A comparison of trademark law: India

As India marches on in its endeavour to attract more foreign direct investment (FDI), catapult the recognition of intangibles in wealth creation and stimulate a digital economy that also empowers small and medium enterprises, there has been a huge transition in the management, administration and understanding of IP in India.

India, no doubt, is taking great steps towards strengthening its IP ecosystem. New milestones have been set in the quest to foster innovation in the knowledge-driven economy. Some key developments include revamping the administration and infrastructure of the IP offices in India.

The robust judiciary has greatly contributed towards the magnanimous development of IP. Litigation in trademarks, copyrights and patents has reached new heights, with the Indian courts adopting international principles and ruling to protect IP rights strictly to deter infringers. The progress in the years gone by has been vital, promising new milestones in IP in times to come.

While this is no doubt progressive, for years the focus of businesses has predominantly been on protection and enforcement of their IP, and rightfully so. However, the demands of the modern world and progressive businesses far outpace such requirements. Beyond the realm of IP protection and enforcement lies the vital field of the creation of IP and leveraging of intangible assets.

The modern way of working considers issues of brand creation, risk mitigation, licensing and franchising, protecting the brand from dilution, commercialisation and monetisation, among many others. The requirement from the legal industry is now to step up and be proactive, rather than reactive.

The author believes that the pursuit of solutions has to be multidimensional, since businesses have several aspects under consideration. Within all this, the solution still has to be legally acceptable under the laws and practice. To accomplish this, the legal industry has to understand the business, be an optimist and anticipate risk from a strategic perspective within the tools of law as provided.

Today, IP should not only serve as insurance against attacks, but a strong protective shield that completely deters violations and safeguards the business and the brand. This would require business leaders across the globe to be more aware and understand how intellectual assets significantly affect business, its valuation, its brand and, along with it, the return on investment.

For this, the area of focus must also shift to understanding industry verticals. The knowledge required to cater to pharmaceutical clients is very different from the knowledge needed to cater to a fast-moving consumer company where marketing and customer experience are paramount. The experience is extremely dissimilar for startups who desire protection and shields around business models, but may be cash strapped.

New issues of IP commercialisation, insurance and mortgage, as well as its relevance in the creative economy and its impact on GDP, brand valuation, brand evaluation, issues of corporate governance, mortgage, insurance, and collaboration through ecosystems are all contemporary concepts that need to be addressed now.

With economic activities being exponentially driven by new-age inventions, it becomes crucial to safeguard the rights and interests of the inventors. The government has taken many steps in the right direction through policies and schemes, including the launch of its own IP Exchange. Incidentally, this idea was also floated by the author almost 10 years ago, and this approach is a step in the right direction.

The conversations and focus areas for industry bodies that deal with the IP landscape have also transitioned to how innovation impacts IP, licensing in the metaverse, issues of trade secrets, how to structure business plans so that innovation is the focal point of the business, the impact of financial markets on IP, and how to best commercialise IP.

These issues have become talking points as businesses themselves are hungry to absorb the new world order, and such issues are being recognised and adopted by companies driven by a globally competitive scenario. Many companies, dealing with economic slowdown, have understood the need to leverage benefits from such issues and in many cases use them as best practices. Some such issues are also discussed below.

Social and digital media have made the world a small place, and the reach of a brand to unknown parts of the world, and unknown consumers, has never been easier. India already had the concept of well-known trademarks, but has intensified its practice on the declaration of trademarks as well known.

The courts in India recognise the power available to proprietors to obtain a declaration, and directed that the option of filing petitions to seek a well-known declaration must be used, and issued a direction to the registrar of trademarks to act on this. This opportunity is already being acted on by proprietors and will have more takers.

The Securities and Exchange Board of India (SEBI) has made it mandatory for the promoter to disclose the IP status in their IPO, or any follow-on offer, to indicate the schedule of trademarks, the impact of protection or lack of it, and of disputes or challenges in any way that may affect brand or business value.

Status of licences and technology transfers are also to be declared along with issues of ownership being consistent to arms-length, related party transactions, transfer pricing and issues of corporate governance, royalties, and schedules of subsidiary companies or associate companies and their material effect, if any, on such intangibles.

Disclosures of ongoing grants of patents or trademarks, or court actions, or changes in royalties, need to be communicated as also resolutions to buy, sell or mortgage them. Corporate governance and audit reports are now focusing on IP risks and opportunities, including getting an assessment of any IP grant or breach to the earnings.

In fact, corporate governance and IP is an exciting and developing space. Every decision that a company takes, including ones that impact IP on royalties, impacts shareholders.

With the above-mentioned mandate from the SEBI, periodically conducting IP audits is vital to ensure that the IP being created is protected. In fact, in many cases, audits help in identifying IP that exists in a business but may not have been protected.

Brand valuations have also evolved from damages in courts to breach of contracts, to having a transactional aspect. Clauses on the IP valuation at opportune moments in transactions between two parties are a relevant point for businesses to consider. Brand valuations are not just relevant to identify cash flows but also for fundraising. In fact, more than 90% of the valuation is for the IP in the business as per many industry reports. It becomes imperative to have valuation norms, then. For example, the insurance of IP is a complicated exercise in the absence of valuation norms.

The SEBI has also been keeping its eye on related party transactions catapulting the overlap of IP and taxation to a great degree. Inculcating and capturing the ecosystem of IP in the business or company is also a vital area.

It is important that top management constantly talk about their focus on IP to their employees, as it sensitises all the relevant people in the ecosystem to ensure there is no IP leakage, and to capitalise on hidden IP, if any.

Another step towards capturing the innovation in the business is by ensuring that the company has policies and a framework for research and development, i.e. all the creative units in the company must log the work being created and ensure that the work is communicated to the legal teams for protection. There needs to be a more holistic discussion between corelation of innovation to utility v IP filing, given shareholder interest in better deployment of funds.

India is also looking to have substantial growth in the brand protection landscape with the help of artificial intelligence (AI), as it’s a game changing technology that is bound to have a significant impact on IP law.

The Advertising Standards Council of India has started its own actions against brands for false, exaggerated or disparaging claims in advertisements, with substantial complaints issued last year. Seeking legal counsel has gained traction, as it also adds to reputation management.

Advertisements are corporate assets and it is vital to ensure that they are not just legally compliant but create a harmonious conversation between marketers, advertisers and lawyers to produce a value-driven campaign. Stronger guidelines have been framed for celebrities and influencers, the crypto-regulated industry, and the gaming industry. For example, social media endorsements are getting regulated to be identified as paid promotions rather than routine feedback.

With substantial innovation and the convergence of business with law, having a basket of solutions so that the business can be reconciled to the best or optimum solutions with the least risk and highest governance is needed more than ever.

The legal profession has to be far more savvy about business, and much more creative. To this effect, it has become necessary to be educated with newer technologies, the risk-to-reward ratio, risk mitigation and other strategic measures that may enhance the scope of success or mitigate the probability of a loss or risk at best.