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Patent Licensing Agreements and the clauses covered under it

By: Riya Bansal

INTRODUCTION:-

In the later part of 19th century new inventions in various fields of art, processing, manufacturing, apparatuses, machinery and other substances produced by manufacturers were at upsurge. Thus, there was a threat to inventors that their inventions could be infringed easily as there was no law to refrain infringers from using or copying such inventions. So to safeguard the inventor’s interests the British rulers at that time enacted the Indian Patents and Designs Act, 1911. With the evolution of Indian political and economic conditions in the later part of the 20th century, there was need of a comprehensive law to ensure the greater effectiveness and security of the patent rights and to encourage inventors for making new and useful inventions in different fields. Therefore, the Patents Act, 1970 was enacted which repealed and replaced the 1911 Act so far as the patent law was concerned. Now there was no threat to the interests of inventors as there was an option of licensing of patents by mode of a written agreement, which is proved to be beneficial for the inventors as they could protect their inventions and at the same time grant permission to make partial use of their inventions.

PATENT:-

Patent is a monopolistic intangible right granted to a person who has invented a new and useful article or a new process of making an article. In India, such right is conferred upon the inventor through a Government issued Certificate, in which it is explicitly mentioned – what the invention is and inventor is the owner of it; and this government issued certificate is known as “Patent”. The inventor or person who invents is called “Patentee” only when his invention gets approved by Government and thereupon he can make exclusive use of his invention.

The word patent is derived from the Latin term ‘Patene’ which means ‘to open’. There is no exhaustive definition of ‘Patent’, but to get the true essence of the definition of patent one can read Section 2(1) (m) of Patent Act 1970 [1][which defines Patent] along with Section 2(1) (j) of Patent Act 1970[2] [which defines Invention].

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PATENT LICENSING:-

Patent Licensing is a contract between Patentee (known as Licensor) and Licensee; wherein licensor grants permission to a third party (known as licensee) to sell, use, exercise etc. his or her patented invention. In case of grant of Patent license the ownership of a patent remains with the patentee and mere partial use of patent is permitted. Thus partial use of patent is subject to certain terms and conditions which are agreed upon by both licensor and licensee. Since Patent Licensing is a contract, it must satisfy all the essentials mentioned under Section 10 and Section 11 of the Indian Contract Act, 1872, i.e., the contract must be done between persons who are of sound mind, who have attained age of majority and who are not disqualified under any law and there must be a lawful object for a lawful consideration with the free consent of parties. There are various modes of patent licensing like Exclusive Licensing, Non – Exclusive Licensing, Voluntary Licensing, Compulsory Licensing, etc.

PATENT LICENSING AGREEMENT:-

Now a day’s Patent Licensing is used as a source of income for the patentees, as it has become the most easiest and convenient way to transform patent into a reality without incurring any financial or marketing or manufacturing expenses. With patent licensing we have to keep in mind that it is associated with an agreement through which a patent is licensed and such agreement will be considered invalid if it is unregistered and is not in writing[3].

Patent Licensing Agreement is a negotiated agreement between the licensor and licensee, wherein licensor authorizes licensee to make partial use of its patent, in compliance with the terms and conditions of the agreement, in exchange for an agreed pecuniary consideration (technically to be called as Royalty). Once the terms and conditions of the said agreement are negotiated upon, then the parties have to convert it into a written agreement so that it can be duly executed and registered in the official Register of Patents. Generally the said agreement is made, with agreed terms and conditions, for an agreed period of time, for a defined purpose, and in a definite territory.

Also we could say that the Patent Licensing Agreement is legally binding upon the parties as they have certain duties which are to be performed according to the terms and conditions of the agreement. And legally binding means that if any of the party fails to perform its duties in compliance with the terms of the agreement then the aggrieved party can sue the party committing breach accordingly, but for that it is mandatory that the Patent Licensing Agreement is to be registered as per Section 67 of the Patents Act, 1970[4].

CLAUSES OF PATENT LICENSING AGREEMENT:-

The clauses of Patent Licensing Agreement generally, defines the scope of rights and obligations of the parties and; helps in eliminating ambiguity and disputes, as they are written only after being negotiated and agreed upon mutually by both the parties. It is very crucial that the clauses of patent licensing agreement are drafted accurately so as to avoid any kind of disputes down the road. The list here in below is not exhaustive but most important and basic clauses of a patent licensing agreement are tried to be covered and clauses are to be included or excluded in the agreement considering various factors pertaining to type of patent and mutual consent of the parties.

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  • GRANT OF LICENSE

This clause mainly deals in what type of licensing is done by the licensor i.e. what type of patent licensing is granted by licensor to licensee (like exclusive license or non-exclusive license etc.) and to what extent the licensed patent can be used by the licensee.

  • TERM OF AGREEMENT

In this head the term or period to use the licensed patent under the agreement is defined and would specify the expiry of agreement which can be set even without the expiry of patent. And all date and time related conditions pertaining to use of licensed patent would be included under this head. It can be included that what would happen in case of bankruptcy or insolvency.

 

  • ROYALTY

 This is the pivotal clause to be included in every agreement because receiving Royalty is the primary objective of licensing a patent. Royalty is basically the amount of consideration to be paid by the licensee, in exchange of receiving permission for using patent, to the licensor.

Thus this clause contains terms like how the royalty payment would be made, what amount of royalty is to be paid by the licensee, what rate of royalty is to be charged (if any), how the royalty charged would be calculated i.e. through which method will the royalty to be charged will be calculated etc. Royalty rate of a patent may vary from 0.5% to 25 % depending on the licensee and type of patent.

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  • LICENSOR’S PATENTS RIGHT

This clause defines the rights of the licensor and the extent to which a licensee can use partial rights of licensor for utilizing the licensed patent to earn profits. Also licensee’s rights are to be defined.

  • LIABILITY AND INDEMNITY

The said clause helps in determining that in what all conditions a licensee would amount to be liable to compensate the licensor and whether licensee would be held completely liable or not. Also it must be elaborated that what are the duties of the parties and if such duties are not performed or if any obligations are not complied with then party in default would be liable.

  • NOTICES

Under this it is to be decided and agreed upon the method of service of Notice (like by way registered AD post or by personal delivery or by nationally recognized courier service etc.) And also it has to be decided that from what date such notice will be considered effective or when will such notice be considered effective after receipt of the notice.

  • ENTIRE AGREEMENT

It has to be discussed whether any previous existing representations or agreements pertaining to the subject matter of the present agreement are to be merged with the present one or not. And whether any changes made to the present agreement are to be validated by written consent of the parties or no such written consent is required.

  • TERMINATION OF AGREEMENT

It should be clear from this clause that what all acts would amount to termination of this agreement. And what all must be done post termination (like immediately cease use of patent by licensee, handover any profits post termination to licensor etc.)

  • DISPUTE RESOLUTION

This helps in determining whether parties would like to solve their disputes (if any) through method of litigation or arbitration or any other way of dispute resolution. Also it is to be mentioned well in advance that which state’s law will govern the arising disputes and what would be the jurisdiction to solve or try such disputes in.

IMPORTANT PROVISIONS UNDER LAW PERTAINING TO PATENT LICENSING AGREEMENT:-

Here under we would deal with the aspects of provisions pertaining to patent licensing agreement and the other aspects of the mentioned provisions would not be discussed.

  1. PROVISIONS UNDER THE PATENTS ACT, 1970
  • SECTION 68 [5]– Patent Licensing Agreement is valid only when it is in Writing and is Duly Executed :

License of a patent shall be valid only when it is in the form of a written agreement, between the licensor and the licensee, which is duly executed. Such written agreement must be presented in form of a Document wherein all the terms and conditions are implicitly or explicitly incorporated. Also the terms and conditions of the Patent Licensing Agreement or we can say Document; play a pivotal role in defining the rights and obligations of the licensor and the licensee.

  • SECTION 69 [6]– Application for Registration of title of Licensee :

By Licensee – According to Section 69(1), where any person becomes entitled as a Licensee, he or she shall apply in writing in the prescribed manner to the Controller for the registration of his or her title or registration of notice of his or her interest in the register of the Controller.

By Licensor – According to Section 69(2), without prejudice to the provision of section 69(1), an application for the registration of the title of any person who gets entitled by the virtue of a patent license may be made by the licensor in a prescribed manner to the controller.

  • SECTION 70 [7]– Power of registered proprietor or grantee to issue Licenses for Patent :

This provision of the Patents Act, 1970 empowers the registered proprietor or the grantee to issue licenses for the patent and to give effectual receipts in lieu of consideration received by them for grant of any such license pertaining to patent.

  1. PROVISIONS UNDER THE PATENTS RULES, 2003
  • RULE 90 [8]– Application of Registration of :

Title of Licensee as per Section 69 of Patents Act, 1970 – According to Rule 90(1), Application for registration of the title of Licensee referred in Section 69(1) and Section 69(2) of the Patents Act, 1970 shall be made, in Form 16 to the Controller; within a period of 6 months from the date of execution of patent licensing agreement.

Document of Patent Licensing Agreement as per Section 68 of Patents Act, 1970 -According to Rule 90(2), Application for registration of any document (i.e. document which may affect the rights and obligations of a patentee in any way), like Document of Patent Licensing Agreement, shall be made in Form 16 to the Controller within a period of 6 months from the date of execution of patent licensing agreement.

  • RULE 91 [9]– Power of Controller to direct or call for any document or proof pertaining to Patent Licensing Agreement Application :

This provision of Patents Rules, 2003 empowers the Controller to direct or call for any document like Patent Licensing Agreement as claimed in Applications under Rule 90(1) or Rule 90(2) or any other proof or written consent as he may require. The required documents or proofs must be accompanied by the 2 copies (i.e. copies which is certified to be true copies by the applicant or his agent) of the Document, like Patent Licensing Agreement, for which such Application was made.

 

This Rule of Patents Rules, 2003 prescribes the way in which the Controller will register the entry of title of licensee or of document of Patent Licensing Agreement in its Register only after the receipt and complete enquiry of the application made by the applicants under Rule 90(1) or Rule 90(2).

