Tag: law classes

Categories
Blog

Corporate Social Responsibility and the related provisions in India and USA (Impact of COVID-19)

By: Anmol Sharma

In these times of crisis, a strong commitment to the well-being of stakeholders is of utmost importance. Companies around the world are currently facing sharp drops in demands that puts job at risks, threatens the income of suppliers and local communities in which we erode the confidence of providers finance to firms. Therefore welcome that companies around the world are stepping up their social responsibilities activities examples are Unilever a British dutch conglomerate that donated soaps, sanitizer, bleach, and food. German chemical company BASF gave away over 100 million masks and supplied health care facilities with hand sanitizers for free of charge. Microsoft grants its worked 12 weeks of paid parental leave because of school disruption. Another example could be of Danone, they announced to guarantee all employment contracts and wages onto the summer to extend childcare and health care programs and to put in place a 300 million euro find to support fragile suppliers.

Learn more about Corporate Law with Enhelion’s Online Law firm certified Diploma course certified by Scriboard Advocates and Legal Consultants!

Likewise in India Ratan Tata had donated INR 1500 Crores to the government, being the biggest industrialist he donated such big amount of money in this pandemics and he even stated that if the country needs more help I might sell my company or everything I had earned till yet for the country, some of the bug donations had been done by Actor Akshay Kumar who donated an amount of Rs. 35 Crores to the government of India. Reliance industries donated INR 500 Crores to the PM cares meant for Covid crisis. SCR money can be helpful in ongoing pandemic situation of Covid-19, to run community kitchens, provide shelters to homeless and stranded migrants labourer example: to support to civil society responding to food relief. It can prevent deterioration in gains made in Area of child rights, girl rights for example: lots of children may be pushed into child labour, malnutrition may rise, under age marriage of girls given more poverty.

CSR is not philanthropy, Rather responsibility towards society. A way to achieve balance of Economic, Social and Environmental imperatives. As per Companies act 2013, 2% of profit should go for certain CSR related activities such as Environmental protection, Girl education, Nahi Kali(Mahindra).

CSR (Corporate social responsibility) comes in 2007 in India & in USA it truly began in 1971. In India company act it is mandatory provision under section 135 of company act 2013, which came into effect from 01.04.2014 on the other hand in USA CSR (Corporate social responsibility) is type of soft law which do not requires a statue or regulation that means hard law but is nonetheless seen as obligatory by most corporations because of consumer expectations and internal norms. Principles of building the legal shell specifically in interpreted rights, duties, and causation, are mainly worldwide embraced. Thus, corporates must have CSR schemes that are “litigation ready” when it requires human rights because the UNGPs would be informed about the content of sensible corporate practices, which had censorious implications for multinational civil and commercial disputes. That is to say, UNGPs (The United Nations Guiding Principles) make multinational tort liability of corporations to 3rd parties.

Learn more about Corporate Law with Enhelion’s Online Law firm certified Diploma course certified by Scriboard Advocates and Legal Consultants!

CSR (Corporate social responsibility) is basically bringing consciousness about society, surroundings, environment and that is where the CSR brings in the stake holder perspective to think about society & have those consideration in the mind of businessmen basically when they are discussing strategy. [1]The capitalists should act as a trustees (not owners) of their property and conduct themselves in a social responsible way. This concept actually measures financial, social & environmental performance of the corporation. [2]The Business Responsibility Reporting (BRR) are mandated for requirement of top 100 (from 500 to now top 1000) lasted entities in their annual report. In todays world 90% of CEOs claims that Sustainability is key to success. Research shows that if you have good CSR programme it will increase employee commitment, customer satisfaction, reduce risk and even get better access to finance. The good example of irresponsibility is Volkswagen case, Volkswagen is known to be the most responsible companies top-rated on different screens and still it turned out that they had tampered with their emission technology and that of course led to major drop in their brand value but its also read to a drop in their share prices of the companies.

Learn more about Corporate Law with Enhelion’s Online Law firm certified Diploma course certified by Scriboard Advocates and Legal Consultants!

Top management of corporate sector is not going to do the Job but they have to endorse the activities on the CSR so the first thing then is to put together a group of company across the company 5 to 10 people from different department and they together are going to find out and discuss what this companies main social impact or the main footprints of the company, a good check list for that is the sustainable development with 5 goals the SDGs of course those 5 goals are relevant for individual companies depends upon which secretary they’re in so first will be MAP lets say companies and the industry of producing clothing in developing countries well probably decent work and economic growth is most relevant or if company is in oil industry then climate action issues is relevant and if the company is in fish farming well then it would be life below water is more important. When the goals are identified a concrete plan with concrete target and how to reach the target must be set up when that is ready we move on to the second step that is TEST take the draft plan presented to key stakeholders ask for their input revise accordingly who are stakeholders like customers, suppliers other employees, non governmental organisation, environmental organisation these are ones to to come with feedback and then revise  the plan according to that then we’re ready for the third step which is LAUNCH the launch is about making the rest of the company aware of the plan and let them buy into tithe day-to-day work how do you do that, put it on a company website or newsletter or monitors be creative. The fourth step is the IMPLEMENTATION have you had to follow up the plan, are we reaching the targets are we not why there will be unexpected happenings these are great learning point. Now the last and fifth step that is REPORTING the reporting is like accounting coming forward with what worked or what didn’t work and why, and, be open and be honest and transparent not only focused on what went went well but also the problems the challenges one might think that companies with big CSR report are doing a lot of things are being good companies but actually its not true its the opposite way around companies with the big report writing a lot those are the ones who have been criticised and have to explain that they have changed and convinced the reader the CSR reports are good source of finding out to which extent the CSR work is actually integrated into the company.

Learn more about Corporate Law with Enhelion’s Online Law firm certified Diploma course certified by Scriboard Advocates and Legal Consultants!

Working practices of the corporate company have been totally changed since this pandemic of Covid-19 and turn corporate company to work on different platforms, for example, to work from home is mandatory these days as offices are still closed for time being for the safety of their own. This measure had been taken worldwide whether it’s India or the USA or any other country as this the social responsibility of corporate sectors to make sure that people are safe during these pandemics and they won’t suffer any monetary problems.

The legal department of the corporate sectors is still analyzing and evaluating the effects of this pandemic on contractual relationships of all sorts, as well as the consequences of Covid-19 on contractual relationships of all sorts, also as possible mitigating strategies which will have to be compelled to be implemented. In particular, the performance of contracts that one can reasonably expect to be impacted by the spread of coronavirus (a sizable amount of contracts of all kinds, indeed) would require deep analysis to verify whether or not they include the act of God clauses that would potentially and ultimately excuse performance from any (or both) parties within the event an unforeseen scenario. In this scenario, the legal departments will play a crucial role in this pandemic situation where they had to make a strategy for the corporate sectors so that it favors the corporate sector rather than affecting them. Even the Boards of the company had to come forward with strong leadership as they had several commitments towards their company. We are now seeing great samples of true leadership that goes beyond direct responsibilities within companies to a way larger scale: Leading initiatives that, because of the large power of globalization and therefore the scale of social and professional networks, have a really powerful reach. According to section 135 of the companies act, CSR spend is mandatory for every company beyond a financial threshold, Net worth of INR 500 Crores or Turnover of INR 1000 Crores or Net Profit of INR 5 Crores, required to spend 2 % of average net profit of last 3 years on CSR projects, reports made under clause (0) of sub-section (3) of section 134 specify the reasons for spending the amount. On the other hand in the USA, there are corporate foundations in the companies where spending money on CSR is also mandatory, recently [3]500 firms spend around $20 billion a year on CSR activities.

Section 135 of the companies act, the compliance of constitution of the CSR committee of the board 3 or more directors, at least 1 independent director, CSR committee shall formulate and recommend CSR policy (preference to be given to local), recommend CSR activities and expenditure on the same, monitor CSR policy from time to time, with this the responsibility of The Board as follows –

  1. Disclose composition of CSR committee.
  2. Approve CSR policy and report.
  3. Ensure SCR activities and undertaken by company
  4. Ensure spending on CSR activities and reporting of non-compliance.

Learn more about Corporate Law with Enhelion’s Online Law firm certified Diploma course certified by Scriboard Advocates and Legal Consultants!

Now, on the other hand, the same business laws are there in the USA where it is mandatory for every company to spend on CSR and The Boards of the companies had to take measurable steps to ensure their responsibilities.

 Like we talk about today’s time then one of the most crucial steps taken under CSR in all the companies is that they had to make sure that all the departments including there buildings must be sanitized properly not only in India or USA but this is world-wide like in India it is set up by the central government for the promotion of sanitation, likewise in the whole world including the USA and other countries it is mandatory that to sanitized every building and keep sanitizer bottles or packs for employees so that they can be safe during this pandemic.

On other hand in India work from home is a new format which is not as successful as where employees work as in the office premises but yes during this pandemic this rule has to be followed by every corporate sector same as in the USA this step of work from home has been taken up and been followed up there also for the care of employees.

In India promoting education, including special education and employment vocation skills especially among children, women, elderly, and, the differently ables and livelihood enhancement projects.

On 23.02.2020 in India funds may be spent for various activities related to COVID 19 under item no. (i) and (xii) of Schedule VII relating to the promotion of health care, including preventive health care and sanitation, and, disaster management (including state Disaster Management Fund).

28.03.2020: contribution to PM cares fund shall qualify as CSR expenditure under item (vii) of Schedule VII.

[4]The SALARY of the employees during the lock-down and payment to casual/contractual workers – not CSR, any ex-gratia payment is made to temporary/ casual workers/ daily wage workers over and above the disbursement of wages. Specifically to fight COVID-19, the same shall be admissible towards CSR expenditure as a one-time exception provided there is an explicit declaration to that effect by the Board of the company, which is duly certified by the statutory auditor.

On the other hand in the USA, there are cuts of salaries during lockdown even the former president didn’t do much about it but Newly appointed president Biden said that corporate sectors must pay the salary to there employees in this pandemic situation as it is difficult not only for corporate sectors but people of the country who are working in the corporate sectors are also suffering a lot in this Pandemic situation even the Government is also facing monetary problems in the whole world.

Learn more about Corporate Law with Enhelion’s Online Law firm certified Diploma course certified by Scriboard Advocates and Legal Consultants!

CSR can be good for a company, first it can builds good image, responsible behaviour which gives competitive advantage, can act as a marketing strategy. CSR can be for government by helps government in achieving its social objectives welfarism concept.

BENEFITS TO CSR, Lack of awareness will be resolved, lack of interest of local community in participation of CSR activities will be tackled, an opportunity to build trust and synergy between CSR, NGO and Local bodies. All these will be a precursor in institution of CSR in India as well as in USA.

[1] Gandhis Concept of “Trusteeship”

[2] SEBI has, vide circular dated August 13, 2012

[3] Fortune Global, https://hbr.org/2018/01/stop-talking-about-how-csr-helps-your-bottom-line#:~:text=Today%2C%20Fortune%20Global%20500%20firms,for%20attracting%20and%20motivating%20employees

[4] Schedule VII Companies act COVID NOTIFICATION

Learn more about Corporate Law with Enhelion’s Online Law firm certified Diploma course certified by Scriboard Advocates and Legal Consultants!

Categories
Blog

Laws relating to Private Equity in the Construction Industry

By: Ananyaa Jha

Introduction

The capital investment in a business plays a major role in determining its long-term sustainability and success and there are various sources available, one of which is private equity, which has gained momentum since the past two decades in India, especially owning to the boom of the IT sector. At present the private equity (PE) firms are showing tremendous growth, the funds are distributed evenly across different sectors to mitigate the risk-factor. PE is a capital form of investment in a company that is not listed or traded publicly.

The paper discusses the law governing private equity in India along with how does a PE investment work. It also throws light upon the increasing demand for last-mile funding in construction industry and how private equity can come to the rescue.

Private Equity & its’ Importance?

