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April 2014 Newsletter

The Government of India, Ministry of Commerce and Industry (Department of
Industrial Policy and Promotion) has published the Patent (Amendment) Rules, 2014
on 28
February 2014. The amendments are effective from the date of publication.

The salient aspects of the amended rules include:
Applicant: Introduction of a third category of applicant for patent in the form of "small entity".

The fees charged to small entity applicants have been fixed in between the fees for a natural person and a large entity. The applicants can now be categorized as follows:
(a) Natural Person Applicant: Any natural person either alone or jointly with other natural persons.
(b) Small Entity Applicant: An enterprise (proprietorship, Hindu undivided family, association of persons, co-operative society, partnership firm, company or undertaking) engaged in "manufacture or production of goods" or "providing or rendering of services", with the following limitation of investment:
(i) Enterprise engaged in "manufacture or production of goods" with an investment in plant and machinery not exceeding ten (10) crore rupees. (Approx. US$ 1,611,085)
(ii) Enterprise engaged in "providing or rendering of services" with an investment in equipment not exceeding five (5) crore rupees. (Approx. US$ 805,545)
In case of Small Entity applicant status, the applicant needs to provide an evidence for the same. Such evidence has to be filed at least once with the particular application number.
(c) Large Entity Applicant: An applicant other than a Natural Person or Small Entity.
Official Fee: Establishment of a revised fee structure for filing of patent application as well as other proceedings before the Patent Office.

Furthermore, filing an application or document with the Patent Office in hard copy (i.e., not availing the e-filing facility/online mode) would incur an additional 10% official fee in the respective category.
Also, in case of partial or full transfer of an application from an applicant with Small Entity status to an applicant with Large Entity status, the difference, if any, in the scale of fee(s) between the fee for Small Entity and the fee for Large Entity, in the same matter, is to be paid by the new applicant along with the request for transfer.
We hope this edition of the Newsletter interests you. We invite your feedback and comments.

Micolube India Ltd. V. Rakesh Kumar Trading as Saurabh Industries and Others - By Harnain Alag
Chipping in to the growing domestic IP Jurisprudence a three judge bench of the Delhi High Court perorated the present judgement analysing whether a suit for infringement can be filed against a defendant being the registrant of the design himself. Facts: Plaintiff carried on the business of manufacturing and marketing petroleum products and other allied and cognate goods. It asserted to have created two novel designs in containers used for selling the said products and obtaining registration for the same. When the Plaintiff found out that the Defendants were selling their goods in identical containers and are thus infringing the registered design of the Plaintiff, the Plaintiff instituted an action for permanent injunction against the Defendants.

The three major issues deliberated were:

