Streamlining the Patent Process in Startups: A Pressing Priority

India has leveraged the startup ecosystem by offering a conducive environment to make them powerhouses of innovation. According to the Economic Survey 2021-22, the number of new recognised start-ups increased to over 14,000 in 2021-22 up from 733 in 2016-17. The survey further emphasized that intellectual property (IP), notably patents, was the key to a robust knowledge-based economy.

Similar to any other business undertaking, startups interact with various stakeholders, including employees, who regularly exchange ideas and develop key IP. Hence, business operations that significantly rely on IP exchange need an optimized and watertight structure of intellectual property rights protection, especially when they aspire to cater to international markets. In line with the growing importance of startups and IP, the government of India has launched the “Start-up India, Stand-up India Scheme” to support early-stage startups.

 

Recognition as a ‘Startup’

 

Entities to qualify as a ‘startup’ need to be recognized by the competent authority under the START-UP INDIA initiative and fulfil all the criteria for the same. For the sake of more clarity, the Department of Promotion of Industry and Internal Trade issued a notification in 2019[1] according to which an entity incorporated as a private limited company, a partnership firm, or a limited liability partnership in India can be considered a startup for up to ten years if its turnover since its incorporation has not exceeded one hundred crore rupees.

Further, such an entity should be actively working towards “innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential for employment generation or wealth creation.” Notably, an entity formed due to restructuring or splitting up an existing business cannot be deemed a startup.

A foreign entity can also be considered a start-up if it fulfils the criteria of turnover and specified period of incorporation/registration and submits a valid declaration to substantiate the requisites as per the provisions of the START-UP INDIA initiative.

 

Minding the IP of Business

 

An important criterion for getting startup registration is that the entity should be working to innovate, develop or improve products, processes or services. To protect technical innovation, patent registration is crucial, especially for startups, where the start-up’s success is tied to the novelty of their product and process. The DPIIT has recognised a total of 69,492 startups to date. In addition, startups have filed a total of 6000+ patent applications.7

A product or process with patent protection helps create a solid business model, enabling them to earn a good market reputation, a return on investment (ROI), and access new opportunities for expansion and generate funds.

To this effect, businesses can undertake the following best practices to optimise their inventions and ideas:

  1. Build an IP culture that drives innovation in the organization. For instance, implementing rewarding ownership strategies, implementing IP incentive schemes, encouraging teams to research and identify areas where valuable IP protection can be secured, etc.
  2. Foster IP awareness within the organization.
  3. Build an IP protection system that is driven by strong policy and practice. Organisations should focus on structuring agile protection strategies that prevent knowledge leaks. Undertaking regular IP audits and compressive risk analysis should be the focus.
  4. Once the IP is protected, its commercialization should be the focus. Additionally, organisations should be aware of their IP infringement and take proactive measures to enforce their rights effectively.

 

Gaining Traction with DPIIT Recognition

 

Benefits from Intellectual Property Rights (IPR)

 

A startup recognised by the DPIIT is eligible for tax breaks on:

  • Prior Turnover
  • Prior Experience
  • Earnest Money Deposit

DPIIT recognised startups can now get listed as sellers on the government e-Marketplace.

Self-certification Under Labour & Environment Laws

  • Startups are allowed to self-certify their compliance with nine labour and three environmental laws for 3 to 5 years from the date of incorporation.
  • In respect of three environmental laws, units operating under 36 white category industries (as published on the website of the Central Pollution Control Board) do not require clearance under three Environment-related Acts for three years. Hence, startups can focus on their core business and keep compliance costs low.

Fund of Funds for Startups (FFS)

  • The government has set up a corpus fund of INR 10,000 Cr. INR 5409.45 cr has been committed to 71 VC firms. In total, INR 5811.29 Cr was invested in 443 startups. 

Faster Exit for Startups

  • As per the Govt Notification, startups are now notified as “fast track firms”, enabling them to wind up the operations of their startups in 90 days.

Seed Fund Scheme

  • Grant up to INR 20 lakh to validate proof of concept, prototype development, or product trials.
  • Grant up to INR 50 lakh for market entry, commercialisation, or scaling up.

Tax Relief

  • Recognised startups are exempted from Income Tax for 3 consecutive years out of the 10 years since incorporation.
  • Startups incorporated on or after April 1 2016, but before April 1 2022, can apply for an income tax exemption under Section 80-IAC of the Income Tax Act.

 

Patent Incentives for Start-ups in India

 

Patent Facilitators

 

The government has identified over 226 local patent facilitators[2] to extend their expertise to DPIIT-recognised startups. The government would reimburse these facilitators for their services.

Patent facilitators are responsible for:

  • Providing general advisory services on a pro bono basis
  • Providing pro bono assistance with IPR filings
  • Assisting with the filing and disposal of IP applications at the National IP offices under CGPDTM
  • Drafting specifications (provisional and final)
  • Preparing and filing responses to examination reports and other queries, notices or letters by the IP offices
  • Appearing at hearings as may be scheduled
  • Contesting opposition, if any, by other parties
  • Final disposal of the IP application. 

 

Fee

 

The government has provided 80% rebate on the patent filing fee to make the process more attractive.

 

Expedited patent registration process:

 

Expedited Examination can be made by filing Form 18A accompanied by Form 9 (Publication). A request filed under a Regular Examination request via Form 18 (rule 24B) can be converted to an Expedited Examination by submitting Form 18A and Form 9.

The IPO has significantly reduced the duration of the patent timeline.

  • Publication: Within 1 month from the date of filing of Form 9.
  • Issuance of the First Examination Report (FER) to the Applicant: Within one month, but no more than two months, from the date the patent application is assigned to the Examiner; and within 45 days from the date, the Examiner submits the FER to the Patent Controller.
  • Response to the First Examination Report by Applicant: Within 6 months of receiving the FER from the IPO.
  • Disposal of the First Examination Report (FER) by the Controller: Within 3 months from the receipt of the last reply from the Applicant.

