laboratories Pvt. Ltd., and Madras High Court in Fatima Tile Works & Anr v. Sudarsan Trading Co. Ltd. & Anr.] that if there is no real trade connection between the proprietor of the mark and the licensee or his goods/ services, there is room for conclusion that the grant of the licence amounts to trafficking in the mark. Trafficking of a trade mark conveys the notion of dealing in a trade mark primarily as a commodity in its own right rather than for the purpose of identifying or promoting merchandise in which the proprietor of the mark is interested. Besides stretching the language of the statute to read the permissibility of an agreement between the user and a sub-licensee, Kapil has added a caveat that in such arrangements, if the proprietor has provided for stringent quality control of the sub-licensee, all would be well. If so, the proprietor could directly enter into another user agreement with the “sub-licensee”. Why would he resort to sub-licensing?

Unregistered Marks and Licensing

I agree with Kapil that the TM Act does not contain any provision prohibiting the licensing of an unregistered trademark. This issue has also been addressed by courts in India and I am citing a Calcutta High Court judgement in Caprihans India (P) Ltd. v. Registrar of Trademarks. It was held by the Court that a person who claims to be proprietor of a trademark would also mean a person claiming to be the proprietor of an unregistered trademark, using it through a common law licensee.

However, for the same reasons above, I disagree that a sub-licensing arrangement is justifiable in this case as well.

Images from here and here

We’re pleased to bring to you a guest post by Nikhil Purohit, analysing the Delhi High Court’s recent grant of an interim injunction restraining an e-rickshaw manufacturer from using the mark ‘DMW’, in a trademark infringement action by the luxury car manufacturer BMW. Nikhil is a 4th year student at the National Law School of India University, Bangalore.

BMW v. ‘DMW’ E-Rickshaw: Did Delhi HC Grant Injunction Based on an Incomplete Assessment?

Nikhil Purohit

On March 23rd, the Delhi High Court in the case of BMW AG v. Om Balajee Automobile (India) Pvt. Ltd. passed an order granting an ad-interim injunction (‘Order’) against an Indian e-rickshaw manufacturer from using their mark. The plaintiff, BMW, is a leading automobile company and their mark (Figure 1) is registered in India in respect of, inter alia, goods in Class 12 (vehicles). The defendant, on the other hand, is involved in manufacturing, marketing, and selling of E-Rickshaw, Electric Cargo, and Electric Loader under the trademark DMW (Figure 2) (‘DMW Mark’).

Figure 1

Figure 2

In this post, I shall argue that the High Court erred in its reasoning, by incorrectly applying principles of trademark law and existing precedent. The plea, in this case, can broadly be said to have been made on two primary grounds: ‘deceptive similarity’ and ‘dilution of the mark’.

Deceptive Similarity

The plaintiff’s claim was that the defendant’s DMW mark was deceptively similar to their BMW marks. They highlighted that the only difference between the two marks was the first letter and even then, the letters ‘B’ and ‘D’ were visually and phonetically similar. Further, they argued that the use of the DMW mark was being made in respect of e-rickshaws, which were a type of automobile, similar to the goods as covered by their marks.

The court agreed [para 15] that the mark was deceptively similar, holding that the defendant had adopted the essential features of the plaintiff’s mark and that there was a visual and phonetic resemblance in the marks.

It must, however, be noted that the court overlooked a substantial difference in the two marks. The BMW mark is characteristically accompanied by their logo with concentric circles filled with alternate colours and the term ‘BMW’ is written within the said logo. No such logo accompanies the DMW mark. Further, as also argued by the defendant, there is a difference of “colour, font and size” of the two trademarks.

Which factors are applicable while determining deceptive similarity?

The defendant, then, submitted an argument that I consider to be vital in this analysis: that the nature of products being manufactured by both parties was substantially different, despite both marks being registered under the same class. They pointed out that their product, i.e. e-rickshaw, was not being manufactured by the plaintiff. They further highlighted the difference in the nature of the market for both the products as while the e-rickshaws were being sold under INR 1 lac, the entry-level vehicle of the plaintiff cost around INR 35 lacs.

