BUSINESS LAW

INTELLECTUAL PROPERTY RIGHTS IN INDIA

INDEX

Introduction to Intellectual Property Rights...................3 Protecting Intellectual Property

Rights...................3 Reasons for the growing importance of Intellectual Property

Rights...........................3 Why Intellectual Property infringements happen?

..........................4 India in Intellectual Property Rights protection: An International

purview...7 Structure of Intellectual Property Offices in

India..................8 Domestic laws related to

IPR...9 Intellectual Property Rights in computer

software....................10 Indian Act...................11 Copyright

Department

of

Industrial

Policy

and

Promotion

(DIPP)

and

IPR...............................................12 Intellectual Property Appellate Board (IPAB)

..................12 Impact Modernization.................13 Current Issues related to Intellectual Property Rights protection in of

India................15 Conclusion and future

ahead.16 Bibliography 20

Introduction to Intellectual Property:

The term Intellectual Property (IP) reflects the idea that its subject matter is the product of the mind or the intellect. These could be in the form of Patents, Trademarks, Geographical Indications and Industrial Designs, Layout-Designs (Topographies) of Integrated Circuits, Plant Variety Protection and Copyright.

Intellectual Property, protected through law like any other form of property, can be a matter of trade, that is, it can be owned, bequeathed, sold or bought. The major features

that distinguish it from other forms are their intangibility and non-exhaustion by consumption.

Intellectual Property is the foundation of knowledge-based economy. It pervades all sectors of economy and is increasingly becoming important for ensuring competitiveness of the enterprises.

Protecting Intellectual Property Rights: Experts say that in coming years, corporate battle for supremacy will neither be for market share on the streets of Bangalore nor Mumbai nor in Dalal Street or Wall Street for large sums of money. It will not be fighting global cost competitiveness either. It will be before the judicial forum in public visibility and finally behind closed doors with the help of private arbitrators, and the subject matter of dispute will be intellectual property. The corporate world is already spending an increasingly large amount of time and money either defending or obstructing grant of or prevention of the use of IPR (intellectual property rights). Reasons for the growing importance of Intellectual Property Rights: India joining the WTO agreement on TRIPs is a recent phenomenon. In such a scenario, there are two influences impacting the corporate: 1. The markets are getting restructured on the back of IPR, and provide a kind of first-mover advantage and a strategic opportunity to re-write the market equation. This is a positive influence. 2. A barrier against competition, and ability to realize monopoly or super normal rent/returns. This is a not-so-socially-positive move, yet is powerful and strategically important. The most important factor in such a situation is the faith that the IPR once granted will be a talisman against competition and any infringement can be fought through the legal system and the predator punished with penalties. However, the peculiarities of the patent system have made

India Inc. sit up and think again about whether the legal forum is the best way to protect the commercial interests of the patentees innovation. Mature corporate are for sure moving away from litigation as a way to deal with or protect their property rights. Why Intellectual Property infringements happen? A close look at some of the known and contested infringements shows that the existence of three factors simultaneously encourages the predator to be adventurous: 1. Innovators of new products often are under compulsion to recover their costs through product pricing, and this very model of recovery sows the seeds for infringement. Higher the R&D (research and development) expense, higher the pricing premium and larger is the menace of infringement. Often, a market for low-tech products gets created quickly and at a significant price discount. 2. The spurious sellers and sophisticated reverse engineers who sell a variant of the original product, which are two sides of the same coin, and hence, response will have to be different. 3. The way we fund commercial research can also be the culprit. Or it can also be that the inventor over-engineers the product and ends with a classic market dilemma. However, there are more factors to the growing infringement of Intellectual Property:

Successful infringers are smart guys, and they have the ability to either reverse engineer the product at lower costs and/or quickly pass it off in the market as original. They understand and exploit the imperfections of technology and the market.

The real problem is not about reverse engineering or developing a copycat at half the cost. It is the lack of access to complimentary assets and facilities which are still holding infringements at lower-than-possible levels.

The Belief that the violator can get away with or at best minimal damage is a critical requirement and is based on a clear appreciation of the imperfections of the law, be it its structure and evolutionary nature or its lax implementation.

