Court grants 2 mnths to CBI for obtaining sanction to prosecute accused in Aircel-Maxis case

New Delhi: A Delhi court today granted two months time to the CBI for obtaining sanction from authorities concerned to prosecute certain accused in a case against former Union minister P Chidambaram and his son Karti for alleged irregularities and criminal conspiracy in the Aircel-Maxis deal case. The agency had on July 19 filed charge sheet against the Congress leader, his son Karti, 10 individuals, including public servants, and six companies as accused in the case.

Special CBI Judge O P Saini allowed agency’s request to grant time after senior advocate Sonia Mathur told the court that sanctions are awaited. “Adjourn the matter for October 1,” the court said. Mathur, who appeared on behalf of the Central Bureau of Investigation, told the court that the agency was expecting sanctions for prosecution from concerned authorities in about four weeks.

The CBI is probing as to how Chidambaram, who was the Union finance minister in 2006, granted a Foreign Investment Promotion Board (FIPB) approval to a foreign firm, when only the Cabinet Committee on Economic Affairs (CCEA) was empowered to do it. The senior Congress leader’s role has come under the scanner of investigating agencies in the Aircel-Maxis deal of Rs 3,500-crore and the INX Media case involving Rs 305 crore.

In its charge sheet filed earlier in the case against former telecom minister Dayanidhi Maran, his brother Kalanithi Maran and others, the agency had alleged that Chidambaram had granted an FIPB approval in March, 2006 to Mauritius-based Global Communication Services Holdings Ltd, a subsidiary of Maxis. The Maran brothers and the other accused named in the CBI charge sheet were discharged by the special court, which had said the agency had failed to produce any material against them to proceed with the trial.

Corporations and Human Rights: Need for Regulatory Compliance

Author : – Nitish Nayan

 

Introduction

Multinational corporations (MNCs) have become one of the prominent actors on the world stage, and only one of several non-state entities seeking participatory role in the international law. The international body has come to recognize the role of MNCs in the international politics because of the power they wield, both in the political and the economic sphere. This political clout and economic power of MNCs have led them to expand their wings in the territory of the major markets in the world.

Emergence of Corporations in different part of the world have ensued the debate: whether Corporations which are free to exercise unfettered power in furtherance of narrow economic interest should be held accountable to internationally agreed upon norms of human rights.[i] This debate has arisen mainly in view of emerging problems from the corporate activities that range from environment to violation of labour and human rights. This is not just an abstract debate. The integration of world economy followed by liberalization of trade economy has left the developing country particularly vulnerable to the corporate activities. The acute problem of poverty in the developing countries has been identified as a main reason for this vulnerability which presents numerous opportunities for corporation in form of labour exploitation, environmental pollution and other economic as well as social issues.[ii]

These facts together with the inability of the local government to devise regulatory mechanism have put corporations doing business, particularly in the third world countries, in the questionable position. The failure of local government to devise proper regulatory framework have been led due to various factors such as political instability in the country, effort of the government to create liberalized trade environment or pressure from MNCs itself.

As a direct consequence of the effort to manage the problems generated by the transnational challenges of corporate groups, human rights issue have assumed great significance in the corporate affairs. Under pressure to be more accountable, many corporations have taken up the banner of Corporate Social Responsibility (CSR), adopting various voluntary initiatives. However, there has been little or no call from the international community to devise an international mechanism presenting binding norms for the conduct of corporations nor has much attention been devoted to remedying the presumed shortcomings in developing country regulatory systems that thwart effective remedies for these social harms. Instead the international opinion has focused on giving piecemeal remedy by calling for non- binding code of conduct for the corporations.

The reluctance of the international community to formulate binding conduct on the corporation centres on the policy debate. It has been contended by some that corporation is a private property of shareholders and that the sole purpose of the corporation is to maximize profits. Thus, the sole obligation of the corporation is to “make as much money for its stock- holder as possible”[iii].  Even, it has been argued once by noted entrepreneur that “CSR undermines the very foundation of our free society.”[iv] This theory reduces the ability of the corporations in obeying the law, abiding by prevalent ethical customs, and promoting good public relations, as these thematic principles might come in their way to maximise profits.

However, others believe that corporation has a social responsibility other than constituents. This theory mainly rests on the assertion that corporations are not just private property of the individuals but are social institutions that come into existence with the permission and support of the state. The state allows them to exploit vast resources, to which the state hold only as the trustee on behalf of the whole mankind. Therefore the corporate purpose should include the state’s interest of promoting general welfare. The proponents of this diametrically theory, therefore, urge that a regulatory framework should be evolved to reflect the said purpose in the corporation’s behaviour. The largely voluntary measures associated with corporate social responsibility should be augmented by legal means to promote important social values.[v]

The constant shift of position from that of the philanthropic attitude of the corporation to that of responsibility and accountability towards the society has led up to demands for international regulatory framework for the conduct of corporations. It has been argued that voluntary philanthropic attitude of corporations allow the corporations to operate without being bound by the definite standard and any way such charity have not yet helped in containing the human rights abuses. The proven corporate misconducts, such as exploitation of workers, harming the fragile environment, marginalization of vulnerable populations and producing other negative social consequences have only the buttressed the claim for stricter scrutiny of corporate behaviour, thus, pressing the need for regulation of corporate social responsibility by evolving suitable mechanism- both at regional as well as international level. However, a host of institutional, political, and historical forces have thus far inhibited the emergence of an international and municipal human rights legal framework that can bind corporate entities.

 

Development of Regulatory Regime for Corporate social Responsibility
Corporate activities that harm the environment, violate labour and human rights, and undermine the state institutions remain problems in all market economies. Nowhere are these problems more acute than in developing countries. While domestic regulatory systems can help in of protecting the environment and worker rights and the judiciary can ensure that human rights are upheld and corporate misconduct prosecuted, yet the general view is that, whether due to inadequate resources or ineptitude, the same expectations do not hold for developing countries, particularly the nations which fare badly on Human Index scenario. As evidence of corporate transgressions has mounted, it is noteworthy that there have been very few calls from the international regulators to oversee these matters, nor has much attention been paid in strengthening the regulatory system of the developing countries that may check human rights abuses. Instead, policy makers and many activists have focused on voluntary corporate social responsibility (CSR) measures.[vi]

Corporate Social Responsibility is an umbrella term that refers to a variety of initiatives in the areas of social concern, for example- labour rights, environmental standards, etc. As the operations of the corporations in the present times are increasingly venturing out of borders of the home state, these initiatives look to international law for their normative authority, intending to apply sometimes international legal prescriptions directly to corporations.[vii]

The primary actors in promoting and protecting the rights of all individuals always have been intergovernmental organizations, such as the United Nations, as well as individual governments. Recently these international and national bodies have turned their attention towards scrutinizing the corporate practices on the revelation of wide spread human rights abuses. Some corporations have also responded by creating their own policies regarding human rights violations in the countries where they operate. In this context, it would be not out of place to highlight the international documents which aim at improving compliance of corporations with human rights and see how far these international goes in ensuring practice of corporations in conformity to the established human rights norms. However, before that it is equally imperative to define what practices comprise international human rights which the corporations are expected to promote and protect.

 

1.1  Defining- International Human Rights

Before a corporation may be expected to promote and protect international human rights, it is necessary that there must be some consensual definition among the different stake- holders as to what these rights constitutes. While the rights that accrue to individuals vis-a-vis governments are generally defined in the constitutional document of governance, determining what specific rights should be the concern of corporation is not as straightforward an exercise. Of guidance, however, are several international documents, ratified by and binding upon the international community of states, containing specific international human rights guarantees. The most definitive interpretation of human rights obligations at the international level is contained in the International Bill of Human Rights.[viii] It is composed of the Universal Declaration of Human Rights (Universal Declaration or UDHR), the International Covenant on Economic, Social and Cultural Rights (ICESCR Covenant), and the International Covenant on Civil and Political Rights (ICCPR Covenant), and the Optional Protocol to the International Covenant on Civil and Political Rights.[ix] These documents constitute the basic definitions of human rights and identify the responsibilities of nations and individuals to respect those rights.

The Universal Declaration is accepted as the definitive interpretation of the human rights to which all member states are bound as parties to the United Nations Charter.[x] Several of the articles of the Universal Declaration are incorporated into customary international law which is binding on all states. The UDHR contains thirty articles that cover civil and political rights, as well as some fundamental economic rights. These rights may be described broadly as rights to control one’s own body and actions, and rights to be free from discriminatory or persecutorial state interference. Some particular rights include the right to human dignity and non-discrimination on a variety of bases: life, liberty and personal security; freedom from slavery; the right to work and for equal pay for equal work; the right to equal protection; marriage rights; and the right to own property. Corporations often find themselves faced directly and indirectly with issues involving the human rights defined in the UDHR.

In an ever-changing political and social context, the rights contained in Universal Declaration assume great significance even for the corporate bodies. Corporations may be presumed to be faced with labour issues, such as those involving equal pay, the ability to form and join labour unions, and paid leisure time. Prohibitions against forced labour, torture, interference in religious and political beliefs are also all rights protected by the UDHR and are issues that many of today’s corporations are facing.

The rights contained in the UDHR and the U.N. Covenants are universal. Recent international conferences including the U.N. World Conference on Human Rights held in Vienna in 1993 the U.N. Fourth World Conference on Women, held in Beijing in 1995[xi], reaffirmed the principle of universality over calls for some religious or cultural interpretation of those norms.[xii]

 

1.2 International Regulatory Regime for Corporations

Several international and national bodies, as well as private corporations themselves, have enacted or attempted to enact schemes for regulating the activities of these MNCs. As the report of human rights abuses became frequent, human rights NGOs, International organizations and national governments turned their attention to contain these abuses and hold MNCs accountable for violations. A range of options have been proposed, from developing national laws to establish international and regional treaties or guidelines.[xiii] In addition, some kind of arrangements in form of voluntary non- binding codes has been suggested such as individual codes of conduct.

 

1.2.a Corporate Code of Conduct

The “Code of Conduct” is a written policy or kind of statement of principles, intended to serve as the basis for a commitment to particular enterprise conduct.[xiv] These codes have been developed on the model framework by organizations such as ILO and OECD.[xv] It is interesting to note that the code arrangements of both the organization is characterized as voluntarily arrangements and sets out a range of non- binding commitments.[xvi] MNCs usually enter in to a code varying it with suitable need of national laws and international standards. The content of the code also vary depending upon the sector in which the corporation is engaged. The OECD has identified eight broad areas of conduct to be covered under the code. Among these labour rights, environmental standards, consumer protection, information disclosure are some of the notable entries. However, these codes have termed as insufficient by its critique, as may be seen from case studies followed in next chapter, because there is no formal role of any external agencies in monitoring and reporting on code compliance.

1.2.b United Nations Norms on Protection of Human Rights

The UN Sub- Commission for the Promotion and Protection of Human Rights has adopted the draft norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (“the Norms). The Norms set out a comprehensive guidelines aimed at improving the compliance of MNCs with human rights.[xvii] The Norms begins with the Preamble, reflecting international standard on human rights as adopted under various UN documents. The norms imposes obligation on the corporations with reference to rights which they are suppose to uphold. These norms include imposing collection of rights, ranging from environmental and consumer protection to non- discrimination and the workers’ rights.

The UN norms came in to existence as a result of previous failed attempt to produce standardized corporate human rights obligations, such as the UN Code of Conduct for Transnational Corporations (UNCTC) and also in order to address the many of the shortcomings of a voluntary approach to the corporate responsibility.[xviii] The norms are yet to be adopted by the UN human Rights Council. The Norms have till not became binding, many political commentator already believe that there will be considerable pressure on the MNCs to comply with it. Many commentators have also touted the Norms as having the potential to find their ways in the multilateral treaties.

 

 

Approaches to Corporate Responsibility in the Context of Human Rights
2.1 Overview of the Debate

The debate on two approaches viz. voluntarist approach and state centred – primarily revolve around the effectiveness and desirability of interference by the state in the operations of the corporations. The business and industry commentators see these voluntary codes of conduct as the most effective means of ensuring that the corporations take human rights in to the account.[xix] It is argued by them that consumer pressure provides an incentive for a corporation to voluntarily adopt a code of conduct because consumers will boycott goods produced by a corporation whose practices violate basic human rights standards. Even if the real offender is the host country and not the corporation, consumers may react negatively toward the corporation.[xx]

However, at the other end of spectrum, many analysts who have examined the voluntary code of conduct framed on the model of OECD and ILO draft statement believe that such codes have proven ineffective mechanism in the protection of the human rights. They have pointed out that these codes have been marred by lack of enforceable standards, lacunae in the definition of human rights and the way these are articulated are some of the major deficiencies amongst the others.[xxi]

 

2.2 Critique of Voluntary Code of Conduct

Codes of conduct serve as a strategy to preserve human rights. This voluntary system of regulation, however, proves insufficient.[xxii] First, codes lack accountability for compliance with international law because corporation develop their own codes. Even if the corporations comply with the basic international human rights norms, many corporations’ codes lack express responsibilities, especially in situations where these corporations confront government violations and experience conflict as to corporate duties.[xxiii] Furthermore, most corporations with codes utilize self-regulation, a standard that does not assure compliance or resolution because the codes lack the necessary accountability to a third party. Concurrently, the argument that some corporation adopt codes of conduct merely to defend corporate presence and limit liability remains valid because many corporations remain complacent about improving human rights violations while realizing excessive profits from the exploitation of labourers. Additionally, the premise that countries exhibit a reluctance to impose standards proves sound because some corporations assess standards as economically unviable when compared to other competing trade countries without standards.[xxiv] Finally, the inadequacies of this voluntary private system of regulation, although an admirable effort to fill the void between existing norms and international law, severely compromise human rights standards because it lacks accountability.

 

Proposal for Strengthening the Regulations
After having considered the merits of voluntary code of conduct and the role of the state in developing responses towards human rights and the extent towards these regulations govern the corporate social responsibilities, this chapter outlines the proposal for better techniques which could strengthen the existing dispensation in compliance with these rights.

 

3.1 The Need for International Legal Framework

The current scope of the international human rights law of MNCs is wide but scattered evenly. It encompasses examples of codes, guidelines and compact which have been termed as soft law by some analysts.[xxv] The actual legal cover these initiatives provide is in reality non-existent. The legal duties imposed on corporations have some potential authority, but as yet they remain ill-defined and ineffective. The United Nations Development Program (UNDP) report explains that “there are no mechanisms for making ethical standards and human rights binding for corporations.”[xxvi] Aside from the lack of international procedures, it has been usually reported that the resort to national laws is often frustrated by the “corporate veil” of business structures, official corruption, the lack of effective procedures, or the unavailability of counsel or resources to aggrieved parties.[xxvii]

As a result, growing number of policy institutes, legal experts and development specialists have been urging that efforts toward CSR be augmented with legally-binding obligations, including the elaboration of an international framework or treaty. The legal, practical, and political difficulties associated with the development and implementation of a binding normative framework for corporations is known to everyone. However, any effort on reaching such multilateral agreements must address the issue relating to challenge of establishing a system of implementation and enforcement, including corporate disclosure and reporting requirements; monitoring, investigation and complaint mechanisms as most of the countries in developing world lack ability and means to ensure compliances.[xxviii] Apart from this, such treaty should also identify and establish some kind of oversight body to ensure fixing of direct liability on the corporations in the reported instances of human rights violations by MNCs.

 

3.2 Need for Imposing Criminal liability on the Corporations

Human Rights abuses by the corporation are not only limited to violation of workers’ rights, impairing environmental sustainability, but extended to perpetrating war crimes. The instance of Dutch company- Royal Shell which has used the help of corrupt and repressive military regime of Nigeria against ethnic minority Ognoi for opposing its operation is well known.[xxix]

To curb such practices it is necessary to evolve a mechanism imposing criminal liability to the corporations for its complicity in the war crimes. The issue of possible extension of the jurisdiction of the International Criminal Court (ICC) may be considered by the international forum.[xxx] The trial of criminal action of the corporation by the international body becomes all the more important because usually the host country has little or no control over such business enterprises as most of the corporations are rooted in the developed world.

The concept of criminal liability of the corporation is already finding its way both in national and international legislation. Although the current dispensation is mainly restricted to the issues of terrorism and financial criminality, the human rights issue may be recognized in the near future.

 

3.3 Developing National Legislation

While international initiatives related to corporate accountability continue to occupy centre stage, nonetheless it is important to note that these initiatives recognize that the primary responsibility to promote, secure and protect human rights remains with the national government. A large range of substantive national laws relate directly to issues of corporate social responsibility, such as labour standards, health and safety regulations, consumer protection, factory emission requirements, anti-trust provisions, product liability, and many others. While the terminology may not expressly refer to human rights, these laws are a vital element of corporate social responsibility.

Such substantive laws, as well as procedures for implementation and redress, vary dramatically from country to country. In situations where national laws are weak, companies may be able to engage in objectionable conduct with impunity. Even where legal standards do exist, governments may be unwilling or unable to enforce them. Given their relatively disadvantageous position, the governments of developing countries may be under particular pressure to avoid confrontation rather than risk losing the benefits associated with foreign investment.[xxxi] Official corruption, reportedly widespread in many countries, aggravates this problem. Since, many of these problems are particular to the underdeveloped nations, some analyst have called upon the developed world to enact legislation for binding code of conduct on the MNCs operating in the poor host countries.

For emerging economies, such as India, the review of companies’ law may be considered seeking new standards in the areas of reporting, duty of care, and liability to ensure that companies meet their environmental, social, and economic and human rights responsibilities.

 

3.4 Human Rights Impact Assessment

Human rights impact assessment is the process of predicting the potential consequences of a proposed policy, program or project on the enjoyment of human rights. The objective of the assessment is to inform decision-makers and the people likely to be affected so that they can improve the proposal to reduce potential negative effects and increase positive ones.[xxxii] Human rights impact assessment is a relatively recent concept. Other assessment programmes like environmental impact assessment and economic impact assessment are taken on regular basis as the policy issues while beginning any project.

It may be noted that almost every states is a party to one human rights treaty or another. To comply with its international human rights obligations, a State must ensure, before it adopts any proposed law, policy, program or project that it is consistent with its human rights, as well as other, legal obligations flowing from such treaty. From the corporation point of view, human right impact assessment incorporates taking of the preliminary view of the implications of corporate action including investment project on the human rights. Such assessment should be taken both in the state where regulatory dispensation is in shape and even in the rogue state.[xxxiii] The requirement of such assessment may be even more necessary in the disturbed nations. It should be made mandatory for the corporation to assess whether their investment in the repressive state would worsen the human rights situation, benefitting the insensitive government. In such state, for such assessment to be carried out, it is necessary to establish oversight monitory body to verify the report submitted by the corporation. In the other states the monitoring may be done by the independent authority appointed by the national government.

Conclusion

The increasing power of the corporations and the impact of corporate decisions on international law prove that corporations should be hold more accountable and responsible for its actions, while international law accommodates the norms to enforce the accountability. Corporations’ conduct directly influences human rights because large corporation possess immense power obligating them to protect workers’ rights while influencing government standards. Given the predominance of market economies in today’s world, improving regulation must be a priority. Voluntary measures can only play a role if states establish basic regulatory frameworks.

