India has emerged as a preferred choice of foreign direct investment (FDI) and is likely to become a top destination for inflow in coming years, as signalled by the Confederation of Indian Industries and EY in a 2020 survey titled “How can India step up its game?”
Key core indicators are a growing economy, market potential, skilled workforce and policy reforms. Recent corporate tax cuts, measures to improve ease of doing business, simplification of labour laws and FDI-related reforms have bolstered a positive global image as a favoured destination.
Intellectual property (IP) rights protection is an important determinant for investment by multinationals, not only for technology-driven enterprises but any company investing significantly in research and development.
Identifying, protecting and enforcing IP rights gives a competitive edge in today’s innovation-driven market, and India’s robust regime has well-defined laws protecting various forms of IP such as patents, trademarks, designs, copyrights, layout of integrated circuits and geographical indications. All are Trade-Related Aspects of IP Rights (TRIPS) compliant, meeting minimum standards for protection and enforcement of IP rights.
INDIA-SOUTH KOREA RELATIONS
To improve and upgrade economic ties between India and South Korea, a comprehensive economic partnership agreement (CEPA) was signed between the two countries in 2010. Article 12 of the CEPA recognises the importance of IP rights as a key factor of social, economic and cultural development, and emphasises co-operation between the two countries in IP Rights. It also requires the parties to provide “laws with more extensive protection of intellectual property rights than accorded under the TRIPS agreement”.
India has since taken many initiatives to further strengthen economic ties and attract South Korean investment. The India-Korea Startup Hub was launched in 2019 to nurture collaboration between startups, investors, incubators and aspiring entrepreneurs in both countries.
In 2020, India’s Department of Science and Technology and South Korea’s Ministry of Science and Information and Communication Technologies announced 12 joint research proposals in green mobility, renewable energy, engineering sciences, and materials science and technology involving scientists and researchers from both countries, with any IP rights generated becoming jointly owned.
The impetus has encouraged India and South Korea to agree on fast track negotiations to upgrade the CEPA. In tandem, bilateral trade between the two is expected to reach USD50 billion before 2030.
Foreign applicants can file a patent application either through the patent co-operation treaty route, within 31 months from date of priority, or within 12 months from date of filing priority application through the Paris Convention route. The official fee is reduced by almost 80% if the application is filed in India by natural persons, startups, small entities and educational institutions.
Under the Startup India initiative, an entity is considered a startup if:
- Incorporated in India as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932), or limited liability partnership (under the Limited Liability Partnership Act, 2008), up to 10 years from date of incorporation or registration;
- Turnover for any financial year since incorporation or registration has not exceeded USD 12.3 million; and
- The entity is working towards innovation, development or improvement of products or processes or services, or is a scalable business model with high potential for employment generation or wealth creation. However, an entity formed by splitting or reconstructing an existing business is not considered a startup.
A foreign startup entity can also benefit from reduced official fees if it fulfils the criteria for turnover and period of incorporation or registration. It can also apply for expedited examination of Indian patent applications. Article 12 of the CEPA specifically calls for co-operation between the Indian Patent Office and Korean Intellectual Property Office, and it is possible that patent prosecution highway agreements may be signed in future between the two offices.
In recent patent-related case, Indian courts are interpreting provisions of the Indian Patents Act, 1970 liberally, which are beneficial to applicants or innovators. Over the issue of patentability of computer-related inventions, in Ferid Allani v Union of India, the court opined that if an invention demonstrated a technical effect or technical contribution it should be patentable, even though it may be based on a computer program.
In another case, Nippon A&L v the Controller of Patents, Delhi High Court dealt with the issue of the scope of amendments to patents or patent applications allowed under section 59 of the Patents Act, 1970. Interpreting the provisions, the court liberally held that “amendments to a patent specification or claims prior to grant ought to be construed more liberally rather than narrowly”. It added that, “so long as the invention is disclosed in the specification and the claims are being restricted to the disclosures already made in the specification, the amendment ought not to be rejected, especially at the stage of examination prior to grant”.
This judgment was much awaited relief for the applicants, since controllers at the Indian Patent Office do not usually allow a lot of amendments in claims during prosecution of patent application.
The Indian Trademarks Act, 1999, which is TRIPS-compliant, provides for registration of trade and service marks, multiclass applications, and the concept of well-known marks.
India follows the “first to use” principle that places prior user of trademarks in a superior position. Courts have also recognised the principle of trans-border reputation, as well as the common law principle of passing off, apart from infringement action codified under law. So, in case of violation of a trademark (registered or unregistered), an entity may file for an infringement suit or passing-off action.
It is also pertinent to note that post amendment to the Trade Marks Act in 2010, chapter IVA was inserted to provide for trademark protection under the Madrid Protocol. India also follows the international classification of goods and services (Nice Classification). Further, for figurative elements of marks, the country follows the Vienna Agreement.
In a recent decision considering arbitrability of a trademark-related dispute, Delhi High Court, with intent of timely disposal of cases, clarified that disputes over violation of trademark licence agreements can be resolved through arbitration.
In another recent order considering Facebook as a well-known trademark, Delhi High Court restrained an entity selling confectionaries and articles called “Facebake”.
Design protection is provided under the Designs Act, 2000. A design includes features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article, whether two or three-dimensional, or in both forms, by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye.
A reciprocity design application can be filed within six months from date of priority. Foreign entities can also benefit from discounted fees provided to startups or small entities if they meet the prescribed criteria.
Apart from patents, trademarks and design forms of IP, India also recognises other forms such as copyright, geographical indication, plant varieties and semiconductor layout design of integrated circuits.
DELHI HIGH COURT’S IPD
Expecting many IP appeals and revocation or rectification actions to be transferred from the erstwhile IP Appellate Board (IPAB), the chief justice of Delhi High Court announced the creation of the IP Division (IPD) in July 2021 to deal with both transferred and fresh IP matters.
The court subsequently circulated the IPD Rules, 2021, in October 2021, for input from members of the bar. These rules regulate matters listed before the IPD and prescribe the practice and procedure for exercise of the original and appellate jurisdiction of the IPD, and for other miscellaneous petitions arising out of specific IP statutes.
The IPD has now started listing cases transferred from the former IPAB. These are presently being listed before the joint registrar of the High Court to put the files in order, remove discrepancies and supplement information pertaining to the cases, as prescribed by the rules and practice of the court. The high courts of Mumbai, Chennai and Kolkata have yet to frame their rules pertaining to the functioning of their respective IP divisions.
Emerging economies like India and South Korea have already recognised the potential of IP for their economic growth. Article 12 of the CEPA recognises the importance of IP rights as a key factor of social, economic and cultural development, and emphasises co-operation between the two countries.
Although India’s IP enforcement regime has developed significantly, with the judiciary as torchbearer, IP owners also need to be vigilant towards protecting and enforcing their IP rights.
Recent amendments to IP laws by the legislature and the creation of a separate bench for disposal of IP matters is indicative of an IP-friendly economy for multinational companies.