Issue 11 March 2002

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Various IPR legislations continue to be in the pipeline, much to the disappointment of the international legal community. The only legislation which has proceeded to implementation is the new Designs Law, which was brought into force on May 11, 2001. It is hoped that the new Trade Marks Law will be in place by the middle of the year, since certain pending matters of procedure and detail have finally been sorted out. Law relating to Geographical Indications of Goods and Semi-conductor Integrated Circuits Layout Designs, while passed by the Parliament, still await formal notification.

Here are the salient features of the new Designs Law :-

• Amplification of scope of a design to include composition of lines or colours applied to any article whether in two or three dimensional form. Earlier, a design registration was limited, inter alia, to visual features of shape, configuration, pattern or ornamentation applied to an article, whether two or three dimensional, by an industrial process or other means.
• The concept of "absolute novelty" in place of "local novelty" for assessing the registrability of a design has been introduced.
• Priority can now be claimed from a design application filed in the UK or any of the other convention countries or group of countries or countries which are members of inter-governmental organisations. This provision operates prospectively.
• International classification of Industrial Designs based on Locarno classification has been adopted.
• All registered designs along with the representations of the articles will now be published in the official gazette.
• The two-year secrecy period post registration of a design has been removed. Anyone can now inspect a registered design and obtain its certified copy.
• A design, which has lapsed, can be restored within a year.
• A design registration is now valid for 10 years extendable by a further period of five years.
• The application form has been substantially revised and the official fee increased.

• Amplification of definition of trade mark to include registration of a shape of goods, packaging and combination of colours;
• Filing of multi-class applications, registration of collective marks and trade marks for services;
• Increasing the term of registration and renewal from seven to ten years;
• Recognizing the concept of "well-known trade marks". This would prohibit registration of a mark which is merely a reproduction or imitation of a well-known mark - even in respect of different goods or services;
• Making cognizable offences relating to falsification of trade marks and application of false trade descriptions. Police are empowered to search and seize goods following certain procedure;
• Widening the scope of infringement. For instance, use of a registered trade mark as a part of a corporate name or use of a mark which is identical or deceptively similar to a registered trade mark even in respect of different goods or services will be regarded as infringement of a trade mark

Now, a few words on Government’s policy on payment of royalties for use of trade marks of foreign companies. Departing from its past policy, the Government has now decided to permit payment of such royalties to the extent of 2% on exports and 1% on domestic sales. The percentage of royalties will be on the basis of "gross sales less agents’/dealers’ commission, transport cost (including ocean freight), insurance, duties, taxes and other charges and cost of raw materials, parts, components imported from the foreign licensor or its subsidiary/affiliated company." Interestingly, unlike in the case of royalties for transfer of technology where the duration for payment of royalties is 7 years, there is no such limitation for payment of royalties for trade marks. However, where transfer of technology is envisaged along with license of trade marks, then the royalty for trade mark license has to be subsumed within the payment and the period of royalties for technology transfer. Thus, no separate royalties can be paid for use of trade mark under a licence over and above royalties for transfer of technology.

There has been an interesting decision of the Supreme Court of India. While analysing the rival marks “PIKNIK” (consisting of three essential features, i.e., peculiar script, curve and the device of a boy with a hat) and “PICNIC” (along with the word Cadbury’s), Supreme Court held that the absence of the essential features have made the latter mark “PICNIC” look dissimilar in spite of the phonetic similarity. Extending the principle laid down by the English Courts, the Supreme Court held that “more importance” has to be given to the dissimilarity in essential features rather than to the similarity of the two marks. However, in a subsequent case the Supreme Court disagreed with the ratio laid down on the ground that in a passing-off action, to determine the likelihood of deception or confusion in the minds of the trading public, similarity between the competing marks has to be given more importance.

A Bill under discussion to further amend the Patents Law aims to :-

• Enlarge the term of patent to 20 years;
• Widen the definition of invention in view of Article 27 of the TRIPS Agreement. The definition proposed is "...a new product or process involving an inventive step and capable of an industrial application";
• Widen the term "chemical process" to include biochemical, bio-technological and micro-biological processes. Provide for publication of applications after eighteen months. At present an application is substantively published only after examination and acceptance of the complete specification;
• Provide for examination of an application only upon request. A period of four years is provided for making the request. Upon failure to request examination, the application shall be treated as withdrawn;
• Shorten the time for putting an application in order for acceptance subsequent to its first examination to 12 months. The present law provides for a maximum of 18 months;
• Provide for importation of patented article to constitute a valid defence in revocation proceedings initiated for not working the patent.

In a recent judgement, the High Court of Calcutta has dramatically widened the interpretation of “manner of manufacture” in the definition of “invention”. In absence of a statutory definition of “manufacture”, the Patent Office had evolved a ratio that “manufacture” must be an industrial process for the production of tangible and vendible article and substance. It maintained that living organisms are not articles and substances, though they may form a part of the process for the production of one but not a part of the end product itself. Therefore, the Patent Office had permitted processes, for example, of the manufacture of antibiotics or alcohol through microorganisms involving a technical level of human intervention. The High Court of Calcutta has now held that there is no statutory bar to living organisms forming a part of the end product. This judgement is bold in view of the conservative stand Patent Office has so far adopted and it is likely to provide a precedent for several cases that would not have otherwise been considered patentable.

Some of the significant developments in Corporate Law and in the area of Foreign Investment :-

• Hitherto investment in Indian companies by Foreign Institutional Investors (FII) was restricted between 24%-40%. Now, FIIs have been permitted to increase beyond these limits up to the relevant sectoral cap for the industry concerned provided such increase has the approval of the board of directors and shareholders of the Indian company.
• The government is planning to introduce necessary amendments in the law to make it possible for board meetings to be held through video-conferencing. It is contemplated that three out of the four minimum board meetings in a year could be conducted through video-conferencing.
• Provisions related to buy-back of shares by a company have been amended. Important changes include the ability to buy-back up to 10% of the shares of a company with a board approval but without the necessity of approval of the shareholders and a condition that no offer of buy-back shall be made within a period of 365 days from the date of preceding offer of buy-back if any. The time limit for fresh issue of shares by a company that has completed a buy-back has been reduced from 24 months to 6 months.
• The peak rate of import duty is being reduced from 35% to 30%. By the year 2004-05 there will only be two basic rates of import duty – 10% covering raw materials, intermediates and components and 20% covering final products.
• Income tax rates for domestic companies will be 36.75% (inclusive of a surcharge of 5%) and for foreign companies the tax has been reduced from 48% to 42% (inclusive of 5% surcharge)
• Dividend tax of 10% on companies has been abolished. Instead, the income will henceforth be taxed in the hands of the recipients and will be subject to a deduction of 10% at source.

After July of 1991 when the new Industrial Policy was announced, there was much euphoria and government too announced a series of measures with a view to simplifying and streamlining the policies governing foreign investment. However, of late, red-tapism seems to have sneaked in, adding to the ever-increasing woes of the foreign investors.

© Remfry & Sagar March 2002