Issue 16 October 2004

________________________________________

Welcome to another edition of Remfry's Letter from India! Just the other day, a leading economic daily carried two articles, one on the grant of an EMR in favour of pharma major Eli Lilly and another heralding Airtel (Telecom company Bharti Tele-Ventures' flagship brand) as a billion dollar brand. Commensurate with its increasing relevance, intellectual property is headline news today. Being in the IP business, we have a ringside view to fresh developments, the more significant of which are mentioned below.

Activity in the trade marks arena has, for the most part, been in the positive direction. The momentum garnered by the Trade Marks Office in the past year has resulted in sizeable clearance of backlog. However, this 'fast track' exercise has also resulted in a few lapses on the part of the Trade Marks Office, which have been a cause of concern to both practitioners and the applicants. Issues such as misplacement of documents resulting in requests not being taken on record and in some cases abandonment of applications have been actively agitated by the trade marks fraternity. The Trade Marks Office, conscious of these irregularities, has promised remedial measures but it remains to be seen when steps will be initiated in this direction.

Turning the spotlight on court rulings, re the issue of grant of an interim injunction in cases involving delay in bringing action, the Supreme Court of India has issued a landmark decision in Midas Hygiene P. Ltd. & Anr. versus Sudhir Bhatia & Ors. Even though the suit was filed after ten years of knowledge of the defendant's mark, the Court was of the view that since there was prima facie indication of dishonest intention to pass off goods, the case was fit for grant of an interim injunction. It was stated that normally in cases of trade mark/copyright infringement, an injunction must follow and shall not be ruled out merely on the ground of delay. Further, the grant of injunction becomes necessary if it prima facie appears that the adoption of the mark itself was dishonest.

The facts of Milment Oftho Industries & Ors. versus Allergan Inc. involved use of an identical trade mark 'OCUFLOX' for pharmaceutical products by both parties. The respondents claimed to have introduced the mark in several jurisdictions (not including India) before the appellants began its use in India. The appellants, in turn, asserted that they had coined the word 'OCUFLOX' and were prior users of the mark in the country. The Supreme Court pronounced that given the international character of the pharmaceutical field, medicinal products enjoyed worldwide reputation and thus, the ultimate test should be 'who is first in the market'. It held that the mere fact that respondents had not used the mark in India was irrelevant in the face of first use in the world market and accordingly, dismissed the appeal and confirmed the order of the Division Bench granting interim injunction.

Another interesting case on trade marks has been Baker Hughes Ltd. and Anr. versus Hiroo Khushlani & Anr. Here, the defendant entered into an agreement with the Baker group to incorporate a joint venture ('JV') company in India under the name 'Baker' and sell the Group's products thereunder. A clause in the agreement stipulated that if the shareholding of the plaintiffs fell below a certain percentage, the name 'Baker' would be deleted from the JV company. The agreement dated back to the days of the 'lice raj' when permissions/approvals were required from the Government for almost every business venture and the said agreement was not submitted for such approval. It was the plaintiffs' case that the agreement was not required to be recorded and even if it was, the obligation to do so was upon the defendant. The defendant, on its part, contended that since the agreement was not valid for failure to comply with Government Policy, no part thereof could be enforced including the clause in question. The Trial Court said that even if one presumed the agreement was a dead letter and a void contract since it was not recorded with the Government, the defendant ought to return the benefits it derived from the agreement as mandated by Section 65 of the Indian Contract Act. This case has wide implications on trade mark licensing and suggests that rights of trade mark owners should not to be compromised on technical grounds.

________________________________________

Recent grants of Exclusive Marketing Rights (EMRs) by the Patent Office have attracted a fair share of attention. To meet India's obligations under the TRIPS Agreement, pending the transition to a full-fledged product patent regime, provisions relating to inter alia EMRs were incorporated in the Patents Act, 1970 with retrospective effect from January 1, 1995. As things stand, application for the grant of an EMR can be made for an invention relating to a substance intended for use or capable of being used as a drug or medicine (except the intermediates for the preparation thereof) which has been claimed in a Black Box application. Upon receiving an EMR, the holder (by himself, or his agents or licensees) has an exclusive right to sell or distribute the product of the invention for a period of five years from the date of grant or till the date of grant or rejection of the patent on the corresponding product patent application, whichever is earlier.

