Sep 20, 2021 | Indian Patents Act 1970, IPR & Business, Startups
Technology Licensing is a contractual arrangement in which the licensor’s Intellectual Property (IP) such as, patents, trademarks, service marks, copyrights, trade secrets, or other intellectual property may be transferred to a licensee for a specified period of time. A Licensing Agreement involves two main parties, namely the licensor (party that owns concerned IP) and a licensee (party that enters into contract to use IP). The consideration in the form of royalty is one of the important clauses to be finalised before executing the license agreement between the parties involved.
Technology Licensing is an essential tool for companies that are smaller in size, or do not have the R&D resources that their competitors possess, to stay relevant in a particular industry. In such cases, licensing helps them to close the gap with their competitors by allowing them to gain access to the resources and innovations that they need[1].
Difference between License and Assignment
Licensing and Assignment are different modes of technology transfer. Assignment is when the assets or IP is permanently transferred by the owner (i.e. assignor) to the buyer of the IP (i.e. assignee), by way of sale or transfer. This results in a one-time payment of consideration or a lump sum payment of royalty for the IP, by the assignee. The assignor transfers all rights, including title over the asset, to the assignee.
Licensing on the other hand involves the owner of the intellectual property (i.e. licensor) permitting the a third party including company or an organisation (i.e. licensee) to use the IP as per the terms of a licensing agreement, while maintaining ownership, resulting in continued earnings in the form of a licensing fee.
Technology Licensing can be done in the following different ways:
- Licensing
- Assignment
- Joint venture (JV)
As mentioned earlier, licensing is an act of providing authorization by the licensor to a third party to use the licensed asset, as per the terms and conditions of the licensing agreement. A License Agreement is important as it enables the patent holder to provide the required permissions for an entity with the resources to bring his ideas to fruition.
An assignment is when the licensor transfers wholly, or in part, their right, title and interest in their technology.
In a JV, a new JV Company is formed and the requisite assets such as the patented technology are either licensed or transferred to this JV. Both companies contribute assets to such a venture, and the company giving the technology is both licensor and licensee in this case.
The licensor agrees to transfer his rights of the patented intellectual property that they developed, for a duration determined by the license agreement. During this time, the licensee is entitled to benefits and has rights to the patent’s interest. A patent license must be in writing to be legitimate, according to Section 68 of the Patent Act[2] . It was in the case of PVR Pictures Ltd. v. Studio 18[3], that the Delhi HC held that term sheet agreement shall not amount to a license agreement. A licence agreement can aid in the development of a mutually beneficial commercial partnership. Unlike, when a patent is sold or transferred to another party, the licensor retains ownership of the patented innovation.
Technology Licensing enables an organisation or any other party to utilise some technology that may otherwise be protected by intellectual property safeguards, such as a patent, copyright, etc.
Why should one license? There are notable benefits of doing so. Firstly, in the case of licensing, there is very little requirement of coordination between the two parties, and is similar to a commercial transaction involving a buyer and a seller. Secondly, the licensees can determine what technologies they want to license before paying for it, saving them money that would have otherwise gone into R&D. Thirdly, the transaction is instantaneous, which gives the company control over the technology much faster than if they were to develop it in-house.
In a Technology Transfer, the assets that get transferred include know how, methods, techniques, products etc, along with registered IP, such as, patent, copyright, design, trademark etc. Payment may be in the form of a lump-sum royalty, a running royalty (depending on volume of production), or a combination of both.
A Technology Transfer (TT) agreement may be:
Exclusive Licensing: The licensee has an exclusive right to use the IP, as per the terms of the licensing agreement. This agreement is such that even the licensor is not allowed to use the licensed asset for the duration as specified by the license agreement. Exclusive license may be issued on either a territorial basis (for instance, India only) or on a global basis (for the entire world).
Non-Exclusive Licensing: In non-exclusive licensing, the licensor may license out their assets to multiple licensees at the same time. Unlike an exclusive license, all licensees are permitted to use the license as per the terms of the license agreement. The licensors are also free to use the assets that they licensed to others.
There are different kinds of technology licenses. Licenses may be availed to get all the IP rights that are necessary to reproduce, make, use, market, and sell products based on a type of technology (e.g., a license to develop a new software product that is protected copyright or any other form of IP protection). A license may be procured to get the IP rights necessary in order to create and market a product that complies with a certain technical standard or specification.