 

Conclusion

 

The objective of innovation and promoting patent filing by startups is simple, i.e., a patent is directly related to innovation and contributes to significant economic growth for a startup. The upsurge of startups has also led to massive employment generation, with over 5,60,000 jobs in 2016-2020. Hence, it is imperative to have an enabling ecosystem where entrepreneurs are encouraged to file more IPs seamlessly. While launching incentivized schemes and actively working towards reducing the compliance burden for new businesses when filing IP applications is a step in the right direction, there is still a pressing need to address the issues of procedural delays and complex patent processes to tap into the intellectual prowess of the country.

The objective of innovation and promoting patent filing by startups is simple, i.e., a patent is directly related to innovation and contributes to significant economic growth for a startup. The upsurge of startups has also led to massive employment generation, with over 5,60,000 jobs in 2016-2020. Hence, it is imperative to have an enabling ecosystem where entrepreneurs are encouraged to file more IPs seamlessly.

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The Nuts and Bolts of Foreign Filing Licence (FFL) In India

Like any other IP right, a patent is also a jurisdictional right confined to the jurisdiction where the application is filed, and the rights granted. A patent is also considered a negative right, which enables the patentee to prohibit others from manufacturing, using, selling, and distributing the patented goods and services. If the invention is not protected in a specific jurisdiction, it can be used by any third party without restrictions. Hence, the applicants must choose jurisdictions carefully to safeguard their inventions in those countries.

Given that a patent is a valuable asset that can aid international business expansion, businesses must develop a foreign filing strategy. The strategy could be based on specific parameters like potential markets, manufacturing centres, competitors, emerging markets, and licencing opportunities to decide where to seek protection for their invention.

Apart from the specific parameters outlined above, the applicant must be aware of particular provisions of the Patents Act, 1970, which forbid Indian residents from filing patent applications outside India without first filing in India.

It is pertinent to note that, as an exception, a patent application can be directly filed outside India by an individual (Indian Resident) by seeking prior approval from the Indian Patent Office. This is referred to as a Foreign Filing Licence (FFL), as envisaged under Section 39 of the Indian Patent Act, 1970.

 

What is the objective of providing the option of a Foreign Filing Licence?

The primary objective of FFL is to analyse patent applications for sensitive technological information or subject matter to prevent the unauthorised export of valuable knowledge to foreign countries. The FFL assists the Indian Patent Office/government in determining the patent application’s sensitive subject matter (pertaining to defence or atomic energy). Once it is ascertained that there are no issues with disclosing the details of the invention to a foreign country, the Indian Patent Office usually grants the Foreign Filing Licence within 21 days of receiving the request.

When the applicant is not required to seek a Foreign Filing Licence
  • When the applicant is not a resident of India, and the invention was created outside of the country.
  • If the applicant is a resident of India who filed a patent application in India six weeks before filing a patent application in another jurisdiction.
When the applicant is required to seek a Foreign Filing Licence
  • When the applicant or inventor is a resident of India.
  • When the applicant does not wish to file a patent application in India before filing a patent application outside of India.
  • When the applicant is a resident of India, a patent application has been filed in India, but the six-week term has not yet expired.

It is important to note that if the invention is related to nuclear energy or defence, the Indian Patent Office may not issue the FFL without the prior consent of the Central Government.

 

Statutory provisions governing Foreign Filing Licence in India

Rule 71 of the Patent Rules, 2003 describes the procedure and mandates seeking permission to file a patent application outside India.  

Rule 71: Permission for filing patent applications outside India under section 39.

“(1) The request for permission to submit a patent application outside India shall be made on Form 25.

(2) The Controller must respond to a request made under sub-rule (1) within twenty-one days of the request being filed.

Provided that in the case of inventions relating to defence or atomic energy, the period of twenty-one days shall be counted from the date of receipt of consent from the Central Government.”

 

Requirements for Seeking a Foreign Filing Licence

Since the main objective of FFL is to examine the nature of inventions and technologies in the nation’s best interest, an applicant must sufficiently disclose the invention’s details, including the title, description, and drawings (if any). In addition to the above information, the applicant must submit the following forms with all required data.

Form-25[1]: to request permission to make a patent application outside India. Form 25 must include:

  • Title of the invention
  • Name, address, and nationality of inventors who are “resident in India,”
  • Name and address of the applicant if rights have been assigned to the applicant.
  • Names of foreign countries where the application will be submitted once the Foreign Filing Licence is issued.
  • Reason for making such an application.

Form-26[2]: Power of Attorney (POA) from the inventor(s) or applicant residing in India and appointing a patent agent to represent them.

 

Can a Foreign National Apply for a Patent in India?

As outlined above, an Indian Foreign Filing Licence is not applicable for foreign nationals filing a patent application in India. A foreign national may apply for a patent in India by following one of the two routes mentioned below:

  1. Paris Convention Route: Under the Paris Convention for the Protection of Intellectual Property, a foreign national of a convention country can use the convention route to file a patent application in India. Any invention filed in their home country may also be filed for patent protection in India within 12 months by claiming priority from the earliest filed application in their home country.
  1. Patent Cooperation Treaty (PCT) Route: A foreign national may also file a patent application in India under the PCT route.

However, if they intend to file a patent application directly in India, they must follow their country’s patent law to confirm if there is a similar requirement in their jurisdiction.

Even though FFL enables Indian residents to file patent applications directly in a foreign country without filing the first application in India, inventors and the applicants (who are Indian residents) must strictly comply with the requirements of the FFL discussed above to avoid serious consequences, including imprisonment for a term of up to two years, or a fine, or both.

Even though Foreign Filing Licence (FFL) enables Indian residents to file patent applications directly in a foreign country without filing the first application in India, inventors and the applicants (who are Indian residents) must strictly comply with the requirements of the FFL discussed above to avoid serious consequences, including imprisonment for a term of up to two years, or a fine, or both.

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Anticipation of Invention: Patent and Latent Threats

A patent is representative of a quid pro quo arrangement and on the basis thereof patentees are granted a monopoly over their inventions. However, the process of securing such a monopoly can be complicated by ‘anticipation.’ Any invention anticipated in a prior art is most likely to be invalidated or made ineligible for a patent grant. This is because anticipation signifies a lack of ‘novelty’ in the claimed patent.