In furtherance of this argument, the defendant placed reliance on the decision of the Supreme Court in Nandhini Deluxe v. Karnataka Cooperative Milk Producers Federation Ltd (‘Nandhini Deluxe’). In Nandhini Deluxe, the Supreme Court relied on the test as laid down in Polaroid Corporation v. Polaraoid Electronics Corporation (‘Polaroid’) with the relevant portion being as follows:

“Where the products are different, the prior owner’s chance of success is a function of many variables: the strength of his mark, the degree of similarity between the two marks, the proximity of the products, the likelihood that the prior owner will bridge the gap, actual confusion, and the reciprocal of the defendant’s good faith in adopting its own mark, the quality of the defendant’s product, and the sophistication of the buyers.” (emphasis supplied)

Pertinently, the instant Court, based on Nandhini Deluxe, acknowledged that all variables as mentioned above had to be considered in the determination of deceptive similarity [para 19]. Despite this, upon examining the strength of the plaintiff’s mark, the court directly concluded as follows:

“In these circumstances, the use of the mark DMW by the defendant prima facie appears to be a dishonest act with an intention of trying to take advantage of the reputation and goodwill of the brand of the plaintiff. It is likely to mislead an average man of ordinary intelligence.”

Should the Nandhini Deluxe principles have been applied?

In relation to the applicability of the Nandhini Deluxe factors, the Court merely observed that, “the facts of the present case are materially different”. I disagree that the facts were materially different, enough to permit the Court to avoid applying a test that holds binding value in the determination of infringement by way of deceptive similarity, particularly in cases involving different goods in the same class. Similar tests have been applied by the Delhi High Court itself and by the Supreme Court, giving support to the applicability of these factors.

On that note, I look at the other determinative factors (aside from the strength of the mark and similarity – which I have already elaborated on) laid down by the Nandhini Deluxe Court, which should have had a bearing in the instant Court’s reasoning:

• Actual confusion: No proof of actual confusion was shown in the instant case, thus weighing against BMW.
• Defendant’s good faith: In the present case, there was no proof or analysis as to the dishonest intention of the defendant, in attempting to deceive consumers by adopting a deceptively similar mark. The term, ‘motor works’ is a generic term for the nature of the products sold and the ‘D’ standing for ‘Deshwar’ represents the surname of the owner of the brand. The mere fact that BMW is a prior mark does not lead to a necessary presumption of dishonest intention as that of itself does not indicate bad faith of the defendant, and in any case, is overshadowed by the existence of other factors.
• Quality of the defendant’s products: There is no dispute that the defendant is manufacturing good quality products as can be seen from their growth and expansion over the years. In any case, the quality was not challenged by the plaintiff.
• Likelihood of prior owner bridging the gap: The plaintiff did not lead this argument in their pleadings. Even otherwise, it seems highly improbable for a manufacturer of high-end luxury products to enter into the rickshaw market.
• Proximity of products: Per this test, there is required to be a competitive proximity of the products sold under the two marks. In the instant case, there appears to be a significant difference in the nature of products  (despite being of the same class) manufactured by the parties, which thereby lead to them being sold through different trade channels. The defendant’s products, thus, cannot be said to compete with those of the plaintiff’s and consumers would not substitute one’s product for the other.
• Sophistication of buyers: The court did not examine the nature of the consumer base of the defendant. Per DMW’s official website, they appear to cater to two different sets of consumers. They supply their e-rickshaws on a commercial basis to “major industries all over India & overseas”. Given the commercial nature of transactions, it is highly probable that these customers, being industry leaders, will have the capacity to differentiate the two marks. In respect of an economically weaker consumer base (which the defendant, per their website, also services), as claimed by the defendant, such section is not likely to have “any connect with the plaintiff” – significantly diminishing the argument of likelihood of confusion.

