LETTER FROM INDIA

INTELLECTUAL PROPERTY

CORPORATE LAWS

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Issue 4 November 1995

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Sequel to the third issue of our "Letter from India" sent in April 1995. Since then we have a mixed bag of news to report: Stagnation in respect of amendments of Patents and Trade Marks laws, some progress in respect of Copyright law and certain regression in respect of practice relating to foreign investment. ________________________________________

PATENTS LAW:Stalemate

Difficulties in Implementation of GATT/TRIPS Agreement

As reported in the last issue of our Letter from India in April, 1995, India is in a bit of a quandary. On the one hand, India continues to be a member of WTO and signatory to GATT/TRIPS Agreement. On the other, an attempt to amend the (Indian) Patents Act, 1970 to implement the provisions of the said Agreement by means of a Presidential Ordinance followed by a Bill to ratify said Ordinance failed in March 1995.

While there is no problem with respect to a majority of the provisions of the Patents Act, uncertainty lingers over some provisions including those relating to pharmaceutical substances per se. The basic aim of signing GATT/TRIPS Agreement was, inter alia, to bring the Patents Act in conformity with the Patents Law of the other member countries of WTO. The changes intended were in respect of:-

1. Pharmaceutical substances;

2. Term of a patent;

3. Compulsory licensing;

4. Concept of invention; and

5. Microorganisms.

India has a ten year transition period under the GATT/TRIPS Agreement to amend the Patents Act. The said ten years would expire on December 31, 2004, by which time it is certainly expected that the Patents Law will have been extensively overhauled. However, under the GATT/TRIPS, Agreement, India was enjoined to make a provision for receiving applications for pharmaceutical substances per se, i.e., "black box" filings without these being summarily rejected.

Be that as it may, it is encouraging to note that the Indian Patent Office has been receiving - and still continues to receive - "black box" filings if it is indicated at the time of filing that the application is being filed under Article 70(8) of GATT/TRIPS Agreement. These applications are allotted a number and put into cold storage - to be taken up for examination only after January 1, 2005. And it is still possible, theoretically, to obtain an interim pipe-line protection as envisaged by Article 70(9) of GATT. However, no application for interim pipe-line protection has been filed so far.

Unfortunately, the question of amending the Patents Act is now more a political than a legal issue. With the Parliamentary elections due for sometime early 1996, it is now expected that the ruling party will not take any action until then and any effort to amend the Patents Act will be resumed only after the elections are over. We have been advised unofficially that the Patent Office will continue to receive applications for pharmaceutical substances per se under Article 70(8) of GATT. Therefore, we do not expect any changes to the Patents Law or practice until after the elections. We hope and (we have been unofficially intimated) that when the Patents Law is indeed amended it will be with retrospective effect so as to take care of all the "black box" filings which have already taken place.

TRADE MARKS: No Progress

The bill for amending the Trade Marks law, which, among other things, provides for registration of service marks, was passed by the lower house of the Parliament on May 29, 1995. However, the upper house is yet to approve it and according to current indications, nothing is likely to emerge until after the general elections scheduled for early next year.

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In the second issue of "Letter from India" we had mentioned that there had been significant judicial precedents in India on the question of recognition of trans-border reputation of internationally well-known marks. Since then, there has been yet another significant decision by the Madras High Court - in the "Tiger Balm" case by which an Indian company was restrained from using upon or in relation to its medicinal formulations the well - known trade mark "Tiger Balm" associated with Haw Par Brothers International Limited, Singapore. The Indian company was marketing its products in a packaging which was almost identical to the packaging used by the Singapore company internationally. Interestingly, the Indian company had obtained registration for the trade mark "Tiger Balm" way back in 1961 while the Singapore company had only an application pending in the Trade Marks Registry. Even though the Singapore company did not have any formal business presence in India, evidence was led to establish that "Tiger Balm" enjoyed considerable reputation in India by advertisement. This gives us good reason for optimism with respect to protection of internationally well-known trade marks.

COPYRIGHT: AMENDMENT OF LAW

Since we last reported, developments have taken place in the field of copyright law. The Copyright (Amendment) Act, 1994 came into force with effect from May 10, 1995 and some of the salient features thereof are listed below:

(i) A comprehensive definition for "computer programme" (absent in the previous Act) reading as follows has been introduced: "computer programme" means a set of instructions expressed in words, codes, 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. As under the earlier Act, computer programmes continue to be treated as "literary works". The definition of "literary works" under the new Act includes "computer programmes, tables and compilations including computer databases.

