Intellectual Property

Trade Marks Rules, 2017

Published In:Inter Alia - Quarterly Edition - April 2017 [ English Chinese japanese ]

Some of the key changes introduced by the Trademark Rules, 2017 (‘TM Rules 2017’), which have come into force on March 6, 2017 and replace the erstwhile Trademark Rules, 2002 (‘TM Rules 2002’), are as follows:

i. For the first time, a mechanism has been introduced enabling brand owners to file an application with the Registrar for determination of a trademark as ‘well-known’;

ii. TM Rules 2017 specifically provide for the registration of a sound mark;

iii. Definition of ‘opposition’ has been amended to include opposition not only in relation to a pending trademark application, but also opposition to alteration of a registered trademark and opposition to the grant of protection to an international registration designating India;

iv. Where use of a trademark is claimed prior to the date of application, the applicant is required to file an affidavit testifying such use along with supporting documents;

v. Official fees for trademark registration have been increased substantially; however, concessions have been provided to small enterprises, startups and individuals, and to e-filings;

vi. Expedited processing of a trademark application has been provided for, including examination and other proceedings such as processing responses to the examination report, show cause/hearings, publications, and oppositions;

vii. Video conferencing is provided for, to enable hearings and email has been permitted as a means for service of documents ;

viii. The number of adjournments that a party can ask for has been limited to a maximum of two and the adjournment period has also been limited to a maximum of 30 days; and

ix. New provisions have been included for trademark registration through the Madrid Protocol in relation to the Madrid Agreement Concerning the International Registration of Marks.

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Delhi High Court on Permissibility of Photocopying of Text Books for Preparing Course Packs

Published In:Inter Alia - Quarterly Edition - January 2017 [ English Chinese japanese ]

A Division Bench (‘DB’) of the Delhi High Court, by its judgement dated December 9, 2016 in the case of Chancellor, Masters & Scholars of the University of Oxford & Ors v. Rameshwari Photocopy Services and Ors[1], disposed the appeal filed by the publishers against the order passed by the Single Judge on September 16, 2016.[2] The DB held that photocopying of copyrighted materials for preparing course packs would be a permissible activity and would not constitute infringement so long as such copying was for purposes of educational instruction. The DB reaffirmed the following findings of the Single Judge on substantive points of law: (i) utilisation of the copyrighted work would constitute fair use to the extent justified for the purpose of education, irrespective of the quantity of reproduction; (ii) “course of instruction” under Section 52(1)(i) of the Copyright Act, 1957 was not limited to a lecture in a class room and extends to various acts of imparting instruction; (iii) reproduction of works under Section 52(1)(i) can be made by an intermediary, i.e., a photocopier, and need not be limited only to reproduction by a teacher / pupil; (iv) course packs will not adversely impact the market of the publishers since students are not potential customers; and (v) distribution of course packs would not amount to “publication” as the element of profit was missing in such publication.

The DB, however, partially overturned the judgment of the Single Judge and remitted the matter to the trial court for a fact specific determination of whether: (i) inclusion of the copyrighted works in the course packs was justified by the purpose for which course packs are prepared, i.e. for instructional use; and (ii) whether photocopying of entire textbooks (copied back to back) would be a permissible activity. This issue arose from the findings of the local Commissioner’s report highlighting that apart from the course packs that contained excerpts of various textbooks, eight books had been photocopied back to back.

In light of the legal determination above, the DB refused to grant the publishers an interim injunction. However, the photocopying agency was called upon to maintain records of the course packs photocopied by it and supplied to the students and also file a statement to this effect with the trial court every six months till the trial is completed.

[1]     Chancellor, Masters & Scholars of the University of Oxford & Ors v. Rameshwari Photocopy Services and Ors., RFA(OS) 81/2016, Delhi High Court

[2]     The Chancellor, Masters & Scholars of the University of Oxford & Ors v. Rameshwari Photocopy Services and Ors., CS(OS) 2439/2012, Delhi High Court (Judgement dated September 16, 2016).

 

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National Intellectual Property Rights Policy

Published In:Inter Alia - Quarterly Edition - October 2016 [ English Chinese japanese ]

The National Intellectual Property Rights Policy (‘IPR Policy’), which was announced by GoI, Department of Industrial Policy and Promotion (‘DIPP’) on May 12, 2016, recognises that the Indian regime on intellectual property rights (‘IPRs’) is compliant with the standards specified by the World Trade Organisation under the Agreement on Trade-Related Aspects of IPRs, and has identified certain objectives to promote an ecosystem to catalyze the full potential of IPRs. These objectives include:

i.  creating public awareness about the economic, social and cultural benefits of IPRs by launching campaigns linked to initiatives like “Make in India” and “Smart Cities”, specifically targeting industry and R&D entities, creating suitable course materials for educational institutions and sensitizing the media to IPRs;

ii.  evaluating potential in specific sectors through comprehensive base line surveys, formulating and implementing targeted programs for creating and utilizing IPRs, and devising mechanisms that benefit medium and small scale enterprises, start-ups and grassroot innovators;

iii.  carrying out appropriate legislative changes to update IPR laws in consonance with national needs and priorities and enhancing transparency and efficiency in administration and enforcement of laws, by undertaking adequate stakeholder consultation;

iv.  modernising and strengthening IPR administration by, inter alia, increasing manpower and focus on training officers to ensure that Indian IPR offices operate efficiently, while providing user friendly services;

v.  capitalizing the existing intellectual property assets in the country by, inter alia, setting up of a platform that functions as a common database of IPRs, which would allow interaction among potential users, buyers and funding institutions, thereby improving IP networking;

vi.  sensitizing creators of IPRs of their rights to enforcement and protection measures, strengthening IPR-targeted forces in State police forces and conducting IPR workshops at judicial academies for facilitating effective adjudication of IPR disputes; and

vii.  strengthening and expanding human resources, institutions and capacities for teaching, training, research and skill building in IPRs.

While the responsibility for actual implementation of the objectives will remain with the identified Ministries / Departments under the IPR Policy, DIPP will be the nodal point to coordinate, guide and oversee implementation and future development of IPRs in India.

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Statutory License for Internet Broadcasting under the Copyright Act, 1957

Published In:Inter Alia - Quarterly Edition - October 2016 [ English Chinese japanese ]

DIPP issued an office memorandum dated September 5, 2016, clarifying that internet broadcasting companies are also covered, along with radio and television broadcasting organizations, within the statutory licensing regime prescribed under Section 31D of the Copyright Act, 1957 (‘CR Act’). This view was taken based on a broad interpretation of the words “any broadcasting organization desirous of communicating to the public” under Section 31D of the CR Act read with the definition of the term “broadcast” under Section 2(dd) of the CR Act and the definition of the term “communication to the public” under Section 2(ff) of the CR Act.

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Diverging John Doe orders in relation to blocking URLs

Published In:Inter Alia - Quarterly Edition - October 2016 [ English Chinese japanese ]

The Bombay High Court (‘Bombay HC’) recently passed a number of orders dated June 16, 2016,[1] July 1, 2016[2] and July 22, 2016[3] that have narrowed down the scope of John Doe orders. The Bombay HC refused to pass orders that would result in wholesale blocking of hundreds of websites that allegedly offered and hosted illicit links to the movies ‘Udta Punjab’, ‘Great Grand Masti’ and ‘Dishoom’. The Bombay HC held that an order to block entire website without demonstrating that the entire website contains infringing material cannot be granted and that specific uniform resource locators (‘URL’) containing infringing material must be identified and established.

