LETTER FROM INDIA

INTELLECTUAL PROPERTY

CORPORATE LAW

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Issue 8 April 1999

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PATENTS LAW

India became a member of the Paris Convention and the Patent Cooperation Treaty ("PCT") effective December 7, 1998. The Patent Office in India now functions as the Receiving Office, Designated Office & Elected Office for the purpose of international applications filed under the PCT. Applicants can now file international PCT applications in their local Receiving Offices designating India as a Designated State and an Elected State.The national phase of such an application will begin upon expiry of (a) 21 months from the priority date, if the applicant decides to proceed with the application for obtaining patent in India based on the international search report, or (b) 31 months from the priority date, if the applicant opts for an international preliminary examination.

India has announced its recognition of Chinese Patent Office and US Patent Office as authorised international search and examining authorities in addition to the Australian, Austrian and European Patent Offices.

A bill to amend the Patents Act, 1970 ("the Act") was passed by both Houses of the Parliament in March 1999. The salient features of the amendments carried out in the Act are:-

Retrospective operation (w.e.f. January 1, 1995) and revalidation of all black box applications received by the Indian Patent Office.

Black box applications for product patents are limited to "medicine or drug" defined as follows: all medicines for internal or external use of human beings or animals; all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of diseases in human beings or animals; all substances intended to be used for or in the maintenance of public health, or the prevention or control of any epidemic disease among human beings or animals; and insecticides, germicides, fungicides, weedicides and all other substances intended to be used for the protection or preservation of plants.

Exclusive Marketing Rights (EMRs) for products as above may be acquired subject to fulfillment of following conditions:

An application in India seeking patent protection for product per se is filed on or after January 1, 1995 (Black Box application);

Corresponding application is filed in a convention country before Indian filing but not before January 1, 1995 and a patent is granted on such application on or after the Indian filing; Marketing approval has been granted in such convention country on or after the Indian filing; and Marketing approval has been granted in India by the concerned Indian authorities. Application for grant of EMRs will be considered provided the black box application satisfies the fundamental criteria of patentability as laid down in the Act, e.g., article/substance in question is not obtained by a mere admixture resulting only in the aggregation of properties of the components thereof. Any article or substance based on the system of Indian medicine as defined in Indian Medicine Central Council Act, 1970 and which is already in public domain has been excluded from the purview of EMR provisions. "First filing" requirement in case of an invention where the inventor is resident of India has now been waived. Importation of the article/substance by a person holding EMRs will not be a ground available to a third party to seek compulsory license from the Government.

DESIGNS LAW

A comprehensive enactment to revise the existing Designs Act, 1911 in accordance with the WIPO guidelines/Paris Convention is on the anvil. For purposes of claiming priority, India continues to recognise reciprocal arrangements with Australia, Eire, New Zealand, Sri Lanka and United Kingdom.

TRADE MARKS LAW

Government of India has, effective December 3, 1998, notified 130 WTO signatory countries and, effective December 7, 1998, notified 150 Paris Convention countries for the purpose of claiming priority under the Trade & Merchandise Marks Act, 1958. The period of priority will be six months and will operate prospectively. In order to tackle the accumulating backlog in the (Indian) Trade Marks Registry, special initiatives code named "Operation-Arjuna" & "Operation-Surya" have been launched. The objective is to expedite prosecution of pending applications and issuance of renewal certificates under a simplified procedure on verification of relevant documents.

CORPORATE LAW

Some of the significant developments are summarized below: The previous limit of "USD 3 million" or its equivalent for external commercial borrowing (at a minimum simple maturity of three years) by corporate and institutions has been raised to USD 5 million.

100% foreign equity investment is now allowed on automatic basis in projects for construction and maintenance of roads, highways, vehicular tunnels and vehicular bridges, ports and harbours in addition to electricity generation, transmission and distribution (non-atomic), subject to a ceiling of approx. USD 350 million. There is a proposal to allow foreign equity investment in pharmaceutical and drug industry upto 74% under the automatic route. A notification in this regard is expected soon. The cap on foreign equity investment in private sector banks has been increased from 20% to 40%.

49% foreign equity investment is allowed in companies providing Global Mobile Personal Communication by Satellite (GMPCS) services. Such investment will be subject to obtaining license from the Indian Telecom authority.

The Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948 have been amended to provide for private (including foreign) investment in power transmission. Procedure for extending sovereign counter guarantees to the Fast Track Power Projects (announcement of which had been held up for some time) has been simplified and several counter guarantees have been issued. The tax holiday granted to power projects has been extended upto the year 2003.

Companies are now allowed to buy-back their own shares up to 25% of their paid up equity share capital and free reserves. Also, companies can now invest or give loans up to 60% of their paid up equity share capital and free reserves without prior approval of Indian Government but with the approval of their board of directors. For any investment and loans beyond this limit, companies will have to pass a special resolution (i.e., 75% majority vote) in a shareholders' meeting.

The euphoria following a progressive budget for the current fiscal year has been somewhat dampened by the political instability. The stock markets are fluctuating... and the year looks eventful! Nevertheless, the country has resiliently weathered many such storms in the past and we do not see any grave cause for pessimism.

© Remfry & Sagar April 1999

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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.