Attitudes to towards IP protection in India

Although India has a wide range of long-established, enforceable intellectual property (IP) rights, various speakers had very different experiences of how IP was treated within their companies.

Amir Singh Pasrich, managing partner of International Law Affiliates, said that in his opinion, the protection of IP in India was too often reactive: “Companies tend to happily carry on until there’s a crisis – it’s like not going to a doctor until they need a major operation. When a company decides to go to court to enforce their rights, they demand the best lawyer, and don’t worry much about how much the lawyer charges. This corporate mentality has to change – prevention is necessary.”

As far as Herbert Smith’s Nick Gardner was concerned, the importance of IP protection was something that companies often had to learn the hard way. He suggested that some India companies were shocked when they tried to expand outside their home territories, and discovered that every aspect of their product line has been protected in some way by their overseas competitors. “This scenario has the potential to destroy a company’s business,” he said.

Where companies suffer from a lack of internal stakeholder interest in IP protecting rights, this can make the life of the in-house counsel difficult. Employees may simply not alert the legal department that they are working on a project that may benefit from formal IP protection. Alternatively, even if the legal department is aware of specific matters that need protection, they may not be able to obtain the necessary documentation from key individuals to enable this to happen. In this scenario, it may help concentrate stakeholders’ minds if the in-house counsel can put a financial value on the implications of their non-cooperation.

Training of key personnel is often suggested as a way to remedy lax corporate attitudes towards the importance of IP. However this, in itself, is not without its consequences. Some speakers hinted that, after training, their internal clients tended to become over-enthusiastic about trying to protect their IP rights, even if the cost/benefit of such protection was questionable. To alleviate this problem, it was suggested that an IP training programme should probably go hand in hand with a formal policy on IP registration, which sets out in what circumstances protection will be sought. Such a policy may help prevent resentment and loss of faith in the system from those employees whose inventions the company believes are not worth protecting.

In relation to patents, once technical personnel have been trained about the contents of a typical application, counsel should expect more prolonged discussions about what an application should contain. Enhanced knowledge may help technical staff become more aware of the hows and wherefores of patent registration – but it will not necessarily result in less work for the corporate law department.

Of course, there will always be some key stakeholders it will be difficult to persuade of the importance of IP. While one speaker said that large multinationals were increasingly winning IP disputes in India, another speaker said that many mid-ranking government officials either remained ignorant about IP matters, or were actively hostile to the whole concept. “Some police offices and customs enforcement officers do have an attitude problem with IP issues,” they said. “You can teach them about the law – but what can you do if they’ve been in the job for 40 years, and have decided they hate IP? You can’t find answers on how to deal with these people in any textbooks.” Turning to the judiciary, they added: “It’s helpful if you can appear in front of a judge who really understands the terminology you are dealing with – like what the difference is between a website and a domain name, for example.”

Justifying investment in IP protection

Protection of IP rights may be a costly and time-consuming process. For those rights capable of registration, counsel will have to factor in the direct financial cost of the registration itself, time required to create and submit the registration document, plus subsequent challenges to the registration. This is before costs are incurred in relation to any subsequent enforcement action. For non-registrable rights, costs will be incurred if rivals decide to challenge the company’s right to use their IP, or if the company decides to commence its own enforcement proceedings against its rivals.

This, of course, all takes time and money. Several speakers therefore offered practical suggestions about how this expense could be justified to the counsel’s internal management team. One speaker pointed out that it was simply cheaper to make use of a statutory registration process – even if a registration fee was payable – than to rely on less-defined alternative protection options, which may have a higher evidentiary burden in order to be successful. In addition, formal registration sometimes offered some specific benefits, such as the right to have a dispute heard in a specialist court.

One private practice lawyer pointed out that the cost of proactive IP protection could be considered in relation to the cost of marketing the item or brand to be protected. Put simply, counsel could consider pushing IP registration costs into the start-up budget for a new project launch, rather than having to find money out of the legal department’s own operational budget. “It’s often said that trade mark litigation is quite expensive, but you have to consider its cost relative to the advertising budget that created the brand in the first place,” said one Herbert Smith representative. “Companies only have to defend their brands because they’re successful.”

For companies who are most interested in IP enforcement, one speaker had an interesting suggestion about which group of workers should receive specific IP training: the sales force. Although these people may not be an immediately obvious priority for an IP training programme, there was a logic to this speaker’s argument. They claimed that the sales forces are arguably the best group of people for gathering intelligence about the activities of rival suppliers – simply because they talk to their customers about developments in the wider market. If sales staff are informed about which IP rights the company wishes to protect, and which rights this protection entails, they will be better placed to understand which possible infringements should be referred to the legal department for further investigation. And, although not suggested at the meeting, it may even be worthwhile for the legal department to provide their team with financial incentives to report any possible IP infringements by rival companies. The cost of doing so would almost certainly be less than hiring a special investigator to proactively seek out infringements – while also increasing the company’s revenues.

