IPO launches consultation on exhaustion of IP rights post-Brexit

The UK government has launched a consultation on the future regime for the exhaustion of IP rights. The consultation is open for responses from 7 June to 31 August 2021. It is going to be a crucial decision which would significantly impact IP owners, consumers, and others involved and affected by parallel trade. 

IP rights give economic incentives for creations, products and innovations of new technology, enabling rights owners to benefit from the information and intellectual goods created. Consumers benefit from the availability of a wider range of innovative or attractive goods. But move away from this justification and you have a plain old monopoly, which means fewer goods being made, innovation being sidelined, and prices being raised.

The doctrine of exhaustion of IP rights exists to balance the different interests of consumers and rights owners when goods move between jurisdictions, preserving competition in situations where the traditional justification for IP protection is not convincing. The doctrine limits the ability of IP rights holders to use their rights to control the distribution of physical goods once they have legitimately been put on the market. Intellectual property rights can be invoked to prevent goods crossing territorial borders, an issue that has caused problems within western Europe since the earliest days of the European Economic Community. “Parallel trade” - goods moving between national markets outside the manufacturer’s official channels, are a challenge to rights-owners’ marketing strategies, but often a key factor in reducing prices.

Price differentials, naturally, lie at the heart of parallel trading. Traders - arbitrageurs, they might prefer to be called - will buy goods where they are cheap and move them to markets where they command a higher price. At one level, this is nothing that has not been going on for centuries: Traders will buy produce where it is grown and move it to where people want to buy it. But in the consumer society it’s far more complicated. Purchasing power differs enormously, even within the European Economic Area, and a rational manufacturer will pitch their prices according to what local consumers can afford - which might represent a fantastic bargain to someone in a richer EU country.

Following Brexit, the UK is no longer bound by the requirements of EU’s rules, which in essence say that once goods have been placed on the market within the European Economic Area any IP rights attached to them will not be infringed if those goods are imported into another Member State (although the rules do provide for cases where there are legitimate reasons for stopping parallel imports, for example where they have been repackaged). The goods have to be free to circulate within the EEA. Notwithstanding all the talk of taking back control, the UK (at least in part because the Northern Ireland Protocol limits its room for manoeuvre) continues to apply the same rules after Brexit, so we are open to trade in cheap pharmaceuticals from The Netherlands; but the EU simply treats the UK as a third country, not within the Single Market, so parallel imports entering EU Member States from here are likely to infringe.

The consultation identifies four possible regimes: 

● The current unilateral EEA regime 

● National exhaustion 

● International exhaustion 

● A mixed regime 

The current unilateral EEA regime 

Once goods are put legitimately on the market in the EEA, rights are considered to be exhausted in the UK. IP rights cannot be used to prevent goods being imported from the EEA into the UK. On the other hand, the EEA is closed to parallel imports from the UK, but that is a matter for EU law so naturally the consultation does not touch on this aspect.

National Exhaustion 

Under this regime, rights are only considered exhausted in the UK once goods are legitimately put on the market in the UK, so IP rights can be used to prevent goods put on the market anywhere in the world from flowing into the UK. But this option has been ruled out by the government because of the inconsistency with the Northern Ireland Protocol, which means no checks are needed on the goods crossing the border with the Republic of Ireland. 

This option was only included in the consultation to gather what evidence is available on economic impact.

International exhaustion 

This regime would automatically allow the import of goods from any country. exports, on the other hand, would be automatically allowed only to those other countries with an international regime. This means that the rights are considered exhausted in the UK when goods are legitimately put on the market anywhere in the world. IP rights then cannot be used to prevent goods from entering the UK from any other country. This would have significant implications for IP owners in that it would limit their ability to prevent goods from being parallel imported into the UK. 