Dilution of the Mark

The next contention of the plaintiff was that the principle of dilution of a mark would be applicable, attracting Section 29(4) of the Trade Marks Act, 1999. Per Section 29(4), the three conditions that must be satisfied by an infringing mark are that it:

“(a) is identical with or similar to the registered trademark; and

(b) is used in relation to goods or services which are not similar to those for which the trademark is registered; and

(c) the registered trademark has a reputation in India and the use of the mark without due cause takes unfair advantage of or is detrimental to, the distinctive character or repute of the registered trademark.”

In the instant case, the court did not explicitly address conditions (b) and (c), and assumed them to be accepted. While the latter is non-contentious, the former raises certain doubts. This is because condition (b) requires non-similarity of goods with “those for which the trademark is registered”. In the instant case, since the descriptions for which the BMW mark is registered, include ‘vehicles’ or ‘automobiles’, the DMW goods are indeed similar to the same (they rather fall within that description). Thus, a claim under section 29(4) was untenable. Pertinently, here, the question concerns the description for which the trademark is ‘registered’ and not the goods for which the mark is actually used – as used to determine likelihood of confusion in a deceptive similarity claim.

It is also relevant to note the instant Court’s reliance on ITC Limited v. Philip Morris Products SA [‘ITC Limited’]  for applicable principles as regards dilution where the court noted as follows:

“Parliament has consciously eschewed the “deceptively” similar standard-which is defined by Section 2, in relation to infringement claims under Section 29(4). This would mean that the identity or similarity standard is a notch higher — the claimant has to prove or establish that the two marks are identical with or similar to each other. The question of deception does not arise here. There must be a near identification of the two marks or they must have the closest similarity .” (emphasis supplied)

Although the court noted that the standard of similarity in a claim of dilution was a ‘notch higher’ than that in a claim of deceptive similarity, the Court still imported the same analysis as for deceptive similarity and merely noted that the DMW mark was visually and phonetically similar to the plaintiff’s mark. It did not examine whether the higher standard of similarity, to the extent of constituting ‘near identification’ or ‘closest similarity’, had been met. As highlighted above, the differences such as the use of a logo, the font style and size, and the colour point towards non-satisfaction of such a high threshold.

On the consideration of the final condition, the court merely noted as follows:

“The defendant is obviously seeking to encash upon the brand quality and goodwill which the mark BMW enjoys in the market. Such use by the defendant is detrimental to the reputation of the registered mark BMW of the plaintiff company.” (emphasis supplied)

The High Court, thus, did not go into the determination of whether the use of the DMW mark was deliberately to encash upon the goodwill of the BMW mark but considered it as “obvious”. It did not point to any material indicating that such use was a conscious choice or whether any advantage was being experienced by the defendant by using the DMW mark. Similarly, on the question of detriment to reputation as well, the High Court merely paid lip service to the statutory provision without indicating any reason why the plaintiff would be prejudiced by the use of the DMW mark.

Conclusion

In light of the above analysis, it is clear that the High Court failed to appropriately apply existing principles and case law, to arrive at its conclusion. Although admittedly, in an ad-interim injunction hearing, the court is merely required to form a prima facie opinion, this does not mean that the prima facie opinion should be formed based on an incorrect and incomplete assessment of the factual circumstances and existing legal principles.

A few weeks ago we had an interesting series of posts on SpicyIP, debating the role of the Intellectual Property Appellate Board (IPAB) and whether it should continue to exist. Along with our former blogger Rahul Bajaj, who is currently a Rhodes Scholar at Oxford, I have drafted the petition below requesting the government to consider a proposal to scrap the IPAB and transfer its functions back to commercial courts and High Courts. We intend to send it to the Ministry of Commerce on Monday. If any of our readers have comments on the petition or would like to add their name to it please feel free to email me at preddy85[at]gmail.com:

Dear Mr. Goyal,

Sub: A petition to shut-down the Intellectual Property Appellate Board (IPAB) and transfer its functions to Commercial Courts & High Court