The concept of anticipation varies across jurisdictions, generally differing on the offering of the grace period. For instance, in the US a one-year grace period is provided to an individual for filing a disclosure in the event of obtaining the confidential subject matter of the invention directly or indirectly by the inventor or the joint inventor. Here, the principle of relative novelty governs the consideration of anticipation. Whereas in Europe, only a six-month grace period is provided, only in cases where the information is obtained by deceit or has been made public through an official international exhibition.

The law in India has taken an alternative route. The Indian Patent Act, of 1970 has identified conditions in which the grace period is afforded to evaluate anticipation. The Act defines what does not constitute anticipation under sections 29-34.

This article aims to provide the reader with a better understanding of the concept of anticipation under the Indian Patent Act, 1970.

 

What Amounts to Anticipation for Patents in India?

 

As highlighted above, the term anticipation is not defined in the Indian Patent Act,1970 however, the Act specifies what is not considered anticipation under Chapter VI, Section 29-34.

In the case of M. C. Jayasingh vs Mishra Dhatu Nigam Limited,[1] the Madras High Court while examining the provisions pertaining to “Anticipation” under the Indian Patents Act 1970, observed inter alia, “Though Section 13(1) refers repeatedly to “anticipation”, the expression “anticipation” is not defined in the Act. But, Chapter VI, containing Sections 29 to 32, deals with anticipation by previous publication. Here again, there is an element of confusion. Sections 29 to 32 do not stipulate as to what constitutes anticipation by publication. Rather, these sections merely point out what would not constitute anticipation. While Section 29 indicates what is not anticipation by previous publication, Section 30 indicates that a mere communication of the invention to the Government may not constitute anticipation. Similarly, Section 31 indicates when a public display would not constitute anticipation, and Section 32 indicates when the public working of a patent would not constitute anticipation.”

The Court proceeded to observe that a conclusive meaning of anticipation could be deciphered by examining the expression “new invention” under section 2(1)(l). Hence, the anticipation by publication would simply mean “that the subject matter had either fallen into the public domain or had become part of the state of the art.” This understanding of anticipation is further circumscribed by the exclusions mentioned under Sections 29 to 32.

It is pertinent to note that the concept of anticipation does not necessarily prevent an inventor from doing something purely because it would be an obvious/anticipated extension of what had been known in the art before the priority date. It rather demands a deep deliberation and analysis of what would have been obvious or already in use at the priority date to an individual skilled in the art who had access to what was known in the art at that date.

Anticipation by Previous Publication (Section 29)

 

This section provides that any publication of the invention made in India or abroad without the prior consent of the applicant or patentee is not considered anticipation and the ground for rejection of the patent. The patentee must establish that he filed an application for the patent as soon as he found out about the publication. This section does not mention about the time period of filling the application after such a publication.

The law on anticipation by prior publication has been summarised by Sachs LJ in the case of General Tire & Rubber Company v. The Firestone Tyre and Rubber Company Limited And Others,[2] as, “If the prior publication contained a clear description of, or clear instructions to do or make, something that would infringe the patentee’s claim if carried out after grant of the patentee’s patent, the claim would be anticipated. If, on the other hand, the prior publication contained a direction which was capable of being carried out in a manner which would infringe but would be at least as likely to be carried out in a way which would not do so, the patentee’s claim would not be anticipated, although it might fail on the ground of obviousness. To anticipate the claim, the prior publication had to contain clear and unmistakable direction to do what the patentee claimed to have invented.”

 

Anticipation by Previous Communication to the Government (Section 30)

 

Any disclosure of the invention to the government prior to the filing date of a patent application for the purpose of the investigation is not considered anticipation.

Moreover, in Shogun Organics Ltd. Vs. Gaur Hari Guchhait & Ors[3], the Delhi High Court clarified that the language of Section 30 now makes it clear that the disclosure to a government department or to any other authority, not just of the patentee, but by any other person, would not constitute prior publication. The language is person-neutral. It cannot be said from a reading of the provision that only disclosure by the patentee/applicant is covered under Section 30. 

 

Anticipation by Public Display (Section 31)

 

 An invention that has been displayed or published publicly is not eligible to be patented on the account of lacking novelty. However, under certain circumstances, a publicly displayed patent can be considered ‘novel’ in the following cases:

  1. The display or use of invention at an industrial or other exhibition is notified by the Central Government in the Official Gazette;
  2. Publication of any description or portion thereof as a result of the exhibition’s display or use of the invention;
  3. Usage of the invention by anyone, after the aforesaid display in exhibition, other than the inventor or a person deriving title from him; and
  4. Description of the invention in a paper read by the inventor before a learned society.

It is important to note that, an application for a patent can only be granted in the abovementioned circumstances if it is filed within 12 months of such public display/publication.

In Ralph M. Parsons Co (Beavon’s) Application[4], it was observed that learned societies would disseminate the relevant learning without consideration of economic gain. Thus, a learned society would normally be a non-commercial body of people and would not typically be associated with commercial exploitation. For a publication to be regarded as a “transaction” of a learned society, it must be published under the auspices of and finally be the responsibility of the learned society. Therefore, a publication that occurs via a third party, such as a reporter who is present at the conference, would not be regarded as a publication by society. Moreover, the publication by a society of an abstract of a paper is considered to be a publication of a paper.[5]

 

Anticipation by Public Working (Section 32)

 

An invention filed in a patent application is not considered to be anticipated due to the working of the invention in public by the patentee or person deriving title from him or any person authorized by him, subject to the meeting of the following criteria:

  1. The working of the invention should not be public prior to 1 year from the date of filing of the patent application; and
  2. The working of the invention in public is performed for the purpose of reasonable trial.
  3. The nature of the invention needs the invention to be worked in public.

Hence, the 12 months time period mentioned in the provision can be regarded as the ‘grace period’ for the inventor to file an application for the grant of the patent after public use. This is an opportunity for the inventor to apply for the grant of patent in an event of him mistakenly or in good faith using the invention in the public domain.

