PIRATE BAY: A SINKING SHIP FOR HOLLYWOOD? (PART I)

This post series deals with the possible legal liability of the search engine, Pirate Bay (TPB) under U.S. and Indian law. The U.S. law on contributory infringement of copyright is discussed as their jurisprudence on this point is quite rich. This analysis is used as a basis for examining the possible liability of TPB, if a case of contributory copyright infringement is filed against them under Indian law.

INTRODUCTION: THE TRIAL

Four men, namely, Fredrik Neij, Gottfrid Svartholm Warg, Peter Sunde Kolmisoppi and Carl Lundström, involved in the running of the hugely popular Swedish website, www.thepiratebay.org (TPB), have been sued in Sweden by industry heavy weights like Universal, Warner Bros, etc. on the grounds of “deliberately facilitating distribution of copyright infringing material”. (Specifics charges will be discussed later in the post.) They were charged after police raids in 2006 when officers searched their premises in Stockholm and seized servers. If found guilty, the four face up to two years in prison and a fine of 1.2 million kronor (£100,000).

Touted as the internet piracy trial of the decade, the case again brings to light the growing sentiment against copyright law. The trial, which commenced on February 16, 2009, has already witnessed a lot of drama.

BACKGROUND

TPB is the world’s largest BitTorrent tracker and search engine with an estimated 25 million active users. In fact, the TPB website has claimed that half of the world’s torrents are found using its trackers.

BitTorrent is a technology that enables people to share any content (including large files), it has benefits like relieving excessive pressure from the servers used to mediate exchange of information or files among users, the high-bandwidth communications capacity for a server is dispensed with, and the need for costly server storage space is also eliminated.

The torrent files, listed on TPB, contain all the information needed to download film or music files from others who have often copied them without permission (files contain infringing material). This is not to say that all torrent files are infringing, but numerous infringing files can be easily located using any of its indexes or trackers. For instance, if one were to search thepiratebay.org for a torrent file version of Will Smith’s latest, Seven Pounds, several links to the searched content will show up.

Thus, Pirate Bay comes into the picture acting as a tracker, listing millions of torrents, including torrents which link to files containing infringing content, like big Hollywood films, music tracks from every major recording star and software from leading companies. Post clicking on the link found on TPB, in order to view the content of the file, you have to download it from the content provider’s computer. TPB does is out of the picture at this point. The exact nature of technology involved is still not clear and the prosecution is trying to grapple with this problem. (See also, “Showbiz lawyers: we've used The Pirate Bay”).

As regards its business model, the site is free to access and use (registration is required for some activities, but that is free) and is supported by advertising.

CLAIMS

The prosecutors argue that, “the Pirate Bay is not merely a search engine, as claimed by the defendants. It’s an active part of an action that aims at, and also leads to, making copyright protected material available [illegally].” They go on to argue that it is the classic example of accessory - to act as intermediary between people who commit crimes, whether it’s in the physical or the virtual world.

The defendants on the other hand contend that no copyrighted material is stored on Pirate Bay’s servers [Napster] and no swapping of files actually takes place there [Napster/Grokster]. Pirate Bay locates [torrent] file sharers on the internet and acts as a directory, such torrents and trackers are disconnected from the content.

The Pirate Bay’s legal adviser, Mikael Viborg, has stated that because torrent files and trackers merely point to content, the site’s activities are legal under Swedish law.

Moving on, for the purposes of Swedish law, establishing intent is crucial for proving the commission of a crime and in order to show such intent the prosecutor and civil plaintiffs would have to show that the overriding purpose of TPB is to encourage unlawful sharing of copyrighted material.

The difficulty of this task was reflected in the fact that the prosecution keeps getting jiggy with the chargesheet. For starters, on the second day of the trial the government altered its charges from ‘assisting copyright infringement’ to one of ‘assisting making available copyright material’, partnered with dropping of half the charges. The charges were again tweaked on 24 February, 2009, this change included deletion of a sentence from the charge and is characterized as a relatively minor change. The other change included changing the charge from “provide the ability to others to upload torrent files to the service” to “provide the ability to others to upload and store torrent files to the service”. This change is said to be one which will help the prosecutor’s case.

An alteration of charges on the second day led the defendants to claim an early victory in the case, arguing that the same had resulted in partial acquittal. In response, Peter Danowsky, legal counsel for the music companies, stated that, “It's a largely technical issue that changes nothing in terms of our compensation claims and has no bearing whatsoever on the main case against The Pirate Bay. In fact it simplifies the prosecutor's case by allowing him to focus on the main issue, which is the making available of copyrighted works.”

The court agreed with the prosecutor’s case and ruled that, “the change made by the prosecutor to the charges is merely an amendment to existing charges - not dropping independent charges - and therefore there is no possibility to apply for an acquittal verdict due to the amendment.” This confirms the initial view of the music companies’ counsel that the amendment is of little importance to the overall case. Hence, the early hype in favour of pirate bay might be an overenthusiastic response.

The United States Position

Contributory copyright infringement in the United States has been defined as follows: “One infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it.” There is no statutory provision for contributory infringement in the Copyright Act; it is completely based on common law principles in the U.S. DMCA deals with safe harbours and comes at a later stage, it does not deal with the principles of contributory copyright infringement. DMCA safe harbours come in at a later stage, first we will examine whether TPB can be held liable under the common law principles of contributory copyright infringement in the U.S. In the next post we’ll deal with DMCA safe harbours and whether TPB would qualify as an OSP for the purposes of the DMCA.

Thus, the question is whether the search engine, TPB, becomes liable for contributory copyright infringement by providing links to files on a third party computer which could contain infringing material.

The defendants vehemently argue in the negative on the ground that they merely act as search engines. Thus, TPB has been likened to a library catalogue or phone directory: it is merely an index to point the user in the direction of the information or material they need. The prosecution disagrees on grounds discussed earlier in the post. To reiterate, they argue that, “Pirate Bay is not merely a search engine, as claimed by the defendants. It’s an active part of an action that aims at, and also leads to, making copyright protected material available [illegally].”

It is interesting to note that the claim and counter claim are arguments turning on the nature and use of the technology (being the search engine). TPB argues that the technology is neutral, in that it can be applied for both legal and illegal purposes (searching files/links which contain legal or illegal content). Therefore, given the absence of control and the neutral nature of the technology, the service provider should not be liable for the acts of infringement by the users.

They stick to the Sony standard of the operator or innovator not being liable if the device or technology is capable of substantial non-infringing use, this defense would hold even if the distributor had some idea that device could be put to infringing use.

It’s interesting to note that if BitTorrent were to be sued for contributory copyright infringement, they could make a similar case. They could argue that their website stores no content, has no central server etc.

Moreover, once the users download the BitTorrent software, apart from the User Manual which tells them how to use the software for downloading material available online and deal with problems, the point of contact between the software provider and the customer is lost. Thus, BitTorrent should not be held liable if post installing the software, users use it to upload, swap and access copyright infringing material.

However, as Jane C. Ginsburg (in her article, “Separating The Sony Sheep from The Grokster Goats: Reckoning The Future Business Plans of Copyright-Dependent Technology Entrepreneurs”) argues, the courts have not used neutral nature of the technology to let off the innovator, even in cases of neutral technology, the more infringement becomes an integral part of the innovator’s business plan, the more likely it is that the innovator would be held liable for copyright infringement.

