India is racing to upgrade its creaking IP infrastructure. Will the improvements be fast enough to ensure a timely accession to the Madrid Protocol and satisfy the demands of domestic and international rights holders?

To many international intellectual property owners, India, with its complex laws and regulations, may seem overwhelming. Statistics paint a picture of a country where piracy is rampant, cyber-squatting is rife and effective protection is a pipe dream.

That’s why both domestic and foreign corporations welcome India’s pending ratification of the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, an international agreement for the registration of trademarks in a number of countries by means of a single application known as the Madrid Protocol.

The Lok Sabha, the lower house of the Indian parliament, passed the Trade Marks Amendment Bill, 2009, on 18 December to facilitate India’s ratification of the protocol. It now awaits approval from the Rajya Sabha, the upper house, and presidential assent.

“India’s accession to the Madrid Protocol will be a major step towards the harmonization of global trade mark law,” says Rodney Ryder, founding partner of Scriboard, an IP and information technology legal consultancy. “The benefits will be important, not only to foreign brands, but to Indian marks that aspire for the global stage.”

Accession will mean foreign brand owners can protect their marks in India by filing Madrid Protocol applications in their own jurisdictions, providing those countries are protocol members. “It is important to note that this system does not require a local attorney for each jurisdiction, which saves cost, effort and time,” says Shruthi Sabamurthy, a lawyer at Universal Legal.

Delays threaten Madrid

Any IP owner exploring protection mechanisms in India would, however, be naive to expect smooth procedures as soon as the country joins the protocol. “India has agreed to accede to the Madrid Protocol,” says Mohan Dewan, managing partner at RK Dewan & Co. “However, the disarray within the Trade Marks Registry and the lack of staff are going to seriously complicate matters.”

Nikhil Krishnamurthy, a senior partner at Krishnamurthy & Co, warns that it is unrealistic to assume that accession will lead quickly to actual enforcement. “India’s implementation of the Madrid Protocol will in all likelihood be delayed until the Trade Marks Registry is ready with adequate infrastructure to handle domestic and international trademark applications, says Krishnamurthy. “It is difficult to anticipate when the registry will start accepting applications under the Madrid Protocol.”

Nikhil Krishnamurthy Senior Partner Krishnamurthy & Co

Anil Kumar, of counsel at P&A Law Offices in New Delhi, says India’s ruling coalition is preoccupied with the Nuclear Liabilities Bill, the Finance Bill, labour welfare legislation and other new laws. “Given the political climate in India, it is likely that World Trade Organization and TRIPS-related amendments to law may get pushed [back], partly due to more pressing legislations taking precedence,” he says.

Such delays may actually be welcomed by some members of the Indian legal profession. While the Madrid Protocol is widely viewed as a blessing for international IP rights owners, ratification may be bad news for Indian lawyers. “While corporates will benefit from the deal, government and local trademark attorneys may lose out as it would reduce local filings considerably,” says Sanjay Chhabra, a partner at Archer & Angell.

The root cause of India’s IP woes

While there are great challenges at the enforcement level, many IP professionals believe that the root cause of India’s IP problems lies much deeper, particularly in legislation, and argue that inadequate protection deters research and development.

For example, Jitendra Verma, managing director of Lifecare Innovations, a Gurgaon-based medical biotechnology company engaged in research, development, manufacturing and marketing of healthcare products, says much of the patent period is spent before a pharmaceutical product comes to market.

“Drugs, pharmaceuticals, vaccines and bio-therapeutics require laboratory developments followed by pre-clinical and toxicity studies and generally three phases of clinical trials, so most of the patent life is consumed with the development of the product,” he says.

According to Verma, the development process can take 15 to 20 years, and since Indian patents are only valid for 20 years, there is virtually no time for commercial exploitation. “In my view, there should be a debate on the issue and the duration of the patent should [start from] the date of commercialization, while conferring protection from the date of filing,” he adds.

Jitendra Verma Managing Director Lifecare Innovations

Lawyers also argue that India’s IP laws hamper technological innovation. “In respect of patents for pharmaceutical and agro-chemicals, the law is weak and there is certainly a need to strengthen it,” says Pravin Anand, the managing partner of Delhi-based IP firm Anand and Anand. “This is certainly an area where a complete re-look is necessary.”

Bumpy road to modernization

Despite such criticism, foreign investors can expect a more robust IP regime to develop over the next few years. “In a span of two decades since the Indian economy has opened up, the IP laws enacted have doubled in number as compared to what they were before [liberalization],” says Akshat Pande, a senior associate and head of IP at SRGR Law Offices.