The term private equity refers to capital investment in an entity that isn’t publicly traded. It’s an interest or ownership in a company that isn’t publicly listed. Private Equity investment can be made in a public company with the objective of making them private and delisting them from the stock exchange platform. Private Equity investors gain equity in return for the capital they invest in the company. Private Equity investors are generally institutional investors (such as banks, hedge funds, pension funds etc.) or individuals having a high net worth, or private equity firms comprising of accredited investors.[1]

Private Equity is different than venture capital as the latter is a funding provided to start-ups or entities which are in the nascent stages which showcase a lucrative growth in the long run, whereas private equity is more commonly invested in mature businesses that have already been established but are unable to generate profits due to poor performance & lack of efficiency, and are in-turn failing.  Private Equities play an active role in the functioning of an entity in order to improve the performance and help steer the company in the direction of increased revenues so that upon selling the investment and exiting from the entity, a generous amount of profit can be earned.[2]

Learn more about Private Equity Law in India with Enhelion’s Online Law firm certified course certified by ANB Legal Advocates and Solicitors!

PE is a crucial form of investment as along with providing the required liquidity in a project, it stimulates entrepreneurship & increases shareholders value, in turn promoting job creation and fuelling economic growth. PE leans towards the riskier side of an investment scale as there is high likelihood of a company failing to perform. It involves a high level of long-term risk in order to yield high returns. Various strategies of PE investment include but is not limited to- growth equity funds, leveraged buyouts, venture capital investments, certain real estate investment amongst others.

Construction Industry & Private Equity

Construction industry and private equity have joined hands for the past many years, coming together to fund significant development projects worldwide. In the absence of PE firms, a lot of real estate development projects wouldn’t see the light of day or wouldn’t have reached the finish line. In this industry, the PE firms make available the required funds to help a project start and finish. These firms have a major role to play in the development of real estate.

Development of the real estate in any country is a costly affair, sometimes requiring the support of foreign investors too. The entire project can cost upwards of 10 to 100 crores. In majority, the development firms fall short of the necessary amount to fund the project in its entirety. This is where PE firms come into the picture. Usually, a banking institution will cover a hefty amount of the costs yet it leaves approximately 20-35% to be funded by the developers, which could still be a large amount, unable to be funded by the developers on their own, they may require additional help funding their project, bringing in private equity.[3]

If a PE firm chooses to invest in a real estate development project, they will have a major role to play in the process of decision-making. Basically, the PE firm/investor are regarded as either a majority or a part-owner of the property in which they are investing, owing to the large scale of investment in the project, they get entitled to a considerable scale of ownership of said project, which entitles them to have substantial influence in all the decisions to be made. They will provide their input throughout the construction process. The construction firm, in all becomes indebted to the PE firm.

Learn more about Private Equity Law in India with Enhelion’s Online Law firm certified course certified by ANB Legal Advocates and Solicitors!

The year 2020 has witnessed a drop in PE investments because of the novel coronavirus disease’s outbreak (COVID-19 pandemic). The chance of specific sectors like healthcare, technology, e-commerce among a few others currently bringing about investment opportunities exists[4].

The real estate industry has taken a major hit due to the ongoing COVID-19 pandemic and the end of first quarter (March) has shown the sector to reach an all-time low. Commercial as well as residential sectors have been hit severely.[5] The already ailing residential sector in terms of poor demand is witnessing a hard time to launch any new projects or to even finish the ongoing projects due to shortage of labour and continuous construction stoppage.[6]

The slowdown in the sector will remain even post COVID-19 crisis and as lockdowns relaxation continues nationwide, since the construction sector is faced with a critical working capital crisis which holds utmost importance to restart the business & sustain it successfully. Many have their hopes pinned on intervention by the government to help recover the loss created by the pandemic. However, private equity can prove to be of aid in this current scenario.

The regulatory framework revolving around PE funds in India

In India, commonly the PE funds are established as trusts & in accordance with SEBI (Alternative Investment Funds) Regulations, 2012, are registered as an alternative investment fund (AIF). Although, only a company, trust and limited liability partnership are available to be used as the legal vehicle for the PE funds. Companies Act, 2013 provides for PE funds to be established as companies but this method is not used much due to the lax compliance required in comparison to trust structures and in addition, the unclear precedents for fund-raising. According to the Limited Liability Partnership (LLP) Act, 2008, the alternative investment funds can be instituted as LLPs, however, the LLPs use for PE funds is quite rare.[7] The regulatory framework:

  1. SEBI (AIF) Regulations, 2012

SEBI via notification dated May 21, 2012, repealed & replaced 1996 Venture Capital Funds Regulations of SEBI with the Alternative Investment Funds Regulations of 2012, The AIF Regulations were intended to provide for unregulated funds & extends its principles in this regard along with increasing stability and accountability of the market. There are 3 categories along which these AIFs are spread. Category II categorizes such AIFs which don’t come under the ambit of Category I & III. According to regulations, PE funds get registered as Category II. The purpose of preparing these regulations was to create a standard structure in order to govern private set of funds & investment vehicles to improve the channelizing of the funds.

SEBI has recently issued a circular that introduces various notable changes to the legal framework that currently exists. To strengthen the disclosures required, SEBI directed compulsory Performance Benchmarking along with standardizing PPM, that’s the prime document for disclosing all the relevant information to the potential investors, & Annual Audits for the alternative investment funds. On 1st March, 2020, all these changes have been enforced.

  1. The Companies Act, 2013

The Companies Act, 2013 brought with it a required overhaul for companies’ governance in India. The Act of 2013 brought major changes by placing regulatory responsibility, accountability & heavy compliance policies on private companies. Private companies take the ‘private placement’ route to raise capital as they aren’t permitted to offer securities to the general public & raise capital, so they have to take a different approach, wherein the securities are issued to only a selected no. of private individuals. Section 42 of the Act governs the ‘private placement’ process and all such private companies have to comply with the provisions contained in the section. The Section plainly states an invitation or an offer can’t be made to over 200[8] individuals, excluding the securities that are offered under ESOP[9] & the Qualified Institutional Buyers, but such immense rules in respect of PE funds are inapt because regulating the investments that are done through PE funds do not necessitate large compliances because the securities aren’t offered to the public. [10]

Learn more about Private Equity Law in India with Enhelion’s Online Law firm certified course certified by ANB Legal Advocates and Solicitors!

The working of PE Investment

Elucidated below is a guideline which the investors/firms need to follow when they invest in private equity of an entity:

  • Raising Capital & Share-Purchase: The Private Equity investment process starts with chalking out an acquisition plan, & ways in which capital for it could be raised, that encompasses decisions based on different kinds of financing used for raising capital, etc, along with conducting due diligence. As soon as the acquisition deal closes, the management duties of the firm that’s been acquired becomes the responsibility of PE investors.
  • The Acquired Company’s Restructuring: The subsequent move is restructuring of the firm required to increase its productivity by managing the company through improving operations & reducing costs. It covers a wide range of crucial decisions about the operations, the expansion, the profitability, the strategy to be adopted, along with the company’s growth model. The involvement level will be directly proportional to the size of their investment.[11]
  • Selling/Exiting the Company: Generally, the end mission of PE firms is putting the company on sale/exiting at a sizeable profit, which usually takes place after around 3 to 7 successful years after initial investment, although the number of years may vary depending on specific strategic circumstances. After the acquired company begins profiting, & continues to show consistent growth, it is the right time to sell it as there exists high probability of the promoters gaining enormous profits from the sale of the entity. The PE investors get their share of the profits and enjoy a good return.

The demand for last-mile funding in Construction Industry

PE firms have been on the look out to take advantage out of the increasing need of last-mile funding by the construction/real-estate developers because of the on-going stagnation in the residential sector which has worsened due to the liquidity crisis that is existent in the country. Many of the PE investors are keeping an eye for offering capital out of existing funds for construction projects which are in the final or late stage & also establishing platforms in order to finance such real estate projects. [12]

After Real Estate (Regulations & Development) Act (RERA) was implemented in 2017, the developers since then have focused on completing the construction projects & so the demand for funding capital in the late-stages has soared. The banks unwillingness to refinance loan in addition to the liquidity crisis in the financial market has elevated the demand for PE funds because a substantial number of late-stage projects are unable to finish due to lack of capital.

Given the scenario, influx of last-mile capital funding coming in to complete projects is very positively transformative for all the concerned stakeholders. The benefit of last-mile funding is that comparatively it’s a less risky approach as these projects have the necessary approvals, the construction has begun & to some extent have started bringing about sales, so all of this helps to mitigate the risk involved, which provides better chances of reward & hence, investors interests piques.

The PE firms’ interest in the real estate sector is growing at the same time when the government is taking initiative to revive the sector. The government in 2019 announced the establishment of a Rs 25,000 crore AIF in respect of last-mile funding to get the stalled residential projects back on track, because sales have been on the declining scale since 2014, except a marginal rise in the year 2016, but the demonetisation decision by the government & goods and services tax (GST) implementation worsened the situation in 2017 & since the recovery in the sector is moving very slowly.

Conclusion

Private Equity and the construction sector haven’t always connected as the PE investors have by & large steered clear of the construction industry owing to a great deal of inherent risks, like the business having a cyclic nature, professional management, succession planning along with the unrealised expectations in respect of financial requirements of the construction business, i.e., bonding, & the owners of construction companies have been apprehensive of outside investors. However, that perception is changing as PE investors will bring not just financial aid but act as a strategic partner, unlike the other sources of capital & work with the business & make a sustainable model by keeping a long-term vision, thereby maximizing value. The PE firms will bring in deep understanding of the construction industry & help the companies grow by investing not just capital but an array of other valuable requirements for the company to grow.[13]

[1] https://www.investopedia.com/articles/financial-careers/09/private-equity.asp, (Last Visited at 9:00 AM on 6th November, 2020).

[2] https://www.investopedia.com/ask/answers/020415/what-difference-between-private-equity-and-venture-capital.asp#:~:text=Private%20equity%20is%20capital%20invested,potential%20for%20long%2Dterm%20growth., (Last Visited at 10:00 AM on 6th November, 2020).

[3] https://workwithfocus.com/news/private-equitys-role-in-real-estate-development-construction/, Last Visited at 5 PM on 6th November, 2020.

[4] Rukmini Rao, “Coronavirus: E-commerce, SaaS and healthcare to attract more PE funding, says report”, Business Today, May 14, 2020, available at https://www.businesstoday.in/current/corporate/coronavirus-e-commerce-saas-and-healthcare-to-attract-more-pe-funding-says-report/story/403823.html (last visited at 2 PM on 6th November, 2002).

[5] Knight Frank India Survey.

[6] Kailash Babar, “Covid-19 impact: Real estate sentiments hit lowest level”, The Economic Times, April 16, 2020, available at https://economictimes.indiatimes.com/wealth/real-estate/covid-19-impact-real-estate-sentiments-hit-lowest-level/articleshow/75175857.cms?from=mdr (last visited at 7 PM on 6th November, 2020).

[7] Pratish Kumar, Sumitava Basu and Divya Dhage, “Private Equity in India: market and regulatory overview”, available at https://uk.practicallaw.thomsonreuters.com/8-504-2425?transitionType=Default&contextData=(sc.Default)&firstPage=true, (last visited at 11:00 AM on 6th November, 2020).

[8]  Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.

[9] Employee Stock Option Plan

[10] B&B Associates, “Private Equity in India: Evolution and Legal Overview”, July 31, 2020, available at: https://bnblegal.com/article/private-equity-in-india-evolution-and-legal-overview/, (last visited at 9:00 PM on 8th November, 2020).

[11] https://corporatefinanceinstitute.com/resources/careers/companies/equity-firm/, last visited at 11:00 AM on 8th November, 2020.

[12] Bidya Sapam, “Private equity firms sense big opportunity in last-mile real estate funding”, December 3, 2019, available at: https://www.livemint.com/industry/infrastructure/private-equity-firms-sense-big-opportunity-in-last-mile-real-estate-funding-11575311313757.html, (Last Visited at 10 AM on 9th November, 2020).

