Wednesday, October 9, 2013

Section 3(3) and 3(4) of the Competition Act, 2002: Difference in Standard of Proof

I have earlier written on Section 3 of the Competition Act, 2002 here, here and here. During the course of a discussion, I noticed that Section 3(4) does not provide for a presumption of appreciable adverse effect on competition (AAEC), unlike Section 3(3) which gives rise to a presumption of AAEC. What is the consequence of the difference in the language of the two sub-sections?

Section 3(3) enumerates agreements which “shall be presumed to have an appreciable adverse effect on competition”, whereas Section 3(4) lists agreements which cause or are likely to cause an appreciable adverse effect on competition. It could be said that the absence of presumption in the latter translates to higher burden of proof on the Competition Commission to establish that parties are in contravention of Section 3(1) by virtue of an agreement which attracts Section 3(4).

In other words, under Section 3(3), so long as the Commission is able to establish that the agreement entered into by the parties deals with one of the four situations enumerated thereunder, it shall be presumed, without any further empirical evidence, that the agreement has an appreciable adverse effect on competition. Such agreements include the ones which directly or indirectly determine purchase or sale prices, limit or control production, supply, technical development, investment etc, market allocation and bid rigging, among others. Simply put, these agreements shall per se be presumed to have an AAEC unless such presumption is rebutted.

On the other hand, under Section 3(4) which deals with tie-in arrangements, exclusive supply arrangements, refusal to deal arrangements and resale price maintenance, the Commission has to arrive at the conclusion that such agreements have indeed caused AAEC or are likely to cause AAEC, but cannot be presumed to cause AAEC. Therefore, these agreements are not per se anti-competitive.

Friday, September 27, 2013

Section 68 of the Patents Act: Registration of “Interest Creation” and the meaning of “Use”

Section 68 of the Patents Act states that the following classes of documents shall be compulsorily registered in the register of patents:
1.       Assignment of a patent
2.       Entitlement to a patent by transmission or operation of law
3.       Assignment or transmission of a share in a patent
4.       Entitlement as a mortgagee
5.       Entitlement as a licensee
6.       Any other interest in the patent

The first 4 categories are relatively clearer compared to the 5th and the 6th categories. What qualifies as a “license” to a patent? When is a person a “licensee”? If one were to be guided by the spirit of the definition of a license under the Indian Easements Act, 1882, a license means the consent to do something in whose absence the action does not have the sanction of the right owner and would amount to infringement of the right.

Therefore, any agreement between a patentee and a third party which permits such third party to do something, which he could not have in the absence of grant of rights/consent under the agreement, may be treated as a “license” within the meaning of Section 68. In the context of the Patents Act, the scope of exclusive rights of the patentee is circumscribed by Section 48. Therefore, it could be said that any agreement with the patentee that permits a third party to do anything which is covered by Section 48 is a license.

Would every person in a product value chain necessarily need a license to the patent to deal with the patented product? For instance, if there is a patentee X who manufactures the patented product A, and X contracts Y to design the packaging for the patented product A in a certain fashion, does Y need a “license” to the patent as part of the contract? In other words, does Y’s handling of the patented product to design its packaging amount to “use” within the meaning of Section 48 of the Act, warranting the grant of a license?

The answer to this question would decide whether or not the agreement between X and Y needs to be registered under Section 68 of the Act. I’ll let readers think over the issue and write on the meaning of “use” in the next post.

Saturday, September 7, 2013

Sections 60 and 62 of the Competition Act- Are they Inconsistent?

In my last 2 posts, I had written on the interplay between the Competition Act and the Patents Act during the course of which I had said the following about Section 60 of the Competition Act:

What is critical to note is that Section 60 of the Competition Act states that the Act “shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force”. In other words, this Act has an overriding effect over all other laws, including the Patents Act....

How does one harmonize the interpretations of “unfair price” under the Competition Act and “reasonably affordable price” under the Patents Act?

Is harmonization necessary since, as stated in my previous post, Section 60 of the Competition Act states that the Competition Act shall prevail over all other legislations or provisions in other legislations which are “inconsistent” with it? Although the Patents Act may be treated as the “parent legislation” which governs patents and patentees, Section 60 of the Competition Act ensures that the latter prevails over the Patents Act. 

An exercise in harmonization is necessary because the overriding effect of Section 60 of the Competition Act can take effect only when it is established that two provisions are “inconsistent” i.e. they are in conflict with each other. If, however, harmonization is possible without distortion of the objects or language of either legislation, Section 60 must be the option of last resort. So how does one harmonize “unfair price” with “reasonably affordable price”? 

It must be borne in mind that both “unfair price” and “reasonably affordable price” judge the cost of the transaction through the prism of the effect of the price on the licensee, as opposed to the proportionality between the price demanded and the value of the technology being licensed. In other words, “fairness” of a price may be the same as its “reasonable affordability”, but it is distinct from “reasonable price”. 

Therefore, it could be said that both the Patents Act and the Competition Act are in harmony with each other when they require the cost of a licence to be fair/reasonably affordable. In fact, so long as there is no conflict between the two requirements, it could be said that what is “reasonably affordable” under the Patents Act would be “fair” under the Competition Act.”

To this analysis, let me bring in Section 62 of the Competition Act, which reads as follows:

62. Application of other laws not barred: The provisions of this Act shall be in addition, and not in derogation of the provisions of any other law for the time being in force.