1. In 2015, while addressing a conference of Chief Justices and Chief Ministers, Mr. Narendra Modi, the Prime Minister of India, had questioned the efficacy of tribunals and voiced concern over the low rate of disposals of cases by tribunals that were set up with the specific purpose of speeding up litigation in India.[1] One such tribunal which operates under the Department for Promotion of Industry and Internal Trade (DPIIT) is the Intellectual Property Appellate Board (IPAB).
2. The story of the origin of the IPAB is still a mystery. There is no publicly available document explaining the rationale for creating the IPAB or expanding its functions every few years. Since it was originally proposed in the Trade Marks Bill, 1993, the IPAB’s jurisdiction has been widened significantly, to include a number of functions that were originally discharged by the High Courts as well as the Copyright Board. The IPAB’s powers includes hearing appeals against the orders of the Controllers of Patents and the Registrars of Trademarks, hearing revocation/rectification petitions against registered patents and trademarks and finally, determining royalty rates under the Copyright Act.
3. A myth often used to justify the creation of the IPAB is that IP litigation requires technical expertise on the bench. This makes little sense for trademark litigation which usually involves comparing and understanding two trademarks and understanding the nuances of trademark law. For patent litigation, there is an element of technical expertise that is required but it is a known fact that no single Technical Member can have the scientific expertise to hear cases across the board, ranging from biotech patents to mechanical patents. Rather, like in other cases involving questions of science(s) such as criminal cases involving forensics sciences, the courts can depend on expert witnesses for assistance. In fact the Patents Act has such a provision for the appointment of scientific advisors[2] and High Courts while deciding patent infringement lawsuits have relied on expert witnesses to reach satisfactory conclusions. It should be understood that questions like ‘inventive step’ or ‘anticipation’ are as much questions of law as they are questions of fact. It would also be pertinent to mention over here that two of the finest patent law judges in India, Justice (retd.) Prabha Sridevan and Justice Ravindra Bhat, currently on the Supreme Court did not have degrees in sciences.
4. Since its creation, the IPAB has been dysfunctional for large periods of time. For instance, the IPAB has not been able to hear patent cases since 2016 when the last Technical Member (Patents) retired from the Board. It has not had a Technical Member (Trade Marks) since December, 2018.[3] Since its inception, as per our calculations, the IPAB has not had a Chairperson for a cumulative total of 1,130 days.[4] The delays in appointment have in turn caused severe delays in the progress of IP litigation in India. Such delays have been commented upon by even the United States Trade Representative (USTR).[5] These delays presumably have a very real cost on the Indian economy, especially for sectors where intellectual property is vital. One such example is the pharmaceutical industry where the revocation of a patent over a pharmaceutical product can cause entry of competitors. This can translate into a reduction in prices through increased competition. Similar examples can be found in many other sectors where IP is an increasingly important variable in business calculations.
5. Part of the problem with the multiple laws that vested jurisdiction in the IPAB, is that they divided litigation between regular courts and the IPAB. For instance, trademark and patent infringement suits can be filed only before District Courts or High Courts with original civil jurisdiction, while the IPAB can hear only revocation petitions. The questions of law and fact are often quite similar in both infringement and revocation lawsuits. It makes little sense to divide such litigation between two different forums. The specter of overlapping litigation between the IPAB and the regular courts has also caused significant confusion and litigation, with one case travelling all the way till the Supreme Court for a hearing on just this one issue.[6]