For example, a group of enterprises have agreed on a technical standard to ensure interoperability of devices and owners of IP essential to practice the standard, pool their IP rights and license it to anyone who wishes to use the standard on reasonable and non-discriminatory terms.
Ericsson and Oppo are two companies who entered into a Global Patent license agreement. This agreement covers a cross licensing agreement covering 2G, 3G and 4G patent portfolios from both the companies. Besides, cross-license, the agreement also includes business cooperation on a number of projects related to 5G such as device testing, customer engagements.
The case of Dunlop India Ltd. v. Forech India Ltd[4] involved a license for making conveyor belts, based on a license agreement between the two parties. In GE Plastics v. Commissioner of Customs, Mumbai[5], a JV with Indian Petrochemicals Corporation Ltd. (IPCL), a technology licensing agreement was in question.
The following are the pros and cons of Technology Licensing:
Pros:
- It enables a company to enter a new market very quickly. Additionally, financial and legal risks are minimised when technology licensing is used.
- Licensing also enables companies to overcome any stringent tax barriers or any other hindrances that would otherwise increase the costs if they opted to develop their own technologies.
- Licensing can also be used for the acquisition of technology from outside the region through arrangements such as cross-licensing agreements/ grant back clauses.
- Licensing also is a major tool for enterprises in developing nations, to make use of comparatively lower licensing rates and to make profits without spending significantly on R&D.
Cons:
- Licensing a technology to an external company results in the weakening of the licensor’s hold over the technology itself.
- Licensing a technology also results in lesser profits as compared to directly leveraging the technology oneself.
Conclusion
Licensing is a useful tool for companies to compete in an effective manner. However, they must be well aware of the pros and cons mentioned above. They must also take special care to use licensing only when they need it, as it may create a recurring dependence on external organisations to develop technologies for them. It may not be an effective strategy, if companies are attempting to differentiate themselves from their competitors in the market space.
In conclusion, if a firm wants to take their rivals head on, and do not have the time or resources to develop their own technology, licensing is the most practical and cost-effective tool they can use to remain competitive.
By: Aditya Datha
Symbiosis Law School, Hyderabad
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[1] Solomon Moreira, When Licensing New Tech Is Better Than Building It In-House, Harvard Business Review- https://hbr.org/2020/06/when-licensing-new-tech-is-better-than-building-it-in-house
[2] Patent Act, 1970
[3] [2009 SCC OnLine Del 1878: (2009) 41 PTC 70]
[4] CS (OS) No. 382/2012, Delhi HC
[5] Final Order No. 388/2004- NB(A)
Sep 9, 2021 | Contracts
Disputes are an intrinsic component of the legal system, arising from variances in understanding, implementation, violation of obligations, infringement of rights, or unexpected events. In the Indian context, it is crucial to effectively resolve contractual disputes to preserve an ideal business environment in a country undergoing fast economic growth and increased corporate operations. Nevertheless, the existing legal system needs assistance to provide prompt decisions. The court procedures are widely known for their lengthy duration, sometimes extending the pursuit of justice beyond reasonable time limits. Although settling conflicts in court is not intrinsically fruitless, the excessive number of cases overwhelms the legal system, resulting in harmful problems such as significant delays, extensive backlogs, and costly litigation costs. This is especially problematic in contractual disputes, as even minor issues can snowball into protracted legal conflicts.
In such a setting to solve these apparent flaws, Alternative Dispute Resolution (ADR) emerges as a viable route, delivering quick and cost-effective justice. This very idea has been present in India in the form of the Arbitration and Conciliation Act, 1996, Mediation Act, 2023, and even Section 89 of the Civil Procedure Code, 1908, where the Courts encourage individuals to resolve conflicts under the ADR process, which is a time-saving mechanism that aids to resolves issues quicker than court hearings, ensuring speedy resolutions, where proceedings occur privately, fees and expenses are less, and its scheduling is adaptable. Moreover, a neutral third party oversees ADR proceedings.
Today, this very mechanism is incorporated by individuals in their commercial agreement, as a dispute resolution clause, which may consist of methods like conciliation, mediation, negotiation, or arbitration, to avoid early and needless court actions.