It is pertinent to note that, the section draws a significant distinction between public use and mere public publication.

In the case of Poysha Industries Ltd v. Deputy Controller of Patents and Designs[6], the Calcutta High Court adjudicated upon the issue of distinction between public use and public knowledge. The issue was whether the invention was publicly used or publicly known in a part of India. The Appellants, in support of their contention, stated that the method used by them to crimp the top portion of the containers did not require special skills or techniques. The said containers had been supplied by the appellants to M/s Zandu Pharmaceuticals and another company since 1960. However, the appellants failed to establish that the invention was publicly used and known, hence the appeal failed.

The same has been further clarified in Monsanto Co v. Coramandal Indag Products (P) Ltd.[7] by the Supreme Court, wherein it was held that, “It is clear from the facts narrated by us that the Herbicide CP 53619 (Butachlor) was publicly known before Patent Number 125381 was granted. Its formula and use had already been made known to the public by the report of the International Rice Research Institute for the year 1968. No one claimed any patent or any other exclusive right in Butachlor. To satisfy the requirement of being publicly known as used in clauses (e) and (f) of [s 64(1)], it is not necessary that it should be widely used to the knowledge of the consumer public. It is sufficient if it is known to the persons who are engaged in the pursuit of knowledge of the patented product or process either as men of science or men of commerce or consumers. The section of the public who, as men of science or men of commerce, were interested in knowing about herbicides which would destroy weeds but not rice, must have been aware of the discovery of Butachlor. There was no secret about the active agent Butachlor as claimed by the plaintiffs since there was no patent for Butachlor, as admitted by the plaintiffs. Emulsification was the well-known and common process by which any herbicide could be used. Neither Butachlor nor the process of emulsification was capable of being claimed by the plaintiff as their exclusive property. The solvent and the emulsifier were not secrets; they were admittedly not secrets and were ordinary market products. From the beginning to the end, there was no secret and there was no invention by the plaintiffs. The ingredients, the active ingredient, the solvent and the emulsifier, were known; the process was known, the product was known, and the use was known. The plaintiffs were merely camouflaging a substance whose discovery was known throughout the world and trying to enfold it in their specification relating to Patent Number 125381. The patent is, therefore, liable to be revoked.

Therefore, for information to be publicly known, it is not essential that it should be used widely or be in the knowledge of the general public only. It would satisfy the legislative purpose if the information was known to individuals engaged in the research of the patented product or operating within the same industry or science.

 

Anticipation by Use and Publication after Provisional Specification (Section 33)

 

The objective of this section is to clarify that the information disclosed in public or the invention worked in public is not considered for anticipation between the filing of:

  1. A patent application with a provisional specification and a complete specification (within 12 months from the provisional filing); or
  2. A priority application in a convention country and a convention application in India.

This means that if the invention is used or published after the provisional application is filed, a complete specification filed later is not deemed to have been anticipated. Therefore, the Controller cannot refuse to grant a patent, revoke or invalidate it by citing that the subject matter of the provisional specification was used or published in India or in another jurisdiction at a time after the filing of said specification.

It is important to note that the provision applies only if the complete specification of the patent is filed within 12 months of the provisional specification.

Further, in cases where the complete specification has been filed in pursuance of a convention application, the Controller cannot reject the grant of patent on the grounds that the subject matter of the application was filed for protection in India within 12 months from the date of priority application filed in the convention country.

This section essentially seeks to safeguard the interests of the inventors between the periods of filing of provisional and complete specifications, and between the periods of filing the priority application in the convention country and the filing of the complete specification in India, in an event where the subject matter of the invention is placed in the public domain.

 

The Doctrine of Inherent Anticipation

 

The doctrine of inherent anticipation refers to a kind of anticipation wherein anticipation is found even in the absence of appropriate disclosure in a prior art reference.

In general, anticipation can be of two types: explicit anticipation and implicit anticipation (i.e., the doctrine of inherent anticipation). The term explicit anticipation refers to anticipation wherein each technical element disclosed in the claim is disclosed in a single prior-art document. According to the explicit anticipation, a claim is rejected by the patent office if all the technical features are found in a single prior art document. According to the doctrine of inherent anticipation (i.e., implicit anticipation), a claim is rejected by the patent office even if all the technical features are not disclosed in a single prior art subject to the presence of the missing technical features inhere in the prior art. 

Generally, there are two accepted tests to appropriately understand the doctrine of inherent anticipation. According to the first test, a check is performed to determine that the inherency of anticipation is not established only based on the probabilities or possibilities. A technical feature is considered to be inherent only if said technical feature is the “natural result flowing from” the invention description and invariably leads to the outcome. According to the second test, a check is performed to determine that an accidental or unintentional outcome, not appreciated as inherent to the claim by a person of ordinary skill in the art, does not constitute anticipation.

The IPAB in Enercon (India) Limited vs. Aloys Wobben[8] held that “patent is invalid for anticipation if a single prior art reference discloses each and every limitation of the claimed invention. The prior art reference may anticipate without disclosing a feature of the claimed invention if that missing characteristic is necessarily present, or inherent, in the single anticipating prior art. It is not necessary that inherent anticipation requires that a person of ordinary skill in the art at the time would have recognised the inherent disclosure. But it is necessary that the result be a necessary consequence of what was deliberately intended in the invention.”

 

Overcoming Anticipation Rejection

 

In view of the above, it is always advisable to file a patent application before placing it in the public domain. If the nature of the invention requires the invention to be placed in the public domain or worked in the public domain, the inventor(s) must ensure compliance with the requirements outlined in Section 29-30 in order to maintain the novelty of the invention and avoid patent rejection due to anticipation.