I. Whether the suit for infringement of registered Design is maintainable against another registered proprietor of the design under the Designs Act, 2000? II. Whether there can be an availability of passing off in the absence of express saving or preservation of the common law by the Designs Act, 2000 and more so when the rights and remedies under the Act are statutory in nature? III. Whether the conception of passing off as available under the Trade Marks can be joined with the suit for infringement of a registered design under the Designs Act when the same is mutually inconsistent with that of remedy under the Designs Act, 2000? The Hon.ble full bench by 2:1 majority disposed off the reference in the following terms: I. Regarding the first issue, it was held that a suit for infringement of registered Design is maintainable against another registered proprietor of the design under the Designs Act, 2000 and the expression "any person" found in Section 22 of the Designs Act would not exclude a subsequent registrant as no such words of limitation are found in Section 22. Reliance was majorly placed on the following grounds: The court on the combined reading of section 2(d)(definition of .design.), section 4(Prohibition of registration of certain designs), section 5(Application for Registration of Deisgn), section 6(Registration to be in respect of particular article), section 9(Certificate of Registration), section 10(Register of Deisgn), section 19(Cancellation of Design) and section 22(Piracy of registered design) of the designs act held that the aforesaid provisions show that the plaintiff who has a monopoly right over a design could sue the defendant, who also has a registered design, on the grounds that his/her design was not new, novel or significantly distinguishable when compared to the Plaintiff.s registered design. There are no words of limitation in Section 4, 11 and 22 which would exclude institution of an action against the subsequent registrant. ii. Regarding the second issue, It was held that the Plaintiff would be entitle to institute an action for passing off in respect of a design used by him as a trademark provided that the action contains the necessary ingredients to maintain such a proceeding. Reliance was majorly placed on the following grounds: Trade Marks Act confers certain statutory rights, it does not deprive a user of an unregistered trade mark the right to protect the misuse of his mark by a defendant Therefore, in so far as a design, which is registered under the Designs Act is concerned, it may not have the statutory rights, which a registered trade mark has, under the Trade Marks Act, it would certainly have the right to take remedial steps to correct a wrong committed by a defendant by instituting a passing off action. A passing off action would be based on a plea that a design which is an unregistered mark, was being used by the Plaintiff , iii. Regarding the third issue, it was held that a composite suit for infringement of design and passing off would not lie. The Court could, however, try the suits together, if the two suits are filed in close proximity and/or it is of the view that there are aspects which are common to the two suits. Reliance was majorly placed on the following grounds: The Court in the final issue regarding the filing of a composite suit for infringement of a registered design along with an action of passing off held that the composite suits would not lie. However the Court could try the suits together though as different causes, if the suits are filed in close proximity, or there exists certain aspects which are common to both and the court has jurisdiction to try both the matters. The court noted that, the suit for infringement was based on "newness and originality" of the design whereas an action of passing off is instituted when a trademark is misrepresented by someone else.s mark thus causing damage to the goodwill and reputation of the person and his goods. Since both of these constitute different causes of action hence, they cannot be combined in the same suit.