 

The governments’ effective regulation of human rights proves essential because enforcing issues confer standards and encourages international law to accommodate economic and political reality. Corporations in developing world, as well as those in other industrialized nations, should uphold human rights standards in accordance with international law. The increasing responsibility of the corporations, and their fundamental role, necessitates the imposition of a mandatory and regulated global human rights enforcement mechanism. The implementation of such mechanism across the international spectrum with effective regulation protects individuals because it detects violations, promotes standards, encourages responsibility, and advances accountability in accordance with human rights law. At the same time, empowering domestic regulators is an essential component of this mechanism, since primary responsibility to protect human rights, under the international treaty, is that of a state. Until this happens, the corporations and governments will profit at the expense of human rights and will remain exempt from liability.

 

 

 

[i] The Challenge of Imposing Human Rights Norms on Corporate Actors, Schutter Olivier, Transnational Corporations and Human Rights, 2006, ed. Schutter Olivier, p. 2
[ii] Dr. Sheikh Saleem, Corporate Social Responsibilities: Law and practice, 1996, p. 23
[iii] This line of argument was propose put forward by noted economist Milton Freidman in his book capitalism and Freedom, as noted in Corporate Social Responsibility Frank Lopez in Global Economy after September 11: Profits, Freedom and Human Rights, 55 Mercer L. Rev., 739
[iv] ibid
[v] Dodge v. Ford Motors Ltd, 170 N.W. 668 (Mich 1919). In this case the debate as to role of corporations ensued between Henry Ford and Dodge Brothers.
[vi] These voluntary initiatives have been adopted on the model draft prepared by some International Organizations, such as Global Compact; Global Reporting Initiative; OECD Guidelines for Multinational Enterprises.
[vii] B Hepple, ‘The importance of Law, Guidelines and Codes of Conduct in monitoring corporate behaviour’ in Corporate Code of Conduct, Mc Leay, Transnational Corporations and Human Rights, Schutter O, ed; 2006, p. 220.
[viii] The drafting of International Bill of Human Rights was of the first amongst the many tasks that UN has taken soon after its establishment in 1945.
[ix] Basic facts about the UN, UN Department of Public Information, New York, 2004, p. 223
[x] ‘The Universal Declaration remains the primary source of global human rights standards, and its recognition as a source of rights and law by states throughout the world distinguishes it from conventional obligations
[xi] The World Conference on Women recognized the universality of the human rights norms by calling upon the corporations and other employers to resolve the issue of international mandate of non- discrimination against female work force at the work place.
[xii] While the rights recognized under the International Covenants are universal, but it calls upon the states and individuals including the corporations to maintain fine line between upholding universal norms and not imposing culturally insensitive practices in the workplace.
[xiii] Mc Leay, Corporate Code of Conduct, Transnational Corporations and Human Rights, Schutter O, ed; 2006, pp. 219-  220.
[xiv] Ibid, p. 222
[xv] OECD defines the code as ‘commitments made voluntarily by the companies and other similar entities, which put forth standard and principles for the conduct of business activities in the market place’. See, Bunn I, Global Advocacy for Corporate Accountability: Translantic Perspectives from the NGO community, 19 AMUILR, 2004
[xvi] Supra note # 13.
[xvii] Gelfand J, The Lack of Enforcement in the UN Draft Norms, Transnational Corporations and Human Rights, Schutter O, ed; 2006, p. 313
[xviii] Carolin Hillemanns, UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights, 4 German Law Journal No. 10 (1 October 2003) – European & International Law
[xix] Ibid;
[xx] See, Su-Ping Lu, Corporate Codes of Conduct and the FTC: Advancing Human Rights through Deceptive Advertising Law, 38 Colum. J. Transnat’l L. 603, 606 (2000)
[xxi]Mc Leay, Corporate Code of Conduct, Transnational Corporations and Human Rights, Schutter O, ed; 2006, pp. 222-223.
[xxii] Ibid
[xxiii] Lopez Rene, Corporate Social Responsibility in a Global Economy, 55 Merc Law Review 739, (2004)
[xxiv] See below, the case studies on adidas code of conduct in China
[xxv] Dr. Sheikh Saleem, Corporate Social Responsibilities: Law and Practice, 1996, p. 185
[xxvi] United Nations Development Program, Human Development Report, 1999 available at http://hdr.undp.- org /reports/global/1999/en/pdf/hdr_1999_full.pdf
[xxvii] International Council on Human Rights Policy, Beyond Voluntarism: Human Rights and the Developing International Legal Obligations of Companies (2002) at www.ichrp.org/ac/excerpts/41.pdf
[xxviii] Ibid
[xxix] For details on the instance, See, Cassel Douglas, Corporate Initiatives: A Second Human Rights Revolution, 19 Fordham Int’l L. J 1963, (1996)
[xxx] However, the such extension of Jurisdiction may require complete overview of the ICC Statute, See, Chiomenti Cristina, Corporation and the International Criminal Court, Transnational Corporations and Human Rights, Schutter O, ed; 2006, p 287.
[xxxi]Supra note # 26, In the case study of Adidas operation in China, the unwillingness of the national authorities may be seen in extending regulations to the private corporations.
[xxxii] Professor Paul Hunt, Impact Assessments, Poverty and Human Rights, Submitted to UNESCO
[xxxiii] Supra note # 25

Pharmaceutical Patent in India: Access to Medicines

Akshay Khandelwal

Abstract

Patents provide the Patent owner with the legal means to prevent others from making, using, or selling the new invention for a limited period of time, subject to a number of exceptions. Patents do not constitute marketing authorizations. The TRIPS Agreement stipulates that it must be possible for all inventions to be protected by a patent for 20 years, whether for a product (such as medicine) or a process (a method of producing an ingredient for a medicine).

TRIPS (The Agreement on Trade Related Aspect of Intellectual Property Rights) attempt the arduous task of balancing private and public rights. On one hand, it protects the interest of the pharmaceutical companies that invest heavily in R & D of Drugs and, on the other; it allows nations that belong to the WTO to promote public health in their respective countries. However, patents on pharmaceutical products have adversely affected industrially developing and least developed countries, hampering their ability to formulate appropriate public health policies that would enable their ailing citizen to access medicines. For instance Pharmaceutical patents have raised the cost of life saving drugs, effectively putting them out of the reach of the majority of the World’s population.

The Article will analyze the effect on availability of medicines to the public due to the pharmaceutical patent system in the light of Indian Patent Act, 1970 and TRIPS agreement. The Author will identify the difficulties which the common people are facing and the unlawful gains which the patent holders are making, due to this patenting system.

“The idea of a better ordered world is one in which medical discoveries will be free of patents and there will be no profiteering from life and death.”

Indira Gandhi at the World Health Assembly in 1982

INTRODUCTION:

The patent system is social policy tool that aims to stimulate innovation. Internationally, patent protection is governed by the World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. TRIPS do not establish a uniform international law, but sets out minimum standards of patent protection that must be met by all WTO members. Developed countries have already implemented the agreement, and other countries such as India are implementing it now, in 2005. Least-developed countries are not obliged to do so until 2016.

Medicines are expensive when they are protected by patents. The patent holder has a monopoly on the drug for a minimum of 20 years, and uses that period to maximize profit. But as soon as generic competition is possible, prices of medicines plummet: for instance, after the Brazilian government began producing generic AIDS drugs in 2000, prices dropped by 82%.

Protection of public health was one of India’s major concerns when the TRIPS Agreement was being negotiated. The Patents Act, 1970 did not provide for product patents for inventions relating to medicines. The duration of protection of process patents for medicines was also limited to a maximum of seven years. This conscious policy choice adopted in India’s Patent Act yielded positive results over a period of three decades in building a good industrial infrastructure for manufacturing generic medicines, while also to keeping the price of essential drugs at a relatively low level. During the final stages of negotiations that resulted in the TRIPS Agreement, India attempted to ensure that TRIPS provisions would not substantially affect the public health needs of the large sections of the population that are below the poverty line. Subsequently, India made conscious efforts to incorporate the flexibilities available in TRIPS and the Doha Declaration when India amended the Patents Act in 1999, 2002 and 2005.

The reasons for the lack of access to essential medicines are manifold, but in many cases the high prices of drugs are a barrier to needed treatments. Prohibitive drug prices are often the result of strong intellectual property protection. Governments in developing countries that attempt to bring the price of medicines down have come under pressure from industrialized countries and the multinational pharmaceutical industry. The World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS) sets out the minimum standards for the protection of intellectual property, including patents for pharmaceuticals. While TRIPS does offer safeguards to remedy negative effects of patent protection or patent abuse, in practice it is unclear whether and how countries can make use of these safeguards when patents increasingly present barriers to medicine access.

The lack of protection for product patents in pharmaceuticals and agrochemicals had a significant impact on the Indian pharmaceutical industry and resulted in the development of considerable expertise in reverse engineering of drugs that are patentable as products throughout the industrialized world but unprotectable in India. As a result of this, the Indian pharmaceutical industry grew rapidly by developing cheaper versions of a number of drugs patented for the domestic market and eventually moved aggressively into the international market with generic drugs once the international patents expired. In addition, the Patents Act provides a number of safeguards to prevent abuse of patent rights and provide better access to drugs. The Indian Patents (Amendment) Act, 2005 introduced product Patents in India and marked the beginning of a new patent regime aimed at protecting the Intellectual property rights of patent holders. The Act was in fulfillment of India’s Commitment to World Trade Organization (WTO) on matters relating to Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement).

Background:

Sick people in India and around the world depend on the willingness of Indian producers to carry out the research to develop and manufacture affordable generic versions of second-line AIDS drugs and other new medicines. India has a long history of fighting for protection of public health over intellectual property: it led developing countries’ resistance to the TRIPS Agreement during the Uruguay Round of WTO negotiations, and also played a key role during the 2001 WTO ministerial conference in Doha, which resulted in the adoption of the Doha Declaration on TRIPS and Public Health. Unlike other developing countries, it has also waited as long as was permitted by TRIPS before introducing patents on pharmaceutical products. In the new post-2005 TRIPS context, it is crucial that India continue to develop policies that promote access to medicines, not just out of responsibility to its own people, but as a lifeline to patients in other developing countries.

At the time of independence in 1947, India’s pharmaceutical market was dominated by Western MNCs that controlled between 80 and 90 percent of the market primarily through importation. Approximately 99 percent of all pharmaceutical products under patent in India at the time were held by foreign companies and domestic Indian drug prices were among the highest in the world. The Indian pharmaceutical market remained import-dependent through the 1960s until the government initiated policies stressing self-reliance through local production. At that time, 8 of India’s top 10 pharmaceutical firms, based on sales, were subsidiaries of MNCs. To facilitate an independent supply of pharmaceutical products in the domestic market, the government of India founded 5 state-owned pharmaceutical companies. Today, India is the world’s fifth largest producer of bulk drugs.

Government policy culminated in various actions including: the abolition of product patents on food, chemicals, and drugs; the institution of process patents; the limitation of multinational equity share in India pharmaceutical companies, and the imposition of price controls on certain formulations and bulk drugs. Subsequently, most foreign pharmaceutical manufacturers abandoned the Indian market due to the absence of legal mechanisms to protect their patented products. Accordingly, the share of the domestic Indian market held by foreign drug manufacturers declined to less than 20 percent in 2005. As the MNCs abandoned the Indian market, local firms rushed in to fill the void, and by 1990, India was self-sufficient in the production of formulations and nearly self-sufficient in the production of bulk drugs.

Regulatory framework for Pharmaceutical Patent before TRIPS Agreement:

The focus of the intellectual property regime that India has had to adopt since it took Commitments under the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) have remained on the ability of the country to provide mechanisms which can ensure that the country is able to provide access to medicines to its citizens at affordable prices. India has had a unique position among the countries in the developing world for it has a strong generic pharmaceutical industry, which has been able to provide medicines at prices that were among the lowest in the world. Much of the credit for this development goes to the Patents Act that India enacted in 1970. Two key provisions facilitated this process.

• The first was introduction of a process patent regime for chemicals and,
• The second, shortening of the life of patents granted for pharmaceuticals.
The Patent Act 1970 stated objective was to foster the development of an indigenous Indian pharmaceutical industry and to guarantee that the Indian public had access to low-cost drugs. The Act replaced intellectual property rights laws left over from the British colonial era and ended India’s recognition of Western-style “product” patent protection for pharmaceuticals, agricultural products, and atomic energy. Product-specific patents were disregarded in favor of manufacturing “process” patents that allowed Indian companies’ to reverse engineer or copy foreign patented drugs without paying a licensing fee. This allowed the domestic industry build up considerable competencies and offer a large number of cheaper “copycat” generic versions legally in India at a fraction of the cost of the drug in the West, as long as they employed a production process that differed from that used by the patent owner. The Act protected process patents for 7 years instead of the usual 15 years needed to develop and test new drugs.

Indian Patent (Amendment) Act, 2005 (In consensus with TRIPS Agreement):

On March 23, 2005, the Indian Parliament passed the Patent (Amendment) Bill 2005 (Bill No. 32-C of 2005). It was the third amendment to the Indian Patent Act (1970). The amended Patent Act conforms to requirements set forth by the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Since the new law came into effect on January 1, 2005, there have been serious concerns regarding the role of the domestic Indian generic industry in the new product patents regime, and the continued availability of essential medicines at affordable prices.
To meet its TRIPs obligations, India amended its patent law on March 22, 2005, abolishing its “process” patents law and reintroduced Western style “product” patents for pharmaceuticals, food, and chemicals. This action effectively ended 36 years of protection for Indian pharmaceutical companies and stipulated that Indian companies selling copycat drugs must pay foreign patent holders a “reasonable” royalty for copies sold in the Indian market. The amendment made reverse engineering or copying of patented drugs illegal after January 1, 1995.

The Act allowed for only two types of generic drugs in the Indian market:

• Off-patent generic drugs and,
• Generic versions of drugs patented before 1995.

At present, nearly 97 percent of all drugs manufactured in India are off patent and therefore will not be affected by this Act. It also introduced a provision establishing compulsory licenses for exports to least developed countries with insufficient pharmaceutical manufacturing capacities. The Amendment grants new patent holders a 20-year monopoly starting on the date the patent was filed and, without a compulsory license, no generic copies can be sold during the duration of the patent.

Compulsory Licensing:

Compulsory Licensing is a procedure whereby a Government can allow any company, agency or designated person the right to make a patented product, or use a patented process under license, without the consent of the original patent holder. 36 Under section 84(1) of the amended Act, an application can be made for compulsory license three years after the grant of a patent: “At any time after the expiration of three years from the date of the grant a patent, any person interested may make application to the Controller for grant of compulsory license.”

Pharmaceutical Patent under TRIPS Agreement and Access to Medicines:

The World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS or “Agreement”), which sets out the minimum standards for the protection of intellectual property, including patents for pharmaceuticals, has come under fierce criticism because of the effects that increased levels of patent protection will have on drug prices. While TRIPS does offer safeguards to remedy negative effects of patent protection or patent abuse, in practice it is unclear whether and how countries can make use of these safeguards when patents increasingly present barriers to medicine access.

The Fourth WTO Ministerial Conference, held in 2001 in Doha, Qatar, adopted a Declaration on TRIPS and Public Health (“Doha Declaration” or” Declaration”) which affirmed the sovereign right of governments to take measures to protect public health. Public health advocates welcomed the Doha Declaration as an important achievement because it gave primacy to public health over private intellectual property, and clarified WTO Members’ rights to use TRIPS safeguards. Although the Doha Declaration broke new ground in guaranteeing Members’ access to medical products, it did not solve all of the problems associated with intellectual property protection and public health. The recent failure at the WTO to resolve the outstanding issue to ensure production and export of generic medicines to countries that do not produce may even indicate that the optimism felt at Doha was premature.

Indian generic drug manufacturers have been manufacturing generic versions of branded drugs. Under the Act, such generic drug manufacturers that had made significant investment and were marketing the product before January 2005 can continue marketing the product in the new regime. The Act grants them immunity from infringement suits from patent holders. They would only have to pay a reasonable royalty to the patentee. Indian generics makers still retain significant scope for copycatting patented Western drugs, legally or illegally, without penalty. And Western companies have seen relatively few of their patent applications approved. Industry observers who expected India’s IPR climate to suddenly change after the 2005 Act may have been overly optimistic in their estimate of how fast things can change in this industry.

India is one of the few developing countries that decided to use the full ten-year transitional period (1995-2004) under the TRIPS Agreement. During this period from 1995 to 2004, India received numerous product patent applications that the Indian Patent Office started examining in 2005. These applications are at various stages of examination and whether they are granted or not will have a significant impact on continued access to generic medicines.

Flexibilities available under TRIPS and its use by the Indian Government to secure access to essential medicines:

The introduction of pharmaceutical patents in India has been particularly controversial. Indian producers have long been suppliers of low-cost medicines (including key HIV/AIDS treatments), domestically and also to other low- and middle-income countries. In amending its patent law to meet new international obligations, India, like many developing countries, attempted to take advantage of flexibilities in TRIPS to ameliorate potentially negative effects that pharmaceutical patents might have on the supply of medicines. India used its full transition period, waiting to introduce pharmaceutical product patents until 2005 (pharmaceutical process patents were already available prior to TRIPS). Applications dating from 1995 onward were received but were not examined on HIV/AIDS (UNAIDS) and civil society groups, defend 3(d) and point to India as a model for developing countries attempting to use TRIPS flexibilities to promote public health.

In 2005, when India was compelled to re-introduce the product patent regime, the Indian Parliament, aware of its responsibility not only to Indians but to patients across the world adopted the only pragmatic solution available — to utilize flexibilities available under TRIPS in an attempt to secure the availability, affordability and accessibility of medicines. According to this approach, TRIPS does not set any universal common standard for the substantial aspects of the patent law. Thus, as the Doha Declaration on the TRIPS Agreement and Public Health (Doha Declaration), clearly states every WTO member has the right “to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose”. Thus the TRIPS implementation strategy was “to find the means within the patent system and outside it, to generate the competitive environment that will help to offset the adverse price effect of patents on developing country consumers. The cautious approach suggests the implementation of TRIPS should be done with minimum damage”.

As noted above, the various amendments to India’s patents law introduced flexibilities at both the pre- and post-grant stage of a patent application. This study explores the potential of three of these key flexibilities in allowing continued generic production of medicines.
• The first relates to medicines invented prior to 1995. Under TRIPS there is no obligation to provide patent protection to products invented prior to 1 January 1995.

• The second is one of the most important flexibilities employed by India which is the restriction of the scope of patentability in relation to known substances. Thus, section 3(d) of the Patents Act, 1970 prohibits the patenting of known medicines unless the patent applicant can demonstrate increased therapeutic efficacy. It must be borne in mind that section 3(d) is not a blanket prohibition on such patents. However, the Indian Patent Office is expected to apply this provision strictly while examining the applications before it. It is also expected to apply the provisions of section 3(e) that prohibits the patenting of mere admixtures and section 3(i) which excludes from patenting any process of “medical or surgical, curative, prophylactic or other treatment of human beings…”

• Finally, section 11A(7) of India’s patents Act, 1970 provides that where a company was already producing and marketing a product before 1 January 2005 on which a patent application was made in the mailbox, should that patent be granted, the company may continue manufacturing that product on the payment of a reasonable royalty. These are only some of the flexibilities available under the Indian law. However, if applied strictly they offer a significant space for generic production.