Successful infringers have a realistic understanding and the ability to exploit the imperfections of the technology, market and the legal protection the inventor enjoys. This is in sharp contrast to the patent-holder who swears by his often over-engineered product, justifies its high pricing and hangs to the patent as a talisman.

A patent, to begin with, can be thought of as a three-way contract, between the inventor, the granting Government and the public at large. The problem starts here, as at the stage of patenting the inventor has little knowledge of the source, form and time of the possible challenge, from the vaguely defined public at large. The patentee compounds this problem by working to obtain a patent as an end in itself.

There are several reasons why making patents work commercially is important:

Cognitive bias of the administrator: Commercially successful patents have been so not because of the legal protection they enjoy, but because of the way they work the patent to be commercially efficient.

Though the innovation process in industries differs, the legal process has a one-size-fitsall approach. A dispute in a judicial forum does not guarantee success for the original inventor, despite its impartiality. Research has shown that cognitive bias is sharper in patent and intellectual property issues. The context of a challenge/infringement is not necessarily the same as the original grant of the patent. The law on the subject is still young and evolving.

Lifespan of products and technology is becoming shorter, but the judicial process is becoming longer. A patent gives its holder a protection of two decades and the possibility that the product/technology is succeeded by the next generation during this period is very high. Technology and pharma companies are examples of how a technology can become dated in a few years a two decade patent protection in most cases is irrelevant.

It will be to the infringers delight to drag the dispute in a judicial forum for a decade, as by then, few other generations of technology/invention would have happened. Winning an infringement suit does not automatically lead to injunction on the infringer, as the courts consider it only on demonstration of its need.

Patent protection versus catch-up time: In reality, what the inventor enjoys is essentially a catch-up time before the invented around version hits the market.

The protection strategies of the inventor should therefore revolve around: a) lengthening the catch-up time, and b) when the catch up is about to happen, move to your next advantage, which means becoming a serial inventor. Reverse engineering a well-oiled R&D set-up is not as easy as reverse engineering a product.

Research has shown that catch-up time works effectively in certain industries such as auto parts, pharma and telecommunication, and not so in the case of electrical parts industry.

Mechanisms which are required to achieve a longer catch-up time include technology bundling, technology concealing, and cross licensing.

In intellectual property (IP) protection, India is rated higher than China and the Czech Republic, but comes behind the US, the UK, Canada and Taiwan, according to Ernst & Young and Indian Semiconductor Association report on the semiconductor sector competitiveness.

In a benchmarking study, E&Y and ISA found that barring the Czech Republic, India has the least number of US patent applications and grants to its credit. This is because design companies in India, being captive arms of multinational companies and third party service providers, handle some portions of projects rather than execute the entire IP or product development projects on turnkey basis. However, the report found that there could be several small Indian companies creating IP but not filing for a US patent owing to the substantial cost involvement.

India in Intellectual Property Rights protection: An International purview

A UN agency, namely, World Intellectual Property Organization (WIPO) based in

Geneva administers treaties in the field of intellectual property. India is a member of WIPO. Department of Industrial Policy & Promotion is the nodal Department in the Government of India for all matters concerning WIPO. India is also member of 2 major treaties, namely, Paris Convention for the Protection of

Industrial Property (relating to patents, trademarks, designs, etc.) of 1883 and the Berne Convention for the Protection of Literary and Artistic Works (relating to copyright) of 1886.

Apart from these, India is also a member of the Patent Cooperation Treaty (PCT) which facilitates obtaining of patents in several countries by filing a single application. India is also a member of the World Trade Organization (WTO). The WTO agreement, inter-alia, contains an agreement on IP, namely, the Agreement on Trade Related Aspects of Intellectual Property (TRIPS). This Agreement made protection of intellectual property an enforceable obligation of the Member States. TRIPS Agreement sets out minimum standards of intellectual property protection for Member States. India has complied with the obligations contained in the TRIPS Agreement and

amended/enacted IP laws.