Let’s reproduce Section 60 of the Competition Act to compare the language of both provisions:

60. Act to have overriding effect: The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

While on one hand Section 60 proclaims the overriding effect of the Competition Act over anything that is inconsistent with the Act, Section 62 states that the Act shall be in addition to, and not in derogation of other laws. What this could mean is that so long as there is no inconsistency between the Competition Act and other legislations such as the Patents Act, both statutes shall apply simultaneously to a situation to which both Acts apply. In the event the other legislation is inconsistent with the Competition Act, the latter shall prevail.

Therefore, if “reasonably affordable price” under Section 84 of the Patents Act and “unfair price” under the Competition Act are not inconsistent with each other, both these requirements shall apply simultaneously to a patent license or such other transaction. Simply put, one requirement need not be subsumed in or prevail over the other. Also, the question as to which of these requirements/statutes applies first may not be that relevant when both are to be satisfied by the transaction.

Friday, September 6, 2013

Patents and Competition Law- II

In my last post I had shared the first of the 2 posts I had written on the PatLit blog on competition law and patent litigation. Here’s the second post for the benefit of our readers:

In my previous post, I discussed certain situations under Indian law which could attract both the Patents Act and the Competition Act. Continuing in the same vein, this post discusses the interaction between the two sets of legislation in instances of abuse of dominance. 

Section 4 of the Competition Act recognizes abuse of dominance by an “enterprise” or a “group”. Section 2(h) of the same Act exhaustively defines an “enterprise”, which includes a person, natural or juristic. As for the definition of a “group”, this is provided for in the Explanation to Section 5. 

In order to establish abuse of dominance by a patentee, the first ingredient to be established is that the patentee enjoys a position of dominance in the relevant market. As to what constitutes “relevant market”, Section 19(5) states that the Competition Commission of India (CCI) could have regard to either the “relevant geographic market” or the “relevant product market”. 

In assessing whether a patentee enjoys a dominant position in the relevant market, Section 19(4) of the Competition Act lists a host of factors which the CCI must have due regard to. Some of the factors include the market share of the enterprise and the economic power of the enterprise including commercial advantages over competitors. Critically, Section 19(4)(g) also recognizes the following factor to establish the patentee’s dominant position:  

monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise” 

The above-underscored portion is wide enough to include a patent grant which could bestow a monopoly or a dominant position in the relevant market. Therefore, if an aggrieved party is able to establish that the existence of a patent on a particular technology has resulted in the patentee acquiring a position of dominance, that alone is sufficient to satisfy the first and basic ingredient of Section 4 i.e. position of dominance of the patentee. 

The second ingredient of abuse of dominant position is dealt with by Section 4(2) of the Competition Act, which lists a host of situations that could amount to abuse of dominance. For instance, imposition of an unfair or discriminatory price in purchase or sale (including predatory price) of goods or services amounts to abuse of dominance. What is important is that the Act recognizes and distinguishes between “unfair price”, “discriminatory price” and “predatory price”. Each of these clearly is capable of having distinct meanings. 

Since the interface between the Patents Act and Competition Act is being discussed, it is important to understand the position of these legislations on similar or identical or related issues. For instance, while the Competition Act refers to “unfair price”, Section 84(1)(b) of the Patents Act (Section 84 being the compulsory licence provision) refers to a “reasonably affordable price”. How does one harmonize the interpretations of “unfair price” under the Competition Act and “reasonably affordable price” under the Patents Act?

Is harmonization necessary since, as stated in my previous post, Section 60 of the Competition Act states that the Competition Act shall prevail over all other legislations or provisions in other legislations which are “inconsistent” with it? Although the Patents Act may be treated as the “parent legislation” which governs patents and patentees, Section 60 of the Competition Act ensures that the latter prevails over the Patents Act. 

An exercise in harmonization is necessary because the overriding effect of Section 60 of the Competition Act can take effect only when it is established that two provisions are “inconsistent” i.e. they are in conflict with each other. If, however, harmonization is possible without distortion of the objects or language of either legislation, Section 60 must be the option of last resort. So how does one harmonize “unfair price” with “reasonably affordable price”? 

It must be borne in mind that both “unfair price” and “reasonably affordable price” judge the cost of the transaction through the prism of the effect of the price on the licensee, as opposed to the proportionality between the price demanded and the value of the technology being licensed. In other words, “fairness” of a price may be the same as its “reasonable affordability”, but it is distinct from “reasonable price”. 

Therefore, it could be said that both the Patents Act and the Competition Act are in harmony with each other when they require the cost of a licence to be fair/reasonably affordable. In fact, so long as there is no conflict between the two requirements, it could be said that what is “reasonably affordable” under the Patents Act would be “fair” under the Competition Act. 

Having said this, it would be banal to state that to decide what is unfair or not reasonably affordable, it may be necessary to first determine what is fair or reasonably affordable, which probably calls for use of econometrics, and not just wordplay. In situations like these, the CCI has the power to farm out certain issues, such as licence fees, for the consideration of and determination by the Controller General of Patents.

Under Section 21A of the Competition Act, the CCI could refer the issue of determination of licence fees to the Controller General of Patents before taking a final call on the issue of unfair pricing. In the alternative, in certain situations, the CCI may first record a finding of unfair pricing and then refer the matter to the Controller General of Patents for determination of a fair price. 

The situation discussed in this post is but one possible scenario. However, the larger point being made here is that there exists a plethora of options outside of the Patents Act in patent-related matters, and it would help to consider them in bringing about the desired outcome, instead of restricting oneself to only the Patents Act.” 