We have been here before, though it was over 20 years ago. Following the Silhouette case, the Commission had a report drawn up entitled "The economic consequences of the choice of regime of exhaustion in the area of trademarks" (NERA/SJ Berwin, February 1999), which found that the issues were complex and the benefit to consumers of changing to international exhaustion likely to be small (in some sectors under 2 per cent). It then consulted widely, including with Member States: in the UK, the result of this was the Eighth Report of the Select Committee on Trade and Industry (9 July 1999). The Commission dropped the idea of changing, though the Select Committee favoured international exhaustion at least for some goods. Which leads us to...

A mixed regime 

This would mean that specific goods and sectors could be subject to one regime and all other goods, sectors and IP rights subject to a different regime. Switzerland has a regime in which most goods can be parallel imported but an exception for medicines which is governed under their national regime. It is going to be a rather complex system if implemented and may be difficult for consumers and businesses to understand, but that doesn’t seem to have given the government pause for thought since the referendum. 

Note that the consultation does not cover some major topics such as: 

● Exhaustion of rights in purely digital goods. 

● Geographical indications or plant variety rights 

● Counterfeit goods 

● Parallel exports

Conclusion

Since the “National Exhaustion regime” has been ruled out, the UK government is left with limited possibilities . It will be interesting to see which regime will win the votes for this Post-Brexit battle as this will be of great commercial concern. Will the Government  head towards a “Mixed regime” and implement a complex system for consumers and businesses or getting cheap exports through “International regime” become the vote-winner? Only time will tell.

India: Use of a trade name similar to a trade mark does not necessarily constitute infringement

In a recent Trademark infringement matter, the Delhi High Court has held that in order to qualify as infringement under Section 29(5) of the Trademarks Act, 1999 (“Act”) there has to be exact use of the registered mark and mere use of a prefix/suffix would not amount to infringement. The Court was hearing a trademark infringement matter wherein the defendant had used a word “MERCYKIND” as part of its trade name which was allegedly similar to that of Plaintiff’s registered trademark “Mankind”.

BACKGROUND

Mankind Pharma Ltd., one of India’s largest Pharmaceutical Company (the “plaintiff”) instituted a Trademark Infringement suit seeking an injunction against Chandra Mani Tiwari and Mercykind Pharmaceuticals Pvt. Ltd[i]., for infringing its registered trademark “MANKIND” and a series of other marks with the suffix/prefix “KIND” and for passing off their business/goods by adopting and using the trade name “MERCYKIND PHARMACEUTICAL PRIVATE LIMITED”.

While passing the order, the Court mentioned that the registered trademark “MANKIND” would be infringed under Section 29(5), if the defendants were found to be using “MANKIND” as part of their trade name. Here, the defendants are using “MERCYKIND” as part of their trade/corporate name which is not a registered trademark of the plaintiff. Thus, there would have been infringement under Section 29(5), if the defendants, as part of their trade name, had used “MANKIND”. Merely because the name of the defendant’s Company is deceptively similar to the plaintiff’s trademark “MANKIND” or any other registered trademarks of the plaintiff with “KIND” as prefix or suffix, it does not amount to infringement under Section 29(5).

This case makes an interesting read for the following reasons:

He who comes into equity must come with clean hands:

In this case, the Court took a strong objection to the fact that the plaintiff had concealed certain information from the Court which the Court considered to be relevant and had weightage in the matter.

The Plaintiff, not so long ago while responding to certain Trademark Examination Report for registration of two of their trademarks had taken a stand that “ATORVAKIND” (plaintiff’s mark) is different from “ATORKIND”; and “STARKIND” (plaintiff’s mark) is different from other cited marks such as “KINDERPLEX”, “KINDERBON”, “KINDERCAL”, “KINDIGEST”, “STAR-VIT”, “STAR”, “STARNET” and “STARCET”. The Court stated that such conduct of the plaintiff disentitles them to the equitable relief. Though the plaintiff contended that the statement made by the advocates for the plaintiff in the communications to the Trademark Registry is a submission of law made in the context and the plaintiff cannot be bound, however the Court refuted the plea and stated that the said contention would not make the fact “irrelevant”.