Bilateral cooperation agreements (MoUs) have been entered into with UK, France, USA,

European Patent Office and Japan. These focus on human resources development, capacity building and awareness and outreach activities. Multilateral Cooperation: India has an active cooperation programme in intellectual

property matters with WIPO. These, inter alia, include organization of joint seminars and workshops and study programmes besides technical assistance by WIPO experts.

Structure of Intellectual Property Offices in India:

Domestic laws related to IPR: There are various laws related to IPR in India: The Copyright Act 1957 The Patents Act 1970 The Trademarks Act 1999 The Designs Act 2001 The Patents Rules 1972 The Copyrights Rules 1958 The Design Rules 2000 The Trade Rules 2001 The Geographical Indications Act 1999 The Semiconductors Integrated Circuits Layout-Design Act, 2000 The Information Technology Act 2000

The framework of IPR laws has undergone a lot of changes over the last few years around the world with well established minimum bench marks or standards. India too has witnessed the enactment of major legislative initiatives with regard to stronger protection of IPRs in harmony with our obligations under TRIPS. These include: 1. The Patents (Amendment) Act, 2005. 2. The Trade Marks Act, 1999 which repeals and replaces the Trade and Merchandise Marks Act, 1958.

3. A legislation for the protection of geographical indications called the Geographical Indications of Goods (Registration & Protection) Act, 1999. 4. The Designs Act, 2000 which replaced the Designs Act, 1911. Intellectual Property Rights in computer software: In India, the Intellectual Property Rights (IPR) of computer software is covered under the Copyright Law. Accordingly, the copyright of computer software is protected under the provisions of Indian Copyright Act 1957. Major changes to Indian Copyright Law were introduced in 1994 and came into effect from 10 May 1995. These changes or amendments made the Indian Copyright law, one of the toughest in the world. The amendments to the Copyright Act introduced in June 1994 were in themselves, a landmark in the India's copyright arena. For the first time in India, the Copyright Law clearly explained:

the rights of a copyright holder position on rentals of software the rights of the user to make backup copies The amendments imposed heavy punishment and fines for infringement of copyright of software.

Most software is easy to duplicate and the copy is usually as good as original, the Copyright Act was greatly in demand. According to this Act, the infringer can be tried under both civil and criminal law. According to section 16 of this Act, it is illegal to make or distribute copies of copyrighted software without proper or specific authorisation. The only exception is provided by section 52 of the Act, which allows a backup copy purely as a temporary protection against loss, distribution or damage to the original copy. The 1994 amendment to the Copyright Act also prohibits the sale or hiring, or any offer for sale or hire of any copy of the computer program without specific authorisation of the Copyright holder.

A civil and criminal action may be instituted for injunction, actual damages (including infringer's profits) or statutory damages per infringement etc. With these amendments, even the criminal penalties have substantially increased. Section 63 B, stipulates a minimum jail term of 7 days which can be extended up to 3 years. The Act further states the fine ranging from Rs. 50,000 to 2, 00,000. Government agencies have been very actively participating in protecting of the rights of the copyright holder. Both Ministry of Information Technology and Ministry of Human Resource Development have been active in incorporating amendments to the Indian Copyright Act. These agencies are now helping the law enforcing agencies e.g. the Police in enforcing the law. Today, NASSCOM officers and those of these government agencies are committed to enforce copyright laws and eradicate the menace of software piracy. Indian Copyright Act: "Computer Programme" has been included in "Literary Works". The definition reads as follows:

"Literary Work" includes computer programmes, tables and compilations including computer databases. "Computer Programme" means a set of instructions expressed in words, codes, and schemes or in any other form, including a machine-readable medium, capable of causing a computer to perform a particular task or achieve a particular result.

"Author" means in relation to any literary, dramatic, musical or artistic work, which is computer, generated the person who causes the work to be created. "Computer includes any electronic or similar device having information processing capabilities".

Markets are churning rapidly on the back of IPR and old equations being re-written with significant economic impact. The IPR law is still young and evolving. What India needs at this juncture is a forum with teeth, to balance and protect the inventor, the predator and, of course, the market. What one needs is not another judicial forum, but a forum of inventors, infringers, and the market.

