Business Method Not Patentable: Yahoo vs. Rediff

The IPAB in this case deliberated as to the patentability of a ‘Business Method’ in India. The IPAB held that the patent application filed by Overture Services Inc. (which was later taken over by Yahoo Inc.) was not patentable under the provisions of Section 3 (k) of the Indian Patents Act, 1970 which states as under:

“Section 3 The following are not inventions within the meaning of this Act,— (k) a mathematical or business method or a computer program per se or algorithms;.”

The invention relates to “A method of operating a computer network search apparatus”. India Ltd. filed a pre-grant opposition and the Patent Office found that the patent did not pass the novelty and patentability test. This order was appealed against by Yahoo and the matter was heard by the IPAB.

Rediff argued that the alleged invention was merely a computer program which performs a business method causing a search listing with given key words provided by a user based on the amount of money deposited.

The IPAB considered the question as to whether the Invention is patentable or not. The IPAB considered Section 3(k). The IPAB observed that in contrast to the law prevalent in the US, in India the law specifically excludes business method patents and there is no administrative acceptance therefor.

The IPAB relied on a passage in Mathew Fish in “Patent Law: Interpretation and Scope of Protection” which stated “For inventing business methods no incentive is required because better business methods are necessary ingredients of the art of doing business and further the need for making more money is inexorable. Secondly the exclusion of competition may really be counter-productive to the technological prosperity of the society.”

The IPAB held that since the invention falls under the purview of Section 3 (k) it is not patentable and therefore the patent applied for was rejected.

In its arguments, Yahoo contended that several patents have been granted for business methods to Google and also cited the case of Dimminaco AG v. Controller of Patents (IPLR 2002 July 255). The IPAB observed that there should be a uniform practice, when similar inventions come up for grant of patent before the Indian Patent Office. The IPAB further maintained that if the actual position is that the Patent Office had been adopting different standards for different applicants, it is not a desirable state of affairs. The IPAB stated that if other patents suffer from the same vice of S.3 (k) then as and when the question arises, it will be dealt with. The IPAB stated that the patentability bar cannot be ignored merely because it is alleged that in other cases erroneous decisions have been issued.

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Bayer Vs. Natco: Compulsory License Saga Continues

In our previous newsletter we reported on how the Controller General of Patents allowed an application for grant of Compulsory License in favour of NATCO for the Kidney and Liver Cancer drug of Bayer called SorafenibTosylate, sold as Nexavar.

BAYER filed an appeal to the order of the Controller General before the IPAB along with a petition for grant of interim stay of the order. The IPAB heard arguments of both parties and considered the evidence adduced and held that the order of the Controller General shall not be stayed.

Inter alia, BAYER relied heavily on the fact that CIPLA was currently selling a generic version of the drug in question in the market at Rs. 5,400/- for a month’s supply. BAYER contended that this price is even lower than the price at which NATCO will be selling in the market i.e. Rs. 8,800/- for a month’s supply.

It was duly noted by the IPAB that BAYER had filed a suit for infringement of the patent in question before the Delhi High Court against CIPLA. This suit is currently pending. No injunction has been granted in this case and thus CIPLA continues to sell the product till date. BAYER has also instituted a suit against NATCO which is currently pending. It was also noted that both CIPLA and NATCO have applied for revocation of the patent.

The IPAB observed that the Appellant, BAYER has been unable to decide whether CIPLA is its friend or its foe. On the one hand BAYER claims that the reasonable requirement of the public is being met by CIPLA selling large quantities of the drug in the Indian Market at low prices and thus, there is no need for grant of compulsory license to NATCO. On the other hand BAYER is also saying that CIPLA is infringing its patent and must be stopped.

The IPAB held that it is the responsibility of the patentee to meet the public interest and sell the patented article at reasonable prices. The Patentee cannot rely on the acts of another especially when it is the case of the Patentee that such other person is selling the patented article illegally.