On the other hand, in the case of Department of Electronics and Information Technology v. Star India Private Limited,[4] a division bench of the Delhi High Court (‘Delhi HC’), by its judgement dated July 29, 2016, upheld a sweeping John Doe order for blocking 73 websites on the grounds that if only a single URL is blocked, the same website can very easily provide access to the blocked content through another URL.

[1]     Balaji Motion Picture Limited & Anr. v. Bharat Sanchar Nigam Ltd. & 49 Ors., Notice of Motion (L) No. 1783 of 2016 in Suit (L) No. 633 of 2016.

[2]     Balaji Motion Pictures Ltd. & Anr. v. Bharat Sanchar Nigam Ltd. & Ors., Notice of Motion (L) No. 1940 of 2016 in Suit (L) No. 694 of 2016.

[3]     Eros International Media Ltd. and Anr. v. Bharat Sanchar Nigam Limited & Or., Notice of Motion (L) No. 2147 of 2016 in Suit (L) No. 751 of 2016.

[4]     Department of Electronics and Information Technology v. Star India Private Limited, R.P.131/2016 in FAO (OS) 57/2015.

 

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Diverging rulings by the Bombay HC and Delhi HS on the Issue of Jurisdiction in Trademark and Copyright Infringement Cases

Published In:Inter Alia - Quarterly Edition - October 2016 [ English Chinese japanese ]

Pursuant to the decision of the Supreme Court of India (‘SC’) in Indian Performing Rights Society Ltd. v. Sanjay Dalia and Anr. [1] (‘Sanjay Dalia Case’), the Bombay HC and the Delhi HC have had the opportunity to interpret this ruling and have adopted diverging views.

For instance, in the case of Manugraph India Limited v. Simarq Technologies and Ors[2] the plaintiffs (having registered offices in Mumbai) brought a suit for trademark infringement before the Bombay HC, although the cause of action arose in Delhi for one set of plaintiffs, and in Kolhapur for the other set. The Bombay HC, however, ruled that it continues to have jurisdiction despite no cause of action having arisen in Mumbai on the reasoning that Sections 134 and 62 of the Trade Marks Act, 1999 and the CR Act allow plaintiffs to institute suits at the place where they carry on their business, irrespective of whether or not a cause of action arose in that place. Further, the Bombay HC held that the only mischief the SC was trying to remedy in Sanjay Dalia Case was the mischief of plaintiffs filing suits at far-flung subordinate offices where no cause of action had arisen.

However, a Division Bench of the Delhi HC has taken a contrary view in the case of Ultra Homes v. Purushottam Kumar Chaubey & Ors.[3] In this case as well, the plaintiff instituted a suit before the Delhi HC on the ground that it carried on business in Delhi, i.e. its principal office was located in Delhi. However, the cause of action arose in Deogarh, Jharkhand (where the plaintiff’s subordinate office is located). Applying the principle laid down in the Sanjay Dalia Case, the Delhi HC held that the plaintiff would be deemed to carry on business at the place of his subordinate office and not at the place of the principal office and therefore, in such a situation, the plaintiff could sue only at the subordinate office and not at the place of its principal / registered office.

[1]     Indian Performing Rights Society Ltd v. Sanjay Dalia and Anr., Civil Appeal Nos. 10643-44/2010 (arising out of Civil Suit FAO (OS) No. 359/2007)and Civil Appeal arising out of SLP [C] No. 8253/2013.

[2]     Manugraph India Limited v. Simarq Technologies and Ors, Notice of Motion No. 494 of 2014 in Suit No. 516 of 2013, Bombay High Court (judgement dated June 15, 2016).

[3]     Ultra Homes v. Purushottam Kumar Chaubey & Ors., FAO (OS) 494/2015, Delhi High Court (judgement dated January 20, 2016).

 

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Photocopying for Course Packs Falls within “Fair Dealing” and Does Not Amount to Copyright Infringement

Published In:Inter Alia - Quarterly Edition - October 2016 [ English Chinese japanese ]

In the case of The Chancellor, Masters & Scholars of the University of Oxford & Ors v. Rameshwari Photocopy Services and Or.[1], a suit was filed by five publishers against Delhi University and Rameshwari (a photocopying shop attached to Delhi University) alleging that by photocopying and distributing substantial extracts of academic text books for course packs, for sale, the defendants were infringing the publishers’ copyright in these books. However, the defendants’ main argument that photocopying of academic books for course packs fell under Section 52 of the CR Act, i.e. the fair dealing provisions, was upheld by the Delhi HC. On the grounds that the acts of the defendants fell under Section 52(1)(i) of the CR Act i.e. reproduction of a work by a teacher / pupil in the course of instruction, the Delhi HC held that: (i) this provision applies to an institution and its students and is not limited to an individual teacher and his / her student; (ii) the words “course of instruction” is not limited to a lecture in a class room and extends to various acts of imparting instruction throughout the academic session; (iii) the course packs were provided to students at nominal rates and only contained extracts of the books and, hence, would not be considered as competing with the books of the publishers; and (iv) such an interpretation would not violate the Berne Convention for the Protection of Literary and Artistic Works or the Agreement on Trade-Related Aspects of Intellectual Property Rights as these conventions have left this issue to be decided by their respective member countries. The publishers have filed an appealed on October 5, 2016 challenging this decision and the matter is pending before a Division Bench of the Delhi High Court.

[1]     The Chancellor, Masters & Scholars of the University of Oxford & Ors v. Rameshwari Photocopy Services and Or., CS(OS) 2439/2012, Delhi High Court (judgement dated September 16, 2016).

 

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Patent Amendment Rules, 2016 Come into Effect

Published In:Inter Alia - Quarterly Edition - July 2016 [ English Chinese japanese ]

The Patent (Amendment) Rules 2016 (‘Patent Amendment Rules’) were brought into force on May 16, 2016 to provide several incentives to ‘startups’ for facilitating IPR creation and protection, and clearing the huge backlog at the patent office, streamlining patent procedures and reducing the prosecution timelines. Some of the key amendments are mentioned below:

i. A new applicant category, i.e., ‘startup’ has been introduced. A ‘startup’ is defined to mean an entity where: (a) more than five years have not lapsed from the date of its incorporation or registration; (b) the turnover for any financial year out of the five years has not exceeded Rs 25 crores (approximately US$ 3.7 million); and (c) it is working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or IPR;

ii. An applicant may request for expedited examination of the patent application within 48 months from the date of priority on the permitted grounds.

iii. The timeline for filing the response to the first examination report has been reduced from 12 months to six months;

iv. At the time of filing a national phase application (in India) corresponding to an international application filed under the Patent Cooperation Treaty, the applicant may now be allowed to delete claims; and

v. The Controller General of Patents Designs and Trademarks will be required to dispose of the request for a foreign filing license within 21 days from the date of request. In case of inventions relating to defence or atomic energy, the period of 21 days would be considered from the date of receipt of consent from the Central Government.

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Division Bench of the Bombay High Court restrains Wockhardt from using the mark ‘CHYMTRAL FORTE’

Published In:Inter Alia - Quarterly Edition - March 2018 [ English Chinese japanese ]

In the matter of Torrent Pharmaceuticals Ltd. (‘Torrent’) v. Wockhardt Ltd. & Anr.[1] (‘Wockhardt’), by way of order dated November 17, 2017, the Division Bench of the Bombay HC set aside the order of the Single Judge dated March 15, 2017 following an appeal filed by Torrent and granted an interim injunction restraining Wockhardt.

