A loss of data by India’s Trade Marks Registry is indicative of wider problems that plague domestic and international IP owners

“Is it possible that the Trade Marks Registry in this country can lose over 44,000 of its files and not realise that it has for over five years? Unfortunately, it appears it is.”

For any trademark owner in India, this statement, which opened an order by Justice S Muralidhar of Delhi High Court, is a terrifying one.

The court order, which was delivered on 6 April, paints a painful picture of an intellectual property system that continues to beleaguer Indian and foreign IP owners alike. How thousands of files disappeared from the Trade Marks Registry’s offices in Mumbai, Delhi, Chennai, Kolkata and Ahmedabad remains a mystery. “What is disconcerting,” Muralidhar continued, “is that even the Trade Marks Registry has no real answer yet to the many questions that arise: who caused these many files to go missing, when exactly they went missing, whether these missing files can be recovered and, if not, whether they can be reconstructed.”

In one fell swoop, India has forced business owners to question whether the country’s effort to revamp and modernize its IP machinery is all bark and no bite. Bizarrely, it is not a lack of legal precedents or laws that have set IP owners back, but rather procedural issues that they are forced to wrestle with. Inadequate staffing at the IP offices, administrative delays and cumbersome procedures dictating the course of action against infringers and are all causes of frustration for companies holding or wishing to protect their IP assets in India.

The backlog of work has further compounded the inherent deficiencies in the system. “There are huge pendencies in the Trade Marks Registry, which lead to avoidable delays even for administrative matters such as the recording of amendments to existing registration, subsequent ownership and change in address,” laments Dev Bajpai, the executive director, legal, and company secretary at Hindustan Unilever. “This adversely affects enforcement of IP rights in pending trials.”

Adds Samta Mehra, a partner at Remfry & Sagar: “The recruitment of officials has not kept pace with the rise in the volume of applications, leading to delays in registration.”

The Office of the Controller General of Patents, Designs and Trade Marks has embarked upon a campaign to modernize India’s IP infrastructure by digitalizing IP files and providing the option of online filing. Much of this has been touted as preparation for India’s accession to the Madrid Protocol.

“[Filing an application online] is a big plus, especially when you are servicing clients in different time zones,” says Latha Nair, a partner at K&S Partners. “You can check the status of a mark online and conduct a search online. I believe that, recently, even patent inspections have been made possible online. That is definitely a positive change.”

Latha Nair Partner K&S Partners

However, such achievements have been overshadowed by the shortcomings exposed by Muralidhar’s order. “You cannot imagine the embarrassment we go through when a foreign client wants to get hold of a file and we have to confess that it has been lost by the registry,” says an IP partner in Delhi who wished to remain anonymous. “The status of the IP offices in India today is really not very encouraging. If India wants to accede to the Madrid Protocol and enable filing, there’s a lot more to be done.”

Logistical nightmares

Logistical labyrinths have been a key cause of concern for rights owners across India. Authorities have been unable to expedite proceedings, even at the Intellectual Property Appellate Board (IPAB) in Chennai, which was designed to reduce the pressure of cases flooding India’s high courts. Lawyers blame the delays in resolving disputes on the IPAB’s poor organization. “As of December 2010, the IPAB had received appeals for 199 cases related to patents, of which only 46 were disposed and had managed to resolve just 1019 out of 2541 cases related to trademarks,” says Mehra.

Samta Mehra Partner Remfry & Sagar

Much of this has to do with the requirement to transfer the IPAB’s documents from Chennai to its regional centres every time a matter is listed. To overcome this unnecessary shuffling of documents, Delhi High Court has asked the Delhi High Court Bar Association to advise the government on setting up permanent IPAB centres in Mumbai, Delhi and Kolkata.

Until the current process undergoes a transformation, companies may have to focus more on defending their marks, rather than exploiting them through filing and licencing activities, (see Standing up for your rights, page 26).

“I think the reality for us is we tend to be more on the defensive,” says Ben Adams, director of legal and IP at Nokia India. “We’d probably like to be more offensive here, but due to court systems or the time it takes to get a design patent granted, by the time you’re actually armed to take an action, the commercial need has passed.”

