Category: law

Target set on “Big-Tech Platforms” with amendments proposed to the IT Rules, 2021

Target set on “Big-Tech Platforms” with amendments proposed to the IT Rules, 2021

Posted by admin on

With India having the second-highest digital consumption and internet users in the world, makes it a lucrative market and a breeding ground for various social media platforms as well as content providers. In view thereof, the need for and importance of a robust digital content-regulating legislation cannot be undermined. Enacted with an intention to provide the necessary legal framework, the Information Technology Act, 2000 (“IT Act”) and the corresponding rules have had to walk a tight rope. Between protecting the delicate rights of the “digital nagriks”, such as their freedom of speech, right to reputation, copyright in their content etc. on one hand, and, conditionally safeguarding the digital platforms from every other “questionable” content posted/uploaded by third party “nagriks”, on the other, this legislation has been put to test on several occasions. In fact, right after being notified by the Ministry of Electronics and Information Technology (“MeitY”) last year notification last year (May 2021), the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules”) have been mired in several litigations and controversies. Recently, on June 6, 2022, the MeitY re-published draft amendments to the IT Rules for public consultation and stakeholders’ comments, after initially withdrawing it on 2nd July, 2022 on account of an ‘editorial’ glitch. The public note accompanying the draft amendments that evidently sets the target on the ‘Big Tech Platforms” questioning their accountability is particularly interesting to note:

Putting the Interests of Digital Indians First

Proposed amended IT rules to provide additional avenues for grievance redressal apart from Courts and also ensure that the Constitutional rights of Indian citizens are not contravened by any Big-tech Platform by ensuring new accountability standards for SSMIs. …..

as the digital eco-system and connected Internet users in India expand, so do the challenges and problems faced by them, as well as some of the infirmities and gaps that exist in the current rule vis-a-vis Big Tech platform. Therefore, new amendments have been proposed to the IT Rules 2021, to address these challenges and gaps.

 

While the amendments proposed in the draft do not particularly appear to be an attack on the Big Tech platforms (such as Twitter, Meta’s Facebook, Instagram and Google’s YouTube, to name a few), the actual effect of the proposed amendments pose a challenge to their existing autonomy and the compliance requirements now expected of them are nothing short of onerous, making ‘due diligence’ a behemoth task. We have analyzed the four crucial amendments proposed by the MeitY and our comments on the same hereinbelow:

1. Requiring intermediaries to “ensure” that users comply with requirements in rule 3(1)(a) and rule 3(1)(b) of the IT Rules 2021

Under the existing IT Rules, an “intermediary”1, as a part of their due diligence requirement, is required to prominently publish on its website, mobile based application or both, as the case may be, the rules and regulations, privacy policy and user agreement for access or usage of its computer resource by any person. The proposed amendment additionally requires that the intermediaries shall now have to “ensure” that users comply with the said rules/policies, by: one, informing the user of the rules/policies in place, and second, “causing the user” not to host, display, upload, modify, publish, transmit, store, update or share any information that the user does not have right over or is inconsistent with the laws of the country (as prohibited under rule 3(1)(b), IT Rules).

This amendment requiring “ensuring” users’ compliance of the platform’s rules/policies and “causing” the user not to act in contravention with the provisions of the IT Act and Rules, is vague and worrisome for the following reasons:

i. CONTRADICTS THE SAFE HARBOUR PROVISION OF THE IT ACT: Section 79 of the IT Act allows the intermediaries an immunity or a “safe harbour” against liability for any third-party information, data, or communication link made available or hosted by them. However, this safe harbour is conditional, and subject to Section 79(2)-(3) of the IT Act. A platform/service will qualify for an intermediary defence only if: one, its function is limited to providing access to a communication system over which user generated content/information is hosted or temporarily stored; two, the platform does not initiate, select the receiver or modify the content of the transmission which is made or stored by third parties; and, three, the intermediary observes ‘due diligence’ and also observes other guidelines provided by the Central Government. The ‘due diligence’ to be observed have been provided under IT Rules with several landmark decisions (such as Shreya Singhal case2, MySpace case3 etc.) providing clarity as regards compliance by the intermediary. It is only logical to assume that for “ensuring” or “causing” the users’ compliance of the platforms’ privacy policy/ terms and conditions, the platform will have to now scrutinize, sift and regulate the content/information posted/uploaded by the users as a part of the “additional due diligence” requirement necessary for claiming intermediary status. This ‘additional’ due diligence shall cause the platform to lose the intermediary status right away as its function shall now no longer be ‘limited to providing access’, and the platform shall have to ‘select the receiver’ and/or ‘modify the content’ to comply with the amended rules. Evidently, the proposed amendment is in conflict with the safeguards provided to the intermediaries under the parent legislation.