Indeed, a 2009 report from the Department of Industrial Policy and Promotion shows that the filing of patent applications jumped from 4,824 in 1999-2000 to 36,877 in 2008-2009. Patents granted also rose sharply from 1,591 in 2001-02 to 18,161 in 2008-09. Similarly, trade mark applications increased from 90,236 in 2001-02 to 130,172 in 2008-09, while trademark registrations climbed from 6,204 in 2001-2002 to 102,257 in 2008-09.

“While India has a good set of IP laws, which are forward-looking and IP rights-owner-friendly, providing unique interim remedies, their interpretation and implementation across the country differs widely and IP enforcement overall suffers considerably,” says Keshav Dhakad, director of IP rights and licence compliance at Microsoft India. He argues that education and sensitization programmes for judicial officers on the economic, cultural and social role of IP in India are few and far between.

Keshav Dhakad Director of IP Rights & Licence Compliance Microsoft India

Milestones and bottlenecks

India’s quest for an improved IP regime has led to a number of important advancements over the past few years. In 2007 the Indian Patent Office was appointed as an international searching authority and an international preliminary examining authority under the Patent Cooperation Treaty (PCT), which is administered by the World Intellectual Property Organization (WIPO). This allows the Patent Office to do preliminary examinations of international applications received by WIPO through the PCT.

In 2003, the Intellectual Property Appellate Board (IPAB) was created to handle matters relating to trademarks, designs and geographical indications. Since 2007, the IPAB has started hearing pending patent cases and other appeals that are pending before the high courts. The IPAB has sittings in Chennai, Mumbai, Delhi, Kolkata and Ahmedabad.

With the modernization of IP processes, lawyers and their clients frequently have to deal with technical hiccups and delays while knots in the system are untangled. Recently, the Patent Office added a search feature to its patent information retrieval system (IPIRS) that allows applicants to check the status of their applications. However, teething problems with the database sometimes result in the actual status of an application being different from what is reported on the IPIRS.

Similar problems have occurred at the Trade Marks Registry, where applications were declared “abandoned” in online records as a result of technical glitches associated with the digitization of physical files. “In many cases, we recommended that the clients file review applications for abandoned ones,” says Manisha Singh Nair, a partner at Lex Orbis. “This strategy worked,” she says. “We managed to bring many ‘abandoned’ applications back on track, out of which the registry accepted many, and some are being freshly examined.”

At the Office of the Controller General of Patents, Designs & Trade Marks in Mumbai – the central Indian IP office – bulk scanning of files and the creation of a digital database has stressed internet servers. In addition, instructions to clear up a backlog of old files resulted in a slowdown in the general functioning of the office.

“Clients have been distressed,” says Sunil Krishna, a partner at Krishna & Saurastri. “Their matters are not processed quickly and their queries not answered on time. New files are kept on hold while officials clear up the backlog. We have been following up personally with officials and also have had some meetings with the controller general and his team to resolve these issues.”

Recovery brings fresh delays

While India struggles to rectify problems with its electronic databases, patent and trademark filings by international and domestic companies continue to increase, especially as fears over the recent global downturn recedes. “In the past 12 months we have seen an avalanche of patent filings,” says Manoj Singh, managing partner of Singh & Associates. “Economic resurrection has seen IP owners return with more vigour and impetus,” he says.

The wave of new applicants has caused a backlog of work at the Trade Marks Registry, resulting in the delayed processing of applications, the misplacement of files and the breakdown of a sequential work order. “The biggest IP challenges faced in India are a lack of transparency and limited online file access at the Trade Marks Registry, which does not seem to be the case in foreign jurisdictions,” laments Nariman Khan, legal head and company secretary at Tata Asset Management.

India will undoubtedly need to clear several hurdles before its accession to the Madrid Protocol can be completed. However, lawyers say current efforts by the government to modernize the country’s IP infrastructure are worthy of praise. “It is commendable to note that trademark registries across India are working at breakneck speed to upgrade their infrastructure to enable a seamless transition after the bill comes into force and the Madrid Protocol becomes a reality in India,” says Dipak Rao, a partner at Singhania & Partners in Noida.