Thursday, September 5, 2013

The Overlap between Patents and Competition Law- I

Last month, I had written a two-part series on the intersection between competition law and patent litigation on Prof.Jeremy Phillips’s patent litigation blog PatLit. For the benefit of the readers of this blog, reproduced below is the first post in the series:

Patent litigation all over the world has gradually moved beyond its standard template which typically involves suits for infringement, counterclaims for patent invalidation or contractual disputes. Since the conduct of warring parties has a bearing on competition and consumers, competition law is gradually beginning to make its presence felt, even in India. In this post, I shall deal with some of the situations where there is interplay between the Indian Patents Act 1970 and the Indian Competition Act 2002. 

Although the Patents Act is typically associated with patent grant and enforcement, Section 140 of the Act lists those restrictive covenants whose presence in patent-related contracts is forbidden for being unfair or discriminatory. The Section, among other things, expressly proscribes any contractual provision that envisages exclusive grant-back or prevents challenges by a licensee to the validity of a licensed patent or enables coercive package licensing by the patentee/licensor. Such contractual clauses may also attract Section 4 of the Competition Act, which deals with abuse of dominant position, provided the ingredients of the Section are satisfied. 

In other words, in limited situations, the manner of patent exploitation and enforcement and its effect on the market is capable of attracting both the Patents Act and the Competition Act. For instance, a patentee may be in a position to dictate licence terms, including exorbitant licence fees, to others players in the market who seek access to his proprietary technology. Subject to certain conditions being satisfied, it is possible to invoke the compulsory licensing (CL) mechanism provided for under Section 84 of the Patents Act to moderate the terms of the licence. Here too, it is also possible to assess the fairness of the patentee’s terms through the prism of Section 4 of the Competition Act. 

 The difference between the two mechanisms is that Section 84 requires the applicant for a CL to wait for three years from the date of patent grant to move a CL application, whereas one need not wait for three years under the Competition Act to complain against abuse of dominance. Also, under the Patents Act, one needs to satisfy the requirement of being a “person interested” within the meaning of Section 2(1)(t) to move a CL application (I have written elsewhere in detail on the interpretation of the definition of a “person interested”), whereas anyone can file an information for abuse of dominance under the Competition Act. 

A question that may arise is whether the same relief may be granted by both the Controller General of Patents and the Competition Commission of India (CCI). Under Section 84(4) of the Patents Act, the Controller General has the power to determine the terms of a compulsory licence. Under Section 27 of the Competition Act, the CCI has the power, among other things to modify the terms of the hitherto abusive agreement, besides imposing a penalty. 

Further, Section 28 of the Competition Act empowers the CCI to divide the abusive enterprise to ensure that it is never in a position to abuse its dominance. Pertinently, Section 28(2) of the Competition Act envisages “transfer or vesting of property, rights, liabilities or obligations”. In other words, Sections 27 and 28 together allow the CCI to create an interest by way of a licence in favour of a third party on terms that the CCI deems fit. Clearly, the CCI has broader and much more lethal powers than the Controller General. 

What is critical to note is that Section 60 of the Competition Act states that the Act “shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force”. In other words, this Act has an overriding effect over all other laws, including the Patents Act. Critically, once the ball is set rolling under the Competition Act, the informant or complainant does not have the option of pulling back since if the CCI sees merit in the information or complaint, it takes over. The informant then merely assists the CCI. Therefore, the choice of the legal option to be employed depends entirely on the outcome desired by an aggrieved party.”

Saturday, August 24, 2013

Announcements: The Blog now has a Logo and a Twitter Handle

For over two years of its existence as “The Demanding Mistress” since December 2010 (the blog was previously called “Yukti”), the blog never has had a logo of its own. After being constantly badgered by some of the blog’s well-wishers to create a logo, I requested a very dear friend and confidante to design one for the blog. The result has been splendid to say the least, and for which I am deeply grateful to her!

The logo has the letters “TDM” fused in seriatim with the image of Lady Justice in the background, a cravat at the bottom right corner and the blog's name at the bottom.

Also, my co-blogger Amshula took the initiative of creating a twitter account for the blog. The Twitter handle is @DMistressblawg, where we shall provide constant updates of our posts and legal developments. 



Sunday, August 18, 2013

Does the Designs Act Provide for a Counter-claim for Cancellation of a Registered Design?

A few days ago I was asked if the reference to “defence” of invalidity of a design under Section 22(3) and (4) of the Designs Act, 2000 may be construed as a reference to a counter-claim for cancellation of a design in response to a suit for infringement of the design.

Section 22(3) of the Designs Act states that the grounds for cancellation of a design enumerated in Section 19 of the Act may be raised as defences in a suit for design infringement. In my opinion, Section 22(3) provides for only a “defence” of invalidity, but not a “counter-claim” seeking invalidation of the registered design.

This is because unlike Section 64 of the Patents Act which speaks of both a counterclaim to a suit and a stand-alone petition before the IPAB to revoke a patent, Section 19 of the Designs Act restricts itself to a petition for cancellation of the design before the Controller of designs, but does not provide for a counterclaim.

The framework of the Designs Act, in a way, is similar to the Trademarks Act wherein there is no provision for rectification of a trademark by the Court. Therefore, although it is possible for the defendant in a suit for design infringement to raise the defence of invalidity of the design as part of his written statement, it is not in the nature of a counter-claim. At best, the defence could have the effect of preventing the grant of an injunction, interim or permanent, if the Court comes to the conclusion that the validity of the design is under serious fire. However, the Court does not have the power to revoke/cancel the registered design.