Hence, the logic is that even if the technology was to be neutral (which most technologies are), if the technology provider or innovator had actual knowledge of the use of the technology for infringing purposes or promoted the technology as such, then the neutrality lost relevance. This understanding is evident in the Sony case itself, as in that case what shifted the balance in favour of the innovator was the fact that the innovator lost control or the ability to patrol the use of the device post sale. We’ve already seen that TPB has forwarded neutrality of the technology as a defence.

In order to preempt liability on the grounds of knowledge and inducement, they argue that as operators they have has no control or cannot patrol the links displayed on the search engine, it’s the users who make the links available in relation to torrent files on their own personal computers and TPB displays these links in response to a search entered by any other user. Hence, it has no knowledge of content, nor does it encourage infringement. They also point out that most of the torrent files do not contain infringing material.

Moving on to seeing how the U.S. courts have treated the knowledge/inducement requirement, we start with the Napster dicta, where the ability of Napster to patrol the central server and its continued contact with the users, aiding and advising them in their attempts to infringe copyright, made them liable for contributory copyright infringement. Thus, actual knowledge of specific infringing acts and failure to regulate them became the standard of liability for P2P networks with central servers.

This standard was subsequently discarded by the US Supreme Court in the Grokster case. As Jane C. Ginsburg writes, the Napster decision contained its own seeds of demise: if Napster was liable because it could maintain control over its users’ activities, then the next device or service would be sure to make it difficult, if not impossible, for the service to exercise control. So were born the P2P file-sharing enterprise like Kazaa, and its U.S. licensees, Grokster and Morpheus. [Unlike Napster, these services had no centralized directory: they dispersed information about file location across computer ‘nodes’ around the world. Users could find each other, but the services disclaimed the ability to prevent infringements as they were occurring.]

The Grokster Standard

In the Grokster case, songwriters, record producers and motion picture, sued Grokster for contributory copyright infringement. In light of the specific technology in place and the innovator arguing that he merely provided a medium of exchange and had no knowledge of specific infringing acts, the U.S. Supreme Court, rejecting the Napster standard of actual knowledge of specific infringement as a misapplication of the Sony standard, set out the following three “features” as determinative of contributory copyright infringement: (1) the defendant promoted the infringement-enabling virtues of its device; (2) the defendant failed to filter out infringing uses; and (3) defendant’s business plan depended on a high volume of infringement. Interpreting the third criterion, one could argue that through this the court made it incumbent on the service provider to weed out the infringing features when such technology was available.

In Grokster, all three elements were easily demonstrated. Applying the factors to the case, the court held that the Grokster operators had sent out emails extolling P2P copying, and had “aim[ed] to satisfy a known source of demand for copyright infringement, the market comprising former Napster users.” One of the defendants not only declined to devise its own filters; it blocked third-party filters and the defendants’ business plans depended on advertising, whose rates would turn on the volume of users encountering the ads. The more the defendants could attract visitors, the better for their businesses, and the prospect of free music attracts more visitors than paid music. Taken together, these factors demonstrated a clear intention to foster infringement. As the Court declared: “The unlawful objective is unmistakable.” Thus, it is evident that, given the flux in technology, Grokster focused more on the intention of the innovators and operators.

The next part of this post will deal with the application of the Grokster standard to TPB, including a discussion on Perfect 10 v. Google & Anr. The last post will deal with possible liability of TPB under Indian Copyright laws and the IT Act. Also, I would like to thank Shamnad, Pranesh Prakash, J. Sai Deepak and Mihir for their invaluable guidance on the technology involved and for their comments on the post in general.

Guest Post on Patent Examiners and Labour Markets

We bring you a guest post by Chirantan Chatterjee, a very bright doctoral student in Policy & Management, at the Carnegie Mellon University.

Chirantan is interested in exploring the Indian labour market for Indian patent examiners. For those interested, please write to him at chirantan[at]cmu.edu.

How do I know what you know? – Except if I am Einstein...

In a world of dwindling economies, rising impetus for governmental assistance to bail out firms, and protectionist policies to resurrect domestic industries across the globe, one thing is conveniently being put in the backburner for short term firefighting. What will happen to innovation and innovative output? And in that, patent offices, the creation of the WTO-TRIPs agreement signed by many countries, along with the role of patent examiners, could play a critical role. This especially when one looks at events with a calmer mind and assesses that patent examiners in a downturn will have lesser industry options and might have to stay put at national patent office jobs. The issue is finding curious interest especially among some arm chair academicians, if one goes by a recent paper at the International Industrial Organization Conference proceedings of 2009. Investigating mobility and career concerns of patent examiners at the US Patent Office, Canadian economists Corinne Langinier and Stéphanie Lluis use a random sample of 647 patent examiners (who granted patents on Dec 19th, 1995 at the US Patent Office) to offer some interesting preliminary results.

Using measures such as experience (number of years an examiner spends as a primary examiner), talent (number of years as assistant examiner and number of patents per year as assistant examiner), and effort (number of patents per year as a primary examiner) the authors show that experience always decreases the likelihood of promotion or change of task. Therefore, the longer the examiner has stayed at the USPTO the less likely he is going to change of task (e.g., administrators, or work at the board of appeal). Effort and talent, influences differently the mobility outcome.

Talent as being the tenure as assistant examiner has a significant and strong effect on promotion within the organization. The shorter time an examiner spends as assistant the more likely he is promoted. Talent however measured as number of patents per year as assistant has a significant but small effect on the outcome. The more patents are granted as assistant, the more likely the examiner leaves. In other words a more prolific examiner can be envisaged to leave the US Patent office sooner than somebody slower, to pursue alternative career options perhaps in the industry.

But would that truism hold across all sectors and more so in an economy which has recently undergone patent reforms in a world of recessionary pressures. One cannot be sure without undertaking for example a detailed study of examiner background, recruiting trends, wages, alternative career options etc for a new created patent office like one in India – after the 2005 patent reforms. And all of the above could further be analyzed in a systematic manner by looking at before and after 2005 trends of institutions supplying patent examiners, tracking their opportunity costs of being an examiner (leaving a private sector job for example), and biases if any by industrial sectors where one wants to be recruited (pharmaceuticals and hi-tech could get higher number of applications than others after 2005). It is not easy to know as a patent examiner what you and me might know as the inventor of a patent (except if I am an Einstein), and this career option deserves a systematic investigation especially in an emerging economy with a reformed patent system as in India – any takers?


For two other papers on patent examiners, check:

1. Alcacer and Gittelman (2003, 2004), where authors report that patent examiners add 40 per cent of all citations and two-thirds of citations on the average patent are inserted by examiners.
2. Also see an interesting report by Sampat (2004) and check out the conclusions in page 33-35 of the paper.

Report on NUJS Event: “Injunctions v. Damages in IP Cases by Justice Sikri

Pursuant to a talk by Justice Arjan Sikri on Injunctions vs Damages in IP cases, we bring you a detailed note on the talk, painstakingly prepared by Prakruthi Gowda, one of the top students at NUJS.

Please join me in thanking Prakruthi for documenting this talk so well and thereby advancing the cause of IP education in India.