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CONCLUSION:-

Licensing a patent invokes registration of a written agreement between the licensor and licensee. The aim of execution of agreement is, to reflect the intention of the parties for licensing a patent and; to gather specifications and details, which they have agreed to, in form of written agreement. It is mandatory that the Patent licensing Agreement is written and is registered in the Register of Patents. Clauses of patent licensing agreement plays an important role in deciding the disputes (if any) or to prevent any disputes between licensor and licensee. Even though it is an easy way to license a patent through a definite agreement, but the parties must pay utmost attention while chalking out the terms and conditions of the patent licensing agreement as this is the only document which shall define the grundnorms for the parties for patent licensing i.e. define the rights and obligations of the parties who agrees to patent licensing. So while preparing Patent Licensing Agreement keep your all senses wide open!!!

[1] Refer to “http://www.ipindia.nic.in/writereaddata/Portal/IPOAct/1_31_1_patent-act-1970-11march2015.pdf” for complete Sections, P.6.

[2] Id. at P.5

[3] Refer to case – National Research Development Corp. (NDRC) vs. ABS Plastics Ltd. ,[April 2009]

[4] Supra 1 at P.55

[5] Supra 1 at P.56

[6] Ibid.

[7] Supra 1 at P.57

[8] Refer to http://www.ipindia.nic.in/writereaddata/Portal/IPORule/1_70_1_The-Patents-Rules-2003-Updated-till-23-June-2017.pdf for complete Rules, P.38

[9] Ibid.

[10] Ibid.

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Analysis Of Trademark Laws In USA, UAE, And Germany

By: Jeetu Kanwar

INTRODUCTION

World Intellectual Property Organization (WIPO) is the body which has setup certain rules and regulations for governance of Intellectual Property (IP) services throughout the world. It mainly includes 193 countries which are part of United Nations. [1]

Trademarks are part of such intellectual property. It simply helps to differentiate between the goods of the manufacturers. It helps to distinguish goods with similar or identical owners. Also through trademark one is able  to protect his intellectual property. It confers legal rights upon the owner of the trademark.

Here comes the role of trademark laws. It helps to protect owner of the trademark. An owner can bring a legal action against the other person who causes trademark infringement. Such personal is liable for punishment. The owner of trademark can take legal action which is both civil as well as criminal action. Thus the person is liable to be punished with fine or imprisonment or both.

Different countries have their own regimes of trademark laws. They are governed by various laws and have different set of rules and regulations to counter trademark infringement. This makes the rules to differ from country to country and region to region. Thus there are several blend of regulations making trademark laws unique in nature.

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In this write-up trademarks laws of following countries are explained and a parallel analysis is drawn for a better understanding:

  1. S.A
  2. A.E

TRADEMARK LAWS IN USA

In its basic essence trademark law in the USA is made to protect and distinguish goods made by one person from that of another manufacturer. This helps to protect and differentiate similar kinds of goods and to give due credit to the producer. In the USA most of the service marks originate from their use and thus are totally identical from their mere use in different setups.  In order to protect the mark, it is always suggested to either register the trademark with the federal government and if that is not possible then the mark should mandatorily be registered with the state government to avoid any kind of misuse or infringement.[2]

A trademark in the USA is infringed when another person uses the same mark in a manner such that it likely causes confusion among the common masses.  Several people can use mark but only when it doesn’t cause any confusion among common people. [3]

Next thing to consider here is about the procedure to register the trademark in the USA[4]

All the application with regard to the registration of trademark needs to be moved to the United States patent and trademark office.  After this application, the trademarks are checked for their resistibility. If a mark is found eligible for registration and fulfills all the criteria then it is published in the official gazette. In the case of use based applications, they published and if are not opposed then registration is issued providing detail of the expiration period.

In the case of intent use based application, a notice of allowance is issued which is valid up to a period of three years from the issue of the notice of allowance.  After which registration is issued.

An application for registration must include the following:

  1. It should include the name and address of the owner who wishes to register.
  2. It should include the applicant’s citizenship or residence or place of organization.
  3. It should include details of the goods on which the mark needs to be used.
  4. It should include the details where the mark was first used.
  5. It should include a declaration that needs to be signed and the application needs to reveal the specimen and drawing of the mark.
  6. It should include the meaning of the words which are not in English.
  7. It should also include a claim declaring a prior use of the mark which the applicant is trying to register in order to ascertain whether anyone else is using the same.
  8. It should also include a fee for the goods which come under the category of international goods.

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After due verification and completion of the application for registration of a trademark, the United States Trademark and patent office mails the certification of the registration to the owner of the trademark.

TRADEMARK LAWS IN UAE

Government of UAE has taken strict measures and provisions for the protection of their intellectual property especially trademark. There are stringent provisions for the regulation of trademark laws in UAE. Trademarks in UAE are protected by Federal Trademark Laws, which ensures proper supervision of trademarks and their misuse.[5]

REGISTRATION AND INFRINGEMENT OF TRADEMARK IN UAE

A trademark is widely used to distinguish between goods of one trader from that of another.[6] Registration of trademark in UAE is done by forwarding an application to the trademark section of the ministry of economy and commerce. After due completion of application and procedure for registration, the trademark is registered with the ministry. If in case any other person or organization or other entity uses the same registered trademark then it will amount to trademark infringement.

In this, the owner of the trademark can file a suit or take legal action for trademark infringement. Thus such trademark infringement is liable to be punished and the owner of the trademark can claim compensation for the same.

The trademark law also provides criminal remedies for trademark infringement which is in terms of imprisonment or fine or both. One can also take action against trademark infringement through the means of Dubai customs which filters the trademark infringement cases and products which infringe the trademark. This makes the trademark protection of products more efficient and well protected.[7]

Thus to ensure the rights over a trademark, it is important to register your trademark in UAE. This protects business innovations through the means of a trademark.[8] The registration of a trademark provides validity and protection in case another person copies or uses the same trademark which is similar to yours. If your trademark is not registered in UAE then you cannot take legal action against another business and enterprise.

TRADEMARK LAWS IN GERMANY

All German trademark applications need to be filed at the German Trademark and Patent Office (DMPA).[9] German trademarks are governed by the trademark act, which is implemented by European Union trademark directives. [10]  Trademarks that are not opposed by DMPA and fulfill all the standards are qualified to be registered as a trademark.  All German trademarks cover the entire federal republic of Germany[11]

In Germany, there are specialized ordinary courts for enforcement of trademarks infringement. They are also competent to tackle the disputes related to unfair competition and domain name dispute resolution policy.

PROCEDURE FOR TRADEMARK REGISTRATION IN GERMANY

One of the steps for the trademark registration procedure is to publish the trademark in the official gazette for three months.  During these three months, anyone in Germany with a similar or identical trademark may file an opposition against the trademark published in the official gazette. No trademark gets an extension from this period of three months.

Opposition to the trademark may be filed by the owner of the already registered trademark or owner of trademark who previously got such a trademark registered. In Germany, a trademark opposition is filed in writing and a nominal fee is to be paid.[12] The German trademark office will see whether the trademark complies with the standards of the trademark.

In Germany trademarks are valid for a period of three years from the date of filing of the application. If the owner wants to do renewal of the trademark then same can be done by filing an application for renewal one year earlier from the date of expiry of the trademark. Also there is a provision of a grace period which consists of six months. In this grace period a renewal application can be filed by paying late fees.[13]

It is mandatory to use the trademark within the five years after registration. If such trademark is not used then it is liable to be cancelled on the ground of non use. Such

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CONCLUSION

Through analysis of trademark laws of different countries, it can be safely concluded trademark registration is of utmost importance. It is vital to know that trademark registration provides various privileges to the owner of the trademark. Registration helps to tackle the problem of trademark infringement.

  1. Trademark infringement is one such common problem which is prevalent in almost every country. Thus to give due credit the owner of trademark, registration is a must.
  2. It can be safely concluded that all these three countries have their own set of statutes to govern trademark laws. Though they different rules but all rules have same essence which to punish the wrongdoer.
  3. Also the procedure for registration of trademark tend to vary when we move from one country to another but the basic outlines which includes publication of trademark in the official gazette remains the same.
  4. Another key aspect to keep in mind is that in all these three countries trademark is registered for a certain time period and after the expiry of that period the trademark need to be file for renewal.

Thus this analysis of trademark laws is essential in order to gain insight about variety of laws prevalent among other countries. This helps to get better understanding of different laws. Hence it helps to understand all kinds of dimensions of trademark laws.

 

 

 

[1] https://www.wipo.int/about-wipo/en/

[2] https://www.bitlaw.com/

[3] https://www.uspto.gov/sites/default/files/documents/tmlaw.

[4] https://iclg.com/practice-areas/trade-marks-laws-and-regulations/usa

[5] http://diazreus.com/protecting-your-trademark-in-the-uae

[6] https://www.wipo.int/edocs/lexdocs/laws

[7] https://www.mondaq.com/trademark/736132/new-trademark-application-procedures-in-uae

[8] https://www.dlapiperintelligence.com/goingglobal/intellectual-property/

[9] https://thelawreviews.co.uk/edition/the-trademarks-law-review-edition-3/

[10] https://www.worldtrademarkreview.com/portfolio-management/trademark-procedures-and-strategies-germany

[11] https://iclg.com/practice-areas/trade-marks-laws-and-regulations/germany

[12] https://www.lawyersgermany.com/register-a-trademark-in-germany

[13] https://igerent.com/trademark-registration-germany

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Impact of Covid-19 on the Aviation Industry

By: Mayank Singh

Aviation is one of the most influenced industry during Coronavirus emergency which has happened because of magnitude of pandemic. This Pandemic has resulted large scale emergency which tends to suspension of flights and limitations on venture out universally to hinder the spread of infection. It is conceivable to watch the effect of COVID-19 on the flight business in every region including Europe, North America, Asia-Pacific and the remaining part of the world. In the country like United States, for instance, after the public Wellness crisis occurred due to COVID-19 episode, practically the entirety of the region is on outright lockdown, which Consequently, limits homegrown travel inside the nation. Nations like Spain, Italy, France, and India are under full lockdown and a wide scope of flights are ended until further notice.