Significance of Arbitration
Even if conciliation, mediation, or discussion are considerably more flexible and efficient than arbitration, individuals who adopt a dispute resolution clause in contracts prefer arbitration because not only can the parties pick an arbitrator to evaluate the evidence but also the decision carried out in arbitration have legal enforceability, making it legible and effective with limited options of review or appeal. As part of their crystallized dispute resolution policy, up to 91% of businesses prefer arbitration to litigation to resolve disputes, according to a report by PwC India[1].
Arbitration may seem identical to any court proceeding. However, there is more to arbitration than the selection of an arbitrator and the presence of legally binding force. Unlike litigation, the dispute resolution procedure is less stringent, and the judge/arbitrator may not hear any other case simultaneously, allowing arbitration to be concluded more swiftly. Moreover, arbitration can incorporate a degree of bargaining, providing the arbitrator greater freedom in their final arbitral award decision; apart from that, this approach is prevalent in commercial disputes and other industries such as securities, labor, employment, and construction. In international contracts, arbitration has been a preferred means of dispute resolution, and most crucially, it helps prevent class-action lawsuits. In brief, parties add arbitration clauses to handle future conflicts swiftly and cost-effectively.
Conditions for Arbitration Clause in a Contract
As per Section 7(1) of the Arbitration and Conciliation Act, 1996, ‘”arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.’ As per Section 7(2), an arbitration agreement may be in the form of an arbitration clause in a contract or the form of a separate agreement. However, there is no universally applicable format for arbitration clauses in contracts and simply mentioning an arbitration clause is not sufficient, for a contract to fully benefit from arbitration. Therefore, to optimize the likelihood of effective and efficient dispute resolution through the translation of an interest or dispute into an arbitration clause, it is critical to strategically ascertain the client’s interest in the dispute, the contract’s characteristics, the parties involved, the types of conflicts that are probable to arise, and the countries that are likely to be involved in any potential dispute. Additionally, comprehension of circumstances that may necessitate extraordinary provisions—such as temporary relief, confidentiality, and other critical matters—might be required. In conclusion, every arbitration clause must be suitably crafted by the specific circumstances, criteria, and parties involved in the dispute. A hastily drafted arbitration clause can potentially develop into a pathological provision that is unenforceable or requires clarification, resulting in costly and time-consuming legal conflicts.
Arbitration clauses can be drafted in 3 ways: primary, general, and complex clauses, depending on the type of contract, which include:
- Primary clauses are essential terms required for a sustainable arbitration agreement, commonly contained in institutional model agreements.
- General clauses: These are typically used in contracts involving significant transactions, where extra elements are provided beyond the opening phrases, addressing specific matters including venue, language, and governing law.
- Complex clauses: These consist of elements beyond primary clauses, such as confidentiality, discovery, multi-party arbitration, and waiving of appeals. They require careful adaptation to prevent discrepancies and maintain validity across jurisdictions.
Other requirements may include that the arbitration agreement must be written.
Independence of Arbitration agreement
If a contract refers to a document containing an arbitration clause, and the contract is in writing, then that arbitration clause is considered part of the contract, as per Section 7 (3) and (4) of the Arbitration and Conciliation Act, 1996. However as per the Doctrine of Severability, if a small part of a law doesn’t follow the parent law, the court can remove that part and keep the rest of the law intact. Under the same instance as well, as per Section 16(a) and (b) of Arbitration and Conciliation Act, 1996, the arbitration provision in a contract is viewed as different from the primary contract itself and consequently remains valid even if the contract expires or becomes null and void. Similarly, even if both parties mutually terminate the arbitration agreement, still in case of disputes involving the primary agreement’s/ primary contract terms or subject matter, dispute will be handled by arbitration, as stated in the case of Ashok Thapar v. Tarang Exports (P) Ltd, (2018).[2] Thus the arbitration clause, a distinct agreement in the contract, exists independently from its other clauses. Despite of this, the ultimate resolve depends upon the nature of the controversy and its effect upon the existence or survival of the contract itself, as provided in the case of Mulheim Pipecoatings Gmbh v. Welspun Fintrade Ltd,(2013)[3].
Conclusion
From the detailed analysis presented in the text, it’s clear that the significance of arbitration clauses in contracts is multifaceted and substantial. They provide a structured path for resolving conflicts, enhance contract enforceability, and protect all parties’ interests, making it valid and legally robust. Moreover, being independent of the contract itself, the enforceability of the arbitration process remains intact even if parts of the contract are disputed or nullified.