ii. ABOVE AND BEYOND THE EXISTING DUE DILIGENCE REQUIREMENTS: The various decisions on ‘due diligence’ requirement of the intermediaries have settled the manner and extent to which the platforms/service providers have to act in order to be safeguarded from user (third party) generated content. The due diligence requirement is limited to publishing policies, terms and conditions, user agreement etc. for its users only informing them that they are required to comply with rule 3(1)(b). And, it is been repeatedly held that the intermediaries cannot be asked to screen or regulate content as it would fall outside the ambit of “intermediary status” as laid down in the IT Act.4 Further, it has also been well established that infringing/objectionable content can only be removed upon the intermediary “receiving actual knowledge” of such content, by way an order or direction from the court or a government agency, as laid down in Shreya Singhal case5 and/or knowledge based on specific information (such as the specific URL/s) given by the person whose work was being infringed by the content uploaded, as established in the MySpace case. If an intermediary fails to remove or disable access to the content which is unlawful upon despite actual knowledge, it shall be in breach of the due diligence threshold and would fall out of the ambit of the ‘safe harbour’ provided to an intermediary. While providing general mechanisms for identifying infringing content, such as the Rights Management Tool, Notice and Take Down provision, Take Down Stay Down tool and Hash Block Filter, have been found as effective tools for complying with the due diligence requirement of social media platforms (MySpace case), none of these existing tools appear to be technologically sufficient in “ensuring” compliance of the platforms’ policies/terms/rules in the manner proposed in the amendment. The ‘due diligence +’ requirement is not only onerous but almost impossible to meet, considering, the Big Techs have to handle a humungous amount of data/content on a daily basis.

2. Addition of rule 3(1)(m) and 3(1)(n) to respect the principles of the Constitution of India

With the laudable intent of protecting and safeguarding the rights guaranteed under the Constitution, the MeitY has proposed an addition to the ‘due diligence’ requirements whereby:

One, the intermediary shall take all reasonable measures to ensure accessibility of its services to users along with reasonable expectation of due diligence, privacy and transparency;

and

Second, the intermediary shall respect the rights accorded to the citizens under the Constitution of India.

It would not be an exaggeration to say that the devil lies in the lack of details. Not defining key terms in the proposed amendment above, such as “accessibility”, “privacy” transparency” and failing to elucidate what taking ‘reasonable measures’ or ‘respecting the rights’ would practically entail, makes this addition open to interpretation, confusion and invariable litigations (should the amendment come into force, as is). It is again important to flag that any regulation or sorting or control on the content/information by the platforms shall strip them of the intermediary status offering safeguards under the IT Act.

3. Changes in the grievance redressal mechanism of the intermediary under rule 3(2)

The existing mechanism entails acknowledgement of a complaint by the Grievance Officer within 24 hours, followed by its disposal within 15 days of receipt. The amendment clarifies that the complaint includes requiring actions where a user or user account is to be suspended, removed or blocked, or an information or communication link is requested to be suspended.

The amendment has further proposed that where the nature of the complaint requires an information or communication link to be removed, it shall be required to be acted upon and redressed within 72 hours of reporting, with ‘appropriate safeguards’ ‘to avoid any misuse by users’. While the objective of the timeline appears to preventing objectionable/unlawful content’s proliferation (i.e. going viral), there are several practical issues that Big Techs may face:

For starters, it has been acknowledged time and again that Big Techs deal with massive amounts of data daily and consequently, several complaints are raised each day. The redressal timeline of 72 hours may be quite onerous. Further arises the question, whether a delay in meeting with said timeline (by say, a few hours) would strip the platform of the intermediary status?

Secondly, requiring take down of content in such a short time may result in more removals to err on the side of caution, thereby resulting in stifling the free speech that the said amendments were proposed to safeguard in the first place.