A report of International Air Transport Association says that Aviation industry may endure misfortune on income as much as 113 billion dollar in this emergency. Around 4.2 billion explorers were carried around the globe in 2018, according to the World Bank Organisation. Fragments that were driving the flying business before the COVID-19 pandemic join expanding extra cash the whole course over the globe, the presentation of low-passage planes, developing by and large budgetary exercises, new travel plans, and some more. Besides, substitution of creating business plane has likewise contributed far and away to the market headway.

The primary elements affecting the aeronautics business since the pandemic remember the drop for visits and travel as an enormous number of global and homegrown flights are being dropped worldwide to check the infection’s transmission. Governments over the globe deny outsiders’ visas and lock up affected regions which is also one of the noteworthy purpose behind the log jam of the flying business. The International Aviation division has different portions of Air lines, from which, alongside cooking and other assistance giving firms, traveller aircraft section is required to get generally influenced.

Carrier organizations affecting the airplane producing businesses may likewise be seeing the crossing out of an airplane request in the short term. Driving flying organizations which are in effect universally affected incorporate Airbus, Qatar Airways, Lufthansa, China Eastern Airlines, Emirates, Boeing, American Airlines Group Inc. what’s more, Delta Air Lines. For evident reasons, Qatar Airways has suspended all of its trips to and from Italy it was one of the most noticeably terrible hit nations by the COVID-19 pandemic. The organization has consented to downsize its activity which incorporates diminishing flights and dispensing with less savvy airplane. As a prudent step of COVID-19 episode, Qatar Airways had grounded all its ten A380 airplane until 31 May 2020.

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Furthermore, owing to the pandemic, Emirates likewise finished much of its traveller traffic. By and by, the company looks for rescue classes by aircraft and air terminal guiding partnerships. In Europe , for example, air terminal supervisory organisations are reliant on the procurement of $15.4 billion missing due to a pandemic. It is researched that air terminals in Europe are expected to receive 700 million fewer passengers, 28 percent less than previously expected.

Turning to economical aspect, the phenomenal decrease in avionics and business activity has incapacitated air terminal income sources. In the subsequent quarter, the normal reduction in by and large air terminal incomes on a worldwide scale is figure at $39.2 billion (USD) and over $97 billion for 2020. Air terminals must continue meeting their capital costs responsibilities as they stay depicted by fantastically high repaired costs essential for keeping and working the system sections of the air terminal, including runways, runways, covers, halting stands and terminal structures. The impact of COVID-19 has hence achieved an existential peril to air terminals and to the flying industry unhindered.

The International Air Transport Association ( IATA) has resurrected its study of the financial effect of the general growth emergency of the novel (COVID-19) on the overall air transport market. IATA is also watching cumulative compensation events for the explorer company in 2020 of between $63 billion (in a situation where COVID-19 is contained in new business divisions and over 100 instances in current business divisions beginning at 2 March) And $113 billion (with the broader distribution of COVID-19 in this situation). No estimates of the effect on payload exercises are yet available.

The past IATA analysis (given on 20 February 2020) placed a $29.3 billion decline in income based on a condition that would see the benefit of COVID-19 largely limited to business sectors linked to China. The virus has spread to more than 80 nations since that time, and forward appointments on courses beyond China have been badly affected.

Budgetary sectors of the economy reacted positively. After the start of the flare-up, aircraft share prices have dropped by approximately 25 percent, with about 21 values concentrating more noteworthily than the drop that occurred at a similar point during the 2003 SARS emergency. To a large degree, this decline as of now costs a lot more remarkable than our previous inquiry in a stun to business profits.

To consider the developing circumstance with COVID-19, IATA assessed the likely effect on traveller incomes dependent on possible situations.

The unexplained extension attributable to COVID-19 is almost unimaginable. The possibilities of the company in a large part of the world have gotten ug in minimally more than two months. How the infection can expand is muddled, but whether we see the effects on a few industry sectors and a $63 billion income misfortune, or a more pervasive influence that triggers a $113 billion, loss of income in this pandemic.

“Numerous carriers are cutting limit and taking crisis measures to diminish costs. Governments must observe. Aircrafts are giving a valiant effort to remain above water as they play out the imperative undertaking of connecting the world’s economies. As governments look to upgrade gauges, the carrier business will require thought for help on duties, charges and space portion. These are uncommon occasions,” said Alexandre de Juniac, IATA’s Director General and CEO.

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Impact of Covid-19 on Indian Airlines.

In the budgetary year 2021, the Indian aeronautics division is probably going to lose up to $ 4 billion, warning firm CAPA India has stated, raising the misfortune gauge from the past $3.6 billion.

CAPA India likewise talked about a higher capitalization necessity for Indian carriers, up from $2.5 billion to $3.5 billion of every investigation delivered on July 3. Systematically, the organization said the Indian flight industry could be decreased from the greater part twelve, including Air India, IndiGo, Go Air and Spice Jet , to just a few players now.

“Restructuring seems more likely and would result in a very drastic shift in the industry ‘s structure. If timely recapitalization does not happen, India might be heading for a two-three airline market,” it added. Ongoing traffic has generally included fundamental repositioning traffic, with travellers that were stuck in an inappropriate spot when the lockdown was declared getting back to their headquarters. Optional travel has been restricted, as reflected in the way that in excess of 90 percent of appointments have been for single direction travel, contrasted with 40 percent earlier with COVID,” the report said.

Despite the fact that the administration has permitted carriers to work up to 45 percent of their mid year plan yet it has had little effect as traveller load drifts around the midway imprint. Passages, which have been topped inside a range, have would in general be nearer to the lower end of the band, CAPA India said.

Ahead of Covid-19, one of the fastest rising aviation markets in the world, India is bracing for rough days ahead. Market watchers fear that a complete lack of government support will trigger a shakedown of India’s airline industry, which could have a lasting impact on the once upbeat demand for jet fuel in the country. In seven of the last 10 years, having seen double-digit percentage rise, In the first half of 2020, Indian airlines saw passenger numbers collapse 50 percent year on year to 35.2 million, or the lowest since 2014.

Airfares have also been put under pressure due to a decline of almost 30 per cent in bookings to destinations hit by viruses. As a consequence, airfares to those destinations have declined by 20-30%. With domestic travellers postponing or cancelling their travel plans, domestic traffic growth is also steadily being impacted.

Many companies announced a decline in domestic travel this summer of more than 30 per cent compared to last year. Airfare has been reduced by 20-25% on common domestic routes and airfares are also expected to remain subdued for the summer season. Aircraft transporters’ money adjusts are coming up short and many are nearly insolvency. Likewise, the crisis could provoke loss of occupations and pay cuts. A couple of airplanes have requested various from their laborers to go on leave without pay. Air Deccan has suspended errands and sent laborers on unpaid leaves.

In the interim, the travel industry service has refered to Confederation of Indian Industry (CII) evaluations to recommend the loss of income to the travel industry can run between Rs 72,000 crore and Rs 1.58 lakh crores in 2020-21. As per the service, marked lodgings will endure the greatest shot in the travel industry area, trailed by visit administrators. In view of the fundamental gauges via airlines,the division might be set for a decrease of 50-60% in worldwide rush hour gridlock and up to a half drop in homegrown rush hour gridlock, the note said. It additionally included that “there may be a critical however brief loss of both immediate and circuitous positions in the division.”

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While a few carriers have begun tolerating advance appointments fully expecting facilitating of the lockdown after April 14. In resuming domestic operations, Indian carriers are using a hawk-eyed approach; however, the pace of PLFs would be a main concern. For both 30-day/15-day ticketing periods, the brokerage said its airfare tracker indicates average yield across subway routes has decreased by ~30 percent year to date.

According to flight regulator Directorate General of Civil Aviation, local air explorer traffic hung 82.3% in July differentiated and the very month a year back. From January to July, airplanes passed on a whole of 37.28 million voyagers, a rot of 54.84% appeared differently in relation to the relating time period a year back.

It likewise assessed that because of such misfortunes, “all things considered, some airplane may must be grounded” and “a critical decrease is additionally expected noticeable all around payload took care of at air terminals across India.” 

  Conclusion

Aviation Industries are investing additional amounts of energy to guarantee appropriate sterilization and fumigation of air terminal terminals just as the purification of planes. Be that as it may, notwithstanding taking such prudent steps it is as yet hard to manage the dread ingrained in the psyches of travelers voyaging which consequently is influencing the general business of the flying business. On head of that, so as to control the spread of this deadliest infection government confined all worldwide trips to land in India. This will bring about loss of income and money related pressure.

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Analysis of Competition Law Issues in the Facebook-Jio Deal

By: Abishek TK

Jio – Facebook Crossover: A Financial Entente:

Facebook is one of the only apps used by almost 2.5 Billion users, making the social media platform the world’s largest. While Facebook conquers the world, Whatsapp conquers India with approximately 200 million users, making it the country’s largest. On 21st April 2020, Facebook CEO, Mark Zuckerberg, told the world that the Facebook was teaming up with Reliance Industries. Facebook had purchased a total of 9.99% stake in the Reliance Industries. The 5.7-billion-dollar deal pushes Reliance Industries ahead in its plans of facilitating the launch of its new commerce business. In 2019, Reliance Industries Chairman Mukesh Ambani had other primary contributors to his debt reduction plan with approximately $15 billion deal with Saudi Aramco for a 20% stake in Reliance Industries’ refining and petrochemicals business and a ₹7000 crore for a 49% sale in its fuel retail joint venture to a British firm BP. Usually, any merger between companies or corporations is a tedious process. Out of some approvals, be it regulatory or otherwise, the most critical one is the approval of Competition Commission of India. In order to complete a deal that crosses the thresholds given under Sec. 5 of the Competition Act, 2002[1], the approval by Competition Commission of India is compulsory. Another rule is that, Section 6(2) of the Competition Act, 2002, examined with Regulation 5 of the Combination Regulation confirms a suspensory reign, i.e., the approval must be obtained before the deal is finalized within the United States. Though the deal sounds bold and strong, which it does, can still encounter anti-trust issues. Starting with the multi-billion-dollar investment into Jio will have to be appraised and authorized by means of India’s opposition regulator. For this to happen, the Competition Commission of India will have to go forward and look at the proposed deal and verify that it does not cause appreciable adverse effect on competition within the marketplace. The responsibility of the Competition Commission of India is to analyze now not only the capacity of destructive results on competition how much ever additionally the capability worries it may offer upward rush to. It would be more intriguing and interesting to see if the minority stake purchase in India’s major telecom empire would provide any regulations to Facebook.