The option of defence of design invalidity provided for under Section 22(3) of the Act is akin to Section 107 of the Patents Act which allows a defendant to raise the defence of patent invalidity by relying on grounds provided for under Section 64 of the Patents Act. In a patent infringement suit too, if only defences under Section 107 are raised and no counterclaim under Section 64 is instituted, the High Court cannot invalidate/revoke the patent.

In an earlier post, I had written on the difference between a “defence” and a “counterclaim” in the context of patents citing the decision of the Allahabad High Court in Fabcon Corporation v. Industrial Engineering Corporation (AIR 1987 All 338). Following is what I had written in that post:

In other words, if the counterclaim of revocation is no more treated as a counterclaim, the suit must be adjudicated by a forum which has the power to do so under Section 104 of the Act, namely the District Court.

To my surprise, there is a short order on this issue that was delivered by the Allahabad High Court in Fabcon Corporation v. Industrial Engineering Corporation (AIR 1987 All 338). In this case, the Plaintiff claimed that since a defence of invalidity of the patent under Section 107 (1) was taken by the Defendant, such a defence must be deemed as a counterclaim under Section 64 of the Act. This meant that the suit for infringement had to be transferred along with the deemed counterclaim to the High Court.

The High Court disagreed with the Plaintiff and took a view, which I fully agree with and have always believed in, that a defence as envisaged under Section 107(1) is not the same as filing a counterclaim of revocation under Section 64 of the Act.”

To me, the mechanism under the Designs Act is a curious mix of options provided in the Patents Act and the Trademarks Act. The Designs Act too envisages transfer of the suit to a High Court when an invalidity defence is raised, which is similar to the Proviso to Section 104 of the Patents Act, with the exception being that the Proviso in the Patents Act mentions the suit, “along with the counter-claim”. The absence of a counter-claim seeking cancellation of the design is similar to the Trademarks Act. And yet, there is no provision for stay of the suit for design infringement during the pendency of the cancellation petition, unlike Section 124 of the Trademarks Act.

What complicates the straight-forward conclusion that the Designs Act does not provide for a counter-claim is Section 23 of the Designs Act. This provision makes Sections 106 (suit for groundless threats of infringement) and 113 (issuance of certificate of validity of a patent) of the Patents Act applicable to Designs Act with incidental changes. Extracted below is Section 113 of the Patents Act:

“(1) If in any proceedings before the Appellate Board or a High Court for the revocation of patent under section 64 and section 104, as the case may be, the validity of any claim of a specification is contested and that claim is found by the Appellate Board or the High Court to be valid, the Appellate Board or the High Court may certify that the validity of that claim was contested in those proceedings and was upheld.”

If this provision is to be applied with incidental changes to the Designs Act, how would it read? One possible reading could be as follows:

“(1) If in any proceedings before the Controller or the High Court for the cancellation of a design under section 19(1) and section 19(2), as the case may be, the validity of any registered design  is contested and that design is found by the Controller or the High Court to be valid, the Controller or the High Court may certify that the validity of that design was contested in those proceedings and was upheld.”

Another possible reading could be as follows:

“(1) If in any proceedings before the Controller or the High Court for the cancellation of a design under section 19(1) and section 22(3), as the case may be, the validity of any registered design  is contested and that design is found by the Controller or the High Court to be valid, the Controller or the High Court may certify that the validity of that design was contested in those proceedings and was upheld.”

The second possibility gives the impression that Section 22(3) provides for a counterclaim to revoke the design. However, it could again be argued that when a defence of design invalidity is raised, the Court has the power to declare and uphold the validity of the design, but does not have the power to invalidate the design since the Designs Act does not provide for a counterclaim.

I look forward to the opinions of our readers on the issue.

Thursday, August 15, 2013

Moving Past the “isms” and Stereotypes in the Indian IP Discourse

For quite some time now, the Indian IP discourse has been fraught with unrestrained stereotyping. Either one is dubbed “pro-patentee/pro-right holder” or “pro-public interest”, as if these are always entirely mutually exclusive, besides giving the false impression that opinions necessarily stem from ideological proclivities and can never be issue or fact-based.

I am not going to wax eloquent on the virtues of a “middle path”. Instead, I wish to deal head-on with stereotyping, motivated or otherwise, because if this trend is not resisted and nipped in the bud, any and every alternative or dissenting view will be silenced by slotting commentators in mutually exclusive and opposing factions.

One of the primary reasons that I want to deal with this trend is because it is a serious impediment to constructive ideation in the realm of Indian IP jurisprudence and policy. Instead of investing one’s creative energies in creating a consensus and forging practical/reasoned solutions which strike a balance between incentivising innovation and preserving the realm of commons, precious time is wasted in fending off biases which are encouraged and perpetuated for multiple reasons. The most prominent reason typically is an insatiable hunger to remain the loudest and the most popular voice in a discussion. This is truly the worst possible reason any person could have for taking a shrill tone or an extreme stance on an issue of manifest public interest. And to put it mildly, this need to be heard the most is symptomatic of an exhibitionistic streak, which I think needs professional help.

