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An Introduction To Trade Remedies: Their Need & Working

The World Trade Organisation Members aspire for free trade, however, free trade does not always imply fair trade. Although, as a result of liberalization, there has been the advent of many players in the International market which has increased scope for freer competition, yet, as they say, all that glitters is not gold, the same also brings along with it the phenomena of unfair pricing by the exporters/business players. There has been a parallel increase in the instances of unfair trade practices opted by these market players thereby elevating the risk of injuries that might be caused to the domestic industries/businesses of various nations. Thus, such practices necessitate the need for establishing fair trade order and devising means for the protection of such domestic industries thereby curbing the risk of injuries caused to them due to the deployment of such unfair practices.

Trade remedies can be said to be tools of trade policy which permit the governments to take remedial actions against the imports that seek to cause or have the potential of causing material/substantial injury to the domestic industry of that nation. Generally, employment of these trade remedies as a general rule are discouraged, however in situations where there is a targetted risk to the domestic industry or when there is an invocation of such unfair trade practices, the states can take resort of these remedies as a protection measure as an exception. Thus, these trade remedies are to be invoked as an exceptional measure and not a general rule of law.

Trade remedies under the International law are broadly divided into; anti-dumping action; countervailing duty measures and safeguard actions and are majorly provided for in three separate agreements of the WTO, being, the Anti-dumping Agreement (Implementation of Article VI of the General Agreement on Tariffs and Trade 1994); the Agreement on Subsidies and Countervailing Measures; and the Agreement on Safeguards.

These remedies basically qualify the importing nation to exercise power with respect to regulating the rate, extent, and cost of imports entering into their territory. The importing nation can use these trade restraint mechanisms and impose restrictions and regulations on the exporting nation. Thus, like it is said, power corrupts and absolute power corrupts absolutely, similarly, when the importing nations are vested with such powers, there is the likelihood of them abusing these powers to the disadvantage of the exporting nations as well. Thus, the WTO also contains a system to stop such governments from abusing these measures/actions, since in all circumstances the consequences and impact of the exercise of such powers are more prejudicial to the interest of the exporting nation.

The first among the above-mentioned trade remedies relates to anti-dumping. Dumping means pricing the products in a way injurious to the market. Thus, when manufacturers exporting a product, charge low prices for their products as compared to the prices of similar products in the foreign market, it is referred to as an act of dumping. Thus, generally if viewed, dumping, in fact, should be considered for the consumers, as the products would be available to them at lower prices, however, since it has direct consequences on the domestic industries, thus governments are often found taking anti-dumping actions. Under the WTO, dumping as a general rule is not prohibited, however, it is prohibited if it either causes or threatens to cause material injury to the domestic industry of the importing country or if it becomes the cause for material retardation in the establishment of some industry in the domestic market of the importing country.

Dumping thus connotes, the act of exporting products at a price lower than what they are sold in the home country’s domestic market, or selling products at a cost even lower than their cost of production. It often reflects glimpses of unfair competition as it has the effect of injuring the domestic industries.

Thus, the WTO agreement allows the governments to respond to such practices by resorting to anti-dumping actions when there is a genuine case made out for material injury to the competing domestic industry. For sustaining such actions, the governments have to showcase that dumping is in effect taking place. The governments further are required to calculate the extent to which dumping is taking place, this well can be done by comparing the price at which the exporter is exporting and the price being charged by the exporter in his home country. Lastly, the governments have to establish that such actions on part of the manufacturer/exporter/exporting country are actually causing or threatening to cause injury to that government’s domestic industry.

Anti-dumping action typically means, imposing extra/additional import duty on the product thereby being exported by the exporting country for the purposes of bringing parity between the price charged by the exporting country and the normal value of the products in the importing nation’s home market so that the element of injury or threat of injury to the home market/ domestic industry is eliminated.

The second remedy being, countervailing duties, basically mean imposing tariffs on imported goods to counteract the subsidies made to those goods by their exporting country. Countervailing duties are often also termed as anti-subsidy duties. These duties typically mean import tax which is imposed on the goods for the purposes of either preventing dumping or to is used as a countervailing measure to tackle the export subsidies been granted by the exporting nation on their goods. Thus, where manufacturers by providing subsidies to the exporting products attempt to lower down the price of such products in the foreign market, the importing nation can adopt this remedy and impose tariffs on the products being imported so as to lower down the price of these products in the market of importing nation thereby preventing the domestic industries from the threats which such low prices might cause.