Lastly, the “appropriate safeguards” that intermediaries are expected to put in place to avoid misuse of the proposed mechanism by users need to be clarified further. Most intermediaries would not have the wherewithal in the first place to set up such complex technological measures/tools. That, with lack of clarity on what is considered “appropriate” or “sufficient” makes the entire task an uphill one for the platforms/service providers.

4. Creating a new Grievance Appellate Committee to provide an appeal mechanism to users:

The constitution of the Grievance Appellate Committee – which allows the persons aggrieved from the decision of the Grievance Redressal Officer of the intermediary to approach them in appeal – instead of moving to a court of law, is not problematic per se. It provides an alternative forum to file appeals, without taking away the right to move to the court, irrespective.

What is disconcerting however, is that there is no clarity provided under the (draft) rules regarding the constitution of the Committee, the scope of their jurisdiction and powers, the nature of the proceedings, the procedure they would follow and the binding nature of their orders/directions etc.. Most importantly, it is unclear if the intermediary shall also be given an opportunity to present their case in an appeal before the Committee. If not, how shall the intermediary be made to comply by the orders/directions, how would principles of natural justice be upheld without giving a necessary party opportunity to be heard and would that not result in a waste of time and resources, and wouldn’t this invariably lead to appeals before the courts, putting the very purpose of the Committees constitution into question.

To sum up, the draft amendments as they stand today, have validly caused an upheaval among the intermediaries and relevant stakeholders, and are bound to face resistance from the industry. In what shape would the IT Rules, 2021 be notified as amended, after due consultations, is only a matter of time; however, in the present form, the proposed amendments are set to upturn all the developments that laws related to intermediaries have seen thus far and are bound to result in a multitude of litigations on their validity.

What’s the Whatsapp Controversy?

Posted by admin on

Social media has helped us build bridges in a time we couldn’t traverse real ones. Then came along these new IT rules threatening a shutdown of what had become life savers in a pandemic. Panic and pandemonium was a natural consequence.

Whatsapp was the knight in shining armour and sued the the Indian Government. The extent and the validity of the new IT Rules, 2021 were questioned. Under the rules, Whatsapp must disclose the origin of messages sent using the app. Whatsapp has a problem with this rule because:

  1. It is in violation of their Privacy Policy promising end to end encryption.
  2. They believe if to be a violation of every human being’s fundamental right to privacy.

The Government justified the rules citing reasons of national security, law and order. They believe that controlling the spread of fake news is the need of the hour. And these rules are a way to do so.

The balance of these interests is what needs to be achieved harmoniously.

The Government gave social networking sites three months to abide by the new Rules. That deadline ended on 25th May, 2021. The Rules call for the appointment of a Chief Compliance Officer, a Nodal Contact and a Resident Grievance Officer. The Government cites reasons of creating a robust mechanism to prevent the spread of hate speech and misinformation.

THE PRESS RELEASE –

On 26th May 2021, the Ministry of Electronics and IT issued a press release. It listed the following:

1) The Right to Privacy is a fundamental right and it shall not be infringed. However, no fundamental right is absolute. They all come with reasonable restrictions attached. None of the new reforms would impact the functioning of WhatsApp.

 

2) Disclosing the source of messages will be the last resort. Rule 4(2) of Intermediary Guidelines will apply. The extent of disclosure is when matters concern the sovereignty, integrity and security of India or heinous crimes. Disclosure is mandated only for investigative purposes.

3) In 2018 the Government had proposed to amend section 79 of the IT Act. This amendment was for tracing of origin of information for legal compliance. No objections were raised by WhatsApp then. It was noted that WhatsApp already shares encrypted information with its parent company, Facebook. This is an infringement of the law and a gross violation of the Right to privacy.

4) International precedent was also cited. Many countries including Canada, U.S.A, Australia and U.K. have passed legislation to the same effect. Brazilian law calls for provision of IP Addresses, customer information and geo-location data under certain circumstances.

EFFECT ON BUSINESS –

Revenue for social networking platforms comes largely from advertising and promotions. India holds the second largest market for social media use. It stood at 326.1 million in 2018 and is expected to grow to 448 million by 2023.

Facebook India’s revenues grew by 43 percent year-on-year to about Rs 1,277.3 crore in 2019-20. Its net profit more than doubled to Rs 135.7 crore.

WhatsApp has 400 million users in India and has reported revenues of Rs 6.84 crore.

Understandably, no social network wants to lose the Indian market.