Judiciary Opinion:
Supreme Court on: Access to Medicines (Novartis Case)

The Indian Supreme Court has refused to allow one of the world’s leading pharmaceutical companies to patent a new version of a cancer drug, a decision campaigner hailed as a major step forward in enabling poor people to access medicines in the developing world.
Novartis lost a six-year legal battle after the court ruled that small changes and improvements to the drug Glivec did not amount to innovation deserving of a patent. The ruling opens the way for generic companies in India to manufacture and sell cheap copies of the drug in the developing world and has implications for HIV and other modern drugs too.

Campaigners were jubilant. A ruling in Novartis’s favour would have reduced poor people’s access to the drug, said Jennifer Cohn, of Médecins Sans Frontières (MSF). “The fact that India says patents is to reward innovation as opposed to small changes does stay true to the concept of what a patent should be.”

F. Hoffman-La Roche Ltd., v. Cipla Ltd. (Delhi High Court):

The Court, while rejecting the application from Roche for a temporary injunction preventing Cipla from manufacturing and selling at very low price the generic version of the cancer drug erlotinib, observed:

“therefore, this Court is of the opinion that as between the two competing public interests, that is, the public interest in granting injunction to affirm a patent during the pendency of an infringement action, as opposed to the public interest in access for the people to a life saving drug, the balance has to be tilted in favour of the latter. The damage or injury that would occur to the plaintiff in such case is capable of assessment in monetary terms. However, the injury to the public which would be deprived of the defendant’s product which may lead to shortening of lives of several unknown persons, who are not parties to the suit, and which damage cannot be restituted in monetary terms, is not only uncompensatable, it is irreparable. Thus irreparable injury would be caused if the injunction sought for is granted.”

Problem of Data Exclusivelity in Access to Medicine in India:

Pharmaceutical companies have to submit test and clinical data to the national health authorities to obtain marketing approval for a new drug. The national health authorities keep the innovator data confidential against “unfair commercial use” for ascertain time period, thus barring generic manufacturers from using the submitted innovator data for the stipulated period.

The US and EU grant “data exclusivity” for five years and eleven years, respectively. Most often, companies use data exclusivity provisions to seek a period of monopoly in a country even if it does not have any patents on the product in the country. As such, data exclusivity provisions have considerable implications for developing countries like India.

So far, India has not introduced provisions pertaining to data exclusivity in the three amendments to the Patents Act, 1970. India is now considering amendments to the Drugs & Cosmetics Act, 1940 and the Indian Insecticides Act, 1968 incorporating provisions for data protection.

Once data exclusivity is introduced, generic companies would have to do their own safety and efficacy tests. The huge cost involved in this exercise could result in generic companies being barred from producing a generic version of a product for a period extending effectively beyond 20 years. It may also result in the ineffective use of compulsory license due to data exclusivity provisions, were such a license issued to a generic manufacturer.

Conclusion:

Since 1970, India’s Patent Act has allowed Indian manufacturers to legally produce generic versions of medicines patented in other countries. India’s expertise in reverse drug engineering and the efficiency of its pharmaceutical manufacturing industry fast established it as the prime source of generic medicines in the world. 2005 marks a fundamental and potentially dramatic change in access to medicines in developing countries: countries which do not yet grant patents on medicines, such as India, now have to implement patent laws in compliance with the World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. The Act has some clear provisions to protect the interests of the domestic generic manufacturers. It has achieved a reasonably fine balance among stringent IP measures, while making use of some of the flexibilities that TRIPS offers. The amended Patents Act has an effective opposition system for challenging frivolous patents, limited patentability exceptions, elaborate provisions pertaining to compulsory licensing, and parallel importation.

The changes to the new Patents Act could enable India to continue playing the pioneer role that it played in the pre-TRIPS period, making drugs available at cheap prices to consumers both domestically, and around the world.

An overview : Intellectual Property Rights

Intellectual Property RightsAashka Shah

 

 

What is Intellectual Property Rights (IPR)

Intellectual property rights are the rights given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time.[1]

Intellectual Property Rights are legal rights, which result from intellectual activity in industrial, scientific, literary & artistic fields. These rights Safeguard creators and other producers of intellectual goods & services by granting them certain time-limited rights to control their use. Protected IP rights like other property can be a matter of trade, which can be owned, sold or bought. These are intangible and non exhausted consumption.[2]

 

Intellectual property refers to creations of the mind: inventions; literary and artistic works; and symbols, names and images used in commerce.[3]

 

Intellectual property, very broadly, means the legal rights which result from intellectual activity in the industrial, scientific, literary and artistic fields. Countries have laws to protect intellectual property for two main reasons. One is to give statutory expression to the moral and economic rights of creators in their creations and the rights of the public in access to those creations. The second is to promote, as a deliberate act of Government policy, creativity and the dissemination and application of its results and to encourage fair trading which would contribute to economic and social development.[4]

 

Intellectual property Right (IPR) is a term used for various legal entitlements which attach to certain types of information, ideas, or other intangibles in their expressed form. The holder of this legal entitlement is generally entitled to exercise various exclusive rights in relation to the subject matter of the Intellectual Property. The term intellectual property reflects the idea that this subject matter is the product of the mind or the intellect, and that Intellectual Property rights may be protected at law in the same way as any other form of property. Intellectual property laws vary from jurisdiction to jurisdiction, such that the acquisition, registration or enforcement of IP rights must be pursued or obtained separately in each territory of interest.[5]

 

What is a property?[6]

 

Property designates those things that are commonly recognized as being the possessions of an individual or a group. A right of ownership is associated with property that establishes the good as being “one’s own thing” in relation to other individuals or groups, assuring the owner the right to dispense with the property in a manner he or she deems fit, whether to use or not use, exclude others from using, or to transfer ownership.

 

Properties are of two types – tangible property and intangible property i.e. one that is physically present and the other which is not in any physical form. Building, land, house, cash, jewellery are few examples of tangible properties which can be seen and felt physically. On the other hand there is a kind of valuable property that cannot be felt physically as it does not have a physical form. Intellectual property is one of the forms of intangible property which commands a material value which can also be higher than the value of a tangible asset or property.

 

Types of IPR

  • Trademark
  • Copyright
  • Patent
  • Design
  • Geographical Indication
  • Trade Secret (Confidential Know How)
  • Traditional Knowledge

 

Trade Mark[7]

A trade mark is a sign that you can use to distinguish your business’ goods or services from those of other traders.A trade mark can be represented graphically in the form of your company’s logo or a signature.

Through a registered trade mark, you can protect your brand (or “mark”) by restricting other people from using its name or logo.

Once acquired, a trade mark can last indefinitely as long as you renew it every 10 years. Because a registered trade mark is a form of IP, you can license or assign it to others.

Copyright[8]

Applies to literary and dramatic works, artistic and musical works, audio and video recordings, broadcasts and cable transmissions.

Copyright is also the usual way of protecting software, although some software may be patented if it is a functional part of an invention. Copyright arises automatically; it does not need to be applied for (but can be for register purposes); and lasts 70 years after the death of the author.

 

Patent[9]

A Patent is a right granted to the owner of the patent to stop others from making, using or selling the invention that is the subject of the patent.

The monopoly granted to the patent owner can last for up to 20 years enabling the patent owner to recover costs associated with development and be rewarded financially for their efforts.  However, once the patent has lapsed, the public may use the invention described in the patent.

 

Design

A design refers to the features of a shape, configuration, pattern or ornament applied to an article by any industrial process.[10]

A design registration protects the overall appearance of a product. Almost any type of manufactured product can be protected in this way and there are very few exceptions.

The scope of registered design protection is confined to the appearance of the product; it does not protect the design’s functionality when embodied in a product of different appearance. This means that if a design incorporates a new functional component that is not limited to its appearance, patent protection may be more appropriate.[11]

 

Geographical Indication

Geographical Indications of Goods are defined as that aspect of industrial property which refer to the geographical indication referring to a country or to a place situated therein as being the country or place of origin of that product. Typically, such a name conveys an assurance of quality and distinctiveness which is essentially attributable to the fact of its origin in that defined geographical locality, region or country.[12]

For example, agricultural products typically have qualities that derive from their place of production and are influenced by specific local factors, such as climate and soil.

 

Trade Secret (Confidential Know How)

Broadly speaking, any confidential business information which provides an enterprise a competitive edge may be considered a trade secret. Trade secrets encompass manufacturing or industrial secrets and commercial secrets. The unauthorized use of such information by persons other than the holder is regarded as an unfair practice and a violation of the trade secret. Depending on the legal system, the protection of trade secrets forms part of the general concept of protection against unfair competition or is based on specific provisions or case law on the protection of confidential information.[13]

Trade Secret may include customer profile, marketing strategies, financial information, consumers , suppliers, etc.

 

 

Traditional Knowledge

Traditional knowledge (TK) is knowledge, know-how, skills and practices that are developed, sustained and passed on from generation to generation within a community, often forming part of its cultural or spiritual identity.[14]

 

Conclusion

Thus it is very important to give reorganization to the intellectual of a person and not only it is important to recognize them but also to give it a protection for the benefit of both i.e. the inventor or the creator and the society at large.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[1] http://www.wto.org/english/tratop_e/trips_e/intel1_e.htm

[2] http://www.dcmsme.gov.in/emerge/website_material_on_IPR.pdf

[3] http://www.wipo.int/export/sites/www/freepublications/en/intproperty/450/wipo_pub_450.pdf

[4] http://www.wipo.int/export/sites/www/about-ip/en/iprm/pdf/ch1.pdf

[5] http://www.caaa.in/Image/34_Hb_on_IPR.pdf

[6] http://www.caaa.in/Image/34_Hb_on_IPR.pdf

[7] http://www.ipos.gov.sg//AboutIP/TypesofIPWhatisIntellectualProperty/Whatisatrademark.aspx

[8] http://pasteur.crg.es/portal/page/portal/Internet/HIDE-Technolgy_Transfer/Tech%20Transfer%20Info/ip

[9] http://www.piperpat.com/page/new-innovation-patents#.U1S8pF2Hqho

[10] A design refers to the features of a shape, configuration, pattern or ornament applied to an article by any industrial process.

[11] http://www.davies.com.au/content/43/designs/design-protection

[12] http://ipindia.nic.in/girindia/

[13] http://www.wipo.int/sme/en/ip_business/trade_secrets/trade_secrets.htm

[14] http://www.wipo.int/tk/en/tk/

PUBLIC POLICY SETTING ASIDE ARBITRAL AWARD

Vivek Kerketta

Introduction

Public policy is an attempt by the government to address a public issue. The government, whether it is city, state, or federal, develops public policy in terms of laws, regulations, decisions, and actions. There are three parts to public policy-making: problems, players, and the policy.

The problem is the issue that needs to be addressed. The player is the individual or group that is influential in forming a plan to address the problem in question. Policy is the finalized course of action decided upon by the government.

It is this lack of definition and certainty of the concept which has led to judicial statements against the extension of public policy. The doctrine of public policy is somewhat open-textured and flexible, and this flexibility has been the cause of judicial censure of the doctrine. By far, the most famous expression of disapproval against public policy is its description as a ‘very unruly horse’ which ‘you never know where it will carry you’.

Other expressions of disdain include descriptions such as “a treacherous ground for legal decision” and “a very unstable and dangerous foundation on which to build until made safe by decision”. However, in the second half of the 20th century, the positive function of the court in matters of public policy increasingly gained recognition. In fact, Lord Denning stated, “With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions and come down on the side of justice.”

The public policy in relation to international commercial arbitration is that The UNCITRAL Model Law Commission stated in its report that the term “public policy” comprises “fundamental principles of justice”. It was understood that the term public policy which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery, or fraud and similar serious cases would constitute a ground for setting aside an award.

 Public Policy for India

Public Policy

“It is never argued at all, but when other points fail” said by Burrough. J

The 1996 Act S. 34(2) (b) (ii) provides that if the award is in conflict with public policy of India it can be set aside. However the term “public policy” has not been defined anywhere in the act. Simplistically speaking, the expression “public policy” connotes some matter which concerns the public good and public interest. An attempt to define public policy was made by Winfield when he identified it as “a principle of judicial legislation or interpretation founded on the current needs of the community”. However, current needs being a changing concept, it is impossible to pigeon hole the same.

There are two conflicting positions with respect to ‘public policy’ which is especially witnessed in English decisions, usually referred to as the ‘narrow view’ and the ‘broad view’. According to the ‘narrow view’, courts cannot create new heads of public policy while the ‘broad view’ permits judicial law making. Indian courts over the years, till the infamous ONGC verdict has been inclined towards a narrow interpretation of the term public policy.

Public Policy means the principles and standards regarded by the legislature or by the court as being of fundamental concern to the State the whole of the society. The Supreme Court attempted by the following explanation of the concept:

The phrase “public policy of India” occurring in section 24(2) (b) is not defined in the Arbitration Act. The concept ‘public policy’ is considered to be vague, susceptible to narrow or wider meaning in the context in which it is used. Hence, it should be given meaning in the context and also considering the purpose of the section.

According to section 23 Indian Contract Act state that- What considerations and objects are lawful and what not – “The consideration or object of an agreement is lawful, unless -It is forbidden by law or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.”- In Gurmukh Singh v. Amar Singh , demonstrated that the agreement between appellant and the respondent was only to participate an action of evacuee property. There was no intention either to bring down the price or to defraud the government to sell the same at lower price. Therefore the object of the agreement was not opposed to public policy, a priori, it was not valid under section 23 of the Indian Contract Act.

The act does not define the expression ‘public policy’ opposed to public policy of a particular government. It connotes same matter which concerns public good and interest. The phrase ‘public policy of India used in section 34 in context is required to be given a wider meaning. The concept of public policy connotes some matter which concerns public good and public interest. What is for public good or interest or what would be injurious or harmful to public good or interest has varied from time to time. An award which is, on the face of it, patently in violation of statutory provision cannot be said to be public interest.

Setting Aside of Arbitral Award and Relation with Public policy

In the Arbitration and Conciliation Act, 1996, provides as:-

a. Section 34 (2) (b) (ii) states that arbitral award may be set aside or remitted to the arbitral tribunal for reconsideration by the country if it finds that Arbitral Award is in Conflict with public policy of India. It further explains that an award is conflict with public policy with Public Policy of India if the making of award was induced or affected by fraud, corruption or was violation of section 75 or 81

b. Section 48 (2) (b) enforcement of foreign arbitral award as defined article 44 of (New York Convention Award)may be refused if court finds enforcement would be contrary to the Public Policy of India. The provision also explains that an award is in conflict with Public Policy of India if it was induced or affected by fraud or corruption.

c. Section 57 (1) (e) also states that order that foreign award as defined article 53 (Geneva Convention Award) may be enforceable, it shall be necessary that the enforcement of is not contrary to Public Policy or Law of India.

The enforcement of an award as to be refused as being contrary to public policy if it is contrary to the fundamental policy of Indian law, country’s interest and its sense of justice and morality.

 Ground for aside Arbitral Award:

Fraud- The term ‘fraud’ has been defined in section 17 of the Indian Contract Act 1872, which reads as:

Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, which intent to deceive another party thereto or his agent, or to induce to enter into the contract-

– The suggestion, as to a fact, of that which is not true by one who does not believe it to be true.

– The active concealment of a fact by one having knowledge or belief of the fact.

– A promise made without any intention of performing it.

– Any other act fitted to deceive.

Explanation- Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is in itself, equivalent to speech.

Fraud is a term that should be reserved for something dishonest and morally wrong and such wrong, and much mischief is done as well as much pain inflicted by its use where ‘illegally’ and ‘illegal’ are the real appropriate expression. Chief Justice Edward Coke said, ‘fraud avoids all judicial acts ecclesiastical or temporal. Fraud however is inconsistent with claim of right made in good faith to do the act complained of.

The decision of Supreme Court in SP Chengalvaraya Naidu v. Jagannth, provides an example where it set aside a decree obtained by a party concealing a vitally relevant document from trail court. Here, a plaintiff had obtained the preliminary decree for partition of property, without disclosing to the trail court the release deed with respect to the property executed by him in favour of his employer. The court held that non-disclosure of the release deed before the court was tantamount to plain fraud on the court vitiating the decree.

Corruption-

The Explanation to section 34(2) (b) (ii), clarifies that an award induced or affected by corruption in addition to fraud will be liable to be set aside as being in conflict with the public policy of India. The expression ‘corruption’ has been defined either in the Indian Contract Act, 1872. Corruption of an arbitrator means ‘moral obliquity’ it is a false and misleading metaphor to speak of an arbitrator honest mistake, whether it is of excess or defect, as ‘constructive corruption.’ There is a general principle of law that a domestic award or a foreign award which is induced or affected by corruption, is invalid as well as unenforceable and it cannot sanctioned by the courts.

It is not easy to define corruption, it is not necessary that the arbiter should have been bribed, nor is it necessary that there should be some other form of venality or gross immorality or flagitious conduct.

In Air Corporation Employees Union v. DV Vyas the high court pointed out that the hospitality of the Corporation accepted by the Chairman could not be considered to be formal or niggardly not merit attention. Chandrachud, J said that ‘courts have always zealously upheld the principles that it is not merely sufficient that justice is done but that justice must seem to be done. Though the word ‘corruption’ was not used, the award was quashed for the mere fact that this type of hospitality was accepted.

Confidentially-

Under section 75 of the Arbitration and Conciliation Act, 1996, this provides that ‘now standing anything contained in any other law for the time being in force on India, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings.

The provision of this section extended to the application of public policy of India in section 34(2) (ii), the explanations to which for the Avoidance of any doubt, declares that without prejudice to the generally of the expression ‘public policy of India’, if an award inter alia, is in ‘violation of section 75 of the 34(2) (ii), the words ‘conciliator’ and ‘conciliation’ used in section 75 shall have to be substituted for the words ‘arbitrator’ and ‘arbitration.’

Domestic arbitration’ of international commercial arbitration’ is not a public affair; it is essentially a process of private nature. In the language of Stephen Bond, J said- ‘the users of international commercial arbitration, i.e. the companies governments and individuals who are parties in such case, places the highest value upon confidentially as a fundamental characteristic of international commercial arbitration. The features of international commercial arbitration which attracted parties to it, as opposed to litigitation, confidentially of the proceedings and the resulting award would not enter into the public domain were almost invariably mentioned’.

Inadmissibility of evidence in other proceedings-

The explanation to section 34(2) (b) (ii), by reference the provision of section 81 in it. The provision mandates; ‘the parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is subject of the conciliation proceedings-

– Views expressed or suggestion made by the other party in respect of a possible settlement of the dispute.

– Admission made by the other party in the course of the conciliation proceedings.

– Proposals made by the conciliator.

– The fact that the other party had had indicated his willingness to accept a proposal for settlement made by the conciliator

Thus, without prejudice to the generally of the expression ‘public policy of India’ as used in section 34(2) (ii), an award is in conflict with the public policy of India’, if it is violation of the provision of section 81 of the Act.

Misconduct- Section 30 of the Arbitration Act, 1940 provided that an arbitral award was liable to set aside where ‘an arbitrator or umpire has misconduct himself or the proceedings’. Though the term ‘misconduct’ was not defined in that Act, nevertheless misconduct, as crystallized by the judicial decision, covered a wide range of errors on the parts of the arbitrator.

“An award can be set aside for misconduct if the arbitrator has received bribes, or if he is secretly interested in the subject matter of the dispute. Misconduct may exist where no improper motives are imputed to the arbitrator. It is misconduct, for example, to make an award on a illegal contract.”

Misconduct was before the Supreme Court in V.G.Gorege v. Indian Rare Earths Ltd, a case of misconduct exists where the amount awarded by the arbitrator is contrary to his findings.