Department of Industrial Policy and Promotion (DIPP) and Intellectual Property Rights (IPRs): DIPP is concerned with legislations relating to Patents, Trade Marks, Designs and Geographical Indications. These are administered through the Office of the Controller General of Patents, Designs and Trade Marks (CGPDTM), subordinate office, with headquarters at Mumbai as under: a) The Patents Act, 1970 (amended in 1999, 2002 and 2005) through the Patent

Offices at Kolkata (HQ), Mumbai, Chennai and Delhi. b) The Designs Act, 2000 through the Patent Offices at Kolkata (HQ), Mumbai,

Chennai and Delhi. c) The Trade Marks Act, 1999 through the Trade Marks Registry at Mumbai (HQ)

Chennai, Delhi, Kolkata and Ahmedabad. d) The Geographical Indications of Goods (Registration & Protection) Act, 1999 through the Geographical Indications Registry at Chennai. The Controller General of Patents, Designs and Trade Marks (CGPDTM) is also in-charge of the Office of the Patent Information System, Nagpur and the Intellectual Property Training Institute, Nagpur. The office has 446 personnel in the patents and designs Offices and 291 personnel in trademarks and geographical indication Offices. Along with the legislation, rules have also been amended to install a user-friendly system for processing of IP applications. Intellectual Property Appellate Board (IPAB): An Intellectual Property Appellate Board (IPAB) has been set up at Chennai to hear appeals against the decisions of Registrar of Trademarks, Geographical Indications and the Controller of Patents. The following are some of the responsibilities: IP Legislations

 Copyright is protected through Copyright Act, 1957, as amended in 1999 - administered by the Department of Higher Education. Layout of transistors and other circuitry elements is protected through the Semi-conductor Integrated Circuits Layout-Design Act, 2000 - administered by the Department of Information Technology. New varieties of plants are protected through the Protection of Plant Varieties and Farmers Rights Act, 2001 - administered by the Department of Agriculture and Cooperation. Article 39 of the TRIPs Agreement mandates protection of test data submitted to regulatory authorities for obtaining marketing approvals against unfair commercial use. A Committee under the chairmanship of Secretary, Department of Chemicals and Petrochemicals has examined this issue and submitted its Report to the Government. Impact of Modernization: The growing role of India in international IPR routines and the realization about their importance has led to a surge in the number of such declarations and filings in India. The following figures suggest so: 1. Patents: The filing of patent applications has increased from 4824 in the year 1999-2000 to 28,882 applications in the year 2006-2007. The number of applications examined has gone up to 14,119 in 2006-07 against the figure of 2824 in the year 1999-2000. Statistics for patent filing: 19992000 Applications filed Applications Examined 4824 2824

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 8503 4264 10,592 5104 11,466 9538 12,613 10,709 17,466 14,813 24,415 11,569

2006-07 28,882 14,119

Patents Granted

1881

1318

1591

1379

2469

1911

4320

7359

Scope of Patentability Section 2: Definitions and Interpretations 1. Clause (j) defines invention as follows : - 'invention' means a new product or process involving an inventive step and capable of industrial application; In order to limit patentable subject matter it is suggested that the definition of invention could be changed as follows : 'invention' means a basic new product or process involving inventive step and capable of industrial application. The scope of patentable inventions can be contained only through the definition of invention. 2. Clause (ta) defines pharmaceutical substance as follows: - 'pharmaceutical substance' means any new entity involving one or more inventive steps. The above definition is quite broad and not specific. Even Mashelkar Committee on R&D for pharmaceuticals had made re-commendation in this respect. The definition ought to be as follows: (ta) 'pharmaceutical substance' includes new drug molecule involving one or more inventive steps. What is not patentable? Clause (d) reads as follows: - the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant. The explanation under clause (d) reads as follows : Explanation :- For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy.

