Legal experts answer corporate counsel’s most pressing questions about intellectual property
Four corporate counsel from Infosys, Nokia, Mobiltrain Knowledge Services and Wockhardt share their greatest intellectual property concerns with India Business Law Journal. We asked 12 specialists to tackle these problems and provide practical solutions, protection strategies and legal wisdom for successful IP management.
Gayathri Sriram, CEO, Mobiltrain Knowledge Services: When a non-disclosure agreement specifically states that the signatory has no right to use the information for competitive purposes and they do so anyway, what recourse is there?
Gunjan Paharia, managing partner, Zeus IP: You can enforce it. India does not have any statututory provision that may disallow you to legally enforce any of the clauses that the signatory has signed off on. The deterrent here is the pace of the Indian legal system. It is obvious that once a non-disclosure agreement has been signed, one will have to prove (a) that the IP-related information was transmitted to the person, and (b) that the person has misused it.
The first is easy to prove, but the second is not as the nature (the who and when) of this disclosure can only be guessed. Proving it is an uphill task, especially if such disclosure has occurred orally. Assuming that one can prove this, the suit for enforcement will have to be filed before a district court. The signatory typically would have signed off on an agreement which states that they will be liable to pay damages to the IP owner if the non-disclosure agreement is violated. There is little else one can claim for an offence which is not really considered criminal.
If one files a case for damages in a court of law, the trial itself takes time. Then one has to prove that the offending party either has money or any other property which can be attached. Once you have this order (after all the appeals have been exhausted), then the process of having the property attached is another task. This property, if immovable, could be in a totally different jurisdiction. Add the legal costs that come with the above task and the entire process becomes cost exhaustive and in many cases not worthwhile.
It may therefore make better practical sense if at the time of signing a non-disclosure agreement the second party is asked to deposit an amount with the IP owner which will be forfeited should the agreement be violated. This creates a psychological barrier in the second party’s mind about losing money. In addition, the onus to file a case, prove that the agreement has not been violated and that the IP owner should refund the amount, rests with them. In reality, very few parties would sign such an agreement, but it is definitely worth trying.
Pravin Anand, managing partner, Anand and Anand: There are two possibilities here. If the IP-related information is confidential and has been passed on under conditions of confidentiality, then its misuse can be prevented by obtaining an injunction order from a civil court. This order can be against the signatory, who may be an ex-employee, or the new employer of the ex-employee, who may be a competitor.
In the second scenario, if the IP-related information is commonly known and in the public domain, it may be difficult to protect through an action for breach of confidentiality. One would have to then look for whether the information constitutes a protectable intellectual property. Drawings, designs, a list of customers or suppliers, pricing details, etc., may be protected as literary or artistic works under the Copyright Act.
There is also growing a new tort known as the “hot news doctrine”, which applies to things like match results, such as cricket scores, where speed to obtain the data and communicate it may be the essence of a competitive edge. To steal the data (even though there may not be copyright in it) may amount to the misappropriation of the hot news.
Gayathri Sriram, Mobiltrain Knowledge Services: When a product or process has a patent pending on it, does it deter a competitor from going ahead?
Amarjit Singh, managing partner, Amarjit & Associates: In my view, mere pendency of an application for the grant of a product or a process patent in itself is not a sufficient deterrent. A suit for infringement of a patent is maintainable only after the patent has been granted.
A competitor intent on using the technology of the process patent, or the subject matter of a pending patent application, or intent on manufacturing of the end product, will find ways to cause obstructions by filing oppositions to the grant of a patent. If their opposition is unsuccessful, they may file an appeal or make minor modifications to their technology with a view to create plausible defences that can be used in an infringement action. If the competitor is a corporate giant, it is not difficult to achieve these objectives.
Sanjay Kumar, managing partner, Perfexio Legal: Unless a patent is granted, no right in relation to an invention is conferred upon the applicant and no suit for infringement can be initiated against the infringer/competitor. However, damages in relation to the infringement of a patent can be obtained from the date of publication of the application for a patent.
From the date an application for a patent has been filed until the grant of a patent, an application is scrutinized by the patent office as well as by third parties in any opposition proceedings. Accordingly, during the pendency of a
patent application, a competitor may act with caution, but will not be deterred from going ahead.