“The arbitrator may be a most recpectable person, but even so, his conduct cannot be reconciled to general principles. A judge must not take upon himself to say whether evidence improperly admitted had or had not any effect upon his mind. The award may have done perfect justice, but upon general principles it cannot be supported.

Legislatative Perspective

The Principle of public policy has been stated by Lord Mansfield in Holman v.Johson in following language:

The principle of public policy is this: ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon immoral or illegal act. If from the plaintiff own stating or otherwise, the cause of action appear to arise ex trupi causa, or the transgression of positive law of country, there the court says he has no right to be assited.

Public policy targets protection and promotion of public welfare. It is the principle of, under which freedom for contract or private dealings is restricted by the law for the good of community.

The general concept of public policy comprehends a wide range of topics categorized under certain heads. Agreement may offend against public policy by tending to prejudice of state in time of war (trading with enemies, etc), by tending to the perversion or abuse of municipal justice or in private life by attempting to impose inconvenient and unreasonable restriction on free choice individual marriage or their liberty to exercise any lawful trade or calling.

In the Indian constitution also in preamble it is well said “WE, THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens: JUSTICE, social, economic and political; LIBERTY of thought, expression, belief, faith and worship; EQUALITY of status and of opportunity; and to promote among them all FRATERNITY assuring the dignity of the individual and the unity and integrity of the Nation.”

The Sovereign, Socialist, Secular, Democratic, Republic all this status comes only when good policy is formed and its enacted by the Government. The American President George Washington said- By the people, for the people, of the people, the public policy should be made in such a way that it benefits or works for the people only. It must be made for interest of the society.

Under Indian Constitution the Fundamental Right in Right to Freedom article 19 (4) restrict the right of the individual if the any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the sovereignty and integrity of India or public order or morality, reasonable restrictions on the exercise of the right conferred by the said clause.

Thus fundamental right can also be restricting if the public policy is against the interest of the society or individual because it disturb and violates the sovereignty and integrity of a country. So the policy must be made by seeing or needs the rights and duties of the individual and society.

The section 23 says that the consideration or object of an agreement is lawful, unless- It is forbidden by law or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent, of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.

Therefore, the contract i.e. (agreement) between the parties should be made in such way that it does not oppose the public policy which hampers the interest of the society and individual.

 

 Judicial Intervention

The Indian legislature and judiciary have a fundamental choice to make- to respect party autonomy and finality of arbitral awards as envisaged by the 1996 Act or impose judicial supervision on arbitration and revert to the days of the 1940 Act. This choice will shape the course of Indian arbitration for the next decade and beyond.

In recent years, all over the world, a shift has been encouraged from litigation to alternative methods of dispute resolution such as arbitration, mediation, and conciliation etc., in an attempt to overcome the problem of inordinate delay in disposal of cases that litigation entails. In India especially, the attempt of the parliament which aims to bringing about cost-effective and expeditious resolution of disputes and further preventing multiplicity of litigation by giving finality to an arbitral award.

Prior to the enactment of the 1996 Act there was widespread discontent over the excessive judicial intervention allowed by its predecessor, the 1940 Act. The 1940 Act permitted courts to set aside an arbitral award where “the award had been improperly procured or otherwise invalid.”

The 1996 act attempted to rectify this problem by limiting the basis on which awards could be challenged to a few narrow grounds (which mirrored those found in the UNCITRAL model law and New York Convention on the Recognition and enforcement of Foreign Arbitral Awards).

The recent decision of the Apex Court in ONGC vs. Saw Pipes where a broad interpretation was given to the expression ‘public policy’, has given an unexpectedly different dimension and direction to S. 34. The objective behind this research is to examine the merits of having a broader notion of public policy in connection with setting aside arbitral award and also to look into the possible problems that could crop up due to this, especially the effect on finality of arbitral awards.

In case where the validity of the award is challenged, there is no necessary of giving a narrower meaning to the term “public policy of India”. Om the contrary, wider meaning is required to be given so that a “patently illegal award” may set aside.

Principles lay down under Section 34 states that an award may be set aside if it is contrary to:-

• Fundamental policy of Indian law,

• The interest of India,

• Justice or morality,

• If it is patently illegal.

In Renusagar Power Plant Co. Ltd. v. General Electric Co. the court in view of the absence of a workable definition of “international public policy” found it difficult to construe the expression “public policy”. In the Renusagar case, while giving narrow meaning to the expression ‘public policy of India’ the Apex Court observed that “It is obvious that since the Act is calculated and designed to subserve the cause of facilitating international trade and promotion thereof by providing for speedy settlement of disputes arising in such trade through arbitration, any expression or phrase occurring therein should receive, consisting with its literal and grammatical sense, a liberal construction.”

The court further declared “patent illegality” to mean that the award is contrary to the substantive provisions of law or the provisions of the 1996 Arbitration Act or against the terms of the contract. Thus “error of law” was now included as a ground to set aside the award, thereby making the provision of S. 34 an appellate provision rather than one to be used as an application to set aside the award. In order to justify adding “error of law” as a ground to set aside the award, in light of a contrary precedent in place, the court distinguished between the two cases on the ground that while Renusagar was dealing with a foreign arbitral award, the award in the instant case is a domestic one and thus “error of law” could be used as a ground to set it aside. In light of this reasoning, it can be safely assumed that the court did not intend S. 34 to apply to foreign arbitral awards and the separate provision provided in the Act i.e. S. 48 was to apply in these circumstances

The Supreme Court distinguished Oil & Natural Gas Corporation Ltd v. Saw Pipes Ltd. from that of Renusagar Power Co. Ltd v. General Electric Co. on the ground that the Renusagar judgment was in context of a foreign award, while the ratio of SAW Pipes would be confined to domestic awards only.

The most recent decision of the Supreme Court on the subject of setting aside an award on the ground of public policy under Section 34 is Venture Global Engineering Vs. Satyam Computer Services Ltd. Based on the earlier judgment in Bhatia International v. Bulk Trading S.A. and Anr., the Supreme Court in this case held that it is open to the parties to exclude the application of the provisions of part I by express and implied agreement, failing which the whole of part I would apply.

The Supreme Court in its judgment of ONGC v. Saw Pipes Ltd has ruled that an arbitral award can be challenged under Section 34 of the 1996 Act on the ground that it violates the public policy of India, inter alia, because it is contrary to the fundamental policy of Indian Law, justice and morality or is ‘patently illegal’.

The arguments against setting aside awards based on an expansive reading of “public policy” turn on questions of the importance of party-autonomy and minimal judicial interference. It is on this basis that the decision in ONGC v. Saw Pipes has been heavily criticized. However, a refusal to set aside an illegal award under the guise of party autonomy effectively mean that parties are allowed to do indirectly what they cannot do directly.

This was in contrast to the Apex court’s observations in Narayan Prasad Lohia v. Nikunj Kumar Lohia wherein it was held that if an award was in accordance with the agreement of the parties, it may not be set aside by the court. But, as per the ONGC case, the award must be in accordance with the agreement of the parties and the agreement of the parties must lie within the parameters prescribed by the non-derogable provisions of Part I. If the award does not meet the said criteria, it may be set aside, via Section 34(2)(a)(v) read with Section 28(1)(a) of the Act.

Renusagar was a case of private international law involving enforcement of a New York Convention foreign arbitral award governed by the Foreign Awards (Recognition and Enforcement) Act, 1961 of India which was based on the principle of speedy enforcement of arbitral awards with minimum court interference..

The court in Venture Global Engineering vs. Satyam Computer Services Ltd. wherein the court held that it is permissible to set aside a foreign award in India by applying the provisions of S. 34 of Part I of the Act i.e. it held that unless otherwise agreed upon by the parties, Part I of the act also applies to foreign awards which could thus be set aside for violating Indian statutory provisions and for being contrary to Indian public policy.

 

 

 Conclusion

The scheme of the Arbitration and Conciliation Act, 1996 is very clear- to minimize court interference in the arbitral process and to ensure speedy enforcement of arbitral awards without the intervention of courts on unlimited grounds and aforementioned judgments have adopted a very strained interpretation of the Act. In such a situation to allow an expansive reading of ‘public policy’ would nullify the entire purpose. Finality being the most attractive and unique feature of arbitration has been struck at its very roots by the expansive interpretation of the term ‘public policy’ by the ONGC court, as a result of which arbitration as it now stands in India is just another step in the appeal process.

Further, the challenging of International awards and their setting aside on the ground of them being against the public policy and by applicability of Part I of the Act posses a potential threat to the basic foundation of International Commercial Arbitration. However, there are two legislative proposals before the Indian Parliament which indicate that the legislature did not intend to include “error of law” as a public policy ground under S.34 (2) (b) (ii) of the Act. Both the April 2001 Bill and December 2003 Bill, have proposed amendments to the 1996 Act as follows:

“34 A (1) In the case of an arbitral award made in an arbitration other than an international arbitration (whether commercial or not), recourse to the following additional grounds can be had in an application for setting aside an award referred to in sub-section (1) of section 34, namely–(a) that there is an error which is apparent on the face of the arbitral award giving rise to a substantial question of law …”

To sum up, it can be said: “Public Policy can be a ‘double-edged sword’ in arbitration- ‘helpful as a tool, dangerous as a weapon’.”

ENFORCEMENT OF IPR WITH REFERENCE TO BORDER SECURITY MEASURES

VIVEK KERKETTA

INTRODUCTION

The recognition of the need to protect of intellectual property especially with regard to counterfeit trademark and pirated copyrighted goods, the enforcement of intellectual property rights at the borders has emerged as a significant issue in recent times. In view of this, the scheme of border measures has been discussed internationally at various flora including the World Trade Organization, the World Customs Organization, and the World Intellectual Property Organization as well as during negotiations of many multilateral and bilateral free trade agreements.

India too, sought to enable right holders to enforce intellectual property rights at the border and, thereby, enhance border protection of intellectual property rights. In this regard, the Government of India notified the Intellectual Property Rights (Imported Goods) Rules, 2007 in May 2007. The Rules, based on the model legislation by the World Customs Organization, seek to empower the Customs authorities to suspend the clearance of goods suspected to be infringing intellectual property in India. Further, they empower the Customs authorities to adjudicate on the issue of infringement and seize or dispose the goods on finding in favour of the right holder. The Rules, however, present a major source of concern for importers. They fail to strike a balance between the rights of the right holders and the safeguards provided to the importers or the obligations of the right holders. In view of this, they present immense potential for abuse and their implementation has had a chequered history. The controversy surrounding the dual–SIM patent, presently being argued before various Indian flora, highlights the issues raised by the implementation of these rules, and presents a case for their re-evaluation.

 

 

ENFORCEMENT LAWS IN INDIA :

The general laws in relation to Intellectual Property Enforcement in India are mainly the following:

• Code of Civil Procedure

• Indian Penal Code

• The Civil and Criminal Rules of Practice.

While Civil Procedure Code provides for the civil remedies and enforcement through civil courts, the Indian Penal Code provides for penal remedies. The rules of practice of the trail courts, High Courts and the Supreme Court of India set the finalities of the enforcement procedure. India follows common law tradition and judicial precedents do have binding force.

ENFORCEMENT MECHCANISM AVAILABLE UNDER THE INDIAN LAW:

 Civil remedies

Under civil remedy Protection for Design is there against infringement of Copyright in a design area

-an injunction,

-damages or

Compensation and delivery up of infringing articles. No Provision for criminal proceedings against piracy of designs. Unregistered design can be protected under Copyrights Act.

 

Civil remedies for enforcement of the Copyright including injunction, damages, account of profits, delivery of infringing marks and damages for conversion can be invoked by owner of copyright or in certain cases, publisher of the trademark label.

 

Suit for damages: Damages can be claimed – (1) as an amount of loss sustained by the holder of copyright by reason of infringement. (2) as an amount representing the profits made by the infringer and (3) as an amount representing the value of infringing copies.

 

Whenever a registered Tardemark is violated or infringed, to the detriment of its proprietor or user, the aggrieved person can make use of the remedies available in a civil court. The most common remedy for infringement of a registered trademark is to file a suit in a civil court, to restrain the defendant from using the registered trade mark of the plaintiffs. The issues arising in a passing off action are:-

• Whether the plaintiff has established a goodwill or reputation in connection with a business, profession, service or any other activity, among the general public or among a particular class of people prior to the first use of the defendant.

• Whether the defendant’s activities or proposed activities amount to a misrepresentation which is likely to injure the business or goodwill of the plaintiff and cause damage or likely to cause damage to his business or goodwill.

• Whether the defendant succeeds in one or more of the defenses set up by him.

For Patent civil remedy is not there.

 Criminal remedies

Protection for Patents: Criminal liability: penalties available under Section 118. Contravention of Secrecy provisions relating to certain inventions in cases relating to infringement of Patents. Failure to comply with Section 35, is punishable with imprisonment for a term which may extend to two years or with fine or both.

A suit for the infringement of a patent can be instituted only after the sealing of the patent. Damages caused of infringement during the period between the dates of advertisement of acceptance and the date of the sealing may be cleared in the suit. In an action for infringement of a patent a defendant may plead any of the following defenses:-

• Denial of infringement.

• Plaintiff is not entitled sue for infringement.

• License to use the invention expresses or implied.

• Estoppel

• Existence of an unlawful contract.

• Claims invalid on account of lack of novelty and non- obviousness.

• Innocent infringement in cases against a claim for damages or account of profit.

The procedure concerning infringement action must confine to the Civil Procedure Code, if the suit is filed before a District Court and if the matter is before the High Court the rule of practice of the court also shall apply. The main reason for a possible delay in getting orders in a patent infringement suit is the provision for preferring appeals from interim order of trial courts.

Protection for Trade Marks Act, 1999 provides for a comprehensive scheme whereby those persons who un-authorized deal with the trade marks can be punished for various offences. The offences includes:- Falsifying and falsely applying trade marks, Selling goods or providing services to which false trademark or false trade description is applied.

Removing piece goods etc. contrary to Sec. 81 which deals with stamping of piece goods, cotton yarn and threads. Falsely representing a trade mark as registered. Falsification of entries in the register; and Abetment in India, of acts done outside India etc.

The punishment of these offences includes a minimum imprisonment of 6 months and minimum of Rs.50, 000 which may extent to a maximum of 3 years and Rs.20, 000 respectively. Section 105 of the Act provides for enhance penalty on second or subsequent conviction.

Protection for Copyright :The owner of the copyright and also any person can initiate criminal proceedings, by filing a complaint before the competent First Class Magistrate within whose jurisdiction, the plaintiff resides or the infringement takes place or deemed to have taken place. The procedure prescribed under Criminal Procedure Code applies to the proceedings before the criminal court.

On conviction, the Criminal Court can sentence the accused to an imprisonment upto 3 years and a fine extending upto Rs.2 lakhs. Recent amendment have made the imposition of punishment to a minimum term of 6 months and a fine of Rs.50,000 mandatory unless for special reasons to be recorded if the magistrate awards lesser punishment than the minimum.

For Protection of Design act, no criminal remedies is there.

 

 Administrative remedies

For Protection of Trademark: The Act vests certain powers in the various administrative authorities to relief and remedies to the aggrieved persons. It is the Registrar who mostly exercises these powers under the guidance of the Central Government.

For Copyright Protection: An application can be made by the owner of the copyright in any work or by his duly authorized agent, to the Registrar of Copyright to ban the import of infringing copies of trade mark label which were earlier confiscated from infringer to the owner of the copyright.

And for Patent and Design Act, no administrative remedies is there.

 

 

 

BOARD ENFORCEMENT MECHANISM IN INDIA:

 

In India border measure are enforced by Customs Department. Department of Revenue/Central Board of Excise and custom has issued the notification/Rules/Circular for enforcement of IPR border measure:-

A. Customs Notification No. 49/2007- custom (NT) dated 8-5-2007.

B. Intellectual Property Right (Imported Goods) Enforcement, 2007 dated 8-5-2007

C. Custom Circular No. 41/2007 dated 29-10-2007.

Legal Provision:

• In section 2 (n) of custom Act, 1962 empowers the Central Government to prohibit importation and exportation of any goods for the protection of Patents Trademarks and Copyrights by Issuing of Notification.

• Section 11 (2) (u) of Customs Act, 1962 empowers the Central Government to prohibit importation and exportation of any goods for the protection of any other law for the time being force by issuing of notification.

 

 Customs Notification to Prohibit Import of infringing goods:

 

• Department of revenue issued Notification No 49/2007- Customs (N.T) dated 8-5-2007 which prohibits imports:-

 Of goods having a false trade mark and false trade description.

 Of goods made or produced beyond the limits if India and intended for sale and having in which copyright exists under the Designs Act.

 Of product made or protected beyond the limits of India and intended for sale of which patents is in for which patent is force under the Patents Act, 1970.

 Of the product obtained directly by the process beyond the limits of India and intended for sale for which patent is force under the patents Act, 1970.

 Of goods having false geographical indications.

 Of goods prohibited to be imported by issuance of order issued by Registrar of Copyrights under section 53 if Copyright Act, 1957.

 

 

 

 Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007

 

• Import of infringing goods are prohibited under Notification No. 49/2007- Customs (NT) subjects to following conditions and procedures laid down in Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007.

• Department of Revenue notifies the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 on 8th of May 2007.

• The rules have been framed in the line of TRIPS and WCO (world Customs Organization) model.

 

Salient Features of the Rules:

 

• The rules inter alia provide for:-

• Filing of a notice by the right holder.

• Registration of said notice by the Customs.

• Time limit for right holder to join proceedings.

• Single point for registration of the notice filed by the right holder.

• Fees of Rs. 2000/- for every notice.

• Adequate protection to the rightful importer.

• Adequate protection to the Customs for bonafide act.

• Suo-moto action by the Customs in specific circumstances

• Disposal of the confiscated goods.

• No action against goods of non commercial nature contained in personal baggage or sent in small consignments intended for personal use of the importer.

 

 

 

 

 

INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHT WITH THE CUSTOMS ACT, 1962 AND PROCEDURE UNDER INTELLECTUAL PROPERTY RIGHTS (IMPORTED GOODS) ENFORCEMENT RULE, 2007

A.Defination:-

1. Categories of Intellectual Property within the Scope of the Rules:

The Rule 2 of the rules provides definitions. It is borrowed from the model legislation by the Geneva based World Customs Organization, Rule 2(b) and 2(c), defining the term “intellectual property” and “intellectual property law” respectively, indicate that the Rules are applicable to those imported goods suspected to be infringing rights either in a trademark, copyright, geographical indication or patent. It bears noting that the Article 51 of the TRIPS mandates to introduce provisions only with respect to counterfeit trademark or pirated copyright goods. India is not obligated to introduce border measures with respect to other categories of intellectual property such as patents or geographical indications. The extension of border measures to other categories of intellectual property, especially to patents becomes significant in view of the institutional incompetence of the customs authorities to deal with complex matters relating to patent law.

 

2. Institutional incompetence of Customs Administration to Deal with Patent Related Issues:

The TRIPS does not require members to introduce provisions with respect to all categories of intellectual property and the mandate to introduce border measures under TRIPS extends only to copyright and trademark related matters. In relation to patents, the most relevant argument against introduction of border measures is that the patent infringements are difficult to assess at first sight. This difficulty arises from the technical complexity of products to which patents are attached and the complex nature of patent law itself.