6. On the few occasions that it operates, the IPAB usually functions only in Chennai where it is headquartered or in Delhi where it has a secondary office. On rare occasions its judges fly to Mumbai to hold hearings. Its Chennai office is lacking in infrastructure and the minimum requirements as outlined by the IPAB’s former Chairperson Justice Prabha Sridevan in her report to the Madras High Court are yet to be met by the government.[7] The IPAB has been operating in Chennai out of the selfsame building since its inception. Promises of a new building are yet to be met. More worrying than the infrastructural constraints is the fact that the IPAB’s existence severely impedes physical access to justice because even on the best of days it is present only in two cities. On the other hand, infringement lawsuits can be filed in District Courts or High Courts (with original jurisdiction) across the country. IP litigation in India these days is no longer the preserve of big corporations. Small and medium industries across India are increasingly involved in IP litigation. Due to the present state of affairs, important industrial and commercial centers like Mumbai, Gujarat, Bengaluru and Hyderabad can access the IPAB only through lawyers located in Chennai or Delhi or alternatively spend on the travel of local lawyers to those cities, thereby increasing costs of litigation. Prior to the creation of the IPAB, similar cases could be heard in High Courts across the country.
7. Over the last decade, the DPIIT has faced several lawsuits before various High Courts and on occasion before the Supreme Court over the IPAB. Some of these challenges pertained to the independence of the IPAB[8], while others have included lawsuits over appointments[9] or lack thereof[10]. Each such lawsuit creates additional administrative work for the DPIIT. Earlier this year, the Supreme Court was forced to intervene to keep the IPAB running.[11]
8. While infrastructural issues can potentially be resolved by directing more money and resources, we are of the considered view that these solutions will still not address the root cause of the problems outlined above viz. the IPAB itself. This fundamental problem can be addressed by shutting down the IPAB and transferring its functions to the commercial courts created under the Commercial Courts Act, 2015. This legislation was brought in by your government to speed up commercial litigation. While there is no doubt that the commercial courts have their share of problems[12], on balance, we think that they would be a significantly better forum than the IPAB for the resolution of IP disputes. . This is for the following reasons. First, these commercial courts exist across the country and not just in Delhi and Chennai. Second, the government, especially the Law Ministry and DPIIT are making sincere efforts to streamline the functioning of the commercial courts through e-filing[13], greater transparency measures[14] and modern procedural interventions like case management hearings[15]. Rather than spend administrative and financial resources trying to improve the IPAB, we think it is more sensible for the government to direct its attention towards strengthening the institutional framework for commercial courts as a whole. The appellate function of the IPAB can be shifted back to the High Courts, as was the case prior to the constitution of IPAB.
9. As with any bold measure of reform, there is bound to be opposition to our recommendation, especially from IP lawyers benefitting from the current state of affairs. There may also be a constituency of people genuinely believing that the IPAB’s continued functioning would be a good idea. Notwithstanding this reality, the Ministry must take strength from the Prime Minister’s statement made in 2015 and shut down non-performing tribunals.
10. We must also hasten to add, that we are not the first people to suggest the scrapping of the IPAB. Many years ago in 2013, Justice Prabha Sridevan who was the former Chairperson of the IPAB, wrote an opinion editorial in a national newspaper recommending that the government shut down the IPAB and transfer its functions back to the High Courts.[16] She reiterated that view as recently as in April this year.[17]
11. Today with the benefit of hindsight, it is safe to conclude that the creation of the IPAB under the Trade Marks Act, 1999 was a historic mistake and it is up to the government to take steps to rectify this error. We hope the government takes cognizance of our representation and initiates a discussion with all stakeholders on this very important issue.