Talk on “Injunctions v. Damages in Intellectual Property Cases” by Justice Arjan K. Sikri
(Prepared by Prakruthi Gowda, 4th year, NUJS, Kolkata)

The Honourable Judge presented the judiciary's perspective with respect to the development of jurisprudence in Intellectual Property infringement. He began with by explaining basic concepts of infringement in Trademark law and identified three main kinds of infringement in trademarks, namely:

(i) when identical marks are used on similar goods.
(ii) When similar marks are used on identical goods.
(iii) When identical marks are used on identical goods (Counterfeiting).

He discussed the Confusion or the Deception test and Civil and Criminal Remedies that are available to the plaintiff in the instance of an infringement. Injunctions and damages or accounts of profit are among the civil remedies that are available to the plaintiff.

The three kinds of injunctions that a plaintiff can seek are
(a) Temporary injunction.
(b) Permanent Injunction.
(c) Mandatory Injunction.

Temporary Injunctions are granted under Order XXXIX of the Civil Procedure Code. Temporary injunctions are grnated during the pendency of the suit, when there is a need to restrain the defendant and where immediate relief is required. There are however certain conditions that need to satisfied before a temporary injunction is granted. A prima facie case needs to established before the court as the court has not formed a final opinion and balance of convenience with respect to both the parties needs to be looked into.

The Honourable Judge discussed balance of convenience with special reference to IP cases. Whereby he pointed out that one of the most relevant considerations before granting a temporary injunction is whether the denial of a temporary injunction can be compensated by the granting of damages at the conclusion of the suit. Another relevant consideration which he said has begun to increasingly influence judges is public interest. For instance in the case of pharmaceutical goods, public interest needs to be considered as the granting or refusing of an injunction would directly affect the public.

He then discussed his judgment in the case of Kanungo Media (P) Ltd. Vs. RGV Film Factory, 138 (2007) DLT 312. The controversy in this case was with respect to a film produced by the Ram Gopal Verma Film Factory titled Nishabd which was to be released in ten days. The plaintiffs claimed right over the title on the ground that it had already produced a movie titled 'Nisshab', which had won several awards. The plaintiff prayed for a decree of permanent injunction preventing the Defendants from using the brand name and title “NISHABD”. They also prayed for an ad interim injunction to restrain the defendants from using the name and the title 'NISHABD' for their film. The case extensively looks into the position of law in relation to legal protection of titles.

Temporary injunction was refused on the grounds that the plaintiff had failed to approach the court earlier. The same line of reasoning was previously adopted in the case of Biswaroop Roy Choudhary v. Karan Johar, 2006 VII AD (Delhi) 351 where it was held that since the plaintiff had waited for the defendants to expend large sums of money and energy in the completion of the film with the same title, the balance of convenience shifts in favour of the defendant. He then discussed the vacating of the stay with respect to release of the Hindi remake of the Tamil film Ghajini. He noted that granting of an interim injunction would have caused irreperable damage to the defendant. Damages were thus deposited by the defendant to be paid on the conclusion of the case.

The other forms of relief that can be obtained in infringement suits are damages or an account of profits.The former is the calculation of damages on the basis of basis of the loss suffered by the plaintiff where as the latter is calculated on the basis of profits earned by the defendant . Punitive damages are also awarded in some cases to act as a deterrent.
The following considerations are taken into account in the calculation of lost profits of the plaintiff:

i) Royalty which is lost by the plaintiff owing to infringement.
ii) The loss caused by 'but for sales' i.e., the profits that would have accrued to the plaintiff from the sale of his product in the instance of non-infringement. This would include the actual loss in sales as well as the loss of profits caused by the loss in reputation and goodwill.
iii) The loss caused to the plaintiff when he is forced to reduce the price of his goods in the market in order to compete with the pirated or counterfeit version (which is priced much lower owing to the reduced cost of production).


The jurisprudence in relation to damages is very well developed in the United States unlike in India where the jurisprudence is oriented towards the granting of injunctions in intellectual property infringement cases. In this context the Honourable Judge referred to the case of EBay Inc. v. MercExchange, 547 U.S 388 (2006) where the US supreme court held that patent cases were no different from other cases when it came to applying the four factor test for determing whether or not an injunction ought to be grnated: prima facie case, balance of convenience, irreparable injury and public interest. He made a reference to contentious questions that arose after this decision as to whether refusal of an injunction amounts compulsory licensing.

The judge pointed out that in India 75% of intellectual property rights infringement cases are filed under the original jurisdiction of the High Courts. Cases are often valued at more than Rs. 20 lakhs as the discretion with respect to valuation of suits in the case of damages and injunction vests with the plaintiff. The entire battle with respect to infringement suits is in relation to temporary injunction under Order XXXIX (Rules 1 and 2) of the Civil Procedure Code. Appeals are filed in most cases to the Supreme Court on the granting or refusal of an injunction by a Single Judge of the High Court. 90% of jurisprudence in relation to intellectual property rights infringement is under Order XXXIX and thus cannot be treated as precedents. Numerous cases are settled after the granting or refusal of injunction by the Supreme Court on appeal.

The insistence on injunction in India over damages is because of the nature of the infringers and the difficulties associated with assessing damages. Defendants are often fly by night companies, who shift or abscond as soon as an infringement suit is filed. Small traders and shop owners who are the infringers in most cases do not maintain account books and file returns, which makes it very difficult to assess account of profits. As if often also pointed out by intellectual property owners, the true battle begins only after the decree with respect to damages is granted. It is often impossible to obtain damages from the defendant even after obtaining an execution decree. Thus, the plaintiff gives up on the damages pleaded for once an injunction is granted.

His honour pointed out that there are often three kinds of disputes in infringement cases. Firstly disputes with respect to infringers dealing in counterfeit or pirated goods, where identical marks are used on identical goods. Ex-parte injunctions are often granted in these cases. Secondly disputes involving small traders attempting to exploit the goodwill of established brands. This for instance would include underwear with the brand name of Mercedez Benz. In this case, there need not be any similarity between the goods. Injunctions are granted in these cases also. Thirdly, there are genuine disputes in relation to infringement involving established manufacturers where the defendant is not a fly by night company. Most cases fall in the first two categories and there are often no final judgments.

He made references to the cases of Kabushiki Kaisha Toshiba v. TOSIBA Appliances Company 2008(37)PTC394(SC), Khoday Distilleries Limited (Now known as Khoday India Limited) v. The Scotch Whiskey Association 2008(37)PTC413(SC), Pfizer Products, Inc. v. Mr. Altamash Khan MIPR 2007 (3) 445, among others as involving genuine disputes. In the Pfizer case the plaintiff, sought to restrain the defendant from using his trademark “VIAGRA” or deceptive variants and also from using the domain name www.viagra.in which was deceptively similar to that of the plaintff www.viagra.com. The suit was decreed in favour of the plaintiff. The Khoday case was in relation to alleged infringement of trademark owned by The Scotch Whiskey Association by Khoday distilleries which manufactures whiskey under the mark 'Peter Scot'. The Court held that the tests of deceptive similarity required to be applied in each case would be different and would depend on the nature and kind of customers.