Torrent filed a suit inter alia for infringement and passing-off against Wockhardt based on their registrations for the marks CHYMORAL and CHYMORAL FORTE with rights dating back to the year 1962, and Wockhardt’s subsequent adoption, use and registration of the mark CHYMTRAL FORTE (‘Impugned Mark’). The key arguments relied upon by Wockhardt were that: (i) both the rival marks were derived from the active ingredient TRYPSIN – CHYMOTRYPSIN and the prefixes CHYM and CHYMO are publici juris; (ii) the Impugned Mark was not deceptively similar to CHYMORAL FORTE; (iii) Torrent failed to prove any misrepresentation by Wockhardt; and (iv) there has been significant delay as well as acquiescence as the Impugned Mark had been registered and allegedly coexisted in the market with Torrent’s product CHYMORAL FORTE for a period of eight years.

The Single Judge dismissed Torrent’s application for an interlocutory injunction against Wockhardt and held that the three tests in the classical trinity of passing off, i.e. reputation, misrepresentation and likelihood of damage, had not been satisfied, and that Torrent (and its predecessors) were also held to have acquiesced in the use of the Impugned Mark by Wockhardt as it failed to oppose or object to the use and registration for a considerable period of time.

The Division Bench allowed the appeal, inter alia, on the basis that Torrent had satisfied the tests for establishing passing-off. The Division Bench held that in order to prove ‘misrepresentation’, the plaintiff does not have to prove any mala fide intention and the act of putting the goods in the market with a deceptively similar trademark, is enough to constitute misrepresentation. The Division Bench also held that an incorrect test had been applied to determine ‘reputation’ and that association of the product with its source or the maker is not required to prove reputation. Further, the Division Bench observed that the tests laid down in Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd.[2] should be adopted while determining possibility of confusion between medicinal products and accordingly, Wockhardt ought to be restrained from continuing the use of the same. On the issue of delay and acquiescence, the Division Bench opined that there was no proof of a positive act attributable to Torrent and mere inaction or delay must not be confused with acquiescence.

Wockhardt has now challenged this order of the Division Bench by way of a Special Leave Petition before the Supreme Court, which is currently pending.

[1]     Commercial Appeal No. 125 of 2017 in Notice of Motion of (L) 35 of 2017 in Commercial Suit (L) 32 of 2017.

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Trade variations of footwear / sandals should not be given exclusive monopoly: Delhi High Court denies interim protection for Crocs registered designs

Published In:Inter Alia - Quarterly Edition - March 2018 [ English Chinese japanese ]

In the matter of Crocs Inc. USA (‘Crocs’) v. Liberty Shoes Limited & Ors. and other footwear manufacturers in India (‘Defendants’), the Delhi High Court (‘Delhi HC’) rejected Crocs’ applications for interim injunctions for piracy of copyright in their registered design.

Crocs had obtained design registrations under the Designs Act, 2000 for its perforated and non-perforated clog-type slippers/shoes in May of 2004. Crocs brought various infringement suits against the Defendants who were manufacturing and selling sandals with clog-type designs largely similar to Croc registered design. The Delhi HC was of the opinion that the registered designs ought not to have been registered in the first place and the registrations were liable to be cancelled as these designs were published and disclosed prior to their registration dates. This finding was arrived at on the basis of internet archival pages dated 2002 (which disclosed similar designs) from the website of Holey shoes. Evidence was also gathered from Crocs’ own website prior to 2004 which also revealed largely similar designs. On the issue of novelty and originality, the Court was of the view that the designs registered by Crocs were neither original nor novel as they were not significantly distinguishable from products already existing in the market and were mere ‘trade variants’ of a sandal, which did not deserve any exclusivity or monopoly.

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Well-known Trademarks

Published In:Inter Alia - Quarterly Edition - July 2017 [ English Chinese japanese ]

The Trade Marks Rules, 2017 (‘New Rules’) and the public notice dated May 22, 2017 issued by the Trade Marks Registry inter alia provide for a mechanism whereby brand owners can file an application with the Registrar of Trademarks (‘Registrar’) for determination of a trademark as ‘well known’[1]. The key provisions in connection with this mechanism have been briefly summarized below:

i. The application to the Registrar for determination of a trademark as ‘well-known’ will have to be based on, inter alia, the following criteria:

a. knowledge or recognition in the relevant section of the public;

b. duration, extent, geographical area of use and promotion / advertisement;

c. duration and geographical area of any registration of or any application for registration reflecting use or recognition of the trade mark;

d. record of successful enforcement of the rights by any court or the Registrar; and

e. number of actual or potential consumers / person involved in the distribution of the goods or services.

The application will have to be accompanied by documentary evidence for each fact that is sought to be claimed including evidence as to use of the trademark, including publicity and advertisement, applications for registration made or obtained in India and outside, annual sale turnover based on the trademark etc.

ii. If the Registrar determines that the trademark is well-known and after deciding on the objections received (if any), the Registrar will publish the mark in the Trademark Journal and include it in the list of well-known trademarks. An appeal lies to the Intellectual Property Appellate Board (‘IPAB’) within three months from the date of any decision of the Registrar.

The New Rules do not provide for a specific time frame within which the Registrar will determine if the mark is well-known. One of the main advantages of the ‘well known’ mark status in India, if the mark is registered, is the availability of a remedy of dilution under Section 29(4) of the Trade Marks Act, 1999.

[1]     The term ‘well-known trade mark’, in relation to goods or services, is defined under Section 2(1)(zg) of the Trade Marks Act, 1999 to mean a mark which has become so to the substantial segment of the public which uses such goods or receives such services that the use of such mark in relation to other goods or services would be likely to be taken as indicating a connection in the course of trade or rendering of services between those goods or services and a person using the mark in relation to the first-mentioned goods or services.

 

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Copyright Board Merged with the IPAB

Published In:Inter Alia - Quarterly Edition - July 2017 [ English Chinese japanese ]

Sections 160 and 161 of the Finance Act, which have come into force on May 26, 2017, amend the provisions of the Copyright Act, 1957 and the Trade Marks Act, 1999 to pave way for the merger of the Copyright Board with the IPAB. As a result, all the functions of the Copyright Board (including adjudicating disputes in relation to assignment of copyright, granting of compulsory licenses and statutory licenses in relation to certain types of works) will now get transferred to the IPAB.

Pursuant to powers granted under the Finance Act, the Central Government has promulgated and brought into force the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 (‘Tribunal Rules’) which govern the qualifications, experience and other conditions of service of the members of various tribunals, including the IPAB. According to the Tribunal Rules, a search-cum-selection committee would be responsible for the recruitment of members for the IPAB.

Given the fact that the Copyright Board has not been functional for quite a few years now, the merger of the Copyright Board with the IPAB gives a forum to the concerned stakeholders to seek redressal of their grievances. However, it still remains to be seen how effectively the IPAB will be able to perform the tasks, roles and responsibilities erstwhile carried out by the Copyright Board, given the huge backlog of pending matters at the IPAB.

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Summary Judgment by the Delhi HC in a Trademark Suit

Published In:Inter Alia - Quarterly Edition - July 2017 [ English Chinese japanese ]

In the case of Ahuja Radios v. A Karim,[1] filed under the Commercial Courts Act, 2015, the Delhi HC, by its order dated May 1, 2017, passed a summary judgment granting a permanent injunction restraining infringement of trademark, passing off and delivery in favour of the plaintiff, i.e. Ahuja Radios.