But even so, the effectiveness of an arbitration clause and its value in commercial agreements greatly depends on its meticulous drafting, which could include constituents such as the governing law, the seat of arbitration, the appointment of the arbitrator, or the language. Such a well-crafted arbitration clause, tailored to the specific needs and contexts of the parties and the nature of the contract, is essential to ensure that disputes are resolved efficiently without further complications. The potential pitfalls of poorly drafted clauses—such as being unenforceable or requiring extensive legal interpretation—are highlighted and encourage the need for precision and foresight in contractual drafting.
Thus, such clauses must be comprehensive and customized to address all potential issues, ensuring that arbitration is an efficient alternative to traditional litigation and supports India’s broader economic and legal environments
[1]AK492- May 2013 Corporate Attitudes & Practices.indd-https://www.pwc.in/assets/pdfs/publications/2013/corporate-attributes-and-practices-towards-arbitration-in-india.pdf
[2] (2018) SCC Online Bom 1489
[3] (2013)SCC Online Bom 1048
Author: Gautam Bhatia, CHRIST (Deemed to be University), Bangalore
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Aug 25, 2021 | Copyright
From Elbert Woods’ ‘Ickey Shuffle’ to Stephen Curry’s signature point to the sky in praise after scoring a three-point basket to the iconic ‘Sii!’ move adopted by Ronaldo, sports fans around the world have come to associate their favorite legends with their signature celebratory moves. This, accompanied by a shift of fan following from sport clubs or countries to individual players, has increased the popularity of these athletes and has paved the way for them to market their personality and captivate audiences both on and off the sports arena using uniquely choreographed dances or celebratory moves[i]. However, the problem arises when third parties feed off their popularity by attaching images or sketches of such celebrations to products such as water bottles or t-shirts, thereby unfairly taking advantage of the character that the athletes have worked so hard to create. A solution that presents itself is to allow signature sports celebrations to be protected under copyright law thereby preserving the uniqueness of the celebration and allowing athletes to commercially exploit their own creations, thereby allowing them financial gain especially considering that most of them have short-lived careers[ii].
Protection afforded to Dramatic Work
The primary objective of copyright protection is to encourage artists, craftsmen, musicians, and other creators to make their creations available for public welfare and enjoyment, by rewarding these creators with protection and property rights of and over their creations. The Indian Copyright Act, 1957 extends not only to literary and artistic works but also to dramatic work which includes choreographic moves that are “fixed in writing or otherwise but does not include a cinematograph film”[iii]. Therefore, it is a well-established principle of intellectual property jurisprudence that choreography can be afforded copyright protection. However, fixation is a criterion that must be mandatorily met for a dramatic work to be protected under copyright law and while Western Jurisprudence on fixation adopts a wide approach[iv], Indian Jurisprudence is narrow. The Indian Judiciary has held that a dramatic work can only be afforded protection under Copyright law if it fulfills the criteria of being fixed in writing or concretized in a literary format[v]. Additionally, in the case of Academy of General Education, Manipal and Ors. v. B. Malini Mallya, the Supreme Court emphatically held that a unique form of ballet could be copyrighted as a dramatic work only if reproduced in a literary format[vi]. This exclusion of fixation in the form of a video recording significantly hampers the rights of choreographers and performers who live in a technology driven world but can only claim copyright protection for their choreography if translated to a written format[vii]. However, performer’s rights have been elucidated under the Act and it protects against reproduction, broadcasting, or communication of original creations to the public without the consent of the creator[viii], thereby given “any person who makes a performance” an exclusive right over their creative expression[ix].
Sports Celebrations as Choreography
When Hennry Abromson decided to apply for copyright protection of a sports move called PS:I 1 created by long distance runner Peter Stine, a lot of critics pointed out that celebratory moves in sports may actually lack the qualifications to be considered a true choreography. While it may be reasonably assumed that a single move such as pointing up to the sky may be too insignificant to qualify as a complete choreography, a sequence of moves such as jumping into the air, spinning around and landing on a single foot may be long and complicated enough to meet the necessary qualifications. Interestingly, the European Court of Justice observed in the case of Karen Murphy v Media Protection Services Ltd[x]. that events in sports that have a unique and original character worthy of being protected alongside other forms of creative expression can be granted protection under Copyright law. Additionally, the United States Supreme Court observed that any expression that involves even a “modicum of creativity” shall qualify to be a work protectable by copyright thereby recognising that celebratory moves can be considered as choreography[xi].