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Section 4 of Competition Act, 2002 sets down arrangements identifying with maltreatment of predominance which obviously expresses that a prevailing element ought not utilize its situation of solidarity to make hurt the contenders and customers in the business sectors of the nation. The Competition Act, 2002 in segment 19(4) has set out specific variables which help in deciding if an element is predominant in an applicable market or not. Prior to deciding if the arrangement among Facebook and Jio Platforms can prompt the act of maltreatment of strength by the two substances, it is basic to realize whether Facebook’s WhatsApp pay and Jio Platform’s JioMart are prevailing in their pertinent market or not.

Establishing Dominance:

Jio and Facebook are both emperors in their respective fields. According to the Telecom Regulatory Authority of India, 32% stake is owned by Jio in the 1.15 billion Indian mobile services industry. It possesses the highest number of customer base and revenue-sharing share in the telecom industry. This means, Jio has an overall customer base of 369.93 million, exceeding its rivals, Bharti Airtel and Vodafone- Idea. Regarding Facebook, it basically operated via three platforms- Facebook, Instagram and Whatsapp. As for Whatsapp, it currently has a solid 400 million users in India[2]. These 400 million users are among the 600 million people who get right of entry of internet. A fragment of effectiveness compared to Whatsapp can be seen in applications like Hike, WeChat and Telegram.

JioMart is an online staple help which gives conveyance administrations of basic food item and fundamental things from close by kirana stores of the nation. JioMart right now works in just three spots of the nation for example Navi Mumbai, Thane and Kalyan. The important market of JioMart is by all accounts an online staple conveyance administration. It is appropriate to take note of that JioMart in this market has under 5% piece of the pie and furthermore is another major part in this market. It can influence neither the opposition nor the rivals in the online basic food item administration market of the nation. Subsequently, in the wake of investigating the components referenced in segment 19(4) of the Competition Act, 2002, it tends to be reasoned that JioMart is certainly not a prevailing part in its important market.

Jio is looking forward to revolutionize ‘JioMart’ in order to merge small and medium sized ‘kirana’ businesses. This would firstly enhance mother-pop shops within the domestic and local markets by tying them to the digital platforms. Once this is over, it would try to penetrate another market by utilizing the dominance of Whatsapp. If all these are successful, Whatsapp might allow JioMart to function through the messaging platform itself. If this is carried out in the manner that Whatsapp comes with default JioMart platform, it could cause an abuse of dominance under Section 4(2)(d) as downloading Whatsapp would be the main agreement the JioMart will be kind of a given in itself. The disadvantage in that kind of a strategy is, customers will not be able to use any other embed e-commerce portal on Whatsapp. This will become unfair and cause disturbances in the market as it might leave the customers with no choice but to accept the given deal.

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The said deal may have an impact on payment apps due to the establishment of Whatsapp Pay project long-stalled by Facebook. The partnership with Jio will establish the payment service for itself. Once Whatsapp Pay enters the field, industry players like Google Pay, Paytm, and Pay will face a tough competition. People will easily be able to text and pay simultaneously without switching apps. To keep things in balance, the Competition Commission of India will have to consider whether Facebook and Jio would become dominant in the relevant markets, potentially abusing the dominant position in order to monopolize the field using Whatsapp Pay. Since the combined power of Jio and Facebook would make it difficult for any other platform to compete, the CCI should analyze whether it would be likely that any anti-competitive acts by Jio or Facebook would create new monopoly in the other relevant markets.

Appreciable Adverse Effect on Competition:

Determining the resources and market positions of the combines techno-heads is difficult, especially in the technology sector. Google LLC[3], CCI found that there is a need to now not only depict the standard applicable marketplace but also related to relevant markets which have been anguished by the behavior of the concerned parties. Section 20 (4) lists that factors that the Competition Commission of India should not forget to include if there is any substantial destructive effect on the competition arising from the said combination.

The quintessence of this combination is to check for horizontal or vertical overlaps. If there is no appearance of horizontal overlaps, there is a strong possibility of vertical integration. For example, Jio introduces internet access to smartphones, smartphones with internet can access Whatsapp, which can ultimately be combined with JioMart. Though this is not the ideal vertical integration, but the use of dominant function in a single market to move into a new marketplace would possibly be to have an adverse effect on the natural competition in the ‘physical’ trade market. Strategic investment, when seeks to impale a specific segment by making use of the leverage on their respective fields to arrive at a completely new product, criteria has to be comprehensive in order to check and verify the potential adverse effect on competition, if any. The United States court imposed 5 billion dollars fine on Facebook for violation of privacy is itself a warning on the Indian regulators to intervening in this a way achieving the deal specifically, to protect the Indian Start-Up movement, which is probably an important bulkhead of the Digital India ship.

Platform Neutrality:

Platform Neutrality, as the name proposes, comprises of impartiality toward any item showed on a market. This standard is abused in occurrences of combination, in which the stage holds a double job through acting each as a mediator and a commercial center contender. Since the stage is a pool of customer insights, it offers the owner business endeavor and side to improve its administrations through dominatingly dispensing bogus hunt rankings and serving one-sided pointers sooner than its customers. Courses of action like these outcomes in the special treatment being concurred to the office’s in-living arrangement cloud kitchen brands, building up an irregularity in the reasonable resistance in the pertinent zone.

It is appropriate to take note that the monstrous e-exchange associations, for example, Amazon and Flipkart have constantly been underneath the examination of the Courts for disregarding the stage impartiality strategies. All India Online Vendors Association had blamed each of those organizations for manhandling their strength inside the relevant commercial center by giving special solutions for there to some degree possessed producers. After due examinations concerning this depends, the CCI had unnoticed the cases of them disregarding any popular rivalry standards. Notwithstanding, rehashed charges by the method of equivalent organizations made the NCLAT award a test into this issue again.

Network Effect:

The Network Effect, additionally called network externality, is the increase picked up by method of the officeholder clients while an additional individual joins the gathering. Its utilization is particularly generally far reaching inside the time area in which the enormous network is a bit of leeway to the clients and the got data fills in as a little something extra for its proprietor. Henceforth, there lies no competition inside the truth that having an enormous base of records can bring about an endeavor achieving a prevailing situation inside the market. This predominance, in sure occasions, can go about as an essential for organizations in leading enemy of forceful conduct. The organizations with the guide of keeping up their matchless quality in a solitary pertinent market contribution to each other material market, in this manner mishandling its energy to develop predominant in both those business sectors. Such moves are named as utilizing and are denied underneath Section four(2)(e) of the Competition Act, 2002 (“the Act”).

Carefully predominant associations like Google have utilized their strength in the past, utilizing its got realities to sell its own administrations for example Google Flights, Google Maps, etc. The creators battle that the arrangement whenever did, might be each other case of this type of misuse. As each Facebook and Jio are at prevailing situations in their particular business sectors, they have an unbridled admittance to realities which can be utilized for their own one of a kind business advantage. For example, WhatsApp by means of its settlement with JioMart can assemble a tremendous heap of data at the admission styles of the customers in India, which later can be used for the ad of the JioMart stage through Facebook. Also, if WhatsApp goes to a choice to make Jio Payments Bank on the grounds that the on line UPI-principally based value elective, it’ll achieve Reliance Companies accessing its total client base, which incorporate the records of its adversary telecom partnerships. Each one of those points of interest blended have the capacity of making Jio and its auxiliaries predominant exclusively dependent on the realities that it recognizes associations own, subsequently which remember it for the ambit of utilizing underneath Indian Competition Act.

Deep Discounting:

Deep Discounting, normally named as ruthless evaluating, happens while a monetarily wealthy organization costs its item at a significantly decline charge contrasted with the contrary organizations inside the commercial center. While the partnerships secure such developments as a component of their expansion approach, the overwhelming development inside the reliance of its client’s outcomes in them achieving a place of intensity, unjustly. This can be mounted by method of depending on Section 19(4)(f) of the Act, which offers for ‘buyer reliance’ as one of the justification for evaluating the predominance of an organization. So as to downsize the burden of such enemy of forceful tendencies, such estimating has been described as maltreatment of strength under Section four(2)(a)(ii) of the Act, making it violative of the standards that ensure honest rivalry in the business sectors.

Jio, inside the past, has been blamed for savage valuing for its net administrations. In truth, following this system, it has developed to be one in everything about most significant telecom producers in India. Subsequently, the creators battle that the arrangement has the capacity of monetarily backing the stage to present profound limits for their items, building up a tremendous distinction in the expenses inside the market. This differential valuing by method of drawing in the clients by means of its uncommon decreases can pressure out the contrary e-staple brands inside the relevant commercial center. While these limits may prompt a fast time-frame advantage for its clients, the minimization in their decisions will achieve a drawn out misfortune. JioMart by utilizing sorting out its imposing business model will in the end be equipped for help its expenses unnecessarily, in this way constraining its customers to search for their items at some random charges.

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Conclusion:

The objective of Competition Act, 2002 is to guarantee the free progression of exchange and keep the elements from stopping rivalry on the lookout. In the 21st century, the idea of shopper government assistance can’t be deserted in any of the situations. The intensity of the CCI gave by the Competition Act, 2002 is restricted to a degree. Indian Competition Law doesn’t punish endeavor to turn into a prevailing element and this is the greatest downside.

In the current arrangement, Facebook and Jio Platforms through its administrations WhatsApp Pay and JioMart separately will endeavor to get prevailing in their pertinent market by utilizing unscrupulous strategic policies. Notwithstanding, CCI can’t stop such practices because of absence of arrangements in the Competition Act, 2002. The ideal opportunity for a change has shown up and the Indian Legislature should embed such arrangements in the demonstration so as to enable the CCI to manage such unreasonable practices in the nation.