The plaintiff had procured an interim injunction on March 6, 2013 against the defendant restraining the defendant from dealing in products (being public address systems and audio equipment) bearing the plaintiff’s model number ‘SSA 250 M’ under the ‘AHUJA’ trademark or those which were deceptively similar. Thereafter, upon the inspection of the defendant’s premises by a local commissioner on April 3, 2013, amplifiers of 250 W [Model No. SSA 250 M] were recovered and the Commissioner’s report mentioned that the defendant had admitted to the amplifiers not being original. Despite of the defendant’s allegation that the recovered amplifiers were fraudulently implanted at its premises, the Delhi HC determined that the plaintiff is the undisputed registered proprietor of the trademark in question and that the defendant is not entitled to use the same. The Court noted that the defendant has no real prospect of resisting the decree of injunction and also has little prospect of succeeding in its defense.

[1]     Ahuja Radios v. A Karim, CS(OS) 447/2013, Delhi High Court (order dated May 01, 2017).

 

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Summary Dismissal of Suit for infringement

Published In:Inter Alia - Quarterly Edition - June 2018 [ English Chinese japanese ]

In the matter of Jaideep Mohan v. Hub International Industries & Anr.,[1] the Delhi High Court (‘Delhi HC’) summarily dismissed the suit for trademark infringement at the initial stage of framing of issues.

Jaideep Mohan (‘Plaintiff’) had instituted the suit, inter alia, for permanent injunction to restrain Hub International Industries and NV Distilleries & Industries Pvt. Ltd. (‘Defendants’), from using the trade mark ‘GOLDSMITH’ on the grounds that the same is deceptively similar to the Plaintiff’s registered trademark ‘BLACKSMITH’ in respect of identical goods i.e., alcoholic beverages.

The Defendants contended that the Plaintiff cannot claim exclusivity in the mark ‘SMITH’ as the application for registration of the mark ‘SMITH’ in class 33 (which covers alcoholic beverages) was still pending, and, accordingly, argued that the Plaintiff’s suit was liable to be dismissed under Section 17 of the Trade Marks Act, 1999. The Defendants also  contended that there are many entities which have been using the word ‘SMITH’ and ‘BLACKSMITH’ prior to the use of the word by the Plaintiff and that the overall packaging and get-up of the rival goods are completely different.

The Delhi HC, relying on Godfrey Philips India Ltd v. PTI Pvt Ltd,[2] summarily dismissed the suit for infringement and passing off and took the view that the terms ‘BLACKSMITH’ and ‘GOLDSMITH’ have a definite meaning and are clearly understood by most of the population of the country, including those who are not conversant with the English language, and hence there was no infringement and the suit was not likely to succeed. The Delhi HC was also persuaded by the fact that more than 90% of the sales of the Plaintiff were effected through defense and police canteens, where the relevant public was unlikely to get confused merely by the commonality of the term ‘SMITH’.

[1] 2018 (74) PTC 154 (Del).
[2] 2017 SCC OnLine Del 12509.

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The Intellectual Property and Antitrust Review | India

Published In:The Intellectual Property and Antitrust Review - Edition 3 [ ]

I INTRODUCTION

In the past few years, the debate on the interplay between competition law and intellectual property rights (IP) in India has continued to draw attention. In addition to dealing with questions of jurisdiction and addressing disputes dealing with fair, reasonable and non-discriminatory (FRAND) terms, the Competition Commission of India (CCI) has increasingly focused its attention on issues such as the impact of standard-setting on competition law; and the use (or abuse) of IP-related judicial processes by dominant enterprises to stifle competition.
The general prohibition on anticompetitive agreements[1] and abuse of dominance[2] under the Indian Competition Act, 2002 (the Competition Act) applies equally to IP-related business practices as it would to non-IP-related conduct. The only reference to IP rights in the Competition Act is by way of an express carveout that recognises the right of any person to impose reasonable and necessary conditions for protecting IP rights, specifically conferred under certain identified Indian IP statutes.[3] This carveout does not, however, extend to unilateral conduct, thereby exposing IP holders to the risk of scrutiny under the abuse-of-dominance provision (Section 4) of the Competition Act.
In this chapter, we provide (1) a brief overview of the year in review; (2) issues surrounding antitrust and licensing in India; (3) the international debate surrounding the standard-selection process and the manner in which the CCI and Competition Appellate Tribunal (COMPAT) have interpreted competition claims arising out of standards while issuing prima facie orders;[4] (4) the circumstances under which transfer of IP could be viewed as a transfer of assets under the merger control provisions (Section 5) of the Competition Act;[5] and (5) finally we discuss, under ‘other abuses’, the emerging jurisprudence involving IP-related vexatious litigation leading to abuse-of-dominance claims before the CCI.

II YEAR IN REVIEW

The emerging discourse surrounding IP-linked antitrust issues in India is invariably tied to the application of the disciplines contained in Section 3 of the Competition Act (which deals with anticompetitive agreements) and Section 4 of the Competition Act (which deals with abuse of dominance).
The debate on IP-related antitrust issues in India came to the fore in 2014 when the CCI examined[6] whether the practice of several domestic and multinational passenger vehicle manufacturers (PVMs) of selling spare parts and diagnostic kits only through authorised dealers resulted in ‘denial of market access’[7] to independent repairers and after-sales service providers, or constituted a ‘refusal to deal’.[8] Without examining the larger question of the primacy of IP holders’ right to use and commercialise an IP-protected technology the way they deem appropriate, the CCI summarily held that PVMs’ decision not to supply spare parts and diagnostic kits to third-party or non-authorised dealers and after-sales repair and service providers results in denial of market access, and IP rights do not offer any protection from a finding of infringement under Section 4 of the Competition Act.[9] Consequently, the CCI has opened the door for ‘compulsory licensing’ of IP protected technology to third parties, should it establish that the owner of the IP-protected technology is in a dominant position in a relevant market.
While examining the claim on refusal to deal, the CCI’s approach appears to give primacy to short-term foreclosure effects over the due deference that relatively more mature antitrust jurisdictions, such as the United States, extend to primacy of IP rights, which are essential for fuelling innovation and competition in the long run. Drawing simplistic analogies,[10] the CCI summarily held that selling diagnostic tools in the open market would not compromise the IP rights of the PVMs in the diagnostic tools.[11]
On appeal by certain PVMs, the COMPAT agreed with the CCI’s findings that PVMs’ decision not to supply spare parts and diagnostic kits to third-party or non-authorised dealers amounted to refusal to deal.[12] Further, the COMPAT dismissed the arguments of the PVMs that restrictions requiring supply of spare parts and diagnostic tools only through authorised dealers were ‘reasonable’ restrictions to protect their IP and that the PVMs were simply trying to prevent the circulation of counterfeit spare parts in the aftermarkets. In this regard, the COMPAT observed that circulation of counterfeit parts would be curbed if the restrictions imposed by PVMs on sale of genuine spare parts in the aftermarkets were removed.
While coming to its decision, the COMPAT also observed that the PVMs did not have valid IP rights because (1) the PVMs’ copyright protection did not subsist under the copyright laws in India, as the article to which the copyrighted drawings pertained had been produced more than 50 times by an industrial process,[13] and (2) the PVMs were not able to prove that the right under a patent registered by a parent outside India is available in India.
In another instance, the CCI held that a claim of alleged violation of the complainant’s (an animation company) registered title by the defendant company (another animation company) was not a competition-law concern, given that there had been a series of legal proceedings between the parties to claim ownership of the title ‘Picasso’ in various forums and courts.[14]
More recently, the Madras High Court in a decision that could be more immediately relevant to competition cases initiated at the behest of IP implementers against the potentially anti-competitive practices of IP owners, has ruled that the scheme of the Competition Act empowers the CCI to consider settlement agreements between the complainant(s) and defendant(s).