V Balakrishnan, director and chief financial officer, Infosys: Under the Indian Patent Act while it is clear that computer programmes per se cannot be patented, there exists ambiguity and diverse views on whether computer programmes per se as a part of a hardware invention can be patented and to what extent. Will this ambiguity lead to discrepancies in the grant of patents?
Dev Robinson, partner, Amarchand Mangaldas: It certainly has led to discrepancies, and change is required in the law to definitively set out what is and what is not patentable. Many inventions that relate to software peripherally get rejected. That cannot be good for industry.
The issue of where to draw the line on patentability of computer-related or implemented inventions has been dealt with emotively.
In fact, it is the opponents that seem to have had the last word. I don’t believe that the opponents to software patents can be said to truly represent public interest. They are often companies following a business model based on service rather than innovation, and therefore there is a vested interest.
Some non-governmental organizations have also been involved in consensus building. I doubt very much that many of them have actually experienced the patent system at work. Fear of abuse in this case cannot be a justification to altogether remove a technology field from patent benefits. That can hardly be considered to be forward looking. Besides, there are checks in the patent system that address a patentee’s abuse.
The situation can be compared to a time when we did not have product patents in the pharmaceutical sector: 35 years of absence did not contribute to development of the industry any further than improving processes. Few if any new chemical entities were developed in India. A lack of patent protection could also be one of the reasons why many drugs still remain unavailable in India while they are readily being vended in other countries.
At the end of the day, innovation falls in the hands of private players. The government cannot be expected to provide all technology solutions. Private players need incentives. Providing patent protection is one good incentive.
Amarjit Singh, Amarjit & Associates: Computer programmes per se are not an invention under section 3(k) of the Patents Act, 1970.
The use of the term “per se” itself shows that if a computer programme is a part of a hardware invention, it would not fall within section 3(k). Most countries in the world grant protection to computer software per se under copyright law by treating it the same as a literary work.
In my view, a computer software or programme is a process which has utilitarian value and contains features that involve technical advances as compared to the existing technology. Thus, at the option of the inventor, protection should be made available for computer programmes per se under the Patents Act. Having said that, I feel that the protection which a computer programme receives under copyright law lasts for a considerably longer period than the protection that an invention is afforded under the Patents Act.
Ben Adams, director, head of legal, India and emerging market services, Nokia: What improvements are you seeing or would you recommend for the Indian patent prosecution system (both in respect of speed and depth of the review process)? How can we as corporates best encourage such changes and future developments?
Nandan Pendsey, senior associate, AZB & Partners: The Indian patent office has recently circulated guidelines titled Examination of Patent Application and Consideration of Report of Examiners by Controllers. I think this is a step in the right direction. These guidelines seek to make the patent application examination procedure speedy, effective, comprehensive and transparent.
These guidelines also demarcate the responsibilities between controllers and examiners, thereby cutting down on duplication.
The recruitment of new examiners at the patent office will help to tackle the backlog without compromising on the quality of examination. Efforts to digitize processes at patent offices have helped provide the requisite infrastructure to enable the online filing of patent applications and have made the prosecution history of a patent accessible online.
Corporates could play a big role by assisting the patent office with the modernization of its hardware and software systems and conducting training sessions for examiners.
Gayathri Sriram, Mobiltrain Knowledge Services: Litigation is often expensive and time consuming. Can a smaller court or tribunal be established to handle cases from small entrepreneurs?
Saikrishna Rajagopal, managing partner, Saikrishna & Associates: While small courts can indeed be established under specific statutes, courts need to make an effort to identify matters which are suited to the alternative dispute resolution (ADR) process. This will surely assist in bringing down the lifespan of litigation and addressing cost concerns.
Frustration with the admittedly slow pace of litigation in India and also the cost of such engagements have made a case for expanding the ADR options available to small businesses. While arbitration – a “court like process” before a mutually acceptable arbitrator – often is no less expensive, the process is shorter than litigation. Other ADR processes such as mediation and conciliation are equally efficacious and commercially viable options for resolving disputes.
Pravin Anand, Anand and Anand: In India, litigation is not expensive as compared to other countries, which is probably the reason why even the common man can afford it. That in itself leads to the cluttering of our courts with excessive litigation.