References:

[1] Civil Suit No.562 of 2007

[2] [1972] R.P.C. 457

[3] CS (COMM) 201/2017: (14.08.2019 – DELHC):MANU/DE/2598/2019: 2019 SCC OnLine Del 9653:Delhi High Court

[4] [1978] FSR 226

[5] Ethyl Corporation’s Patent [1963] RPC 155

[6] AIR 1975 Cal 178

[7] AIR 1986 SC 712

[8] ORA/6/2009/PT/CH ,ORDER (No. 18 of 2013)]

 

 

Image Credits: Photo by JESHOOTS.COM on Unsplash

Anticipation can be of two types: explicit anticipation and implicit anticipation (i.e., the doctrine of inherent anticipation). The term explicit anticipation refers to anticipation wherein each technical element disclosed in the claim is disclosed in a single prior-art document. According to the explicit anticipation, a claim is rejected by the patent office if all the technical features are found in a single prior art document. According to the doctrine of inherent anticipation (i.e., implicit anticipation), a claim is rejected by the patent office even if all the technical features are not disclosed in a single prior art subject to the presence of the missing technical features inhere in the prior art. 

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Delhi HC Draft Rules for Patent Suits, 2021: Streamlining the Procedure

The Delhi High Court has witnessed a surge in the number of patent infringement actions filed before it across various scientific and technological fields including pharmaceuticals, diagnostics, mechanical engineering, telecommunications, electrical /electronics, wind technology etc, since the past 10-15 years.

In a bid to address the growing complexities concerning patent suits and actions, the Delhi High Court vide its notification dated 10th December published the Rules governing Patent Suits, 2021 in the public domain and has invited inputs and suggestions of the relevant stakeholders, by 17th December 2021.  

The main objective of Drafting a new set of rules is to streamline the procedure for filing patent suits and establish a uniform structure of provisions and governing mandates concerning patent litigation in the city’s adversarial system, following the establishment of IPD.   

Key Highlights of the Draft Rules Governing Patent Suits, 2021

The Draft Rules clarify that the published rules will apply to all patent suits in India which lie before the Intellectual Property Division of the Delhi High Court. As per the issued notification, in case of any inconsistency occurs over the Delhi High Court (Original Side) Rules, 2018 and the Delhi High Court Intellectual Property Division Rules, then in that case the present rules will prevail.

Further, the General Clause of the Rules (Rule 17) states that “Procedures and definitions not specifically provided for in these Rules shall, in general, be governed by The Civil Procedure Code, 1908 as amended by The Commercial Courts Act, 2015 and the Delhi High Court (Original Side) Rules, 2018 as also the Delhi High Court Intellectual Property Rights Division Rules, 2021, to the extent they are not inconsistent with the present Rules.”

As per the Definition Clause Rule 2(b), it is maintained that all suits seeking relief under Section 48, Sections 105, 106 including counterclaims under Section 64, Section 108, 109, 114 in the Patent Act, 1970 are governed by the provisions of the Rule. Additionally, the provision of Priority Patent Application has also been provided for in the Rules. It is defined under Rule 2(j) as, “ A parent application, a Convention application or a Patent Cooperation Treaty application from which the suit patent claims priority.”

Rule 3 elaborates upon the mandated contents of the pleadings and Rule 4 provides the details of the documents to be attached with the respective pleadings discussed under Rule 3. It also highlights the specifications that are crucial to mention in the pleadings.

  1. The Plaint (Rule 3 A) shall discuss a brief background of the technology and relevant technical details, ownership details, corresponding suits/applications emanating from the innovation and the respective requisite details of the suit. An infringement analysis through a claim’s vs product chart, list of experts and details of the royalties received qua the suit/ patent portfolio also has to be mentioned.
  1. Written Statement (Rule 3 B) shall be inclusive of arguments comprehensively challenging the claim of infringement. Technical analysis with specifics of the product/process used by the defendant shall be included in the written statement while claiming non-infringement. Further, if the defendant is willing to obtain a license from the patentee, quantum for the same has to be elaborated upon. Details of the sales of the allegedly infringing product/process also have to be provided.
  1. Counter Claim (Rule 3 C) shall be precise as to the grounds that are raised under Section 64 of the Patent Act. The ground claiming lack of novelty or inventive step shall have to be supported by ‘art documents. If a counter-claim is filed seeking relief on the ground of noninfringement, then the requirements for a Suit under Section 105 of the Act shall be followed.
  1. Replication ( Rule 3 D) shall initially summarize Plaintiff’s case and Defendant’s case. Subsequently, it shall provide a para-wise reply to the written statement.
  1. A suit seeking a declaration of non-infringement under section 105 of the Act, shall specify the scope of the claims, the product/process being implemented by the Defendant claimed to be non-infringing and the technical/legal basis on which declaration is being sought
  1. A suit under section 106 of the Act for an injunction against groundless threats shall contain the nature of the threat, whether oral or documentary; details of any challenge made to the validity of the patent and an invalidity brief pursuant to the challenge and details pertaining to correspondence that may have taken place between the parties.

It is pertinent to note that, strict directions and guidelines for the governance of relief applications under the Patent Act, 1970 saves judicial time and resources and improve the quality of judgements delivered by the court.

Further, the Draft Rules segregate the suit adjudication into three case management hearings, apart from the first listing, namely First Case Management Hearing, Second Case Management Hearing, and Third Case Management Hearing. The Rules enumerates specific directions that may be given by the Court at each stage, and also provide guidelines on when certain specific documents may be filed, officers may be appointed, etc. 

A key concept of Hot-tubbing has been discussed under Rule 9 (iii) that provides that expert testimony can be directed by the Court if it deems fit, on its own motion or application by a party to be recorded by Hot Tubbing technique guided by Rule 6, Chapter XI, Delhi High Court (Original Side) Rules, 2018. Further, the rule also discusses the recording of evidence through video conferencing, by a Local Commissioner or at a venue outside the Court’s premises; all subjected to the discretion of the court.

The current Draft under Rule 12 has provided for “compulsory mediation”. It provides that at any stage of the proceedings if the court is of the opinion that the parties ought to explore mediation, it shall appoint a mediator/ a panel of mediators and technical experts to explore the pathway of amicable dispute resolution.

Under Rule 13 the court has been empowered to prepare a list of scientific advisors that shall assist the Court in the adjudication of patent suits. The list shall be subjected to periodical review. When the assistance of the expert is sought, they would have to submit a declaration of integrity and impartiality. 

