India: Intellectual Property Environment In India

India presents an enormous opportunity, as well as a substantial challenge, to Intellectual Property (IP) owners. The past few years have seen major economic and legislative changes following accession to the WTO. The opening of the economy, and, in particular, the major role India is playing in the knowledge economy, has brought IP issues to the forefront. This article analyses some recent judicial and legislative changes that demonstrate India’s commitment to establishing an effective IP framework. It also briefly outlines preventive measures that IP owners can take for timely protection and effective enforcement of their intellectual property rights in India.

Battling resilient counterfeiters

Unlike in China, where IP owners may find large factories producing counterfeit or infringing products, in India, you are likely to find a huge number of small and medium-sized industries which collectively have a big impact.  At times, IP owners are reluctant to take action against small scale manufacturers thinking that their production volumes do not have sufficient impact on their sales.  Our experience has shown that an early strike not only helps in restraining small players becoming organized, but can also deter new players from entering the trade.

The problem of counterfeiting in India varies from sophisticated operations where the target audience is an overseas market to a small re-filling operation. Typically, the operation would have a chain where a "rag picker" would bring the original used bottles, printing would be outsourced and in an overnight operation the filling would be done and products supplied on cash basis. Rising consumerism and an increasing appetite for branded goods among the middle class has given a boost to the counterfeit industry. More often than not there are markets, or pockets, which are infamous for a counterfeit activity. However, the operators have strong market associations which collectively oppose any raid action, often organizing a mob to create confusion so that, in the mayhem, counterfeit goods can slip away. They also seem to have their own network of informers and are often tipped off about possible search and seizure.

As a result, the role of investigators in helping companies address and control this problem is becoming very important. Companies are increasingly investing in finding out the various links in the chain so that the problem can be addressed more effectively. The information obtained can also form the basis of an effective IP strategy, addressing issues such as enforcement options (civil or criminal); choice of forum; and defenses that may be raised by the counterfeiter.

Recent IP reforms

India has amended its IP laws significantly during the last few years in order to comply with WTO regulations. Some of the changes that have direct implications for IP owners are outlined below:

New Trade Mark Law (effective from September 15, 2003)

• The new legislation is in compliance with the TRIPS agreement and contains important provisions which have been widely welcomed by IP owners and practitioners. Service marks have been introduced and it is now possible to obtain registration for service marks in India.

• Well known marks defined and broader protection given:

• Infringement redefined

• Enforcement streamlined

The new Act gives brand owners increased protection and makes it easier for them to enforce their rights in India.   In addition, it helps streamline the registration procedure. The Trade Marks Office has also made procedural changes to address delays in the registration process, and clear the backlog of applications. The examination process has been decentralized and the Trade Marks Registry is issuing supplementary trade mark journals on CD ROMs to expedite publication of marks. With the procedural and statutory changes in place, new applications/mark are being registered within 2 years of filing (where no opposition has been filed), as opposed to 5-6 years previously.

Amendments to the Patents Act have been the subject of intense debate, particularly those relating to the grant of pharmaceutical product patents. The Patent Law despite controversies and lobbying for and against finally saw light of the day on January 1, 2005 in compliance of India’s obligations as a WTO member. The act has been amended and product patent in relation to pharmaceutical products can now be registered in India.

The copyright law in India is largely TRIPS compliant. Major changes were made to the Indian Copyright Act in June 1994, coming into effect in May 1995. The amendments to the Act were a landmark in the copyright industry. The much required protection was given to computer software, clarifying the rights of the user to make backup copies and imposing heavy punishment and fines on infringers of software copyright. The Act is once again proposed to be amended in order to address challenges posed by digital environment in particular downloading of music, movies, books, software and other copyrighted material from the internet. The proposed amendments are awaiting approval from the parliament. The amendments would provide room for stricter Copyright law provisions in line with international standards.

Meanwhile, software piracy in India continues, however, to be a growing problem. Although the 1995 amendments provide increased statutory protection, there is a need for continuous education and enforcement efforts from the government and various industry alliances. A large number of PC users remain unaware of the law governing software piracy and believe it is legal to copy software.

Piracy in the media and entertainment industries continues to be rampant. Illegal screening of films by cable operators; sale of counterfeit cassettes and CDs; downloading of music onto MP3s; and unauthorized broadcasting continues to decimate legitimate business.

Similarly, book piracy continues to damage the publishing industry. The business of book piracy is a lucrative one in India. Whereas a legitimate copy of a book may sell for $8-9, a pirated version can be produced for 50-60 cents and sold for $3. Thus, profit margins are high. The publishers are lobbying the Government to improve enforcement and awareness amongst the trade and public.

One of the common problems faced by global brand owners in the Indian market is that due to popularity of their brands they are indiscriminately copied by Indian companies for completely different or unrelated goods.  Incidence of well known brands being used as part of corporate/trade name is quite common.  It is quite challenging to stop such use particularly where it is adopted for completely different or unrelated goods.  The obvious argument of the traders in such cases is that because there is no commonality of trade channels, end users of products or services, no confusion will be caused.

The Indian Courts have, over a period of time, embraced international developments and handed down a number of landmark judgments that have changed the face of IP litigation. They have, for example, repeatedly confirmed that it is not necessary to have actual physical sale of goods in India. The doctrine of ‘trans border’ and ‘spill over’ reputation in famous marks has been recognized by the courts. The Supreme Court in a trade mark dispute involving medicines held that "medicines are international in character". Thus, use of a mark on medicines in countries outside India may be just as relevant as use of the mark in India.

Until recently, the concept of awarding costs and damages in IP disputes by the courts in India was not fully developed. Thus, counterfeiters/infringers had little or no financial deterrence. Generally, the infringers are not likely to maintain proper records of the transactions made and thus the damages could not be quantified. Also the process of determining damages on the basis of actual or potential loss suffered by the right holder being cumbersome the IP holders would generally give up their claim. Increasingly the Indian courts are now recognizing a need to impose financial penalties in the form of awarding damages to discourage law breakers from violating the intellectual property of right holders. The courts are not only awarding compensatory damages but also punitive damages. In an action brought by publisher of Time Magazine, the court awarded approx. US$ 11,000 as punitive damages and in an action by Microsoft, the court awarded approx. US$ 43,800 as compensatory damages.

Finally, the debate as to which is the most effective way of combating counterfeiting in India goes on. Unlike China, there are no administrative remedies available in India for enforcement of intellectual property rights. Therefore, the possible options to seek relief are either civil or criminal route or both. There are obviously advantages and disadvantages in both Civil action (through the Courts) and Criminal action (through the police).

The choice of remedy should, perhaps, be dictated by the objective sought to be achieved. If, for example, it is a market level problem and you want to carry out multiple raids at various locations, criminal action will be a better option. On the other hand, if you have an identified target to go after, which is either a manufacturing unit or a big wholesaler/importer, civil action would be the preferred route. It may be pertinent to mention that it is common for civil courts to appoint "court commissioners" with powers to search premises, seize goods, inspect books of account and in some cases destroy infringing goods. In many cases, the court order provides for police assistance during raids. Thus the impact of raids in a civil action is as of action through police.

To sum up, as in any other developing country, working with law enforcement authorities and courts in India can be quite challenging. However, so long as IP holders are clear about their objectives and have an appropriate strategy in place, it should be possible to achieve the desired result.

©Rouse & Co. International

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.