The above explanation can give different interpretations for different purposes. Moreover when new molecules only are to be patentable salts, esters, etc. and other derivatives of the known substance should not be treated as patentable inventions. The purpose of clause (d) and explanation should be to contain the patentable subject matter. The explanation should be either deleted or modified as follows: Explanation :- For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, complexes, combinations and other derivatives of known substance shall not be patentable. New clause (ja) may be incorporated as follows : - inventions which do not strictly meet the criteria of industrial application e.g. stem cell, partial gene fragments, research tools, PCR technique, machine based embedded bio-informatics software, genomic information and data base. Clause (j) in the Patents Act reads as follows: - plants and animals in whole or any part thereof other than micro-organisms but including seeds, varieties and species and essentially biological processes for production or propagation of plants and animals. Micro-organisms and non-biological and micro-biological processes are under mandated review in the WTO. The review was initiated in 1999 and till now final decision has not yet been taken. In addition to this no definition of micro-organism has been provided in the amended Act or even in the TRIPS Agreement. Micro-organisms occur in nature, there is genetically modified micro-organism and then they perform certain activities. Since micro-organism occurs in nature they are discoveries and not inventions and as such they should not be patentable. Genetically modified micro-organisms perform certain activities and as such only specific activity can be patented only as process patents. Because of these reasons it is desirable that micro-organisms are excluded from patentability. Section 5: The amended Act provides that Section 5 shall be omitted. However, it is important to be more specific about the scope of patentability. Because of the new scope of patentability Section 5 should read as follows: Section 5 - Patents shall be available for basic new inventions including pharmaceutical substances as defined in Section 2 clause (ta) whether products or processes in all field of technologies provided that they are new,

involve an inventive step and are capable of industrial application excluding inventions not patentable as stipulated under Section 3. Section 11 A Sub-section (7) The third proviso of this sub-section reads as follows : provided also that after the patent is granted in respect of applications made under subsection (2) of section 5, (Mail Box applications filed during 1995-2004) the patent holder shall only be entitled to receive reasonable royalty from such enterprises which have made significant investment and were producing and marketing the concerned product prior to the 1st day of January 2005 and which continue to manufacture the products covered by the patent on the date of grant of the patent and no infringement proceedings shall be instituted against such enterprises. Even the provisions in sub-clause (7) about 'reasonable royalty' and 'significant investment' can create unnecessary claims and objections to meet the objectives of allowing enterprises to continue manufacturing of the product if the patents are granted. In addition the applications should be dealt with only on the basis of proposed new definitions of invention and pharmaceutical substances. Section 25

Section 117 A in sub-section 2 provides for sections for which appeals shall lie to the appellate board. The amended version of this section provides that only sub-section (4) of Section 25 relating to post-grant opposition would be appealable. No appeal possibility is thus available in regard to pre-grant opposition. It is important that even any decision taken relating to pre-grant opposition should also be appealable both by the patent applicant and the opponent. In view of this, it would be appropriate if decisions taken under the entire Section 25 become appealable. Does Indian patent law stifle innovation? Ultimately, the debate boils down to whether disallowing patents on incremental innovation will discourage firms from doing fresh research. Section 3(d) forces firms to focus efforts on innovation and hardcore research instead of tinkering with known substances The aggressive posture of the Geneva-based IFPMA and the Washington-based PhRMA on the Madras High Court Order rejecting the Novartis challenge to Sec 3 (d) of the Indian Patents Act

is not surprising because the Indian Patent Act will now become a model law for several developing countries, defeating the IFPMA and PhRMA objective of establishing a TRIPs-plus IPR regime. Likewise, the threat of depriving Indians of new research products seems hollow. If they do not register their patents in India, the domestic industry has the proven capability to reverseengineer the same and provides them at much lower prices. If they register the patent and do not work it, India's patent law has adequate mechanism to deal with such situations and ensure that the product is available to the needy. More importantly, what is there in the new Section 3(d) that is causing heartburn? It creates a bar to differentiate discovery from invention. The patent applications that cannot cross the bar are treated as "trivial changes" not eligible for patents. Novartis argued in the Madras high court that the bar be removed as it is not clearly defined. This would have allowed trivial changes to slip through and be eligible for patents. The logical thing was to seek a clearer definition of the bar than seeking its removal. But obviously, that would not have served the purpose of those wanting to patent trivial changes. 2. Trademarks: The backlog of unexamined trademark applications of approximately 5 lakh cases has been brought down to zero. Renewal of Trademarks certificates are now being done instantaneously in clear cases and new applications are examined within one week. As against only 8,010 registrations in 1999-2000, 13 times more TMs were registered in 2006-07, that is, 109,361. 3.38 lakh trademark certificates were issued during the last 3 years whereas only 1.65 lakh marks were registered in 64 years (since 1940 to 2004). Statistics for trademarks: 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Filed Examined Registered