“Use” of a trade mark:

Since the Plaintiff had alleged infringement under sub-sections (1) to (4) of Section 29, the Court took cognizance of the fact and considered to test whether the defendants were really using “MERCYKIND” as a trade mark.  

Section 29(6) of the Act defines the “use” of the mark: a person is considered to be using a registered mark, if, in particular, he—

(a) affixes it to goods or the packaging thereof;

(b) offers or exposes goods for sale, puts them on the market, or stocks them for those purposes under the registered trade mark, or offers or supplies services under the registered trade mark;

(c) imports or exports goods under the mark; or

(d) uses the registered trade mark on business papers or in advertising.”

In this case the primary objection of the plaintiff was the word “MERCYKIND” which was being used by the defendants. However, upon observation, the Court found that the word “MERCYKIND” was used only in the name of the defendant Company. The Plaintiff had also contended that the defendants are carrying on the business in the same goods as the plaintiff, under the marks “MERCYMOX”, “MERCYCOUGH”, “MERCYCOPE”, etc. The Court observed that the issue was about the usage of the word “MERCYKIND”, which in fact was not the trade mark of the defendants and was also not used as a trade mark by the defendants. Once, it was established that the defendant’s trademarks were words with the mere prefix “MERCY”, the question of “MERCYKIND” also being the trade mark of the defendants with respect to the same goods of the defendants would not arise. Therefore, it was observed by the Court that “MERCYKIND” was not the trade mark of the defendants, therefore, Section 29(1) to (4) do not apply in this case.

Infringement of a trademark under Section 29(5):

The Court further determined the alleged infringement test under Section 29(5) of the Act, which is: “A registered trade mark is infringed by a person if he uses such registered trade mark, as his trade name or part of his trade name, or name of his business concern or part of the name, of his business concern dealing in goods or services in respect of which the trade mark is registered.”

What has been constituted as infringement under Section 29(5) is use of the registered trade mark as trade name or part of the trade name. Thus, the Court held that there would have been infringement under Section 29(5), if the defendants had used the plaintiff’s registered Trademark “MANKIND” as part of their trade name. Merely because “MERCYKIND” is the name of defendant Company, which may be deceptively similar to “MANKIND” or any other registered trade mark of plaintiff with “KIND” as prefix or suffix, would not amount to infringement under Section 29(5). Therefore, it was held that the use of a trade name similar or deceptively similar to the registered trade mark would not constitute infringement under Section 29(5). Thus, prima facie, no case of infringement within the meaning of Section 29 is made out.

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[i] http://delhihighcourt.nic.in/writereaddata/upload/Announcements/AnnouncementFile_8J7VKAUHFZD.PDF

https://www.livelaw.in/use-of-a-trade-name-similar-or-deceptively-similar-to-the-registered-trade-mark-would-not-constitute-infringement-under-section-295-of-trade-marks-act-delhi-hc-read-judgment/

India: The Trademark Rules, 2017: Process made simpler, Faster, Start-up friendly but dearer

In a constructive attempt to streamline, simplify and expedite the trademark registration processes, the Trade Mark Rules, 2017 have been notified and came into effect from March 6th 2017. In consonance with the National IPR Policy, 2016, the Rules also introduce specific provisions for Start-Ups and Small Enterprises to stimulate and promote innovation and creativity among such entities.

The Salient Features of the Rules are as follows:

GENERAL:

• Definition of Start-Ups and Small Enterprise introduced.
• Number of Forms has been reduced from 74 to 8. 
• Procedures relating to registration as Registered User of trademarks have been simplified. 
• Provisions have been introduced to serve all applications, notices, statements and other documents electronically - from applicants to the Registry and vice-versa.