Mindgym Ltd. V. Mindgym Kids Library Pvt. Ltd. by (Justice Manmohan Singh, 21-Mar-2014, Delhi High Court) - By Piyush Joshi
The Mind Gym Ltd. filed a suit for Permanent Injunction restraining infringement of trade mark, passing off,
unfair competition, delivery up, recovery of damages, against the Defendant MindGym Kids Library Pvt. Ltd. to restrain the latter.s use of the trademark MINDGYM on account of deceptively or confusingly similar with The Mind Gym The High Court of Delhi vide order dated March 21, 2014 injuncted the defendant.s from using the trade mark MINDGYM or any other mark deceptively or confusing similar to the plaintiff.s mark THE MIND GYM either as part of its corporate name or as a trade mark or as a domain name or in any other manner. The court divides its reasoning into the following heads:
1. Passing Off and Goodwill in India: Under this head the court essentially recognised that in a passing off action the aim is the protection of goodwill that the company has earned by its activities. The court also relied on the case N.R. Dongre v. Whirlpool (AIR 1995 Delhi 300) to state that the goodwill could also be due to the trans-border reputation of the company and that it was not necessary that localised reputation was necessary.
2. Principle of Infringement and grant of Injunction: The court observed that in order to prove infringement, the plaintiff must demonstrate that the defendant copied essential features of their registered trademark. Without venturing into an actual comparison of the marks, the court concluded that they were indeed identical and that the plaintiff had a valid registration.
3. Trade Name: In this section the court observes that the defendant.s contention that the phrase MIND GYM was an essential part of its corporate name and that they should not therefore be restrained from using their corporate name was rejected by the court. The court cites a number of High Court judgements such as K.G. Khosla Compressors Ltd. v. Khosla Extraktion Ltd.( AIR 1986 Delhi 181) and Montari Overseas Ltd. vs. Montari Industries Ltd.( 1996 PTC (16) 142), to clarify that the law had held on numerous instances that registered trademarks could not be used as a part of a corporate name.
The Delhi High Court has always protected well known mark and in my opinion, the defendant.s use of the visually similar word .MINDGYM. for its products would lead to likelihood of confusion among others, leading them to associate the two. MINDGYM should hence be granted damages for infringement of its trademark later at the trial stage. Jurisdiction in Cyberspace in India¡¦By Sushmita Das "Whatever else or more it may mean, is jurisdictio, in its popular sense of authority to apply the law to the acts of men"- Oliver Wendall Holmes. Jurisdiction has always been one critical issue in cyber-offences. Given the fact that the world-wide-web ("www") can be accessed from any where in the world (and thus touches the boundary of each of the countries and their respective jurisdiction), literally any and every offence committed in cyberspace can be called for scrutiny by courts of any or all countries. On the contrary, in as much as the cyberspace is not within the "territorial" limits of a country, it is always open to the accused to argue lack of jurisdiction. To determine jurisdiction in cyberspace we first need to know what is jurisdiction. Jurisdiction means the authority which a court has to decide matters that are litigated before it or to take cognizance if matters are presented in a formal way for its decisions, it could be said that it is the power/authority of the court to decide matters that are brought before him. Recently in India, there are a large number of cases where Courts have exercised jurisdiction over non-resident defendants or respondents. In 2009 Justice Sanjay Kishan Kaul in an expeditiously contested case on jurisdiction examined the overview of law in global jurisdictions. With the growth of e-commerce and commercial activity over the World Wide Web, it has become possible for business to be conducted across the globe without actual presence in every place. The present case, inter alia, involves the question of jurisdiction in such a situation. The case was titled as India TV (Independent News Service Ltd.) Vs. India Broadcast Live LIC & Ors., and is related to the domain name The plaintiff is stated to be the owner of the domain name which is stated to have been registered by the plaintiff. Plaintiff came across the website of defendants. while carrying out an Internet search and they were using the said website for video streaming of Indian television channels. All the defendants involved in the above case were American entities. With the commencement of action in Delhi High Court, the defendants filed a "Reverse Domain name hijacking" action in Arizona Court against IndiaTV. The Indian Court while dealing with Anti Suit Injunction was concerned mainly with two issues, namely; a. Exercise of jurisdiction over the defendants located in the United States.; b. Whether an injunction ought to be granted restraining the defendants from proceeding with the suit filed in the United States. On this issue the Court followed the principles laid down by the Apex Court in Modi Entertainment Network and Anr. Vs. W.S.G. Cricket Pte. Ltd. In the said case the Hon'ble Supreme Court of India had held that: "The courts in India like the courts in England are courts of both law and equity. The Principles governing grant of injunction-an equitable relief- by a court will also govern grant of anti-suit injunctionwhich is but a species of injunction. When a court restrains a party to a suit/proceeding before it from instituting or prosecuting a case in another court including a foreign court, it is called anti-suit injunction. It is a common ground that the courts in India have power to issue anti-suit injunction to a party over whom it has personal jurisdiction in an appropriate case. This is because courts of equity exercise jurisdiction in personam. However, having regard to the rule of comity, this power will be exercised sparingly because such an injunction though directed against a person, in effect causes interference in the exercise of jurisdiction by another court." From the above discussion the following principles emerge. (1) In exercising the discretion to grant an anti- suit injunction the court must be satisfied of the following aspects; (a) the defendant, against whom injunction is sought, is amenable to the personal jurisdiction of the court. (b) if the injunction is declined, the ends of justice will be defeated and injustice will be perpetuated; and (c) the principle of comity respect for the court in which the commencement or continuance of action/proceeding is sought to be restrained must be borne in mind. (2) In a case where more forums than one are available, the court in exercise of its discretion to grant anti-suit injunction will examine as to which is the appropriate forum having regard to the convenience of the parties and may grant anti-suit injunction in regard to proceedings ;which are oppressive or vexatious or in a forum non- convenience.