[1] Section 5, Competition Act, 2002.

[2] Manish Singh, WhatsApp reaches 400 million users in India, Tech Crunch, (26.07.2020), https://techcrunch.com/2019/07/26/whatsapp-india-users-400-million/.

[3] Umar Javeed v. Google LLC, Case No. 39 of 2018, dated 16-4-2019.

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What is the difference between IPC and CrPC?

What is the difference between IPC[1] and CrPC[2]?

According to the National Crime Records Bureau, in 2018, India registered more than 50 lakh criminal cases. It is vital for the citizens of any country to know the laws and understand the differences between their applications. The maxim: Ignorantia Juris Non-excusat (Ignorance of the law is not an excuse) is embedded in the Indian Penal Code. Ignorance of Law or lack of knowledge does not stand as a defence in the court of law. India, as a country has more than 1200 laws in existence. However, crimes in India are regulated by:

  1. Indian Penal Code, 1862
  2. Criminal Procedure Code, 1973
  3. Indian Evidence Act, 1872

 

The criminal justice system in India is divided into two parts:

  1. First Part: Substantive Criminal Laws

These laws provide for the punishments for the offenders by the extent of the crime committed.

 

  1. Second Part: Procedural Law

This law provides a process for establishing the offenders’ guilt and imposing the punishment prescribed under the substantive criminal laws.

  • The Indian Penal Code, 1862

The Code is the country’s primary criminal Code and was drafted during the British Raj in the year 1850 and was presented to the then Legislative Council in the year 1856. It came into force on 01st January 1862.

The Code covers various offences (divided into multiple categories) and the related punishments for the said crimes. For instance, Crimes against the body (Murder, kidnapping, Culpable homicide, etc.), Crimes against property (theft, dacoity, etc.), Economic crimes (Cheating and Counterfeiting) and various other crimes.

  • Criminal Procedure Code, 1973

The Code is the procedural law which provides a detailed procedure for punishments under the penal laws. It thereby enforces and administers the Indian Penal Code and various other substantive criminal laws. The Parliament enacted the Code on 25th January 1974 to consolidate and amend the law relating to Criminal Procedure.

The Criminal Procedure Code is read along with the Indian Penal Code, 1862 and the Indian Evidence Act, 1872. There often exists a state of perplexity concerning the difference between the Indian Penal Code, 1862 and the Criminal Procedure Code, 1973. Let us now look at the differences between the two legislations.

 

Difference between the Indian Penal Code, 1862 and Criminal Procedure Code, 1973

  1. The Indian Penal Code is a substantive law[3], whereas the Criminal Procedure Code is procedural law.[4]
  2. The Indian Penal Code states various crimes and classifies them into multiple categories. The Code also prescribes the penalties and the punishment for the respective offences. On the other hand, the Criminal Procedure Code defines the procedure that the police take to investigate any violation after having committed any crime mentioned under the penal laws.
  3. The Indian Penal Code aims to provide a primary penal code in the country for giving punishment to the wrongdoers. On the other hand, the Criminal Procedure Code’s main motive is to provide for binding procedures that must be enacted during the administration of a criminal trial.
  4. The Criminal Procedure Code, 1973 provides for the courts and Magistrate’s powers, while the Indian Penal Code does not.

Let us now take an example to understand the difference between the legislations better.

Izzie to kill Mathew enters his house and murders him by hitting him with a hammer and slitting his throat. Section 300 of the Indian Penal Code, 1860 defines ‘Murder.’ And Section 302 of the Code prescribes the punishment for the said crime. The section specifies that any person who commits the act will be punished with death or life imprisonment.

How will Izzie be punished for the crime committed?

Murder is a non-bailable and cognizable offence. The Criminal Procedure Code, 1973 thus specifies a procedure to be followed to determine the offender’s guilt, whether or not bail will be granted, evidence to be taken into account, trial, investigation and impose the individual penalty.

CONCLUSION

The three primary legislation governing criminal law in India: Indian Penal Code, Code of Criminal Procedure and the Indian Evidence Act continue to play an essential role in the courts of law for the effective execution and justice administration. Due to the rise in crimes and criminals, it becomes vital for all citizens to learn the country’s primary criminal laws’ fundamental differences.

[1]The full form of IPC is Indian Penal Code

[2] The full form of CrPC is Criminal Procedure Code

[3] Substantive laws refer to those laws that define individuals’ rights and duties and the respective punishment and organizations.

[4] Procedural Laws include those rules that govern the process of determining individuals and organizations’ duties and rights.

 

 

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Star India Private Limited v. Leo Burnett

– By Apoorva Mishra

The plaintiffs entered into an Agreement dated 9th April, 2000 with Balaji Telefilms Pvt. Ltd., in order to create, compose and produce 262 episodes of a television serial entitled “KYUNKI SAAS BHI KABHI BAHU THI”.  Since then Balaji has produced episodes of the serial and their services were engaged by way of contract of service and as such the plaintiffs are the first copyright owners under Section 17 of the Copyright Act. Balaji has devised the original artistic work depicting inter alia the logo and the title in a peculiar stylized font and containing as its essential features the words “KYUN KI SAAS BHI KABHI BAHU THI” and as per the agreement plaintiffs have become the owner of the said artistic work. The serial had acquired immense goodwill and reputation so much so that the public associate the said serial with plaintiffs and plaintiffs alone. Plaintiffs started endorsing the serial and the characters in form of products and services for a fee. In February 2002, the defendants came up with the commercial for a consumer product “TIDE DETERGENT” telecasting it with a title, “KYONKI BAHU BHI KABHI SAAS BANEGI” and characters of a grandmother, mother-in-law and daughter-in-law, similar to the characters of J.D., Savita, Tulsi as in the serial of the plaintiff. The plaintiffs contended that there has been an infringement of copyright because an average viewer will have an impression that the plaintiffs are endorsing the defendant’s product and there is a connection between plaintiffs in the said serial and the defendants and their product. It is contended that the defendants are not entitled to do so without obtaining the prior consent and/or the permission from the plaintiffs and they have misrepresented the public at large and on account of this plaintiffs have suffered loss due to continuous act of infringement of copyright and passing off of the copy to the defendants.  The matter was brought before the Hon’ble Bombay High Court raising several issues:

First, Have the defendants by making the commercial film, violated and/or infringed the plaintiffs’ copyright in the T.V. serial “KYUN KI SAAS BHI KABHI BAHU THI”?

The court ruled that anything which is not a substantial copy of the film shall not be held liable for copyright infringement. Therefore, defendants by making the commercial film have not violated and/or infringed the plaintiffs’ copyright.

The court has rightly dealt with the above issue, for the second film to infringe the copyright of the first film it has to be the exact copy of that film which is not the case here. The plaintiff’s film is a work of 262 episodes whereas defendant’s advertisement is a work of 30 seconds in which only for 8 to 10 seconds the characters appear as a prelude to the tide detergent. The major and substantial part consists of tide detergent. Nothing is common between the two scripts. The defendants have put in their own independent skill and labour in making of the advertisement whole sole purpose is to promote the Tide detergent. The models are same in both the film. These models are professional and free to contract. There cannot be, therefore, any act which would amount to infringement by using the same models. Even if the idea is borrowed there, can be no copyright in the idea.

Second, Have the plaintiffs’ proved the defendants have infringed the plaintiffs’ artistic work?

The court denying the contentions of the plaintiffs coined the term Originality. Originality merely means effort expanded or that it involves skill, labour and judgment in its creation. Under Section 17 of the Copyright Act, the Author of a work is the owner of the copyright therein. The defendants have contended that the logo consisting of the two hands is a symbol in common use and in the public domain and open to anyone to use. The holding hands well known form of representing the handing over of something from one to another and are a commonly used symbol and they denied on the fact that the plaintiffs have put any skill, labour or some sort of judgement in its creation but has merely taken the lettering style from a source easily available in public domain. Hence, there is no originality, therefore no copyright.

Third, Have the plaintiff’s proved that the defendants are guilty of passing off their reputation and goodwill in the T.V. serial?

The court held that the defendants are not guilty of passing off as they do not satisfy the essentials of passing off per se. Plaintiffs’ serial is shown on Star Plus Channel which is not owned by the plaintiffs. Goodwill does not accrue to the plaintiffs. The plaintiffs have no goodwill or reputation. It is the case of the plaintiffs that their serial/film is associated exclusively with the Star Plus Channel by the public and public is well aware that it can be seen only on Star Plus. Also, the T.V. commercial will not cause any harm to the plaintiffs’ serial or their reputation because the field which the plaintiffs’ serial occupies as a film/soap opera is different from the field of defendants’ commercial that of an advertisement of detergent Tide. Even the activity area is also not in common, therefore there is no misrepresentation.

On the facts of this case, there is no fictional character involved like ‘Superman’, ‘Shaktiman’ Teletubbies’. In the serial there are ordinary people in common life who plays the role of some character or the other. At least from the material on record there is nothing special in any, of the characters of which it can be said that they have gained any public recognition for itself with an independent life outside the serial. This, the plaintiffs have failed to establish. It is also not a case of one film against another film and further the defendants are not merchandising any character from the serial by means of their T.V. commercial. There should be in actual character merchandising and not mere potential of character merchandising.

The court, after analysis the entire case, rightly pronounced the judgement in favour the defendants. The defendants are just promoting their consumer product “Tide” via a T.V. commercial which in no way is connected. The field of activity of the plaintiff and defendant are totally different. No likelihood of damage has been caused to the plaintiff. The characters of which the plaintiff claims to be copied are simple general roles of our Indian society and the defendants are simply targeting the audiences of India who will relate easily to these household roles and nothing special that the plaintiffs have done with these characters for which they claim a copyright on them. This isn’t a case of misrepresentation or fraud and no real damage has been caused. No prudent person will confuse the advertisement with plaintiffs’ serial. Moreover, for character merchandising the plaintiffs should prove that the public would look at the character and consider it to represent the plaintiffs or to consider the product in relation in which it is used as has been made with the plaintiffs’ approval. But the plaintiffs have failed to establish this. In my opinion, the defendants have rightly pleaded that they are a major consumer goods Company, well known in their own right and their products including Tide have their own reputation amongst the public; Tide will be associated with the defendants and not with the plaintiffs.

