The Parliament is considering a bill that decriminalises offences across 42 statutes. Intellectual property rights statutes i.e. the Copyright Act, 1957, the Patents Act, 1970, the Trade Marks Act, 1999 and the Geographical Indications Act, 1999 are among the laws that are proposed to be amended.
The objective of this bill is to increase the ‘Ease of Living and Doing Business in India’. The Statement of Objects and Reasons provide several general reasons for the bill including making India a global investment hub, reducing judicial burden and incentivising businesses by reducing the fear of harsh punishments. When it comes to the intellectual property rights statutes, the bill not only misses the mark but also dilutes significant requirements:
Copyright Act: The bill proposes to remove Section 68 from the Copyright Act. Section 68 penalises, with imprisonment, persons who make false statements for the purpose of deceiving or influencing any authority or officer.
The removal of Section 68 does not achieve much. The need of the hour is for the law to be amended to differentiate between different acts of copyright infringement, limit criminalisation only to mass piracy and not routine infringement and require prior judicial cognisance as a pre-condition to criminal investigation.
Criminal penalties for copyright infringement has been a very contentious issue in India. Section 63 of the Copyright Act which is the main provision that is invoked in these cases has divided High Courts for decades. The Supreme Court has recently taken a very controversial position on this issue.
In Knit Pro International v. The State of NCT the Supreme Court held that copyright infringement is a cognisable and non-bailable offence under the CrPC. This means that the police can begin investigations on receiving a complaint without having to approach and wait for directions from a judicial magistrate. This compromises the right of the accused to post bail bonds with the police and instead shifts the responsibility onto courts (increasing judicial burdens). Further, copyright owners can use this power to threaten and scare users and extort license fees (especially prevalent in the software and music industry) which can impact the ease of doing business. Given the existence of Section 52 which provides user rights that are not infringements, establishing ‘guilt’ is very difficult in all cases of alleged infringement and powerful criminal tools at the hands of copyright owners can stifle creativity, speech and access to knowledge.
In fact, the TRIPs agreement does not require India to criminalise all copyright infringements. There is a distinction between ‘piracy’ and copyright infringement. While every act of ‘piracy’ is copyright infringement, every act of copyright infringement is not piracy. The distinction lies in intention and degree. Therefore, there is a need to differentiate acts of copyright infringement and limit criminal penalties and processes to cases of mass piracy.
Patents Act: The bill proposes several amendments to the Patent Act, 1970, of which the ones below are significant:
Diluting patent working and consequently diluting compulsory licenses: For several years we have advocated on this blog the importance of patent “working” requirements (e.g. here, here and here). The extent of ‘working’ of a patent lies at the heart of our patent regime and should not be taken lightly since it can trigger other vital provisions such as compulsory licenses which in turn can result in increased domestic production and development! Further, the public has the right to know the extent to which a patentee has exercised their rights, on a commercial scale, in India. The form in which these details are to be provided is Form 27. Non-filing of this form or intentional, incomplete filing attracts criminal penalty under Section 146 which prescribes a fine of INR 10 lakhs for non-compliance. Instead of ensuring strict compliance with this provision which is intended to benefit society, the bill proposes a ten-fold reduction in penalty.
Foreign companies that either do not manufacture their invention in India or do not import their inventions in India can fall foul of these requirements. Patent working requirements serve broader developmental goals since they enable competitors and society to monitor such deadwood patents that impede domestic firms from entering the market. Further, Form 27 requirements are already very diluted and without them it will be impossible to obtain compulsory licenses, a core part of the Indian patent system. Therefore, diluting criminal penalties for non-compliance with patent working requirements changes the very nature of patent laws in our country and could also have long term deleterious effects on business in India.
False patent marking: The bill proposes a whopping ten-fold increase in the fine prescribed for false patent markings i.e. falsely marking products as ‘patented’ or ‘patent pending’ under Section 120 (from INR one lakh to INR 10 lakhs). The purpose for this increase is presumably to discourage public deception. However, this amendment opens the doors to undesirable consequences. For example, disproportionately large penalties may be imposed even for inexpensive, mass-produced products or products that refer to recently expired patents. Instead of increasing criminal penalties the government could have decriminalised this offence and created a pathway for civil enforcement for damages.
New powers to Controller: The bill also proposes to give new adjudicatory powers to the Controller to impose penalties for any contravention or default under the act. The requirement for providing these new powers is not immediately clear. Similar new powers have been granted to the registrar of trademarks and geographical indications.
Trade Marks Act and Geographical Indications Act: Certain amendments to the Trade Marks Act and Geographical Indications Act don’t seem problematic such as the punishment for falsely representing a trade mark or geographical indication as registered has been reduced from imprisonment to fines. However, it is unclear why the government wants to completely remove Section 109 of the TM Act and Section 44 of the GI Act which punish persons who knowingly produce false register entries as evidence.
Author states the following regarding the working reports filing:
“Patent working requirements serve broader developmental goals since they enable competitors and society to monitor such deadwood patents that impede domestic firms from entering the market.”
This shows a lack of practical experience and naivety. I’m sorry for being blunt, but there is no other way to characterize this.
In my view, the domestic firms are not entering the market for a variety of reasons, but not because they are purely hindered by the deadwood patents. To an extent, the author’s comments make sense with respect to pharmaceuticals. However, for the vast number of other industries, it really does not make sense to have this disingenuous requirement to file information on whether the patent has been “worked” by the Patentee. There are multiple reasons, some of which I list below.
Firstly, it is a bureaucratic burden to do that. Ask any patent agent, whether they like to do this clerical work or not. They would predominantly agree that it is a time wasted on an activity which does not help them develop “real skills”. These working report filings have become a way for the not-so-productive Indian patent law firms to milk money from the clients who do not want to have anything to do with the Indian patent offices after the grant of the Indian patent.
Secondly, the enforceability of the requirements to file the working report is not realized to the fullest extent. For instance, how are the software patent holders going to calculate and file the accurate information on the working in Indian market with so many challenges existing in the jurisdictional determination of working? With the apps being downloadable in different countries, user equipment being available in different countries, and servers being present in different countries, how are they going to file the accurate information? No serious patent regime should have this “working report” requirement.
Thirdly, there are alternative venues available for the domestic manufacturers to enter the market which has active patents, but not worked. There is always a possibility to seek the tech transfer and license under FRAND conditions. When that does not work, there is a way to invalidate the patents through the opposition and/or revocation proceedings. When the both does not work, there is always a way to work with a competitor who would offer a better price and has a patent portfolio that can cause substantial damages to the companies which are merely patent “trolls” i.e., the ones with the granted patents and not working them in the Indian market.
Lastly, patents give structure to the negotiations in tech transfer agreements. Without a patent regime that is serious enough, the companies are going to find themselves in a hard position to perform tech transfer to the Indian companies. With the working reports being a gun held to the head, how does one expect them to invest in the Indian market and offer competitive products?
There is a need to what is working in other countries. In terms of quality of patent services, Chinese patent office is a country mile ahead of the Indian patent office. In all dimensions. May be it would be prudent to check what is done better in other jurisdictions before always seeking for more and more non-technical bureaucratic work from the patent agents.
Don’t even get me started with the criminal liability for the falsified information and such under the patent law. These legal requirements are many decades behind and the time to evolve is now.
As a patent practitioner working in the industry for more than a decade and handling portfolios in different countries, I am terrified to file and prosecute the patent applications in India because everything is so against the modernity. We still seek physical signatures of people in a plethora of forms when these are entirely outdated. Adding more frustration to every task is not the way to attract investments in an industry.