 

The field of intellectual property law is a specialized field, requiring both legal and technical expertise. The Courts have been divested of their authority to hear such matters which are now heard by a specialized Intellectual Property Appellate Board. The High Court of Delhi with respect to the power of the Drug Controller General of India to decide on matters relating to patent infringement, wherein the Court opined that the Drug Controller lacks the technical expertise to deal with matters relating to patentability and patent infringement.

 

Patent law requires the understanding of complex technology for the purposes of claim construction, and customs administration lacks the infrastructure to undertake such a process. It is, therefore, suggested that the Customs administration must establish a specialized cell for intellectual property matters comprising of specialized members possessing both technical and legal expertise in such matters.

 

Definition of Right Holder:

 

Rule 2 (d) defines right holders to mean a natural person or a legal entity, which according to the laws in force is to be regarded as the owner of protected intellectual property right, its successors in title, or its duly authorized exclusive licensee as well as an individual, a corporation or an association authorized by any of the aforesaid persons to protect its rights. This provision indicates that the owners of intellectual property rights as well as their assignees and licensees are entitled to seek protection under the Rules.

 

3. Definition of “Goods Infringing Intellectual Property” – A Conundrum

 

Sub-Rule (a) of definitional Rule defines the term “goods infringing intellectual property” to mean “goods which are made, reproduced, put into circulation or otherwise used in breach of the intellectual property laws in India or outside India and without the consent of the right holder or a person duly authorized to do so by the right holder”. On reading of Rule, the language of confusing, two interpretations may arise The first interpretation, which the author proposes, is that the term “goods infringing intellectual property” means the goods which are made, reproduced, put into circulation or otherwise used in India or outside in breach of intellectual property laws. (the term intellectual property laws shall be interpreted as per Rule 2(c), and shall mean the Copyright Act, 1957, the Trade Marks Act, 1999, the Patents Act, 1970, the Designs Act, 2000 or the Geographical Indications of Goods (Registration and Protection) Act, 1999).

 

Interpretation, the term “in India or outside India” qualifies the place where the infringing act takes place. The question whether goods made, reproduced, put into circulation or otherwise used outside India can breach the intellectual property laws above mentioned? The simple answer is no. The Patent Act, 1970 under S. 48 provides that the patentee has the exclusive rights mentioned therein in India. Similarly, Section 13(1)28 of the Copyright Act, 1957 provides that copyright shall subsist throughout the territory of India. Further, trademark law in India is territorial in nature and requires that the infringing activity must take place within the territorial limits of registration, i.e., within India. The Model Law, under Article 1, includes a that clause “if such making, reproduction, use or putting into circulation of the goods took place outside the country the goods are deemed to be infringing if the acts would have constituted an infringement in the country had they been undertaken in the country”.

 

The alternative interpretation of the Rule 2(a) involves reading the terms “in India or outside India” as qualifying the term “intellectual property law”, rather than defining the place where the infringing acts occur whether the acts are infringing as per the Indian intellectual property laws or the intellectual property laws outside India, the goods shall be considered as goods infringing intellectual property. It is conclude that those goods which are made, reproduced, put into circulation or otherwise used in breach of intellectual property laws of countries other than India shall be considered to be “goods infringing intellectual property”.

 

The Rules, under such an interpretation, in effect allow the right holder to rely on rights which are available under intellectual property laws outside India, even where such rights are not available under the Indian laws. Such an interpretation would render the provision arbitrary and in discord (without a “reasonable nexus”) with the object of the legislation, thereby making them susceptible to being struck down as unconstitutional.

 

B. Procedure for Registration:

 

The Rules provide an elaborate procedure for the enforcement of intellectual property rights of the right holders by customs authorities. The Rules envisage the provision of notice by the right holder to the Commissioner of Customs (or any officer authorized on his behalf) requesting for the suspension of clearance of goods suspected to be infringing intellectual property.

 

The Right holder is required to give the notice in a specified format (provided in the Annexure) along with the payment of Rs. 2000 as application fee. Whether his notice has been registered or rejected within a period of 30 days.41 The registration of notice is subject to two conditions, namely: the execution of a bond by the right holder with the Commissioner of Customs undertaking to protect the importer, consignee and the owner of the goods and the competent authorities against all liabilities and to bear the costs towards destruction, demurrage and detention charges incurred till the time of destruction or disposal. Further, the right holder is required to execute an indemnity bond with the Commissioner of Customs indemnifying the customs authorities against all liabilities and expenses on account of suspension of the release of allegedly infringing goods.

 

On the registration of the notice, the Commissioner is required to communicate to the right holder the validity period of the registration during which the assistance by the customs authority shall be rendered, with the minimum period being one year. Rule 4(3) of the Rules provides that all customs offices shall render assistance to the right holder.

 

C. Scope of the Power of the Customs to Detain and Seize Goods Under the Rules:

 

1. Rules 6 and 7: Enabling Provisions-

 

Rules 6 and 7 are the enabling provisions which empower the customs administration to suspend the clearance of goods infringing intellectual property rights. Rule 6 provides that after the grant of the registration of the notice the import of allegedly infringing goods into India shall be deemed as prohibited within the meaning of Section 11 of the Customs Act, 1962. Rule 7(1)(a) of the Rules empowers the customs authority to suspend the clearance of goods on the basis of the notice given by the right holder to suspend the clearance of goods if he has reason to believe that the imported goods are suspected to be goods infringing intellectual property rights. The rules further provide for communication of the order of suspension of clearance to both the importer and the right holder, stating the reasons for such suspension. From the date of such communication, the right holder is required to join the proceedings before the customs administration within a period of ten working days (extendable to twenty working days) failing which the goods shall be released provided that all other conditions of import of such goods have been complied with. Rule 7(1) (b) empowers the customs authority to suspend the clearance of goods suo motu if it has prima facie evidence or has reasonable grounds to believe that the imported goods are goods infringing intellectual property.

 

In case of suo motu action, Rule 7(4) of the Rules requires the right holders to give notice under Rule 3 and to fulfil obligations (such as execution of bond under Rule 5) within a period of 5 days from the date of suspension of clearance, failing which the goods shall be released by the customs administration. If the right holder complies with the above mentioned provisions (both in case of prior notice or for suo motu action), the Deputy Commissioner of Customs or the Assistant Commissioner of Customs is empowered to seize the goods under Section 110 of the Customs Act, 1962 if he has reason to believe that the goods are“goods infringing intellectual property rights” and are liable for confiscation under Section 111(d) of the Customs Act, 1962.

 

2. Rule 7 and Audi Alteram Partem:

 

Rule 7 of the Rules is the enabling provision empowering the Customs administration to suspend the clearance of goods. The order for suspension of clearance of goods under Rule 7(1) is made on the basis of the notice given by the right holder, and this forms the basis for the suspension of clearance. Therefore, the right holder is entitled to make a prima facie case for infringement by virtue of the notice. However, the importer is not provided an opportunity to be heard and he is entitled to seek the clearance of the goods only after he receives the communication from the customs authority under Rule 7(2).

The very nature of the order is such that the rule of audi alteram partem must be excluded. That being said, it is imperative that the post-decisional hearing shall take place “as soon as” the order for suspension of clearance is made. The requirement under the Rules is that the order of suspension must be communicated to the right holder “immediately”. Therefore, the importer’s right may be prejudiced for an unreasonable period of time with his goods being detained at the ports without a decision being reached by the customs authority. Once the right holder has joined the proceedings, the proceedings may prolong for an unreasonable period of time, as is often the case in India given the administrative delays.

 

The requirements laid down in the case of Maneka Gandhi v. Union of India, is that in cases of post decisional hearing, a fair opportunity of being heard must be “given immediately” after the impugned order. If the post-decisional hearing is commenced immediately but is unreasonably or unduly delayed, the purpose of giving the post-decisional hearing “immediately” would be defeated. Such a reading shall enable importers to seek an appropriate writ in cases where there is an unreasonable delay in the reaching its conclusion, with the reasonableness being tested on a case by case basis.

 

3. No Need for prima facie Evidence: Undue Burden on Customs Administration:

 

The format of notice provided in the Annexure indicates that the right holder is not required to provide evidence to establish that the goods are infringing in cases where he does not seek to prevent the import of a specific consignment. The right holder is required to give prima facie proof of infringement only where the infringement by goods in a specific consignment is alleged at the time when the notice for registration is given. A situation where at the time when the right holder gives the notice of registration there is no specific consignment which infringes the rights of the applicant. The right holder in such circumstances shall be granted the registration of the notice without submitting any proof concerning infringement regarding a specific consignment. On the basis of this notice, the customs administration is required to determine the scope of his intellectual property rights and detain goods which they suspect to be infringing.

 

Under the TRIPS Agreement, the right holder making an application for suspension of clearance of the goods to the Customs administration is required to provide “adequate evidence” to satisfy the customs administration that there is prima facie an infringement of the intellectual property right.

 

D. Right to Examination of Goods and Supply of Information:

 

Rules 8, 9 and 10 contain provisions for examination of goods by the right holder, supply of information to the right holder and supply of information to the importer, respectively. Rule 8 empowers the Commissioner to allow the right holder/importer to examine the goods, the clearance of which has been suspended, and to provide representative samples for examination, testing and analysis to assist in determining whether the goods are pirated, counterfeit or otherwise infringe an intellectual property right. Rule 9 enables the right holder to seek information such as the name and address of the importer and such additional relevant information regarding the consignment which has been suspended. Similarly, Rule 10 enables the importer to seek information relating to the right holder. However, these provisions are to be applied without prejudice to the protection of confidential information, thereby ensuring that sensitive information regarding the importer or the right holder is not disclosed.

 

E. Disposal of Infringing Goods:

 

Rule 11 provides for the disposal of infringing goods. This rule is applicable where upon determination by the Deputy Commissioner of Customs/Assistant Commissioner of Customs, it is found that the goods detained or seized have infringed intellectual property rights, and have been confiscated under Section 111(d) of the Customs Act, 1962 and no legal proceedings are pending in relation to such determination. The said authority in such cases can destroy the goods under official supervision or dispose them outside the normal channels of commerce after obtaining ‘no objection’ or concurrence of the right holder. Rule 11 raises major concerns for the importer since the disposal of goods by the Customs authority amounts to a final determination of the rights, and the only remedy is to seek monetary compensation from the right holder.

 

 Customs Circular 41/2007:

 

Central Board of Excise and Customs has issued a circular No. 41/2007 dated 29-10-2007 which apart from explaining various provisions of Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007, in border security measure, place detailed procedure for electronic registration of the notice by the Right Holders. Salient features of the Circular 41/2007:-

• On- line recordation as a trade facilitation measure.

• 110% of value of goods Bond amount and 25% of bond value as BG- uniformity.

• Recordation valid for 5 years (extendable thereafter on payment of fees).

 

 

ISSUES RAISED BY THE IMPLEMENTATION OF THE RULES: A CASE STUDY:-

A. The Ram Kumar Patent Saga

 

This litigation involves a patent granted to Mr. Soma Sundaram Ram Kumar on a “Mobile telephone with a plurality of SIM cards allocated to different communication networks”. Mr. Ram Kumar sought to enforce the patent rights against a number of multinational and national importers including Hansum India, Samsung and Micromax.

 

Mr. Ram Kumar filed an application in the Chennai Patent office on March 4, 2002 containing 4 claims and 12 drawings and was allotted Patent Application No. 161/MAS/2002 which was granted in 2008. Mr. Ram Kumar, then filed an application under Rule 3 of the Intellectual Property Rights Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. Mr. Ram Kumar filed an application on December 8, 2008 with the Officer of Commissioner of Customs under the Customs Notification No. 47/2000 read with Circular No. 41/2007 Customs Circular dated 29.10.2007 called the Instructions for Implementation of Intellectual Property (Imported Goods) Enforcement Rules, 2007.

 

The first course of litigation before the Indian Courts was with respect to the constitutionality of the Rules. In this petition, Samsung raised the issue of lack of expertise of the Customs authorities. However, the petition had to be subsequently withdrawn for the lack of territorial jurisdiction.

 

The second course of litigation was before the Madras High Court, wherein Mr. Ram Kumar sought a restraining order against manufacturers such as Samsung, Mirco Electronics and Spice Mobile, restraining them from manufacturing and selling multiple SIM holding mobile phones.

 

The third course of litigation was before the customs authorities and highlights the concerns on behalf of the importers. The claims related to dual SIM which allowed simultaneous communication multiple headsets

 

The Chennai customs authority upheld the contentions of Hansum India Ltd. Holding that the claim 1 of Mr. Ram Kumar patent had limited scope. The claims, therefore, were held not to be infringed by the cell phones manufactured by Hansum since these cell phones used a single headphone/earphone jack. Similarly, the New Delhi customs authority, in an order dated 8th June, 2009, by J.P. Kundu, the Assistant Commissioner of Customs, found that claim made by Mr. Ram Kumar was vexatious and the impugned goods were covered by the prior art declared by him.

 

Against the orders of customs authorities, Mr. Ram Kumar filed writ petition in the Madras High Court, dismissing the petition, held that the proper forum for the redressal was the Customs Appellate Tribunal, an authority envisaged as the appellate authority under the Customs Act, 1962. Therefore, at present, the orders of the Customs administration allowing the clearance of the goods from the Mumbai, Chennai and Delhi ports stand affirmed and, the stand of the importers has been upheld.

The case involving parallel imports and trademarks in India, Cisco Techonology Vs Shrikhant the plaintiff’s employed sec. 29(6) (c) of custom act read with sec 140 defense and were successful in getting an exparte order directing the customs authorities to notify all ports to bar imports of defendant goods and also appointing a local commissioner to seize all goods bearing the mark in issue and inventory the same.

In the judgement of the Delhi High Court in Electronics Company Ltd. & Anr. vs G.Choudlhary & Anr defendants, who were the parallel importers were held liable for infringement of Trademark. The registered owner of the Trademark “Samsung” filed a suit against the defendants for importing from China and selling in cartridges and toners branded “Samsung” manufactured by the plaintiff itself in China. The plaintiff argued that although the products are genuine, they were not meant for Indian markets. The reasons by the plaintiff included that the descriptions that accompanied the products were in Chinese, there was no warranty offered and that the use of these products were likely to constitute a breach of warranty of other legally purchased machinery.

Bangalore Aug 10, 2003: Banashankari police arrested three software engineers for illegally copying software from a company they were working for. The accused enginners, who were working with the Ishoni Networks India Private Limited, had started a new company called Ample Wave Communication Network in Koramangala. They had illegally copied code of the company’s software and were using at their company, police said Ishoni Director Antonio Mario Alvares had lodged the complaint with Banashankari police. Police have seized four computers, four CPUs, four keyboards, one server and one laptop from the accused.

New Delhi Aug 28, 2002: Central Bureau of Investigation officials in New Delhi nabbed Shekhar Verma, a former employee of Mumbai-based Geometric Software Solutions Company and a computer engineer from the Indian Institute of Technology, Kharagpur. It turned out that Verma was accused of stealing $60 million worth of source code of a software product of Geometric Software’s US-based client, Solid Works, and trying to sell them to other companies for a fortune. The American firm has the exclusive rights over the software.

 

 

 

 

 

 

Summary of Indian Government Initiatives to Protect IPR :-

The Indian government has initiated various steps towards Intellectual Properties Rights Protection. Indian enforcement agencies are working effectively and there is a decline in the levels of piracy in India. In addition to intensifying raids against copyright violators, the Government has taken a number of measures to strengthen the enforcement of copyright law. A summary of these measures is given below:-

• The Government has brought out A Handbook of Copyright Law to create awareness of copyright laws amongst the stakeholders, enforcement agencies, professional users like the scientific and academic communities and members of the public. Copies of the Handbook have been circulated free-of-cost to the state and central government officials.

• National Police Academy, Hyderabad and National Academy of Customs, Excise and Narcotics conducted several training programs on copyright laws for the police and customs officers. Modules on copyright infringement have been included in their regular training programs.

• The Department of Education, Ministry of Human Resource Development, Government of India has initiated several measures in the past for strengthening the enforcement of copyrights that include constitution of a Copyright Enforcement Advisory Council (CEAC), creation of separate cells in state police headquarters, encouraging setting up of collective administration societies and organization of seminars.

• The Government also initiates a number of seminars/workshops on copyright issues. The participants in these seminars include enforcement personnel as well as representatives of industry organizations.

As a consequence of the number of measures initiated by the government, there has been more activity in the enforcement of copyright laws in the country. Over the last few years, the number of cases registered has gone up consistently.

 

 

Conclusion:-

As a laws concerning intellectual property are already in place, the need of the hour is a specialized and tactful judiciary, which can deal with intellectual property rights issues with aptness keeping the national interest in mind and ensure effectiveness of enforcement system. Rights holder should be encouraged to participate in enforcement actions. The quantum of damages awarded by the court should be such that they not only compensate the right holder for the losses suffered, but should also act as a deterrent for infringers form engaging in illegal activities. Infringers can also be directed to take corrective advertising to indemnify the loss caused to the good will of the right holder.

 

 

 

 

 

 

 

 

 

 

 

 

WILL under Indian Law

Will is the legal declaration of a person’s intention which he wishes to be performed after his death and once the Will is made by the testator it can only be revoke during his lifetime. A person cannot give his ancestors property in the form of a Will but he can make a Will only of his Self-Acquired property. A Will does not involve any transfer, nor affect any transfer inter-vivos, but it is an expression of intending to appoint a person who will look after the properties after his (Testator) death. A Will regulates the succession and provides for succession as declared by the testator.

Historical Background of ‘Wills’: As the time rolled the emergence of the Will became more popular, Indian Law which is governed under ‘Section: 5’ of “The Indian Succession Act, 1925” which provides different rules for intestate succession and testamentary succession in India. It applies to all the communities in India except Muslim community. In India there is a well developed system of succession laws that governs a person’s property after his death. ‘The Indian Succession Act 1925’ applies expressly to Wills and codicils made by Hindus, Buddhists, Sikhs, Jains, Parsis and Christians but not to Mohammedans as they are largely covered by Muslim Personal Law.

 Statutory Definition of ‘Will’: The term ‘Will’ is defined under ‘Section: 2(h)’ of The “Indian Succession Act, 1925”, means the legal declaration of the intention of a testator with respect to his property which he desires to be carried into effect after his death. A testator is authorised with a power to appoint any person as beneficiary of his Will whereas ‘Section: 5’ deals with the law regulating succession to deceased persons moveable and immovable property

Meaning of ‘will’: A Will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at the time of death. A Will can be made by anyone above 21 years of age in India. A Will is a statement made by a testator in the written form stating the manner in which his estate/property must be distributed after his death. A Will being a testamentary document comes into effect after the death of the testator and if the person dies without writing any Will then he is said to be have died intestate. The person in whose favour the testator bestows the benefits called beneficiary or legatee. A Will is otherwise called as Testament.

 Features of A Valid ‘Will’: There are certain characteristics which should be included in the instrument of will such as :-

• The Name of The Testator: The name of the testator should be mentioned accurately without any error in initials, spelling or grammatical mistake so that it will not affect the instrument of Will. The name of the testator can also be clarified by looking into his birth certificate or any school certificates.

• Right To Appoint Legatee: The testator is having absolute right to appoint any person as a legatee or beneficiary of a Will and legatee should execute the Will carefully and in accordance with the law.

• To Take Effect After Death: A testator who is having power to make the Will during his lifetime, but it will take effect only after his death. A gift made by a person during his lifetime and will take effect during his lifetime, cannot be considered as a Will.

