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 5^th and the 6^th 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.

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.

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.” 

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.”

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. 

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 a 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.

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.