Under Rule 16, In addition to the provisions in the Commercial Courts Act, 2015 for Summary judgment, Summary Adjudication of Patent suits can be undertaken in the following conditions;

(a) Where the remaining term of the patent is 5 years or less;

(b) A certificate of validity of the said patent has already been issued or upheld by the erstwhile Intellectual Property Appellate Board, any High Court or the Supreme Court;

(c) If the Defendant is a repeat infringer of the same or related Patent;

(d) If the validity of the Patent is admitted and only infringement is denied.

Conclusion

The Draft Rules present adaptability to the technological revolution that has enveloped the industry sectors across the world by simplifying litigation and increasing flexibility of the procedural aspect of the law. The contents of the pleadings are unambiguously discussed, leaving no room for confusion, as all the requisite information can be obtained by the parties at the first instance. Further, the clearly earmarked list of mandatory documents to be filed by the litigants saves judicial time wasted in adjournments owing to the lack of availability of documents.

Incorporation of methods of video conferences, hot-tubbing etc. for the purpose of collecting evidence while providing for the filing of technical primer, makes the case more comprehensible and streamlines judgment quality across the patent suit. The Draft has also successfully addressed the issue of a lengthy litigation process by providing for Summary adjudication of Patent suits.

Since the Rules are currently open to the opinion and suggestions of the stakeholders, it is yet to be seen how the final rules would shape up.

Image Credits:  Photo by Markus Winkler from Pexels

The Draft Rules present adaptability to the technological revolution that has enveloped the industry sectors across the world by simplifying litigation and increasing flexibility of the procedural aspect of the law. The contents of the pleadings are unambiguously discussed, leaving no room for confusion, as all the requisite information can be obtained by the parties at the first instance.

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Draft Delhi High Court IPR Division Rules, 2021: Observations and Concerns

On 10th October, 2021 the Delhi High Court had issued a Public Notice proposing the Draft “Delhi High Court Intellectual Property Rights Division Rules, ­ 2021”. The Court vide the said notice had invited comments from the members of the Bar by 24th October, 2021. In a much-anticipated development, following the incorporation of the inputs from the Bar, on 10th December 2021 the Hon’ble High Court released the finalised draft of the proposed Rules and has sought suggestions by the relevant stakeholders by December 17, 2021.

 

In July 2021, the Hon’ble Chief Justice of the Delhi High Court announced the constitution of IPD (Intellectual Property Division) following the abolition of IPAD. The Draft Rules seek to regulate the matters listed before the IPD with respect to practice and procedure for the exercise of its original and appellate jurisdiction, and for other miscellaneous petitions arising out of specific statutes[1].

 

The Structure

The Draft Intellectual Property Rights Division Rules, ­ 2021 has a framework of 41 Rules addressing and dealing with various procedures and definitions to be applied while adjudicating cases before the IPD. The General Clause under Rule 29 clarifies that “procedures not specifically provided for in these Rules shall, in general, be governed by The Civil Procedure Code, 1908 as amended by The Commercial Courts Act, 2015 and the Delhi High Court (Original Side) Rules, 2018.”

It is pertinent to note that, following the inputs by the Bar, the term “Acts” under Rule 2a is also now inclusive of the Information Technology Act, 2000. Consequently, under Rule 2d “Appeal” shall also include “an appeal filed before, or transferred to, the IPD” with the nomenclature [C.A. (Comm. IPD-IT)] Under Section 62 of the Information Technology Act, 2000.

The Draft Rules under rule 2i the “intellectual property subject matter” for the purpose of these rules concern the following:

  1. Matters pertaining to Patents, Copyrights, Trademarks, Geographical Indications, Plant Varieties, Designs, Semiconductor Integrated Circuit Layout-Designs, Traditional Knowledge, and all rights under common law, if any related to these.
  2. Matters relating to passing off, unfair competition, disparagement, comparative advertising, and other similar issues.
  3. Matters concerning the protection of trade secrets, confidential information, and other related subjects.
  4. Matters relating to tortious actions related to privacy and publicity rights involving intellectual property issues.
  5. Matters pertaining to data exclusivity, domain names, and other matters relating to data protection involving intellectual property issues, as well as those arising under the Acts.
  6. Matters involving internet violations relating to any of the subject matters under clauses (i) through (v).

Notably, the rights related to data protection, data inclusivity and other such related matters are also covered under the scope of the said “subject-matter’. The Explanation attached with the provision states that cases pertaining to the Information Technology Act, 2000 which deal with the rights and liabilities of the intermediaries, online market places and e-commerce platforms

And those “issues relating to any of the aforementioned rights, shall be deemed to be within the purview of intellectual property rights.” 

The final Draft Rules present a precise scope of jurisdiction of the Draft Rules under Rule 4, as compared to the earlier version. The Rule now states that “Every IPR subject matter or case or proceeding or dispute filed before or transferred to, the IPD, as defined in Rules 2(i), 2(j) and 2(l), shall be heard and adjudicated by a Single Judge of the IPD except those that are to be decided by a Division Bench as per Section 13 of the Commercial Courts Act, 2015.”

Rule 6 elaborates the procedure for filing an appeal before the IPD. As per Rule 6 (xii)

“Procedures applicable to Civil Appeals filed before the Single Judge: The Delhi High Court Rules and Orders as also the Practice directions issued from time to time, to the extent there is no inconsistency with these Rules, shall be applicable to appeals filed before the IPD.”

Procedures for filing original civil petitions, civil writ petitions and civil miscellaneous petitions are discussed under Rules 7, 8 and 9 respectively. Further, Rules 10 to 14 enumerate additional requisite procedures to be followed while addressing a suit to the IPD.

Subsequent to the comments by the members of the Bar, the final Draft Rules have incorporated additional provisions pertaining to the recording of the evidence, hot-tubbing or other such modes of recording evidence, discovery and disclosure, preservation of evidence by the parties, Confidentiality clubs and redaction of confidential information and, damages and accounts of profits; from Rules 15-20.