Since a player’s celebratory moves take the form of a choreography and are unique and original expressions of their personality as well as passion for the sport, they fall within the purview of the Indian Copyright Act, and within the ambit of Copyright Law in general. Moreover, if dance routines and sequences can be translated into writing, as held in the Malini Mallya Case[xii], a sequence of moves adopted by sportspersons can also be reduced to writing thereby fulfilling both the narrow fixation test under the Indian law as well as the wider tests used in other countries. As a result, unique celebratory sports moves should be afforded copyright protection especially to protect the originality of well-known players from amateurs in the league and to expand the realm of Intellectual Property Jurisprudence in the country.
Is Copyrighting a Sports Celebration Worth It?
While there are definite positive aspects to copyrighting a unique sports celebration, its enforceability can pose a challenge especially considering the difficulty in determining the value of the expression which is a necessary requirement for the award of damages. Justice Holmes proposed a solution to this problem in the case of Bleistein v. Donaldson Lithographing Co[xiii], by observing that the public must be called to decide the value and public appeal of these moves rather than leaving it to persons strictly educated in the field of law and having little or no experience deciphering the true commercial value of creative expressions. However, the issue of proving actual damages will persist on the side of the registrant thereby diminishing the actual practical application of copyright registration for a unique sports move.
Conclusion
A thorough analysis of the copyright protection regime leads to the conclusion that celebratory moves in sports can be copyrighted because their protection is in consonance with the objectives of copyright law, and they generally fulfil the conditions of originality and fixation. Although athletes have previously shied away from copyrighting their moves, the large media coverage of major league sports now as well as the popularity and reputation of individual players, which can be marketed, may be the required nudge towards such a movement[xiv].
[i] Loren J. Weber, Something in the Way She Moves: The Case for Applying Copyright Protection to Sports Moves, 23 COLUM.-VLA J.L. & ARTS 317, 318 (2000).
[ii] Eldred v. Ashcroft, 537 U.S. 186, 212-13 (2003).
[iii] The Indian Copyright Act, 1957, §2(h), No. 14, Acts of Parliament, 1957 (India).
[iv] David Vaver & Pierre Sirinelli, Principles of Copyright Law, WIPO, (Jul. 2002), https://www.wipo.int/edocs/pubdocs/en/copyright/844/wipo_pub_844.pdf.
[v] Anupama Mohan v. State of Kerala, WP (C) No. 22790 of 2015.
[vi] Academy of General Education, Manipal and Ors. v. B. Malini Mallya, Civil Appeal No. 389 of 2008.
[vii] The Indian Copyright Act, 1957, §2(f), No. 14, Acts of Parliament, 1957 (India).
[viii] The Indian Copyright Act, 1957, §38), No. 14, Acts of Parliament, 1957 (India).
[ix] The Indian Copyright Act, 1957, §2(qq), No. 14, Acts of Parliament, 1957 (India).
[x] Karen Murphy v. Media Protection Services Ltd. (2007) EWHC 3091 (Admin).
[xi] Baltimore Orioles, Inc. v. Major League Baseball Players Ass ‘n, 480 U.S. 941 (1987).
[xii] Academy of General Education, Manipal and Ors. v. B. Malini Mallya Civil Appeal No. 389 of 2008.
[xiii] Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251-52 (1903).
[xiv] Hennry M. Abromson, The Copyrightability of Sports Celebration Moves: Dance Fever or just Plain Sick?, 14 Marq. Sports L. Rev. 571, 601 (2004).
Author: Rachel Thomas, Christ University
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Aug 4, 2021 | Indian Patents Act 1970, IPR & Business
A patent is a statutory grant provided by the Government for novel, inventive and industrially useful inventions, including both products and processes. Getting a patent for an invention is an exciting time for an inventor, however, it is important to commercialise the patent so that the patented product becomes a source of revenue for the inventor and is able to see the market.
Most patents don’t generate money in their existence due to various reasons, such as:
- The patent might be too early to the market, thereby, it is hard for the inventor to find potential buyers.
- If the prototype or proof-of-concept is not ready, it becomes difficult to convince buyers because buyers would be interested in looking into scaling up the patented technology of the inventor.
- The patented technology may be complex and manufacturing the patented product might not be possible without seeking permission from other patent owners.