Compliance will also mean modifications of present versions of programming. This would lead to resource drain that ma not have been part of company budgets. Imagine having to programme the same app for the same purpose, but around specific laws.

IN SUM

The Government believes that WhatsApp owes a certain responsibility to India for the business it does here. Especially since it allows for free dissemination of information.

 

The Government insists that the Rules are being implemented to safeguard national interests, and the people at large. The IT Act and Telegraph Act allow retrieval of information by enforcement agencies. But advanced technology and end to end encryption is making this more and more difficult.

The only way for WhatsApp to identify the source of a message is to do away with end-to-end encryption. This is a loss of its USP an is bad for business. Also, it’s an attack on the right to privacy of its users. End-to-end encryption doesn’t allow for retrieval of content. For compliance, Whatsapp will now store this as as “hashed” data. This means more server space and no regard for data minimization polices.

An adverse decision resulting in a ban in the WhatsApp matter means India will be in tyrannical company. India will join the elite list of China, North Korea, Syria and Iran.

Let’s call this the first wave. The second one is coming. The Personal Data Protection Bill, 2019 is almost ratified.

 

Coronavirus outbreak

COVID-19 & FORCE MAJEURE

Posted by admin on with 0 Comment

The coronavirus causing COVID-19 has spread like wildfire, playing havoc with the global supply chains, bringing the world economy to an unprecedented standstill. These extraordinary times we find ourselves living in is certainly throwing light on some interesting issues in the realm of contract management.

How does COVID-19 affect contractual obligations?

While it has made it difficult for some parties to execute their contractual obligations, it has left others absolutely incapable of execution. 

In the thick of this scenario, parties are reviewing their contracts and hoping to rely on ‘force majeure’ clauses to temporarily suspend their performance obligations under the contract to protect themselves from failure to provide goods or services and in some cases to completely end their contractual arrangement. Luckily, the Department of Expenditure (Procurement Policy Division) of the Ministry of Finance vide an office memorandum dated 19.02.2020 has called the outbreak of COVID-19 a natural calamity and has clarified that ‘force majeure’ may be invoked whenever appropriate following ‘due process’. Though this interpretation by the government may not be binding it may still have persuasive strength in interpreting contracts with the Government of India.

What is Force Majeure?

‘Force Majeure’ is a contractual provision. According to Black Law’s Dictionary “it is an event or effect that can neither be anticipated nor controlled… that prevents someone from completing or doing something that he or she had agreed or officially planned to do”. This concept has neither been defined nor specifically mentioned in statues, so whether or not it can be invoked will depend on the general terms of the contract, the events that precede or succeed it and the facts of the case.

What legal provision govern the claim for Force Majeure in India?

Indian Contract Act does not specifically provide for Force Majeure. Some reference however has been made under Section 32 of the Indian Contract Act, 1970 to contracts that are contingent on the happening of a certain event, where if the event becomes impossible it renders the contract void. This means that there may be certain unanticipated events outside the control of parties that may render a contract unworkable for a limited time while the event lasts, leaving a window for normalcy once the event ceases to exist. It is during such circumstances that ‘force majeure’ comes into play.

What type of events qualify as Force Majeure? Is the outbreak of COVID-19 a force majeure situation?

Force Majeure provisions in contracts tend to be formulated in one of the two ways. 

  • The parties to the contract may mutually decide over the list of events to be categorized under this clause, which typically includes acts of war, riots, fire, flood, hurricane, earthquake, explosion, strikes, lockouts, slowdowns, prolonged shortage of supplies, governmental action etc.
  •  It is either a closed list of categories, such as “a finite list of force majeure is the following events ……” or it is an open list of categories, such as “force majeure is the following types of events; including …….” 

In India the closed list tends to be more favoured. The current outbreak of COVID-19 has been declared a pandemic by the World Health Organization and interestingly you will rarely see the word pandemic listed in force majeure clauses. If you do see it listed in the clause, then you know that you are within the force majeure territory and you can go on to test other elements of force majeure that might be available, and if not, then that makes navigating through the force majeure regime a lot more difficult. 