Ben Adams Director of Legal and IP Nokia India

The task of defending brands and clamping down on infringers is exacerbated by the need to seek prior written opinions from a designated officer appointed by the controller general. “Section 115 of the Trade Marks Act, which requires a written opinion to be taken from the Trade Marks Registry before the police can act on an alleged trademark infringement, needs to be dropped,” says Bajpai. “Making trademark offences cognizable and persisting with the need to seek prior written opinion does not help.”

A procedural issue that plagues foreign patent owners is the requirement for them to file details of all corresponding foreign applications when applying for a patent in India. For foreign companies filing in more than 50 countries, this obligation is arduous. As Sanjay Kumar, the head of IP at Lakshmi Kumaran & Sridharan explains, the difficulty lies not in collating all the data, but in filing this information within a strict six-month deadline. Applications that fail to comply with this requirement become vulnerable to opposition since anyone can file a pre-grant opposition under section 8(1) of the Patents Act on the grounds that this requirement has not been complied with. “The repercussions are quite huge,” says Kumar. “There are certain laws on the same lines elsewhere in the world, but nothing like what exists in India.”

Once a patent has been granted, it needs to be worked in India. “That is quite cumbersome,” says Kumar. “If your patent relates to a drug, you must use the patented drug in India, sell it there and also manufacture it there. If you don’t comply, your application becomes vulnerable to the grant of compulsory licence.”

Sanjay Kumar Head of IP Lakshmi Kumaran & Sridharan

Staffing setbacks

Another impediment to achieving efficient IP filing and protection procedures has been a severe shortage of human resources. India’s trademark and patent offices are simply not equipped to handle the sheer volume of work that is channelled their way. The problem lies not just in numbers, but also in inadequate training.

“At the registry level, one faces problems wherein the examination conducted is very liberal and weak,” says Chander Lall, the managing partner of Lall & Sethi. “This puts an obligation on the owner to initiate several oppositions in relation to marks which ought to have never reached publication. Historically, clients who have not been diligent will find that the register is already crowded with very similar marks.”

Chander Lall Managing Partner Lall & Sethi

This severely affects both trademarks and patents that are granted in India. “My sense is there’s probably very little that gets rejected,” says Adams. “More research is needed in order to do a better job.”

In addition, lawyers and advocates are urgently demanding specialized IP training in the judiciary and a dedicated bench devoted entirely to handling IP matters. “The slow pace of the judiciary is something that our clients have always been disillusioned with,” says the anonymous IP lawyer. “That would have to be attributed to the level of awareness of IP laws at the lower courts or the district courts. Although we have very solid laws in IP, implementation is not something that district courts are used to.”

The size of court lists and the number of matters before each judge suggest that litigation is the worst possible method of dispute resolution rights owners should opt for. “It is very frustrating for clients who can feel that they are not getting a fair hearing because, when their matter is heard, it is only heard by the judge for 10 to 15 minutes before being adjourned, part-heard, to a later date,” laments Lisa Sen, a consultant at Field Fisher Waterhouse in London.

Adams says a dedicated bench or expert courts – like the eastern district of Virginia or the northern district of California in the US – would provide much-needed relief to rights owners taking their cases to court in India. “There are certain forums which have gained a reputation of being fast and expedient, with judges who are well versed in the area,” he says. “You’re never going train up the entire judiciary to know how to take up these cases, but there should be a model to follow to try and identify one or two forums that could be experts in this area.”

Many observers believe that educating and empowering India’s enforcement authorities has already contributed vastly to effective IP protection. Customs authorities in particular have been empowered to take action against any export or import of prohibited goods and seize goods that are liable for confiscation. Major customs houses in India have IP units, which monitor the interest of importers and enforce legal provisions relating to the infringement of IP.

When asked who could shake things up and bring about the necessary improvement to India’s IP machinery, some say the responsibility rests with the Department of Industrial Policy and Promotion – the body that all IP offices are answerable to. PH Kurian, the controller general at the helm of affairs, is also singled out as a key figure that can influence positive change within the system. “He’s a very honest officer and very hardworking,” says the anonymous partner. “He started on a very good note, but from our interactions with him, I understand he has also thrown his hands up in the air saying ‘I really can’t do much about this place’.”