- If the patent is poorly drafted and claims of the patent specification are not strong, enforcement of the patent becomes difficult even if the buyer replicates the technology after seeking the permission of the patent holder.
Having a patent granted or registered imparts a set of right to the owner of the patent (also called patentee), opening up various options that a patentee can use in order to make money from the patent, such as:
- Patentees can manufacture and sell their patented product themselves or through joint ventures by partnering up with other companies.
- Patentees can license their patented products or technologies to companies for an exchange in lumpsum payments, royalties, or both, by permitting companies to manufacture, market and sell the patentee’s patented products or technologies.
- Patentees can assign or sell their patents to other entities or companies & earn money.
Patent licensing is the most used method for patentees to commercialize patent or technology to generate revenue. Patentee can license his patent and introduce it to the market to earn royalties and sign deals with investors and other companies. Let us now discuss the differences between patent licensing and patent assignment along with their pros and cons.
Patent licensing
The dictionary meaning of the word “license” is permission. By entering into a patent licensing arrangement, the patentee grants a license or permission to the company to manufacture, market and sell their patented products in specified markets. Licensing of patents and technologies is completed by executing a Technology or Patent License Agreement comprising of all terms and conditions which both parties must agree upon mutually. The term of the license may be the same or less than the term of the patent itself, as the term of a patent starts from the date of grant and lasts for 20 years forth. However, in most of the cases licensing does not just involve using a patent but also involves sharing of knowledge, experience and expertise that the patentee has. Therefore, even if the patent expires, the licensing relationship continues. By executing a license agreement, the patentees get to push their products into new markets by taking advantage of the manufacturing, marketing and selling expertise of the company or the licensee, and the company gets to use innovative and new technologies of the patentees.
In case of patent licensing, the patentee doesn’t transfer ownership of the patent to a company but rather a set of rights for a specific period of time. The patent license may be exclusive or non-exclusive in nature. In exclusive licenses, the patentee grants a license to only one party whereas if the agreement is non-exclusive, the patentee may grant it to more than one party.
Let’s consider a situation relevant to our current scenario. An independent researcher has invented a formula that can cure Covid-infected patients who contract the deadly black fungus disease. The patentee gets a patent for this formula, but due to a limitation of resources, he cannot afford production of the same. In such a case, he can either grant permission (i.e. license his technology) to any drug manufacturing company (exclusive licensing) or to several other drug manufacturing companies (non-exclusive licensing) to produce, distribute and sell the drug on a massive scale in return for some royalty fees. However, if the drug is vital for a greater public health concern, and if there is an increased demand in the market or the price of the drug is too high for the general public to afford, then the licensing will fall under a specific category called compulsory licensing in which government can license the patent associated with the drug without the permission of the patentee for large scale production and affordable accessibility.
In licensing, some important points to be considered by both parties are:
- Term of the patent
- Scope of rights granted
- Value of technology and royalty fees
- Stage of technology (idea, prototype, etc.)
- Market size
- Patent prosecution and renewal responsibilities
- Terms of termination
- Dispute resolution measures
- Governing laws
- Liabilities and indemnities
Patent assignment
Assignment means permanent transfer of rights. In this way, patent assignment is a kind of selling of the patent by the patentee to a company. When assignment occurs, amendments in the patentee name are also required to be done formally where patent assignment deed along with prescribed forms and fees is required to be submitted to the patent office. There are various advantages of patent assignment for the patentee. Upon patent assignment, the patentee usually gets a lump sum amount of money and is relieved of renewals and all other statutory obligations with respect to the patent. For the company or patent buyer, assignment is a simple and easy way to acquire a patent portfolio without performing in-house research and development.
Patent licensing and assignment are two popular options to exploit patent rights. Both have their own pros and cons and is hence advisable to seek expert advice before entering into any kind of agreement, to make good use of the opportunity.
Author Bindu Sharma
Acknowledgement: I would like to thank Raghu Ram V, Udit Sharma & Himani Jaruhar for helping me to finalize this article
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May 22, 2021 | Indian Patents Act 1970, IPR & Business
In this case, Sun Pharma Laboratories (hereinafter referred to as ‘Sun Pharma’), one of the leading Indian pharmaceutical company, came before court for the relief of permanent injunction to restrain BDR Pharmaceuticals (hereinafter referred to as ‘BDR’) from using trademark which is structurally and phonetically similar to that of Sun Pharma’s mark. Brief facts of the case are as follows:
- Sun Pharma is carrying business of manufacturing and marketing pharmaceutical products for several decades and in the year 2009 they came out with the product LABEBET. LABEBET contains LABETALOL salt which is primarily used for treating hypertension and related issues. They also got the mark “LABEBET” registered in class 5 on 30th October, 2009 and since then they have been using this mark to sell their product in the market.
