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Analysis of Corporate Laws in USA, UK and UAE

By: Tanvi Rai

Introduction

“A modern economy is marked by the feasibility of endogenous change: Modernization brings myriad arrangements from expanded property rights to company law and financial institutions.”

– Edmund Phelps

Corporate law, which is also commonly known as enterprise, business, commercial or company law is a sphere of law which deals with managing and governing rights, duties, relationships and conduct of various companies, organisations, businesses and even persons. It is directly related to the life cycle of a company/corporation/business hence it involves the company’s formation, funding, governance, death and many more related aspects.

An additional aspect of Corporate Governance is represented by capital markets, culture of the business, share ownership, and many more aspects, legal rules, characteristics, problems differ from one jurisdiction to another, yet are present in across the world. Corporate law essentially regulates and controls relations amongst companies, its investors, shareholders, board of directors, employees, creditors, other stakeholders like the government, consumers, the society at large and environment along with their interaction with one another. Commercial law is umbrella term which includes company and business laws and all activities related to them. This also includes financial and corporate governance laws.

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Brief Historical Background of Company Law

The modern company law began in the year 1844 in England, United Kingdoms, with passing of the Joint Stock Companies Act. For the very first time a corporation/company could have been incorporated by registration. Before this act, a company could only be incorporated by obtaining either by sanction of a special Act of the Parliament of England or by obtaining a Royal Charter. There was also an important creation made in the process, which was re creation of office of the Registrar of the Joint Stock Companies. In the year 1855, the English Parliament passed another act namely the limited Liability Act which provided for the limited liability to the members of a registered company. Further, in 1856, a new and comprehensive act came into force which superseded the 1854 act and marked the starting of new company law in England creating articles and memorandum of association.

In North America, this charter and new law had two purposes, one was the colonizing rub-off, and another was a trading purpose. The Hudson’s Bay company was almost completely dedicated to only trading activities but most companies like Plymouth, London Company, Massachusetts Bay Company were wholly engaged in settlement of colonists. In other parts, the chartered English Companies continued to be formed for the expansion of new trade.

Analysis of Corporate Laws in USA, UK and UAE

Corporate Law in United States of America

The United States of America is the world’s largest economy having corporate laws at federal, state and local levels and has been flooded with business prospects. This corporate law at the federal level creates minimum requirements for business in company shares and governance rights. Being capitalistic democracy, the country and its corporate laws allow the companies to get incorporated in the state of their choice and convenience, regardless of the place of their headquarters. This and other standards have been enlisted in the Securities Act of 1933 and the Securities and exchange Act of 1934. Over the last century, Delaware General Corporation Law is the most preferred State Law for incorporation of major Corporations and companies. This is specifically for the of lower corporate taxes, lesser shareholder rights against the board of directors of the company and that Delaware has a specialised court and legal profession. Nevada has replication the same. Out of the fifty states, twenty-four of them abide by the Model Business Corporation Act, whereas the states of New York and California are essential due to their massive size.

Incorporation, Charter Competition and Corporate Personality

The articles of incorporation are the foundation of the Company, they not just laid about the basics but also determine the state of incorporation of the company and accordingly levels of corporate taxes, various qualities of shareholder and stakeholder rights, the duties of directors and other things are determined. A business which has been rightly and legally incorporated acquires the status of a separate legal entity which is different from that of its investors. The company can both sue and be sued in its own name.

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Corporate Governance

In principle, a corporation’s constitution can be designed in any way so long as it complies with the compulsory rules set down by the state or federal legislature. Most state laws, and the federal government, give a broad freedom to corporations to design the relative rights of directors, shareholders, employees and other stakeholders in the articles of incorporation and the by-laws.

Duties of the Director

Decisions of a company are majorly entrusted on the directors; these can retrain as well as empower the directors in whose favour they exercise their discretion. The directors should promote shareholder value, which exercising their own business judgement to balance all the claims against various stakeholders, employees, and shareholders. Another duty of the directors are their fiduciary duties which expects them to avoid any conflict of interest between their own pursuit of profit and the interests of the corporation. Another requirement in most of the states is a basic duty of care in performance, this standard is determined from the fact that any prudent man could follow in any contract of services. But the state of Delaware has discarded these duties and allows liability waivers. Duty of care, which is primarily rested upon the shoulders of the board of directors includes standard of diligence and to act with reason and care.