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Compulsory Licensing of Patents

– By Apoorva Mishra

Compulsory licensing is an involuntary licensing where the licensor is unwilling to grant the license to the willing licensee, but this entire agreement of compulsory licensing is enforced by the state, by which the licensor has to transfer the rightful authorization of the patent to the licensee, against all his wishes. Government is basically the protector and acts as a guardian for the public at large. Therefore, for the benefit of nation, it has the right to grant the patent and next moment take away the patent and patentee’s monopoly over it. The requirements of the society at large supersedes against the rights of the patent holder to answer the pressing public requirements. Following situations may attract compulsory licensing where IP holder:

  • Charges unfair and discriminatory prices; or
  • Limits production of goods and services; or
  • Restricts technical or scientific development of goods and services; or
  • Desecrates consumer welfare.

Internationally, compulsory licensing has been supported saying that it helps in catering to the needs of the public at large and development of developing and underdeveloped countries. Compulsory Licensing has been mandated by several agreements like WIPO (World Intellectual Property Organization), Paris Convention for the promotion of industrial property. TRIPS has envisaged several conditions for issuance of compulsory licensing:

  1. The person or company should apply for licensing after 3 years to the grant of patent.
  2. Before applying for compulsory licensing, the person or company should make an attempt for voluntary licensing.
  3. The person or company then should apply to the board for compulsory licensing if the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time.

In India, we have seen a growth of many foreign companies reason being they hold knowledge and they rule the terms.  Therefore, there exists a chance that these companies can abuse their positions. Compulsory licensing of IPRs in cases of such abuses would be an apt remedy that will deter these companies from abusing their dominant positions. Keeping in mind Indian conditions compulsory licensing will spur growth and development in Indian industrial sectors. Keeping in mind the size of Indian market the incentive for innovation will not erode to the extent that might deter companies from entering in to innovative endeavours as courts have granted reasonable royalties in cases where compulsory licensing has been awarded. Compulsory licensing will make the products more accessible to public and it will be beneficial for public welfare.

The developing and the under developed countries are not much concerned about protection of patent laws as much as developed countries are because they don’t have resources to spend on development of costly mechanism to ensure protection of patents.

There are few reasons behind this:

  • by allowing piracy, developing and underdeveloped countries can ensure availability of needed goods and services to their citizens at affordable prices
  • The local industries which produce counterfeit goods employee thousands of workers and therefore reduce unemployment.
  • In order to advance in science and technology, they need maximum access to intellectual property of advanced nations.

More than 80% patents in developing and underdeveloped countries are owned by citizens of technologically advanced countries. Consequently, their governments are not willing to spend huge amounts in developing effective administrative mechanism to enforce IPRs of citizens of advanced states.

The Government will, however, pay royalty to the patent holder for using his patent without his permission, but this will in turn discourage the patent holder from making any further inventions or innovations. The discouraged Research & Development shall lead to deteriorating economic growth. The developing or under-developed countries shall refrain from investing in R & D, indirectly affecting the economy, and will settle for generic goods. This might increase the risk of goods turning into inferior quality. Ultimately, as a result of weak intellectual property regime, a country becomes less competitive, and brain drain is an obvious result.

Compulsory licensing becomes inevitable to deal with the situations of “patent suppression”. By incorporating an effective mechanism of compulsory licensing, governments of developing countries may pressurize the patent holders to work the patent to maximum national advantage. The threat of non-voluntary licensing may be helpful in negotiating a reasonable price of the needed drug acceptable to both the patent owner and the government. Compulsory licensing might be necessary in situations where its refusal may prevent utilization of another important invention which can be significant for technological advancement or economic growth.

Compulsory licensing ensures that a good number of producers or manufacturers are there to cater to the needs of society; it spurs competition and consumer welfare. Those who argue against it saying that it leads to erosion in incentive for innovation forget that a right is always accompanied by a corresponding duty, and failure to perform that duty might have its implications in law.

The abuse of patents is a very likely to occur where the patentee has its rights protected under Patent laws. The patent holder has monopoly rights but they are more likely to abuse. The patent holders are often tempted to indulge in to anti-competitive practices and they try to extend their monopoly into areas where they do not have rights protected by IPRs. Software companies like Microsoft, several pharmaceutical companies, as discussed above, are protected under the patent laws and most of the time they are the sole manufacturer. So this gives them an opportunity where they can dictate their terms over the entire market which might lead to exploitation of others right in the market. In such a scenario, compulsory licensing comes into play, which acts as a remedy to abuse of patents, where government intervention leads to increase in the versatility of the market leading to a monopolistic market rather than a monopoly, the consumers have a choice and the product will be easily available, where the opponents have argued that compulsory licensing will lead to discouragement for innovations, but this also true that this will lead to a heated competition, which will in return lead to a peer pressure over the patent holder to work more over his product, get distributers, improve his research and product and make it available to the public at large. This will lead to an increase in the economy. There are reasonable apprehensions that FDI may dry up if compulsory licensing is granted as a remedy, to that essential facility doctrine must be adopted, so that only what is essential and necessary should prevail.

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Case study on Bayer Corporation v. Union Of India

– By Apoorva Mishra

FACTS

  • The writ petitioner in the case was Bayer Corporation. The second respondent in the case was the DCGI and the third respondent was Cipla.
  • The Indian Patent Office had granted the petitioner, patent number 215758 on 3 March 2008. Therefore, by virtue of Section 48 (rights of a patentee) of the Patents Act, Bayer got the exclusive right to prevent third parties, from the acts of making, using, offering for sale, selling or importing the patented product in India, without its consent.
  • Cipla then introduced a drug “Soranib” which was a substitute of its patented drug. Subsequently, on 31st July 2008 Bayer wrote to the DCGI requesting that marketing approval be not granted to Cipla for its drug “Soranib” as Bayer had the exclusive right to market the drug.
  • It urged the DCGI to reject the representation of Cipla for grant of marketing approval for spurious adaptation of its patented drug “Sorafenib Tosylate”, as the same would contravene DCA.
  • Also, Bayer wrote to Cipla asking it to confirm whether it had filed an application before DCGI for grant of marketing approval for a drug covering “sorafenib tosylate” but received no reply.
  • Bayer filed the petition seeking directions to, inter alia, restrain grant of drug license in regard to an application by the third respondent for the license to manufacture, sell and distribute its drug ‘Soranib’. The petitioner claimed that the said drug was an imitation of, or substitute for, its patented drug.

ARGUMENTS BY BAYER

  • The Petitioner contends that in the absence of an overriding provision in the Drugs Act, reinforces the intention of the legislature that its provisions of the Drugs Act are to be read in addition to the Patent laws and not to the contrary. Therefore, Section 2 of the Drugs Act have to be read in conformity with the Section 48 of the Patents Act which establishes a concept of “Patent Linkage” which imposes a burden on the Drug Controller to make sure that any of his decisions of granting market approval for a drug do not violate any law for the time being in force.

 

  • The petitioner relies on Section 18 and Form 44 of the Drugs Act, which talks about mentioning of patent status of the drug. While making an application before the Drug Controller, CIPLA ought to have mentioned the subject Patent of Bayer. Therefore, by a mere reading of Form 44, and also by virtue of publication of grant of the subject patent, it would be well within the knowledge of the Drug Controller that the subject patent exists in relation to the product for which CIPLA has applied for consequently, if the marketing approval is granted, it will contravene the provisions of Section 17B of the Drugs Act, as well as the provisions of Section 48 of the Patent Act.
  • The petitioner contends that the application of Cipla is for the license to manufacture, sell and distribute its drug “Soranib” which is an imitation of the Petitioners’ patented drug. The drug “Soranib”, being “spurious drug” as defined in Section 17B of the Drugs Act, the DCGI would not only be exceeding his jurisdiction but also give a decision which would be ultra vires Chapter IV of the Drugs Act.

ARGUMENTS BY CIPLA

  • Cipla contends that Bayer’s claim for patent linkage, based on an interpretation of Section 2 of the Drugs Act is misleading, because the grant of drug regulatory approval by the DCGI cannot, by itself amount to a patent infringement.
  • The existence of patent infringement cannot be assumed merely because the patentee states so, but has to be clearly established before a court of law in accordance with the infringement provisions mentioned under the Patents Act, 1970. Such an assessment is beyond the statutory powers of the DCGI, which is institutionally incapable of dealing with complex issues of patent scope, validity and infringement.
  • Cipla states that Section 107A of the Patents Act, clearly exempts from patent infringement any of acts of making, using or even selling a patented invention, in so far as such acts are necessary to obtain information for the filing of a drug regulatory application before the DCGI.
  • Cipla relied on the concept of “Bolar Provision” under Section 107A of the Patents Act which permits any drug manufacturer to experiment with any patented drug and is aimed at speeding up generic entry into the market and the availability of low cost drugs to the consumer.
  • Cipla states that Section 19 of the Patents Act provides limited powers to the Controller. It may at its best only direct that a reference to the earlier patent be inserted but does not authorise the controller to deny the grant of the patent itself to the applicant. Hence, DCGI cannot assess the possibility of patent infringement and dent drug regulatory approval on such grounds.
  • Cipla argued that the terms ‘limitation’ and ‘substitute’ in Section 17 B (b) cannot be read in isolation to the remainder of the sub-clause. The words ‘substitute for’ were to be read along with ‘in a manner likely to deceive’. The text of the said sub clause reveals that the same covers a situation where an individual is passing off his drug as that of another by way of using deceptive marks get-up or packaging and this did not include patents.

 

ISSUES RAISED

(1) Whether a combined reading of the Drugs Act and the Patents Act lead to the conclusion that no marketing approval can be granted to applicants for drugs or formulations, of which others are patent owners, by reason of Section 2 of the Drugs Act, read with Sections 48 and 156 of the Patents Act?

(2) Whether drugs or formulations which infringe patents are “spurious drugs” under the Drugs Act?