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Delhi High Court Decision: TM Act Allows Parallel Import

Parallel import is where a product is bought legally from one country, imported into another country and sold at prices which are lower (or in exceptional cases higher) than the prices charged by the manufacturer/ trade mark right holder in such other country. The Importer in such cases sells the products without the permission of the manufacturer/ trade mark right holder. Parallel import is one of the ways in which grey markets are facilitated. In a recent case, a division bench of the Delhi High Court comprising Hon’ble Mr. Justices Pradeep Nandrajog and Hon’ble Mr. Justice Siddharth Mridul heard and decided an appeal from the order of a Single Judge relating to the doctrine of International Exhaustion of Rights which lends legality to parallel imports. International Exhaustion of Rights implies the exhaustion of rights of a trade mark holder over goods bearing such marks, once they have been sold in the international market. In their decision, the Division Bench overruled the decision of the Single Judge and held that the Trade Marks Act, 1999 does recognize the doctrine of International Exhaustion.

The facts of the case are briefly given hereunder:

Samsung Korea and Samsung Electronics Co. Ltd. (the Indian entity) are part of the Samsung Group of Companies and manufacture, amongst other things, printers, cartridges and the like. The Indian entity has been licensed the right to use the trade mark Samsung in India by the Korean entity. The Defendants/ Appellants import and distribute Samsung products in India at low prices. They are not authorized distributors of Samsung products and have not been given permission by Samsung to sell the products in India. The Defendants also operate a website whereby they offer for sale a varied range of the printers under the mark SAMSUNG at prices much lower than those offered by the Plaintiff. The Defendants use the technique of deep hyperlinking whereby the Defendants are also able to establish a connection between their website with that of the Plaintiffs when it comes to displaying the product to the consumer. The imported products were not supported by warranty of the Plaintiffs.

The Plaintiffs alleged that the Defendants are guilty of infringement since they are selling the Plaintiffs’ products bearing the SAMSUNG trade Mark in India without the permission of the Plaintiffs and also since they are meta tagging and deep hyperlinking.

The Plaintiffs further contended that the Defendants are also tarnishing the reputation of the Plaintiffs' well known trade mark SAMSUNG by providing the goods which are actually not intended to be sold to the Indian public. Any element of dissatisfaction would then clearly attack or reflect on the reputation of the Plaintiffs mark SAMSUNG.

Section 30 lays down instances when certain acts would not amount to infringement. Interpretation of Sub section 3 of Section 30 was the main point at issue in the present case. Section 30 (3) reads as under:

“(3) Where the goods bearing a registered trade mark are lawfully acquired by a person, the sale of the goods in the market or otherwise dealing in those goods by that person or by a person claiming under or through him is not infringement of a trade by reason only of-

  • the registered trade mark having been assigned by the registered proprietor to some other person, after the acquisition of those goods; or
  • the goods having been put on the market under the registered trade mark by the proprietor or with his consent.”

Hon’ble Mr. Justice Manmohan Singh, the Single Judge before whom the original infringement suit lay, considered the points at issue at length, considered the arguments and evidence put forth by both the parties and found in favour of the Plaintiffs. Justice Singh held that the Indian statute does not recognize International Exhaustion and parallel importation amounts to infringement. The Learned Single Judge held that for goods to be ‘lawfully acquired’ within the meaning of Section 30 (3) they have to bear a registered trade mark which means that the said acquisition has to be from the domestic market.

The Hon’ble Single Judge interpreted Section 30 (3) (a) in the following way “…. the said acquisition for the purposes of the sub clause (a) must arise within the same market wherein there are three persons present, person acquiring the goods, registered proprietor and the assignee of the trade mark. This the reason why the said Section 30(3) (a) also says that the registered trademark having been assigned after the acquisition of those goods which means that the acquisition must emanate from the registered proprietor where the registered proprietor has the knowledge about the said acquisition and he assigns the trademark after the said acquisition.”

The Hon’ble Division Bench held a view contrary to that of the Hon’ble Single Judge and stated that “There is no law which stipulates that goods sold under a trade mark can be lawfully acquired only in the country where the trade mark is registered. In fact, the legal position is to the contrary. Lawful acquisition of goods would mean the lawful acquisition thereof as per the laws of that country pertaining to sale and purchase of goods. Trade Mark Law is not to regulate the sale and purchase of goods. It is to control the use of registered trade marks. Say for example, there is food scarcity in a country and the sale of wheat is banned except through a canalizing agency. Lawful acquisition of wheat in that country can only be through the canalizing agency.”