Derivative Suits

The Board of Director owe their duties and responsibilities to the company as whole and not to each and every shareholder and stakeholders individually therefore the right to sue for breach of duty by the Board of directors as a whole or a single director rests by default with the company itself. Hence, this creates a problem where action is brought against a single director when the company has been taken over and the board is non- friendly or has been replaced after the company suffering bankruptcy. There are a few solutions to the aforementioned problem, first being that jurisdictions outside of US allow specific share to shareholders to claim is right. Second is by giving standing to sue to non-shareholder groups and last and the main alternative is with an independent shareholder to derive a claim on company’s behalf to sue for breach of duty. This is decided by the courts on the merits of the case.

Corporate Law in United Kingdom

The Department of Business, Enterprise and Regulatory Reform which is BERR and was formerly the Department of Trade and Industry the DTI is responsible for corporate law and Governance Directorate. UK’s interest in the development of EU company law is represented by this directorate. Matters relating to various aspects of corporate governance are dealt with in codes of best practice.

Formation of the Company

An assortment of organizations might be consolidated under the Companies Act 2006. Individuals keen on beginning the undertaking – the forthcoming chiefs, representatives and investors – may pick, initially, a limitless or a restricted organization. “Limitless” will mean the incorporators will be obligated for all misfortunes and obligations under the overall standards of private law. The choice of a restricted organization prompts a subsequent option.

Rules of Attribution

While a limited organization is considered to be a legitimate individual separate from its investors and representatives, truly, an organization can just act through its workers, from the directorate down. So there should be standards to credit rights and obligations to an organization from its actors. This typically matters in light of the fact that an oppressed outsider will need to sue whoever has cash to pay for penetrate of a commitment, and organizations as opposed to their representatives frequently have more cash.

Directors’ Duties

Directors designated to the board structure the focal expert in UK organizations. In doing their capacities, directors (regardless of whether officially designated, accepted, or “shadow directors”) owe a progression of obligations to the company. There are by and by seven key obligations systematized under the Companies Act 2006 segments 171 to 177, which mirror the precedent-based law and fair standards. These may not be restricted, deferred or contracted out of, however organizations may purchase protection to take care of directors for costs in case of breach. The solutions for penetrates of obligation were not arranged, yet keep precedent-based law and value, and incorporate remuneration for misfortunes, compensation of ill-conceived gains and explicit execution or directives.

Corporate Governance

It communicated that different rules, recommendations and rules structure the rule of corporate organization inside the UK, for instance, exclusively based law rules, for instance, trustee commitments of bosses, secured reports of an association including notice and articles of alliance, form expressly Organizations Act 1985, the presenting rules applying on all associations recorded on the Point Rules or Authority Rundown, the Consolidated Code on

Corporate Administration; be that as it may, the Code’s courses of action are not central, yet it is compulsory for the recorded associations to give their yearly report a declaration showing consistence with the Code and give reasons if not concurring. Keasey, Thompson and Wright (2005) found that the Code is joined by the Smith Direction insinuating audit sheets and evaluators; the Turnbull Direction related to

Code’s internal control need and the Higgs Audit and proposed proposition of good practices. Moreover, non-authentic standards appropriated by bodies addressing institutional monetary trained professionals, for instance, ABI PIRC (the Benefits and Venture Exploration Experts and NAPF are fundamental. All the recorded associations will without a doubt adhere to these standards. Moreover, in case of public associations’ takeovers, Mergers and the rules of the Takeover close by the City Code on Takeovers are important. Additionally, Code of Market Direct of Budgetary Administrations Authority is huge as it relates to the information introduction, which is significantly sensitive and mystery and if it isn’t followed, it might incite make a sham market.

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Corporate Law in United Arab Emirates (UAE)

The corporate law of UAE regulates all the aspects of a company and its management right from governance to finance of the company. Each emirate has its own corporate code.