The potential repercussion of this judgment of the Madras High Court[15] on settlement in IP cases has been discussed in the subsequent paragraphs.

III LICENSING AND ANTITRUST

Antitrust concerns associated with IP licensing arrangements are relatively low on the CCI’s enforcement agenda. Where the CCI has dealt with complaints arising out of the unfairness or restrictions of licensing terms, it has done so fairly simplistically, without dealing, in any significant manner, with the interplay of IP and antitrust or balancing IP rights with the public interest.

i Anticompetitive restraints

Restrictive terms in licensing arrangements would be examined as vertical restraints under Section 3(4) of the Competition Act. In the absence of any specific provisions for assessing licensing arrangements, antitrust concerns arising out of licensing arrangements are treated within the same conceptual framework that applies to the sale of goods or services under the Competition Act. Simply put, restrictions accompanying IP licensing arrangements are prohibited if they can result in an AAEC, and the CCI is unlikely to reach a finding of AAEC unless the IP licensor enjoys significant market power.[16] For instance, any attempt by an IP licensor to determine the pricing decision (for the licensed IP) of the IP licensee would be scrutinised as potentially anticompetitive ‘resale price maintenance’.[17]
An IP licensor could also impose territorial or customer-specific restrictions as part of the IP licensing arrangement (e.g., the aforementioned broadcaster being forbidden from broadcasting the licensed video content outside a certain territory or from broadcasting to a specified group of potential viewers). Such territorial or customer-specific restrictions would be scrutinised as an instance of potentially anticompetitive ‘exclusive distribution’[18] or an anticompetitive refusal to deal.[19] An IP licensor could also restrict the IP licensee from dealing with any competing IP licensor, a restriction that would be examined as a potentially anticompetitive ‘exclusive supply’ arrangement.[20] Any attempt by an IP licensor to make the grant of the IP licence conditional on the IP licensee purchasing the IP licensor’s other products, services or licences would be treated as a potentially anticompetitive ‘tie-in’ arrangement.[21]
Notably, the Competition Act provides a limited carveout allowing IP owners to impose restrictions, including restrictions accompanying their licensing arrangements, which are reasonable and necessary to prevent the infringement of their existing IP rights.

ii Refusals to license

Unlike in the United States and the EU, where refusal to deal is usually examined as unilateral conduct, in India, refusal to deal can also be scrutinised as an anticompetitive vertical restraint. Thus, a refusal to grant a licence altogether or imposition of unreasonably restrictive licensing terms can be examined as a potentially anticompetitive refusal to deal. For instance, in the Auto Parts case, the CCI viewed the car companies’ refusal to license their diagnostic (software) tools and repair manuals to independent repairers and workshops as an anticompetitive refusal to deal.
A ‘refusal to license’ can equally be scrutinised as an abuse of dominance under Section 4 of the Competition Act, to the extent that the refusal results in a denial of market access,[22] restricts the production of goods or services,[23] or restricts the technical or scientific development relating to goods or services.[24] For instance, in the Auto Parts case, apart from holding the car companies liable for anticompetitive vertical restraints, the CCI also held that the car companies’ refusal to license the diagnostic tools to independent repairers and workshops was an abuse of their dominance.
However, in a recent decision, the CCI observed that a delay in licensing on account of plausible business justifications, namely minimising the imminent threat of reverse engineering, could not be considered as denial of market access, as every entity has a right to protect its own commercial interests.[25]

iii Unfair and discriminatory licensing

Where an IP licensor is in a dominant position (e.g., the owner of a standard-essential patent (SEP), where dominance can flow from the patent being indispensable for complying with an industry or technical standard), the terms of its licensing arrangements could be scrutinised for being potentially ‘unfair’ or ‘discriminatory’ and thus, abusive. For example, charging excessive royalty rates or charging different royalty rates to similarly placed customers may be viewed as an imposition of unfair or discriminatory prices and thus, an abuse of dominance.[26] For instance, in a complaint against Monsanto Inc, United States (MIU),[27] the CCI reached a preliminary view that MIU had charged ‘unfair’ royalty rates since its trait value (a kind of recurring royalty fees) was a percentage (16–18 per cent) of the maximum retail price of the final seed packet in advance of each crop season.[28] In turn Monsanto Technology LLC (Monsanto) filed a suit for infringement of patent, trademark and passing off before the Delhi High Court against the Nuziveedu group (sub-licensee of Monsanto’s BT cotton technology). The Nuziveedu group refused to pay license fee in terms of the agreements with Monsanto, claiming that Monsanto could not claim anymore than the “trait value” fixed by the State governments. Recently, a division bench of the Delhi High Court found against Monsanto by stating that plant varieties and seeds cannot be patented under the Indian Patents Act. The observations of the Delhi High Court in this case may have a bearing on the CCI’s investigation against MIU.The CCI has dealt with the issue of discriminatory or unfair licensing terms in a few cases. In Atos/Verifone,[29] the CCI examined allegations that Verifone, a manufacturer of point of sale (POS) terminals,[30] had imposed unfair and discriminatory conditions in the grant of licences for its software development kits (SDKs), a basic version of which was required to operate POS terminals, to value-added service (VAS) providers[31] and third-party processors (TPPs)[32] such as Atos. In its licensing arrangements with VAS providers, Verifone restricted the licensee from using any third party to develop or assist in developing any software using the licensed software, without first obtaining prior permission from Verifone and disclosing certain confidential information, including the names of its customers. Verifone contended that these restrictions were further to its IP rights pursuant to which it could legitimately restrict the grant of its licence to third parties without its permission. The CCI disagreed with Verifone’s plea and viewed the restrictions as simply the means to further Verifone’s entry and growth in the VAS market. The CCI also held that Verifone’s rationale for not allowing VAS developers to develop payment software (i.e., that it may damage the basic software of the POS terminal that was necessary for its functioning) was inconsistent with Verifone’s practices in other countries. The CCI also found the SDK licence agreement imposed ‘unfair’ disclosure requirements on VAS providers that were driven by Verifone’s desire to gain confidential commercial information from VAS providers and enable it to exploit the lucrative VAS market. Based on these findings, the CCI held that Verifone had imposed unfair and discriminatory terms in its SDK licence agreements with VAS providers and imposed a penalty of approximately US$670,000.
The CCI’s approach towards excessive pricing claims in the IP licensing context is consistent with its general approach on unfair pricing, where it has chosen to adopt a simple cost-plus approach for determining whether the price has a reasonable relation to the economic value of the product supplied. The CCI’s decisions on IP and antitrust issues are being contested before the appellate courts and it will take a while before definite guidance on these issues emerges.