It doesn’t take an IQ of 200 to realize that the consequence of this trend is that the issue/subject takes a back seat, and individual egos come to the fore. It is certainly possible and perfectly acceptable that two people may never see eye-to-eye on any aspect of any issue, but then the genuine way in true academic tradition to address the ideological chasm is to debate and disprove, or to agree to disagree, instead of promoting a whisper campaign that only results in turning the chasm to a schism.

For instance, my PIL against the customs notification on Section 107A(b) of the Patents Act, which was dismissed on grounds of lack of locus standi, has been sought to be portrayed as part of some fictitious campaign to undermine international exhaustion in the context of patents in India. The larger perception that is being pushed by those who give motivated fodder to such a sentiment is that I am supposedly an active pro-patentee commentator. Nothing could really be further from the truth. Critically, I do not and I repeat, I do not think it is hara-kiri to take a pro-patentee stance. After all, every debate needs diversity of thought, and I have a right to hold an opinion.  Importantly, thus far, I can safely state that my opinions have been guided by reason, rigorous legal research and experience.

My stance on Section 107A(b) is not driven by any ideology. It was and remains an exercise in legal research which I undertook at a point when I felt that a particular line of thought was being accepted unquestioningly without exploring the possibility of an alternative view (here’s a detailed article I wrote on Section 107A(b) in the IJIPL). In fact, I have absolutely no issues in considering the possibility of my interpretation of the provision being wrong. But then, that is not the point.

The point is this- analysing a provision in a certain way must not be or become politically incorrect merely because patentees could benefit from it. After all, some of the stated objects of our Patents Act, as reflected in Section 83, are as follows:

(a) that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay;

(c) that the protection and enforcement of patent rights contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations;

Besides, examples abound where in the course of my analysis of a particular case or decision, I have come to conclusions which the patentees in those cases may not agree with. For instance, I wrote two fairly detailed posts on the violation of Section 8 by the patentee in Roche v. Cipla. In that case, I took the clear view that having arrived at the conclusion of violation of Section 8, the Court ought to have revoked the patent on Erlotinib. This was not based on any prejudice or bias. Instead, it was an opinion based on the need for logical consistency and proper statutory interpretation. Again, I agreed with the critical findings of the Supreme Court in the Novartis case.

This is not to say that I have never taken a stance which is beneficial to patentees. However, these opinions were an exhortation to strike a balance in the way our Courts enforce patents. Having handled IP matters in the High Court and the IPAB, I have enough experience and conviction to back my opinions on the manner and quality of IP enforcement in India. Therefore, one finds it unfair and a tad bit unscrupulous when genuine opinions are silenced through a sub-radar campaign.

I have tried my best to observe restraint in ignoring these motivated voices by focusing on the subject, but now it has come to a point where it is important to speak out lest silence is mistaken for weakness or lack of conviction . I think it would help to bear in mind that the primary reasons for writing on IP issues on informal fora like blogs are to increase one’s own conceptual clarity, to contribute to IP awareness and to engage members of the public in a discussion on an issue which is bound to affect them. It appears that this initial spirit of idealism has slowly given way to an atmosphere of one-upmanship and avoidable negativity.

One sincerely hopes that this is a passing phase, and that gradually the spotlight will be back on the subject.

Saturday, August 10, 2013

Pepsodent v. Colgate: Comparative Advertising War

After fighting a bitter war on comparative advertising under the erstwhile Monopolies and Restrictive Trade Practice Act, 1969 between 1997 and 2003 which was settled, leading toothpaste brands Pepsodent (of Hindustan Unilever Limited) and Colgate (of Colgate-Palmolive) are at it again.

The last time around Pepsodent had claimed that its toothpaste was "102% better than the leading toothpaste" in germ-fighting capabilities. In its latest advertisement, Pepsodent has directly named Colgate claiming that its toothpaste Pepsodent Germicheck is 130% better than Colgate's product.

It remains to be seen if Colgate will treat this as commercial disparagement besides bringing it within the meaning of infringement under Section 29(8) of the Trademarks Act, 1999. 

After the Rin v. Tide campaign of HUL, this is yet another instance in recent times of HUL resorting to comparative advertising. Writing elsewhere on the Rin v. Tide campaign in February 2010, following is what I had stated on the position of the law on comparative advertising:

In my last post, I had discussed in brief the recent advertisement for Hindustan Unilever’s detergent brand "Rin", in which a rival brand "Tide" figures prominently. Quite a few comments to that post referred to the Horlicks v. Complan judgment of the Delhi High Court. However, a more recent decision of the Delhi HC on the issue of comparative advertisement is available, namely the one delivered in the case of Dabur India v. Colortek Meghalaya (February 2010).

In this judgment, it was the case of the Appellant Dabur that its mosquito repellent brand “Odomos” was disparaged by an ad of the respondent Colortek which owned the rival brand “Good Knight”. The Division Bench of the Delhi High Court affirmed the Single Judge’s decision that there was no disparagement of Odomos in the impugned ad. Consequently, no injunction was granted against the respondent Colortek. To support its decision, the Court referred to a host of Supreme Court decisions on various aspects of the issue.

The Court first discussed the limits of “commercial speech”, as set out by the Supreme Court in Tata Press v. MTNL (1995); according to the Supreme Court, “commercial speech” is guaranteed as part of freedom of speech under Article 19(1)(a) of the Constitution. Although, the Supreme Court in that case did not define “commercial speech”, it was stated that advertisement would fall under one of the species of such speech.