[13] https://www.cohnreznick.com/insights/private-equity-builds-bridges-construction-industry#:~:text=Private%20equity%20brings%20a%20lot,a%20company%20needs%20to%20grow., last visited at 11:30 AM on 10th November, 2020.

Learn more about Private Equity Law in India with Enhelion’s Online Law firm certified course certified by ANB Legal Advocates and Solicitors!

Categories
Blog

Social Media Marketing and Consumer Psychology

By: Bushra Sarwar

What is social media?

Usage of internet, social media, smart phone apps and other technology for digital communication has become part of the everyday lives of billions of people. Nowadays, social media is prevalently used by everyone. Social media is a digital platform like Facebook, Instagram, Twitter, Linkedin, etc., which is used by the public to share their ideas, photographs, and information in the virtual world. Other activities like blogging, social gaming, business network, advertisement, platform to promote new talent, movie review etc. even politician used social media to create awareness and reach the voters (Stephen, 2016).  Even in such pandemics, social media helped a lot to spread awareness about the harmful effects of covid. As per the news article of Krishnan (2019), average time spent on social media by Indian is more than 2 hours. An average US adult spent 38 minutes/day on Facebook, while 16-24 years age group youth spent 3hours/day on social media (Metev, 2020). Metev (2020) expected more than 3 billion people are expected to join the social media network.

Social networking began as a way for friends and family to communicate. Still, it was later embraced by companies who wanted to take advantage of a typical new medium of communication to reach consumers. The strength of social media is the opportunity to communicate and exchange data with everyone on this world or several individuals at the same time. Social networking has been primarily adopted as an efficient tool that supports companies’ marketing objectives and strategies, especially in aspects related to customer interaction, management of customer relationships and communications.

Learn more about Marketing Management and Digital Marketing with Enhelion’s Online course certified by Socio Media and Sahil Malhotra!

Types of Social Media Network:

Foreman, C. (2017) defined various types of social media network and its usage. Social networking can strategically strengthen two-way contact between businesses and consumers and link more customers to organisations as a result. Figure 1 presents the summary of Foreman defined social media network. Ten types of social media network are explained, and every platform has a different usage for its users. Along with social media, network examples are also given.

Social networks are communication and interaction channels that lead to growing trust among societies. Any website or online forum that allows users to express their views, thoughts, information, and promotes engagement and community building can be categorised as a social network. (Ziyadin et al., 2019).

What is Social Media Marketing (SMM)?

SMM is the use of social media platforms (Facebook, Twitter, Snapchat, Instagram, Youtube, Pinterest etc.) to create your brand, to reach in the audience, to boost traffic on your website, and to reach masses at once. SMM includes sharing great content on your social media pages, listening to your followers and engaging them, reviewing your metrics, and running social media ads.

Do you ever realize, if you visit any add, shopping sites like Amazon, Flipkart, Myntra, AJIO etc., on social media, you start getting recommendations to buy or see on the same kind of advertisement on your social media platform? It is surprising why it happens? It happens due to data analytics tools. Whenever you start visiting a website, company start storing your data and using predictive analytics, start identifying your choices of things and start sending mail related to your wish list.

Fundamentals of Social Media Marketing:

Figure 3 presents the fundamentals and core pillars of social media marketing. Whenever you are in think of to publish something on social media, start looking on the five fundamental principles of SMM. Social media platform generated a lot of content writer jobs to youth. Firstly identify your strategy, define your goals and objectives, identify social media platform and decide the type of content which you want to share with the world.

Start planning and publishing the excellent content on the desired platform, engage your audience by social media tools. By using analytics, identify the preferences of the masses and start catering the same advertisement.

What is consumer psychology?

Consumer psychology is the branch of social psychology to understand the behavior of consumer. Consumer psychology is the process used by consumer to select, decide, and in purchasing of products. Consumer psychology is very important to the business world, once they understand the behavior of consumer, it would be easy for them to serve the products of their choice and desire. As per the Kotler (Marketing Management Book Author), marketing is the pull process, not push process and in this way it differs form selling. When companies start innovating the products, and selling the products as per the consumer’s choice, companies start gaining the market share and stay ahead from their competitors.

Influence of social media on consumer psychology:

As per Fitzgerald (2019), social media has become an essential tool to influence the buying behaviour of consumers. Now a day’s business world is using social media network to reach a large number of population. Studies believed that three kinds of factors affect consumer psychology: social, personal, and psychological. Individual elements are people’s interest and opinion; psychological factors are a person’s beliefs and attitude, whereas social factors are peer’s group, social group, and social media group.

Learn more about Marketing Management and Digital Marketing with Enhelion’s Online course certified by Socio Media and Sahil Malhotra!

Fitzgerald presented few facts which show that social media influence consumer psychology:

  • 71% population buy the things based on social media referrals (hubspot report)
  • For purchasing 31% user browse social media. (marketing week.com)]
  • Social media influence purchase of 47% millennial. (Deloitte)
  • To increase brand familiarity 80% population uses social media. (maybe Tech)
  • Shopping brands which have social media presence, their sales are 32% more. (Big Commerce).
  • Mostly brands (90%) use social media for creating brand awareness. (Hootsuite)

The above facts shows that social media has strong presence and influence our decisions. Now this article is discussing the stages of consumer buying process-

Figure 4 Buying Behavior Process

Figure 4 presents the stages of consumer buying behavior process. Social media has strong presence in all the stages, which influence need identification process of customers, during exploring the products, social media sites provides lot of options to explore number of brands products which influence the decision making process of consumers. Social media influence purchase of consumer through various factors. Factors are given below:

  1. Create product awareness
  2. Originate social proof to influence other customers
  3. Discount offer, promotion on social media
  4. Brands endorsed by celebrity and advertise on social media
  5. Celebrity and well known person reviews
  6. Trend set by the influencers

The above factors show the influence of social media in the buying behaviour of consumers because these factors affect consumer psychology. Social media platforms create awareness about the products. Social proofs are significant in an online platform to make a purchase. Whenever we buy any products from social media, we always look for reviews, from the other customers who already purchased the same products and are using it. This creates a picture of satisfaction o sense of belongingness in our mind and forces us to buy the same products which have excellent reviews on social media platforms.

Sometimes, discounts, sales, offers influence or pull the consumer to make a purchase. For example Flipkart, amazon, myntra, big bazaar generate offers on the occasion of Diwali, Dussehra, or any Festivals. Similarly, big bazaar has Wednesday offers. These all offer influence consumer psychology. Similarly, celebrity advertisement and celebrity endorsement also influence our psychology.

Why consumer psychology is important?

Seventy-six per cent of customers expect businesses or brand houses to consider their needs and desires (Salesforce survey). This suggests that if a business brand doesn’t know what a customer wants until they can tell you, they’re likely to take their company elsewhere. Influential companies develop their marketing campaigns based on insights into customer behaviour. Based on their thoughts alone, they do not produce goods and marketing plans; they bring external input into the fold to figure out what consumers want and how they want it then engage with them accordingly. This is the essence of having a meaningful customer experience. For creating a loyal customer base, customer experience is significant.

Conclusion:

This article/write-up throws the light on social media and consumer psychology. The article starts with the introduction of social media, social media networks, and social media marketing. Ten types of social media network discussed in this articles which have a strong presence in the minds of consumers. Strategy, planning and publishing, engaging the customers, analyse and predict consumer behaviour is the fundamental of social media marketing. The article also discussed consumer psychology and how social media platform affects consumer psychology and influence consumer behaviour. Articles also discussed why consumer psychology is essential for the business to increase their outreach and presence in the global world. In all sense, it shows that social media has a strong presence which influences our psychology and buying decision process.

Learn more about Marketing Management and Digital Marketing with Enhelion’s Online course certified by Socio Media and Sahil Malhotra!

Reference:

Foreman, C. (2017). https://blog.hootsuite.com/types-of-social-media/

Fitzgerald, R. (2019).https://connextdigital.com/how-social-media-impact-consumer-buying-behavior/

Krishnan, V. (2019). https://www.thehindu.com/news/national/how-much-time-do-indians-spend-on-social-media/article29201363.ece

Metev, D.(2020). https://review42.com/how-much-time-do-people-spend-on-social-media/

Stephen, A. T. (2016). The role of digital and social media marketing in consumer behavior. Current Opinion in Psychology, 10, 17-21.

Ziyadin, S., Doszhan, R., Borodin, A., Omarova, A., & Ilyas, A. (2019). The role of social media marketing in consumer behaviour. In E3S Web of Conferences (Vol. 135, p. 04022). EDP Sciences.

Categories
Blog

Analysis of Trademark Laws in USA, UK, and UAE

Trademarks are, generally, words, names, symbols, devices, designs, or other distinctive signs or stamps which serve to recognize the wellspring of merchandise or benefits and recognize them from those sold by others.[1] Trademarks are usually of names, logos, symbols, devices, etc., representing an individual entity. For instance, the ‘M’ for McDonald’s has a ‘™’ to it specifying the distinction of its source.

Trademarks are essential as they show how viable the product is. They have been used by companies that have a brand value attached to them. It offers quality and ensures the customers’ product safety is received; this also saves the company from fraudulent misuse of their brand name or logo.

Trademarks promote enterprise, both locally and globally, by providing owners of trademarks with recognition and profit. Trademark protection also hinders unfair competitors’ efforts, such as counterfeiters, to use similar distinctive signs to market their products and services. Trademark law allows people with skill and enterprise to produce and market goods and services more profitably, thereby facilitating domestic and international trade. Moreover, trademarks can protect consumers from unwittingly paying a premium for inferior products.[2]

Learn more about Intellectual Property with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

Brands play a significant role in the socio-economical out a way for the people. The quality of a product is essential in the growth of a brand and the shareholders. To facilitate the whole system of intellectual property, independent trademark laws have been brought out in countries for the ease of business and to protect the companies against fraud.

Rochelle Dreyfuss observes that, in recent years, trademarks have begun to serve an additional purpose, of “becoming products in their own right, valued as indicators of the status, preferences, and aspirations of those who use them.[3] As putting the concept in simple terms by Robert N Klieger, the Trademark makes tomorrow’s business something more than an accident.[4]

US Laws

The US trademark framework accommodates both government and state assurance of brand names. Regardless of whether under government or state law, enlistment is anything but essential for enforceable rights. The principal statute dealing with Trademark and unfair competition law in the United States is the Lanham Act, 15 USC Section 1051 et seq. The Act had been altered on various occasions since its effective date more than 70 years ago. The amendments have, among other things, made dilution of famous trademarks a federal offense; provided statutory damages as a remedy against sellers of goods bearing counterfeit marks; permitted the filing of applications for registration based on an intent to use, and created a private cause of action against cybersquatting.[5]

The Lanham Act governs the enforcement of trademarks, service marks, and unfair competition. It provides authority from the USPTO, which is the US Patent and Trademark Office, to register marks used in interstate or foreign commerce.[6] As a general rule, registration is not expected to get brand name rights or authorize a brand name. Instead, the first body to use a distinctive mark, in the beginning, to utilize a particular mark in business may guarantee rights to that Trademark for the merchandise or organizations with which the imprint is utilized. The proprietor of an unregistered trademark may not use the ‘®’ mark, as it may be used only proceeding or in connection with a registered mark; however, the holder of an unregistered mark might use the ‘™’ symbol to put others on the announcement that it claims rights to a mark.[7]

Learn more about Intellectual Property with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

As the US Supreme Court has suggested that a trademark is an elaborative form to display the quality of production and to maintain the benefits of a good reputation.[8] Therefore, in the US system, the goodwill is considered over the registration and substantive clauses. The Supreme Court, while quoting the  same stated, “In truth, a trademark confers no monopoly whatever in a correct sense, but is merely a convenient means for facilitating the protection of one’s goodwill in trade by placing a distinguishing mark or symbol-a commercial signature-upon the produce or the package in which it is sold.”[9] Trademark rights can be lost through indecorous licensing, assignment, genericity, or abandonment. If the use of a trademark is licensed without adequate quality control or supervision by the trademark owner, the Trademark will be cancelled. [10]

The language of the statue is somehow or another predictable, with this limited the vision of the extent of Federal protection. Under the Act, a firm initially should select an imprint that is equipped for recognizing its merchandise. Under state law, a trademark need not be famous in order to give rise to a weakening claim. Instead, dilution is available if-

(1) the mark has “selling power” or, in other words, a distinctive quality; and

(2) the two marks are substantially similar. [11]

The steady development in the subject matter and scope of trademark law has not gone disregarded, and legal scholars have long called warnings about the dangers of overly well-developed trademark rights.[12] The laws are based on the gravity of good-faith and the vitality of the owner. If any hindrance is found from the plaintiff, the court decides based on natural justice.