APPLICATION AND ANALYSIS

ISSUE 1 : Whether a combined reading of the Drugs Act and the Patents Act lead to the conclusion that no marketing approval can be granted to applicants for drugs or formulations, of which others are patent owners, by reason of Section 2 of the Drugs Act, read with Sections 48 and 156 of the Patents Act?

What is Patent Linkage?

Patent linkage is the practice of linking drug marketing approval to the patent status of the originator’s product and not allowing the grant of marketing approval to any third party prior to the expiration of the patent term, unless consented to by the patent owner. This creates a duty in favour of the Drugs Controller to ensure that marketing approval is not granted to generic manufacturers in cases where the drug is already covered by an existing patent.

Difference between the objectives of the Statutes

The Drugs Act is a public regulatory measure, prescribing standards of safety and good manufacture practices which are to be followed by every pharmaceutical industry, or which are to be satisfied by the importer of a drug, to assure that what are marketed are safe. The provisions of the Act manifest Parliamentary concern with public health in ensuring standard practices, and that people do not fall prey to adulterated or spurious drugs. There is a general public policy interest in such regulation.[1]

The Patents Act on the other hand, puts in place a regime containing standards for conferring private monopoly rights in favour of inventors. It requires that processes or products, to claim patents, should involve steps that are “technical advance as compared to the existing knowledge or having economic significance or which has not been anticipated by publication in any document or used in the country or elsewhere in the world before the date of filing of the patent application.

Authority of the DCGI

The Controller of Patents and other officers are experts at judging whether claimed products or processes are patentable. This expertise is not only in respect of pharmaceutical products, but other specialized areas as well.

This expertise depends upon adjudging, on an objective basis, whether a product or process is novel, or contains an inventive step. Such expertise does not necessarily exist in the case of officials under the Drugs Act, who are required to test the safety of the product, and ensure that it conforms to the therapeutic claim put forward. Whether it involves an inventive step, or is novel, is not within the domain of the Drugs Act authorities and officials.

The existence of patent linkage standards in express legislation, in other parts of the world underscores that courts, in the absence of a Parliament mandated regime, should not blaze into an obviously legislative path. No doubt, courts can, through interpretive devices such as purposive interpretation, or for avoiding absurd results, at times “fill in” statutory gaps.[2]

Bayer relies on Section 2 of the Drugs Act and Section 156 (of the Patents Act) to contend that statutory intention is clear that Drugs authorities are bound by patents, granted under the Patent Act, by virtue of Section 156 and therefore, they cannot, by conferring drug or marketing approval permit violation of patents validly granted. However, Section 156 is a clarification, that the Government, and its officials, as grantors, are bound by the patents. This means that they have to respect patents, and cannot infringe them.

Patent Linkage in Grant of Market Authorisation

One of the important reasons to inferring Drug agencies role in patent policing or enforcement is unacceptable, is that some developed countries, and the European Union cautioned against patent linkages. [3]

The EU Directorate General for Competition noted that “Patent linkage refers to the practice of linking the granting of MA (market authorization), the pricing and reimbursement status or any regulatory approval for a generic medicinal product, to the status of a patent (application) for the originator reference product. Under EU law, it is not allowed to link marketing authorisation to the patent status of the originator reference product. Since the status of a patent (application) is not included in the grounds set out in the Regulation and in the Directive, it cannot be used as an argument for refusing, suspending or revoking Marketing approval (MA).[4]

The court also rejected the Bayer’s argument that Rule 122 B(1) (b) of the Drugs Rules, read with Form 44 and the data required (Appendix 1 to Schedule Y), gave an insight that patent linkage is intended by Parliament. The court stated a known principle of statutory construction, which said that the Parliament or the concerned legislature is deemed to be aware of existing laws when it enacts new legislative measures.[5]

Therefore, there is no patent linkage in the country and what the Petitioner wants to do is to legislate it through the interpretations, which is impermissible. The court should avoid from making any policy choices which are to be made by executive and then made by the law. The concept of patent linkage is controversial in nature, since:

(1) It clothes regulatory authorities, which are executive bodies solely concerned with scientific quality, efficacy and safety issues, with completely new powers, and into areas lack in expertise, i.e. patent rights policing.

(2) It transforms patent rights which are private property rights, that depend on the owners’ promptitude and desire to enforce them, into public rights, whose enforcement is dependent on statutory authorities, who are publicly funded.

(3) Such linkage potentially undermines the “Bolar/Early Working” exception that encourage quick access to the post patent markets for generic medicines. This is a major public policy consideration in India, which faces a host of public health challenges.

The Hon’ble High Court rightly decreed the issue in favour of the Respondents, because Whenever there is a complaint on infringement it has to be challenged before the Intellectual Property Board and suits in the High Court. Before each such body, the patentee has to establish and prove infringement, wherever alleged, and may, in some cases, face challenges to the grant of its patent. Such crucial provisions, conceived in public interest, would be rendered a dead letter, if the Drugs authorities, on a representation of the patentee were to refuse licenses or approval, to applicants who otherwise satisfy the requirement of the Drugs Act and its provisions, or even be precluded from examining such applications, on assumed infringement. Also, under the Patents Act, infringement of a patent is not considered a criminal offence. On the other hand, under the Drugs Act, violation of any of its provisions constitutes a criminal offence. If patent linkage is directed, an act of infringement which is not an offence would indirectly be alleged to be an offence.

 

ISSUE 2: Whether drugs or formulations which infringe patents are “spurious drugs” under the Drugs Act?

Section 17-B of the Drugs Act defines spurious drugs as follows:

(a) if it is manufactured under a name which belongs to another drug; or

(b) if it is an imitation of, or is a substitute for, another drug or resembles another drug in a manner likely to deceive or bears upon it or upon its label or container the name of another drug unless it is plainly and conspicuously marked so as to reveal its true character and its lack of identity with such other drug; or

(c) if the label or container bears the name of an individual or company purporting to be the manufacturer of the drug, which individual or company is fictitious or does not exist; or

(d) if it has been substituted wholly or in part by another drug or substance; or

(e) if it purports to be the product of a manufacturer of whom it is not truly a product.

Bayer states that Cipla’s generic version of Sorafanib, which, it is contended, is sold under the brand name “Soranib” would amount to a “spurious drug”. If Bayer’s contention were to prevail, every generic drug would ipso facto amount to a “spurious drug”, since they are deemed substitutes of originator (patented) drugs. Such interpretation is facially untenable and contrary to the intent of the Drugs Act. The key elements of “spuriousness” are deception, in the manner of presentation of the drug concerned, in the sense that they imitate or represent themselves to be something that they are not.

The definition of “spurious drugs’ was introduced because of the problems of adulteration of drugs and production of spurious and sub-standard drugs, as posing a serious threat to the health of the community. A declaration by the drug agency entrusted with the task of deciding applications seeking marketing approval that someone not holding a patent is attempting to get clearance for a “spurious drug” would be pre-emptive, and would negate the provisions requiring that enforcers should follow certain mandatory procedures, and prosecute potential offenders.

When a pharmaceutical company first markets a drug, it is usually under a patent that allows only the pharmaceutical company that developed the drug to sell it. Generic drugs can only be legally produced for drugs which are free of patent protection. After the patent on a drug expires, any pharmaceutical company can manufacture and sell that drug for a fraction of the original cost of testing and developing that particular drug; in essence, says Bayer, this is a “generic” product.

 

Therefore it was rightly held by the court in favour of CIPLA because if Bayer’s contentions were accepted then every drug would be considered as spurious drug and generic drugs are nothing but the substitutes of patented drug, whereas the key element of determining the spurious drug is deception, in a manner, that they imitated themselves as something which they were not.

CONCLUSION

The court rightly dismissed the writ petition and pronounced the judgement in favour of the Respondents. Patent Linkage forces the regulatory authorities to perform a function which is completely in different domain altogether leading to changing the nature of patent right from a private right to a public right. If at all, patent linkage has to be adopted it should make sure that it does not come in the way of Compulsory Licensing. Even though such measures are good for the benefit of investing into Research and Development, but it still discourages generic competition in the market, leading to large monopoly of pharmaceutical company due to which the accessibility of the drug is difficult and if at all the drug is made available, it is at a very higher price which is unaffordable almost by the majority section of the people. Hence, whenever there is a need and it is in the benefit of public, market approval should be granted so that the drug can cater to the public, if the situation demands then, the generic drug manufacturer can be asked to pay royalty to the patent holder. This will also discourage monopoly of foreign pharmaceutical companies in the Indian market leading to rise in Indian economy as well.

 

[1] Robert  Galantucci,  Data  Protection  in  a  US-Malaysia free trade  agreement:  New  barriers  to  market  access  for generic  drug  manufacturers, Fordham  Intellectual  Property,  Media and Entertainment Law Journal, 17 (2007), 1083.

[2] Orange Book: Approved Drug Products with Therapeutic Equivalence Evaluations, Available at: http://www.accessdata.fda.gov/scripts/cder/ob/default.cfm

 

[3] European  Generic  Medicines  Association,  New  strategy  on patent  linkage  is  contrary  to  EU  law  and  threatens access  to competitive generic medicines, 2 February 2006, http://www.egagenerics.com/pr-2006-02-02.htm

[4] European  Union  –  DG  Competition,  Pharmaceutical  Sector Enquiry:     Preliminary     Report,     28    November     2008,  http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/preliminary_report.pdf

[5] Syndicate Bank v  Prabha D Naik AIR 2001 SC 1968.