Yours Respectfully,

Footnotes:

[1] “PM Narendra Modi critical of Tribunals, asks if they are a barrier for justice”, Economic Times , April 5, 2015 available at https://economictimes.indiatimes.com/news/politics-and-nation/pm-narendra-modi-critical-of-tribunals-asks-if-they-are-barrier-for-justice/articleshow/46813862.cms

[2] Section 115 of the Patents Act, 1970.

[3] Prashant Reddy T., “The case for scrapping the IPAB”, SpicyIP, April 15, 2020.

[4] Id.

[5] “2020 Special 301 Report”, Office of the United States Trade Representative, April, 2020 at p. 51 available at https://ustr.gov/sites/default/files/2020_Special_301_Report.pdf.

[6] Aloys Wobben and Another vs. Yogesh Mehra and Others, (2014)15 SCC 360.

[7] Report of the Chairperson, Intellectual Property Appellate Board as per the orders of the Hon’ble High Court of Madras dated 06.06.2011 filed in W.P. 1256 of 2011 before the High Court of Judicature at Madras available at https://www.spicyip.com/docs/CCF09212011_00001.pdf

[8] Shamnad Basheer v. Union of India W.P. No. 1256 before the High Court of Madras decided on March 10, 2015.

[9] Sanjeev Kumar Chaswal v. Union of India W.P.  (C) No. 6299/2011 before the High Court of Delhi decided on October 3^rd, 2011.

[10] Asian Patent Attorney Association (India Group) v. Union of India W.P. No. (C) No. 2251 of 2011 before the High Court of Delhi; Order dated July 8, 2019 in Mylan Laboratories Ltd. v. Union of India W.P. (C) No. 5571/2019 & C.M. Appln. 24540/2019 before the High Court of Delhi;

[11] AIPPI v. Union of India W.P. No. 1431/2019 before the Supreme Court of India.

[12] Ameen Jauhar & Vaidehi Misra, “A critical look at the Commercial Courts Act: Govt. must avoid misadventures”, Business Standard, June 23, 2019.

[13] Asit Ranjan Mishra, “Ease of doing business: DIPP calls for fast-track commercial courts”, Livemint, January 9, 2017. See http://e-commcourt.gov.in/.

[14] Commercial Courts (Statistical Data) Amendment Rules, 2020.

[15] Order XVA of the Code of Civil Procedure as amended by the Commercial Courts Act, 2015.

[16] Prabha Sridevan, ‘Whose Tribunal is it anyway?’, The Hindu, November 15, 2013 available at https://www.thehindu.com/opinion/op-ed/whose-tribunal-is-it-anyway/article5351733.ece.

[17] Prabha Sridevan, ‘Regarding the Scrapping of the IPAB’, SpicyIP April 21, 2020 available at https://spicyip.com/2020/04/regarding-the-scrapping-of-the-ipab.html.

Image from here

A single-judge bench of the Delhi High Court recently passed an order granting an interim injunction in the case of Reckitt Benckiser (India) Private Limited v. Hindustan Unilever Limited. The case concerned an allegation of disparagement caused to the Plaintiff’s product Dettol antiseptic liquid by the Defendant’s Lifebuoy soap commercial. After the Plaintiff proved a prima facie case of disparagement, the Court granted an interim injunction restraining the Defendant from airing the advertisement until the final decision in the suit. This case is the latest battle in the war of disparagement suits between the parties and provides a note to discuss the applicable standards of disparagement in comparative advertising.

Background

Reckitt Benckiser (RB) took Hindustan Unilever Limited (HUL) to court after HUL aired an advertisement in April 2018 which allegedly depicted RB’s Dettol antiseptic liquid as being ineffective against germ protection. The Plaintiff claimed that the advertisement compared RB’s antiseptic liquid with the Defendant’s own bath soap and in doing so unfairly showed through the advertisement that the soap is more effective than the liquid and tried to negatively portray the use of the Plaintiff’s product. Adding to this, the Plaintiff pointed out that the Lifebuoy bath soap is a cosmetic product under the Drugs and Cosmetics Act whereas Dettol’s antiseptic liquid is listed as a drug under the same Act. Hence, comparing the liquid which is meant to be used as a supplement to bath soaps as being ineffective for the purpose of bathing, with the Defendant’s product which works as a standalone product for bathing and depicting the former as being ineffective for germ-killing would be a false and misleading claim that disparages the entire category of antiseptic liquids of which the Plaintiff is the market leader with more than 85% sales. Further, the Plaintiff claimed the said advertisement was also in violation of an earlier judgment that HUL itself had secured in its favor wherein HUL had contended that unlike products (antiseptic liquids and cosmetic soaps) could not be compared. For this, the Plaintiff sought a permanent injunction to restrain the Defendant from airing the advertisement.

A Prima Facie Case

For disparagement claims in comparative advertising, a 3-step test is used to determine if the claim can succeed. First, there must be a misleading or false claim regarding a product; second, the claim must lead to the deception of the consumer; and third, it is likely to affect consumer behavior. Further, the balance of convenience should be found in favor of the claimant for granting relief.