UK Laws

The United Kingdom has a history of trademarks and indictive marks on its products from the 16th Century before the rule of King James I. All these rules were merely in good conscience, and finally, the these were complied with and codified in the Trade Marks Registration Act 1875. These gave the traders a sense of ethics and gave powerful rights to their proprietors and are very important and valuable assets.

Trademark registration is a fairly more organized sector in the United Kingdom as compared to the United States. For the application of a registered trademark, a body has to do the following-

  1. They can register a trademark by applying to the United Kingdom Intellectual Property Office (abbreviated to the UKIPO).[13]
  2. The second option is to file an application with the EU Intellectual Property Office (abbreviated to the EUIPO). The main profit of applying for an EU trademark is it covers all EU member states (including the UK), so you save the money and time of having to make distinct applications in multiple national intellectual property offices.[14]
  3. Lastly, an application can be made using the Madrid Protocol. This allows a home trademark recording or application to form the basis of an application for a so-called international registration. This claim is filed with the International Bureau of the World Intellectual Property Office (or WIPO).[15]

It is to be standard that the trademark laws of the United Kingdom include England, Wales, Scotland, Northern Irelands, and the Isle of Man, and the people of these can only apply for Trademark by the following process. Due to the high level of harmonization in trademark law within the European Union and its member states, Brexit will have a substantial effect on trademark protection in the United Kingdom. First, Brexit would mean that EU trademark protection would no longer extend to the United Kingdom. Not even an often-mooted membership of the EEA as a form of soft Brexit would enable the unitary right to extend to the United Kingdom.[16]

Implementation of trademark rights in the United Kingdom is predominately a civil matter. Both recorded Trademark and passing-off entitlements can be outlooked in the High Court (Chancery Division), as well as in the IP Enterprise Court. Judges in these courts tend to be IP experts. Claims at the Intellectual Property Enterprise Court can be multi-track or small entitlements track; the track chosen has inferences for the remedies available to the proprietors. The ensuing part features an unusually large number of cases this year in relation to “exhaustion of rights” which provide an important role in ensuring free movement of goods within the single market of the claimant.[17]

The administrator of a mark cannot exercise total control over every use of the Trademark; he will, however, be able to an agreement with it like most other property rights by, for example, by assigning, licensing, and mortgaging it. [18]This view surfaced in Arsenal v Reed[19] where it was held that the primary function of a trademark is the origin function.

EU trademark law contains a variety of specific defenses and other limitations on the exclusive rights conferred upon Trademark the EU. Set out under Article 15 of the 2017 EUTM Regulation and Article 7 of the 2008 TM Directive, “exhaustion” acts as a limitation of the exclusive rights provided to EU trademark owners.[20]

UAE Laws

The trademarks in UAE is similar to that seen under the general concept that trademarks are names, words, signatures, letters, figures, illustrations, logos, titles, hallmarks, seals, pictures, patterns, declarations, packets, or any other symbols or group of marks if they were used or proposed to be used either to extricate goods, products or services from whatever sources, or to show that certain services, belongings or products belong to the owner of the Trademark, because of their delivery, manufacturing, selection or trading. The voice accompanying a trademark is considered a part of it. [21]It is governed by the Federal Law No. 37 of 1992 on Trademarks.

The enlisted brand name will be under legitimate assurance in UAE for a long time since the date of authentic TM enrolment. To keep the brand name in power following ten years – the proprietor should pay extra authority fess to the UAE Ministry of Economy for additional augmentation. The amount of expansions for brand name endorsements isn’t restricted.

The UAE Trademark Law contains no direct causes of action for what is frequently referred to as ‘trademark infringement’ in other jurisdictions. Rather, Articles 37 and 38 set out criminal offences focused on fabricating and emulating trademarks. The phrasing of the offenses can make it problematic to bring actions against anything other than the direct counterfeit.[22]

Learn more about Intellectual Property with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

The lawsuit before the courts includes very little oral advocacy. Instead, written pleadings are exchanged during each hearing. There are usually several rounds of pleadings before the court adjourns to issue its decision. Cases are heard by the bench; there are no jury trials.[23] The work of witnesses to provide oral evidence – particularly in civil cases – is possible but very rare. Authorities may be appointed by the court to provide an opinion on technical or complex matters.[24] The UAE is expected to implement the GCC Trade Mark Law in the coming months. The government has also announced the setting up of specialized IP Courts, which are expected to be in operation soon.[25]

The Trademark Law likewise gives criminal solutions for the encroachment of brand names as fines and additionally detainment. You can likewise make a move against brand name encroachments through Dubai Customs, which has the order to quit encroaching items prior to entering the nation, in this way making your brand name assurance more productive and secure.

Therefore, it is seen that trademarks all over the world are similar and follow the common strategies laid down by the World Trade Organisation. A trademark is the most valuable asset of a business to upkeep its prestige; therefore, it is more important to register the business trademark and to keep an updated. Usually, a trademark is registered for ten years, depending on the laws of each country. It is important to maintain trademarks by brands, especially well-developed brands. Any counterfeit in the following should be brought into action in the courts as many countries have

[1] Brian Farkas, Which Protection Do I Need: Patent, Copyright, or Trademark? NOLO, https://www.nolo.com/legal-encyclopedia/which-protection-do-i-need-patent-copyright-or-trademark.html

[2] Michael Cosgrove et al, Case Study:  Trademark Infringement Issues,7 JOURNAL OF BUSINESS CASE STUDIES,19, 19-26 (2011)

[3]Jeanne C. Fromer, The Role of Creativity in Trademark Law, 86 THE NOTRE DAME LAW REVIEW,1885, 1892-93,(2011)

[4] Ibid.

[5] Roberta Jacobs & Lesley McCall Grossberg,United States, THE LAW REVIEWS,(Oct 2019), https://thelawreviews.co.uk/edition/the-trademarks-law-review-edition-3/1209926/united-states

[6] Jessica Hiney &Lisa M Mottes, Trademark procedures and strategies: United States, WTR, (29 Mar 2017), https://www.worldtrademarkreview.com/portfolio-management/trademark-procedures-and-strategies-united-states

[7] Ibid.

[8] Park ‘N Fly, Inc. v. Dollar Park ‘N Fly, Inc., 469 U.S. 189, 198 (1985)

[9] United Drug Co. v. Theodore Rectanus Co, 248 U.S. 90 (1918).

[10] TradeMark Law, HG.ORG, https://www.hg.org/trademark-law.html

[11] Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d 1026 (2d Cir. 1989).

[12] Ralph S. Brown, Jr., Advertising and the Public Interest: Legal Protection of Trade Symbols, 57 Yale L.J. 1165, 1177-80 (1948)

[13] Charlie Bond, UK: The Basics of Trade Mark Law, MONDAQ, (Nov 20,2017), https://www.mondaq.com/uk/trademark/648042/the-basics-of-trade-mark-law

[14] Ibid

[15] Ibid

[16] Marc Mimler, The Effect of Brexit on Trademarks, Designs and Other “Europeanized” Areas of Intellectual Property Law in the United Kingdom, British Institute of Comparative and Operative Law, (Dec 2017), http://eprints.bournemouth.ac.uk/31199/1/Brexit%20Paper%20no.7.pdf

[17] https://www.worldtrademarkreview.com/portfolio-management/trademark-procedures-and-strategies-united-kingdom

[18] All Answers Ltd. November 2018. Trademark Systems in the UK. [online]. Available from: https://www.lawteacher.net/free-law-essays/business-law/trademark-systems-in-the-uk-business-law-essay.php?vref=1

[19][2003] EWCA Civ 696

[20] Trademark Infringement, 109 TRADEMARK REP. 532 (2019).

[21] Intellectual Property, Information & services, https://u.ae/en/information-and-services/business/intellectual-property

[22]  David Harper,UAE – Trademark Litigation 2017 (A global guide), CWB LEGAL, (Oct 21,2016), http://www.cwblegal.com/trademark-litigation-2017-global-guide-uae/

[23] Ibid.

[24] Ibid.

[25] Maria Farrukh Irfan Khan, Trade mark litigation in the United Arab Emirates: overview, UNITED TRADE MARK & PATENT SERVICES,(Sept 01, 2018), https://uk.practicallaw.thomsonreuters.com/w-011-8550?transitionType=Default&contextData=(sc.Default)&firstPage=true#co_anchor_a192792

 

Categories
Blog

Role Of Intellectual Property Law In The Sports Industry

By: Pallavi Tiwari

  1. INTRODUCTION

Sports are said to form 1-5 percent of the GDP and thus are very important for economy and various related companies. As far as the recent trend is concerned Indian Premier League (IPL) is going on and this is the most appropriate example to understand the connection between sports, marketing and business. Here, every team has its brand value, their advertisements, their theme songs, logos, brand name, tag-lines, marketing strategy and players’ performance strategy and all of this forms a part of IPR.  All these assets need to be protected as part of IPR from being taken away by third parties.  IP in sports came up first as recommended by Kunstadt but only with respect to copyright and trademark as the players who invest labor to develop a new move should be given economic benefit for the same.[1]

Copyright subsists in the photos clicked in the IPL events and the theme song of the themes or the title track of IPL itself.[2] Design rights can be established in the bats used by players which are specially designed and aim to facilitate their game. Trademark relates to the logo of the teams or their merchandise used in the games. All this helps in the branding of the team and also create some value in the eyes of the viewers. Unless and until something is appealable it holds no value in the market, so for investment it is important that it has created some value in the market. These logos and other IP rights have to be protected so that no one else could copy them or use them in their business and gain advantage of the established image of the players or the team, according to trademark dilution under Section 29(4) of the Trademark Act. [3]

Any third party could come up with these marks or designs and thus cause great loss to the owners and can also tarnish their image by selling bad products in the name of the players or teams by creating confusion in the minds of the consumers, which happened in the famous PayPal or Paytm case. Thus sports and IP laws work in intersection with each other and IP is essential for the commercialization of sports.[4]

Learn more about Sports Law with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

  1. PATENT LAW AND SPORTS INDUSTRY

Patent law can be used in the sports industry with respect to the techniques used in the game or in the making of sports equipment to enhance the efficacy. Some examples of such patents are “D.S. Miller’s Dominant Hand Putting Method” or the “Nolan Ryan’s baseball pitch” and both are either to evade the impediments caused due to some handicap or improve the technique involved in a game. Patent can only be granted if something is novel, non-obvious and has industrial use as per Article 27(1) of the TRIPS[5] and also imbibed into the Indian Patent Law. As far as sports patents are concerned and the first requirement of novelty is to be addressed, it is important to note that even if a player has developed a technique or a move to play or designed an equipment to enhance the game it is important that he gets a patent first on it and then use it in front of other players. If he fails to do so, the patent is said to be already in the public and thus not novel or non-obvious. To determine novelty it is important that the technique or anything to be patented should not be in the mind of the public already expert in the field but the moves or techniques used by the players are just movements of limbs  and thus very commonly discussed and seen amongst the players. Thus generally players fail to get patent due to non-fulfillment of the novelty criteria. Another condition is of industrial application and there is no proof that sport related patent can be used commercially or in an industry. It depends on patent to patent and thus this condition may or may not be fulfilled.[6]

Sports is about learning new moves and mostly players learn from one another but if these moves are patented it would cause an unfair advantage on the other competitors. Sometimes another player in between of a match can use a patented move which would cause the game to come to a halt and thus destroy the basic essence of sports. Thus, this would make the players first think and then make a move or use a technique which would not be spontaneous anymore and going against the principles of sports.[7]

As far as India’s position with respect to patenting moves of a game are concerned section 3(m)[8] of the Indian Patent Act clearly debars “a mere scheme or rule or method of performing mental act or method of playing a game” from being granted a patent. Thus India is still not open to patenting of sports or the moves involved as compared to US which observes as laid down in Diamond v. Chakraborty[9] case that anything can be patented.[10]

Thus, the position of patent grant with respect to sports move is still not clear and uniform across the globe so no decision can be called upon the same.

