PATENTS LAW

Despite the passage of two years since GATT/TRIPS Agreement was to become effective, the much awaited amendment to our Patents Law continues to be elusive. The only time any attempt was made to amend the (Indian) Patents Act, 1970 it failed because the ruling party did not have enough support in the Parliament.

The political situation in India has been a little turbulent. Since India signed GATT/TRIPS Agreement, we have had three Prime Ministers. (The last one was sworn in only a few days ago.) While the present Prime Minister is regarded to be liberal in his outlook, the Government - a coalition of twelve parties - supported by two parties from outside continues to be the same. We do not therefore, expect any major changes to our Patents Law in the coming months. The only comforting fact is that India continues to be a member of WTO and the maximum time that it can postpone the inevitable is until December 31, 2004. We are hopeful that the Patents Law will be amended sooner. In the meantime, the Indian Patent Office continues to receive 'Black Box' applications, as laid down by Article 70(8) of GATT/TRIPS Agreements.

Indian Patents Rules (1972) are expected to be amended this year. These concern, inter alia, jurisdiction for filing patent applications. Currently, the Indian Patent Office is located in Calcutta with branches of concurrent jurisdiction in Bombay (now named "MUMBAI"), Delhi and Madras (now named "CHENNAI"). An Indian applicant can file a patent application only in that Patent Office within whose jurisdiction it resides or its principal place of business is located. For an overseas applicant, the jurisdiction is determined by the principal place of business of its attorney. Thus, all the applications of our overseas clients are always filed at the Patent Office Branch, Delhi (where we are located).

The Delhi Patent Office is currently reeling under a backlog of cases. It was only to be expected since it receives the maximum number of patent applications as compared to other branches.

Under the proposed amendment to the Patents Rules, the jurisdiction will no longer be determined by the principal place of business of the applicant or its attorney but will be the choice of the applicant or its attorney. It will therefore, soon become possible to file applications in any branch of Indian Patent Office which will hopefully, result in an evenly balanced disposal of cases throughout India.

TRADE MARKS LAW

There is no knowing when the new trade marks law will come into force. The ruling coalition has just been through a political crisis and has managed to survive under a new Prime Minister. While he wants to continue with the economic reforms, it may take some time for the Government to "settle" down to consider less serious and non-political issues such as the trade marks bill. As soon as we have any indication, we shall report.

FOREIGN INVESTMENT

On January 17, 1997, the Government further liberalised its policy on foreign investment and transfer of technology and we believe that the modified guidelines are one step closer towards achieving transparency which overseas investors have been clamouring for. Here is a synopsis of the salient aspects of the current regulations governing foreign investment and transfer of technology.

Insofar as transfer of technology and compensation therefor is concerned, "automatic" approval will be granted regardless of the nature of industry involved provided:

While 74% foreign equity looks attractive in comparison to 51%, it is illusory. In legal terms there is no difference between the two levels. A simple majority of 51% would get translated into super majority only if the equity shareholding is 75% or more. Under Indian corporate law, a shareholder holding 25% plus one share becomes entitled to certain veto or minority rights. Thus, 74% foreign equity would be attractive to a foreign investor purely in commercial terms but would not give him any rights superior to those of a 51% equity shareholder.

Some other procedural changes have been carried out in order to streamline the procedure for automatic approval. As a consequence it is now intended that applications under the "automatic" route will be disposed of within a fortnight.

Proposals which do not conform to the parameters for "automatic" approval, will continue to be made to a specified governmental agency giving justification for deviation from the standard norms above given. Certain guidelines have been announced for consideration of such proposals. Of particular interest are the criteria to be applied by the Government in approving the setting up of a 100% holding or subsidiary company by an overseas company. Such criteria are protection of proprietary technology or induction of sophisticated technology, export of at least 50% of production, proposals for consultancy and proposals for power, roads, ports and industrial model towns or estates. Also, in the case of an existing joint venture, where the Indian partner is unable to raise resources for expansion/technical upgradation, the Government may permit increase in foreign equity up to 100%.

If the wholly owned subsidiary is to act purely as a holding company then the Government requires that all subsequent/downstream investments be carried out only with its prior approval.

We might mention that the announced guidelines are not intended to be rigid. They are administrative in nature and would not prevent the Government from considering proposals in their totality based on some other criteria or special circumstances or features which it may consider relevant.

Effective April 1, 1997: In terms of the proposed budget (for the fiscal year April 97 - March 98), corporate tax rate has been reduced from 43% to 35% for domestic companies and from 55% to 48% for foreign companies. Peak rate of import duties has been reduced from 50% to 40% and in case of "project imports" and capital goods, the import duty has been reduced from 25% to 20%. The import duty on computer parts (other than populated printed circuit boards) has been reduced from 20% to 10%. Import of plans, designs and drawings and computer software will no longer attract any duty.

Again, in terms of the said budget,but effective June 1, 1997, the tax on royalties and fee for technical services will be 20% as opposed to the earlier 30%. However, many tax treaties for avoidance of double taxation between India and various countries provide for a rate even lower than 20% in which event such lower tax rate will prevail. Tax on dividends has been abolished but the company distributing such dividends would have to pay a 10% tax on the amount so distributed.

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