Patience with patents

The number of patent applications has shot up since India ushered in its product patent regime in 2005. The result has been a pile-up of applications due to the shortage of examiners required to process them. “The present level of infrastructure, including human resources, at the Patent Office is inadequate to meet the rising demand” says Rao. “The current setup is to process 15,000 applications per annum, while 70,000 are in the pipeline for examination, according to PH Kurian, the controller general of patents, designs and trademarks.”

The delay in granting patents is a big concern and problems persist even though amendments to the Patent Act, 1970, have helped speed up the process. “The law at various instances does not put very strict time limits on the Patent Office to take action,” says Madan. “This allows for delays in the … grant of a patent in some cases.”

Another issue of concern is the patentability of software innovations, which is not allowed under the Patents Act. “There have been extensive discussions between the industry and the ministry on the issue and everyone involved from an individual developer to software giants have expressed the ambiguity in the position on software patenting in India,” explains Madan.

Various methods have been used to draft and file such patents, but there is no clear understanding on the issue of software patenting due to the lack of judicial pronouncements and educational materials from the Patent Office. A draft Patent Office manual, which promises to provide extensive guidelines on the issue, has yet to be formalized.

Wrestling with pirates

As authorities race to transform their procedures with new software and technological upgrades, IP owners tackle those who misuse those very programmes. “The most pressing IP issue which we have faced over the past 12 months is the discovery of new sophisticated ways by which software counterfeiting and related frauds are being committed,” says Dhakad. “The wheels of the criminal justice system tend to turn exceptionally slowly in India, and the criminal conviction of software pirates is almost unheard of,” he adds.

It is important to note that efforts have been made to curb piracy through education, raising awareness and the deployment of state machinery. In May 2009 a police station was set up in Mumbai to deal specifically with cyber-crime cases. “Among other functions, the police station also looks into issues of software piracy,” says Jose Madan, executive director of IP at Khaitan & Co. “This is definitely a positive step in the enforcement of copyright law relating to piracy in India.”

Other projects include efforts by Karnika Seth, managing partner of Seth Associates and founder of the Cyberlaws Consulting Centre, who last year developed and delivered a series of training programmes to educate the Delhi police force about cyber crime.

Success at the borders

IP protection has become more complex as a result of a shifting trade environment. According to Chhabra, “Geographical barriers to trade among nations are collapsing due to globalization, a system of multilateral trade and a new emerging economic order.”

The counterfeiting of branded merchandise, particularly through the import route, remains a challenge for IP owners. However, since 2007, customs officers in India have been empowered to enforce IP law through the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007.

Based on the guidelines of the Geneva-based World Customs Organization, the rules permit customs authorities to deal with the import of counterfeit, pirated goods and parallel imports at border points. Chhabra argues that although these rules are at a nascent stage, they appear to keep a watch on infringers who make trans-border transactions of goods such as drugs and mobile phone handsets.

Courtroom battles

Tussles over IP have led to prolonged and sometimes heated courtroom battles in India. Commentators have expressed anxiety about the protection of trade secrets and confidentiality during a trial, the lack of judicial awareness about IP and the delays in obtaining relief from the court, which result in grave commercial losses.

While many rights owners will be wary of filing lawsuits in India, some say prosecution is efficient and worthwhile if pursued early. “If the plaintiff has a good prima facie case, the Indian courts are very prompt in granting ex parte injunctions, restraining the defendant and his agents from infringing the plaintiff’s trademark, copyright patent or design,” says Rao.

Some argue, however, that the Indian courts have in fact become more proactive and have stepped in to fill the vacuum created largely by administrative inaction. “The courts have been regularly passing path-breaking judgments, recognizing the global reputation of marks and affording them protection in India,” says Chhabra. “Due to judicial activism, other agencies too have started to play their role in curbing the menace of IP infringement a little more seriously.”

Krishnamurthy agrees with this view, but notes that sometimes such judgments may have negative repercussions. “While the Supreme Court in the case of Bajaj Auto Limited v TVS Motor Co passed a very forward-thinking order to the effect that the hearing of a suit in IP matters must proceed on a day-to-day basis and final judgment should be given normally within four months from the date the suit is filed, this seems to have affected the grant of interim injunctions in patent matters,” he says.

In addition, some lower courts appear to have trigger-happy fingers as far as ex parte injunctions are concerned. “One of the biggest problems we face is the unexpected disruption to business arising from ex parte injunctions granted by certain courts in India in unfounded cases,” explains Shailyamanyu Singh, IP counsel for Procter & Gamble in Singapore.