Market menaces

To complicate matters, IP owners are forced to battle menaces unique to the Indian market. Pirates and petty infringers, who either pass off or dilute well known brands as their own, are among the biggest troublemakers rights holders must tackle.

“Cases where small traders adopt well known marks for totally different goods, due to poor legal advice or simply IP ignorance, are the most troublesome for clients,” says Gunjan Paharia, the managing partner at Zeus IP. “These cases cannot be ignored and although the fight is never prolonged, just keeping the marketplace clean and preventing dilution is what eats away into the client’s enforcement budgets.”

12-point plan

Tips and tricks on IP protection*

  1. Conduct a strategic review to identify IP assets to be protected.
  2. Take active steps to seek statutory protection for trademarks even if use is not contemplated.
  3. Deploy the token use of marks by small shipment and participation in trade fairs and exhibitions to ward off any cancellation action. Publish cautionary notices.
  4. Initiate legal action at the earliest when misuse is noticed to avoid prolonged proceedings. A watch service should be utilized to record and preempt misuse.
  5. Choose an appropriate forum if court proceedings are to be instituted as some venues are more knowledgeable on IP matters.
  6. Ensure that suitable clauses are included in the licence agreement to guarantee that the trademark owned by the licensor is neither diluted nor usurped by the licencee.
  7. Maintain and exploit patents in India.
  8. Invent and protect at a higher pace than rivals to secure freedom of operation.
  9. Formulate a clear enforcement strategy.
  10. Understand the strengths and weaknesses of Indian markets.
  11. Take a cautious approach towards maintaining deadlines.
  12. Perform due diligence checks on the various organizations and individuals with whom you have dealings in India.

* The above tips were suggested by Samta Mehra, a partner at Remfry & Sagar

*

Sen says a thorny issue relates to detecting infringement outside India’s metros, particularly in remote areas of the country. And even if such activity is identified, enforcement against the perpetrators is sluggish. “It is easier to obtain an interim injunction against infringing activities in India than in countries like the UK, but actually enforcing the injunction, particularly in remote areas of the country, is not very effective,” says Sen. “Court proceedings generally take a very long time and are frequently adjourned often making it very difficult to obtain final relief.”

Lall shares the details of a case involving a foreign client who struggled to stop a competitor in India from filing applications to register similar marks. “Each of these marks, despite being blatantly similar to pre-existing marks on the register, would proceed to advertisement, compelling our client to file oppositions,” recalls Lall. “The Indian company would not even contest these oppositions and simply abandon the mark. But they would continue to file fresh applications. A few marks would slip through the cracks and proceed to registration and our client had to institute cancellation actions. All of this was a big cost issue.”

Lall and his team addressed the problem by filing a civil suit against the Indian party to restrain them from filing similar applications. The court ordered the Indian party not to file fresh applications until the matter was decided.

Adams has combated similar problems. “I would suspect one of the biggest challenges most companies face is finding out what’s actually happening,” he says. “The biggest asset that we have is our broad distributor network and the number of partners we have in the field.
No one’s stripping down devices – but they’re clearly letting us know if there’s a retailer using a Nokia name or other parties selling Nokia apparel.”

Although the Indian legal system is not very different from what exists in the UK or other common law countries, IP owners may encounter key differences in the way law is practised. Local knowledge is thus essential.

“At the enforcement level, the offenders are usually small parties but many in number,” warns Lall. “It is never possible to take one infringer head on and nail him to the ground by claiming heavy damages and costs. Instead, strategies have to be aligned to file actions against multiple parties and settle quickly with restraining orders.”

Bajpai argues that harsher punishment could also prove a valuable deterrent. “IP violation is not seen as a serious offence and bail is granted as a matter of routine,” he says. “In addition, once IP infringement comes to light and court orders are enforced by the police, the property in which the trademark or copyright is illegally applied is released by the court easily.”