(3) The burden of establishing that the forum of choice is forum non- convenience or the proceedings therein are oppressive or vexatious would be on the party so contending to avert and prove the same. As far as the situation in this country is concerned, there is no 'long arm' statute as such which deals with jurisdiction as regards non- resident defendants. Thus, it would have to be seen whether the defendant's activities have a sufficient connection with the forum state in this case (India/Delhi); whether the cause of action arises out of the defendant's activities within the forum i.e. (India/Delhi) and whether the exercise of jurisdiction would be reasonable. The above review also establishes the manner in which the judiciary in India is pro-active and even in the absence of clear statutory provisions, the attempt is to uniform the law and to strike the right balance rather than alienate India from the rest of the world. The challenge to the legal community posed by such an environment is currently being dealt with at the national and international level.
To conclude now the Domain name disputes are being settled by online arbitration under the Uniform Domain Name Disputes Resolution policy adopted on August 26, 1999 by The Internet Corporation for Assigned Names and Numbers (ICANN), which has been a through success. Moreover, the disputes pertaining to the same have also been successfully settled by its Alternative Disputes Resolution (ADR) service providers. Steps have also been taken towards creating an international convention for the recognition of foreign judgments applicable throughout the world.

Section 3 of the Competition Act, 2002, deals with anti-competitive agreements. The ambit of section 3 is very wide and it covers not only express agreements but also implied agreements [section 2(b)]. Section 3(2) of the Act says that the key determinant of anti-competitive agreement is their Appreciable Adverse Effect on Competition in India (AAEC) within India. It is crucial to note here that section 32 of the Act provides that even if an agreement has been entered into outside India, the CCI would have powers to enquire into such an arrangement if such an agreement has an AAEC in India.
Generally the agreements that are likely to cause AAEC in the market are anti competitive agreements. Section 3(1) of the Act, provides a general prohibition on the following to enter into agreements which causes or is likely to cause an appreciable adverse effect on competition in India:
1. Enterprise and enterprise
2. Enterprise and association of enterprises
3. Two associations of enterprises
4. Two persons
5. Persons and an association of persons
6. Person and an enterprise
7. Person and an association of enterprise
8. Association of persons and enterprises
9. Association of persons and association of enterprises.
The Act does prescribe some arrangements which will or might be caught by the anti competitive arrangements prescribed there under, it should be noted that these are only examples of anti-competitive arrangements and the list is not exhaustive. Arrangements that are not specifically prescribed under the Act might still be caught within the general prohibition. The examples as laid down in the Act are prescribed below:
1. Directly or indirectly determining purchase or sale prices.
2. Limiting or controlling production, market(s), technical developments or investments
3. Arrangements for sharing markets or sources of production or provision of services
4. Directly or indirectly engaging in bid-rigging or collusive bidding
5. Enforcing a condition on the purchaser of certain goods, to also purchase some other goods
6. Entering into exclusive distribution or supply arrangements
7. Arrangement between persons involving a refusal to deal with a particular manufacturer or customer
8. Entering into arrangements to sell goods on the condition the prices to be charged on the resale by the purchaser, shall be the prices stipulated by the seller, unless it is clearly stated that prices lower than those prices may be charged ("resale price maintenance")
Section 3(3) provides that an agreement would have AAEC if there is a practice that is carried on, or a decision that has been taken, between any of the parties mentioned above, including cartels, engaged in identical or similar trade of goods or provision of services, that can either .
a. Directly or indirectly determine the purchase or sale prices;
b. Limits or controls production, supply, markets, technical development, investment or provision of services;
c. Shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way;
d. Directly or indirectly results in bid rigging or collusive bidding (effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding).
The section provides an exception to the joint ventures entered into by the parties if they increase the efficiency in production, supply, distribution, storage, acquisition or control of goods or provisions of services. Section 3(1) of the Act cannot be invoked independently and is necessarily to be used along with section 3(3) related to horizontal agreements or section 3(4) related to vertical agreements. However, it should be clarified that section 3(1) is not merely a suggestive provision but is essentially the "genus" of the Act. It should also be invoked independently to serve the interest of consumers and also cover various other types of agreements which may not fall under the aegis of section 3(3) or 3(4). According to section 3(4), following types of arrangements are in nature, anti-competitive agreements:
a. Tie-in arrangement (includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods);
b. Exclusive supply agreement (includes any agreement restricting in any matter the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person);
c. Exclusive distribution agreement (includes any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods);
i. Refusal to deal (includes any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought);
ii. Resale price maintenance (includes any agreement to sell goods on condition that the prices to be changed on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be changed).
In Re: Alleged Cartelization by Cement Manufacturers (Case No.: RTPE 52 of 2006), the competition regulator has found 11 cement manufacturers, guilty of cartelization and engaging in anti-competitive practices (parallel and coordinated behavior on price, dispatch and supplies in the market), and has imposed a penalty of more than Rupees six thousand crores. ABUSE OF DOMINANCE¡¦By Avijit Singh
Section 4 of the Competition Act, 2002 is the substantive provision dealing with abuse of dominance. The Competition Commission of India (CCI), which despite its relatively short tenure has proven to be a proactive regulator, has imposed several headline fines for abusive conduct by enterprises.
Abuse of dominance or unilateral conduct refers to the conduct of an enterprise that holds sufficient market power in a particular relevant market, such that it can operate independently of market forces and the competitive constraints imposed by its competitors. In keeping with the objective to promote free markets and the freedom of trade and business of enterprises and individuals, the Act does not prohibit any enterprise from actually holding a position of dominance or having substantial market power. However, what is sought to be restricted by the Act is the abuse of such market power or dominance, which would have a detrimental effect not only on competitors, but most importantly, the consumer. Section 4 of the Act prohibits the abuse of dominance by any enterprise or group of enterprises. The Act prescribes a three-step test for the determination of abuse of dominance:
. defining the relevant market;
. assessing dominance in the relevant market; and
. establishing abuse of dominance.
DLF Limited in Belaire Owners¡¯ Association v DLF Limited (the DLF case), The CCI defined the relevant market extremely narrowly to be the market for .high-end residential apartments in the city of Gurgaon.. By restricting the product scope and the geography of the relevant market to a particular suburb, the CCI.s decision that DLF was dominant in the relevant market was but a given. The CCI has considered market share in most cases of abuse of dominance it has reviewed, but has also considered subjective factors such as vertical integration, countervailing buyer power, economic power of the enterprise, entry barriers, statements in the public domain, etc. This is evident from two important orders passed by the CCI relating to abuse of dominance: the MCX Stock Exchange v National Stock Exchange of India Limited (the NSE case)[case no. 13/2009] and the DLF case [case no. 19/2010].
In the NSE case, the CCI held the National Stock Exchange of India Limited (NSE), one of three players in the market for stock exchange services in the currency derivatives segment, to be dominant based on its overall financial strength, strong historical presence in the market for stock exchange services in other segments and vertical integration in the stock market, despite it having a lower market share than MCX, the informant. In fact, the market structure during the CCI.s investigation demonstrated that NSE was in fact the number-three market player (based on market share), while MCX was the number-one player. The CCI specifically observed that, .In the context of Indian law, this indicator does not have to be pegged at any point but has to be considered in conjunction with numerous factors given in section 19(4) of the Act.. Further, in its assessment of dominance in the DLF case, where the CCI imposed a penalty of 6.3 billion rupees on DLF Limited for having abused its dominance, the CCI took into account various factors other than market share, such as statements issued by DLF Limited in the public domain (relating to its dominance in the market, in its red herring prospectus, annual report, etc), vast amounts of fixed assets and capital, turnover, brand value, strategic relationships, wide sales network, etc. Actions that constitute abuse of dominance within the meaning of the Act include:
. exclusionary abuses: these include actions or conduct that could result in the exclusion of competitors or new entrants from the relevant market, such as refusal or limitation of supply, denial of market access, etc; and
. exploitative abuses: These include the imposition of exploitative conditions to sale of goods or provision of services, such as excessive or predatory pricing, tying and bundling, leveraging, etc.
The CCI has effectively brought in an effects-based test through case law by considering the effects on competition, the relevant market and consumers on account of the alleged abusive conduct. In terms of standard of proof, the CCI stated in Shri San Mal Agarwal v. Punjab National Bank [case no. 08/2010] that the informant is not only required to show or establish through reliable material or data that the opposite party has a dominant position in the relevant market but also that it has abused its dominance by indulging in the conduct enumerated under section 4(a) to (e) of the Act. RIGHT TO FIRST REFUSAL¡¯S IN FDI