In this particular case, it was found that prima facie, the Defendant’s advertisement did make a false claim, it was deceptive to the consumer and had the potential to affect consumer behavior. Further, given that the advertisement had not been aired since December 2018, the balance of convenience tilted in favor of the Plaintiff. Taking all these factors into consideration, the Judge granted an interim injunction in favor of the Plaintiff in this case as the advertisement was found to violate Section 30 of the Trade Marks Act, 1999 because it was ‘detrimental to the distinctive character’ of Dettol’s trademark.

Repeat Offenders?

While this is a fairly straightforward case of disparagement, an interesting observation that comes from the Court is the fact that the parties are “using their financial prowess (and) are playing the game of litigation”. The Judge made this observation after noting that the matter had come up in April 2018 and by the time the arguments progressed in July 2019, the advertisement itself was not being aired and was last aired in December 2018. During the arguments stage when there was a suggestion to pursue an amicable settlement, the parties could not agree on the terms for the same and it fell through. Despite it having been more than a year and a half since the advertisement was aired and despite the Defendant not having an intention to air the same in the near future, the Defendant claimed that they should be at liberty to air it at any time and continued with the litigation.

The parties have a history of disparagement claims against each other (see cases here, here and here). The most recent case being about RB putting out a denigrating advertisement about Lifebuoy soap during the COVID-19 pandemic. In the present case too the Judge made an observation regarding the similarity of this matter and earlier cases that had come up. So, this brings us to seriously consider the Judge’s comments on the litigation game being played. Any reasonable audience of RB and HUL’s advertisements that involve a comparison of each other’s products would easily recognize that their claim is based on not just proving the effectiveness of their product but to show the competing product as being completely ineffective, thus making a disparaging claim. While comparative advertising is fair game, the only fetter on it is that it should not unfairly denigrate, attack or discredit other competing products. The series of cases brought to court by these two parties show that these advertisements do not really seem to take the fetter seriously. While HUL did claim that it had the Article 19(1)(a) right to commercial free speech, it has been held in cases of disparagement that this right has to be balanced with the constitutional right of the competitor under Article 21 to the reputation of their goods and the test of proportionality will be applied accordingly; and the scales often seem to tilt towards the plaintiffs in these cases.

The Advertising Standards Council of India (ASCI) uses a Code that promotes self-regulation of advertising content. This Code also provides guidelines on comparative advertising. The guidelines say that comparison should be based on facts and should not mislead customers through the distortion of competing products. Apart from this, the Code also says that competing products must not be attacked or denigrated.  Precedents in the cases of Dabur India Ltd. v. Colortek Meghalaya Pvt Ltd, Colgate Palmolive Company v. Hindustan Unilever Ltd, Havells India Ltd v. Khaitan have repeatedly held that advertisements while comparing should not disparage other products or promote a false claim. The standards set by the courts and the ASCI are understood in a flexible manner in order to allow for companies to promote their products in creative manners they deem fit. However, this very flexibility often leads to the decimation of the line between promoting one’s own product and denigrating a competing product, that is, the line between puffery and disparagement often turns out to be non-existent for advertisers. Perhaps it is time to consider stricter guidelines or look beyond self-regulation with respect to comparative advertising in order to prevent repeated and similar claims of disparagement from advertisements that aim to denigrate competing products.

While it has been observed by courts in cases of comparative advertising that the relief for disparagement has to be restricted to gross cases and that the impact of the advertisements on the consumer must be studied to arrive at a conclusion, the repeated instances of these claims being brought to court on similar grounds of disparagement and also being granted interim injunctions in more cases than not, may be indicative of the fact that these advertisements are perhaps designed to portray a competing product in bad light until they are asked by courts to not do so.