And since in this instance the class of buyers is educated and rich and are mostly aware of the difference between Scotch Whiskey and 'Peter Scot' the use of the mark 'Peter Scot' was not held to be causing confusion and deception. He also referred to the case relating to alleged infringement by Pearl Pet, which is a manufacturer of plastic containers where injunction was refused after looking into the balance of convenience and public interest. The defendant was employing hundreds of employers in his factories and an injunction would cause irreparable damage. He also referred to factors influencing the decision making process with respect to infringement cases like market power of the of the parties and issues in relation to competition law. He went on to stress the need of innovative interpretation and the need for innovative solutions.

The hon'ble judge began his discussion on punitive damages by quoting the judgment in the case of Time Incorporated v. Lokesh Srivastava 2005(30)PTC3(Del). The defendants in this case infringed the trademark 'TIME ASIA' owned by Time Warner Incorporation. The defendants had started printing, publishing and distributing for sale “TIME ASIA SANSKARAN” by using the words “now in Hindi also a News Magazine of International Standards”. An ex parte decree of permanent injunction and punitive damages were awarded to the plaintiff. The court held that punitive damages need to be granted to discourage and dishearten law breakers who indulge in violations with impunity. Punitive damages often spell financial disaster to the defendant. With reference to the granting of punitive damages the judge stressed the importance of differentiating between an honest trader who infringes a right and a dishonest trader. Here he made a reference to the infringement action filed by J.K Rowling with respect to the sale of a downloadable e-book on ebay.

Ebay refused to take responsibility for the content posted on its website. And the defendant who had posted the content was a college student who claimed to have had no knowledge of the fact that his action would constitute infringement. An interim injunction was awarded in this case. This instance is clearly the case of an honest trader and clearly does not warrant the awarding of punitive damages.

The judge concluded by stressing the need for rules to be framed for improved case management in Courts and the importance of alternative dispute resolution mechanisms in intellectual property law litigation.

SpicyIP ranks at number 8!!!!!

Ladies, Gentlemen & Anonymous Commentators, I am thrilled to announce that SpicyIP has just had its "Slumdog" moment. Gene Quinn of IP Watchdog came out with a list of the top 26 patent blogs and guess what..... SpicyIP was ranked at number 8!!!! The list is based on the ranking from the leading blog search engine - Technorati.com. The Technorati ranking is based on how many blogs link back and obviously quite a few blogs are linking back to SpicyIP. The entire methodology of this survey can be accessed here. The entire list is as follows:

1. Patently-O
2. Patent Baristas
3. IPWatchdog
4. Against Monopoly
5. Patently Silly
6. Chicago IP Litigation Blog
7. PHOSITA
8. Spicy IP
9. PLI Patent Practice Center
10. Duncan Bucknell Company’s IP Think Tank
11. Patent Prospector
12. Securing Innovation
13. Peter Zura’s 271 Patent Blog
14. The Invent Blog
15. Promote the Progress
16. I/P Updates
17. IP NewsFlash
18. Orange Book Blog
19. The IP Factor
20. Philip Brooks' Patent Infringement Updates
21. Patent Docs
22. Antiticpate This!
23. Patent Fools (now operated by IPWatchdog.com)
24. Patentably Defined
25. Steve van Dulke’s Patent Blog
26. IP Spotlight

We've passed some other milestones recently, such as our 1000th post and also our 1000th subscriber. Of course we owe all of these encouraging milestones to our dedicated, polite readers who have continued to engage with us, (constructively) criticize us and encourage us. Hopefully we'll cross many more important milestones this year.

SpicyIP Jobs:Patent Attorney

This is with reference to our earlier post, seeking applicants for the position of a Patent Attorney for a company in the life sciences domain.

Details may accessed here by clicking on this link:IPR Head for a Company in the Life Sciences domain

The Indicative CTC for this position is 30lakhs/ per annum. We are still in the process of shortlisting candidates for this.
Interested candidates send in your C.Vs to shamnad@gmail.com and /or ayshashaukat@gmail.com

Follow up on ACTA

Readers will remember a secretive ACTA (Anti-Counterfeiting Trade Agreement) - a proposed multi-lateral agreement with the supposed aim of fighting the growing trade of counterfeited and pirated goods world over. (I say ‘supposed’ because details of what’s actually going on in the discussion of an international agreement, which will have a large effect on most countries of the world, haven’t officially been released) The countries involved in the negotiation of its terms and provisions are USA, the EU, Japan, Canada and Australia. With the governments concerned still insisting on it remaining secretive, details of its development have been hard to come by, but thanks to some inside sources of KEI and other organisations, certain details have begun to emerge. The negotiations of this are still far from over, with many key features of its 6 main chapters yet to be discussed. There will apparently be a supervising structure, the ACTA Oversight Council, to supervise ACTA implementation, consider amendments, interpretations, and modifications to the agreement, and establish and delegate responsibilities to ad hoc working groups. According to Michael Geist's blog and James Love of KEI, there is also disagreement over some of the language in the text. According to KEI,

“…the documents show that the EU has sought greater privacy protection for its citizens than the U.S. and Japan. They also reveal that the EU has sought provisions which would state that seizures of infringing goods by customs officials must not impair legitimate trade, and which would exempt officials from legal liability for their actions.”

(This may remind readers of the Losartan controversy where there was a seizure of ‘in transit’ consignments.)

He also says “Overall, the documents reveal that the U.S. has sought enforcement provisions largely along the lines of those contained in the text of the bilateral free trade agreement the U.S. negotiated with Korea. This is in line with the statements by the Office of the U.S. Trade Representative on the Korea FTA being the basis for the ACTA enforcement provisions.”

Geist writes that of the six proposed chapters, most of the discussion so far has revolved around the Enforcement of IPR chapter. This is further broken down into 4 sections - civil enforcement, border measures, criminal enforcement, and Rights Management Technology/the Internet. However, what’s worrying is that, as predicted earlier, the legislation seems to be tending towards a far stronger protectionist regime than is required (for the non-industrial stakeholders at least). The lack of certain parties, or rather, the inclusion of only certain parties into the developments – industrial parties– is showing in its policies. Amongst other controversial provisions, there are proposals from the USA which would make both commercial and non-commercial infringement a criminal offence. Put simply – p2p file sharing could potentially land you in jail. Other criminal activities would include fake packaging for movies or music, and unauthorized camcording.

There is also a proposed provision on injunctions which does not fall in line with Art. 44.2 of the TRIPS as well as several other national laws. The provision gives the power to the judicial authority to issue interlocutory injunctions to prevent imminent infringement, but disregards that the TRIPS provides limitations to this power. Aside from TRIPS, it should be pointed out that it is also not in line with some of the national legislation of the parties involved. With these discussions being held behind closed curtains, this means one of two things. Firstly, that the negotiators involved are not aware of their own domestic legislation and current international obligations. Or secondly, that they don’t care.

To me atleast, continuing on from my previous post, it seems like the countries (and parties) involved are merely using this Agreement to bypass existing legislation and create their own for their own purposes, which will then trickle down into domestic legislation. I can almost hear the IP protectionists saying that these changes were absolutely necessary in order fulfill their international obligations. (and I’m not the only one – techdirt on the same issue).

However, as mentioned earlier, there still seems to be a good amount of discussion left. And there is also the factor of the new Obama government which could possibly change/influence the way the discussions go. We can hope that the governments/parties involved realize, albeit late in the day, that their citizens have a right to know the proceedings of these discussions.

For portions of the leaked documents and KEI’s take on it, check here.

