LETTER FROM INDIA

INTELLECTUAL PROPERTY

CORPORATE LAWS

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Issue 5 November 1996

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Sequel to the fourth issue of our "Letter from India" sent in November 1995. No major change or development - either in the field of intellectual property or foreign investment - since our last report. In this issue we are sharing with you our experience and observations in some areas which may be of interest to you. ________________________________________

PATENTS LAW - STATUS QUO

Despite the passage of more than two years since India signed GATT/TRIPS Agreement, [Indian] Patents Act, 1970 [the Act] continues to await amendments.

On January 1, 1995, a Presidential Ordinance did come into force enabling filing of Black Box applications for protection of pharmaceutical substances per se. Such Ordinance also made provisions for interim pipe-line protection. Unfortunately, owing to failure of a corresponding Patent [Amendment] Bill to pass through our Parliament, the said Ordinance lapsed on March 26, 1996. These aspects have been discussed in detail in the previous issues of our Letter.

GATT/TRIPS Agreement is self-executing. Therefore, the Indian Patent Office continues to receive applications for pharmaceutical substances under Article 70[8] of GATT/TRIPS Agreement. These applications will be kept in abeyance till December 31, 2004 after which they will be taken up for examination for grant of patents with 20 year term. Thus, as far as receiving Black Box applications is concerned, the Indian Patent Office is proceeding as if the lapsed Ordinance is still in force. It remains to be seen how the Patent Office will react when an application for pipe-line protection [exclusive marketing rights] is made before it as provided for in Article 70[9] of GATT/TRIPS Agreement. So far no application for pipe-line protection has been made. The first Black Box application in India was filed [by our office] on January 7, 1995 and it will be some time before this application becomes eligible for pipe-line protection.

Amendments to the Act is now overdue. Being a member of WTO, India was under an obligation to amend the Act - at least with respect to Black Box applications - with effect from January 1, 1995. There have been veiled threats from many countries to take up the matter with WTO if India does not amend its Act soon. Unfortunately, the political issues in our country have taken precedence over other matters and the patents law has been relegated to a back seat.

Nevertheless, going by the present trends, the situation seems to be encouraging, the delay aspect notwithstanding. The question now is more of when the Act will be amended rather than whether it will be amended. There has also been a considerable patent awareness in this country over the last few months. Opposition proceedings and infringement suits are on the rise. The Patent Office has also become a little more serious in disposing of opposition proceedings and a little more liberal in allowing claims. Sadly, however, nothing much has been done to cut down delays in grant of patents. Hopefully, when the Patent Office is modernised, which it is seriously considering, the situation will improve.

REGISTERED DESIGNS -POWERFUL WEAPON

The designs law in force in India is still the ancient and primitive designs law of 1911. It has been the most ignored and least invoked intellectual property legislation in this country.

Under the [Indian] Designs Act, 1911, any new and original pattern, ornamentation, shape or configuration [design] applied to the exterior of an article by an industrial process is capable of registration for an initial period of five years. Such five year period is extendible by a maximum term of additional ten years. The only caveat is that such design should not have been previously published or registered in India.

As against patents, a vast majority of design applications filed in the Indian Patent Office are indigenous. However, in the recent past, there has been an increase in applications from overseas applicants. The reason for this appears to lie in the fact that of all the intellectual property rights, a registered design is easiest to enforce - the issues involved in most cases being only factual and visual. In an infringement suit, all that is necessary for the registered proprietor of a design to show is that the infringer's design, if viewed from a distance, is capable of being confused with his own registered design. As long as the registered proprietor is confident that the registered design was not previously published or registered in India and he brings the suit for infringement without any delay, there is an excellent chance of obtaining interim relief. In respect of a registered design it is very easy to establish a prima facie case of infringement.

Therefore, considering the normal delays that occur in obtaining patent and trademark protection in India, it is advisable to obtain design protection wherever possible - it only takes six months for a design to be registered. In our experience, many unscrupulous parties obtain design registrations for popular articles available in many parts of the world taking advantage of the fact that such designs may not be previously registered or published in India. Thus, companies which have been manufacturing and selling any particular item of a popular design in other parts of the world often find that entry of such product in India is stymied only because some unscrupulous party has obtained a prior registration. Therefore, it becomes all the more important that any article which has a likelihood of becoming popular with the customer, by virtue of its aesthetic appearance or otherwise, is registered under the Indian Designs Act, 1911. It will avoid unnecessary complications and litigation in the future. There have been some talks with respect to amendment of the [Indian] Designs Act as well. However, the basic structure of the designs law will remain the same and a registered design will continue to be the easiest intellectual property right to enforce.