Under Rule 15, recording of evidence can be undertaken through video conferencing ( as per the High Court of Delhi Rules for Video Conferencing for Courts 2021). The use of videography and transcription technology or any other form of recording evidence can also be applied. Further, evidence can also be recorded at any venue outside the court or by a Local Commissioner. However, it is imperative to note that, the discussed methods shall only be applicable if the court is of the opinion that the same is expedient in the interest of justice.

Interestingly, Rule 18 puts an onus on the parties to the proceedings to “preserve all documentary, tangible and electronic material relating to the subject matter of the proceedings which is capable of being relied upon as evidence” upon the initiation of or receiving notice about the institution of the proceedings before the IPD. Prior to the initiation of the proceedings, a party may issue a Litigation Hold Notice that shall set in motion the evidence preservation liability of the party.

Rule 19 addresses the establishment of a ‘confidentiality club’ by the court at any stage of the proceedings for the preservation and exchange of confidential information filed before the Court including documents, as per the Delhi High Court (Original Side) Rules, 2018. Further, the rules state that upon a request by application the court may direct the redaction of such information. However, the rules fail to mention the party, legal practitioner, expert etc that shall have the Locus Standi to approach the court with such application.

Rule 20 elaborates upon the factors that the courts shall have to take into consideration while determining the quantum of damage for a party seeking to settle accounts of profits/damages. Notably, the rule provides that the courts may engage expert assistance (provided for in Rule 31) in the computation of such damages.

The final Draft Rules, 2021 also lay down provision for summary adjudication under Rule 27 on principles akin to those enumerated in Order XIIIA, Code of Civil Procedure, 1908 and as applicable to commercial suits under the Commercial Courts Act, 2015. It is interesting to note that, unlike the previous version the current rules do not have any provision for summary adjudication in Patent Cases.

With an objective to curb unnecessary delays in the disposal of suits, it is apparent that the High Court has ensured provisions relating to strict guidelines for a written and water-tight timeline for oral submissions are included under Rule 33 of the 2021 Division Rules.

 

Conclusion

The establishment of an independent Intellectual Property Division is an indication of acknowledgement of the importance of Intellectual Property in the country. The corresponding 2021 Division Rules is a concrete step forward, however, the following aspects demand a more sincere deliberation:

  1. Clarity with respect to the Locus Standi of parties, legal practitioners, agents, experts etc. to the case for extending an application to the ‘Confidentiality Club’ needs to be determined.
  2. Under Rule 31 constitution of a Panel of Experts is provided to extend advisory assistance to the court relating to the subject matter of the dispute, as and when necessary. While the provision is definitely in resonance with maintaining the quality adjudicatory function, it fails to elaborate upon the criteria of appointment of the experts. Additionally, the rule mentions ‘reviewing’ the expert panel from time to time, however, the nature and period of such review has not been discussed.

The establishment of an independent Intellectual Property Division is an indication of acknowledgement of the importance of Intellectual Property in the country. The corresponding 2021 Division Rules is a concrete step forward, however, some aspects demand a more sincere deliberation

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Small Entity Status- Can Foreign Companies Claim It?

The government of India has been aggressively pushing for the development and promotion of entrepreneurship in the country. In the Intellectual Property Domain, various concessions have been made for small and upcoming entities. Organizations claiming a ”small entity” status or a “start-up” status while applying for registration are entitled to some additional benefits pertaining to fees and filing requirements.  Here, we briefly look upon the small entity status as per the Indian patent and design rules. 

Intellectual Property Related Government Initiatives to Encourage Small Entities & Startups

In 2020, the Scheme for Facilitating Start-ups Intellectual Property Protection, was launched as an experimental initiative to encourage start-ups to develop and protect their intellectual property, which was extended for a period of three years (April 1, 2020 – March 31, 2023).

Further, the Patent (Amendment) Rules, 2020[1] were notified on October 19, 2020 to simplify the procedure of submitting priority applications and their translations and filing of working statements under form 27. These changes were introduced in consequence to the Delhi High Court’s order in the case of Shamnd Bashir v UOI[2], that resulted in a stakeholder’s consultation.

On November 4, 2020 the Ministry of commerce and Industry[3], notified Patents (2nd Amendment) Rules, 2020[4], making additional filing and prosecution concessions for start-ups and small entities.  The status of start-ups was discussed critically, extending their life for up to ten years. These amendments are set to make protection of intellectual property affordable to every category and class of business. Finally, the government also notified Design Amendment Rules 2021,[5] which recognized start-ups as applicants. The current Locarno classification system[6] and simplified fee structure were introduced specifically to benefit small entities.

 

Categorization of ‘Entities’

 

1.1 Natural Person

Under the Indian Patent Act, natural person includes an individual human being. In this context, the patent application can be filed in the name of one or a group of individuals. Here, the inventorship and ownership lies solely with the inventor and he is entitled to:

  1. Sell
  2. Transfer
  3. License, or
  4. Commercialize their patent as per their want.

1.2 Small Entity

The Indian Patents Rule, 2003 under Rule 2(fa)[7] define ‘small entity’ as:

  • in case of an enterprise engaged in the manufacture or production of goods, an enterprise where the investment in plant and machinery does not exceed the limit specified for a medium enterprise under clause (a) of sub-section (1) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006); and
  • in case of an enterprise engaged in providing or rendering of services, an enterprise where the investment in equipment is not more than the limit specified for medium enterprises under clause (b) of sub-section (1) of Section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006).

In calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other things as may be specified by notification under the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), shall be excluded.

1.3 Start up:

A start-up is an entity recognized as a ‘startup’ by the competent authority under the Startup India initiative and fulfills all the criteria for the same.

A foreign entity shall fall under the category of start-up if it fulfills the criteria of turnover and specified period of incorporation/registration, and submission of a valid declaration to that effect as per the provisions of Start-up India initiative. (In calculating the turnover, reference rates of foreign currency of Reserve Bank of India shall prevail.)