IV STANDARD-ESSENTIAL PATENTS


i Standard-selection process and antitrust

Industry standards are widely acknowledged to be one of the fundamental drivers of the modern economy. Standard setting through stakeholder collaboration usually results in significant efficiencies; for instance, the interoperability of standards, consumer safety, technological innovation and the introduction of performance standards in the market. While antitrust authorities have recognised the pro-competition benefits of standardisation, the standard-selection process itself involves deliberation and communication between competitors that may raise potential antitrust concerns. For instance, coordination in a standard-selection process may lead not only to minimum price-fixing, but also to a buyers cartel in which the licensees (voting members of the standard-setting organisation) coerce patent holders to accept lower royalties in exchange for having their patents incorporated into a standard.[33]
Apart from the coordination concerns involved in a standard-selection process, the adoption of industry standards involving IP may result in the creation of an SEP. Once a patent is included in a standard and is widely adopted, it grants absolute monopoly power to the SEP holder.[34] The SEP holder is under an obligation to license on a FRAND basis and a failure to do so could be an abuse of dominant position. The task of an antitrust regulator is therefore not limited to adjudicating only violation of FRAND commitments by the SEP holder,[35] but also extends to claims involving abuse of the standard-setting process. Globally, much of the antitrust litigation and controversy in relation to standard-selection processes has revolved around SEPs, and specifically patent hold-ups.[36]
In India, the antitrust concerns surrounding standard-selection processes have also followed this trend, looking at issues surrounding FRAND terms for the Global System for Mobile Communications, or GSM standard, in the Erricson v. Micromax case and others. In March 2013, Ericsson sued Micromax, claiming damages worth INR 100 crore (~USD 15.2 million) alleging that Micromax had refused to enter into a licensing agreement covering Ericsson’s patented innovations across several wireless technology standards after three years of negotiations failed to yield a license agreement. Micromax, contested the claims, arguing that Ericsson was not licensing Its SEPs on FRAND terms. Micromax, with and subsequently Intex, approached the CCI aleging abuse of dominance by Ericsson. The CCI noting that the practices adopted by Ericsson were discriminatory and contrary to FRAND terms directed the Director General, Competition Commission of India (DG)[37] to investigate Ericsson for any potential violation of the provisions of the Competition Act. This order of the CCI was challenged by Ericsson before the Delhi High Court. During the pendency of these proceedings, Ericsson and Micromax entered into a global patent license agreement and ended their dispute. Even though Micromax, apparently, has written to the CCI to withdraw its complaint, the Delhi High Court noted that notwithstanding such withdrawal, the CCI would be at liberty to proceed against Erriscon for any potential abuse of its dominant position[38].
In addition, the CCI has turned its attention more recently to the potentially anticompetitive effects arising out of voluntary non-SEP technical standards.[39] Recently, the CCI considered whether the digital projection and screening of Hollywood movies in India, through Digital Cinema Initiative (DCI)-compliant servers – agreed and enforced between six Hollywood movie production houses (HMPs) by way of a joint venture – would lead to an anticompetitive horizontal agreement or abuse of dominant position. The HMPs, to protect their proprietary content from piracy, required the cinema owners and digital cinema service providers to comply with DCI technology. Arguably, the DCI-compliant servers provide better image quality to the viewers and protect HMPs from piracy of their proprietary content. The CCI considered protection from piracy as a reasonable defence under the Competition Act to require the projection of movies through DCI-compliant technology (for protection of HMPs’ copyright), and decided that the allegations did not merit investigation.[40] On considering this issue on appeal, however, the COMPAT equated the requirement of DCI-compliant servers by HMPs with the process of private standardisation, and held that adoption of high standards could possibly have resulted in the creation of entry barriers for non-DCI-compliant service providers. Essentially, in its analysis, the COMPAT viewed the requirement of DCI-compliant technology introduced by HMPs as being a private standard-setting process (that may result in an abuse of dominance). Accordingly, it ordered the Director General to conduct an investigation into the matter. Interestingly, both the CCI and the COMPAT did not delve deeper into the protection available to efficiency-enhancing joint ventures under the Competition Act[41].
While the approach adopted by the COMPAT seems to suggest that a private standard-setting process involving non-SEPs can indeed be investigated under the Competition Act, it remains to be seen how the CCI will balance, on one hand, the need to protect IP developed jointly for the promotion of minimum cinematic ‘quality’ standards with, on the other hand, the competing claims that the IP is being misused to keep out ‘non-compliant’ film distributors and results in an abuse of dominance.

V INTELLECTUAL PROPERTY AND MERGERS
The Indian merger control regime requires the mandatory notification of all mergers and acquisitions that meet certain jurisdictional thresholds; these thresholds are assessed on the basis of the sum of the acquirer and target company’s assets and turnover collectively. However, the question of whether the licensing of IPs constitutes the ‘acquisition’ or ‘transfer’ of assets (and consequently requires notification) has been the subject of some debate. Since IPs can be transferred through many methods, including through their assignment, exclusive licensing, non-exclusive licensing, sub-assignable licensing, for a limited duration or perpetually, the CCI has been called upon to identify situations where such licensing might require merger notification. The CCI has now clarified through its decisional practice that the licensing of an IP will not in itself constitute a transfer or acquisition if the licence is demonstrably non-exclusive – both as a matter of law (de jure) and as a matter of fact (de facto). The licensor has to, among other things, establish that it itself continues to use the IP, or indeed license out the IP to others for wider use; and that the licence is not exclusive, irrespective of terminology used in the licence agreements. As a corollary, IP licences that do not meet this test, either de jure or de facto, will be treated as asset acquisitions that trigger merger notification to the CCI if no statutory exemption is available.[42]

VI OTHER ABUSES (SHAM OR VEXATIOUS LITIGATION – IP AND ANTITRUST)

Sham or vexatious litigation as a tool to exclude competition is one of the important issues in IP and antitrust, since it involves the strategic use of IP infringement actions before courts with the ultimate objective of excluding a rival from the market. Globally, mature antitrust regulators have examined vexatious litigation as a strategy involving denial of market to a competitor. In the EU and the United States, the courts have laid down two broad principles that need to be satisfied when resolving an antitrust claim based on vexatious litigation: first, the lawsuit must be objectively baseless to the extent that no reasonable litigant could except success on the merits; and second, the IP holder’s utilisation of the court system must be conceived in the framework of a plan to eliminate competition.[43]
While in India litigation in relation to both SEP and sham complaints are ongoing, the focus of this section is on complaints involving sham IP litigation. In the past eight years of antitrust enforcement, the CCI has received three complaints regarding sham litigation as a potential abuse of dominance. The CCI initiated an investigation into the first-ever complaint based on vexatious litigation in 2014.[44] However, in the subsequent complaints, the CCI has refrained from directing investigations based on sham litigation, requiring the presence of exceptional circumstances. In all these cases, the CCI has effectively followed the principles laid down by the courts in the EU and the United States to examine claims involving vexatious litigation. The CCI’s approach in the first case of this nature involved a complaint against JCB India Ltd (JCB), where the complainant Bull Machines Private Limited alleged that JCB had, as patent holder, used an ex parte infringement injunction obtained from the High Court to strategically delay its own competing product launch. The withdrawal of the patent infringement suit by JCB soon after the product launch had been successfully delayed, formed the basis of the CCI’s investigation into whether JCB had engaged in sham or vexatious litigation.[45]
In more recent cases, however, the CCI appears to be increasingly reluctant to view as abusive conduct the use of court proceedings to enforce legitimate IP rights. For instance, recently the CCI, in an initiation order in Biocon v. Roche, considered that Roche had been engaged in a long-drawn-out (and continuing) legal battle involving IP rights before the Delhi High Court and noted that recourse to legal proceedings is a right of every party and, as a general principle, cannot be viewed as being sham litigation except under exceptional circumstances.[46] It seems the intensity of the underlying patent battle, as reflected by the time taken in arguments before the High Court, has weighed heavily with the CCI in determining that the patent litigation was not vexatious.
In sum, the jurisprudence on the point of vexatious litigation under the Competition Act so far has developed on the basis of the CCI’s prima facie orders.[47] Since the prima facie orders of the CCI are not determinative of their final findings or meant to list detailed reasoning, the CCI’s approach to vexatious litigation remains a mater of some speculation.[48]