Litigation was time consuming and may still be so in a large number of courts in India, but IP litigation is dealt with rather swiftly. In some courts, like Delhi High Court, the litigation may be as short as six months and in most cases, no longer than two to three years. Smaller courts or tribunals have their own set of issues and the Indian experience has been that a specialist judge in a high court, who is subject to all the discipline of the court, is much more successful than a specialist tribunal.
In IP matters, a distinction cannot be drawn between big and small entrepreneurs as some of the greatest inventions have come from individuals and small and medium enterprises which have then been taken over by big businesses. A distinction can, however, be made between IP that is worth more versus IP that is worth less. In a sense the pecuniary jurisdiction of the high court is based on such a principle, that the greater the value of the estimated losses, the greater the pecuniary jurisdiction and the higher the court.
Gunjan Paharia, Zeus IP: In IP, the majority of cases are for infringement or passing off. One can opt to file a case for both infringement and passing off before a district court or a high court (if the high court has original jurisdiction).
Most litigants prefer to file before a high court (where they can), because the perception is that the judiciary at that level is more open and sensitive to the nuances of IP and likely to give a more reasoned order than a lower court. However, in the lower courts a trial is likely to happen more quickly than before a high court, which is generally overburdened. If cost is an issue, litigants can opt to file a suit before a district court.
I do not think that a smaller court for small entrepreneurs is required, but a specialized court which hears only IP matters and is quicker may be the way to go.
Sanjay Kumar, Perfexio Legal: In India, there is no separate IP court except the Intellectual Property Appellate Board. Infringement actions are handled by a court not lower than a district court. While there is a proposal for establishing a separate IP court in India, we do not foresee the possibility of a separate, smaller court or tribunal to handle IP cases from small entrepreneurs.
Amarjit Singh, Amarjit & Associates: The delegation of power to a smaller court or tribunal to hear and decide patent infringement cases would not serve the desired purpose. Smaller entrepreneurs are free to invoke the jurisdiction of a district judge and seek a remedy in accordance with the provisions of the Patents Act.
The cost of litigation would not be lowered by the establishment of smaller courts or tribunals as the attorneys handling such contentious and technical matters would charge the same fees to deal with such cases irrespective of the forum of litigation. My experience shows that expert attorneys charge higher fees to handle a matter before a special tribunal than the fee which is normally charged for handing a matter before a high court or a district court.
Rahul Chaudhry, partner, Lall Lahiri & Salhotra: Litigation is often expensive and time consuming. However, the major expense does not emanate from the court, but rather the lawyers’ fees and gathering of evidence. In our opinion, the establishment of a smaller court or tribunal will not go a long way in reducing litigation costs.
V Balakrishnan, Infosys: The prevalent trend in most IP infringement cases is for petitioners to obtain interim injunctions. Given that this is driven off legal counsel’s advice, does the law firm community see any inefficacy in using Anton Piller orders and/or Mareva injunctions?
Vikram Grover, partner and head of the trademark litigation team, Remfry & Sagar: Ordinarily, interim relief is limited to temporary injunction, rendition of accounts, costs, etc. The reason for this is to prevent abrogation of the plaintiff’s rights, which is of paramount importance to the right holder. Further, if a plaintiff succeeds in injuncting a defendant and its agents, distributors, partners, etc., confiscation of products becomes secondary.
A prerequisite to any Anton Piller order is the plaintiff establishing an extremely strong prima facie case; serious damage, potential or actual; and evidence that the defendant has in its possession documents/material which could be destroyed.
Such an order is advised routinely in cases involving software piracy and data processing where incriminating evidence can be erased immediately.
Similarly, for Mareva injunctions, a plaintiff is required to establish that a defendant is about to dispose of the whole or any part of his property; about to remove the whole or any part of his property from the local limits of the jurisdiction of the court; and intending to cause obstruction or delay in the execution of any decree that may be passed against him. Hence, the plaintiff has to establish a “real” apprehension.
Mareva injunctions are widely recognized as being harsh on the defendant. Therefore, courts are extremely cautious in passing such sweeping orders and keep the threshold high. Having said that, if these remedies fit into a particular scenario, we do not see why a court would decline such relief to a plaintiff.