66,378 42,500 8010

84,275 70,115 14,202

90,236 1,59,735 6204

94,120

92,251

78,996 72,091 45,015

85,699

1,03,419

2,49,003 89,958 11,190 39,762

79,200 85,185 1,84,325 1,09,361

3. Geographical Indications: 39 Geographical Indications products have been registered since September, 2003. These include Darjeeling Tea, Chanderi Saree, Pochanpally Ikat, Solapur Chaddar, Mysore Silk, Kullu Shawl, Bidriware, etc. 4. Designs: The filing of applications for Design has increased from 2874 in 1999-2000 to 5372 in 2006-07. The number of applications examined has also gone up to 5179 in 2006-07 against the figure of 2067 in 1999-2000. The number of Designs registered has also increased from 1382 in 1999-2000 to 4431 in 2006-07. Current Issues related to Intellectual Property Rights protection in India:

Establishment of NIIPM: The Government has approved a proposal for establishment

of a National Institute for Intellectual Property Management (NIIPM) at Nagpur. The Institute will perform training, education, research and think tank functions.

Modernization of IP Offices: Modernization of IP Offices will provide additional

human resources, higher level of computerization to support on-line processing, strengthening of data-base and novelty search facilities, awareness generation activities, accession to international treaties/conventions is being taken up in 11th Five Year Plan.

Madrid Protocol on Trademarks: Madrid Protocol, administered by WIPO, is a

simple, facilitative and cost effective system for registration of International Trademarks. Indias membership of Madrid Protocol will help Indian companies to register their trade marks in the member countries of the Protocol through a single application. An exercise to amend the Trade Marks Act is underway to enable joining the Madrid Protocol.

ISA and IPEA: A proposal is under consideration to seek recognition for the Indian

Patent Office as an International Searching Authority (ISA) and International Preliminary Examining Authority (IPEA) under the Patent Co-operation Treaty. ISA and IPEAs provide search reports on novelty and examination reports on patentability of inventions.

Mashelkar Committee: The Government of India has set up a technical expert group

under the chairmanship of former Director General of CSIR (Dr. R.A. Mashelkar) to examine the following two patent law issues: o Whether it would be TRIPS compatible to limit the grant of patent for pharmaceutical substance to new chemical entity or to new medical entity involving one or more inventive steps; and o Whether it would be TRIPS compatible to exclude micro-organisms from patenting. Conclusion and future ahead: Currently IPR laws relate to Geographical Indications, Industrial Designs and layout designs of Integrated Circuits. Protection of Undisclosed Information (Trade Secrets) is still not within the ambit of Customs Laws. Section 11(2) and has to be amended.

Formulation of Rules which would lay down detailed procedures enabling IPR holders to approach Customs authorities for enforcement of IPR laws at borders which is already under the active consideration of the Board.

Training courses to sensitize customs officers on IPR and their role in enforcing IPR at borders to be organized on a large scale. Amendments are needed under Copyrights Act, Trade Marks Act and other IPR laws to empower Central Excise officers to seize counterfeit goods manufactured in India and take appropriate action under Central Excise Act 1944 to prevent illicit manufacturing of counterfeit goods.

Bibliography: 1. www.nipoonline.org 2. www.iprindia.com 3. www.iprlawindia.org 4. www.laws4india.com/ipr.asp 5. www.indianembassy.org/policy/ipr/ipr_2000.htm 6. www.ficci.com/media-room/speeches-presentations/2007/apr/gauri/AniceJoseph.ppt 7. www.dipp.nic.in/ipr.htm