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

In a guest post, Nikhil Purohit wrote about the decision of BMW AG v. Om Balajee Automobile (India), wherein the Delhi HC granted an interim injunction restraining the defendant from using the mark ‘DMW’. Beginning with the Court’s analysis on deceptive similarity, Nikhil notes that the Court failed to acknowledge the obvious differences in the parties’ logos. He further observes that the Court failed to correctly apply the principles laid down in the SC’s decision of Nandhini Deluxe v. Karnataka Cooperative Milk Producers Federation, by omitting analysis on the various factors laid down in the case. Subsequently, he notes that the Court failed to adequately address the grounds related to dilution of a mark under section 29(4) of the Act. He states that the Court conveniently concluded that the defendant’s use of the mark was with an intent to encash upon the goodwill of the plaintiff and to its detriment, without relying upon any evidence.

Latha responded to Kapil’s counter by noting, first that while the 1938 UK trademark statute from where India borrowed the term ‘permitted use’ has remained unchanged in India, the UK trademark statute has not only been amended to use the term ‘license’, but also provides for sub-licensing option under section 28(4) of their 1994 Act. She argues that this legislative history is important while debating this issue. Second, she relies on a Delhi HC ruling to note that user by a sub-licensee is explicitly rejected in India. Further, she states that the inclusion of section 2(1)(r)(ii) of the Act was solely to recognize the validity of unrecorded licenses and that the same could not be extended to interpret permissibility of sub-licensing. Third, she observes that the Act requires a connection in the course of trade to be established between the proprietor and the licensee. Rebutting Kapil’s point that ‘quality control’ can be outsourced, she argues that such licensing would amount to trafficking in the mark. Fourth, she accepts that unregistered marks can be licensed, but disagrees with Kapil’s argument on the permissibility of sub-licensing on the basis of the three aforementioned points.

Prashant and Rahul shared a petition drafted by them, requesting the government to consider scrapping the IPAB and transferring its functions back to the commercial courts and HCs. Through the draft petition, Prashant and Rahul highlight the various issues which have plagued the IPAB since its inception, and suggest that transferring the IPAB’s functions back to commercial courts would desirably address such problems. This draft of the petition is open to comments and endorsements from readers, who may reach Prashant at preddy85[at]gmail.com. Prashant and Rahul intend to send the petition to the Ministry of Commerce today.

Other Developments

India

• The CGPTDM issues a public notice extending the due dates at all IP offices to May 18, 2020.
• The IPAB announces that its Chairman will physically attend office with 100% attendance, while the remaining officers shall work at 33% strength. Through his address to the legal fraternity, Justice Manmohan Singh assures that IPAB will remain functional.
• Delhi HC restrains a New York-based corporation from proceeding further with a domain name suit against Hindustan Times.
• Gilead confirms that it is in negotiations with domestic pharmaceutical companies to manufacture Remdesivir.
• A piece in ETNow News outlines the various forms of compulsory licenses which may be evoked to make treatments to COVID-19 available in India, and further notes that patent-holding companies may even enter into licensing mechanisms with Indian companies.
• A piece in the Financial Express argues that COVID-19 has exposed problems in the Indian pharmaceutical sector from its heightened reliance on Chinese APIs.

International

• Ennaid Therapeutics files for patent for a drug which seeks to block the two proteins which cause COVID-19 from invading healthy host cells.
• Israeli research team intends to file a patent for an antibody which attacks the coronavirus and neutralizes the body.
• Polyrizon Limited files a patent application in the US for an innovative technology which prevents the intrusion of the coronavirus through upper airways and eye cavities of persons.
• Gilead plans on expanding production of Remdesivir by entering into collaborations with pharmaceutical companies around the world.
• Gilead may face compulsory licensing despite its plan to collaborate with domestic companies in the US.
• The USPTO announces a new program through which patent applications of small businesses working towards coronavirus-related drugs will be fast tracked.
• A piece in the Livemint argues that Least Developed Countries can make Remdesivir accessible to their populations by ignoring Gilead’s patent over it.
• A piece in The IPKat argues that the private use exception, necessity exception or compulsory license may be invoked as exceptions to liability for patent infringement in Italy.
• A piece in Rwanda Today argues that access to the COVID-19 vaccine, when invented will be highly restricted for poor and less knowledgeable communities.
• A piece in the National Law Journal contemplates the various problems that may be encountered with conducting virtual patent infringement trials in the US.