VII OUTLOOK AND CONCLUSIONS

The Madras High Court’s observation in The Tamil Nadu Film Exhibitors Association v. Competition Commission of India that the Competition Act permits the parties to settle their dispute, subject to CCI’s satisfaction that the settlement would not lead to or help continue any anti-competitive practice in India. This observation opens the door for the CCI to consider the global license agreement between Micromax and Ericsson and the subsequent request by Micromax to terminate the proceedings against Ericsson while examining the allegations against Ericsson. While the Competition Act is designed to remedy instances of anti-competitive practice afecting the market as a whole and not just the interest of select competitors, the CCI may very well continue to examine the allegations against Ericsson, the very fact that the complainant Micromax no longer wishes to pursue its claims against Ericsson may likely weaken the CCI’s case against Ericsson.

To conclude, CCI has adopted a largely balanced and progressive approach in ensuring that the enforcement of competition law is not at odds with preservation of IPs. In doing so, it has taken cues from decisional practice in other jurisdictions, and has evolved its own jurisprudence on issues such as whether patent litigation is sham, or indeed on the role of private standards in the market. However, much of the future direction of the CCI’s decision-making in this area will be determined in appellate review, where the Indian Supreme Court is likely to have the last word. As with many other issues, the enforcement of antitrust law on questions involving IP is likely to continue to evolve in the coming years.

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Delhi High Court imposes costs on Defendant in a Trademark Infringement Action to Curb Dilatory Tactics

Published In:Inter Alia - Quarterly Edition - September 2018 [ English Chinese japanese ]

Skechers Inc. (‘Skechers’), a US footwear brand, filed a civil suit[1] before the Delhi High Court (‘Delhi HC’) against a local footwear manufacturer, M/s Pure Play Sports and other retailers, on the grounds of trade dress infringement, passing-off, dilution, unfair competition etc., as the defendants were involved in the commercial dealing of lookalikes / replicas of Skechers GOwalk 3 products. On May 25, 2016, the Delhi HC granted an interim injunction restraining the defendants and appointed a local commissioner to visit the premises of the defendants to seize the offending goods.

As the defendants failed to appear and/or file pleadings in their defense, within the prescribed period under the recently introduced Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, the right of all the defendants to file their written statements was declared to have been closed, and the Delhi HC proceeded ex-parte against the defendants, except Pure Play. In view of the above, the Delhi HC passed a summary order for disposal and imposed costs in favor of Skechers and opined that it had the power to pass a summary decree in a suit, even in the absence of a specific application requesting the same, as it is satisfied that nothing would come out of putting the parties through the rigmarole of a trial. Thereafter, Skechers filed an application under Sections 35, 35A and 35B of the Civil Procedure Code read with Chapter 23 of the Delhi High Court Original Side Rules, 2018 (‘DHC Rules’), accompanied with a detailed bill of costs, praying for quantification of the costs of the proceedings due to be paid to it. This application file by Skechers was the first of its kind under the DHC Rules.

The key considerations to be taken into account by a Court when granting such costs are (i) judicial time consumed in litigation; (ii) delay in service of summons or efforts made; (iii) delay caused by any party by raising frivolous issues or unnecessary objections; (iv) failure of a party to effect discovery of documents or refusal to answer interrogatories; (v) incorrect denial of facts/ documents, thus, protracting trial; (vi) monetary and other stakes involved in the proceedings; (vii) costs incurred on execution of commission; and (viii) any other cost which the Court may deem fit and proper. Further, under Rule 2 of the DHC Rules, the Taxing Officer / Joint Registrar of the Court (’JR’) has been empowered to entertain, adjudicate and quantify costs by appreciating the documentary evidence put forth.

After reviewing the bill of costs submitted by Skechers, the JR awarded costs amounting to Rs. 8,698,173 (approx. US$118,000) to Skechers. Pure Play has filed a chamber appeal against the order of JR, which is currently pending adjudication. However, the execution petition of Skechers has been admitted and the Court has directed Pure Play to disclose its assets and remain present before the Court on the next date of hearing.

This case has set an important precedent on two counts. First, it lays down with clarity that a Court has the powers to pass a summary judgment / decree suo motu, even in the absence of a written application. Second, the quantum of costs granted by the JR demonstrate the Court’s seriousness in curbing the dilatory tactics employed by litigants, which will likely act as an effective deterrent / disincentive for infringers, who otherwise find it profitable to continue their illegal activities until shut down by an injunction of the Court (as they are fully aware of general trend of Courts being reluctant to impose financial sanctions in intellectual property matters).

AZB represented Skechers before the Delhi HC.

[1] Skechers USA Inc. II v Pure Play Sports, CS(COMM) 573/2016, High Court of Delhi

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Changing Landscape of Intermediary Liability

The High Court of Delhi (‘Court’), in a spate of recent judgments, has critically evaluated the liability of e-commerce platforms in respect of trademark infringement, by carefully examining the business model of the e-commerce platform and the role played by such e-commerce platform in the overall transaction, involving marketing and sale of products to end consumers. The Court has provided substantive guidance on when an e-commerce player operating a marketplace can claim to be an ‘intermediary’, and claim immunity or ‘safe harbour’ under Section 79 of the Information Technology Act, 2000 (‘IT Act’). Section 79 of the IT Act, more popularly known as the ‘safe harbour’ provision, essentially immunizes certain types of intermediaries from liability qua third-party content and material, hosted or made available by them, provided such intermediaries fulfil the prescribed conditions.

The first and foremost of these judgments was rendered in the matter of Christian Louboutin SAS v. Nakul Bajaj & Ors.[1] In this case, Christian Louboutin (‘Plaintiff’), the registered proprietor of the single-colour mark for its distinctive ‘red sole’ filed a suit against www.darveys.com  (‘Defendant’), a website marketing itself as a ‘luxury brands marketplace’ (‘Louboutin Case’), for marketing, offering and selling allegedly counterfeit Louboutin branded products using the name and image of Mr. Christian Louboutin. According to the Plaintiff, the Defendant was also using the Plaintiff’s registered trademarks and the names ‘Christian’ and ‘Louboutin’ as ‘meta-tags’ on its website and in turn, diverting internet traffic. The Defendant, however, argued that the goods sold on the website were genuine. The Defendant further claimed that it was merely booking orders, placed by customers, whose supplies are effected through various sellers and, therefore, it was a mere intermediary, entitled to protection under Section 79 of the IT Act.