  1. COPYRIGHT AND SPORTS INDUSTRY

As far as sports are concerned copyright exists in a lot of things like slogans for a team, pictures of players, or any other photography associated with the events. As copyright now involves broadcaster and performers’ rights under the Act, it gives a broadcaster a right to telecast a particular sporting event and to possess that right the companies pay huge amounts. So if any other person uses the broadcast for his own channel then it shall also be an infringement of copyright. These broadcasters make available to the public the sport events as each and every event cannot be attended by the viewers. Thus broadcasting is the major area where copyright subsists in case of sports and due to the revenue generated by licensing the broadcasting rights events can be organized and other related events can take place. Apart from the field events there are computer games also which use software which can be subjected to copyright protection and also patent protection when combined with hardware as computer programs or software are per se not patentable.[11] The characters or graphics used in video games are also subjected to copyright protection as now the craze for online games and events including video games are no less than field sports events.[12]

Learn more about Sports Law with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants!

As far as copyright in sports is concerned, there are two categories of sports that can be discussed: purposive or non-aesthetic sports or aesthetic sports.[13] Section 13 mentions about works in which copyright subsists and sports is clearly not a part of it. The case of Institute for Inner Studies v.Charlotte Anderson,[14] was one landmark case which discussed why copyright protection is not offered to sports. The High Court observed that yoga asana cannot be granted copyright protection because they are neither included under literary or dramatic work under the Act. The Court also felt that sports lack the main criteria of fixation in tangible medium with respect to copyright. It is also considered anti-competitive in nature as it will thereby reduce the scope for future players to use similar moves.

This is not the case with aesthetic sports (dance, gymnastics, skating) as they involve some creativity and can come under choreographic works protected under copyright. Dancers, gymnasts can also avail the performers’ rights under Section 38 of the Act. They also fulfill the requirements of performance under 2(q) of the Act and performer under Section 2(qq) of the Act and thus are eligible for protection. As far as uncertainty or originality is concerned with respect to copyright protection, aesthetic sports fulfill this criterion. They are also fixated in nature as most of the copyrighted works are as they constitute of certain specific moves.

Further in the case of Star India Pvt. Ltd. v. Piyush Agarwal & Ors.[15] the Single Bench observed that cricket events are subject to performers’ rights protection under the copyright act. But later on, this decision was overruled and the Delhi High Court observed that performers’ rights are not under copyright as they are clearly mentioned to be “special rights” under Section 38 of the Act. But stand in India relating to copyright protection for sports is still unclear.

  1. TRADEMARK AND PROTECTION OF LOGOS AND BRAND NAMES IN SPORTS

Trademarks are used to distinguish goods and services from one another. These days’ sports events also involve a lot of brands and use them in logos and their marks to gain commercially. This is done essentially to create a brand value for products used in these sports or to catch the viewer attention. For example, champions rise is used for FIFA and like in IPL as well every team has their own logo and mark. It helps the viewers to establish a relation with the team or game and to choose their favorite side. There have been cases where players have trademarked their name like David Beckham. In the recent trend of online games it is important to have brand names for teams and events so the viewers can distinguish between them. If some revenue has to be generated through a sports event or by a team it is important that it should have some recognition in the market and this can be established through trademark.[16]

In a famous case STJUE Arsenal v. Reed,[17] the defendant used the branded goods outside the stadium in a commercial manner unofficially thus causing an infringement. Getting trademark on a team or a player’s name which in turn become very popular helps the sports apparel manufacture to establish goodwill on the brand value of the team or the player. According to Forbes ranking it is established that “the portion of [a sports team’s] enterprise value attributable to local revenue streams like television, advertising, merchandise and tickets, that exceeds what a typical team in the same sports generates.”[18]

There are some associated rights to trademarks which are known as personality rights where a player can control how much his personality in the public can be exploited to create a brand value or use it as recognition for a product. When someone uses a player’s name on their goods and does not do well on the goodwill of the player it is a clear case of trademark dilution under Section 29(4) of the Indian Trademark Act. This brand value created by using team names or players’ names can also be used by broadcasters to attract the audience and thus IP law is all mixed up in the sports industry.

  1. TRADE SECRET IN SPORTS AND GAMES

Apart from these above-mentioned IP rights, there is one right which though not yet recognized under IP is important for the sports industry. It is trade secret which forms part of all the secret strategies of teams to win or secret compounds in their gears to make playing easy and winnable or any other dietary ingredient. It is not be disclosed to the public unlike patent rights. Generally other teams might try to steal these assets but they are to be necessarily protected so that no other team or player can gain undue advantage on the same.

Data analysis is another trade secret which needs to be protected from being used by fellow competitors. It may involve screening the way other team plays, their loopholes and the team’s strength and weakness in the past few matches. This then later on helps the team to decide how they will strategize their game and also observe patterns in the player’s physiological and psychological behavior. This data is also known as big-data and though India doesn’t recognize a specific trade secret law it still has been given special importance in US and UK with newly introduced legislations.

  1. DESIGN RIGHTS IN SPORT INDUSTRY

Design rights are generally an extension of trademark law and copyright law where the difference is only that design first of all is only to refer to aesthetic beauty of the product and cannot include anything technical or anything attributing to the functions of the products. Teams or sports events use beautiful designs for products to be used in the game like bats, balls and other goods to attract the viewer attention. It is highly creative in nature and it aims to enhance the appearance of the goods to be used so that if someone buys the product later they can associate it with the design of the team or the player.

One such example is development of clever bicycle by Lucio Tortola, a cyclist to reduce issues in the back and any chance of injury in bicycle rides. This was designed to be a shock absorber and help the cyclists in future. Now this design has become very famous and used by most of the cyclists across the globe. So design is just not for beauty but to also remove some issues involved in the game and help the future players. [19]

Learn more about Sports Law with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants!

  1. CONCLUSION

The author has discussed various IP rights associated with sports and players and how India stands with respect to these rights. There is also another term called ambush marketing apart from these IP rights infringements which is a problem in the sports industry. Generally it is not within the scope of IP law but needs to be addressed whenever any sports issue is under consideration. It is a very prevalent practice these days when some company tries to commercially get advantage on the basis of already established goodwill of an event. They reap commercial gains in this process by unofficially associating themselves with famous sports events and gaining advantage of being a sponsor when they are not.

Relying on afore-mentioned propositions, it is important to recognize the importance of various IP rights in sports and how they can be protected. IP is always an essential ingredient of any commercial activity and since sports is now more of commercial nature it is important to protect it. In this write-up, the author shall discuss how patent, copyright, trademark, designs, trade secret and other IP rights are closely attached to sports and how can they be infringed so that businesses and companies related to sports can avoid such activities. To save a business it is important to save the IP related to it and similar is the stand for sport industry.

[1] F. F. Scott Kieff, Robert G. Kramer &  Robert M. Kunstad, “It’s Your Turn, But It’s My Move: Intellectual Property Protection for Sports Moves”, 25 Santa Clara High Tech. L.J. 765 (2012).

[2] Anita Roy, “Shield of IPR around IPL”,  http://www.legalserviceindia.com/legal/author-616-anita-roy.html.

[3] Vaishali Singh, “The Untapped Emergence of IP Rights and Sports: Faster, Stronger and Higher” (2019) PL (IPR) July 91.

[4] Zia Akhtar, “Sports development, legal infrastructure and protecting Intellectual Property rights” http://www.africansportslawjournal.com/Sports%20development%20legal%20infrastructure%20and%20protecting%20Intellectual%20Property%20rights_.pdf.

[5] Article 27TRIPS 1994, “Patentable Subject Matter”.

[6] “Leveraging Intellectual Property In The Global Sports Economy: Sports As A Tool For Progress And Development”, Global Innovation Policy Centre, https://www.theglobalipcenter.com/introducing-leveraging-intellectual-property-in-the-global-sports-economy/.

[7] Derek Bambauer, “ Legal Responses To The Challenges Of Sports Patents”, Harvard Journal of Law & Technology Volume 18, Number 2 (2005).

[8] Section 3(m), The Patent Act, 1970 “a mere scheme or rule or method of performing mental act or method of playing game”.

[9] 447 U.S. 303 (1980).

[10] Sharada Kalamadi, “Intellectual property and the business of sports management”, (2012), http://nopr.niscair.res.in/bitstream/123456789/14768/1/JIPR%2017(5)%20437-442.pdf.

[11] S.K. Verma, “IP Protection of Software and Software Contracts In India”, Vol. 17 JIPR (2012).

[12] Molly Torsen, “Intellectual Property and Sporting Events: Effective

Protection of Event Symbols through Law and Practice”, International Intellectual Property Institute,  https://iipi.org/wp-content/uploads/2010/07/Sporting_Events_and_Intellectual_Property.pdf.

[13] Seemantani Sharma, “A Copyright Incentive for Promoting ‘Aesthetic Sports’ in India”, The Entertainment and Sports Law Journal, 17(1), 7, http://doi.org/10.16997/eslj.232.

[14] Case Number: CS(OS)–2252/2011.

[15] MIPR 2013 (1) 201; 2013 (54) PTC 222 (Del).

[16] Paras Sharma, “Intellectual Property Rights In Sports” Volume 8, Issue 3, IJCRT, (2020).

[17] [2003] EWCA Civ 696 (21 May 2003).

[18] M Ozanian “The Forbes Fab 40: The World’s Most Valuable Sports Brands 2017”, Forbes, Forbes Fab 40: Teams (2017).

[19] “Reiventing the Frame, Challenging the Status Quo”    https://www.wipo.int/ipadvantage/en/articles/article_0159.html.

Learn more about Sports Law with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants!

Categories
Blog

Analysis of Transportation Laws in India, UAE & USA

By: Subham Agarwal

Humankind has always found ways to transport themselves for business, survival, or food. Transportation has always played a significant role socially, economically, culturally, and commercially. Humankind has also always invented new ways to increase the speed of transportation.

The first-ever steam-powered automobile was built in 1769, and the steam-powered railway was built in 1804. In 1885 the first petrol-powered automobile was developed by Karl Benz, and this year is known as the “Birth year of modern car.” This changed the entire landscape of the transporting system, but change comes at a cost. This started causing various traffic deaths and injuries that resulted in many to express concern. In early 1903, New York City introduced the world’s first traffic law regulating speed limit in the city and countryside. With this, many countries started implementing rules to minimize traffic violations. In later years, the government started imposing stricter rules and regulations to reduce traffic violations, deaths, and injuries.

Learn more about Transportation Laws with Enhelion’s Online Law course certified by Jurist & Jurist International Advocates!

United Arab Emirates (UAE)

The United Arab Emirates is a country predominated by Muslims. However, in the last few decades, people worldwide have settled there. UAE is famous for various things, one of them being strict laws. UAE has stringent rules for Motor Vehicle. In UAE, transportation law is of recent origin. The first law was “Federal Law No. (21) of 1995 Concerning Traffic”. The transportation system is also of recent origin. The first Bus service in UAE was introduced in Abu Dhabi by the Emirate in 2008 in only four routes.