It was observed that dissemination of information about a particular product was necessary since it enabled the public to evaluate its options. The Supreme Court in its turn referred to the US decision of Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council (1975) and said that it is almost settled law in the United States that though "commercial speech" is entitled to the First Amendment protection, the Government was completely free to recall “commercial speech" which is false, misleading, unfair, deceptive and which proposes illegal transactions.

In another case of Colgate v. Hindustan Lever (1999), the Court explained that although a seller has the latitude to represent his product in such a manner that he attracts more customers than he normally would have, such latitude would translate into description and “reasonable assertion” of the product, but not to misrepresentation. In other words, factual representations are perfectly legitimate.

The Apex Court went a step further to state that “commendatory expressions” are not dealt with as serious representations of fact.

When the SC says that “commendatory expressions” are not dealt with as serious representations of fact, it does not mean that such representations are untrue or misleading. On the contrary, what it means is that such representations cannot be taken seriously and that there is no obligation on the part of the seller to the customer with regard to the true quality, rather standing of goods merely because the seller has resorted to puffing.

To support this, the Apex Court relied on a rule of civil law, "simplex commendatio non obligat" , which means simple commendation can only be regarded as a mere invitation to a customer without any obligation as regards the quality of goods. In other words, every seller is entitled to call his goods “world’s best”, “Indian’s no.1”, “world-class quality” and so on.

However, the Supreme Court also cautioned that these principles are by no means conclusive since, by and large, cases of puffing are borderline cases, and that there exists a very thin line which separates puffing from falsehood.

In a nutshell, although commercial speech is available under the Indian Constitution to every seller, if the advertisement is false, unfair, misleading or deceptive, the seller is not entitled to seek protection behind “commercial speech”.

Having referred to the SC decisions, the Delhi High Court then referred to its earlier Pepsi v.Cola decision (2003), where it held that although a seller is entitled to glorify his product, in the process, he is not to denigrate or disparage a rival’s product.

The Court further cited Halsbury which states thus:

"It is actionable when the words go beyond a mere puff and constitute untrue statements of fact about a rival’s product."

The Court also cited its decision in a case of comparative advertising involving Dabur and Wipro, where it held as follows:

“It is one thing to say that the defendant's product is better than that of the plaintiff and it is another thing to say that the plaintiff's product is inferior to that of the defendant."

It is probably a corollarial conclusion wherein the seller is entitled to say he is better than the rest of his competition, and therefore, he is entitled to claim that he is better than a particular competitor as well.

Summing up these decisions, the Court laid down the following three-step test:

1. What is the intention behind the advertisement as deciphered from the storyline and the message ostensibly sought to be conveyed?

2. Is the manner of advertisement or comparison by and large truthful or does it falsely denigrate or disparage the rival’s product?

3. Finally, does the ad have the overall effect of promoting the seller’s product or showing the rival in poor light?

This particular decision of the Delhi High Court is very comprehensive because not only does it sum up the position of the law citing various sources, but also is progressive in its approach for it recognises the impact of the electronic medium. This is reflected in its observation that since the reach and influence of the medium is phenomenal, the advertiser has to per force walk a tightrope. He has to constantly ask himself if the ad runs the risk of having the effect, intended or unintended, of disparaging the rival’s product.

The Court did not stop here, but went further and said:

“we feel that notwithstanding the impact that a telecast may have, since commercial speech is protected and an advertisement is commercial speech, an advertiser must be given enough room to play around in (the grey areas) in the advertisement brought out by it. A plaintiff (such as the Appellant before us) ought not to be hyper-sensitive as brought out in Dabur India. This is because market forces, the economic climate, the nature and quality of a product would ultimately be the deciding factors for a consumer to make a choice. It is possible that aggressive or catchy advertising may cause a partial or temporary damage to the plaintiff, but ultimately the consumer would be the final adjudicator to decide what is best for him or her.”

This observation in a way balances interests of both the seller and the rival, and is of critical importance since it acknowledges market realities, which is a pleasant change for Indian Courts (One hopes that someday a similar sentiment will be adopted in “hardcore” IP matters).

More importantly, the underpinning of this observation is again the good of the consuming public.

Applying the above-stated principles to the facts of the Rin v. Tide controversy, one must assess and analyse the Rin advertisement objectively sans the mischievous light in which the media tends to portray such ads and the vicarious pleasure we derive as humans in seeing two competitors duke it out in full public glare.

One is unable to take a strong call here on this specific case because the question of “overall effect” of the ad is very subjective and one can never be sure of side-stepping the allegation, rather the minefield of arbitrariness in such cases.

On one hand, we could say that since Rin’s contentions are backed by tests of an independent lab, they are factual. A "balanced" view could say that the ad does not really disparage Tide, it merely has an element of mischief in it. I might even say that all mischief is not necessarily disparagement and I think considering the times we live in, what with reality shows and all, ads can no more be plain Jane representations of facts. Therefore, it could be argued that they are entitled to go beyond that, provided they are within the limits of decorum.

And on the other hand, the reference to Tide and its tagline may be seen as mockery. If, despite Rin's claims being grounded in facts, the primary focus of the advertisement is not facts such as the independent lab's tests, there is a chance that Rin (HUL) could be held liable for disparagement.

In other words, in judging the "overall effect" of the ad, the Court may have to look into the question of what caught or catches the eye or attention of the audience. Is the ticker which mentions independent lab tests prominent enough for the average viewer of imperfect recollection to see and remember? If the answer is a no, it probably establishes disparagement.