Copyright in Characters- III (Indian Decision)

In the last two posts, 2 US decisions on copyright protection to characters were discussed and having deliberated to a certain extent on the topic, it would be of much more use to look at the Indian position. I thank Ms.Swathi Sukumar for directing me to the judgment delivered in 1996 by the Delhi High Court in Raja Pocket Books (Plaintiff) v. Radha Pocket Books (Defendant) which dealt with copyright protection for characters.

The plaintiff in this case sought temporary injunction against the defendant to prevent circulation of any kind of promotional material in any manner under the name “Nagesh”, which, according to the plaintiff, infringed its copyright in its character “Nagraj”. The plaintiff further alleged that the defendant’s release of its (defendant’s) comic series called “Nagesh” amounted to misrepresentation because the character closely resembled the plaintiff’s i.e. the character was “Nagraj-like”.

The plaintiff submitted to the Court that in its eponymous comic series, “Nagraj” was the central character and was dressed in green which was an allusion to his serpentine skin and wore a belt which was designed like a snake. The whole series, according to the plaintiff, revolved around the exploits of this character which entitled the plaintiff to copyright in the series as well as the character, its get up and appearance. The title character, in the comics is brought to life by a herpetologist (ahem…Snake expert), has Voldemort-esque powers in that he has power over snakes which are released from his body (I request the readers to bear with these pedantic details; it’s a children’s comics after all) and at the behest of a noble hermit, he decides to put his powers to good use.

The defendant’s title character “Nagesh” too is depicted in almost the same fashion with a slight alteration in the storyline. Nagesh is created when a herpetologist brings a dead person back to life using errr…a snake pearl. This character too uses his powers against crime on the advice of a sage. He too dresses in a green coloured body stocking. Does the character of the defendant “Nagesh” infringe the plaintiff’s copyright in “Nagraj”, if at all there exists one?

Let’s analyse this in the light of the observations made by the US Court in the Star Wars case. In Star Wars, the Court held that for characters to be bestowed with copyright protection, they are expected to bring an element of distinctiveness through their traits i.e. hypothetically speaking, if characters of a run-of-the-mill love story are to qualify for copyright protection, they must distinguish themselves significantly from most characters used in this genre or though belonging to an existing genre, the very features possessed by the character must distinguish the storyline. This is true of most superhero comics because the traits of Superman are different from that of Spiderman and so and so forth. So if one were to introduce a character who is an alien, who can fly and is susceptible to weakness in the presence of a piece of rock from his home planet, chances are that the character infringes Superman.

The other possibility could be that the particular circumstances in which an old theme is set could distinguish the movie from the rest in its genre and yet the characters of the story could be ordinary individuals with no characteristic features; but in such a case, I believe, the characters are not copyrightable in themselves. Of course, this possibility is not relevant to this case. So the character of the plaintiff “Nagraj” appears to be copyrightable owing to his distinctive features. Further, going by the standard of a customer of reasonable intelligence, it would appear that both the characters are substantially similar in content and appearance. This means that the one which was created prior in time is infringed by the later one.

The defendant attempted to support the use of his character by casting aspersions on the priority of the plaintiff’s creation but this was rebuffed effectively by the Court on the basis of the evidence submitted by the plaintiff. As for the similarity in appearance, the defendant sought to counter the plaintiff’s allegation of misrepresentation by saying that the use of the colour green to represent snakes or snake-like beings was common to the trade and the plaintiff cannot usurp this practice to himself. Such arguments are common to trademarks or trade dress cases; for instance, if red and white colours represent the teeth and gums, then the use of these colours on a toothpaste tube may not be considered distinctive enough for grant of rights for exclusive use. But can this argument hold water in this case?

True, the colour green has, over a period of time, come to represent envy, jealousy or cunningness or snake-like qualities, but the fact that it was being used in this case for a character who had power over snakes and which use was original given the context, qualified the use for copyright protection. If there’s an iceman, one would probably expect him to be in white, but the use of this colour combined with the fact of its use to depict a character with unique characteristics vests the creator with copyright in the depiction. A popular example would be the Onida (which in Japanese means the devil) advertisement where the devil is shown. If this were to be used by some other television manufacturer, probably he would infringe the copyright of Onida despite the fact that Onida has no copyright in the devil’s portrayal as such. This means that practices which are common to the trade may not be copyrightable in themselves, but their novel use in certain instances may be copyrightable. Therefore, the use of the colour green to depict a superhero with the powers of a snake prevents others from identical/similar use.

Now, let’s look at what the Delhi High Court had to say on all the above discussed issues. The Court's analysis was based on the interpretation of s.51 of the Copyright Act in R.G.Anand v. Delux Films. The Court observed that grant of copyright is confined to form, manner, arrangement and expression of the author and that in cases where different authors take inspiration from the same source, similarities are bound to creep in, which need not amount to infringement of the first author’s copyright. In these cases, the Court noted, it becomes imperative for the Court to look for similarities in the modes of expression, which if found substantial at once, leads one to conclude that the later work infringes the former in time.

The Court then got down to comparing the various elements of the characters in question and the storylines as well. It is probably safe to conclude that even when one discusses the vestation of copyright in characters, a discussion of the storyline or the context is unavoidable for it is the storyline which helps in fleshing out the salient features better. The Court first noted the striking similarity, phonetic and semantic, in the names of the characters “Nagraj” and “Nagesh” which in effect meant the same. Then there’s the fact of their visual portrayal and not just “word portraits” being nearly the same. Lastly, both characters had almost the same powers and were created in more or less the same way making it difficult to conclude that there was no intention on the part of the defendant to misrepresent or atleast take advantage of the plaintiff’s character. Taking advantage of the popularity of a theme or a fad is one thing and aping the very form or presentation is quite another. The Court pointed out that the changes, if any either in the appearance or portrayal of the character or the sequence of narration, were but inconsequential ("cosmetic", if i may) and hence found prima facie infringement of the plaintiff’s character.

In all these cases, we saw that it was easier to decide copyright infringement of characters because the parties were in the same or related field of activity which fact allowed the Court to analyse and impute motives behind the use of characters. But if a particular fictional character, and a popular one at that, were to be used to sell a product which is nowhere near the field of the activity in which the character was originally used, would it still amount to copyright infringement of the character? Stated otherwise, the question here is if the copyright to a particular character is enforceable only against a person from the same or related field or is it available against anyone irrespective of the field of activity? This is a “dilution-like” argument and fortunately, there are cases available on this. (James Bond Case)

SpicyIP Event: INTA Roundtable on Border Measures Regulations proposed to be organized by INTA ACEC MEASA Subcommittee

The border measures fiasco that we have blogged about here and here has definitely sparked off a debate in the EU as well as India as to what minimum standards may be imposed through the TRIPS and the EC as regards “in transit seizures”. In India, the standards we have adopted are embodied in the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. (The relevant circular on the same may be found here).

In the same vein, the India Task Force of the International Trademark Associations’ Anti-Counterfeiting Enforcement Committee for the Middle East, Africa and South Asia (MEASA) Subcommittee along with ASSOCHAM organizes an all day brain storming roundtable in New Delhi on the 20^th of February, 2009 to help ensure that the Border Measure Rules enacted by the Indian Government “becomes an effective tool of enforcement against counterfeit imports and its proliferation in the market.”