In addition to it, the first passenger rail was started in 2009, i.e., Dubai Metro, while the Abu Dhabi metro and Sharjah metro are still under construction. Also, the construction work for the goods carrier train network commenced in 2009. The fact that transportation is of very recent origin in UAE, so the transportation law relating to Railways and others still need to be developed.

However, when it comes to Air Transport, Dubai airport is the world’s busiest airport for the last six years. All the airport in UAE is controlled by the General Civil Aviation Authority (GCAA), and they make all the necessary guidelines for the airport and air carriers.

UAE has one of the most strict laws relating to road transport. As we all know, UAE’s laws are mostly based on the Deterrent theory, but it helps UAE reduce its traffic death and injury. In 2006, 190 people died per million in traffic collisions linked to high speed and low safety culture. In 2010 it reduced to 100 per million, and in 2014-2018 it dropped by 34%.

Road and Transport Authority (RTA) regulates and issues licenses in UAE. It also operates jointly with the traffic department to ensure more efficiency in implementing rules. The road transportation in the UAE comprises driving rules, road rules, road types, land, and marine transportation. In Dubai, penalty points system are followed for each violation, and the authority adds black points for every violation. It leads to the seizure of the driving license if it reaches 24 black points within 24 months, the penalty charges are as follows:

  • On the first violation, the driving license is seized for three months
  • On the second violation, the driving license is seized for six months
  • On the third violation, the driving license is seized for a year and is given when the driver passes the driving course signed by the traffic authorities.

Various rules under Transportation Law of UAE are:

  • The minimum legal age for driving is eighteen, and the person has to renew every year up to the age of 21 and then in every ten years.
  • Wearing of seat belts for all the passengers is compulsory. A child seat is mandatory for up to 4 years of age, and no child below the age of ten can sit in the front seat. Violation of any of it is punishable with a fine of AED 400 and 4 black points.
  • Drinking and driving is considered as one of the most severe crimes, and if caught, imprisonment and/or fine of minimum AED 20,000 (4lakhs INR approx.). An additional charge under Narcotics law is filed.
  • Using a mobile phone while driving is strictly prohibited, and if caught, a fine of minimum AED 800 and 4 black points is charged.
  • Driver must also follow the “3-second rule,” i.e., there must be a 3-second distance between two cars, and tailgating is considered an offense.

Learn more about Transportation Laws with Enhelion’s Online Law course certified by Jurist & Jurist International Advocates!

These are some traffic rules of the UAE, and the list goes on. Therefore, after looking at these few rules, we can conclude that UAE traffic rules are stringent but needful to avoid accidents and traffic violations. The deterrent model is beneficial, and various country’s legislators should give thought to it.

United States of America (USA)

In the United States of America, transportation consists of road, rail, air, and waterways transport. Travel through roads consist of 40% share, followed by airways and others. In the USA, the highest contributor to Greenhouse gas emission is transportation. Now, looking at the history of transportation, in the 18th century, most of the travels were done by rail, horses, or horse wagons. In this century, most of the population was situated in coastal areas, so traveling from one city to another was very difficult. Then in the 19th century, the automobile revolution took place. People started using motor vehicles, and due to the invention of better air travel, there was a significant shift from rail transport to air transport. In the 20th century, the national highway system came, and the road became the most preferred mode of transportation. Rail transport declined drastically.

In the present situation, all the states have their own traffic rules and guidelines regulated, supervised, and funded by the U.S. Department of Transportation. Although there are different rules for all the states, they are unified by the Uniform Vehicle Code (UVC). It is a model act by the National Committee on Uniform Traffic Law and Ordinances, a private non-profit group. Most of the members of these groups are state governments.

Compared to the various countries, the USA prefers motorized transit than any other form of transportation. 91% of the population owns 4 wheel vehicle, and 86% of workers have private vehicles for commuting to work.

In addition to it, individuals can also have their own private airport in the USA, and all the airlines are private. The airport safety, pilot training, and investigations are done by the Federal Aviation Administration and Transportation Safety Board. The USA has the world’s most developed air transportation system. There is a minimal passenger train or rail network present in the USA, but rail is heavily used to carry goods.

In many U.S. states, traffic offenses are distinguished into two, i.e., traffic misdemeanors and traffic felonies. Traffic misdemeanors are those minor offenses that do not require any hefty long trial. Punishment for these are fines or going to driving school. Traffic felonies are those offenses that endanger the lives of others while driving. For instance, driving a vehicle to hit and kill someone. Punishment for those offenses, which are a year or more imprisonment, comes under the category of traffic felonies.

In most states, the Points System is followed. This is similar to the UAE Black points system. For each offense, points are added in the U.S., and one can reduce it by paying fines or attending driving school. Too many points lead to temporary seizure of license.

Every state has a Department of Motor Vehicle or Bureau of Motor Vehicles, which keep records of the license holders, including tickets issued against such license holders. After being ticketed, a person can inform the local court about the alleged violation, either plea guilty, not guilty, or nolo contender (not to contest) for a specific time period (usually 10-15 days are given). On pleading guilty, the violator can ask the judge to reduce the fine. On pleasing not guilty, a hearing is done before a magistrate or judge, and if acquitted, then all the ticket will be waived off.

Therefore, we can conclude that every state has different rules and regulations in the USA, making it difficult for people who are traveling to various states. We can also see that ticketing and getting justice for that is a very lengthy process and is a significant burden on people. On the positive side, this clumsy process somewhere creates a deterrent in people’s minds before violating any rule.

India

In India, transportation consists of air, land, water, and rail. Air transport comes under the Ministry of Aviation, and the regulatory authority is the Directorate General of Civil Aviation (DGCA). Land transportation comes under the Ministry of Road Transport and Highway. Waterways come under the Ministry of Shipping, and the regulatory authority is the Inland Waterways Authority of India (IWAI). Lastly, railways come under the Ministry of Railways.

India’s first legislative law on transportation was the “Indian Motor Vehicle Act, 1914” central legislation passed by British India. The act had 18 Sections and gave local government the responsibility of registration and providing licenses to vehicle and drivers, and some regulations.

In India, the maximum number of people are dependent on public transportation. For example, Indian Railways came to India in 1853, running from Bombay to Thane, which is now the world’s 4th largest rail network with the most extensive workforce globally, i.e., 14 lakhs employees.

The potential of air transport in India was first realized in 1911 when an aircraft carried mail from Allahabad to Naini across river Ganga. The first civil aviation company in India was set up by TATA sons in 1932. Then, the Air Corporation Act, 1953, came into force to nationalize the entire industry. Today, the Indian aviation industry is one of the fastest-growing industries, with less nationalize control and more safety regulations work by the government.

In the present day, we are under the provision of the Motor Vehicle (Amendment) Act, 2019. This act amended the 1989 act and imposed more hefty fines on traffic violators. Some of the provisions are:-

  • Driving a vehicle without insurance is punishable with imprisonment up to three months or a fine of Rs 2000 or both for the first offense. Earlier it was Rs 1000.
  • Using a vehicle without registration is punishable with a fine of Rs 2000 to Rs 5000 in case of the first offense and for second and subsequent offense imprisonment up to 1 year or fine of Rs 10,000 or both.
  • In 2016, Good Samaritan Law was passed as Bill on the Supreme Court of India’s judgment. Ministry of Road Transport and Highway later issued guidelines. This law protects citizens who help accident victims from any delay or harassment.

Therefore, we can conclude that the 2019 amendment is going in tune with the UAE deterrent model by imposing hefty fines on violators and also creating awareness among people.

Learn more about Transportation Laws with Enhelion’s Online Law course certified by Jurist & Jurist International Advocates!

 

 

 

Categories
Blog

Impact of Real Estate Laws in India and USA

By: Raj Mehta 

What is Real Estate means?

Real Estate is real property that consists of land and improvements, which include buildings, fixtures, roads, structures, and utility systems. Property rights give a title of ownership to the land, improvements and natural resources such as minerals, plants, animals, water, etc.[1]

Real estate law is the area of law that governs buying, using and selling land. It’s the law that governs how people acquire property and what they can do with the property that they own. Real estate law is also called real property law. Real estate law is called real estate because it’s about real property. Real property is land as opposed to personal property which is objects. Fixtures that are permanently on the land like buildings or other large structures are also a part of real property.

Learn more about Real Estate Laws with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

Types of Real Estate

There are several types of real estate. The main categories are:-

  1. Land

Land is the baseline for all types of real property. Land typically refers to undeveloped property and vacant land. Developers acquire land and combine it with other properties and rezone it so they can increase the density and increase the value of the property.

  1. Residential

Residential real estate consists of housing for individuals, families, or groups of people. This is the most common type of estate and is the asset class that most people are familiar with. Within residential, there are single-family homes, apartments, townhouses & other types of living arrangements.

  1. Commercial

Commercial property refers to land and buildings that are used by businesses to carry out their operations. Examples include shopping malls, individual stores, office buildings.

  1. Industrial

Industrial real estate refers to land and buildings that are used by industrial businesses for activities such as factories, research and development, construction.

 What is Real Estate Contracts?

In the Real Estate sector, the contracts regulating the transfer and use of immovable property are generally in the nature of agreements for sale, sale deeds, development agreements, lease deeds and leave and license agreements. The impact of Force Majeure event is considered on some of the aforesaid contracts as under:

  1. Sale Deed:
    • Acts as a evidence of sale and transfer of ownership of property in favor of the buyer
    • Acts as the main document for further sale by the buyer
    • Things to ensure as a buyer:
      • Title of the seller
      • Check whether there is any charge or encumbrance on the property
      • Ensure that all clearances, approvals, and permissions to transfer or sell the property has been addressed
      • All the pages of the deed to be signed
      • Deed should be witnessed by at least two witnesses
      • Finally, get it registered at the jurisdictional sub-registrar office.
      • Details of the parties
  1. Lease Deed:
    • If the term of lease is exceeding one year or reserving yearly rent has to be registered.
    • This agreement binds both lessor and the lessee for the decided duration
    • Things to ensure:
      • The subject matter of lease must be immovable property
      • Duration of lease should be fixed
      • No interest passes to the lessee before execution
      • Termination clauses can be included based on requirements
      • Details of the parties
  1. Leave and License:
    • There is no transfer of the interest of property as that of Lease
    • Licensee acquires personal right to occupy the property
    • Things to ensure:
      • Duration of the rights
      • Details of the parties involved
      • Details of the property
      • Terms of agreement
  1. Mortgage Deed:
    • The funds lent against which the property is used as security is the mortgage money.
    • The Agreement which instruments the transfer is mortgage Deed
    • Things to ensure:
      • Enforceability and validity depends on the type of mortgage
      • Cross verify the agreed interest rate
      • Tenure of the land should be checked up and mentioned
      • Provision for payment of the amount due in the event of mortgagor failing to pay interest

Learn more about Real Estate Laws with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

INDIA

Real state in India is governed infected by a combination of federal and state specific laws. This is largely because, in accordance with article 246 of the Constitution land is the subject matter of state list or less second of the seventh schedule of the Constitution of India, which covers subjects for which only state can legislate, while transfer of property other than the challan, registration of deeds and documents and contracts other than for agriculture land fall under the concurrent list or list third of the seventh schedule of the Constitution of India, which are subject for which both Centre and states can legislate. Additionally, since India is a country with diverse sects, Laws relating to aspects such as devolution inheritance et cetera draw a large influence from various customs and practices, in addition to codified laws. Over the years various judicial presidents and judgements have also adjudicated upon various aspects relating to real state which are either binding or have a strong relevance value, depending upon the form or court which adjudicated.