Alternatively, you may notice many contracts referring to the Act of God. This is an interesting one, because the Act of God traditionally tends to be ‘weather dependent’ and without human interference and in that sense a pandemic or epidemic, tends to not be considered as an Act of God. While some parties to a contract may term the disruption in the supply chain due to the pandemic – a natural calamity, or an Act of God, others may argue that forced quarantine or travel bans are the roots of such disruptions and are ‘acts of government’. Therefore, the sole inclusion of an ‘Act of God clause’ does not ensure the recovery of losses caused by COVID-19. 

To that end, the key factors to check for force majeure are-

– Do you have a closed or open list? 

– Do you see the word ‘pandemic’ mentioned under the provision?

– If not, you may want to look at other categories such as ‘disease,’ ‘epidemic,’ ‘quarantine,’ or ‘acts of government,’. 

It is important to note that in cases where “epidemics” or “acts of Government” are mentioned apart from the force majeure clause, the courts would additionally subject you to show proof of cause, a harmonious construction with other provisions and compliance with the conditions contained in the force majeure clause.

What would an affected party do to claim relief in case the contract does not include an express force majeure clause? 

In case the contract does not include a force majeure clause, or the existing clause does not include a particular event, in such a situation the affected party may be able to discharge the contract using the ‘Doctrine of Frustration’. It is a common law doctrine enshrined under Section 56 of the Indian Contract Act, 1970, and it protects parties against circumstances where their contracts have become impossible to perform and such impossibility in performance may be due to the occurrence of an event which affected their ability to perform. It is however extremely important for the application of doctrine of frustration that such person could not have done anything in their power to prevent such an event from happening and that the impossibility is neither self-induced nor a result of negligence. Further, it is really important to bear in mind that the performance has to be impossible, not just difficult or more time consuming or expensive, IMPOSSIBILITY IS WHAT IS REQUIRED. 

How have the courts interpreted the word ‘impossible’ provided under section 56 of the Indian Contract Act, 1872?

In regard to the word ‘impossible’ the Supreme Court in Satyabrata Ghose v. Mugneeram Bangur and Co. & Anr. held that the word impossible under Section 56 of the Act to “not be used in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor found it impossible to do the act which he promised to do.” 

There is a vast variety of Indian case laws on the doctrine of frustration and one must keep in mind that it is a very high bar to achieve. This can be evidenced by a recent landmark judgement titled Energy Watchdog Vs. Central Electricity Regulatory Commission where the Supreme Court held that force majeure clauses are to be narrowly construed. The court opined that in the force majeure clause contained in the contract in question, “hindrance” could mean an event wholly or partly preventing performance. However, a mere increase in prices would not amount to a hindrance. It was held that since the force majeure clause specifically excluded rise in fuel cost, the fundamental basis of the contract was never dislodged. In view of the fact that alternative modes of performance were available even though the same were at a higher price, a force majeure situation did not arise. The Court further held that since there was a specific clause addressing force majeure in the contract in question, Section 56 of the Contract Act would not have any application. 

The two things to note here are that 

  • the force majeure event must lead to an impossibility; mere hardship, inconvenience or material loss cannot be considered as a force majeure event AND
  •  in case there is a specific force majeure clause in the contract, then Section 56 would have no applicability because essentially the doctrine of frustration results in killing the contract and hence should not be lightly invoked.

How to protect yourself from the legal implications of COVID-19?

At present it is impossible to ascertain the exact damage caused by COVID-19, nonetheless it is advisable for businesses to equip themselves in case of any prospective dispute. Parties to the contract must abide by the terms of the agreement and requirements of force majeure clauses. The affected party must promptly notify the counterparty regarding the occurrence of a force majeure event and must collect all documents to produce as evidence in case of a dispute at a later stage. Most importantly, parties must get their contracts evaluated in detail by legal professionals. 

The jurisprudence and precedents on this subject are limited therefore the interpretation of the courts may vary. This is the personal opinion of the author.

Royalty Payment for Singers- An Adaptation of Necessity

Posted by Mehr Sidhu on with 0 Comment

The scope of copyright protection over the years has increased and it now includes a multitude of materials including songs. Producing a song is a long creative process which requires producers, composers, lyricist, singers among others. 

In the making of a song where there are so many people of different positions involved, there is always the question that who must receive the royalty for its commercial use? 

In case of songs, until recently singers did not receive any royalty, their contribution to the song was blatantly ignored. Fortunately, this changed in 2012 when the Copyright Act,1957 (Act) was amended to include “Performers Rights”. The act defines performers under section 2(qq) to include singers, musicians and actors inter alia, the basic intention was to include any person who makes a performance. The amendment granted the performers both economic and moral rights to their works. 