In order to better understand the statute and the relevant provision the Hon’ble division bench considered external aids such as the Statement of Objects and Reasons which is reproduced as under:

“Sub-clauses (3) and (4) recognize the principle of exhaustion of rights by preventing the trade mark owner from prohibiting on ground of trade mark rights, the marketing of goods in any geographical area, once the goods under the registered trade mark are lawfully acquired by a person. However, when the conditions of goods are changed or impaired after they have been put on market, the provision will not apply.” The Division Bench observed that the expression “in any geographical area” in the 'Statement of Objects and Reasons' of the Trade Mark Bill, 1999 clearly envisages that the legislative intent was to recognize the Principle of International Exhaustion of rights to control further sale of goods once they were put on the market by the registered proprietor of the trade mark. The Division Bench held that unless the statute itself fails to clearly set out the provisions, a statement as to the intent of the legislators may be used as a tool to determine the law.

The Hon’ble Division Bench held that the words ‘the market’ contemplated by Section 30 (3) of the Trade Marks Act, 1999 is the international market i.e. the legislation adopts the Principle of International Exhaustion of Rights.

The Division Bench partially allowed the appeal, in that the injunction against the Appellants/ Defendants from importing printers, ink cartridges/toners bearing the trade mark Samsung/SAMSUNG and selling the same in India was lifted. However it also held that “The appellants shall continue to remain injuncted from meta-tagging their website to that of the respondents. But, while effecting sale of Samsung/SAMSUNG printers and ink cartridges/toners, the respondents shall prominently display in their showrooms that the product sold by them have been imported from abroad and that the respondents do not give any warranty qua the goods nor provide any after sales service and that the warranty and after sales service is provided by the appellants personally. The appellants would prominently display in their showrooms:

Samsung/SAMSUNG Products sold are imported into India and SAMSUNG (KOREA) does not warranty the quality of the goods nor provides any after sales service for the goods. We warranty the quality of the goods and shall provide after sales service for the goods.”

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Water filtration Patent Revoked

The Intellectual Property Appellate Board (“IPAB”) recently revoked a patent entitled “Filter Device” belonging to Hindustan Unilever Ltd (“HUL”). The Revocation proceedings were instituted by Tata Chemicals Limited (“TCL”). The Indian Patent No.195937 of HUL taught an invention which forced water upwards through the filter media. According to HUL “this invention achieves (a) uniform flow; and (b) avoidance of channeling of the water in the filter media due to entrapped air by providing for a hollow substantially vertical passage of water into the filter cartridge such that the water to be filtered encounters the filtration media only when traversing upward. This facilitates the release of entrapped air if any along with the water at the exit outlet because the entrapped air on its way upward does not meet any counter current of water.”

TCL contended that the Invention lacked novelty and that the filter inlet, the upward flow through the filter medium were known, anticipated and obvious. TCL relied on certain US patents filed prior to HUL’s patent to attack HUL’s patent. The IPAB perused the US patents, other documents and evidence adduced and compared it to HUL’s patent and came to the conclusion that alleged inventive features were disclosed in the prior art.

HUL had received an adverse International Preliminary Examination Report (“IPER”) which cited a European Patent Application – 1106578 and when the IPER was communicated to HUL, it did not pay the fees resulting in the deemed withdrawal of a National Phase application filed in the UK (for sake of brevity hereinafter referred to as “GB application”) which HUL did not disclose to the Indian Patent Office and let the status of the GB application remain ‘pending’.

Moreover HUL failed to share the IPER with the Indian Patent Examiner. HUL contended that the European Patent Application – 1106578 was as it is considered by the Indian Patent Examiner and thus there was no need to disclose the IPER. The IPAB held to the contrary and stated that the purpose of disclosing the foreign filing and processing was to aid the Patent Examiner peruse the patent application more thoroughly.

HUL took the plea that the there was no duty cast upon HUL to provide International Search Report (“ISR”) and IPER since the PCT is an inter-governmental body and not a 'country' as specified in Section 8 (2). On this issue the IPAB held “When the IPER was communicated to the applicant, he did not pay the fees. EPO informed the applicant that the application is deemed to have been withdrawn since filing fee/such fee was not paid in time. We have to see whether the words “relating to the processing of the application” in a country outside India would include processing of application in EPO where Great Britain is designated as a country. When the question of non disclosure of the termination of the Great Britain convention application was raised, the respondent took the stand that since the PCT application designating Great Britain as the country was pending, the respondent had stated that Great Britain application was pending. According to respondent it was only a technical distinction but not a real one. So, for the purpose of Section 8(1) he would treat the PCT application as a country application which would render the non disclosure of termination of the other application irrelevant. But when it comes to Section 8(2), the PCT application is not an application in a country. This prevarication cannot be accepted. This is as regards the respondent turning like a weathervane on this issue.”

