Patent law fine with penalties, not prison

By DPS Parmar, LexOrbis
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Chapter XX of the Patent Act, 1970 (act), containing sections 118 to 124, imposes penalties for breaches of various provisions. Penalties include fines and imprisonment. Proceedings before the Controller General of Patents, Designs and Trade Marks (controller) are governed by the Patent Rules, but section 159(2) of the act restricts the rules to matters set out in that section. If a matter is not specified in the section, the controller has no power to deal with it. There is no provision to make rules for the imposition of penalties in sections 118 to 124 and the general criminal law applies. Proceedings are dealt with by the appropriate criminal court.

DPS Parmar
DPS Parmar
Special counsel
LexOrbis

As the controller has no specific power to deal with contravention of the penal provisions of the act, any third party can bring proceedings before the court. This includes the controller. However, if the controller loses the case, their office may suffer the usual consequences. Needless to say, the controller has never brought such an action.

The government introduced the Jan Vishwas (Amendment of Provisions) Bill, 2022 (bill), in parliament in December 2022 to decriminalise minor offences in 42 statutes including the act. The bill was referred to a joint committee of parliament, which will report by the end of the current session. One of the objectives of the bill is to abolish imprisonment for minor offences under patent law, increasing fines instead. For instance, a refusal or failure to supply information under sections 100(5) and 146 leads to a fine of up to INR100,000 (USD1,200). In the case of continuing refusal, in place of a fixed penalty of up to INR1 million a further penalty of INR1,000 may be imposed for every day during which the refusal continues. For furnishing false information the punishment of imprisonment is removed and substituted with a heavy fine of not less than INR2.5 million. For falsely marking products as patented or patent pending under section 120, the fine is increased tenfold.

The most important feature of the bill gives adjudicating powers to the controller to determine the penalties that were earlier missing in the act. Added section 124A provides for imposing penalties where the government is authorised to appoint adjudicating officers to determine penalties under the act. Adjudicating officers will have the power to summon individuals to give evidence and conduct inquiries into violations of the act. A new clause xiiia has been added to section 159(2), inserting the manner of imposing a penalty under section 124A(a). The controller will thus get the power to adjudicate and to impose penalties for any contravention or default under the act in the manner which may be prescribed. This bill proposes an appeal mechanism for any person aggrieved by an order made by an adjudicating officer. Such appeals will be to the high court.

The purpose of these amendments is to discourage any continuation of the default or contravention. When the words in section 123 of the act “he shall be punishable with [a] fine which may extend to one lakh rupees [INR100,000] in the case of a first offence and five lakh rupees [INR500,000] in case of a second or subsequent offence”, are replaced by the words “he shall pay, by way of penalty, which may extend to five lakh rupees, and in case of the continuing default, a further penalty of one thousand rupees for every day after the first during which such default continues”, the substitution emphasises that there is to be strict compliance with the orders of the controller.

This move by the government to decriminalise minor crimes under the act will go a long way to ease doing business in India with regard to patented products. Without compromising the requirement to comply with the public interest provisions of patent law, this bill seeks to streamline the procedure before the controller. Penalties will be imposed only in cases where non-compliance is willful and deliberate. The amendments to the act emphasise that there must be strict compliance with orders made by the controller. Defaulters will find that ignoring the new measures will lead to large, and increasing, financial penalties. The decriminalisation of the act in respect of minor infringements is a welcome move. However, the joint parliamentary committee must report positively on the bill for it to advance. Until then, everyone can only wait and hope.

DPS Parmar is a special counsel at LexOrbis.

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