Further, Tide could seek to distinguish the Delhi HC's Dabur judgment on factual grounds saying that the reference to the rival brand in that case was not as obvious and as direct as it is in the Rin ad. Consequently, it could be argued that the accommodative view taken by the Court in the Dabur case cannot be the standard applicable for this case.

I realise, that in cases like these, counterpoints are bound to exist and thrive; but the one thing that comes out from such instances is that, as audiences, we still look for our own modern-day versions of the Colosseum and gladiators.”

Monday, July 29, 2013

Can the Controller of Patents Review a Patent Grant Under Section 77?

Section 77 of the Patents Act, 1970 lists the powers of a civil court that are vested in the Controller of patents, whose exercise is subject to the Patents Rules, 2003. These powers may be exercised in “any proceedings” before the Controller.

Although what constitutes a “proceeding” is not defined, the use of “any” indicates the broad scope of the provision. In other words, the exercise of these powers is not limited to pre and post-grant oppositions. Therefore, it could be said that these powers are available even in the examination and grant of a patent.

Under Section 77(1)(f), is it possible for the Controller to review a typical patent grant? There is no limitation in the wording of the provision which precludes the exercise of power of review in relation to an order of patent grant. After all, the grant of a patent is a decision passed under Section 43 of the Act, and Section 77(1)(f) deals with review of the Controller’s “decision”, which includes the decision to grant a patent.

That said, the power cannot be exercised suo motu since the provision expressly calls for an application to be made in the prescribed format within the prescribed time, both of which are provided for in Rule 130 (Form 24).

Sunday, July 28, 2013

“Innocent Infringement” under the Trademarks Act, 1999

Last week I was asked if “innocent infringement” is a defense that is recognized under our Trademarks Act, 1999. This was a question I had never had the occasion to deal with, so I looked up the Act. Section 135(3) of the Act does provide for innocent infringement as a limited defense to the extent that it stipulates that a Court shall not grant relief by way of damages (other than nominal damages) or an account of profits in the following situations:

1.       Where the mark asserted is a certification trademark or collective mark;
2.       Where the defendant in a suit is able to prove his ignorance of the trademark registration or the Plaintiff’s status as a registered user;
3.       Where the defendant ceased to use the mark without any delay as soon as he was apprised of the registration.

Defenses 2 and 3 are available even in passing off actions, which the provision expressly provides for. Clearly the provision does not (and logically cannot) preclude grant of injunctive relief. However, while punitive damages cannot be awarded to the plaintiff owing to this provision, what does “nominal damages” translate to? Since the term used is “nominal damages”, it is not in the nature of costs.

Are there any tests laid down to determine what would amount to a slap on the wrist, instead of a rap on the knuckles? I welcome the opinion of our readers on the issue.

Monday, June 24, 2013

Ex Parte Ad Interim Injunction Granted by Delhi HC Against Aprica Pharma on Sitagliptin

In an ex parte ad interim injunction order issued on June 17, 2013 in suit instituted by Merck against Aprica Pharma with respect to Sitagliptin (IN209816), the Delhi High Court has restrained Aprica from selling, distributing,  advertising, exporting, offering for sale and in any other manner, directly or indirectly, dealing in any product that infringes the subject matter of the” patent.

The next date in the matter is August 13, 2013.

Earlier in April, we had reported the denial of interim injunction with respect to the same drug against Glenmark, in which an appeal is pending before Justice Ravindra Bhat. We will keep the readers posted on the developments in the Suits and appeal.

I thank a dear friend for sharing this development with me.

Thursday, June 20, 2013

Snippet: Dr.Reddy’s Sued for Patent Infringement in the US by AbbVie Inc

According to several news reports, Dr.Reddy’s Labs (DRL) has been sued by AbbVie Inc. and Wisconsin Alumni Research Foundation in the US District Court of Delaware for infringement of three patents on the drug Zemplar (Paricalcitol) and its injectable forms. The drug is used to treat secondary hyper-parathyroidism associated with chronic renal failure.

In May 2013, DRL informed AbbVie of the filing of its Abbreviated New Drug Application (ANDA) for injectable forms of Zemplar. In the same letter, DRL also stated, inter alia, its opinion that the three patents were invalid. Predictably, AbbVie has taken the position that filing of the ANDA application prior to the expiry of the three patents is an act of infringement.

We will keep our readers posted on the developments in this Hatch-Waxman litigation.

Tuesday, June 18, 2013

Off-Topic: The Psychology of Attribution

I tried thinking of examples of professions in this day and age where one can safely and practically say that one is competing only with the self, but I honestly can’t think of any mainstream vocation where one could make this claim without sounding clich├ęd and impractical.

Despite the overwhelming explosion of information about every profession, the irony is that quite a few of us continue to live in the bubble that cut-throat competition is the sole propriety of only the professions we practice. But that’s just the grass seeming greener on the other side.

Competition is here to stay in most fields until we evolve a more sophisticated and collective model of growth. Until that Utopian evolution happens, all we can do is to insist on rigorous adherence to certain first principles to ensure that trust, mutual respect and civility continue to be valued and observed in inter-personal dealings at the workplace.

Among those first principles, the one which needs to be ruthlessly insisted upon and enforced, considering that it is most susceptible to the pulls and tugs of competition, is “attribution”. Philosophical justifications aside, “attribution” is practically critical for team work and effective leadership.

Instead of highlighting the positives of attribution, it would probably help more to know the downsides in failing to give someone her or his due. When a team leader or a colleague fails to attribute someone for his contribution, it slowly leads to resentment, and gives the impression that the leader or the colleague is insecure about sharing credit with his team members.