(ii) In relation to any literary, dramatic, musical or artistic work which is computer-generated, the person who causes the work to be created is the "author".

(iii) A new offence has been added in the Act for knowing use of infringing copy of computer programme prescribing imprisonment for a term which shall not be less than 7 days but which may extend to 3 years and with fine ranging from Rs 50,000 (US $ 1,500 approx.) to Rs 200,000 (US $ 6,000 approx.) However, where the computer programme has not been used for gain or in the course of trade or business the court may not impose any sentence of imprisonment and may instead only impose a fine up to US $ 1,500.

(iv) The definition of "communication to the public" has been amplified - "communication to the public" means making any work available for being seen or heard or otherwise enjoyed by the public directly or by any means of display or diffusion other than by issuing copies of such work regardless of whether any member of the public actually sees, hears or otherwise enjoys the work so made available. In an explanation to this definition, it has been clarified that communication through satellite or cable or any other means of simultaneous communication to more than one household or place of residence including residential rooms of any hotel or hostel shall be deemed to be communication to the public.

(v) Every "broadcasting organisation" has been conferred with a special right known as "broadcast reproduction right" which shall subsist until 25 years from the beginning of the calendar year next following the year in which the broadcast is made. The Act stipulates that certain acts, which, when done without the licence of the owner of such right, shall be deemed to have infringed such right.

(vi) The Act specifies certain acts which do not constitute infringement of copyright;

the important one being "the making of copies or adaptation of a computer programme by the lawful possessor of a copy of such computer programme, from such copy

(i) in order to utilise the computer programme for the purpose for which it was supplied; or

(ii) to make back-up copies purely as a temporary protection against loss, destruction or damage in order only to utilise the computer programme for the purpose for which it was supplied".

FOREIGN INVESTMENT - SHAPE OF THINGS TO COME

In the previous issue of our "Letter from India" we had mentioned that the Indian Government appeared to be succumbing to the needs of populism and was trying to slow down the momentum of reforms that had been set into motion in 1991. Since then there has not been much change in the attitude of the Government and the manner of implementation of its policy has been even more indicative of the pressure it is subject to. The ruling party does not have much of a choice, even if there is a risk of sending wrong signals to the overseas community, in view of the general elections which are scheduled to be held in early 1996. In the initial stages of economic liberalisation, the Government, in a euphoric mood, gave approval for setting up wholly - owned subsidiaries in all sectors.

Since about the beginning of this year, it started getting restrictive in granting such approvals in the consumer goods sector by insisting that an Indian company be taken in as a joint venture partner even with a minimal 15-20% equity. This approach has since been extended to even industries involving high technology, although, the Government does finally permit a wholly owned subsidiary after the overseas company is able to convince it that an Indian partner is not likely to make any significant contribution to the project as a minority shareholder. Unfortunately, the Government's approach in implementation of its policy has seen a partial revival of bureaucracy - something that foreign investors have always shied away from. Looking into the crystal ball, we may say that the Government's present attitude to foreign investment is a temporary phenomenon and that the situation is likely to improve once the elections are over. Regardless of who forms the next Government - the ruling party or whoever else - the highest common factor, to use a mathematical parlance, with respect to policy on foreign investment will continue to be the list of 36 "high priority" industries which have been identified by the Government to qualify for "automatic" approval, provided the equity participation by the overseas company does not exceed 51% and limits in respect of technology fee and royalties (detailed in Issue 1 of "Letter from India") are adhered to.

As a matter of fact, we feel that the said list may well be expanded. Thus, the list may well cover a fairly wide segment. In the event of the opposition party/parties coming to power, what seems quite likely is that the area in which 100% holding may be allowed will be narrowed down to "really high-tech industries". We feel also that in respect of consumer goods there will be no possibility to set up a wholly owned subsidiary and that the Government will insist upon a minimum level of Indian share. However, whatever may be the case, one thing the investors would not wish is an increase in the span of discretion in approval of foreign investment proposals and a consequential increase in the role of bureaucracy.

© Remfry & Sagar

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"Letter from India" is intended to provide our clients and associates with information of general nature on legal issues and recent developments in the areas of intellectual property, foreign investment and corporate laws. It should not be relied upon as legal advice or opinion.