Section 38A of the Act focuses on the economic rights of the performers –

    •  A performer can make sound and visual recordings of the performance;
    • A performer can reproduce the performance in any material form including the storing of it in any medium by electronic or any other means;
    • A performer can issue copies of the performance to the public not being copies already in circulation;
    • A performer can communicate the performance to the public;
    • A performer can sell or give the performance on commercial rental or offer for sale or commercial rental any copy of the recording and;
    • A performer can broadcast or communicate the performance to the public except where the performance is already a broadcast, and lastly,
    • A performer can receive a royalty for the commercial use of the performance. 

The economic rights subsist for 50 years from the date it was first performed. 

Similarly, moral rights have been granted under section 38 B of the Act. It explicitly mentions that the performer has the right to be identified for their work unless the contract states otherwise. The section also grants the performers the power to prevent the mutilation and distortion of their work. 

The new economic and moral rights policy for performers does not affect the royalty received by the others who were involved in making the song, so the performer’s right to receive his/her share of the royalties runs parallel. Further, to make it easier for the performers to collect these royalties, the Act provides for the establishment of the Copyright Societies under Section 33. The function of the societies is to collect royalties and assign licenses for the commercial use of different works. 

To this end, the Indian Singers Rights Association (ISRA) which is registered as a copyright society acts as the middleman who collects royalties on behalf of the singers. As a collecting society, it provides licenses for the commercial use of copyright-protected work of the performers and keeps an eye out for their work being used illegally. 

How much royalty will a Singer get paid? 

The royalty received by the ‘singer’ is dependent on the tariff scheme mentioned by the ISRA. This tariff scheme depends directly on the party that requests such license, for instance, if it is a restaurant/bar asking for a license, the tariff charged is dependent on the price of the least priced drink.

Therefore, the royalty received by the singers for the performance of their work varies from case to case. 

Does a singer receive a royalty from online streaming websites? 

Singers do receive a royalty from online streaming websites as it is their right under section 38A, it may, however, be different from radio and television broadcasting. 

Under section 31 D, the act provides for statutory license for broadcasting through radios and television. However, in the case of Tips v. Wynk, the Bombay High Court held that the provisions of statutory licensing do not apply to internet broadcasting, so different schemes apply to internet streaming. 

The royalty paid is dependent on whether the interactive or non-interactive streaming app charges the consumer for the services provided. If the website does not charge the user then the royalty per song is Rs.0.50 per song, and in instances where the user has to pay to avail for the services the royalty is Rs.1 per song.

Is it necessary to pay royalty and have a license? 

According to the Copyright Act, it is absolutely necessary to pay a royalty to the singers for commercial use of their songs. The same has been held time and again by the courts in multiple cases. In cases such as Indian Singers Right Association v. Night Fever Club & Lounge and Indian Singers’ Right Association v. Chapter 25 Bar and Restaurant, the court granted a permanent injunction restraining the defendant from playing the copyright-protected songs without a license from the ISRA. It further held that the defendant was violating the performers Right to Receive Royalty (R3).

The amendment regarding Performer’s Right was definitely a relief for many singers, but most importantly, it was a necessity. It brought the copyright regime of India in harmony with Article 14 of the TRIPS Agreement and also Articles 5 to 10 of the WPPT. 

The jurisprudence and precedents on this subject are limited therefore the interpretation of the courts may vary. This is the personal opinion of the author.

Author:

Mehr Sidhu

Intern, Talwar Advocates

LANDMARK JUDGEMENTS IN PATENT LAW

Posted by admin on with 0 Comment

1. Bajaj Auto Limited Vs. TVS Motor Company Limited JT 2009 (12) SC 103:-

Speedy disposal of Intellectual property rights cases

This case involved the controversy regarding the unauthorized application of the patent of the DTSi technology. The case became very vital regarding not only the financial stakes of the parties but also regarding the application of the doctrine of pith and marrow also termed as Doctrine of Equivalents.

This case was filed before the Madras High Court in 2007. The plaintiffs (Bajaj Auto Ltd), along with the state of Maharashtra alleged the defendants (T.V.S. Motor Company Ltd.) of infringement of the patents of the plaintiffs, which apprehended the invention of the technology of advanced internal combustion engine. The case engaged the questions of patent infringement by the defendant and the damages for the same. Furthermore, the case threw light upon the argument regarding justification of the risks issued by the defendant of the same case.