The IPAB in its order made an interesting observation in relation to the Expert Evidence adduced in such matters “We find as a rule the experts called upon by the parties before us file affidavits. These affidavits are naturally drafted by the respective advocates. So they read almost like the statement of case or counter statement depending on who has called the witness. Instead it may be better to just get their opinion in the form of an affidavit. This opinion will deal with the prior art, the common general knowledge, this invention and why the expert is of the opinion that it is anticipated or not, it is obvious or not. Even when the affidavit has to counter the opinion of the other side expert, it is better merely to say that the expert disagrees with the opinion and for what reason. Instead the affidavits contain attacks on the expertise of the experts. This must be eschewed. Each expert gives his opinion and the reasons therefor and the Court / Board will apply its mind and decide how relevant the evidence is for proving the case. The experts are respected academicians in their fields and such attacks may discourage the best minds from offering to assist us. It will be then a loss to the development of IP jurisprudence. The expert evidence is one of the relevant facts which the court has to consider and while deciding the patentability of some inventions, this may be very crucial. We hope the members of the Bar will bear this in mind, when they request experts to assist us. Whether they appear in the witness box or file affidavits in lieu thereof, the witnesses deserve our respect.”

There is a statutory duty on the part of the Applicants to disclose details of all applications corresponding to the Indian Application filed in other countries. If they fail in this duty they run the risk of their Patent in India being revoked even after it has been granted.

The observation of the IPAB in relation to expert evidence is also quite incisive; experts must be treated as experts, and not as lawyers; they must give evidence on their expertise & ‘evidence by way of affidavit’ should not be argumentative and should not be critical of the other experts or of the evidence given by the opposite side.

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Door Closer Design Infringement

While deciding a suit for design infringement recently, the Delhi High Court found in favour of the Defendant and dismissed the suit on the grounds that the design in question was in the market prior to the Plaintiff filing an application for registration of the same.

The Plaintiff in the case was engaged in the business of manufacture and sale of hardware, such as door closers, springs hinges etc. The Defendant was also engaged in manufacture and sale of door closer.

The Plaintiff in this case claimed that the Defendants were manufacturing and selling door closers of a design identical to the registered design of the Plaintiff. The Plaintiff claimed that the design had been registered since 05-01-2006.

The Hon’ble Delhi High Court found that the product sold by the Defendant were identical to the registered design of the Plaintiff.

The Defendant however relied on Section 22 (3) of the Designs Act, 2000 which states that in a suit for infringement, every ground on which the registration of a design may be cancelled shall be available as a ground of defence.

The Defendant had already instituted design cancellation proceedings against the Plaintiff before the Controller which were pending at the time the Hon’ble Delhi High Court delivered its Judgment. The Defendant in the present case adduced editions of Hardware publications which predated the date of registration of the design i.e. 05-01-2006 which contained advertisements for door closers of the same design but different colour. The Plaintiff however had not claimed novelty in the colour of the door closer but in the shape and configuration of the same.

The Hon’ble High Court observed as under “Though the application filed by the defendants for cancellation of the design of the plaintiff is still pending before the Controller, the ground on which design may be cancelled is available as a defence in view of the provisions in Section 22(3) of the said Act, the design of the plaintiff is liable to be cancelled for the reason is that it is neither a new or original design nor was it registerable under the Act. It was contented by the learned counsel for the plaintiff that the placement of hinges in the product of the plaintiff is different from the placement in the product which was available in the market prior to 05.01.2006. In my view, mere change in the placement of the hinges would not result in altering the shape of the product which was essentially a capsule with two hinges and an iron rod, prior to 05.01.2006 and continues to be the same even thereafter.”

The Hon’ble High Court accordingly dismissed the suit.

It must be remembered that minor workshop modifications do not introduce any novelty of designs.