Types of Business License

There are primarily four types of business licenses provided in UAE, which are professional, commercial, industrial and tourism. Services offered by the various professionals like doctors and others, artisans and craftsmen get a professional license. Trading and commercial activities come under the ambit of commercial licenses, given that these activities are undertaking with the intensions of making profits. Industrial and manufacturing activities are carried out under the industrial license. Lastly, all activities related to tourism like hospitality and travel are covered under tourism license.

Jurisdiction of the company

There are only three jurisdictions that are followed in UAE for formation of a company, there are Mainland, Free Zone and Offshore and all company are divided into these three jurisdictions. These jurisdictions are separate licensing authorities, the mainland is licensed by Department of Economic Development of the respective emirates, which the Free Zone will be licensed by the relevant free zone authority and so will the offshore authority. In the cases of commercial as well as industrial licenses, UAE National holds/owns 51% shares and 49% is held by the expat partner. While in professional license, 100% shares are owned by expat partner but UAE national is appointed as a Local Service Agent.

Limited Liability Company (LLC)

It is the most common form of registered organisation and is recommended where the purpose of the entity is to make sales within the region. An entity with a 100% foreign ownership is not allowed in UAE.  Under the Commercial Companies Law (CCL) of the UAE the foreign investors are allowed to own 49% of equity shares in national companies and 51% at all times by one or more UAE nationals.

LLC under article 218 of CCL can be formed by minimum of 1 and maximum of 50 shareholders who are limited to the liability of their share capital in the company. In the latest amendments to article 217 of CCL minimum share capital requirement is removed allowing founders of a limited liability company the freedom to determine the company’s share capital. MoA or management contract appoints managers and a LLC must appoint one manager and maximum of five managers for business for a fixed or unlimited term. They have fill managerial and administration power, but the LLC is not allowed to practice its activities without Trade License and Commercial Registration Certificate.

Branch/Representative Office

A branch or representative office has the identical legal personality as its parent company as well as operates business under the name of its parent company. The branch or representative office carries out similar activities to that of the parent company. However they are not permitted to carry on business of importing products of the parent company, as this function can only be carried on by local trade agents. In a few instances the representative office of a foreign company are required to obtain an additional license from UAE ministry of Economy. A UAE national must be appointed as a ‘service agent’ for the branch or representative office.

Civil Company

This is a company for the professional like doctors, lawyers, engineers and accountants in UAE. Except the engineering civil company all others are a 100% owned by professional partners. However, a UAE National Local Services Agent is a mandatory. A foreign company can be a partner in a civil company, as long as the foreign company is in the same field as the civil company.

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Comparative Analysis and Conclusion

There is a vast and major difference among laws in US, UK and UAE. The first and the foremost difference is that of Language. While in USA and UK the entire corporate law is in English (which may differ from each other, American English in the states and British English in UK), the law and agreements are primarily in Arabic, and if written in English, have to be deciphered in Arabic. Arabic is preferred over English in UAE.

In the USA, undertakings are at various levels, i.e., government law, state law, and the close by law/local laws. Of course, in the UAE, an individual body picks the rules, and all the organizations require to expect quick to remember. In the USA, cover rules are given to be clung to and further the state applies the relatable standards close by the associations which breaker rules into their by-laws. With the ultimate objective of expense assortment, each level powers its own evaluation which the organization needs to pay. State laws are particular in every one of the 50 states. This grows the multifaceted idea of the pattern of business. The association is restricted by first the public authority rules, by then the state rules, ultimately the local standards. UAE has a uniform system. The organization close by explicit associations picks the rules for all the associations and there is no centre level. Both for the territory associations the ones in smoothed out business zones, there is only one level at which the rules are set down similarly as the obligation procedure is taken.

In UAE, the business and the piece of the business are treated as free substances and the pay made from the branch is considered as the pay of the branch itself, however, in the USA, the branch is treated as a bit of the business and not a unit of the business. Hereafter, the evaluation to be charged on that particular branch is charged on that of the whole business.

The fundamental principles of the UAE give confined commitment to the financial specialists of the association as the business and the speculators are seen as free substances. USA gives a decision to the owners of the association to either get troubled freely on the business and the speculator’s compensation comparably as UAE or the other option is get the business pay in like manner troubled as the owner’s own personal compensation. Regardless, for the resulting decision, certain conditions are to meet.