The plaintiffs sought remedy of permanent injunction for obstructing the defendants from using the technology or invention prescribed in the patents of the plaintiffs; and for obstructing them from marketing, selling offering for sale or exporting 2/3 wheelers (including the proposed 125cc TVS FLAME motorcycle) that consisted of the disputed internal combustion engine or product that infringed the patent. Damages for infringement of the patent were also claimed by the Plaintiffs.

The Supreme Court of India by this landmark judgement directed all the courts in India for speedy trial and disposal of intellectual property related cases. In this two-year-old dispute involving two companies, which had been locked in a patent dispute over the use of a twin-spark plug engine technology, the Supreme Court observed that suits relating to the matters of patents, trademarks and copyrights are pending for years and years and litigation is mainly fought between the parties about the temporary injunction. The Supreme Court directed that hearing in the intellectual property matters should proceed on day to day basis and the final judgment should be given normally within four months from the date of the filing of the suit. The Supreme Court further directed to all the courts and tribunals in the country to punctually and faithfully carry out the aforesaid orders.

 

2. Novartis v. Union of India (2013) 6 SCC 1 :-

Rejection of a patent for a Drug which was not ‘inventive’ or had an superior ‘efficacy’-

Novartis filled an application to patent one of its drugs called ‘Gleevec’ by covering it under the word invention mentioned in Section 3 of the Patents Act,1970. The Supreme Court rejected their application after a 7 year long battle by giving the following reasons: Firstly there was no invention of a new drug, as a mere discovery of an existing drug would not amount to invention. Secondly Supreme Court upheld the view that under Indian Patent Act for grant of pharmaceutical patents apart from proving the traditional tests of novelty, inventive step and application, there is a new test of enhanced therapeutic efficacy for claims that cover incremental changes to existing drugs which also Novartis’s drug did not qualify. This became a landmark judgment because the court looked beyond the technicalities and into the fact that the attempt of such companies to ‘evergreen’ their patents and making them inaccessible at nominal rates.

 

3. F. Hoffmann-La Roche Ltd vs Cipla Ltd., Mumbai Central,:-

First Patent Litigation in India post India’s 2005 Product Patent Regime which included public interest and pricing issues.

Over the years India has seen many patent disputes between Foreign Multinational Pharmaceutical companies and Indian generic drug companies. But the suit between Roche and Cipla has surely set the standards when it comes to a patent infringement suit.

In this case, two plaintiffs, namely, F. Hoffmann-La Roche Ltd. and OSI Pharmaceuticals Inc., filed the suit for permanent injunction restraining infringement of patent, rendition of accounts, damages and delivery against Cipla Ltd. Mumbai. Indian Generic manufacturer Cipla won this landmark case in the Delhi High Court. The case is the first Patent Litigation in India post India’s 2005 Product Patent Regime which included public interest and pricing issues in addition to India’s Section 3d that prevents evergreening. The case was followed by Pharma Giants worldwide.

Roche sued Cipla in 2008 before Delhi High Court claiming that Cipla’s generic product Erlocip violates former’s Indian ‘774 patent claiming “Erlotinib Hydrocloride”. The trial Judge rejected Roche’s appeal to grant interim injunction restraining Cipla from selling generic version of Tarceva on the grounds of public interest and the fact that there was an ongoing patent revocation proceedings against ‘774 patent. Cipla’s generic version costs about 1/3rd of Roche’s patented drug. Roche’s subsequent appeal to Division Bench also failed when not only did the bench uphold the findings of Trial Judge but also imposed costs on Roche for suppression of material patent information about Roche’s later filed application in India (IN/PCT/2002/00507/DEL). This was the Patent Application which was actually on Polymorph Form B of Erlotinib Hydrocloride but was rejected in 2008 following the opposition filed by Cipla primarily on Section 3d. Cipla argued that Tarceva corresponds to Polymorphic Form B (which is not a product of ‘774 patent but a ‘507 rejected application) and that it is Form B which is more stable and suitable for solid oral dosage form than the compound disclosed in ‘774 patent comprising a mixture of Forms A and B. Roche’s subsequent appeal before the Supreme Court (SC) challenging the order passed by the division bench got dismissed due to the ongoing trial at the Delhi High Court.