• Revocability Under The Law: In general a Will made by the testator can be revoke at any time during his lifetime and testator can choose any other person as his legatee. There may be chances where a testator wishes to bring some alterations in the Will then he can make some necessary amendments in the prepared Will which is otherwise called as Codicil. A third party can not file a civil suit against the testator on the ground of cancellation of the Will. A Will made by the testator may be irrevocable in some cases where an agreement is entered into contrary to the Will, may bind the testator.

• Intention of The Testator supreme: The testator of the Will has right to revoke Will at any time which can only be proved by the intention of the testator that whether he is intending to revoke the previous testamentary instruments made by him or he can state in his Will that ‘This is my last Will’ then it can be presumed that all the earlier testamentary instruments has been revoked.

• The Declaration to be ‘Last Will’: A person as testator has power to make declaration of Will unnumerable times but it is always the last will of testator which will prevail. The words “I declare this to be my last will” need not be stated in the instrument of the Will. Once the Will is made by the testator Inserting of words ‘Last and Only will’ at the time of death it can be presumed that all the previous Wills will get revoked and fresh Will has to be effected.

• Lost Subsequent ‘Will’: Mere loss of the original Will does not operate a revocation but it has to be inferring by the stringent evidence to prove its revocability and a testator must show the genuine reasons for the loss of the Will. Once it is proved that a original will is lost then ‘Subsequent Will’ will be valid.

 Kinds of ‘Wills’: A testator who has right to make a Will for the future benefits of his family members which will take effect after his death, the there are certain types of Wills which has to be looked into:

1. Privileged ‘Wills’: As it can be understood from the word privilege provided to certain persons. A privileged Will is one which is made by any soldier, airman, navy persons, mariner who are willing to dispose of their estate during their course of employment. A soldier includes officers and all other rank officers of service but does not include a civilian engineer employed by the army, having no military status. A soldier while making an instrument of Will must have attained the age of 18 years and where a will made by the soldier is in the oral form, will be valid only for a month though a written Will always remain operative. A privileged Will may be revoked by the testator by an unprivileged Will or codicil, or buy any act expressing an intention to revoke it and accompanied by such formalities as would be sufficient to give validity to a privileged Will, or by the burning, tearing or otherwise destroying the same by the testator.

2. Unprivileged ‘Wills’: Wills executed according to the provisions of ‘Section 63’ of the ‘Indian Succession Act, 1925’ are called Unprivileged Wills. An unprivileged Will is one which is created by every testator not being a soldier, airman, mariner so employed. An unprivileged Will like Codicil can be revoked by the testator only by another Will or by some writing declaring an intention to revoke the same and to be executed in the manner in which an unprivileged Will can be executed under the Act or by burning, tearing or destroying of the same by the testator or by some other person in his presence and by his directions with the intention of revoking the same.

Who Can Make ‘Will’: Every person who is competent to contract may make a will but he must be major, sound mind and willing to write a Will. Any person who is the sole owner of a self-acquired property can bequeath by way of will. A person of unsound mind can also make a will but only in lucid intervals. A Will cannot be made by some persons i.e. minors, insolvent, persons disqualified under any law by the court. A Will executed by a minor is void and inoperative though a testamentary guardian can be appointed for the minor to dispose off the property. A Will can be made by the deaf and dumb person by showing consent through writing or gestures in sign language. Nothing prevents a prisoner or alien in India from drawing a Will.

For Whom The ‘Will’ Can Be Made: Any person capable of holding property can be a legatee under a will and therefore a minor, lunatic, a corporation, a Hindu deity and other juristic person can be a legatee. Sections 112 to 117 of ‘Indian Succession Act, 1925’ put some restrictions on the disposition of property by will in certain cases. Dispositions of property by will in some cases have been declared void. If the minor person has been named as legatee by a testator then a guardian should be appointed by the testator himself to manage the bequeathed property.

What Can Be Bequeath In A ‘Will’: Any movable or immovable property can be disposed off by a will by its owner, that property must be a self acquired property of that person and it should not be an ancestral property of the testator. According to Section: 30 of ‘Hindu Succession Act, 1956’ provides that any Hindu may dispose off by will or other testamentary disposition any property, which is capable of being so, disposed of by him in accordance with law.

General Procedure To Make A ‘Will’: A ‘Will’ should be prepared with utmost care and must contain several parts to make a complete Will though there is no defined format for making a Will but a general procedure should be adopted while writing a Will by the testator which includes:

1. Declaration In The Beginning: In the first paragraph, person who is making a Will, has to declare that he is making this Will in his full senses and free from any kind of pressure and undue influence and he has to clearly mention his full name, address, age, etc at the time of writing the Will so that it confirms that a person really wishes to write a Will.

2. Details of Property and Documents: The next step is to provide list of items and their current values, like house, land, bank fixed deposits, postal investments, mutual funds, share certificates owned by testator. He must also state the place where he has kept all the documents if the will documents are under safe custody of the bank then testator has to write details about the releasing of the Will from the bank. Here it is the most important duty of the testator to communicate the above matter to the executor of the Will or any other family members, which will make the Will valid after testator death.

3. Details of ownership By The Testator: A testator while making a original Will should specifically mention that who should own his entire property or assets so that it will not affect the interest of the successors after his death. If testator wishes the name of the minor as beneficiary then a custodian of the property should be appointed to manage the property.

4. Attestation of the ‘Will’ : At the end, once the testator complete writing his Will, he must sign the will very carefully in presence of at least two independent witnesses, who have to sign after his signature, certifying that the testator has signed the Will in their presence. The date and place also must be indicated clearly at the bottom of the Will. It is not necessary that a person should sign all the pages of the Will instrument but he must sign to avoid any legal disturbances.

5. Execution of A ‘Will’: On the death of the testator, an executor of the Will or an heir of the deceased testator can apply for probate. The court will ask the other heirs of the deceased if they have any objections to the Will. If there are no objections, the court will grant probate .A probate is a copy of a Will, certified by the court. A probate is to be treated as conclusive evidence of the genuineness of a Will. In case any objections are raised by any of the heirs, a citation has to be served, calling upon them to consent. This has to be displayed prominently in the court. Thereafter, if no objection is received, the probate will be granted and It is only after that Will comes into effect.

 Registration of ‘Wills’: According to the Section: 18 of the ‘Registration Act, 1908’ the registration of a Will is not compulsory. Once a Will is registered, It is a strong legal evidence that the proper parties had appeared before the registering officers and the latter had attested the same after. The process of registration begins when a Will instrument is deposited to the registrar or sub-registrar of jurisdictional area by the testator himself or his authorised agent. Once the scrutiny of Will instrument is done by the registrar and registrar is satisfied with all the documents then registrar will make the entry in the Register-Book by writing year, month, day and hour of such presentation of the document and will issue a certified copy to the testator. In case if registrar refuses to order Will to be registered then testator himself or his authorised agent can institute a civil suit in a court of law and court will pass decree of registration of Will if court is satisfied with the evidence produced by the plaintiff. A suit can only be filed within 30 days after the refusal of registration by the registrar. If the testator willing to withdraw the Will after the process of registration then a sufficient reason has to be given to registrar, if satisfied he will order for the registration of Will.

Revocation of ‘Wills’: A Will is liable to be revoked or altered by the maker of it at any time when he is competent to dispose of his property by Will. A Will can be revoked by testator of the Will at any point of time which can be classified into two aspects such as:-

• Voluntary Revocation: A testator who wishes to revoke his original Will which is made by him on a specified date and time, he can make revocation of the will himself by writing a subsequent Will or codicil duly executed and by destruction of the previous will, means by burning, tearing, destroying or striking out the signature of the original instrument of a Will.

• Involuntary Revocation: According to the Section: 69 of the Indian Succession Act, 1925 which deals with revocation of will by the testator’s marriage, however this provision does not apply to Hindus. Section 57 of the Indian Succession Act clearly states that a testator’s marriage will not make the Will invalid.

 Probate: It is the copy of the will which is given to the executor together with a certificate granted under the seal of the court and signed, by one of the registrars, certifying that the will has been proved. The application for probate shall be made by petition along with copy of last Will and testament of the deceased to the court of competent jurisdiction. The copy of the will and grant of administration of the testator’s estate together, form the probate. It is conclusive evidence of the validity and due execution of the will and of the testamentary capacity of the testator. A probate is obtained to authenticate the validity of the will and it is the only proper evidence of the executor’s appointment. The grant of probate to the executor does not confer upon him any title to the property which the testator himself had no right to dispose off which did belong to the testator and over which he had a disposing power with a grant of administration to the estate of the testator. Probate proceedings cannot be referred to Arbitration. The probate court (whether it is the District Court or High Court) has been granted and conferred with exclusive jurisdiction to grant probate of a Will of the deceased.

 ‘Wills’ By Muslims Under ‘Mohammedan Law’: A Will under Mohammedan Law is called as Wasiyat, which means a moral exhortation or a declaration in compliance with moral duty of every Muslim to make arrangements for the distribution of his estate or property. The Mohammedan Law restricts a Muslim person to bequeath his whole property in a will and allows him to bequeath 1/3rd of his estate by writing will, which will take effect after his death. A will may be in the form of oral or written if the will is in writing need not be signed if signed need not be attested. Acc to Shia Law if served bequests are made through a will, priority should be given to determination by the order in which they are mentioned a bequest by way of will. A Will Can be made by a person who is of sound mind, major and possessing a absolute title, in favour of a person who is capable of holding property except unborn persons and heirs. The revocation of will is possible only if the subsequent Will is made by the testator. A Muslim person who is allowed to bequeath 1/3rd of his estate, he can exceed its limit on testamentary power of 1/3rd to 1/4th in case where heirs gives consent or only heir is husband or wife.

Statutes Relating To ‘Wills’: There are many laws which are dealing with the concept of ‘Wills’ as follows:

Indian Succession Act, 1925

• Hindu Law (Hindus Personal Law)

• Muslim Law (Muslims Personal Law)

• Indian Registration Act, 1908

Patent of Inventions, Innovation in Softwares: Patinformatics

A comparative analysis of Global players

Ankit Kumar Singh

A. Background:

The practice of granting monopolies by patent has a long history of over 600 years. The term patent can be traced to the term Letters Patent, a grant in the form of a document rolled up with the King’s or Queen’s seal appended at the bottom, conferring certain rights and privileges on an individual. The grant was not sealed or closed but it was open to public. Though letters patent were granted for various purposes, they were most often granted to inventors, and hence the word ‘patent’ was eventually used to describe the inventor’s monopoly. It only excludes others from practising his invention without his permission. The patent system achieves this goal by granting limited exclusive rights to inventors in return for public disclosure of inventions that would encourage scientific and technological advancement. An invention is the creation of a new technical idea and of the physical means to accomplish or embody it. Thus, there must be a concept and a way of putting the concept into some practical form. An unimplemented idea is not patentable. Software is a set of interacting programmes. Each programme is a sequence of instructions written in a well-defined language, encoding operations, processes or algorithms applied to data in the broadest sense. The programme is initially written in a programming language understandable to professionals. At this stage, it is in the form of ʺsource codeʺ, which permits the development and production of a software product. Once written, this sequence of instructions can be compiled, which means translated and transformed into a binary sequence (of 1s and 0s) signalling the presence or absence of an electric impulse, comprehensible for a machine, but no longer to a human mind. It is then in the form of an ʺobject codeʺ or binary code. In simple words, a computer program, or software, is a “set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.” A software-related patent is a “patent that claims as all or substantially all of its invention some feature, function or process embodied in a computer program that is executed on a computer.” A major subject of debate is whether software alone, not in combination with other physical elements or steps, should be, or is, patentable.

B. Arguments in Favour of Patenting:

Although software exists as written text, both as source and object codes, unlike other copyrightable subject matters, its primary purpose is not that they be read by human beings. Rather, software, at least in object code form, is written for the purpose of performing functional tasks. Computer software, in conjunction with the computer, carries out the particular task or set of tasks itself. In short, software is a functional work of technology. Historically, patent protection has always been available for functional subject matters. Patent protection of computer software is that a patent can protect a concept underlying the computer program, and thus would promote the development of the software industry and computer-related industry. Software provides a set of instructions that allow a machine to indicate, perform or achieve a particular function, task or result. In that sense, both hardware and software exhibit technical behaviour.

Since software invention requires considerable investment of time and money, it should be protected. Given the limited ability of copyright to protect the valuable functional aspects of software such as behaviour and structure, sequence, or organization, second comers could simply copy these aspects either directly from the source code or by decompiling the object code. These kinds of practices diminish the real value software and deprive the original developers of the ability to recoup their development costs and from earning money from their inventions. Therefore, the prospect of obtaining an exclusive right to practice and/or license an invention under patent protection gives inventors important financial incentives to invest time and resources in developing new inventions.

The reward in the shape of a patent serves as an incentive to innovators, as it can be argued that developers need means to recuperate their investment. In other areas of innovation, patents have encouraged substantial investment in research and development and have generally promoted innovation. Software development is a vibrant area of innovation, despite the uncertain nature of its legal protection. The success of open source software also serves to diminish the claim, as there is a field of endeavour where thousands of developers innovate without the incentive of patent protection. If a computer program contains elements that meet patentability requirements, it should be awarded software protection. Since software development is a technical field like any other its results should be patentable. Effective protection of the software industry is an economic necessity. Over the few past decades, the software industry has achieved a substantial growth rate which continues to grow unabated. Countries that want to increase or at least to sustain investments in this sector should provide effective protection mechanisms for these technologies.

C. Arguments against Patenting:

Computer programs are already protected by copyright, and thus it is not necessary to provide any other titles of protection. Smaller software developers would not be able to enjoy expensive patent protection, and would be put in a position to pay royalties to patents owned by big corporations. Computer software is actually an algorithm or a mathematical formula. An algorithm is a series of steps to solve a problem and computer program is an implementation of that algorithm, which is like an implementation of mathematical equation. Granting patents for mathematical algorithms would preclude others from performing the same process. So like mathematical algorithms, computer programs should not be patented.

Exclusive rights granted by patents diminish competition by creating monopolies in the market. On the other hand, exclusive rights conferred by a patent owned by small and medium enterprises would strengthen their market position and negotiation power with the possibility to license or assign patents. Patent protection of computer programs would inhibit competition in this field due to the characteristics of software innovation. It is said that software innovation typically involves cumulative, sequential innovation and re-use of others’ work. To a certain extent, this is an inevitable and permitted consequence of the patent system. However, the fact that the software industry has a natural tendency towards monopolies as a consequence of the need for standardization, allows software patents to have a further effect on monopolization in the sector.

Software patents encourage the creation of the so-called ‘patent thickets’: a dense undergrowth of interrelated patents that researchers have to navigate in order to develop new technologies. There are two different types of thickets. The first one is a single technological innovation that may be protected by several patent holders. This situation would require anyone interested in developing software in that area to obtain separate licences from numerous owners. The second type of thicket occurs when a product is covered by a large number of patents, not just one. Patent thickets increase the cost of innovation, they encourage inefficiency through the creation of complex cross-licensing relations between companies, and they may even stop newcomers entering the market if they fail to penetrate the thicket. However, at least one commentator takes issue with critics of patent thickets: even where thickets exist, they have no effect on innovation through research and development spending.

D. Protection of Softwares:

  a) International Perspective:

The most common systems for protecting computer software are: Copyright, Patents, and Trademarks. Copyright protects the expression of an idea in a tangible (material) form. The recent Copyright Treaty by the World Intellectual Property Organization confirms that computer software is to be protected by copyright as a literary work throughout the world. Literary works, such as books and poems, have traditionally been expressed in a written form which is readable to humans. With regards to software, both the source code (human readable form) and object code (machine readable form) qualify for copyright protection. Patents protect the underlying ideas of a product which has commercial value in industry. Computer software incorporates ideas in the form of algorithms and data structures. These ideas can be protected by patents if proven to be innovative enough and of commercial value. Trademarks protect the name that uniquely distinguishes a company or product from the rest. Trademarks are available in regards to computer software in software names and software company names.

In particular, prior to the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement, the status of computer program protection was undefined under the Paris Convention, which regulates global patent rights, and was controversial under the Berne Convention, which regulates the worldwide copyright regime. The TRIPS Agreement places computer programs under the copyright section by stating that “computer programs, whether in source or object code, shall be protected as literary works under the Berne Convention.” Furthermore, TRIPS mandates that all member states create an adequate judicial and administrative enforcement mechanism and provide a dispute resolution mechanism not only for the protection of computer programs but all intellectual property rights.

Despite the TRIPS Agreement, the question of whether or not computer programs can be patented has not been solved. Article 27 of the agreement states that “… patents shall be available for any inventions…in all fields of technology, provided they are … capable of industrial application.” While the second and third paragraphs of the same article allow member states to exclude from patentability some categories such as medical treatment, or inventions dangerous to health or environment, it makes no mention of computer programs. By not commenting on the viability of software patents, TRIPS leaves this decision to the individual signatories. However, even the developed countries differ as to whether computer programs should be patentable, and if so, which limitations should apply.

b) United States:

The U.S. Code defines inventions that are the proper subject matter of U.S. patents as follows: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title.” Not all “inventions” are patentable in the U.S. because neither a mathematical formula nor an algorithm for making mathematical computations or conversions can be patented. Nevertheless, the U.S. Supreme Court also excluded “laws of nature, natural phenomena, and abstract ideas” from patent protection. Before 1981, the United States Patent and Trademark Office (USPTO) treated computer programs and inventions relating to computer programs as mathematical algorithms or abstract ideas and did not grant patents. Attitudes towards software patents have changed significantly following Diamond v. Diehr, in which the Supreme Court stated that a patent claim could not be denied solely because the invention uses “…a mathematical formula, computer program, or digital computer.” An idea in and of itself is also not patentable. The implication is that any mathematical procedure is akin or identical to a law of nature, which leaves doubt as to whether any computer-implemented inventions are patentable.

Following the decision in In re Freeman, the U.S. Patent and Trademark Office (“USPTO”) applies a two-step test—which was further refined in In re Walter and in In re Abele —to determine whether a particular invention is patentable. The first step is a determination of whether the patent claim describing the invention recites elements or steps that are themselves mathematical algorithms. If a mathematical algorithm is not present, patent protection may be the proper vehicle of protection if the other statutory requirements are met. If a mathematical algorithm is present, a second step attempts to determine whether the claim reciting the mathematical algorithm relates or applies, in a non-trivial fashion, the algorithm to physical elements or process steps, so that the claim as a whole must be analyzed.

In 1981, the U.S. Supreme Court clarified that computer technology should not be treated differently from other technologies under the patent law and that inventions involving a computer program can be the proper subject matter for protection by U.S. patents. Furthermore, the Federal Circuit in In re Alappat held that software has the power to convert a general purpose computer into a special purpose machine, which constitutes patentable subject matter. Today, the U.S. grants patents for a wide range of computer software-related inventions provided that they produce “concrete, useful and tangible” results.

c) Europe:

Traditionally, software has been protected by copyright and excluded from patent protection in Europe. Article 52(2) of the European Patent Convention excludes “schemes, rules and methods for performing mental acts, playing games or doing business, and programming computers” from patentability. These exclusions are made for abstract and intellectual mechanisms, as opposed to useful tangible products or processes. Despite this language, however, patents covering computer software have been granted pursuant to decisions of the European Patent Office Board of Appeal. The panels in those cases interpreted Article 52(2) in light of other provisions of the Convention, including Article 52(3), and concluded that while computer software and business methods cannot be patented as such, they can be patented on the basis of the technical effects produced by the software or method. Over the last fifteen years the Technical Board of Appeal of the European Patent Office (“EPO”) has tried to get over this obstacle, almost even to the point of undermining the clear intent of the entire European patent system, but it is still shackled by its current provisions.