Definitively, the relationship of corporate organization practices and laws of the UK and the U.S. are similar or there is an indistinguishable standard. Regardless, for associations and their in-house managing, the changing embodiment of the definitive scene of the two countries propels various troubles. Believe it or not, after the deplorable budgetary crisis of 2008 and 2009, the laws demand totally recorded associations to hold quick to code of ethics and related laws and rules. Considering, it has been dependable with the Sarbanes-Oxley Act and 2004 Act; nevertheless, for non-U.S. firms, SEC has been extraordinarily obliging giving them an open entryway through avoidances to develop their associations as they may go up against conflicting challenges considering neighbourhood laws. In the U.S., SOX expect a critical part for effective corporate organization while in the UK, Demonstration 2004, Smith Direction and various laws coordinate to clear money related itemizing.

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Star India Private Limited v. Leo Burnett

– By Apoorva Mishra

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

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

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

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

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

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

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

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

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

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

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Compulsory Licensing of Patents

– By Apoorva Mishra

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

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

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

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

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

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

There are few reasons behind this:

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

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

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

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

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

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

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Case study on Bayer Corporation v. Union Of India

– By Apoorva Mishra

FACTS

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

ARGUMENTS BY BAYER

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

 

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

ARGUMENTS BY CIPLA

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

 

ISSUES RAISED

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

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

APPLICATION AND ANALYSIS

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

What is Patent Linkage?

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

Difference between the objectives of the Statutes

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

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

Authority of the DCGI

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

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

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

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

Patent Linkage in Grant of Market Authorisation

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

 

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

CONCLUSION

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

 

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

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

 

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

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

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

 

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Case study on Star India Private Limited V. Leo Burnett

– By Apoorva Mishra

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

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

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

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

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

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

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

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

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

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

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Compulsory Licensing of Patents

– By Apoorva Mishra

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

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

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

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

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

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

There are few reasons behind this:

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

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

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

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

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

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

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Censorship and Media

– By Apoorva Mishra

Censorship the control of the information and ideas circulated within a society — has been a hallmark of dictatorships throughout history. In the 20th Century, censorship was achieved through the examination of books, plays, films, television and radio programs, news reports, and other forms of communication for the purpose of altering or suppressing ideas found to be objectionable or offensive. The rationales for censorship have varied, with some censors targeting material deemed to be indecent or obscene; heretical or blasphemous; or seditious or treasonous. Thus, ideas have been suppressed under the guise of protecting three basic social institutions: the family, the church, and the state.

Censorship is a global phenomenon. Time and again, there have emerged news of something getting banned somewhere in the world for reasons that seem unreasonable to many while a necessity to the rest. In India, specially, censorship exists in mass abundance. While each country and each culture censors the media in one way or the other, the amount of censorship or the cut-off level which defines what to show and what not, differs.

There are also different types of censorship. One of the most common criteria behind censorship is the age limits for viewing different media. Sometimes the censorship can be a blanket ban on a certain taboo topics and the definition of a taboo topic would be defined according to the governing authority in the country. So, while the levels of media censorship exist, people are still calling for absolute removal of all types of censorship. Then again, there are proponents who think that its use creates a balance in what ought to be said and written, which again, the opponents criticize on the basis of the threat it poses to the right of speech.

Advantages and Disadvantage of censorship

It is true that media is responsible for spreading information about current events all around the world, the need of the hour is balance of information given. Certain times violent speeches and derogatory comments given by people towards a particular race and religion. While the act in itself can be condemned, there is no need of repeated air-time given to the incident. This can only incite the masses against the said person or the organization he/she is associated with. Such media tactics are often used by political parties for selfish means while ignoring the greater good of the society. This can only bring unrest among the masses and disrupt the peace in the society. Some people may try to spread nonsensical propaganda through unsuspecting media. Censorship will prevent the public display of disrespect to any particular individual or community and promote political correctness.