Deciding which IP rights to protect

The decision as to which IP rights should be protected is, of course, a decision that is specific to each company. This decision will depend on a number of factors, such as the rights available for protection in that particular jurisdiction, a cost/benefit analysis for protecting those rights when considered in relation to the revenues available, together with a consideration of which jurisdictions the company regards as most important for it to protect its rights in. For example, a company may wish to register its trademark in its key markets, but rely on less expensive “passing off” protection in markets where the product’s market share is likely to be marginal.

However, when making these decisions, the in-house counsel should always bear in mind the company’s strategic future direction. For example, if a company intends to expand into specific new markets during the lifetime of a patent, it should consider proactively registering that patent in those markets as a defensive measure. Here, outside law firms are often a useful resource during the registration process. Not only will they be aware of any subtle differences in patent protections between countries, but they can often relieve the administrative burden of carrying out multi-jurisdictional filings.

One speaker indicated that some companies are overly defensive in trying to protect their IP rights, thereby running up unnecessary expense while doing so. On occasions multiple registrations were justified on defensive grounds – if one patent for a specific product was successfully challenged, the surviving patents would continue to protect it. Nevertheless, one counsel recalled how companies occasionally went too far in this defensive stance, because they spend money on registrations that they simply did not need to. “I know people who register Indian trademarks in 14 different languages – but there’s no need for them to do this,” said one corporate counsel. “In India, if a trade mark is registered in English, it is automatically protected in translated form in all of the country’s official languages.” On this same theme, another speaker added, “It’s sometimes important for external counsel to tell their clients ‘no’ – there no reason to file for protection, just for the sake of it.”

Of course, some companies may simply take an ethical position on certain IP matters, and the in-house counsel’s IP protection strategy should reflect that. For example, some companies believes in “open source” software as a concept, so the strategy and budgeting of the in-house legal function should reflect that reality.

Others make a strategic decision to rely on operational rather than legal solutions to protect new inventions. For example, employees may not be given access to all the schematic data relating to a specific product, to ensure they are physically incapable of leaking comprehensive developmental data to the company’s rivals.   Using secrecy/confidentiality measures or terms to protect IP can, of course, be an expensive exercise – not to mention logistically challenging. Another speaker said this approach may be high risk, because employees had a tendency to talk about things that they shouldn’t reveal.

Common problems

During the course of the debate, various speakers outlined specific administrative difficulties or regulatory uncertainties relating to IP protection. One of the most common complaints was how to extract relevant information from the companies’ own employees, in order to allow the legal department or external adviser to register or enforce specific IP rights. Another common concern was how counsel could manage subtle differences between different types of enforceable IP rights, both domestically and also in the international market. Just because one IP right can come into existence in one country, it does not follow that the same right exists in another. Or, if the right does exist, it may have slightly different requirements in different countries, in order to be enforceable.

Several speakers mentioned the importance of proper documentation when dealing with IP assets, especially in relation to M&A due diligence. Here, a common problem was the use of freelance subcontractors. For some, but not all, IP rights, ownership is – by default – held by an independent subcontractor, in absence of any specific contract to the contrary. As a result, some companies wrongly believe that they own specific IP assets, but in fact cannot prove that they do. In some due diligence investigations, this lack of clarity over ownership of rights could seriously affect the company’s value. “Each type of IP rights requires its own form of documentation,” said Harinder Pal Singh Bhullar, head of legal at Indus Towers Limited. “Corporations often make the mistake of lumping all IP rights together,” S Ramaswamy, head of legal and company secretary for JCB India Ltd. added, “There’s no substitute for proper documentation, whether people like that fact or not. If you need to get a signature from a contractor to assign their IP rights, do it now. Don’t wait until tomorrow, because it will never get done.”

On another topic, one in-house lawyer discussed how they believed their company had, in the past, simply been too zealous in relation to its IP enforcement programme. “We bought trade mark infringements right, left and centre – we didn’t even consider how much time we were spending on causing unnecessary hassle,” they said. But the company also learned the dangers of this scatter-gun approach – the hard way: “We tried to enforce proceedings against one small company, only to discover that they had been using the mark for hundreds of years – he could provide us with bills proving usage from 100 years before. When this happened, it was a real shock to the company,” the counsel recalled.

Takeaways

• Many companies take a reactive stance towards IP protection. Education can help change this culture – but it can also bring about over-enthusiasm for enforcing rights of marginal value. Any IP training programme should be accompanied by a clear policy setting out which IP rights will be vigorously protected.
• IP enforcement can expensive. Where money is tight, try to incorporate its cost within other departmental budgets, such as product development or marketing.
• When considering what rights to protect, bear in mind the non-financial advantages associated with specific IP rights, such as the availability of specific courts or remedies, but avoid spending money on duplicate protection, especially if that protection brings no additional benefits.
• In all IP enforcement matters, proper documentation is the key to success. Time spent up-front in ensuring the documentation is in place will save the company time and money if these documents are ever needed.