The Session for the day begins after an introduction to the topic at hand followed by a key note address on the effectiveness of Border Measure Regulations. Following this, the first session commences on the topic “Enforcing IP at the Borders” which includes an indepth analysis into the Indian and other comparable international customs rules as well as an industry response to the same.

The second Session then focuses on the practical implications of the Enforcement of the Indian IP Rules 2007 as well as examining the lacunae in the law from the perspective of the practitioner and three different industries.

This event is in fact a culmination of extensive work by the MEASA Subcommittee of the INTA on practical issues concerning the application of the Intellectual Property Rights (Enforcement Rules) 2007. Based on the active participation of enforcement agencies, customs authorities, industry practitioners as well as Government Officials in this event, INTA hopes to give rise to useful suggestions for strengthening the enforcement measures against counterfeits and culminate in the presentation of a position paper to the Government.

The details of the event can be found here.

SpicyIP Tidbit: GSK floats patent pool for neglected diseases

GlaxoSmithKline (GSK) has offered to contribute to a voluntary patent pool to develop treatments for neglected diseases, among a set of claims that will have set the industry abuzz in strategising future business moves.

In this Guardian interview and this Reuters report, Andrew Witty, GSK's CEO, re-envisions the social contract that pharma industry has with society at large, and offers a slew of suggestions that makes me wonder if the company's CSR department is working overtime.

The big news, of course, is in the Reuters report: that GSK is keen to create a voluntary patent pool to develop new treatments for neglected diseases. It announced that it would contribute its own patents for technologies that "might aid research into malaria, cholera and other diseases". This would be opened up to other companies to add patents to, and be made available to third-party researchers.

However, GSK specifically excluded AIDS from the list of diseases that such a patent pool would cater to, indicating that "the pool was meant to focus on diseases with a severe lack of treatments, and the need for greater access to AIDS medicines was being addressed in other ways."

Not surprisingly, health activists not taken this very well. However, UNITAID, an international drug purchase facility, whose patent pool related to AIDS treatments is expected to go live in 2009, was magnanimous enough to welcome GSK's statement, pointing out that this was "a positive signal from an originator company, that industry intends to do more for diseases in poor countries.”

Besides the patent pool, there are some other relevant issues GSK has discussed, which I bullet below:

• Transparency: GSK has pledged to publish all clinical trial data, notwithstanding whether the results ar epositive or negative, and be more transparent about its payments to doctors.
• Drug price negotiation: GSK is willing to negotiate on the prices of its drugs - it clearly seems to want to avoid a reprise of the 2001 South African issue where GSK was part of the MNC lobby that made a failed attempt to institute legal action against the state for importing cheap drugs.
• Profits for poor: It will invest 20 percent of profits made in least-developed countries towards building healthcare clinics and related infrastructure in those countries.
• End to unethical experimentation: GSK has said it will "end practices that cause public anxiety", referring to its announcement in late 2008 to never again to experiment on great apes.

Recall an earlier SpicyIP post that talks of the growing use of patent pools and cross licensing to tackle accessibility issues, which referred also to this op-ed in Business Standard on patent pools in drugs.

GSK's move also draws parallels with IBM's "eco patent commons" advertised just over a year ago, where IBM, Nokia, Pitney Bowes and Sony, got together to create a pool of environmentally-responsible patents to the public domain, in a portfolio available here. I'm curious to see how many jump into the fray with GSK in this story.

SpicyIP Tidbit: New pricing rules for imported drugs

The government of India is expected to soon issue rules for monitoring prices of imported drugs for diseases like diabetes, arthritis, obesity, cancer and heart diseases.

According to this report from Economic Times, "the government will negotiate prices for imported medicines for identified diseases based on prices of the same medicine in other markets and the cost of production estimated by it, an official said. For other imported patented drugs, the companies would be expected to voluntarily keep prices lower in India."

There are already price control norms in place in India, but loopholes in the regulation offer a lot of leeway to imported brands. Specifically, the National Pharmaceutical Pricing Authority (NPPA), which controls drug prices in India, is unable to keep tabs on the production cost of imported drugs. Currently, it relies on the manufacturers' stated production cost, from which the retail price of the drugs are derived. See this formula for more details, and the ET report .

The purpose of this new pricing regulation is to ensure that essential medicines do not get caught in the monopoly pricing loop, and are instead available at affordable rates.

Government has been in talks with industry over this, and the report tells us that "while the MNCs are ready to negotiate prices for essential drugs, they want to restrict it for government’s bulk procurement programme and supplies to government hospitals."

Elsewhere, GlaxoSmithKline (GSK) in a Guardian interview, which I shall post on later, has indicated that the company is willing to negotiate on the prices of its drugs. It will be interesting to see how this pans out from an industry perspective, and whether others actually pick up the gauntlet.

In an unrelated, but perhaps relevant, piece of news, the second phase of the Jan Aushadi project (24X7 generic drug stores) is now under way, with stores in the NCR and Punjab, and is expected to be scaled up nationwide by 2012, if it runs per schedule. Note the 'if'. The proposed implementation plan for the project is ambitious to say the least - it takes four months to go from one district to about half a dozen, and another year to cover a whole state (the rest of the states are unnamed/undecided); and the whole 600+ districts in the country will be covered in the remaining 24 months.

Will we see more election sops coming our way? Counting down to April-May 2009.

Time to remedy the remedy of Injunctions?

How far should injunctions be used as a remedy in copyright cases? That was the question faced by the Supreme Court in Academy of General Education v. Malini Mallya.

Dr. Kota Shivarama Karanth, a Jnanapeeth awardee, was stated to have developed a new form of the traditional ‘Yakshagana’, named ‘Yaksha Ranga’. Dr. Karanth was the Director of the Appellant academy, while the respondent claimed that she was the owner of the copyright by virtue of Dr. Karanth’s will. It was conceded that ‘Yaksha Ranga’ passed the threshold of ‘originality’ to be classified as a literary or dramatic work.

(For those of our readers who are knowledgeable about dance forms, what exactly is the originality in ‘Yaksha Ranga’? According to Dr. Karanth himself, Yaksha Ranga is a “creative extension of traditional Yakshagana”. What does this mean? How should we assess originality in art forms?)

Nonetheless, Dr. Karanth was alleged to have produced the original work in his capacity as Director of the appellant. Therefore, it was contended that the copyright belonged to the appellant itself, and could not have been passed on to the respondent by virtue of any will. Further, it was contended that in any event, the allegations of infringement were not made out considering that the appellant had performed the dance in a ceremony to celebrate the memory of Dr. Karanth, without charging any fees. The respondent had claimed – successfully in trial – that the work was produced while Dr. Karanth was working for the appellant, but was not produced in the course of employment of the appellant. Therefore, the copyright in the work had successfully devolved on to her. This much was not seriously contested by the appellants.

Next came the question of infringement. The dance was put up by the appellant to honour the memory of its former director without charging any fees. This was held in trial to be infringement, resulting in the remedy of permanent injunction against the Appellant from performing the dance. This is like saying that I infringe the copyright in a poem by reason of the fact that I read out the poem in a ceremony to celebrate the works of the author. And – more importantly – I can be prevented from doing so by virtue of an injunction.