- Sun Pharma while performing trademark search in the registry came across application of the mark “LULIBET” dated 30th May, 2016, which was used by the BDR Pharmaceutical to market their product. And thus, Sun Pharma brought a suit of injunction to restraint BDR from further uses the mark “LULIBET” which is deceptively similar to registered mark of Sun Pharma “LABEBET”.
Arguments by the parties
By Plaintiff i.e., Sun Pharma
- That Sun Pharma is registered proprietor of the trademark “LABEBET” in class 5 since 2009 for medical and pharmaceutical preparation and is entitled to exclusive right of using the same by the virtue of section 28 of the Trade Marks Act, 1999 and that the action of BDR by using deceptively similar mark amounts to infringement by the virtue Section 29 of the Trade Marks Act.
- That the mark “LABEBET” when compared with the mark of BDR i.e., “LULIBET”, is structurally and phonetically similar.
- That both the products are sold in retail chemist shop, hence confusion and deception are likely to occur. Further, the possibility of patients with fungal infection consuming tablet of Sun Pharma cannot be ruled out. Thus, applying the test of imperfect recollection there is no doubt that public at large are bound to get deceived with such similarities.
- That Sun Pharma could not oppose the application of BDR when it was filed before Trade Mark Registry as the publication inadvertently escaped their attention, hence the present suit.
- That the contentions of BDR, that the marks are based on the salt/molecule from which product is formed, and that there are various other similar products available closely resembling to the mark of Sun Pharma against whom no action was initiated does not strengthen their arguments.
By Defendants i.e., BDR
- That BDR is the honest user of the mark, their mark is not deceptively similar to the mark of Sun Pharma, and that their mark was published in the Trademark Journal in the year 2016 which was not opposed by Sun Pharma and they cannot seek injunction for the same at the later stage.
- That the BDR derived the mark “LULIBET” from the salt/molecule upon which the product is based i.e., ‘Luliconzole’ which is used as lotion/cream for fungal treatment whereas Sun Pharma’s mark is based upon the molecule ‘Labetatol’ which is used as tablet/injection for curing hypertension. This, according to BDR form a crucial factor while comparing both the marks.
- That Sun Pharma did not coin the mark LABEBET, it is just based upon the salt/molecule from which product is derived and that there are large number of companies having trademark with the prefix LABE.
- That till the date of suit, no confusion was reported for the said marks and further the subsequent delay on part of Sun Pharma to initiate litigation shows that they are only attempting to stop progress of BDR Pharmaceuticals.
Issues
The main issues before Hon’ble Delhi High Court were:
- Whether the mark of BDR is structurally and phonetically with the mark of Sun Pharma?
- Whether the delay caused in filing opposition to the mark of BDR will deter Sun Pharma from claiming injunction?
Judgement
Court relying on various judgements held that:
“The marks have to be compared as a whole. They have to be judged by their look and their sound. The nature of customers who are likely to buy the goods has also to be considered in my opinion. If the two marks are compared as a whole the mark of the defendant is phonetically, visually and structurally, similar to that of the plaintiff. A person of average intelligence and imperfect recollection is likely to be deceived or confused. That apart as noted by the Supreme Court in Cadila Health Care Limited vs. Cadila Pharmaceuticals Ltd. (2001(5) SCC 73) where the medicinal products are involved the test to be applied would be stricter than should be applied for non-medicinal products. In the case of non-medicinal products, a confusion only creates economic loss but in the case of medicinal products, it may have adverse consequences on the health and life of the individual”.
It was further observed that delay in objecting or delay in bringing an action would not be sufficient to deter Sun Pharma from claiming injunction. And as such medical products are involved in the case which are sold through retail medical shops, court is bound to adopt stricter approach and thus the claim of BDR that both the product is sold in different form and has different usage will not make them escape liability.
No solid grounds were ultimately found to refuse injunction and thus decree was made in favour of Sun Pharma.
By: Dhruv Dangayach, Ramaiah College of Law
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