Resentment in turn leads to progressive levels of dissent because trust in and respect for the leader or the colleague have suffered erosion. After a point, the leader is bound to encounter frequent insubordination, and if he is perceptive enough, is bound to sense a discernible lack of interest in his team members to contribute to the growth of the workplace.

The probable reason why failure to attribute has flammable consequences is that it provides ample fodder to a person’s sense of being a victim, and self-pity is known to be a self-feeding animal. The problem with self-pity is that a person in the grip of this mindset is rarely alive to his or her faults, for he has firmly entrenched himself in an impregnable cocoon of righteous indignation. Needless to say, all this certainly cannot lead to a conducive and productive atmosphere at the workplace.

Attribution facilitates greater co-operation between team members and the leadership even in relatively selfless professions. Someone I know is in the Indian armed forces, and has probably one of the finest service records, which is strewn with acts of bravery. He told me that more than patriotism, it is a fierce sense of loyalty to one’s Commanding Officer which is largely responsible for several acts of unquestioned obedience and bravery during battle. I was told that it is not just the Commanding Officer’s abilities which inspire loyalty, but also the belief that individual acts of bravery of soldiers would not go unnoticed by the CO. This is important because it is the CO who recommends his soldiers for awards of bravery.

This example is not meant to undermine the importance of patriotism, but incentive does play a key role even in the Armed Forces where most of us would typically expect a soldier to be an epitome of selflessness.

Since attribution and incentive are so deeply connected, the former is indispensable to ensure fairness in distribution of incentives. What is pertinent is that the need for rigorous attribution applies all the more if the workplace is in the business of innovation. Enterprises which are in the business of innovation would do particularly well to have specific and sensitive mechanisms in place to recognize individual contributions. Such recognition, contrary to what one might expect, does not undermine the positives of team work. Instead, it forces people to be careful enough to not accept undue credit, which goes a long way in nurturing mutual respect for each others’ talents.

The bottom line is, attribution, which is at the heart of IP jurisprudence, is the hallmark of integrity, and workplaces which fail to recognize this are bound to implode.  

Monday, June 17, 2013

Legality of Pay-For-Delay Settlement Agreements

The intersection of intellectual property law with competition law is something we're fairly familiar with. While the former seeks to grant exclusionary rights, the latter strives to uphold the statutory edict against monopoly. This is yet another area of law where the two clash head-on. 

Pay-for-delay settlement agreements are a type of patent dispute settlement agreement where a sum of money is paid by the originator pharmaceutical company (the patentee) to the generic manufacturer to stay away from the market for a specific period of time. Sai Deepak has recently blogged on the issue here.

This practice of delaying market entry of generic drugs has been called into question both in Europe and in the US. In 2008, the European Commission conducted an investigation focussing on the competition law aspects of such contractual arrangements which seek to keep players off the market, thus having a potential impact on competition. 

In the US, in a judgment delivered just hours ago, the Supreme Court sought to settle the 'circuit-split' regarding the legality of such agreements. While the Eleventh circuit preferred what is called the 'scope-of-the-patent' rule, the Third Circuit favored what it terms as the 'quick-look' approach. 

The scope-of-the-patent rule deems 'pay-for-delay' agreements lawful so long as they do not go beyond the temporal or substantive limitations of the patent grant or the unless the underlying patent litigation is a sham. To put it succinctly, the Eleventh Circuit held such reverse payments to be lawful so long as their anticompetitive effects fall within the scope of the exclusionary potential of the patent. The Third Circuit, on the other hand held that such agreements should be subject to a 'quick-look-of-reason-analysis' and states that any such payments made by a patentee to a generic manufacturer to delay the latter's entry into the market is per se unlawful as it amount to an unreasonable restraint of trade. 

In the present case of Federal Trade Commission v. Actavis, the FTC challenged the Eleventh Circuit's ruling arguing that the scope-of-the-patent rule is a 'paradigmatic antitrust violation' that results in increased prescription costs of customers. Instead, it chose to endorse the quick-look rule, comparing reverse payments to price-fixing. 

As a counter, the respondents argued that reverse payments are not per se anticompetitive and can be seen in the same light as agreements wherein infringers bargain for lower royalty rates in return for delayed entry into the market. 

The Supreme Court, today, rejected the quick-look approach argued for by the FTC by a 5 to 3 vote and held that reverse agreements are not presumptively unlawful. It ruled in favor of the 'rule of reason' and left it to lower courts to decide upon whether advantages of the settlement outweighs the harm caused to consumers. 

In my opinion, even if one is to view it from a competition law angle, it is better to have a late entrant into the market than not have one at all. The delayed entry in no case goes beyond the life of the patent. The FTC's approach seems to take it for granted that the generic manufacturer would win the lawsuit, had there been one. If one is to assume the opposite, an agreement of this sort is bound to benefit consumers in the long run as opposed to risking the generic manufacturer from being ousted by a court's decision. 

If one can resist the temptation to argue on the merits of these approaches, logically speaking, there is no way one can determine in whose favor the balance would have tilted if a lawsuit had ensued. And thus, there is no way to determine whether the agreement is anticompetitive or not, with certainty. 

To reiterate what Sai Deepak has said, there have been no reported instances of pay-for-delay agreements in India making it difficult to gauge whether they would be legal here. It sure will be worth the wait to see how the Competition Commission would decide if such a case were to come up.