Shailyamanyu Singh IP Counsel Procter & Gamble

Singh recalls a case where a Procter & Gamble brand sold worldwide since the 1950s was enjoined from sale in India by a remote district court. “The plaintiff in this case used the mark on disparate goods and his use was admittedly subsequent to our global use,” says Singh. “[The case] was unfounded on infringement or passing off claims. The court granted an ex parte injunction as a matter of routine without giving us the opportunity of being heard.”

“Injunctions in other jurisdictions, if granted, are usually after both the parties are duly heard,” continues Singh. “Claim of damages are promptly decided and executed, which becomes a deterrent for any trader to approach the court with an unfounded request.”

Other observers emphasize the need for IP knowledge beyond the judiciary. “Although the Indian government has committed huge resources towards the modernization of IP offices in India, awareness levels in among certain authorities such as district level courts and the police, is still lagging behind,” says Pande.

What foreign corporates can look forward to is the possibility of India becoming less averse to the idea of awarding damages. Recent proposals to amend Indian IP laws to provide liquidated damages following the infringement of IP rights require it to be calculated as a percentage of sale revenues generated by the sale of the infringing products. “Such liquidated damages should be the minimum damages awarded to an IP owner if the infringement is proved,” says Pande.

“Another suggestion which has been proposed is to have a database created by the Trade Marks Registry for international well-known trademarks,” Pande adds. “This will [help] international companies in enforcing their trade mark rights in India even if the concerned marks are not registered in India, without going through the painstaking process of proving in the court of law that the mark is a ‘well-known trade marks’ as per the Indian law.”

Getting the right advice

For foreign businesses, choosing the right legal adviser is a key to designing robust protection mechanisms to safeguard their IP assets in India. “The positive news is that in the past 10-12 years, there has been an increase in the number of good quality law schools that are providing high standards of IP education, training and facilities to law students,” says Dhakad. “Law students and young attorneys are frequently choosing to pursue higher degrees in the field of IP law in foreign universities to increase their competence. Additionally, there has been a rise in the number of law firms specializing in the field of IP.”

Despite the sophistication demonstrated by legal practitioners, lawyers say effective enforcement will only be possible if all three branches of law enforcement – police, lawyers and the judiciary – are sensitive about IP issues. “One unique challenge which India faces is a lack of a national IP policy or agenda encouraging and cultivating an innovation culture in the country,” says Dhakad. “However, the good news is that the government has finally taken note of this gap and has recently started an industry-wide consultation movement in an effort to identify the elements of the basic draft of [this] policy.”

As Indian authorities gear up to the challenges at hand, IP owners themselves are becoming savvier about the exploitation of their assets. “Besides usual IP protection and enforcement issues, increasingly the emphasis is shifting to the issues concerning IP monetization,” explains Siddharth Mahajan, founder and managing partner of Auxilium Partners. “The transactional issues involving IP assets are increasing and clients are looking to come up with innovative IP acquisition, IP licensing and buyouts of IP assets to maximize their revenues.”

Proactive protection

As India’s IP regime continues to evolve and mature, rights owners should be vigilant and regularly monitor their IP portfolios. “In India, almost every brand, irrespective of its origin, is under ‘attack’, as it were, in cyberspace,” says Ryder. “We did a detailed survey in which we found a cyber-squatter on almost every major brand name,” he adds. In addition to cyber-crimes, Ryder notes the security of IP in outsourcing transactions and digital copyright issues are also major concerns.

Of course, IP owners should alway be mindful of counterfeiting and piracy. “They should keep track of and monitor the retail space, the marketplace as well as their e-businesses online,” says Krishna. “When an IP infringement is detected, owners should take immediate steps to report it to the law enforcement authorities as early as possible, so that all investigative avenues are explored.”

Lawyers also suggest that IP owners undertake periodic surveys of their IP. This can be done internally, in terms of their actual necessity, and externally, in relation to the market use of the IP asset and any violations that have occurred. In addition, business owners should secure their IP through proper documentation, awareness of the consequences of breaching confidentiality and non-disclosure agreements, and by establishing a strong chain of title in the sale, licensing or purchase of all IP.

From a macro perspective observers say a better IP framework in India simply depends on education and societal values about protecting IP. “Ultimately, for intellectual property to be successfully protected, the appreciation, respect and cooperation from the general public is of vital importance,” says Dhakad, “and unless the public is familiar with issues relating to intellectual property rights through education and awareness, robust IP protection will remain an uphill task.”

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