However, Censoring of information may lead to a wrong image perceived by the public. It gives rise to and hides abuse of human rights. If the news coming from a war zone does not show the true nature of the damage inflicted, how can a person be aware of the real situation of the war? If to say that the real death toll and associated imagery should be censored, it will be equivalent to denying even the presence of war. Death is real and people affected in a war zone pay for it with their lives and we owe it to them to know their real stories. Don’t censor the media; rather tackle the issues leading to a situation that might need to be censored. Hiding the complete picture doesn’t erase its presence, merely gives a false perception.

Conclusion

Although the right to freedom of expression does not require an absolute ban on prior censorship, this should be a highly exceptional measure, taken only when a publication threatens grave harm, such as loss of life or serious harm to health, safety or the environment. An article deemed defamatory, blasphemous, obscene or overly critical of the government would rarely if ever meet this threshold. Moreover, a system whereby media content must be officially cleared before it can be released would be unacceptable; its harm to freedom of expression would plainly far outweigh the benefit to its goals. An absence of censorship might not be a perfect notion, as it can cause chaos. But it also doesn’t mean that the government uses it for its own personal gain by suppressing dissent. Ours is a democratic nation, yet has more censorship than most nations.

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Media Content Regulation

– By Apoorva Mishra

In India, media as a whole is regulated through a gamut of statutes and codes. Being one of the largest industries, its regulation is regarded significant in the interest of public and nation as a whole. The real value of such a regulation is to handle the relationship between any segment of media and the public. In case of Television media, the regulation sets the expectations of that relationship and allows the television media to be the “service provider” to be called to account if those standards are not met. On a face value, it works very well if nothing hinders the legal standard and the most importantly the moral standard of the society. It is expected that the Regulatory bodies can mediate relatively informally, away from the court rooms and hopefully effectively to resolve the complaints and improve their performance.

It is known that whenever regulation is introduced in any field where influence on public is huge, there will be a mix of economic, political and cultural concerns and approaches. One could see the impact of visual media to be far more than the print media and hence regulation over it has always been more than its other counter parts. Earlier, broadcasters needed limited access to airwaves, so the state could license away to any private player. This gave an opportunity to increase revenue as well as to regulate the content to be displayed. Technologically, airwaves have also been found to be relatively easier to regulate so the state had full advantage to impose more demanding regulation. Whether there is harm on the right to free trade or free expression, is a later concern, the state was fully aware of its potentially powerful influence over large swathes of audience, hence, former right is allowed to be overridden.[1]

Everything seemed fine till the age of New Economic Policy was introduced in the 1990s which opened the gateway for the private players to serve the public with negligible regulation. This was followed by several consequences both at macro and micro level. Though few hurdles were apprehended but at the same time it pose a problem to protect the much coveted fundamental right of freedom of speech and expression which is guaranteed under Article 19 of the Constitution. Indian society is now going through a process of transition and media is also responding to the various needs to it. However, the subtle balance between Article 19 freedom and public morality and decency is also a surmountable task to attain. To decide such controversial issues, it is of paramount importance that a genuine and neutral body is judging the process.

Media regulation in India is currently a maze, with multiple agencies involved in formulating and implementing policy, drafting and enforcing legislation. To make matters worse, they often appear to be unaware of each other’s interventions and seem to work at cross purposes. Among the official organisations currently involved in media regulation are the following:

  • Union Ministry of Information & Broadcasting: It functions as policy-maker and content
  • Telecom Regulatory Authority of India: At one point it was given the responsibility for regulation of the broadcast sector (in addition to the telecommunications sector) but it backed out and currently it is involved primarily with issues of technology, such as carriage regulation and pricing.
  • Inter-Ministerial Committee: It was constituted by the Ministry of Information & Broadcasting to look into complaints regarding violations of the programme and advertisement codes connected to the Cable Television Act and Rules.

These are the few bodies which are often encountered when issues regarding regulation of television content surfaces. It is true that the idea of an independent regulatory body to regulate the media content is revolutionizing the entire nation. Moreover, one must also accept and adhere to the fundamental right of freedom of expression granted by our Constitution. However this right be regarded as a license to impede our morality and ethics.