Introduction Pre-emptive rights, right of first refusal (ROFR), tag-along right, drag-along right and call and put options are common arrangement between investors in joint ventures, private equity and venture capital investments; which generally forms part of shareholders agreement, share purchase agreement, joint venture and similar agreements. The put/call options were omnipresent in the Investment Agreements (governing joint ventures, private investments and the like) before such options faced the glare of Indian regulators. Indian regulators like the RBI, the Securities and Exchange Board of India ("SEBI") were uncomfortable in permitting such options in the Investment Agreements, albeit, for different reasons and rationale of each regulator. There was no clarity as to whether equity or compulsorily convertible debentures / preference shares issued / transferred to non-residents having any kind of in-built options could be regarded as an eligible instrument for FDI purposes. This lead to multiple interpretations and consequent uncertainty for investors who were interested in protecting their investments. Background
The RBI has been uncomfortable with inclusion of options in Investment Agreements. RBI viewed such .options. as modes of assuring exit to a foreign investor within a specified period, thereby defeating the spirit of equity instruments and making them akin to debt instruments. Considering this, the Department of Industrial Policy and Promotion, Government of India ("DIPP"), on 30th September 2011, announced that all investments in securities with in-built options or those supported by options sold by third parties will be considered as ECBs. However, the industry raised serious objections against the foregoing announcement of DIPP and subsequently, on 31st October 2011, the DIPP deleted the said para from the Consolidated FDI Policy Circular (2 of 2011). Current Framework: RBI¡¯s circular The RBI, vide the Circular dated 9 January 2013 [RBI/2013-2014/436 A.P. (DIR Series) Circular No. 86] has legitimized inclusion of options/right to exit in the Investment Agreements subject to certain conditions. Optionality clauses have been allowed in equity shares and compulsorily and mandatorily convertible preference shares/debentures to be issued to a person resident outside India under the Foreign Direct Investment (FDI) Scheme. The optionality clause will oblige the buy-back of securities from the investor at the price prevailing/value determined at the time of exercise of the optionality so as to enable the investor to exit without any assured return. Conditions for Optionality Clauses
The conditions of providing Optionality clauses are:
1. There is a minimum lock-in period of 1 (one) year or a minimum lock-in period as prescribed under FDI Regulations (depending upon the sector), whichever is higher ("Lock-in Period"). The Lock-in Period shall be effective from the date of allotment of such shares or convertible debentures
2. The non-resident investor exercising option/right shall be eligible to exit without any .assured return. subject to the following:
- In case of a listed companies, the non-resident investor shall be eligible to exit at the market price prevailing at the recognised stock exchanges;
- In case of unlisted company, the non-resident investor shall be eligible to exit from the investment in equity shares of the investee company at a price not exceeding that arrived at on the basis of Return on Equity ("RoE")1 as per the .latest audited balance sheet;
- Any agreement permitting return linked to equity, as above, shall not be treated as violation of FDI policy/FEMA Regulations
- Investments in Compulsorily Convertible Debentures (CCDs) and Compulsorily Convertible Preference Shares (CCPS) of an investee company may be transferred at a price worked out as per any internationally accepted pricing methodology at the time of exit duly certified by a Chartered Accountant or a SEBI registered Merchant Banker. The guiding principle would be that the non-resident investor is not guaranteed any assured exit price at the time of making such investment/agreement and shall exit at the price prevailing at the time of exit, subject to Lock-in Period, as applicable.

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