 The main laws which regulate real estate in India are:

  • The Transfer of Property Act, 1882
  • RERA (Real Estate Regulatory Authority) Act, 2016
  • The Registration Act, 1908
  • Stamp duty has to be paid as per state requirements
  • For Non-Resident Indians (NRIs) FEMA( Foreign Exchange Management Act, 1999) also apply
  • Investors have to abide by local laws and bylaws
  • Clearance as per environmental laws have to be taken before starting with any project for construction of immovable property
  • The specific relief Act, 1963
  • Other labour laws including for regulating minimum wages and safety insurance provisions
  • Land Acquisition Act, 2013

 Impact of Real Estate Laws &Contracts in India

  1. Timely delivery of flats: Developers often make false promises about the completion date of the project, but hardly ever deliver. As per the bill, strict regulations will be enforced on builders to ensure that construction runs on time and flats are delivered on schedule to the buyer.
  2. Furnishing of accurate project details: In the construction stage, builders promote their projects defining the various amenities and features that will be part of the project. But not everything goes as per plan, with several features missing. As per this bill, there can’t be any changes to a plan. And if a builder is found guilty of this, he/she will be penalized 10% of the project’s costs or face jail time of up to three years.
  3. Specifying carpet area: Generally, builders sell flats on the basis of built-in area, which includes a common passage area, stairs and other spaces which are 20-30% more than the actual flat’s area. But, not all buyers are aware of the concept of carpet area. With this bill it will become mandatory to declare the actual carpet area.
  4. All clearances are mandatory before beginning a project: Builders often attract buyers with huge discounts and pre-launch offers. And, the buyer, enticed by the offers, does not bother about the clearance. But, due to delays in getting clearance, the buyer does not get the flat on time. This bill ensures that developers get all the clearances before selling flats.
  5. Each project should have a separate bank account: Developers raise funds through pre-launch offers and use them to purchase some other land or invest it in other projects. This bill will make it compulsory that a separate bank account be maintained for each project. Each transaction will have to be recorded, and diversion to another project will not be entertained.
  6. 6. After sales service: As per an interesting clause in the bill, if the buyer finds any structural deficiency in the development of the building, the buyer can contact the builder for after sales service. But, the buyer should approach the builder within a year of purchase to rectify such defects without further charges.[2]

USA

Real estate laws & Contracts

Each state within the United States follows a mix of statutory and common-law. There are three levels of law in US:-federal, state and local. Under a common law changes in law come by way of case law and a new legislation, each of which is given equal weight. Rules on parent evidence and requirements that agreement in writing to be in force where is from state to state. Courts will generally rely on the express terms of document unless the intent of the parties is unclear. Courts in the US may consider the conduct of the parties in if the terms of the document are in question is ambiguous. In general, contracts for the sale or transfer of real state should be in writing.

Real estate transactions are governed by a wide body of federal statutes and a combination of state statutes and common law. The requirements established by state law often differ significantly from one state to the next. Real estate brokers are employed as the agent of the seller in order to obtain a buyer for their property. The contract between the broker and seller is called a listing agreement. The agreement may be an open agreement whereby the broker earns a commission only if he or she finds a buyer. It is commonly required in real estate contracts that the title to the property sold be marketable. This requires that the seller have proof of title to all the property he or she is selling and that third parties not have undisclosed interests in the title. A title insurance company or an attorney is often employed by the buyer to investigate whether the title is, indeed, marketable. Title insurance companies also insure the buyer against losses caused by the title being invalid.

In order to pass title, a deed with a proper description of the land must be executed and delivered. Some states require that the deed be officially recorded to establish ownership of the property and/or provide notice of its transfer to subsequent purchasers. The most common method of financing real estate transactions is through a mortgage.

Impact of Real Estate Laws & Contracts in USA:-

  • Clarity in business relationships, agreements, and rights of parties
  • Avoiding potential contract disputes and litigation
  • Preventing misinterpretation of communications and agreements
  • Protecting intellectual property, real property, and asset values
  • Better management of commercial relationships
  • Built-in agreements about resolving disputes through arbitration, mediation, or a court in a particular jurisdiction
  • Documentation to allow comprehensive representation and review by an experienced business law attorney[3]

 

[1] https://corporatefinanceinstitute.com

 

[2] Online ISSN 2395-602X|VOLUME 3 | ISSUE 8| 2017 IJSRST

 

[3] https://www.themyerslg.com/contract-benefits/

Learn more about Real Estate Laws with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

 

Categories
Blog

Rise of Financial Institutional Arbitration

By: Yamini Daga

INTRODUCTION

Ever since now litigation has been the most used kind of system for the resolution of the disputes. Though nowadays quite many ways are available through which we can seek the resolution of the disputes like Arbitration, Mediation, Litigation, etc. Then also it is difficult for people to decide that which kind of method they want to opt in. Through time all these methods are emerging in their own fields and ways though litigation are believed to be the oldest form and most opted way. As through litigation people go to the court to seek justice and follow the same age old process.

The Arbitration is also one of a kind of dispute resolution process where the parties privately resolve their dispute as when the party faces a dispute in their agreement they seek the help of the arbitrator. Arbitrator is considered as a third party who listen to both the sides of the party and in return try to resolve their dispute by giving their decision in the form of arbitral award. This is the method where party try to resolve their disputes outside of the courtroom which seems less complex then the proper litigation process as less paperwork is required and experienced person are appointed as an Arbitrator.

Mediation is also a part of the dispute resolution process though in India there are no particular laws related to the mediation at present, but it is still opted by many parties though the decision given by a mediator is not binding in nature unlike the arbitral award which has the same binding authority like the decree passed in the court. In the process of mediation, there is a third party who helps in resolving the dispute by guiding them into the right direction through an informal meeting among the parties to the agreement.

And among all of the above mentioned few methods, arbitration has gained more preference over the age old court systems and the informal meetings with the mediator among the financial sector because of the globalization. As of nowadays people don’t have enough time to go to the court to seek remedy or justice they seek a process which is less complex and which is less time consuming. Thus the emergence of Arbitration is rising in the financial sector too.

ADVANTAGES THAT LED TO WIDENING OF ARBITRATION IN FINANCIAL SECTOR:

Firstly, the procedure of arbitration nowadays require the element of confidentiality. Like whatever is being going on the meetings are not supposed to be seen into the limelight unlike happening in the courtrooms. As there are many mergers & acquisitions cases are coming forward because of the globalization. It is a delicate situation as the sensitive information of the companies can be leaked and be used the competitors to gain an upper hand in the market and use that against the parties of arbitration. Therefore arbitration is a process where the third person who is the decision maker or the arbitrator are bound to maintain the secrecy about the case as they are part of contract to maintain the confidentiality about the parties or about the case.

Secondly, the kind of expertise which is being needed by the arbitrator generally is being lacked by the courts. The Institutional Arbitration have a well-qualified arbitrators with the specific knowledge regarding the subject matter, which in return makes it easier for the parties to seek the justice or solution to their argument.

Additionally, the proceedings of arbitration are generally custom made which provides the level of convenience to the parties by suiting the requirements laid down by the parties and applicability of the arbitral award is easier as compared to the decree or judgment of any court.

 

CUSTOM MADE SOLUTIONS[1]:

As we know, Arbitration is a process which is custom made as in the way it gives option to the parties to decide that how, when, where and in which manner they want to proceed further in the process of arbitration. It provides freedom to parties to decide their method unlike the age old court systems.

  • Parties are free to decide the seat of arbitration, like parties can decide that at which place they would like to hold the meetings and where the whole procedure should take place can be completely decided by the parties. Basically the place of arbitration is decided at the convenience of the parties.
  • Parties are free to determine the way of procedure or procedural rules, the procedural rules are to be decided by the parties in the agreement and if they fails to conclude at a mutual decision than the procedure is being set by the arbitrator themselves.
  • Parties are free to determine the language for arbitration, the language in which they want to hold their proceedings during the process of arbitration.
  • Parties are free to select their arbitrators, parties are free to choose an arbitral institution of their choice like by whom they want their case to be taken care of and the qualifications required by the arbitrator chosen by the parties can also be specified by the party.

 

 GUIDELINES THAT LED TO THE GROWTH OF ARBITRATION IN THE FINANCIAL SECTOR[2]

  1. THE ISDA ARBITRATION GUIDE

The International Swaps & Derivatives Association (ISDA) in the year of 2013 September issued a guide relating to how one can use arbitration in ISDA Master Agreement. Earlier it included sample clause in the agreement, later on an expanded range of model clauses were introduced around the year 2018 for huge number of usage of institutional arbitration all over the world.

  1. P.R.I.M.E. FINANCE RULES

When courts were not able to deal with the nexus disputes arose from the financial sector thus this resulted in the creation of international finance center which is known as P.R.I.M.E. Finance. This deals with the cases related to ADR and in return provides resolution by medium if mediation, arbitration and other disputes resolving services. They have their own rules and clauses which was released with this center on 16th January 2012, situated at Hague. The reason behind opening this center was to fulfill the need of arbitration process required in the financial sectors. All the provisions made under this has only one aim that was to encourage the use of arbitration or law in the financial markets also and to provide justice to people who suffered or went through the wrongdoing or scam of others in this area.

  • THE ICC COMMISSION REPORT

This report was prepared after conversing with at least more than or about 50 financial institutions around the globe and banking counsels or sectors with various policies, awards from minimum about 13 arbitral institutions were also being examined while preparing this particular report.

This report speaks about arbitration that is being performed in the regulatory method, in international finances matters, the disputes between the banking sectors, disputes relating to trade finances, etc. and quite huge growth sectors of arbitration were also recognized in this report.

This report turns out to be were helpful in determining the rise of financial institutional arbitrations among the world by classifying the types of disputes and by recognizing the strength of arbitration process too.

  1. RECENT PROCEDURES

Previously the main purpose behind referring to the national courts over the process of arbitration was to assure speedy resolution of disputes via the judgment given in the format of summary elsewhere, in the process of arbitration the arbitrators are bound by their duty that they have to provide equal, fair and full opportunities to the respective parties of the agreement to set out their cases.

Nonetheless this thought process has been changed now, the institutional arbitration centers around the globe like the Singapore International Arbitration Center (SIAC), the Hong Kong International Arbitration Center (HKIAC), the International Chamber of Commerce (ICC) and many other institutions now provide the summary disposal of the disputes just like old court system which makes the process of arbitration more applicable option.

RECOGNIZED LIMITATIONS OF ARBITRATION

Though the process of arbitration is gaining its pace and being more frequently used method for resolving dispute in the financial market or sector, there are still some justifications that why sometimes this method of arbitration can be avoided. Like in few cases like the criminal cases arbitration is not possible as because these issues are not arbitrable in nature, as the third person can resolve the dispute where the parties to the agreement enter into an argument not where a person committed a crime and being guilty of murder or anything as those cases needed proper justice with the relevant punishments prescribed under the law.

The reason why people opt arbitration may be because of the myth that arbitration process are cost effective process. The Ad-hoc method of arbitration is precisely cheaper and affordable but it lacks experience and some required qualifications too that are being needed by the parties but the institutional arbitration is an expensive method.  As in the financial matters the parties sometimes doesn’t belong to same country which means a matter of cross border agreements are usually being held by the institutional arbitration centers, and it does cost a huge amount of money as the expenditure of procedure and transportation is expensive in nature. The arbitrator might also belong to a different country than any of the party to the agreement which make way for delay in the coordination between the parties to the agreement and the appointed arbitrator which ends up resulting in slow remedies.

CONCLUSION

As the P.R.I.M.E. Finance Rules, the ICC report and other initiatives are being encouraged and set as a means for resolution of disputes by the process of arbitration is being more frequently being recognized by the financial institutions or sectors.

The process of arbitration is most favorable as compared to the other methods of ADR and the age old system of litigation. Though there are many advantages and disadvantages of the process of arbitration but it will still be the most favorable option to be considered for resolving the disputes in the financial sector and the demand for arbitration will grow higher only in the near future too.