TRADE MARKS

The new Government in India (a potpourri of various political parties - each having its own ideology and priority) seems to be pre-occupied with consolidating its position and attending to the series of scams that are surfacing with startling regularity. As a consequence, there has been no progress on the passage of bill for bringing the new trade marks law into force and there are no indications as to when this is likely to occur. Considering the fact that the bill has several highly beneficial aspects (including introduction of trade marks for services and special protection for well-known trade marks), it is unfortunate that overseas companies have to contend with gnawing uncertainty.

Fortunately, courts in India are recognising, more than ever before the concept of international reputation of well-known trade marks and many overseas companies have succeeded (in infringement and passing-off actions) in protecting their valuable trade marks by obtaining orders of injunction restraining misusers from using identical or deceptively similar trade marks. In some cases misusers have been restrained from using such well-known trade marks as part of their corporate name even where there was no common field of activity between the overseas company and the misuser. In the second issue of our Letter, we had informed you of the WHIRLPOOL case. After the defendant (a prominent Indian industrial house) was restrained by the Delhi High Court, it went in appeal before the Supreme Court but did not succeed in having the order of injunction of the Delhi High Court vacated. The Supreme Court dismissed the appeal on August 30, 1996.

COPYRIGHT

In our previous issue we had reported some of the salient features of the new copyright law in India. In this issue, just a few words on registration and enforceability of copyright in India by overseas companies.

Under Indian law, registration or any other formality is not required either for acquiring copyright or for enforcing it in an infringement action. In other words, registration is not a prerequisite or a condition precedent for securing copyright protection in India. It only has evidentiary value in showing that the person mentioned in the Register is the actual author/owner. India is a signatory to the Universal Copyright Convention and the Berne Convention. In terms of the International Copyright Order, 1991 (promulgated by the Indian Government) "foreign works" first published in a country which is a member of either of the Conventions would be accorded the same copyright protection in India as Indian works without undergoing any formalities. This is on the assumption that the home country accords "national treatment" to Indian works, i.e., recognises the criterion of reciprocity. This has led to a somewhat peculiar situation in the Indian Copyright Registry. If an application for registration of copyright is filed by an applicant who is a member of either of the Conventions, the Registry is inclined to return the application on the ground that since copyright protection would be afforded to the applicant automatically, there is no need for registration therefor. It appears that in the process the Registry is trying to reduce its paper work. Thus, in case of infringement, the applicant can rely on the copyright registration certificate issued by his home country and on the basis thereof enforce his rights in India through the International Copyright Order, 1991.

FOREIGN INVESTMENT

Soon after the new Government came into power, there were press announcements by the Ministry of Industry that the policy of liberalisation (set in motion in July of 1991) will not only continue but would further be improved, making it more attractive for foreign investors. For instance, one of the press reports talked of raising the foreign equity limit from 51% to 74% on a near automatic basis in respect of "high priority industries". There was another report which seemed to suggest that an Indian company, even though wholly owned by an overseas company, would be allowed to remit royalties to its parent company. None of these has materialised. One thing which is becoming increasingly clear is that the Government is happier to see foreign investment involving majority participation in manufacturing segments as opposed to a project involving mere retailing or trading. Assembly and quality control which was hitherto accepted as "manufacturing" for the purpose of acquiring foreign equity ownership in an Indian company is no longer acceptable and the Government insists, in certain cases, that the Indian company be involved in "active" manufacture. However, it would be acceptable to the Government if one were to start with import, assembly and quality control and then progressively move on to manufacture.

There was a time when the Reserve Bank of India (RBI) was relatively liberal in permitting overseas companies to set up branch offices in India. Now it is more of an exception unless a strong case is made out. According to RBI it would prefer to see foreign direct investment in Indian companies. We believe that even though the pace is tardy, on balance, the direction seems to be clear.

The new Government is certainly not anti-multinational and cases involving majority equity participation by overseas companies and in some cases even 100% holding are being approved. We are hopeful that once the Government "settles down", we could expect greater and more transparent liberalisation.

© 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.