Raja Pannir Selvam, advocate, Selvam & Selvam: At times clients insist on an Anton Piller order or Mareva injunction knowing very well that the facts of the case do not necessitate one. Often we hear corporate counsel state that filing a suit for injunction is a business decision. Courts do not hesitate to vacate an injunction at a later date after hearing the other party, but the damage done to the business targeted is irreparable.
In some cases, innocent clients are wrongly advised to obtain injunctions or pursue litigation instead of writing a simple letter to the other party, which would have resulted in an amicable settlement.
Even in cases of gross abuse of your IP rights by the other party, it should be a rule of thumb to first approach the other party and let them know that what they are doing is wrong.
At the time of a global economic crisis, companies are cost conscious and often are willing to quickly get a matter settled. What lawyers need to determine is how to best protect the interest of a client in a short frame of time at an affordable cost.
Chander Lall, managing partner, Lall & Sethi: There are several aspects peculiar to IP infringement cases filed in India. First, a majority of the infringement actions are filed by established brand owners whose rights in their trademarks are virtually beyond doubt. Second, most infringements are blatant. Third, most infringers do not maintain proper accounts. As a result, Anton Piller orders are perhaps the only efficacious remedy available. Even Mareva injunctions directing the freezing of assets are not effective because getting a list of assets is very difficult.
In most cases where Anton Piller orders have not been sought or granted, the infringer is quite easily able to dispose of its infringing products and plead innocence, often resulting in failed actions. On the other hand, where Anton Piller orders have resulted in the seizure of infringing goods, the matters end up being settled and in some cases recovery of costs or even claiming damages is possible.
In cases where IP infringement is not so blatant, arguments on injunctions often get delayed, which is harmful to one party or the other, depending upon whether an ex parte injunction was granted. Some courts have started exploring the possibilities of limiting the issues and expediting the trial, but delays still occur.
Lately, there has been a trend for courts to award damages, but a majority of these cases are not contested by the infringing party and are ex parte orders. Such damages are difficult to recover. To reduce the emphasis on injunctions, the entire attitude towards damages and costs will have to change. Most infringers indulge in infringing activities as there is no fear of substantial monetary damages being awarded against them. Likewise, most brand owners restrict their actions to injunctions since the recovery of substantial amounts as damages or costs is rare.
For damages to be an efficacious remedy accounting practices in India will also have to become more stringent, compelling entrepreneurs to maintain proper accounts so that effective court orders can be passed, either awarding costs and damages against the infringer or against an irresponsible rights holder who initiates frivolous actions. Till then Anton Piller orders will remain the only effective remedy.
Maximizing returns from IP assets
Gayathri Sriram, Mobiltrain Knowledge Services: What value does IP really add to a company? Are there examples of startups that have benefited from IP?
Dev Robinson, Amarchand Mangaldas: It would depend upon the kind of startup it is and whether IP and innovation are central to the adopted business model. IP is particularly important where the startup is looking for more funding or is intended to be placed on the block for sale. A definite trend has been observed where patent filings have been used to shore up value. In the software, telecom and IT sectors we have seen startups use licensing along with services as a business model fairly successfully.
Chander Lall, Lall & Sethi: IP plays a very important role today in relation to virtually every aspect of life. As we wake up in the morning, we brush our teeth using a toothbrush which has a well known brand and a unique registered design. The toothpaste has a unique formulation which is patented and the tube has artwork on it, which is the subject matter of copyright.
IP plays an important role not just in our personal lives but also our professional lives. For a company, IP is bound to be either an important ingredient in its day-to-day functioning and activities, or the very basis of its existence.
In a knowledge based economy like India where over half the GDP of the country is from the service sector, IP assets are perhaps the most important. The entire business process outsourcing, knowledge process outsourcing and legal process outsourcing service sectors do nothing but process and produce IP assets. TCS, Wipro, Infosys and Satyam are all examples of businesses which were built and exist on the foundation of IP.
IP today also dictates the manufacturing industry. There can be no production of automobiles, medicines or even a basic toothbrush without the important IP ingredient added to it. The Tata Nano has introduced new low-cost technologies to the automobile sector. It can quite easily be referred to as IP on wheels.
Even agriculture today is becoming more IP dependent. Seeds and fertilizers both involve technology and IP. Plant variety protection, high yield varieties and genetically modified varieties are all terms connected with IP.