 

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Case study on Star India Private Limited V. Leo Burnett

– By Apoorva Mishra

The plaintiffs entered into an Agreement dated 9th April, 2000 with Balaji Telefilms Pvt. Ltd., in order to create, compose and produce 262 episodes of a television serial entitled “KYUNKI SAAS BHI KABHI BAHU THI”.  Since then Balaji has produced episodes of the serial and their services were engaged by way of contract of service and as such the plaintiffs are the first copyright owners under Section 17 of the Copyright Act. Balaji has devised the original artistic work depicting inter alia the logo and the title in a peculiar stylized font and containing as its essential features the words “KYUN KI SAAS BHI KABHI BAHU THI” and as per the agreement plaintiffs have become the owner of the said artistic work. The serial had acquired immense goodwill and reputation so much so that the public associate the said serial with plaintiffs and plaintiffs alone. Plaintiffs started endorsing the serial and the characters in form of products and services for a fee. In February 2002, the defendants came up with the commercial for a consumer product “TIDE DETERGENT” telecasting it with a title, “KYONKI BAHU BHI KABHI SAAS BANEGI” and characters of a grandmother, mother-in-law and daughter-in-law, similar to the characters of J.D., Savita, Tulsi as in the serial of the plaintiff. The plaintiffs contended that there has been an infringement of copyright because an average viewer will have an impression that the plaintiffs are endorsing the defendant’s product and there is a connection between plaintiffs in the said serial and the defendants and their product. It is contended that the defendants are not entitled to do so without obtaining the prior consent and/or the permission from the plaintiffs and they have misrepresented the public at large and on account of this plaintiffs have suffered loss due to continuous act of infringement of copyright and passing off of the copy to the defendants.  The matter was brought before the Hon’ble Bombay High Court raising several issues:

First, Have the defendants by making the commercial film, violated and/or infringed the plaintiffs’ copyright in the T.V. serial “KYUN KI SAAS BHI KABHI BAHU THI”?

The court ruled that anything which is not a substantial copy of the film shall not be held liable for copyright infringement. Therefore, defendants by making the commercial film have not violated and/or infringed the plaintiffs’ copyright.

The court has rightly dealt with the above issue, for the second film to infringe the copyright of the first film it has to be the exact copy of that film which is not the case here. The plaintiff’s film is a work of 262 episodes whereas defendant’s advertisement is a work of 30 seconds in which only for 8 to 10 seconds the characters appear as a prelude to the tide detergent. The major and substantial part consists of tide detergent. Nothing is common between the two scripts. The defendants have put in their own independent skill and labour in making of the advertisement whole sole purpose is to promote the Tide detergent. The models are same in both the film. These models are professional and free to contract. There cannot be, therefore, any act which would amount to infringement by using the same models. Even if the idea is borrowed there, can be no copyright in the idea.

Second, Have the plaintiffs’ proved the defendants have infringed the plaintiffs’ artistic work?

The court denying the contentions of the plaintiffs coined the term Originality. Originality merely means effort expanded or that it involves skill, labour and judgment in its creation. Under Section 17 of the Copyright Act, the Author of a work is the owner of the copyright therein. The defendants have contended that the logo consisting of the two hands is a symbol in common use and in the public domain and open to anyone to use. The holding hands well known form of representing the handing over of something from one to another and are a commonly used symbol and they denied on the fact that the plaintiffs have put any skill, labour or some sort of judgement in its creation but has merely taken the lettering style from a source easily available in public domain. Hence, there is no originality, therefore no copyright.

Third, Have the plaintiff’s proved that the defendants are guilty of passing off their reputation and goodwill in the T.V. serial?

The court held that the defendants are not guilty of passing off as they do not satisfy the essentials of passing off per se. Plaintiffs’ serial is shown on Star Plus Channel which is not owned by the plaintiffs. Goodwill does not accrue to the plaintiffs. The plaintiffs have no goodwill or reputation. It is the case of the plaintiffs that their serial/film is associated exclusively with the Star Plus Channel by the public and public is well aware that it can be seen only on Star Plus. Also, the T.V. commercial will not cause any harm to the plaintiffs’ serial or their reputation because the field which the plaintiffs’ serial occupies as a film/soap opera is different from the field of defendants’ commercial that of an advertisement of detergent Tide. Even the activity area is also not in common, therefore there is no misrepresentation.

On the facts of this case, there is no fictional character involved like ‘Superman’, ‘Shaktiman’ Teletubbies’. In the serial there are ordinary people in common life who plays the role of some character or the other. At least from the material on record there is nothing special in any, of the characters of which it can be said that they have gained any public recognition for itself with an independent life outside the serial. This, the plaintiffs have failed to establish. It is also not a case of one film against another film and further the defendants are not merchandising any character from the serial by means of their T.V. commercial. There should be in actual character merchandising and not mere potential of character merchandising.

The court, after analysis the entire case, rightly pronounced the judgement in favour the defendants. The defendants are just promoting their consumer product “Tide” via a T.V. commercial which in no way is connected. The field of activity of the plaintiff and defendant are totally different. No likelihood of damage has been caused to the plaintiff. The characters of which the plaintiff claims to be copied are simple general roles of our Indian society and the defendants are simply targeting the audiences of India who will relate easily to these household roles and nothing special that the plaintiffs have done with these characters for which they claim a copyright on them. This isn’t a case of misrepresentation or fraud and no real damage has been caused. No prudent person will confuse the advertisement with plaintiffs’ serial. Moreover, for character merchandising the plaintiffs should prove that the public would look at the character and consider it to represent the plaintiffs or to consider the product in relation in which it is used as has been made with the plaintiffs’ approval. But the plaintiffs have failed to establish this. In my opinion, the defendants have rightly pleaded that they are a major consumer goods Company, well known in their own right and their products including Tide have their own reputation amongst the public; Tide will be associated with the defendants and not with the plaintiffs.

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Compulsory Licensing of Patents

– By Apoorva Mishra

Compulsory licensing is an involuntary licensing where the licensor is unwilling to grant the license to the willing licensee, but this entire agreement of compulsory licensing is enforced by the state, by which the licensor has to transfer the rightful authorization of the patent to the licensee, against all his wishes. Government is basically the protector and acts as a guardian for the public at large. Therefore, for the benefit of nation, it has the right to grant the patent and next moment take away the patent and patentee’s monopoly over it. The requirements of the society at large supersedes against the rights of the patent holder to answer the pressing public requirements. Following situations may attract compulsory licensing where IP holder:

  • Charges unfair and discriminatory prices; or
  • Limits production of goods and services; or
  • Restricts technical or scientific development of goods and services; or
  • Desecrates consumer welfare.

Internationally, compulsory licensing has been supported saying that it helps in catering to the needs of the public at large and development of developing and underdeveloped countries. Compulsory Licensing has been mandated by several agreements like WIPO (World Intellectual Property Organization), Paris Convention for the promotion of industrial property. TRIPS has envisaged several conditions for issuance of compulsory licensing:

  1. The person or company should apply for licensing after 3 years to the grant of patent.
  2. Before applying for compulsory licensing, the person or company should make an attempt for voluntary licensing.
  3. The person or company then should apply to the board for compulsory licensing if the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time.

In India, we have seen a growth of many foreign companies reason being they hold knowledge and they rule the terms.  Therefore, there exists a chance that these companies can abuse their positions. Compulsory licensing of IPRs in cases of such abuses would be an apt remedy that will deter these companies from abusing their dominant positions. Keeping in mind Indian conditions compulsory licensing will spur growth and development in Indian industrial sectors. Keeping in mind the size of Indian market the incentive for innovation will not erode to the extent that might deter companies from entering in to innovative endeavours as courts have granted reasonable royalties in cases where compulsory licensing has been awarded. Compulsory licensing will make the products more accessible to public and it will be beneficial for public welfare.

The developing and the under developed countries are not much concerned about protection of patent laws as much as developed countries are because they don’t have resources to spend on development of costly mechanism to ensure protection of patents.

There are few reasons behind this:

  • by allowing piracy, developing and underdeveloped countries can ensure availability of needed goods and services to their citizens at affordable prices
  • The local industries which produce counterfeit goods employee thousands of workers and therefore reduce unemployment.
  • In order to advance in science and technology, they need maximum access to intellectual property of advanced nations.

More than 80% patents in developing and underdeveloped countries are owned by citizens of technologically advanced countries. Consequently, their governments are not willing to spend huge amounts in developing effective administrative mechanism to enforce IPRs of citizens of advanced states.

The Government will, however, pay royalty to the patent holder for using his patent without his permission, but this will in turn discourage the patent holder from making any further inventions or innovations. The discouraged Research & Development shall lead to deteriorating economic growth. The developing or under-developed countries shall refrain from investing in R & D, indirectly affecting the economy, and will settle for generic goods. This might increase the risk of goods turning into inferior quality. Ultimately, as a result of weak intellectual property regime, a country becomes less competitive, and brain drain is an obvious result.

Compulsory licensing becomes inevitable to deal with the situations of “patent suppression”. By incorporating an effective mechanism of compulsory licensing, governments of developing countries may pressurize the patent holders to work the patent to maximum national advantage. The threat of non-voluntary licensing may be helpful in negotiating a reasonable price of the needed drug acceptable to both the patent owner and the government. Compulsory licensing might be necessary in situations where its refusal may prevent utilization of another important invention which can be significant for technological advancement or economic growth.

Compulsory licensing ensures that a good number of producers or manufacturers are there to cater to the needs of society; it spurs competition and consumer welfare. Those who argue against it saying that it leads to erosion in incentive for innovation forget that a right is always accompanied by a corresponding duty, and failure to perform that duty might have its implications in law.

The abuse of patents is a very likely to occur where the patentee has its rights protected under Patent laws. The patent holder has monopoly rights but they are more likely to abuse. The patent holders are often tempted to indulge in to anti-competitive practices and they try to extend their monopoly into areas where they do not have rights protected by IPRs. Software companies like Microsoft, several pharmaceutical companies, as discussed above, are protected under the patent laws and most of the time they are the sole manufacturer. So this gives them an opportunity where they can dictate their terms over the entire market which might lead to exploitation of others right in the market. In such a scenario, compulsory licensing comes into play, which acts as a remedy to abuse of patents, where government intervention leads to increase in the versatility of the market leading to a monopolistic market rather than a monopoly, the consumers have a choice and the product will be easily available, where the opponents have argued that compulsory licensing will lead to discouragement for innovations, but this also true that this will lead to a heated competition, which will in return lead to a peer pressure over the patent holder to work more over his product, get distributers, improve his research and product and make it available to the public at large. This will lead to an increase in the economy. There are reasonable apprehensions that FDI may dry up if compulsory licensing is granted as a remedy, to that essential facility doctrine must be adopted, so that only what is essential and necessary should prevail.

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