Indeed, the order of injunction of the trial Court read, “Defendants or their employees or agents are restrained from performing the above said 7 ballets or Prasangas or in parts thereof in any manner as evolved distinctively by Dr. Karanth by way of permanent injunction.” The Supreme Court did not agree to sustain such a broad order of injunction. It held, “Section 52 of the Act provides for certain acts which would not constitute an infringement of copyright. When a fair dealing is made, inter alia, of a literary or dramatic work for the purpose of private use including research and criticism or review, whether of that work or of any other work, the right in terms of the provisions of the said Act cannot be claimed. Thus, if some performance or dance is carried out within the purview of the said clause, the order of injunction shall not be applicable. Similarly, appellant being an educational institution, if the dance is performed within the meaning of provisions of clause (i) of sub-section (1) of Section 52 of the Act strictly, the order of injunction shall not apply thereto also. Yet again, if such performance is conducted before a non-paying audience by the appellant… the same would not constitute any violation of the said order of injunction.”

In terms of legal principle, the decision is perhaps significant for saying that before passing an order for injunction, Courts should ensure that the order of injunction does not prevent fair use. Injunctions cannot be so broad as to prevent all performances of a copyright work altogether – permissible uses cannot be taken away. However, that still leaves a few prior questions unanswered. Must injunction necessarily follow in every case of infringement? In what circumstances will other reliefs be sufficient? Why should the injunction not be a remedy of last resort, to be granted only on specific proof of irreparable injury? I will follow up on these aspects in another post shortly…

SpicyIP: Border issues at Bidri.

Bidri is an intricate metal craft item that originates from Bidar in North Karnataka. Located on the Andhra Pradesh-Karnataka border, the artisan community of Bidri and the craft are located on both sides of the border. Courtesy the craft line, this region has firmly established its cultural identity on the world craft map.

Interesting antecedents dot history of this craft, one that has a bearing on the brewing discontentment between the artisans of the two different states.

Bidar as history states was the stronghold of the Bahmani Kingdom till the 14th century. The antecedents of this craft date back to that era when a Persian craftsmen at the invitation of the Bahmani sultan migrated to this region, collaborated with the local artisans and developed this craft line. Thus in a nuanced sense, it may not be entirely wrong to say that this craft in its essence is of foreign origin, subject to innovation thereafter with Indian inputs. That it acquired an independent standing and Indian lineage by virtue of traditional endeavour merits reckoning in its relevant part.(thanks Sai, for adding this input)

Featuring prominently in the list of craft items to be exported form India, it however failed to do much for the socio-economics for the artisans per se. A couple of years back, this was a languishing dying art, with artisans migrating fast to other lucrative livelihood options.

Such was the scenario, up until two key developments put the craft back on the revival path; notably factors that carry significant importance in the ongoing G.I discourse and serve as examples to extrapolate in similar other G.I contexts..

Early last year, the Karnataka Handloom Handicrafts Corporation was awarded the much awaited G.I tag. Prior to this the artisans worked as an unorganized sector in informal clusters, appallingly exploited by the middlemen from Bangalore and Hyderabad without any significant economic accrual percolating back to them. Further the main raw material component, the sand sourced from the fort of Bidar which gave the metal artifacts its lustrous sheen, was difficult to procure adding to the woes of the artisans. This scenario prevailed until the \National Bank of Agriculture and Rural Development started the Bidri cluster development programme and set up a Bidri colony in Bidar in 2002.
All well with the progressive initiatives launched to revive this dying art, save for one catch in the latch that’s been festering and threatening to assume full blown proportion lately. The G.I authorized user status has been awarded to the artisans resident in the Karnataka region; totally excluding the Hyderabad artisans from the tangible benefits that may accrue vide the G.I status. Unlike the EU Directives that provide for a mechanism whereby a joint recognition of G.I rights amongst the member states is possible, the Indian legislation mentions none. That be, administration and benefit apportioning becomes a ticklish intra-state issue Is there a reconciliatory path that does not create a disparity in the artisan community that share common traditional footprints?

Another factor that deserves to be highlighted in the Bidri issue is the play of innovation on the promotion of the G.I product. The age long debate on innovation and IPRs has largely been examined from the perspective of traditional IPR doctrines. Contrary to popular notions, this is one case where a sui generis G.I legislation has helped to foster innovation and the craft line “Some of the old designs and varieties, practiced for years by the artisans, had made Bidriware “obsolete” causing a slump in the market. A couple of years ago, Bidriware was considered to be a dying tradition in its home place. Bidriware is native to Bidar and has obtained Geographical Indications (GI) registratiion. In the recent times, things have started to look up for the work after innovative designs were developed by the National Institute of Fashion Technology (NIFT). The experiment is the first of its kind in the long-practiced Bidriware tradition and one of the finest examples of the changing trends in Bidri.Artisans claim that the revenue stream stands substantially enhanced post this.”
As Darwin says, that there is no external design to the evolution of life, just infinite possibilities…
The Bidri in a sense may be so of foreign origin, but is ours to innovate, promote and nurture…

Talk at NUJS: US Legal Education and Culturing Google To Copyright

Two very distinguished academics are visiting NUJS, Kolkata on the 19th of February (Thursday).

Professor Frederick Lawrence, Dean of the George Washington University Law School and a leading civil rights expert will speak on US legal education. His talk is titled: ""Globalization of the American law curriculum". During his talk, he will also focus on the LLM and other higher law degree programs in the US.

His talk will be followed by that of Professor David Nimmer, a leading copyright expert (and revision author of the famous treatise "Nimmer on Copyright") who will speak to us on the latest copyright disputes involving Google. The title of his talk is: "Culturing Google to Copy Right" and below is a short abstract of what he intends to discuss:

"Google Corporation has been involved in a maelstorm of copyright litigation, defining some of the basic issues of copyright in the digital age. This lecture will systematically look at four aspects of copyright doctrine through the Google prism: text searches, image searches, video searches, and book searches."

Their talk will be in Room 006 of Ambedkar Bhavan, NUJS, Kolkata from 3 pm to 6.30 pm (19th February). The tentative schedule is as follows:

i) Introduction of Speakers: Shamnad Basheer: 3.00-3.15 pm
ii) Welcome Address: Professor MP Singh: 3.15 to 3.30 pm
iii) Talk by Dean Fred Lawrence:3.30 to 4.20pm
Q/A: 4.20 to 5.00 pm
iv) Talk by Professor David Nimmer: 5.00 to 5.50 pm
Q/A: till 5.50 till 6.30 pm

All are welcome to attend. And please feel free to drop in whenever your time permits. But if you plan to attend, can you please send me an email at shamnad[at]gmail.com, so that I have some idea of the numbers.

Please also feel free to forward this email to colleagues etc who may be interested in this event.

Dr Reddys and the "Losartan" Controversy: Forced to Cave In?

It appears that given the paucity of time to obtain legal advice and the threat of their consignment being destroyed, Dr Reddy's Labs (DRL) thought the most prudent option would be to cave in and ask that the goods be returned to India.

But first, for those not familiar with this dispute yet, a bit of background:

"On 15 January, Mint had reported that a DRL shipment of the generic version of losartan was seized in transit in the Netherlands. This shipment, on its way to Brazil, was held by the customs authority at Rotterdam, which said it infringed the patent of the original drug—Cozaar. Losartan is not patented in India or Brazil. The patent for Cozaar in the Netherlands is held by DuPont, while US-based pharma multinational Merck and Co. holds the marketing rights."