 

 

 

[1] Allen & Overy, The rise and rise of Arbitration in Banking and Finance Disputes, (2018, 9th February), http://www.allenovery.com/en-gb/global/news-and-insights/publications/the-rise-and-rise-of-arbitration-in-banking-and-finance-disputes

 

[2] Shreya Shrivastava and Sachin Bhatnagar, The Rise of Arbitration in the Financial Sector, (April 11,2020), https://lawcorner.in/the-rise-of-arbitration-in-the-financial-sector/

 

Categories
Blog

Role of Intellectual Property in Mergers and Acquisition

By: Nidhi Poddar

Introduction 

Intellectual Property has not always horse around Merger and Acquisition deals. Intellectual Property plays a disguised role in 2 major aspects:

  1. By making certain Intellectual Property intensive industries, for example, life sciences, where the value of pharmaceuticals can often be viewed with the scope of patent protection.
  2. By making certain deal structures, for example, spin-outs and joint ventures where the rational allocation of Intellectual Property Rights is an unavoidable necessity.

Whether directly or indirectly, consciously or unconsciously, Intellectual Property plays a significant role in any Merger and Acquisition activity. However, it was not unusual that the acquirer decides and proceeds with the typical Acquisition, without involving Intellectual Property experts. In most Merger and Acquisition deals, the acquirer determines the valuation, negotiates principal deal terms, and even finalized the structure of transactions whether internal or external. In certain aspects, Intellectual Property is a rattler to the Merger and Acquisition train i.e. delighted to affix along but not driving with equal importance. This is evidently accurate for valuation in Merger and Acquisition deals. While valuing a business, the bankers or any other person involved will not endeavor to value Intellectual Property separately. As the valuation of Intellectual Property separately is a burdensome task. If in any case, the acquirer measures the value of Intellectual Property separately from the business, then it would not be in the acquirer’s interest as the acquirer has to pay the higher value of the business.[1]

Merger & Acquisition

Waves of Merger and Acquisition is a key feature of corporate history and has evolved significantly in India in past decades. Merger and Acquisition has become the most important aspect of growth strategy in the corporate industry. Merger and Acquisition has shown an effective result in businesses like information technology, telecommunication, business process outsourcing and pharmaceuticals. The strategy of Merger and Acquisition has proven to be a surest way to acquire competencies and funds, opening new market avenues, expanding customer base, snuffing out competition. The strategy helped the corporate industry in maintaining and improving profitability.[2] Merger and Acquisition is a tool for reconstruction of the company in order to maximize the wealth of the company and create goodwill in the global market. Merger refers to consolidation of two companies into one company. This Merger of two companies will help in maximizing profit and enhance the work and ensure that the company achieves the desired goals. Whereas Acquisition refers to a takeover of one company by another company by purchasing its ownership stake. Generally, such a stake is above 50%, which provides the acquiring company the control of management.[3]

Intellectual Property

Intellectual Property is an incorporeal Property which is invented or created by human intellect. Intellectual Properties are intangible in nature and possess a right i.e. ” Right in Rem” which means that the inventor has the right towards the property wholly. The different forms of Intellectual Property are- Copyright, Trademark, Patent, Design etc. Intellectual Property Rights refers to the legal rights possessed by the inventor or creator in order to protect the invention or the creation for a certain period of time. Intellectual Property Rights is an exclusive right to the inventor or the creator or assignee, to use, sell or dispose the invention. Intellectual Property Rights promote the economic development of the country by creating healthy competition and encouraging industrial development and economic growth within the country.[4]

Learn more about Mergers and Acquisitions with Enhelion’s Online Law course certified by Corp Comm Legal!

Intellectual Property is referred to as a corporation’s biggest asset. In the New Economy- Brand names i.e. (Trademarks, Service marks and Trade names), Product value, Brand value, Innovation portfolio of the company plays a pivotal role in the management of assets of the company and are equally important as the goods and services. Sounds, smells, colour and product shape comes under the trademark protection. There should be no surprise that Intellectual Property plays a crucial role in the sale or purchase of a business.[5] Intellectual Property plays a vital role in the strategic development of the corporation. Intellectual Property is one of the various reasons for which different corporations merge or acquire any company, because such Merger and Acquisition strengthens their market share and improves and makes their management system efficient.[6] With the technology advancement, the importance and the value of intellectual property of a company has enhanced. The intellectual property possessed by a company is a cornerstone, thus has increased focus on intellectual property while any commercial transaction. In the present era, it has become the most task to identify and adequately analyze the value of intellectual property of the company as it will directly impact the value of the transaction.[7]

IP due diligence

This article intends to highlight and provide a quick overview on how Intellectual Property due diligence is important in Merger and Acquisition transactions. There is great  significance of Intellectual Property due diligence in Merger and Acquisition transactions in relation to the acquisition or investment in technology and biotech companies because the main purpose of acquiring such company is to target the Intellectual Property Assets (IPA) of the company. Intellectual Property Assets mainly refers to Patents, Trademarks, Copyright. Intellectual Property due diligence refers to a deep investigation which is conducted to understand the value of the Intellectual Property of the target company before any Merger or Acquisition.[8]

Role of Intellectual Property in Merger and Acquisition:-

  1. Value addition to the company portfolio:–

Merger and Acquisition of a company helps in adding value to the portfolio of a company. It is very necessary that companies evaluate the portfolio of the company and check whether the current portfolio meets the requirement of the company objective. In the present dynamic and inconstant market environment, it is not possible to invent something new, thus the companies must search for new opportunities and the ways of acquiring existing innovations of the other companies.

  1. Acquiring unique capabilities:-

Every company wishes to have a stronghold and be in a dominating position against their competitors. One of the major tools to achieve this is Merger and Acquisition. By Merger and Acquisition, a company may acquire the unique innovation or capabilities of their competitors. This will help the companies to have an edge over others. This result in changing the whole outlook of the company and creating a unique and efficient business model. 

  1. Transfer of Technology: –

A fruitful benefit of acquiring an Intellectual Property is that it allows the transfer of technology from one company to another. This helps in proper exploitation and utilization of the Intellectual Property to its full extent.

  1. Diversification: –

The Acquisition or Merger of a company helps in exploring and enhancing different sectors of a business. Merger and Acquisition open new doors of deals and growth within the market. It is very convenient to start a business through pre-existing or pre-established resources, and even this reduces the cost of operation and helps in creating a diversified asset portfolio for the company.

  1. Growth: –

The main objective to implement the corporate strategy is to promote growth and development and to maximize the profit, resulting in achieving the desired goals. The company must ensure that the product portfolio of the company is updated and is efficient to meet the current demand in the market.[9]

Learn more about Mergers and Acquisitions with Enhelion’s Online Law course certified by Corp Comm Legal!

Some classic example of Merger and Acquisition

  1. In 1988, Nestle acquired Rowntree business. It was the largest foreign takeover of a United Kingdom Company. In this deal, Nestle agreed to pay around US $ 4.5 Billion for Rowntree PLC. The main objective of this deal was to acquire famous brands i.e. Kit Kat, Yorkie, and Rolo.
  2. Another Classic example is Acquisition of Luxury Italian fashion house Versace by Michael Kors. The main objective of this deal is to access new product lines and markets through an established brand and IP portfolio.[10]
  3. Motorola Mobility was acquired by Google Inc. which gave the acquirer complete control of Motorola’s patents. Later Google Inc. sold Motorola Mobility to Lenovo, but retained ownership of Motorola Mobility’s Patent Portfolio. The main objective of Google Inc. was to purchase the patents of Motorola mobility.[11]
  4. Another interesting case study is the Acquisition of Rolls Royce by Volkswagen. Volkswagen has acquired all the assets required for the production of cars but was restricted to use the Logo of Rolls Royce. Volkswagen overlooked the fact that prior to the Acquisition, BMW has already acquired the access to use Rolls Royce Logo for its car.[12] BMW was a direct competitor to Volkswagen. Volkswagen purchased all rights to manufacture Rolls Royce cars but did not have engines for their car as BMW was producing engines for Rolls Royce. Rolls Royce factory was manufacturing both Rolls Royce and Bentley cars. After a lot of twists and turns, in 2003 BMW became the owner of Rolls Royce and Volkswagen is sole manufacturer of Bentley cars. This case study reiterates the importance of intellectual property due diligence before any Merger and Acquisition.

By the above stated classic examples what we get to learn from it.

In any Merger and Acquisition proper due diligence of Intellectual Property asset is a must. The nature of Merger and Acquisition is stated as risky and with the technology advancement in the present era has become riskier. Due diligence of Intellectual Property Assets must be the pertinent question before initiating a formal contact with the target company. Before contacting, the company must do some homework and must collect certain information regarding patents, trademark, copyright, goodwill etc. Needless the same amount of importance must be given to the tangible and intangible assets to get a fair valuation.[13]

Conclusion

Intellectual Property are the intangible assets of the company and plays a vital role in the expansion of the company and even add a great value to the portfolio of the company. Merger and Acquisition help in creating asset portfolio, acquire new capabilities, enhance the growth rate which ultimately help the company achieve their goals. To avoid any uncertainties or defects, a company should ensure a proper due diligence and valuation of Intellectual Property asset before acquisition of the Intellectual Property asset.

A company survival, goodwill and the profit depend on the possession of IP assets. It must be ensured that the deal benefits both the parties. Government is bringing out various policies to encourage Merger & Acquisition in India. The Land Acquisition bill, Labor Law and Good & Sale Tax (GST) will have a great impact on the corporate field.

Any company at any level or a startup company must emphasize on the importance of protecting their Intellectual Property rights. The acquiring company must conduct due diligence to improve their marketability and be able to identify weaknesses.

Due diligence is an integral part of any Merger and Acquisition transaction. Any act of negligence while performing due diligence can lead to over valuation of the company and even lead to an exposure to a unknown risk and liabilities.

[1] https://www.sullcrom.com/siteFiles/Publications/Mousavi-IAM-July-Aug-2011.pdf

 

[2] https://pdfslide.net/documents/Intellectual-Property-the-dominant-force.html

 

[3] http://www.legalserviceindia.com/legal/article-2693-role-of-Intellectual-Property-in-an-acquisition-or-Merger.html#:~:text=Intellectual%20Property%20assets%20are%20the,such%20as%20Merger%20and%20acquisition.

 

[4]  https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3217699/

 

[5] https://norrismclaughlin.com/articles/Intellectual-Property-aspects-of-Mergers-a-Acquisitions-part-i-of-ii-conducting-due-diligence/

 

[6]  https://www.udl.co.uk/insights/the-importance-of-ip-in-Mergers-and-Acquisitions

 

[7] http://www.buildingipvalue.com/05_NA/124_127.htm

 

[8] https://www.corporatelivewire.com/top-story.html?id=ip-due-diligence-in-ma-transactions

 

[9] Supra note (3)

[10]  https://www.udl.co.uk/insights/the-importance-of-ip-in-mergers-and-acquisitions

[11] https://www.businesswire.com/news/home/20150407005604/en/Research-Markets-Strategic-Importance-Intellectual-Property-IP

[12] https://medium.com/@ramkumar1984.rajachidambaram/how-ip-acquisition-unlocks-huge-value-in-technology-m-a-23e2739cf091

 

[13] https://www.origiin.com/2019/01/10/mergers-and-acquisitions-intellectual-property-due-diligence/

Learn more about Mergers and Acquisitions with Enhelion’s Online Law course certified by Corp Comm Legal!

Categories
Blog

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].

Learn more about Intellectual Property Contracts with Enhelion’s Online Law course certified by  Scriboard Advocates and Legal Consultants! 

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.

Learn more about Intellectual Property Contracts with Enhelion’s Online Law course certified by  Scriboard Advocates and Legal Consultants! 

  • 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.

Learn more about Intellectual Property Contracts with Enhelion’s Online Law course certified by  Scriboard Advocates and Legal Consultants! 

  • 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).

Learn more about Intellectual Property Contracts with Enhelion’s Online Law course certified by  Scriboard Advocates and Legal Consultants! 

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.