Dev Bajpai Executive Director Legal Hindustan Unilever

Leaning towards litigation

Inevitably, many IP disputes wind up in India’s courts, from India’s most experienced IP forum – Delhi High Court – to tiny district courts dotted all over the country. And the judiciary should brace itself for more cases still, though Kumar says such disputes, particularly in relation to patents, are necessary to resolve ambiguities that persist.

Kumar predicts that there will be a lot of public interest litigation in order to grant compulsory licences. “Those interested will have to prove that the patent has not been worked or that the product is not available at affordable cost,” he says. “Affordability is very subjective. For a foreign pharmaceutical company, ₹10,000 (US$224) per tablet may be considered affordable, while for a generics company, ₹1,000 per tablet is considered affordable. So it’s a question of where to divide the line. What is affordable? What is reasonable? With litigation these terms will be defined.”

The telecommunications industry promises to be just as litigious an environment as the pharmaceuticals sector. Adams points to the growing number of companies in India that are selling Chinese phones with Indian brand names. Those companies do not hold essential 3G or GSM patents, but because they have traditionally been sold on a small scale, they have escaped opposition or been judgment-proof, as it was very difficult to locate them. “Now you’re starting to see these goods in the market and the growing legitimacy of these brands,” says Adams. “The mobile phone space is an area rife with patent lawsuits. I think it’s reasonable to expect some of these emerging brands to get taken up into that as well.”

Survival kit

India presents a paradoxical environment; one that is rapidly changing and evolving to meet international standards, yet still remains a breeding ground for IP theft and infringement. Surviving in such a competitive, fast-moving and unpredictable economy is possible with market intelligence, specialist legal advice and the consistent adoption of precautionary measures (see 12-point plan, page 29).

Lawyers continue to chant the enduring mantra – protect, protect, protect. “The only way really is to start enforcing early,” says Paharia. “A stitch in time really saves nine for the client.” He says those who ignore what are perceived to be smaller issues like dilution, which appear to create no immediate or direct revenue loss, may end up paying considerable sums later when the infringers have developed both in size and reputation, (see Vigilance: the best defence, below).

“India is all about tips and tricks,” says Lall. “I would say the best tip is: Do not go into action mode without knowing the end result. Always explore the various possibilities with your attorneys. Let them walk you through the process. What you will not get is substantial damages, close to real costs incurred, an excellent discovery mechanism or a short trial period – unless you strategize well.”

“Pre-filing searches for trademarks and freedom-to-operate searches for patents should be conducted in order to save on filing costs for non-available IP and avoid unnecessary litigation,” says Rahul Chaudhry, a partner at Lall Lahiri & Salhotra.

Rahul Chaudhry Partner Lall Lahiri & Salhotra

For brand owners unfortunate enough to be embroiled in litigation, record-keeping is essential. “Sales invoices, promotional materials, unsolicited media attention received by the company, instances of successful enforcements – all these things should be kept very safely, for the reason that if tomorrow there is a litigation against your mark, or you want to sue someone for violating your mark, you should have material reflecting the use, fame and reputation of your mark in India,” advises Nair.

Sen says that Indian lawyers have appointed qualified, independent private investigators to obtain information about violations of her clients’ IP rights, especially trade secrets. In addition, “local counsel have had to find a nexus with Delhi High Court before commencing proceedings as the judges in that court best understand IP related issues.”

For patent protection, the statement of working form (Form 27) should be meticulously filled in and deliberated upon. Last month, international pharmaceutical companies Pfizer, Bayer, Bristol-Myers Squibb, Roche and Schering were accused of violating Indian patent laws and holding non-working patents because the drugs they were selling were being imported and not manufactured locally. Furthermore, it has been suggested by Shamnad Basheer, a professor of IP at the National University of Juridical Sciences, that the companies failed to comply with disclosure norms and had not filed Form 27 for several years.

“Clients get jittery when asked to provide certain information on the quantum and value of their patents in India, but that is what is required,” says Kumar. “These forms should never be left blank. If owners don’t want to disclose certain values, they can simply mention that the figure is confidential, but will be disclosed in court if necessary. In the last 25 years not a single compulsory licence has been granted but with the Right to Information Act, compliance obligations and satisfying company policies, maintaining this record may be tricky.”