OFFICIAL FEES:

• Government Fee applicable for various trademark registration related activities has been simplified by reducing the number of entries to just 23. 
• Filing fee of a new application has been increased by about 125 %. (INR 9,000.00).
• Renewal fee increased close to 100% (INR 10,000.00). 
• Fee for expedited registration process increased by 100% (INR 40,000.00).
• Handling fee for Madrid Applications increased by 150% (INR 5,000.00).
• 50% discount on the new filing fee for Individuals/Start-Ups/Small Enterprise. 
• To promote e-filing, the fee for online filing has been kept 10% lower as compared to fees for physical filing.
• Fee for extra characters (beyond 500 characters) in the description of goods/services has been done away with.

EXPEDITED PROCESSING OF APPLICATIONS:

Provisions laid down for expediting the registration from filing through registration on payment of higher fees. Earlier, only examination of application could be expedited.

REPRESENTATION OF SOUND MARKS:

Sound marks applications to be also accompanied by reproduction in MP3 format (not exceeding thirty seconds’ length).

EXPEDITE OPPOSITION PROCEEDINGS:

• Provision to file counter statement to the notice of opposition as soon as it is made available online. 
• The requirement of serving a copy of opposition notice shall be dispensed with if a counterstatement has already been filed based on electronic copy of notice available online. 
• No scope for seeking extensions in case of filing evidences. 
• The number of adjournments for hearings reduced to 2 for each party and each adjournment shall not be allowed for more than 30 days.
• Mandatory costs up to INR 10,000.00 to be awarded to either the Applicant or the Opponent (depending on the case) for not contesting opposition proceedings thereafter. 

WELL-KNOWN TRADEMARKS:

• Modalities for determination of a trademark as a well-known mark have been introduced for the first time. 
• Application to be filed with an exorbitant fee of INR 1,00,000.00 per mark and only through e-filing.

VIDEO-CONFERENCING OF HEARINGS:

Provisions have been laid down to hold personal hearing through video- conferencing or other audio-visual communication devices.

RENEWAL OF REGISTRATION:

The window for renewal of registration now opens one year prior to the date of expiration as against six months under the old Rules.

EXTENSION OF TIME:

Any extension of time, as specifically allowed under the Trademarks Act, 1999, shall not exceed one month.

ASSIGNMENT OF TRADEMARKS:

• Providing a duly certified copy of original document, instrument or deed purporting to transfer the title will suffice; an original instrument or deed is no longer necessary. 
• Filing of Affidavit along with the application for recordal of assignment is no longer required. 

STATEMENT OF USE:

• All applications (except with the intent to use) shall contain a statement of use with respect to ALL goods or services mentioned in the application.
• An affidavit testifying such use (if application claimed prior user date) along with the supporting documents has to be filed.

Visibly Faster Turnarounds By Indian Trademark Registry

This morning, when I opened my inbox, one email in particular surprised me. The email contained our first ever “e-certificate” for a trademark application filed just about one year ago! In the past, such prompt action by Indian IP Offices was almost unheard of. But clearly, the technology-enabled procedural changes introduced over the past year or so have begun to bear fruit.

The issues faced by the Registry in printing and dispatching hard copy (Registration Certificates) are quite well-known. On many occasions, the certificates did not reach the intended recipients. This not only caused delay and inconvenience to stakeholders but also imposed needless cost on the Registry as well as Applicants (who had to apply for a duplicate certificate).

About a month ago, the Indian Trademark office, via its notification dated 28^th July 2016, had notified the new system of sending only e-certificates (Registration), and doing away with the century old system of sending hard copies. This was made effective from 1^st August 2016 for all trademark applications:

• published in the Trade Marks Journal on or after November 23^rd, 2015;

• where no request for amendment filed on behalf of the applicant is pending disposal;

• where Trade Mark registry’s database contains the original application;

• where no compliance requirement is pending on part of the applicant; and

• which have not been specifically prohibited for registration by the order of any court, IPAB or any competent authority.

With the adoption of the new system it appears that the Registry is taking every possible step to eliminate the root cause for delay and thus expedite the registration process and deliver on the higher standards outlined in India’s new IP Policy.