Debolina Partap, vice president, legal affairs, Wockhardt: Is there a way to effectively track IP infringements in-house? It appears that tracking tools for in-house counsel do not exist and clamping down on infringements is a job that is generally outsourced.
Saikrishna Rajagopal, Saikrishna & Associates: The nature of infringement would determine the appropriate tracking system for different industries. For example, tracking software-related infringement is much simpler and often does not require field visits to the infringing locations. Ultimately, companies should appreciate that certain tasks are better done by the experts, and at the same time focus on achieving cost efficiencies in IP infringement tracking by better assessment of targets and persuading outside counsel and agents to work on a return-on-investment basis.
Pravin Anand, Anand and Anand: Tracking IP infringers involves several functions: (a) an investigation function with someone playing a watchdog role in the market; (b) a search function with someone watching the developments on the internet; (c) a database function with someone responsible to maintain a database of all leads; (d) an allocation function where cases are allotted to specific people for specific action; (e) a review function where the in-house person would review results and performance periodically. This can certainly be achieved in-house through simple tracking tools and is being very well done for software by associations like the Business Software Alliance.
Gunjan Paharia, Zeus IP: IP infringement tracking in the marketplace or in cyberspace is something which specialized vendors perform. It is, of course, possible to track infringements in-house should a corporate decide to invest in a large team and effectively train and manage it. As this is an expensive exercise to create as well as to maintain, corporates prefer to outsource it.
The only problem with outsourcing this activity is that very few vendors are “market research” oriented. Most corporates outsource to small investigation agencies that may not get to the root of the problem. This is frustrating for corporates, which are then expected to sift through a lot of irrelevant information to get to one meaty infringement action.
Also, as the agencies do not take the time to understand what really hits a client’s bottom line, a lot of money is wasted chasing unnecessary targets. It is therefore imperative that corporates choose partners who are dedicated to delivering like an in-house team.
Debolina Partap, Wockhardt: Is there any way corporate counsel can get independent strategic advice on IP matters? Are there any think-tanks we could benefit from and reach out to?
Sanjay Kumar, Perfexio Legal: This is a very nascent area in India. Having said that, there are many qualified IP attorneys who may be engaged to provide independent strategic advice on IP matters.
Amarjit Singh, Amarjit & Associates: Most IP boutique firms offer professional services to their corporate clients on IP matters which include strategic advice. Corporate counsel have the option of approaching any good IP boutique and seeking independent strategic advice in relation to patents, trademarks, designs, industrial designs or copyright issues. Our firm has been providing such strategic advice on IP matters to clients for nearly three decades.
Rahul Chaudhry, Lall Lahiri & Salhotra: As far as we are aware, there are no specialized think-tanks which provide strategic advice on IP matters. Some law firms like ours have the expertise to offer such advice if required.
V Balakrishnan, Infosys: Established trademarks that consist of coined and non-dictionary words and have a legacy of usage are increasingly being challenged as colloquially used terms. This can be of particular concern to trademark owners whose products and services set the benchmark for quality. We would be interested in knowing the views of the larger law firm community on this and what they believe needs to be addressed in the law to ensure that the rights of these trademark owners are adequately protected.
Chander Lall, Lall & Sethi: Trademark law deals with monopolies. The moment one talks of protecting a word mark, one talks of an entrepreneur monopolizing a particular word.
There are essentially two types of word marks: invented or coined words, and words which are in the dictionary. It is in the latter case where issues arise of restraining third parties from using a commonly used colloquial word in the name of trademark protection.
Marks such as Eenadu (meaning Today in Telugu) for a newspaper, Wholefoods for food items, Super Flame for a gas burner, Pizza Hut for pizza retail, Holiday Inn for an inn, Plast India for a plastics fair, PC Week for a PC magazine, Hidesign for leather goods, Naukari for a jobs site and Infosys for information systems, are only a few examples where colloquially used names have been protected.
Courts have, however, been much more careful where the claims of the brand owners are exaggerated. Hence, a court frowned upon the attempt by the brand owner of Losorb to stop a third party from using the phrase “low absorb technololgy”. Likewise, only limited restrictions were placed on the use of “sugar free” as a trademark, because it is a commonly used phrase for a sugar substitute.