On Aug. 31, 2001, the European Patent Office issued new guidelines with respect to the patenting of computer programs and business methods. The purpose of these amendments was to confirm the guidelines to the aforementioned European Patent Office Board of Appeal decisions concerning the patentability of business methods and computer-related inventions and with current European Patent Office practice on examining such subject matter. Under the 2001 amendments, the European Patent Office, as it had in the past, relied on language in Article 52(3) of the Convention and language in Rules 27 and 29 of the Convention’s Implementing Regulations to issue computer software patents. Under the revised, current guidelines, the European Patent Office may, assuming all other requirements are met, grant a computer software patent provided it is of a “‘technical character’ to the extent that it must relate to a technical field, concern a technical problem, and have technical features in terms of which the matter for which protection is sought can be defined in the claim.” Accordingly, although computer programs per se are not patentable, under the guidelines, “if a computer program is capable of bringing about, when running on a computer, a further technical effect going beyond … normal physical effects, it is not excluded from patentability, irrespective of whether it is claimed by itself or as a record on a carrier.” It is clear that the existing procedure is well established in favour of some limited patentability of software, even after the defeat of the Directive. European Commissioner Benita Ferrero-Waldner has pointed out that, despite the vote, ‘patents for computerimplemented inventions will continue to be issued by national patent offices and the European Patent Office under existing law’.

d) Japan:

Under Article 2(1) of the Japanese Patent Law, computer software, like all other inventions, is patentable if it is a highly advanced creation of technical ideas by which a law of nature is utilized. In February 1997 the Japanese Patent Office issued its Implementing Guidelines for Computer Software-Related Inventions, published, in part, to “adequately protect software related inventions by clarifying that ‘computer-readable media recording computer programs’ ” may constitute statutory subject matter. Just three years later, in 2000, the Japanese Patent Office issued revised Examination Guidelines for Patent and Utility Model in Japan, which included Computer Software-Related Inventions. Under these lengthy guidelines, the Patent Office sought to address the issues raised concerning the patentability of software-related inventions that are not necessarily recorded on computer-readable media (i.e., Internet-related inventions), as well as the patentability of business methods. Its purpose was to, among other things, achieve consistent decisions among patent office examiners and efficient implementation of the patent and utility model laws.

e) India:

Under the Indian law, computer programmes are protected under the Copyright Act, 1957; they are not entitled to protection through patents. The law relating to patents in India is governed by Indian Patents Act, 1970 as amended by Patents (Amendment) Act, 1999 and Patents (Amendment) Act, 2002, which came into force with effect from May 2, 2003. Section 3(k) of Patent Act, 1970“A mathematical or business method or a computer programme per se or algorithms are not patentable.” According to the Draft manual of practice and procedure :

4.11.1 A computer implemented invention mean any invention, the performance of which involves the use of computer, computer network or other programmable apparatus, or an invention one or more features which are realized wholly or partially by means of a computer programme/ programmes.

4.11.2 Computer programmes are a set of instructions for controlling a sequence of operations of a data processing system. It closely resembles a mathematical method. It may be expressed in various forms e.g., a series of verbal statements, a flowchart, an algorithm, or other coded form and maybe presented in a form suitable for direct entry into a particular computer, or may require transcription into a different format (computer language). It may merely be written on paper or recorded on some machine readable medium such as magnetic tape or disc or optically scanned record, or it may be permanently recorded in a control store forming part of a computer.

4.11.3 If the patent application relates only to a machine i.e., hardware based invention, the best mode of operation may be described along with the suitable illustrations. However, in the case of a process related inventions, the necessary sequence of steps should clearly be described so as to distinguish the invention from the prior art with the help of the flowcharts. The source/pseudo/object codes may be incorporated in the description optionally.

4.11.4 In order to distinguish the invention from the prior art, relevant prior art is also required to be given in the specification. It is always essential to analyze the invention in the light of what is described and the prior art, in order to identify the contribution to the art and hence determine whether this advancement resides in, or necessarily includes, technological features and technical application or is solely intellectual in its content. A hardware implementation performing a novel function is not patentable if that particular hardware system is known or is obvious irrespective of the function performed.

4.11.5 Applications related to computer inventions may broadly fall under the following categories:

(a) Method/process:

(b) Apparatus/system:

(c) Computer program product.

The following aspects should be looked into while dealing with such applications.

4.11.6 The method claim should clearly define the steps involved in carrying out the invention. It should have a technical character. In other words, it should solve a technical problem. The claims should incorporate the details regarding the mode of the implementation of the invention via. hardware or software, for better clarity. The claim orienting towards a “process/method” should contain a hardware or machine limitation. Technical applicability of the software claimed as a process or method claim, is required to be defined in relation with the particular hardware components. Thus, the “software per se” is differentiated from the software having its technical application in the industry. A claim directed to a technical process which process is carried out under the control of a programme (whether by means of hardware or software), cannot be regarded as relating to a computer programme as such.

For example, “a method for processing seismic data, comprising the steps of collecting the time varying seismic detector output signals for a plurality of seismic sensors placed in a cable.” Here the signals are collected from a definite recited structure and hence allowable.

4.11.7 The apparatus claim should clearly define the inventive constructional hardware features. The claim for an apparatus should incorporate a “process limitation” for an apparatus, where “limitation” means defining the specific application and not the general application. As a general rule, a novel solution to a problem relating to the internal operations of a computer, although comprising a program or subroutine, will necessarily involve technological features of the computer hardware or the manner in which it operates and hence may be patentable. For example, in a computer comprising means for storing signal data and a first resistor for storing data, the clause starting with “for” describes the function or process carried out by the apparatus, and form the part of “process limitation” here.

4.11.8 The claims relating to software programme product are nothing but computer programme per se simply expressed on a computer readable storage medium and as such are not allowable. For example, if the new feature comprises a set of instructions (programme) designed to control a known computer to cause it to perform desired operations, without special adoption or modification of its hardware or organization, then no matter whether claimed as “a computer arranged to operate etc” or as “a method of operating a computer”, etc., is not patentable and hence excluded from patentability. The claim might stipulate that the instructions were encoded in a particular way on a particular known medium but this would not affect the issue. e.g., A program to evaluate the value of PI or to find the square root of a number are held not allowable. An invention consisting of hardware along with software or computer program in order to perform the function of the hardware may be considered patentable. e.g. embedded systems.

4.11.10 A mathematical method is one which is carried out on numbers and provides a result in numerical form (the mathematical method or algorithm therefore being merely an abstract concept prescribing how to operate on the numbers) and not patentable.

However, its application may well be patentable, for example, in Vicom/Computer-related invention [1987] 1 OJEPO 14 (T208/84) the invention concerned a mathematical method for manipulating data representing an image, leading to an enhanced digital image. Claims to a method of digitally filtering data performed on a conventional general purpose computer were rejected, since those claims were held to define an abstract concept not distinguished from a mathematical method. However, claims to a method of image processing which used the mathematical method to operate on numbers representing an image can be allowed. The reasoning was that the image processing performed was a technical (i.e. non- excluded) process which related to technical quality of the image and that a claim directed to a technical process in which the method used does not seek protection for the mathematical method as such. Therefore the allowable claims as such went beyond a mathematical method.

4.11.11 The patent application No.558/DELNP/2005 related to method of operating the credential management processor. This was refused as it was found to be attracting the provisions of section 3(k) as the alleged method was relating to ‘receiving ‘, ‘de-referencing’ and ‘storing’ being purely a computer implemented software application. As well as the enhancement of security as claimed in method claims was already disclosed in the cited document and is obvious to a person skilled in the art.

E. Conclusion:

Economists view patent protection as a trade-off between the need to encourage innovation and the necessary evil of allowing a temporary monopoly to the innovator. Although it is controversial, no one can deny the importance of software. There are those who argue that software is so fundamental that our society should not allow anyone to own it to the exclusion of others. Some are content to treat software as copyrightable literature, affording protection only to its expressive, but not its functional aspects. Some argue strenuously that the patent system, which has existed since the late eighteenth century, is outdated and cannot handle this new technology and that some different, sui generis, form of protection should be created for software technology. Others argue that the current patent system is working fine and that it will adapt to this new technology, just as it has done many times before. Failure of TRIPS Agreement to determine whether computer programs can be patentable or not and if so which limitations should apply, creates different application among the member states. The U.S. provides for the patent of computer software and even European Union provides for the patent in the Computer programmes if it has “Technical Effect”. On the lines of US, Japan also provides for the patent to the computer software. India too provides for the Patent of the Computer Program in the Hardware form, in spite of its express negation in Patent Act, 1970.

Counterfeit under Indian Intellectual Property Rights

1.    INTRODUCTION

 

Counterfeiting is the passing off action of the genuine products to customers. Such products are sold under the famous establishing and manufacturing. This is nothing but the cheating consumer and running parallel operation. Intellectual Property Rights (IPRs) come in hand of passing off action. The statute governing IPRs recognizing such activity as an offence and provide for stringent punishment such as counterfeiting activity. Counterfeiting activity remind us the large scale of counterfeiting in currency. Reserve Bank of India with the help of the statutory provision catches such offenders and brings them to prosecution under the Panel provision.

  1. 2.    COUNTERFEITING : HOW IT IS DONE

 

Counterfeit products may include[i]

i)                    products with correct ingredients, but containing insufficient or erroneous   quantities of active ingredients, or expired active ingredients either to save cost or owing to poor quality control factors;

ii)                  wrong ingredients with possibly toxic elements and impurities and therefore directly harmful to patients;

iii)                without active ingredients or using similar class of cheaper ingredients to escape detection; 

iv)                produced by unhygienic manufacture, or lack of rigorous cleaning between production batches; or

v)                  products with false or misleading packaging.

The Standard of Weight and measure (packaged Commodities) Rules 1977 were enacted to regulates the use of correct weighing and measuring instruments in production, trade and commerce to ensure that exact weight, measure and number of any commodity is provided to any customer as contracted for. It also protects the consumers’ benefits by assuring compulsory declarations on packaged commodities. The Standards of Weights &Measures Act 1956 was the first Act which enacted based on metric system and international system of units recognized by OIML – International Organization of legal metrology in order to provide uniform standards of Weights & Measures.

The Rules have tried to make the manufacturer and traders to be responsible for producing and importing the commodities. Every package kept, offered for sale or sold, shall bear conspicuously on it, the name and complete address of the manufacturer, or where the manufacturer is not the packer, the name and address of the manufacturer and the packer and in case of imported packages, the name and address of the importer. The complete and clear address shall mean the postal address at which the registered office of the manufacturer is situated or the factory is situated so that a consumer can identify and locate the manufacturer or packer.

In case any products manufactured outside India but packed in India, the package shall also display the complete name and complete address of the packer or the importer in India. The name of the manufacturer or packer or importer shall be the actual corporate name, or if not incorporated, the name under which the business is conducted by such manufacturer or packer or importer in India. Also the rules further restrict the application of individual stickers or labels on the package for altering or making any declaration as may be required under the Rules.

COUNTERFEITING IN PHARMACEUTICAL INDUSTRY

At the moment the WHO definition reads as follows:

A counterfeit medicine is one which is deliberately and fraudulently mislabeled with respect to identity and/or source. Counterfeiting can apply to both branded and generic products and counterfeit products may include products with the correct ingredients or with the wrong ingredients, without active ingredients, with insufficient (inadequate quantities of) active ingredient(s) or with fake packaging.

A counterfeit drug or a counterfeit medicine is a medication or pharmaceutical product which is produced and sold with the intent to deceptively represent its origin, authenticity or effectiveness at least to some level. Some examples of types of counterfeit drugs include:

1 On the products’ labels the specified active ingredients has not been contained as such as it is declared.

2 The active ingredient which has shown on the labels is different from what is contained in the product itself.

3 Products which contain the correct strength of the specified active ingredients but whose source is different to the one declared.

4 Products which contain the specified active ingredients but in strengths different to those declared; they may also contain different or different quantities of impurities.

Counterfeit medicines are part of the broader phenomenon of substandard pharmaceuticals. Substandard medicines are those products which the composition and ingredients do not meet the correct scientific specifications and which are thus ineffective and causing dangerous to the patients. There are many reasons to make the substandard products may occur as a result of negligence, human error, insufficient human and financial resources or counterfeiting. The difference is that they are deliberately and fraudulently mislabeled with respect to identity and/or source. Counterfeiting can apply to both branded and generic products and counterfeit medicines may include products with the correct ingredients but fake packaging, with the wrong ingredients, without active ingredients or with insufficient active ingredients. A Spurious drug may or may not have ingredients with therapeutic use while Counterfeit drug may comply with quality standard while imitating popular brands.

According to Dr BR Jagashetty, Karnataka Drugs Controller Currently, there is no definition for counterfeit drugs as far as India is concerned. However, the Drugs & Cosmetics Act only carries definitions of spurious, misbranded and adulterated drugs under Section 17 for the domestic market and Section 9 for imports. However there is still the ambiguity on the definition of adulterated and spurious,

The market circle of counterfeit medicines has made the huge profitable business due to high demand and low production costs. The lack of the stringent legislation in many countries also encourages counterfeiters since there is no fear of being apprehended and prosecuted. When prices of medicines are high and price differentials between identical products exist there is a greater motivating for the consumer to seek medicines outside the normal supply system.

 

COPYRIGHT INFRINGEMENT ON SOFTWARE

 

Form of Piracy[ii]

 

Software piracy is defined as an act of unauthorized copying or loading or distribution of copyrighted software in violation of the end user of the end user license agreement. There are four forms of software piracy; end user piracy, counterfeiting, channel piracy, internet piracy.

–         End user piracy means an end user such as an organization, company, or educational institution uses entirely unlicensed software or software in excess of the licensed purchase.

–         Counterfeiting means it involves the making of the exact replicas of the CDs or DVDs of the original software along with holograms, trademarks, packaging, instruction manuals, and certificate of authenticity. The price of the counterfeit products mostly cheaper than the original one.

–         Channel piracy involves the sale of loose CDs or DVDs on which software program has been burnt. These CDs or DVDs are not lookalikes of the original software CDs; neither are they accompanied by an end user license agreement or a certificate of the authenticity. They are sold at a price which is considerably lower than the original software price.

–         Internet piracy the Internet is used as a means to sell, distribute and advertised unlicensed software programs. This can be done in a number of ways such as through bulletin boards, auction sites, peer to peer networks, blogs and other commercial website.

Counterfeiting includes producing the duplicates of the original CDs or DVDs of the original, along with holograms, trademarks, packaging, instruction manuals and certificates of authenticity. The counterfeit product can be bought by the consumers at a lower price than the original product itself. To give the clarification on what can be called as infringement; Section 51 of the Copyright Act contemplates the various acts that amount to infringement of copyright vested with the owner. Also Section 53 restricts the importation of copies which would infringe copyright.

INFRINGEMENT UNDER TRADEMARK LAW

 

If we look into the provisions under Indian Trademark Act, 1999, under Section 29 has provided the definition of the infringement, however, there is nowhere in the Act which has referred to the definition of the counterfeit. Nevertheless if we look into US Trademark Act, it has been mentioned the definition of both the infringement and counterfeit and from that we can come to know the difference between the “counterfeit” and “infringement”. All counterfeit marks are infringing.  Infringing marks also include a broader class of marks that are “confusingly similar” to genuine marks while counterfeit marks include marks that are “substantially indistinguishable” from a genuine mark, this definition contemplates only minor or trivial differences from the genuine mark.  The “confusingly similar” test for infringing marks contemplates wider differences.

Counterfeit goods has been defined that without authorization of the trademark right’s holder the products, packaging has been imitated which cannot be distinguished the essential feature of the goods itself from the genuine one. Counterfeit goods also include packaging materials, stickers, brochures and instructions even though these are presented separately from the goods themselves.

 

PATENT INFRINGEMENT

Under Patent law regime, a patentee has been conferred the exclusive right to make, distribute or sell the invention in India. An infringement would be happened when any of those rights are violated. A patentee may assign license all or some of these rights and it will not amount o infringement if the assignee or licensee exercise such patent rights. In case of a product patents rights of the patentee are infringed by anyone who makes or supplies that substance commercially. In case of a process patent, the use of such a method or process in India by anyone other than the patentee amounts to infringement.

To consider whether anyone other than the patentee has done which amounts to infringement or not would depend upon:

v  The extent of the monopoly right conferred by the patent which is interpreted from the specification and claims contained in the application of the patentee. Any action which falls outside the scope of the claims would not amount to infringement.

v  Whether he is infringing any of the monopoly rights in the patentee to make, or sell the invention.

 

  1. 3.    REMEDIES AVAILABLE UNDER INTELLECTUAL PROPERTY RIGHTs

 

Remedies available to Copyright

 

CIVIL ACTION: When some person has evidence to prove that his copyright has been infringed, he can bring a civil action against person responsible for such infringement, for compensation and other remedies. Under Section 55 the remedies can be damages to compensate the loss due to infringement or/and injunction prohibiting person infringing from continuing to infringe the copyright.

CRIMINAL ACTION: Some infringements are criminal offences also. As far as computer software is concerned, it is an offence in many countries to make an infringing copy to sell and also to advertise the supply of such programme. Section 64 empowers the police to seize all counterfeit software copies, while Section 63 provides for imprisonment of up to three years and fines of up to Rs200, 000 in case of infringement or abatement. Hence people indulging in software privacy are available for both civil and criminal actions[iii].

Also Section 11 of the Customs Act empowers the customs officials to prohibit the importation and exportation of goods in order to protect copyrights and trademarks. In addition, a new customs recordal system has been introduced through the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007 to strengthen border enforcement with the objective of preventing the entry of counterfeit goods into the country.

 

Remedies available to trademark

The Trademarks Act provides remedies not only for the infringement of a registered trademark but also gives remedy of passing off to protect against infringement of an unregistered trademark. Section 27(2) recognizes the common law remedy of passing off against any person dealing in counterfeit goods. Section 29 mentions the definition of infringement of a registered trademark which includes unauthorized use by a person of a mark which because of its identity or similarity with the registered trademark and use in respect of identical or similar goods is likely to cause confusion on the part public or which is likely to have an association with the registered trademark. Section 135 provides for civil remedies in case of either infringement or passing off. These remedies include injunction, damages, delivery up and rendition of accounts.

Under Trademark Act, 1999 has defined counterfeiting in terms of “falsification” and “false application” of a trademark. According to Section 102 of the Act, “a person shall be deemed to falsify the trademark who either makes that trademark or a deceptive similar mark, or falsifies any genuine trademark, by alteration, addition, effacement or otherwise”. Similarly false application of trademark on goods or packages containing goods, other than genuine goods and including use of any package bearing the said trademark for packing, filling or wrapping, spurious goods. Section 103 provides for criminal remedies such as imprisonment of up to three years and fines of up to Rs200, 000 (around $5,000) in case of counterfeiting. Counterfeit in India is cognizable offence. The occurrence or likelihood of occurrence of an offence can be directly reported to a police officer not below the rank of Deputy Superintendent or to the Intellectual Property Cells of police in cities like Delhi, Mumbai, Kolkata, and Bangalore[iv].