For those interested, listed below are the consignments of Indian companies that were seized on grounds of patent infringement by the Dutch customs authorities and the respective dates of seizure.

1. 15.10.08: Ind-Swift Laboratories Ltd (Clopidogrel Bilsulphate- API): Destined for Columbia

2. 27.11.08: Cipla Ltd, through Uni World Pharma Ltd, Dubai (Olanzapine 10 mg Tabs): Destined for Peru

3. 27.11.08: Cipla Ltd, through Uni World Pharma Ltd, Dubai (Rivastigmine 3 mg Tabs): Peru

4. 24.12.08: Dr Reddy’s Laboratories Ltd (Losartan - API): Destined for Brazil

Subsequent to these seizures which prompted India and Brazil to issue very strong statements against this action, DRL opted to back down and have its consignment returned to India. For the TRIPS implications of such seizures, see our previous post.

A recent statement by the EU labelled this seizure as a "temporary detention" and went on to express surprise at DRL's decision to return the seized consignment to India. It notes:

"In the present case, it appears that, following a request by a company which has patent rights over the medicine in question in the Netherlands, the Dutch authorities temporarily detained (which does not mean seize, confiscate or destroy) a small shipment of drugs worth 55.000 euros in a Dutch airport, in order to control it. This action is allowed by TRIPS and is based on provisions in EU customs law that allow customs to temporarily detain any goods if they suspect that these goods infringe an intellectual property right.

The goods were not intended for the EC market and the medicines were finally released by the authorities, leaving their (Indian) owner the right to do with these goods as he pleases. There was certainly no legal obligation to send these goods back to their country of origin (i.e. India). We are still not clear as to why the company decided to proceed that way, but this is in any event beyond our authority once the goods were safely returned to their owner. We have no indication that there is a systemic problem in this respect."

In reply, DRL takes strong issue with the EU characterisation of the action as a "temporary detention", as opposed to a "seizure". Here is what a letter from DRL states:

“To the best of our information and belief, the submission of the EU that the Dutch authorities had "temporarily detained" and not seized the consignment is misleading. Lovells, the attorneys of EI DuPont Nemours & Co and Merck & Co. have stated in their communication of 24 December 2008 to us that "The release of the above mentioned product (Losartan) was suspended on the basis of Council Regulation (EC no. 1383/2003 (OJ EC L 196, 2003) dated 22 July 2003." This communication further demanded that we sign an attached "Declaration of Waiver of Rights" which stated, amongst other things, that "The infringing losartan potassium originated from India and was seized by Dutch Customs at Schipol during a transit shipment to Brazil."

Art 16 of the above Council Regulation provides that if the goods are found to infringe an intellectual property right at the end of the prescribed procedure, such goods shall not be allowed to exported, reexported, placed under a suspensive procedure or placed in a free zone or warehouse. Admittedly, the goods in transit would infringe EU Patent EP 643704 and the corresponding SPC if it were meant to be sold in the EU, though we believed that in the present case as there would have been no infringement as the goods were consigned to Brazil. The inevitable result of an infringement of the EU patent would be the prohibition of release of goods or placement under a suspensive procedure, which in effect is nothing but a seizure.

Under the circumstances, we do not see any material difference between the "temporary detention" alleged by the EU authorities and "seizure" and this appears to be the understanding of Lovells, the attorneys of the patent holder as they have used the word "suspended" and "seized" interchangeably."

DRL then goes on to explain as to why they opted to cave in and take the goods back to India:

"The EU claims that Dr Reddy's was under no legal compulsion to take back the goods to India and that they are unclear about why Dr Reddy's decided to proceed that way. The reason is that Dr Reddy's had very little time to respond to the communication from Lovells dated 24 December 2008 and as explained in the reply to Lovells, it was impossible for Dr Reddy's to obtain legal advice in that period, considering it was during the Christmas vacation. Further, we were mindful of the power under Art 17 for the authorities to destroy goods found to infringe intellectual property rights or otherwise dispose of them to effectively deprive any economic gains to the owner of such goods. We therefore thought that it would be more persuasive to seek return of the goods rather than release for despatch to the customer in Brazil.”

While "technically" the EU is correct that DRL need not have opted for take the goods back to India, the hard reality is that in the light of pressure from originator companies and their lawyers and the relative lack of expertise with EU regulations (EU border control in its present form has been around since 2003, but has begun to be enforced strictly only now), Indian and other developing country companies may find it easier to simply withdraw from protracted and complex legal battles.

In fact, this point may be more than borne out by the fact that Cipla, a spunky generic manufacturer that is on the constant look out for opportunities to take on big pharma decided to simply cave in and abandon its "seized" consignment in the EU. A report by Jyothi Datta of the Hindu Business Line notes:

"It is not just drug makers Ind-Swift and Dr Reddy’s Laboratories’ export consignments that were confiscated by Customs authorities in Amsterdam in the last three-odd months on the grounds of patent infringement...

Details on the size of Cipla’s consignment and the type of medicines being exported were not available, but the company official indicated that Cipla has abandoned the consignment as the cost of litigation was disproportionate to the value of the consignment."

Recent news reports suggest that this issue may be resolved diplomatically. The Hindu stated that "the Netherlands on Tuesday assured New Delhi that it will sort out the issue of frequent seizure of generic drugs produced in India by European countries on the pretext of patent protection.

....Dutch Foreign Trade Minister Frank Heemskerk's, who is on a week-long visit to India, said patent protection should not be used as an excuse for hampering the distribution of generic drugs among the poor people across the globe."

Other papers including the Economic Times and the Mint also reported on the above assurances by the Dutch minister. Given these media statements, one hopes that this issue would be resolved, without a TRIPS challenge. However, diplomatic statements notwithstanding, the threat of future seizures is still present. The present wording of the EC regulation (Council
Regulation (EC) No. 1383/2003 of 22 July 2003), under which such seizures were made, leaves much to be desired and offers some scope for patent owners to insist on such seizures.

Therefore, along with exploring a TRIPS challenge, Indian companies must also ready themselves to challenge such actions under the EC regulation itself. Particularly since case law from the ECJ (European Court of Justice) suggests that the European courts may not be too sympathetic to seizures of in transit/transhipment consignments that were never meant for the EU markets and that are unlikely to impact the commercial interests of IP owners in the EU. However, most such decisions were in relation to trademarks and under an earlier regulation (European Council Regulation Number 3295/94 of December 22, 1994), that preceded the current 2003 EU regulation. If time permits, we hope to explore EU case law in this regard in a future post.

It is interesting to note that the Netherlands has sought more "clarity" on this issue from the European Commission. An ET report notes in this regard that:

"Visiting Dutch minister of foreign trade Frank Heemskerk has said his country wanted to “avoid” such incidents in future and had written to the European Commission seeking clarity on how the EU Customs regulations could be brought in sync with the international Trips regulations which gave concessions to poor countries on the ground of public health. “My country is very much in favour of providing generic medicines, especially to the very poor,” Mr Heemskerk said in an interview to ET.

As to whether the EC will end up limiting the scope of its 2003 Council Regulation in the light of the above controversy and its implications for the spirit of free trade and public health as enshrined in TRIPS, remains to be seen.