Accordingly, it appears that laws in India substantially protect brand owners while maintaining a proper balance between according a monopoly and not permitting common words to be permanently subsumed for personal gain.
Archana Priyadarshini, advocate, Selvam & Selvam: It is true that many a time a trademark, due to extensive use by its proprietor and third parties, becomes a generic term, resulting in losing its distinctiveness. The Indian Trademark Act does not offer protection to generic marks at present and it is certainly necessary to bring in an amendment so that such marks are protected.
However such protection must be offered only after careful analysis of certain factors, for example, whether the mark was indeed initially distinctive without representing any product in particular, and whether it is solely the unchecked use of the mark that has resulted in it becoming generic. This will be a fair balance as it offers protection to trademark owners and at the same time does not violate the fundamental principles of trademark law.
Amarjit Singh, Amarjit & Associates: Trademarks in the nature of coined words, and/or having no direct reference to the character and/or quality of the goods, are highly protected in India. I disagree with the view that coined trademarks which have also established great reputation on account of a legacy of usage are increasingly being challenged as colloquially used terms.
There are some concerns in relation to coined trademarks which, on account of generic usage, have become synonyms with the product. In spite of marks like Xerox and Vaseline having become synonyms of the products, Indian Courts have still granted protection to such marks in appropriate cases.
V Balakrishnan, Infosys: There seems to be a lot of adverse publicity on the enforcement mechanisms in India, which sometimes impacts cross-border transactions. Despite the challenges faced by our judicial and enforcement systems, it would be fair to say that the remedies and efficacy of the remedies are in most cases comparable to or better than in other jurisdictions. It would be beneficial to have some positive literature from the law firm community addressing these issues and educating the broader international business community on our enforcement mechanisms with case studies.
Vikram Grover, Remfry & Sagar: The scepticism seems to be based solely on certain decisions in the pharmaceutical patent area and ignores the massive strides the country has taken since the mid-1990s in its IP rights framework. India has always been at the forefront of establishing an open, equitable and non-discriminatory IP rights regime. Recent administrative as well as judicial reforms and trends highlight India’s commitment to better IP protection.
Having said that, one issue which requires redress is the backlog of cases and resulting delays. This is not to say that the judiciary and/or the legislature are unconcerned. The Indian Code of Civil Procedure has been amended to ensure speedy disposal. It curtails unnecessary adjournments and envisages payment of costs to the other party to compensate for delays caused by adjournments. In addition, after granting an interim injunction, Delhi High Court has, in a few instances, dispensed with the cross-examination of witnesses and directed the parties to prove their case on the basis of examination-in-chief and documentary evidence.
In a very encouraging move, the Supreme Court of India observed in the case Shree Vardhman Rice & Gen Mills v Amar Singh Chawalwala (reaffirmed in Bajaj Auto Limited v TVS Motor Company Limited) that matters relating to trademarks, copyright and patents should be decided expeditiously by a trial court, instead of delving into the question of interim relief, and that a final judgment should be pronounced normally within four months from filing of a suit.
Another interesting trend is awarding punitive damages to the plaintiff where the conduct of the defendant is flagrant and/or where the defendant does not contest the lawsuit despite being served in accordance with law. Recently, in Procter Gamble Company v Joy Creators & Ors, Delhi High Court ordered two defendants to pay ₹100,000 (US$2,000) each to the plaintiff.
Indian courts have also taken a progressive view and attribute considerable importance to decisions by the US Supreme Court, European Court of Justice as well as courts from other countries when dealing with issues falling in uncharted territory.
On the administrative front, the manuals of Patent Office Practice and Procedure, Designs Practice and Procedure and Geographical Indications Practice and Procedure have been published after considering feedback from stakeholders and the public. The patents and trademarks database has been digitized and free access to the database is noteworthy. The Traditional Knowledge Digital Library memorandum of understanding has been signed with various countries over the last two years. Legislative steps include release of the draft Patent (Amendment) Rules, 2011, for public feedback; introduction of the Copyright Bill; and passing of the Trademark Amendment Bill, 2010.
All in all, India has made tremendous progress towards strengthening, simplifying and streamlining its enforcement mechanisms. I believe India so far has successfully balanced the rights of all stakeholders.