[1] Ammu Joseph, Broadcast regulation in the public interest: A Backgrounder, InfoChange Media, available at

http://infochangeindia.org/Media/Broadcast-Laws-and-Regulations/Broadcast-regulation-in-the-public-interest-A-backgrounder.html

 

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An Article on Freedom of Information

– By Apoorva Mishra

Everyone has a right to seek, impart and receive information under the right of freedom of expression. This right to Freedom of Information is the key to achieving many other rights, securing democracy and enabling development. It is also intended to promote a culture of openness among public authorities and to give people the right to access much of the information they hold.

Governments and public bodies hold masses of important information. They hold it on behalf of the public and should therefore:

  • proactively publish information in the public interest.
  • provide open access to people wanting specific information.

The right of freedom of information is based on the principle that the government is required to serve the people. Information forms a very important part of the democracy. It leads to accountability, transparency and good governance.

Role of Information?

  • Gives people a fair chance to know the information, to know what’s happening and give their opinions and debate on the relevant matters.
  • Keeps a check on the government and makes sure that there is transparency maintained.
  • Ensures free and fair election.
  • Gives authority to the civil society and the journalists to expose corruption and wrong doing.
  • Enables people to have access to their personal information.

‘Information’ should include all information held by a public body, regardless of form, creator, date, or classification. Public bodies include executive, legislative and judicial branches of the state, as well as public corporations and publicly-funded bodies. It should be the responsibility of the information holder to prove that it is legitimate to deny access.

Exemption

Most open records laws are based on the presumption that everything is public, unless specifically exempted. Some states specify certain categories of information that always are public. Many exceptions to public access are subject to agency discretion, so one can always try to convince officials that it would be in the public’s interest to release the requested information. In most states, only a few specifically designated types of records are required to be kept secret, for example:

Law enforcement and investigative files: These may be exempt across the board, or may resemble the federal statute, which permits information to be withheld only when some specified harm to the investigation or an individual involved would result from disclosure.

Commercially valuable information: These exemptions usually protect from disclosure information provided by private companies to the government, such as commercially sensitive or trade secret information in licensing or contract applications.

National security: These exemptions are intended to protect from disclosure those documents that if released could potentially harm security interests. At the federal level, these are often documents containing “classified” information.

Freedom of Information and Media

Freedom of Information should not be misused by the media by generating stories against the Government. Freedom of Information is an important tool to provide better understanding to the people who want to know how the government functions, why or how the government makes a particular decision. Media, on the other hand, would prefer a less open government. It is the job of journalists to hold the government to account on behalf of the public. The Freedom of Information Act is a vital tool in their armoury which should not and must not be removed or weakened.

Conclusion

Despite the remarkable trend towards adoption of Freedom of Information, the public in general still faces a lot of obstacles. There is a need for better effective mechanism to cater to public needs. The principle of maximum disclosure dictates that individuals should be granted access to all information held by public bodies, except for very limited and clearly specified categories, subject to harm and public interest tests. It is not unusual for exceptions, along with the reference to official secret acts, to justify arbitrary denials of information access. Perhaps the greatest challenge of all is the shift from a culture of secrecy to one of transparency. This entails a fundamental change in mindsets of politicians and bureaucrats, as well as building public awareness to encourage active exercise of the right to know.

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Authors Guild Inc. v. Google

– By Apoorva Mishra

In 2004, Google announced two programs: “Partner Program,” involved the “hosting” and display of material provided by book publishers or other rights holders and second “Library Project,” involved the digital scanning of books in the collections of the number of university libraries. The Partner Program and the Library Project together comprise the Google Books program (“Google Books”) where all types of books are encompassed. Google creates more than one copy of each book it scans from the library collections, and it maintains digital copies of each book. Google did not seek or obtain permission from the copyright holders to digitally copy or display verbatim expressions from in-copyright books. Google has not compensated copyright holders for its copying of or displaying of verbatim expression from in-copyright books or its making available to libraries for downloading of digital copies of in-copyright books scanned from their collections. Google also provides snippet view for the books for the users to read. Plaintiffs commenced this action on September 20, 2005, alleging, inter alia, that Google committed copyright infringement by scanning copyrighted books and making them available for search without permission of the copyright holders.

ISSUE

Whether Google’s use of copyrighted work is “fair use” under the copyrighted laws?