 

4. Dr Snehlata C. Gupte v. Union of India & Ors (W.P. (C) No 3516 and 3517 of 2007) Delhi HC) :-

What Shall Be The Actual Date Of Grant Of A Patent?

This case was instrumental in determining when a patent can said to be granted under the Patent Act 1970 (the Act). This lack of clarity led to a scrutiny of the relevant provisions the Act and also the existing process with a time gap between the grant and the issuance of the patent certificate. The Delhi High Court, while holding that the date of grant of a patent is the date on which the Controller passes an order to that effect on the file, noted that the language, “a patent shall be granted as expeditiously as possible” (u/s 43) does point out that a patent has to be granted once it is found that either the application is not refused in a pre-grant opposition or otherwise is not found in contravention of any provision of the Act.

At the core of the legal challenge was the existing process, which resulted in a time gap between the grant of a patent and the issue of the patent certificate. The court held that the date of the grant of a patent is the date on which the controller passes an order to that effect on the file i.e. on the day in which the Controller makes a decision to grant a patent. The issue of a certificate at a later date is then nothing more than a mere formality.

The court also came down strongly against the practice of filing serial pre-grant oppositions. through aliases, a practice now fairly common in most pharmaceutical patent cases.

Therefore, the decision taken by the Controller on the file is the determining event for ascertaining the date of grant of patent and the acts of sealing of the patent and entering the same in the Register are ministerial acts evidencing the grant of patent.

5. Bayer Corporation vs Union Of India :-

India’s First Compulsory License

 

On March 9, 2012, the Indian Patent Office granted its first Compulsory License to Natco Pharma Ltd. for producing generic version of Bayer Corporations’s patented medicine Nexavar (Sorafenib Tosylate), which is used in the treatment of Liver and Kidney cancer. While the multinational giant was selling the drug at INR 2.80 lakh for a month’s course, Natco promised to make available the same at a price of about 3 % (INR 8800) of what was charged by Bayer. Natco was directed to pay 6 percent of the net sales of the drug as royalty to Bayer. Among other important terms and condition of the non assignable, non exclusive license were directions to Natco to manufacture the patented drug only at their own manufacturing facility, selling the drug only within the Indian Territory and supplying the patented drug to at least 600 needy and deserving patients per year free of cost.

Aggrieved by the Controller’s decision, Bayer immediately moved to the Intellectual Property Appellate Board (IPAB) for stay on the orderalleging that the grant of compulsory license was illegal and unsustainable. The Board rejected Bayer’s appeal holding that if stay was granted, it would definitely jeopardize the interest of the public who need the drug at the later stage of the disease. It further held that the right of access to affordable medicine was as much a matter of right to dignity of the patients and to grant stay at this juncture would really affect them.

Bayer then filed an appeal challenging the compulsory licence granted to Natco by the Controller-General. The Board stated that the invention must be available to the public at a reasonably affordable price and if not, compulsory licence can be issued and observed that the Sub-sections (a), (b) and (c) of Section 84(1) are separated by the disjunctive ‘or’ and therefore, even if one conditionis satisfied, the Controller will be well within his rights to order compulsory licence.

The Board further noted that The R&D costs and the prices of other drugs do not assist in deciding what the public can afford reasonably. It stated that the reasonably affordable price necessarilyhas to be fixed from the view point of the public and the word ‘afford’ itself indicates whether the public can afford to buy the drug.

It also stated that even if it takes the appellant’s own number (i.e. the number of affected patients) it finds that the supply made by it cannot be said to be adequate and the price definitely is the factor that will determine whether the public will reach out for a particularinvention.

The Board held that the Controller was right in holding that the sales of the drug by the appellant at the price of about 280,000/- wasalone relevant for the determination of public requirement and he was also right in considering the purchasing capacity of the public and the evidence available to conclude that the invention was not reasonably affordable to the public.

On the percentage of royalty that was to be paid by the Respondent to the Appellant (6% that was fixed by the Controller), IPAB increased it by 1 percent but did not change any other terms and conditions of the licence.

The IPAB dismissed the appeal and confirmed the grant of Compulsory license stating that it has dealt with each of the issue indetail in view of the significance of the order of compulsory licence made in India for the first time.