 

Remedies available to Patent

Under the Indian Patent Act, the right of the patentee has been protected. If the monopoly rights of the patentee are violated, his rights are secured by the Act through judicial intervention. The patentee has to institute a suit for infringement. The relief’s which may be awarded in such a suit are Interlocutory/ interim injunction, Damages or account of profits, Permanent injunction.

Section 104 of the Act provides that a suit for infringement shall not be instituted in any court inferior to a District Court having jurisdiction to try the suit. In appropriate cases where the High Court has original jurisdiction to try the suit, the suit shall be instituted in the High Court when an action for infringement has been instituted in a District Court and the defendants make a counter claim for revocation of the patents, the suit is transferred to the High Court for decision because High Court has the jurisdiction to try cases of revocation. Section 104A provides for burden of proof in case of suits concerning infringement. The procedure followed in conducting a suit for infringement is governed by the provisions of code of civil procedure[v].

Only the person who has a right in the patent can institute a suit for infringement. The following persons are entitled to sue:-

(1) The patentee.

(2) The exclusive licensee if the license is registered.

(3) A compulsory licensee when the patentee refuses or neglects to institute proceedings.

(4) A licensee other than the above two licensees can bring an action for infringement upon the terms of the contract between the licensor and licensee.

(5) Assignee, he can sue only after the application for registration of the assignment in his favour has been filed. If a patent is assigned after the commencement of action, the assignee is to be joined as a co-plaintiff. An assignee cannot sue for infringement which occurred prior to assignment.

A suit for infringement can be instituted only after the patent has been sealed. When a specification has been accepted and published i.e., during the period when opposition has been called and is being decided, the applicants cannot institute a suit for infringement. However the damages maintained due to the infringement, committed during the period i.e., between the date of publication of acceptance of complete specification and the date of grant may be claimed in another suit; a separate suit for damages but not suit for infringement. Also a suit can be instituted during the term of even after the expiry of the term even when the term of the patent has expired and infringement occurred during the term of such patent, In case a patent had lapsed and was subsequently restored, committed between the date on which the patent ceased to have effect and the date of publication of application for restoration. When a patent was obtained wrongfully by a person and later granted to the true and first Inventor, no suit for infringement can be instituted for any infringement occurring before the period of such grant to the true and first inventor. Court will issue the notice to the defendant (infringer) so there is no need as such for a person who institutes as such to give the notice to the infringer. Moreover the period a limitation for instituting a suit for patent infringement is three years from the date of infringement.

 

  1. 4.    INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHT WITH THE CUSTOMS ACT, 1962 AND PROCEDURE UNDER INTELLECTUAL PROPERTY RIGHTS (IMPORTED GOODS) ENFORCEMENT RULE, 2007

 

Customs Act, 1962 prohibits import of goods that infringe intellectual property. Section 11 of the Act empowers the Central Government, for the purposes specified in subsection 11(2), to prohibit import or export of goods of any description by issuing a notification. Section 11(2) (n) read with Section 11(1) of the Act empowers the Central Government to prohibit import or export of goods for the protection of patents, trademarks and copyrights. Section 11(2) (u) covers prohibition for the prevention of the contravention of any law for the time being in force. Section 111 and 113 of the Act empowers the Customs to confiscate improperly imported and exported goods respectively.

There have been attempts in the past by the Central Government to issue notifications under Section 11 of the Act and prohibit import of goods that infringe intellectual property. The Central Government issued a notification in 1960 prohibiting export – through sea and land – of goods that attract Section 78 and 117 of the Trade Marks Act, 1968. Another notification was issued in 1964 which prohibited goods bearing false trade mark, false trade description and goods passing off a trademark.

On May 8, 2007, the Central Government vide Notification No. 49/2007-Customs (N.T.), prohibited the import of the following goods, subject to conditions and procedures as specified in the Intellectual Property Rights (Imported Goods) Enforcement Rules,2007, namely[vi]:-

  1. goods having applied thereto a false trade mark as specified in Section 102 of the Trade Marks Act, 1999;
  2. goods having applied thereto a false trade description within the meaning of clause (i) of sub-section (1) of Section 2 of the Trade Marks Act, 1999;
  3. goods made or produced beyond the limits of India and intended for sale, and having applied thereto a design in which copyright exists under the Designs Act, 2000;
  4. the product made or produced beyond the limits of India and intended for sale for which a patent is in force under the Patents Act,1970;
  5. the product obtained directly by the process made or produced beyond the limits of India and intended for sale, where patent for such process is in force under the Patents Act 1970;
  6. goods having applied thereto a false Geographical Indication within the meaning of Section 38 of Geographical Indications of Goods (Registration and Protection) Act, 1999;
  7. goods which are prohibited to be imported by issuance of an order issued by Registrar of Copyrights under Section 53 of the Copyright Act,1957.

 

The Central Government also notified ‘Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007’ on the same date. The rules were notified with a view to strengthen the statutory and executive guidelines provided for the protection of intellectual property rights at the borders.

Under the rules, an intellectual property right holder may give notice in writing to the Commissioner of Customs or any Customs officer authorized in this behalf by the Commissioner, requesting for suspension of clearance of goods suspected to be infringing intellectual property rights. Such notice shall be given in the format prescribed in the Annexure to the Rules and all the information required in the notice should be furnished within 15 days.

Such notice should be registered or rejected within 30 working days of the date of receipt of the notice or date of expiry of extended 15 days period provided for furnishing information required to be filed with the notice. In case the notice is registered, the minimum validity period shall be one year unless the noticee or right holder requests for a shorter period for customs assistance or action. The grant of registration of the notice is subject to following measures[vii]:

v  Customs Department can ex-officio suspends the clearance of the alleged counterfeit goods or on notice if the department has prima-facie evidence or reasonable grounds to believe the goods to be counterfeit. 

v  Customs Department is under duty to inform the right holder immediately about suspension of clearance of goods with the reasons for such suspension.

v  Goods suspended of clearance, is to be released, on 

  • Notice  within 10 days (extendable further with 10 days), when the right holder fails to join proceedings
  • Department’s own initiative within 5 days, when the right holder fails to give notice or fails to fulfill the obligation of executing bond.

v  Period of suspension of release of perishable goods is 3 days. 

v  Department is authorized to seize and confiscate the goods infringing intellectual property rights where it has reasons to believe that the goods are infringing intellectual property and thus liable to be confiscated under the Customs Act.

v  Customs is under duty, upon request by the importer, to provide the name and address of the right-holder and other relevant information relating to the goods suspended from clearance.

v  The right holder is under an obligation to provide customs authorities with the necessary information enabling them to identify infringing goods. The Custom authorities then seek information from the importer, of the person by whom the goods are consigned to India and the address of the person whom the goods are sent in India as well as ask him to produce documents relating to the goods. 

v  Right holder is authorized to examine the suspended goods and to provide samples for examination and analysis to determine whether the goods infringe intellectual property rights.

v  Customs department is to provide, upon request by the right holder, name and address of the importer and other relevant information relating to the goods suspended from clearance.

If the Deputy/Assistant Commissioner of Customs has a reason to believe that the imported goods are suspected to be goods infringing intellectual property rights, Custom Authorities can suspend clearance of suspected goods. Thereafter, the Deputy/Assistant Commissioner of Customs shall immediately inform the importer and the right holder of the suspension of clearance of the goods and shall also mention the reasons for such suspension. However the suspension goods can be released if the right holders fail to join the proceedings within a period of ten working days (extendable by another 10 days) from the date of suspension of clearance. In case the clearance of goods was suspended on Customs own initiative, such goods shall be released within five working days from the date of suspension of clearance, if the right holder fails to give notice or fails to execute the bond. In case of perishable goods, the period of suspension of release is three working days, extendable by another four days.

In case the Deputy/Assistant Commissioner of Customs determines that the goods detained or seized have infringed intellectual property rights, and have been confiscated under section 111 (d) of the Customs Act, 1962, he shall destroy such goods under official supervision or dispose them outside the normal channels of commerce after obtaining ‘no objection’ or concurrence of the right holder. The right holder can raise objection on the mode of disposal within 20 working days (extendable by another 20 days) after having been informed so.

  1. 5.    CONCLUSION

 

The counterfeiting products have affected not only on the loss of the right holder/owner in the market but also the economics of the nation. The Government should develop the regulation and enforcement to control such counterfeit commodities extensively spread out to the market. So for that the strict measures and stringent action to eradicate the counterfeit products is very significance. In addition not only the strict measure taken by the authority to eliminate such counterfeiting products is necessary but also the cooperation from the right holders or owners of such products is important to stop spreading and eliminate such counterfeit products both internal and external markets.


[i] G. Swaminath, Faking it – I The Menace of Counterfeit Drugs, Indian Journal of Psychiatry, Volume 50(4), Oct–Dec 2008.

[ii] www.WorldTrademarkReview.com

[iii] Dr. Firdos T. Shroff, Intellectual Property Rights (IPRs) – A Gateway to Corporate Globalisation, SEBI and Corporate Law, Vol. 89, 2009.

[iv] Ramesh Babu and Abhai Pandey, Better For Brands to Work Together, India IP Focus, 2008.

[v] Article on Patent Infringement Law in India by K.R. Singh.

[vi] Article by Jayant Kumar, India: Enforcement of Intellectual Property Rights through Customs, 2 June 2009.

[vii] INDIA IPR CUSTOM & BORDER PROTECTION, Altacit Global, 2008.

Intellectual Property Rights and The Challenges to Indian Pharmaceutical Industry

The Indian pharmaceutical industry has changed remarkably over the last 50years, from being traders in imported drugs in the fifties, to major bulk drug producers by the eighties. During this transitional period Indian pharmaceutical units have learnt the technology of bulk drug production by their own research and adaptation, and today they produce more than 250 bulk drugs, emphasizing on import substitution and use of indigenous raw materials. At present the Indian pharmaceutical industry has about 300 large units, 1700 medium-size units and about 8000 small-scale units throughout the country.

The Indian law on this subject is contained in the Patents Act, 1970 (a law made by the Indian Parliament) as amended from time to time. In pharmaceutical industry what is patentable is an invention for making a product, and not a discovery in the field of fundamental science. In a discovery nothing new is created. On the other hand, an invention is creation of a new entity, or a new process, though this usually involves utilization of scientific discoveries. The basic requirement for patentability under the Patents law is that the invention should be new and useful, that is, it must have novelty and utility, vide Bishwanath Prasad Radhey Shyam v.Hindustan Metal Industries Once an invention is patented the patentee gets exclusive right to use it, though he may sell or lease it to another. Infringement of the patent can be prevented by an injunction in a civil suit.

TRIPs, the Agreement on Trade-Related Aspects of Intellectual Property Rights is an International treaty by the World Trade Organization (WTO) which sets down minimum standards for most forms of intellectual property (IP) regulation within all member countries of the World Trade Organization. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) treaty in 1994. After India signed the General Agreement on Trade and Tariff (GATT) and the Trade Related Aspects of Intellectual Property Rights Agreement, 1994 (TRIPS) and became a member of the World Trade Organization (WTO). As India is a signatory to the TRIPS Agreement and is a member of WTO, the Patents Act is amended in 2005 to make it confirm to these international agreements. Under Article 70(8)(9) of the TRIPS Agreement regarding pharmaceutical industry, India has the following obligations:

(a) To recognize in principle all kinds of inventions in the area of pharmaceutical and agricultural chemical products in accordance with Article 27 of the Agreement.

(b) To provide a mechanism by which applications can be filed for new inventions as understood in Article 27 in these areas from 1-1-1995.

(c) To apply the test of patentability as laid down in the Agreement irrespective of the law of the country on the date of filing, at the time when patent is granted or rejected.

(d) To provide patent protection for a period of 20 years, from the date of filing once the parties decide to grant the patent.

(e) In the case of product patent applications in these areas, grant exclusive marketing rights for five years or until patent is granted or rejected, whichever period is shorter.

Granting of exclusive marketing rights is subject to three conditions:

(i) product patent for the invention has been granted by another member country;

(ii) market approval is obtained in such other member country; and

(iii) market approval from the country/member granting exclusive marketing right is granted.

Before the recent amendment Section 5 of the Indian Patents Act, 1970 Expressly prohibited product patents and only permitted process patent. After the implementation of TRIPS, the Patents (Amendment)Act, 2005 repealed it and therefore gave way to product patents as well. The difference between process patent and product patent is that under a process patent, medicine or drugs which have been patented can be manufactured by another manufacturer but by using a different process. However, in a product patent drugs which have been patented cannot be manufactured by any process. Thus, product patent is a much stringent restriction than process patent. In consequence of India signing the TRIPS Agreement and WTO India accepted the product patent from 1-1-2005 in accordance with the obligation under Article 27(1) of the TRIPS. It is open to a country signing the TRIPS Agreement to exclude from patentability inventions which are necessary to protect morality, order or health or avoid serious prejudice to the environment, but such exclusion can only be in areas where the majority of member States are also prohibiting the commercial exploitation and denying protection.

The implementation of the TRIPS Agreement will give rise to factors that can put access to medicines out of reach for millions of people in the developing world. The TRIPS Agreement obliges WTO Members to adopt and enforce high standards of intellectual property rights protection, which were derived from the standards used in developed countries. Conforming to TRIPS – by recognizing and strengthening protection of intellectual property rights over pharmaceutical products and processes – will cause problems for developing countries. Implementation of the TRIPS Agreement may lead to high drug prices, low access to medicines and a weakening of pharmaceutical industries in the developing countries. It is feared that patent protection for pharmaceutical products and processes will have the effect of reducing or eliminating competition from generic production of medicines. There are about 10 industrialised countries with the pharmaceutical industry and research base, capable of developing new chemical entities or new medicines. The multinational drug companies in these countries own most of the pharmaceutical technologies and products through patents. The minimum term of 20-year patent protection required by TRIPS effectively allows a pharmaceutical company a monopoly over the production, marketing and pricing of patent protected medicines. It will be able to keep the price of the drug high during the protection period, free from competition. By virtue of TRIPS protection, no generic equivalent can come into the market until expiry of the 20 years, denying patients cheaper alternatives. Domestic manufacturing of pharmaceutical products in developing countries will come to a standstill. Developing countries are able to produce new medicines by a process of reverse engineering; that is, researchers in developing countries may develop a new process different from the process invented (and protected by patent) to manufacture the new medicine or chemical entity. Reverse engineering is possible only in countries where the patent law protects processes but not products. The TRIPS Agreement extends the scope of patent protection to both products processes. It would therefore be possible to apply for patent rights over products for 20 years, and thereafter, further periods of 20 years each could be applied for products covered by patented processes. Developing country pharmaceutical producers will find themselves pushed out of the market, having to compete with the large MNCs. For the smaller producers in the developing world, which specialise and depend on manufacturing cheaper generic alternatives, this would no longer be possible at least, until the expiry of the 20-year period. The TRIPS Agreement further requires patents to be granted, regardless whether the products are imported or locally produced. The means that patent holders can merely import their product, without having to work the patent in the country granting the right. This will mean that a MNC can supply global markets under the patent monopoly, exporting the finished product instead of transferring technology or making foreign direct investment. This is contradictory of the argument of TRIPS proponents that strict patent regimes will increase the flow of technology and investment into developing countries. The TRIPS Agreement, in its present form, contains certain provisions that can be used to limit patent rights. These limitations or exceptions are to be effected through national legislation, in order to curb abuses of intellectual property rights and anti-competitive practices, and generally, to offset the negative impact of patent monopolies. Two of the most important measures include the right of government to grant compulsory licenses and the application of the principle of exhaustion of intellectual property rights, which allows for parallel importation of patented products.

National Pharmaceutical Policy, 2006 Announced

The National Pharmaceutical Policy, 2006 has been announced, it is focusing on research and drug development with clinical trials. The policy lays emphasis on developing human resources in pharmaceutical sciences by opening more institutions on the pattern of the National Institute of Pharmaceutical Education and Research (NIPER). The policy aims at providing a better access to anti-cancer and anti-HIV/AIDS drugs to the patients.

Hon,ble Minister Shri Paswan said the draft National Pharmaceutical Policy, 2006 seeks to rationalise the excise duty on pharmaceuticals. It also seeks to streamline the system of bulk procurement of drugs by the Government besides promoting the generic medicines. The Minister said consumer awareness campaigns would be launched to educate the masses on the new policy. Drugs would be made available to the poor, especially the families living below the poverty line. He said the new policy encourages production of critical bulk drugs in India with emphasis on good manufacturing practices. There would be a Settlement Commission for settling old dues under the Drugs (Prices Control) Order, 1979. A Drug Price Monitoring Awareness and Accessibility Fund (DPMAA Fund) would be set up along with pharma parks. Shri Paswan said the policy lays greater thrust on pharma exports and on improving the retail system for an efficient network for distributing drugs. A Pharmaceutical Advisory Forum would be set up at the national level besides an advisory committee in the National Pharmaceutical Pricing Authority(NPPA) at its head office and five in different regions. These would be headed by the NPPA Chairman.

In addition to the existing 74 drugs and their formulations, the 354 drugs with specified strength as mentioned in the National List of Essential Medicines (NLEM), 2003 have also been included in the draft Pharmaceutical Policy. Apart from the cost plus method, other systems of price control like negotiated prices, differential prices, reference prices and bulk purchase price have also been proposed. He said the raw material cost would be obtained from the manufacturers, central public enterprises in the pharmaceutical sector, import data and market sources.

Govt. disclosed that the Maximum Allowable Post-manufacturing Expenses (MAPE), presently 100 per cent over the manufacturing cost, is proposed to be revised as follows:

(a) 150% in general

(b) 50% additional MAPE for R&D intensive companies which fulfill the laid down standards.

(c) For existing 74 drugs under price control MAPE would continue to remain at 100% for one year in order to avoid a sudden increase in prices. It would be increased thereafter on the above pattern.

(d) Based on the given percentage of MAPE, prices would be fixed for all drugs in the cost plus price control system. Wherever possible ceiling prices would be fixed.

(e) Maximum Retail Price (MRP) would be inclusive of all taxes as in the case of all other packaged commodities.

(f) Some exemptions have been provided for certain drugs from the price control-new drugs developed in India through product patent, process patent and new drug delivery systems would be exempted from price control for 5 years. This will boost R&D in India. Simultaneously, vaccines and biological drugs, drugs for sale to hospitals only, drugs whose MRP is at Rs. 1 per capsule / tablet and generic formulations fulfilling the prescribed norms would be exempted.

(g) A new Drugs (Prices Control) Order would be issued under the Essential Commodities Act 1955 to replace the existing DPCO, 1995.

(h) Re-structuring and strengthening of the National Pharmaceutical Pricing Authority (NPPA) – greater computerization and better monitoring.

(i) Price Monitoring Cells in the State Drug Controller Offices with funding from Government of India.

(j) Drugs (Price Management and Distribution) Act to be enacted for effective regulation of drug prices and for handling health emergencies – it will also provide compounding of minor offences.

(k) Trade Margins on generic-generic drugs, would be fixed (15% – wholesalers and 35%-retailers).

(l) Change in the name of Department of Chemicals and Petrochemicals to reflect Pharmaceuticals also (Name proposed is – Department of Chemicals, Petrochemicals and Pharmaceuticals).

(m) Draft policy along with Cabinet Note has been circulated to all Departments for their comments. On receipt of their comments it would be put up before the Cabinet.