Issue 14 August 25, 2003

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Several intellectual property legislations have been enacted in the recent past to align the laws with the framework provided by the WTO. Although these laws succeed in broadening the spectrum of rights that are to be afforded protection, their pace and manner of implementation has been rather measured and a bit erratic. The Designs Act, 2000 is in place. So too is the Patents (Amendment) Act, 2002. However, the implementation of many other statutes including the Trade Marks Act, 1999 and the Geographical Indications of Goods (Registration and Protection) Act, 1999 is still awaited.

This indicates that enforcement of the Trade Marks Act 1999 is now imminent. An energetic drive to clear the backlog is underway at the Registry. The pace at which applications are being examined as well as marks are being accepted for registration, coupled with the appointment of a series of hearings in respect of numerous matters, all suggest that the Registry is well on track in its endeavour to revamp the process of trade mark registration. Moreover, the momentum is expected to sustain beyond the clearance of the backlog and it is anticipated that in future the entire process of registration of a trademark may be completed within eighteen months.

To recap - the proposed Trade Marks Act, 1999 provides for:-

• Filing of multi-class applications, registration of trade marks for services;
• amplification of the definition of a trade mark to include registration of the shape of goods, packaging and combination of colours.
• Increasing the term of registration and renewal from seven to ten years.
• Recognition of the concept of 'well-known trade marks' and providing tests for the determination of such 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.
• Replacement of Part A and Part B of the Register with a single register of trade marks.
• Making cognizable offences relating to falsification of trade marks and application of false trade descriptions. Empowering the police to search and seize goods in line with specified procedures.
• Assignment of unregistered trade marks without the goodwill of business.
• Use of a registered trade mark even by an unregistered licensee will be construed as use by the registered proprietor so long as there is a written license agreement.
• 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.

The new law also seeks to amend the (Indian) Companies Act, 1956 with a view to prohibiting a mark (whether registered or pending registration) from being used as a corporate name or name of a business concern by a misuser or usurper. A proprietor of a registered trade mark may apply for rectification of corporate name on the ground that it is identical with or resembles the applicant's mark. However, such an objection cannot be raised after five years of coming to know of the registration of the company.

The drift towards harmonization with international treaties is also reflected in recent pronouncements of the Indian courts. In August 2002, the Delhi High Court, dismissing an appeal of the defendant (which had been restrained from using the words 'Holiday Inn' in relation to its hotel business), held that the use of the words 'Holiday Inn' by the appellant amounted to infringement of the respondent's (Holiday Inn Inc. USA) registered trade mark 'Holiday Inn' under class 16 in respect of stationery items as well as passing off of its business as that of the respondent's. The Appellate Court confirmed the injunction observing that the 'global business reputation of the respondent' must not be 'exploited by the appellant in a clandestine manner'. The appellant was actuated by bad faith and dishonest motives.

Amendments to The Patents Act, 1970 were made effective on May 20, 2003. A few significant changes are outlined below:-

• The definition of an invention has been changed to - 'a new product or process involving an inventive step and capable of industrial application'.

• The concept of 'unity of invention' has been broadened to include a group of inventions linked so as to form a single inventive concept.

• The term of patent has been enlarged to twenty years for existing patents and patents granted on pending applications. Examination of an application will now be taken up only upon request, which is to be made within forty-eight months from the date of filing of the application.

• Where an application was filed prior to May 20, 2003, a request for examination is required to be made within a period of twelve months from May 20, 2003 or forty-eight months from the filing date, whichever is later. Upon failure to request examination, the application shall be treated as withdrawn.

• The time frame for putting an application in order for acceptance subsequent to its first examination has been shortened to 12 months (non-extendible). The first reply to the first examination report is required to be made within four months of the date of its issuance.

• An application for patent will now be published on the expiry of eighteen months from the priority date. The definition of 'convention country' has been broadened to include a group or union of countries or inter-governmental organizations such as European Union.

Several developments are taking shape in the area of general corporate law.

The Government has relaxed its controls on the duration of royalty payments in the case of technology collaboration arrangements. Henceforth, Indian companies can pay royalties at 8% on exports and 5% on domestic sales without any restrictions on the duration. Previously, companies (other than wholly owned subsidiaries) had to limit the royalty payments to a period not exceeding seven years from the date of commencement of commercial production or ten years from the date of agreement, whichever was earlier.

The Companies (Amendment) Bill, 2003 proposes far reaching changes in the corporate sector. Some of the key amendments are:-

• A subsidiary company cannot have a subsidiary company, i.e. only one-tier of subsidiary company will be allowed. Restrictions on a public company regarding the value of assets that it can sell, lease or dispose of during a year. Holding companies can opt to prepare and present consolidated financial statements instead of presenting separate accounts for individual companies.
• Statutory auditors prohibited from rendering certain specified professional services which include accounting and book keeping services, internal audit services, investment banking services etc.
• Gap between two board meetings should not be more than three months. Meetings by teleconferencing or video conferencing permissible provided minutes are approved and signed by all attendee directors.

In the area of partnership laws, steps towards the creation of a new legal entity, the 'limited liability partnership (LLP)' are underway. The proposed legislation will have a significant impact on venture capital funds, audit and accounting firms, IT sector and other service based industries. Overall, India seems to be getting its act together. Political skirmishes notwithstanding, strong economic fundamentals are coaxing foreign investors to consider India as an attractive destination for investment.

© Remfry & Sagar August, 2003