At the outset, the Court examined the definition of an ‘intermediary’ under the IT Act and emphasized that its role is limited to ‘receiving, storing, transmitting an electronic record or providing a service with respect to that record’. The Court further observed that in assessing whether an e-commerce platform can be considered as an ‘intermediary’, it is important to assess whether such platform played only an inactive or passive role in the marketing and selling process; in other words, whether such a platform was merely acting as a conduit or passive transmitter of records or of information. Further, the Court also observed that it must be analysed whether such an e-commerce platform is taking adequate measures to ensure that no unlawful acts are committed by the sellers. The Court laid down certain factors to assess this, which include: (i) the terms of agreements entered into between the platform and the sellers; (ii) the manner in which terms were enforced; (iii) whether adequate measures have been put in place to ensure trademark rights are being protected; and (iv) whether the platforms have knowledge of unlawful acts.

The Court found that the Defendant was not an ‘intermediary’ as it was substantively involved in the business operations and had control over the products being sold on the platform. The Court found that the Defendant was actively involved in, inter alia: (a) identifying the sellers; (b) enabling the sellers actively; (c) promoting them; (d) selling the products in India; (e) providing guarantee of authenticity for products on the platform; and (f) claiming that it has relationships with the exclusive distributors of the Plaintiffs’ products etc. The Court further observed that on www.darveys.com, the seller and the person from whom the seller purchases the goods are not known and it is also unclear whether goods are genuine. In view of this, the Court observed that the conduct of the Defendant amounted to ‘conspiring, abetting, aiding or inducing unlawful activity’ as it promoted the infringing products to its members who signed up on the website (by payment of a membership fee). In view of this, the Court came to a finding that the Defendant was not entitled to any protection as an ‘intermediary’ under the IT Act.

The Court, inter alia, directed the Defendant to disclose complete details of all its sellers including their contact information, obtain a certificate of authenticity from its sellers and implement a system whereby upon being notified of any counterfeit product by the Plaintiff, the Defendant must ascertain the authenticity of the product with the seller on its site and thereafter, examine the same with evidence to check if it must be removed. Lastly, the Court further ordered that the Defendant should remove all meta-tags containing the Plaintiff’s mark.

Placing reliance on the Louboutin case, the Court has held two more e-commerce players, being www.kaunsa.com and www.shopclues.com liable for trademark infringement in the cases of Luxottica v. Mify Solutions[2] and L’Oréal v. Brandworld & Anr.[3], respectively.

These decisions are undoubtedly a big step forward in ensuring that brand owners’ rights on e-commerce platforms are protected. The decision in the Louboutin case is especially important as it throws light on specific situations in which an e-commerce marketplace can claim ‘safe harbour’ under the IT Act. Another key practical implication of these cases is that e-commerce marketplaces may now be required to re-evaluate their business models as well as the role they play in the marketing and sale of products on their platforms.

[1] CS(COMM) 344/2018, order passed by Hon’ble Mrs. Justice Pratibha Singh dated November 2, 2018.
[2] CS (COMM) 453/2016, Luxottica Group S.P.A. and Ors. vs. Mify Solutions Pvt. Ltd. and Ors. (12.11.2018 – DELHC)
[3] CS(COMM) 980/2016 – Delhi High Court

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Commencement of TRAI Tariff Order, Interconnection Regulations and Quality of Service Regulations for Broadcasting and Cable Services

Published In:Inter Alia - Quarterly Edition - December 2018 [ English Chinese japanese ]

As reported in the September 2018 issue of Inter alia, the validity of the Telecommunication (Broadcasting and Cable) Services (Eighth) (Addressable Systems) Tariff Order, 2017 (‘Tariff Order’) and the Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) Regulations, 2017 (‘Interconnection Regulations’) issued by the TRAI on March 3, 3017 had been upheld by the Madras High Court. Consequently, the Tariff Order, the Interconnection Regulations and the Telecommunication (Broadcasting and Cable) Services Standards of Quality of Service and Consumer Protection (Addressable Systems) Regulations, 2017 came into effect from July 3, 2018. Subsequently, Star India preferred an appeal before the SC against the Madras High Court judgement arguing, inter alia, that the Tariff Order and the Interconnection Regulations regulated the content of the transmission, which was solely within the ambit of the Copyright Act, 1956 and fell outside the jurisdiction of the TRAI. The SC, by its judgment dated October 30, 2018, upheld the jurisdiction of the TRAI to regulate the content of transmission in light of the larger public interest involved and upheld the validity of the Interconnection Regulations and the Tariff Order in their entirety.

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Four Medical Devices brought under Regulatory Purview

Published In:Inter Alia - Quarterly Edition - December 2018 [ English Chinese japanese ]

By way of a notification dated December 3, 2018, the Ministry of Health and Family Welfare (‘MHFW’) has brought four commonly used medical devices (i.e. nebulizers, blood pressure monitoring devices, digital thermometers and glucometers) under the purview of ‘drugs’, as defined under Section 3(b)(iv) of the Drugs and Cosmetics Act, 1940 (‘DCA’), with effect from January 1, 2020. These are an addition to the pre-existing list of 23 other medical devices, already defined as ‘drugs’ under the DCA.

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Passing-off and Design Infringement can be tried together in a Composite Suit

Published In:Inter Alia - Quarterly Edition - December 2018 [ English Chinese japanese ]

In the matter of Carlsberg Breweries v. Som Distilleries and Breweries,[1] the special bench of the Delhi High Court has, in its order dated December 14, 2018, held that the joinder of two separate causes of action, one for infringement of a registered design and the other for passing-off is permissible and can be tried together in a composite suit. The plaintiffs in this suit alleged both infringement of a registered design as well as passing-off of the plaintiff’s trade dress in respect of the bottle and overall get up of its ‘Carlsberg’ mark. The defendants, in response, raised the threshold objection that such a composite suit was not maintainable in view of the judgment of the full bench (three judges) of the Delhi High Court in the matter of Mohan Lal v. Sona Paint[2] The Single Judge hearing this matter was of the opinion that the decision in Mohan Lal required a second look and based on the Chief Justice’s instructions, the present Special Bench (five judges) was constituted.

The majority in the Mohan Lal case had held that two separate suits would have to be filed for actions arising out of the infringement of a registered design and passing-off. The Court in the Mohan Lal case had however clarified that if such actions are filed at the same time, or in close proximity, they may be tried together as there may be some aspects which may be common.

The special bench of the Delhi High Court overruled the decision of the full bench of the Delhi High Court, inter alia on the ground that the full bench overlooked provisions of Order II Rule 3 of the Code of Civil Procedure, 1908, which permits joinder of multiple causes of action. The special bench further observed that the cause of action of passing-off and that of design infringement, in the instant case, emanated from the same transaction and therefore it was inconceivable for the cause of action to be ‘split’ in some manner and presented in different suits. Therefore, the Special Bench held that to avoid multiplicity of proceedings, on account of common questions of law and fact, a joinder of such causes of action would be permissible.

[1] CS(OS) 1485/2015.
[2] Mohan Lal v. Sona Paint, 2013 (55) PTC 61 (Del) (FB).

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Draft Cosmetics Rules, 2018

Published In:Inter Alia - Quarterly Edition - December 2018 [ English Chinese japanese ]

MHFW has, on November 29, 2018, published the Draft Cosmetics Rules, 2018 under the DCA. The draft rules aim to expand the regulations surrounding import, manufacturing, labelling, and other related activities in relation to ‘cosmetics’ as defined in Clause (aaa) of Section 3 of the DCA. The draft rules also introduce certain stringent norms with an aim to make manufacturers and importers of cosmetics more accountable for the safety of the cosmetics sold in the country. Some of the key salient features of the draft rules pertain to quality standard, labeling, prohibited cosmetics, import registration and enforcement authorities.

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