The corresponding Black Box patent application would not be taken up for examination before January 1, 2005, which is the time provided to India by Article 65 of TRIPS agreement to bring a product patent regime encompassing all fields of technology in place. So far, of the four EMRs granted, two have come the way of foreign multi-national companies - Novartis AG for their blood anti-cancer medicine, Glivec/Gleevec (beta crystalline form of imatinib mesylate) and Eli Lilly & Company, USA for their erectile dysfunction medicine, Cialis (Tadalafil). We have essayed an instrumental role in both. While Novartis has been constrained to file suits for infringement for enforcement of its rights, petitions have been filed against it, praying inter alia that the EMR be revoked. On the other hand, Eli Lilly had to defeat a pre-grant opposition action before an EMR for the drug Cialis was granted in its favour on August 26, 2004. Till date, the most exhaustive judicial decision on the EMR issue has come from the Madras High Court in the case of Novartis AG and Anr. versus Adarsh Pharma & Anr. wherein the Court has granted an interlocutory injunction to Novartis in respect of its anti-cancer drug, GLIVEC. On the contention that the applicant holding the EMR and the drug lice must be the same entity, the Court applied the 'single economic concept' and held that the license which had to be necessarily granted to the subsidiary Novartis India Ltd. at the relevant time (due to certain restrictions in our drug laws) complied with the requirements of the Patents Act, 1970 ('the Act'). As regards the ground that an EMR can be revoked under Sections 64(1)(e) and (f) of the Act which relate to 'prior art' and 'lack of novelty', the Court said that these sections cannot be pressed into service since the applicability of Sections 12 and 13 of the Act, dealing with examination and searches for prior art, were excluded in the EMR process. Finally, on the factum of infringement, the Court affirmed the principles of 'pith and marrow' and the 'Doctrine of Equivalents' while granting injunction. These principles say that it is not necessary that there should be literal infringement of a patent, the 'inventive concept' or the 'spirit of the invention' ought to have been infringed.

Given the strength of the generics market in India, we anticipate quite a bit of legal activity on this issue in the future.

• Coming to procedural matters, the Controller General of Patents recently issued an internal notification stating that the proof of right to file an application in India is required to be established in all cases, including convention applications, where the applicant in India and the convention country is the same entity. Accordingly, assignment from the inventors to the Indian applicant is required to be filed at the Patent Office.
• The matter, however, is being agitated. In fact, the International Association for the Protection of Industrial Property (AIPPI) (Indian Group) will be organizing an interactive Round Table on Intellectual Property in New Delhi and the Controller General of Patents has agreed to be a part of the same. Hopefully, the issue should be settled resolved thereafter.

Meanwhile, the Patents (Amendment) Bill 2003 seeking to inter alia bring about a full product patent regime is still awaiting re-introduction in Parliament. ________________________________________

As regards the corporate sector, over the last decade, the Government of India has, subject to a few exceptions, made it possible for foreign investors to invest freely on an 'automatic' basis up to 100% in Indian companies in most sectors without having to obtain its prior approval. Foreign investors now need only comply with simple post facto reporting requirements.

A more recent departure from past policy now permits payment of royalties up to 2% for exports and 1% for domestic sales exclusively on use of trade marks of the foreign licensor without limit of duration. The royalty will have to be a percentage of 'net sales'. However, in case of an agreement involving transfer of technology and licensing of trade marks, separate royalty for license of trade marks cannot be provided for and such royalties may only be subsumed in the royalty payable for technology.

Another thorny provision for foreign investors is one which prevents a foreign company already in an Indian joint venture (i.e. financial, technical collaboration or trade mark agreement) from getting into other wholly-owned ventures without a 'no objection certificate' from the existing domestic partner. Reportedly, the Government is contemplating scrapping this provision, which would release multi-national companies from their Indian partner's 'bondage'.

Clarification has also been received from the Government on the matter of transfer of shares held in an Indian company by a non-resident shareholder to another non-resident. The Regulations mandate that prior Government permission must be sought only in cases where the transferee has a previous venture or tie-up in India or a technical collaboration or a trade mark licence agreement in the same/allied field in which the Indian company (whose shares are being acquired) is engaged. However, some sections of Government were of the view that permission was required even in cases where there was no previous tie-up. This was contrary to the express provisions of law. The matter was referred to the Government, which recently affirmed that approval was not required for transfer of shares from one non-resident to another.

What emerges is a microcosmic view of the larger Indian phenomenon of development visible in every sphere. Despite obstacles, change is constant, making the IP regime a very vibrant and stimulating area of practice.

© Remfry & Sagar October 2004