As per the Notification of Department of Promotion of Industry and Internal Trade[8], an entity is considered a start-up  

  1. Up to a period of ten years from the date of incorporation/ registration, if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India.
  1. Turnover of the entity for any of the financial years since incorporation/ registration has not exceeded one hundred crore rupees.
  2. Entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

Provided that an entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘Startup’.

How to apply for Small Entity Status in India:

 

Any business can apply for the status of small entity under the MSME Development Act, 2006 at udyamregistration.gov.in. Subsequent to a successful registration the business shall be issued a Udyam registration certificate, that can be furnished as proof for availing various government subsidies and benefits. 

A foreign company can also register as an MSME on the same government portal. However, as a preceding step such a company shall register itself as per the provisions of the Companies Act, 2013[9].

Any Indian entity wishing to declare themselves as small entity for the purpose of Patent registration has to furnish the following documents:

  1. Form 28 of the Indian Patent Act:
  2. Proof of Registration Under MSME Act 2006 (Micro, small and medium enterprise development Act, 2006).
  3. Form 1 of the Indian Patent Act (if Fresh Patent Application is being filed).

Any Indian entity wishing to declare themselves as small entity for the purpose of Design registration:

  1. For an Indian entity to claim the status of small entity, it must be registered under the MSME Development Act, 2006.
  2. To file an application as a start-up, the entity should be recognized as startup by a competent authority under the Union government’s Start-up India Initiative.

 

Can a Foreign Company claim Small Entity Status in India?

On a plain interpretation of the requirements under the Patent rules and Design rules, it is clear that a foreign enterprise can claim the status of a small entity or a start-up, provided it is registered and incorporated in India and is engaged in the manufacture of goods and services as specified in the first schedule of the 2006 Act.[10]

Under the MSME Development Act, 2006 an enterprise is defined as:

enterprise” means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (55 of 1951) or engaged in providing or rendering of any service or services;[11]

With an objective to incentivize the incorporation of OPC (One Person Companies), the Ministry of Corporate Affairs amended the Companies (Incorporation) Rules. The move empowers OPCs to grow without any restrictions on paid up capital and turnover, thereby facilitating their conversion into any other type of company at any time. Additionally, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allowing Non-Resident Indians (NRIs) to incorporate OPCs in India has paved the way for foreign entities to enter Indian markets[12] [13].

 

Application Process for Small Entity Status in India? (Foreign Company):

Patent Rules

A foreign applicant seeking the status of ‘small entity’ for the purpose of filing patent in India, has to submit duly filled Form 28[14], along with the requisite documents of proof.

As per the requirements of Form 28, a foreign applicant has to attach evidentiary documents that verify their status as ‘small entity’ for the want of Rule 2 (fa) of the Patent Rules, 2003. For this purpose, the said documents can include a certified copy of financial statement from a Chartered Accountant, that proves that the investment in plant and machinery and the annual turnover of the entity on the date of filing the application does not exceed the limitations specifications under the MSME Development Act, 2006.

Design Rules

For the purpose of recognitions as a start-up the foreign entity should satisfy the following criteria:

  1. The entity must be a private limited company, limited liability partnership, or partnership firm.
  2. Its turnover at any point during the course of its business (from inception) should not exceed INR 100 crores (approximately USD 13.7 million as on date)
  3. The entity would be considered a start-up only for a period of 10 years from the date of incorporation.
  4. An entity formed by splitting up or reconstruction of an existing business shall not be considered a “Start-up”

For a foreign entity to claim the benefit of being a start-up, an affidavit (which under Indian practices would need to be notarized, although this has not been explicitly mentioned in the Amendment Rules) along with supporting documents must be submitted at the time of filing the application[15], to be submitted with Form 24[16] of the Designs Rules.

References:

[1] https://pib.gov.in/Pressreleaseshare.aspx?PRID=1668081

[2] writ petition No. WPC- 5590

https://www.scconline.com/blog/post/2020/10/28/patents-amendment-rules-2020-patentee-would-get-flexibility-to-file-a-single-form-27-in-respect-of-a-single-or-multiple-related-patents/

[3] https://ipindia.gov.in/writereaddata/Portal/Images/pdf/Patents__2nd_Amendment__Rules__2020.pdf

[4] https://ipindia.gov.in/writereaddata/Portal/Images/pdf/Patents__2nd_Amendment__Rules__2020.pdf

[5] https://www.foxmandal.in/wp-content/uploads/2021/08/Indian-Designs-Amendment-Rules-2021.pdf

[6] https://www.wipo.int/classifications/locarno/locpub/en/fr/

[7] https://ipindia.gov.in/writereaddata/Portal/IPORule/1_70_1_The_Patents_Rules_2003_-_Updated_till_1st_Dec_2017-_with_all_Forms.pdf

[8] https://dpncindia.com/blog/wp-content/uploads/2019/02/DIPP-Notification-dated-19-Feb-2019.pdf

[9] https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00008_201318_1517807327856&sectionId=185&sectionno=2&orderno=2

[10] https://www.startupindia.gov.in/content/sih/en/bloglist/blogs/How-a-foreign-national-from-China-can-start-and-register-company-in-India.html

[11] https://www.indiacode.nic.in/show-data?actid=AC_CEN_46_77_00002_200627_1517807324919&sectionId=9884&sectionno=2&orderno=2

[12] http://164.100.117.97/WriteReadData/userfiles/Notification%201.pdf

[13] http://164.100.117.97/WriteReadData/userfiles/Notification%202.pdf

[14] https://ipindia.gov.in/writereaddata/Portal/IPOFormUpload/1_40_1/form-28.pdf

[15] https://www.foxmandal.in/wp-content/uploads/2021/08/Indian-Designs-Amendment-Rules-2021.pdf

[16] https://www.ipindia.gov.in/writereaddata/Portal/IPOFormUpload/1_109_1/Form_24.pdf

Image Credits: Photo by Startup Stock Photos from Pexels

 

On a plain interpretation of the requirements under the Patent rules and Design rules, it is clear that a foreign enterprise can claim the status of a small entity or a start-up, provided it incorporates itself under the relevant schemes and statutes and is able to furnish documents for proof to the same effect

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