Analysis

Doctrine of Fair Use

The Copyright Act gives copyright holders the exclusive right to reproduce works for a limited time period. Fair use is a limitation on this right. Fair use allows people other than the copyright owner to copy part or, in some circumstances, all of a copyrighted work, even where the copyright holder has not given permission or objects.

Copyright law does not give copyright holders complete control of their works. Copyrighted works move into “the public domain” and are available for unlimited use by the public when the copyright term expires. But even before works enter the public domain, the public is free to make “fair uses” of copyrighted works. The Supreme Court has described fair use as “the guarantee of breathing space for new expression within the confines of Copyright law.”[1]

Fair Use – Transformative in nature

Fair use is more likely to be found when the copyrighted work is “transformed” into something new or of new utility, such as quotations incorporated into a paper, or perhaps pieces of a work mixed into a multimedia product for your own teaching needs or included in commentary or criticism of the original and are not simply a reproduction. There are four factors determining fair use:

  1. Purpose and character of use.
  2. Nature of copyrighted work
  3. Amount or Substantiality of Portion Used
  4. The Effect of the Use in the Potential Market or for the Value of Work

The key consideration is:  Whether the use of copyrighted work is transformative or not?

  • Google’s use of the copyrighted works is highly transformative. Google Books digitizes books and transforms expressive text into a comprehensive word index that helps readers, scholars, researchers, and others find books.
  • Google Books has become an important tool for libraries and librarians and cite-checkers as it helps to identify and find books. The use of book text to facilitate search through the display of snippets is transformative.
  • Google uses snippets of text to act as pointers directing users to a broad selection of books.
  • Similarly, Google Books is also transformative in the sense that it has transformed book text into data for purposes of substantive research, including data mining and text mining in new areas, thereby opening up new fields of research. Words in books are being used in a way they have not been used before. Google Books has created something new in the use of book text the frequency of words and trends in their usage provide substantive information.
  • Google Books does not supersede or supplant books because it is not a tool to be used to read books. Instead, it adds value to the original and allows for the creation of new information, new aesthetics, new insights and understandings.
  • Google does not sell its scans, and the scans do not replace the books. While partner libraries have the ability to download a scan of a book from their collections, they owned the books already — they provided the original book to Google to scan.
  • Nor is it likely that someone would take the time and energy to input countless searches to try and get enough snippets to comprise an entire book.
  • Not only is that not possible as certain pages and snippets are blacklisted, the individual would have to have a copy of the book in his possession already to be able to piece the different snippets together in coherent fashion.

Google Provides various significant public benefits:

  • It advances the progress of the arts and sciences, while maintaining respectful consideration for the rights of authors and other creative individuals, and without adversely impacting the rights of copyright holders.
  • It has become an invaluable research tool that permits students, teachers, librarians, and others to more efficiently identify and locate books.
  • It has given scholars the ability, for the first time, to conduct full-text searches of tens of millions of books.
  • It generates new audiences and creates new sources of income for authors and publishers.
  • Many authors have noted that online browsing in general and Google Books in particular helps readers find their work, thus increasing their audiences.
  • Further, Google provides convenient links to booksellers to make it easy for a reader to order a book. In this day and age of on-line shopping, there can be no doubt but that Google Books improves books sales.

 

CONCLUSION

Google is entitled to summary judgment with respect to plaintiffs’ claims based on the copies of scanned books made available to libraries. Even assuming plaintiffs have demonstrated a prima facie case of copyright infringement, Google’s actions constitute fair use here as well. Google provides the libraries with the technological means to make digital copies of books that they already own. The purpose of the library copies is to advance the libraries’ lawful uses of the digitized books consistent with the copyright law. The libraries then use these digital copies in transformative ways. They create their own full-text searchable indices of books, maintain copies for purposes of preservation, and make copies available to print-disabled individuals, expanding access for them in unprecedented ways. Google’s actions in providing the libraries with the ability to engage in activities that advance the arts and sciences constitute fair use.

 

[1] Campbell v. Acuff-Rose Music, Inc., 114 S.Ct. 1164, 127 L. Ed. 2d 500 [1994]

 

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