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Whirlpool-Videocon Design Tussle

The legal tussle between whirlpool and Videocon over infringement and passing off of registered design of a washing machine went in favor of Whirlpool, with the Bombay High Court passing an ad-interim injunction restraining Videocon from manufacturing the washing machine in question.

Whirpool had contended that Videocon had infringed the design of their washing machine which they had registered in 2009. On the other hand Videocon argued that the design adopted by Whirlpool had already been disclosed to the public previously and hence was not registrable under section 4 of the Designs Act. Moreover Videocon’s counsel submitted that in order to prove that they were guilty of passing off, Whirpool would need to prove that Videocon had the intention to deceive the public and pass off its product as Whirpool’s.

Videocon further argued that the design in question was neither new nor original in light of the fact that it was merely a minor variation of two previous designs of Whirlpool. However the Hon’ble Court was of the opinion that Whirlpool’s registered design could not be invalidated in light of section 6 of the Design Act which allows the proprietor of a registered Design to register different articles with similar designs in a particular class.

The Hon’ble Court judged the two designs in question to be similar and stated that similar shape and size but different color combinations, patterns and ornamentation would not render the two designs different and hence ruled in favour of Whirlpool.

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Lt Foods Ltd. vs Sunstar Overseas Ltd

In the case of Lt Foods Ltd. vs Sunstar Overseas Ltd, the Delhi High Court decided the fate of three interim applications filed by the parties in cross suits seeking injunction against each other for trademark infringement/passing off. The trademark in contention was “Heritage” in respect of rice.

One of the parties Lt Foods was selling rice in India and exporting to several countries since 1997 under the trademark “Heritage”. In 2009, Lt Foods came to know that Sunstar Overseas Ltd. was trying to export containers of rice under a brand name "INDIAN HERITAGE” and made a representation to the Customs Authorities to prevent this export, which the Customs Authorities did. Lt Foods alleged that the “INDIAN HERITAGE” trademark was deceptively similar if not identical to their registered trademark. In their defence, Sunstar Overseas relied on a trademark “Indian Heritage Select” registered in the year 2002 in favour of Sachdeva and Sons Rice Mills Ltd claiming to be licensed users of Sachdeva and Sons Rice Mills Ltd’s trademark although no such license was produced by Sunstar Overseas.

Sunstar Overseas and Sachdeva & Sons Rice Mills Ltd then filed a counter suit against Lt Foods counter claiming that it was Lt Foods that had in fact infringed their trademark. Sunstar Overseas and Sachdeva & Sons Rice Mills Ltd produced some invoices attempting to show sale/export of rice. However the invoices produced by Sunstar Overseas/ Sachdeva& Sons Rice Mills proved to be false.

The Hon’ble Court relied on the Principle of adverse presumption and stated “The law in respect of adverse presumption is well settled that the party who withholds a document or evidence from the court knowingly that the said document will operate to his disadvantage, the court can draw an adverse inference against such a party, in view of the clear applicability of the maxim omniapraesumuntur contra spoliatorem. The Supreme Court in the case of Pradip Buragohain vs. Pranati Phukan, 2010 (6) SCC 614 held:

"We may in this regard refer to illustration (g) to Section 114 of the Evidence Act which permits the Court to draw an adverse presumption against the party in default to the effect that evidence which could be but is not produced would, if produced, have been unfavourable to the person who withholds it. The rule is contained in the well-known maxim :omniapraesumuntur contra spoliatorem. If a man wrongfully withholds evidence, every presumption to his disadvantage consistent with the facts admitted or proved will be adopted."

“It is equally well settled that the court will not assist the party whose case is founded on the falsehood, and the equitable reliefs like injunctions which are discretionary are not available to such party.”

Since the Defendants failed to submit any documents in support of their case, the Hon’ble Court dismissed the Counter suitfiled by Sunstar Overseas and Sachdeva & Sons Rice Mills Ltd and restrained them from using any trademark deceptively similar to the trade mark "HERITAGE" of Lt Foods Ltd.”

Further, the Defendants Sunstar Overseas Ltd. and Sachdeva and Sons Rice Mills Ltd were ordered to deposit Rs. 50,000 each with the Prime Minister’s Relief Fund for wasting the time of the Court.

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