Countervailing Duties (CVD)  are measures of regulation often employed for neutralizing the negative impact that arises due to subsidies being provided by the government of the exporting nation on such products. The cost of the exporting goods is naturally bound to decrease when the government provides subsidies as compared to the prices of the same products in the importing nation wherein no such subsidies are provided. Thus, as a result of importing such subsidized imports, there might be dire consequences for the domestic industries, thereby leading to factory closure and extending to causing huge job losses as well.

Talking about unfair trade practice in the International Trade Law realm, such export subsidies to are considered to be one of such practices since they have serious and damaging repercussions on the domestic industries of the importing nation. The effect that such subsidies cause on the domestic industries can well be showcased by way of the following example; Now, say country X provides an export subsidy to manufacturers in the nation who export pens at $8 per pen in mass to Country Y. And, say Country Y has home manufacturers (being the domestic industry/home market of Country Y) who make the same pens available at $10 in the Country Y. Then, by virtue of the export subsidy being offered by Country X to its manufacturers, the cost of the same pen goes down to $8 per pen when imported from Country X and rises to $10 when manufactured in Country Y. It is obvious, that there would be a tendency in the consumers of Country Y to opt for a pen priced at $8 per pen rather than buying the same pen priced at $10. Therefore, this export subsidy provided by the Country X, though would have the effect of fostering exports of Country X would at the same time have a negative impact on the domestic industries of Country Y. If Country Y, in such circumstances determines that its domestic industry is being hurt on account of the unrestrained flow/import of such subsidized pens then it can resort to the imposition of such countervailing duties on the pens so as to neutralize the impact thereof. The WTO, therefore, provides for a solution to such situations, as it provides Country Y with the option to impose import tax or countervailing duty to be precise, on the subsidized pens to bring the cost of such importing pens to $10 equal to the price of the in-house pens, thereby eliminating the unfair price advantage that the manufacturers of Country X could have over Country Y owing to the export subsidy provided by the Country X.

To ensure, that such countervailing measures are not abused by the importing nations, the WTO has provided for global rules governing trade inter se the nations and also the detailed procedures stating the circumstances giving rise for the imposition of such countervailing duties by the importing nations. These rules are well contained in the WTO’s “Agreement on Subsidies and Countervailing Measures”, which contained in the General Agreement on Tariffs and Trade (GATT) 1994, thereby defining how and when can the export subsidies be used and also regulates the measures that nations can opt for counteracting such subsidies. Generally, the common form of measures opted by the affected nation includes seeking withdrawal of the subsidy through the WTO’s dispute settlement procedure; or as pointed out above, the imposition of countervailing duties on the subsidized imports which have the effect of hurting the domestic producers/ industry of the affected nation.

The definition of the term “subsidy” for the purposes of the agreement has been kept quite broad. It is defined to include any financial contribution made by a government or government agency, including a direct transfer of funds (such as grants,loans and infusion of equity), potential direct transfer of funds (for example, loan guarantees), fiscal incentives such as tax credits, and any form of income or price support.

In order to ensure that there is no abuse of such measures by the affected nation, there are limitations placed on the occasions when such measures may be resorted to by the nations. Thus, an importing nation can charge such countervailing duties only after conducting an in-depth investigation into such subsidized exports. The agreement thereby, provides in great detail the rules for determining if a product is subsidized and also calculating the amount of such subsidy, there is a further mention of the criteria for establishing/ascertaining if such subsidized imports affect the domestic country and further also extends to rules for implementation as well as the duration of the countervailing duties which generally is five years.

The third remedy being, the Safeguard Actions. These actions are more like emergency actions. Thus, in times when there is a surge of imports causing or threatening to cause serious substantial injury to the domestic industry. A member of the WTO may cause temporary restriction on the imports of particular products if it so feels that such imports have the effect of causing serious injury to the domestic industry. These measures are generally adapted to buy time for the domestic industries to adjust to the foreign competition created by virtue of increased quantities of imports causing serious injury to the domestic industries of the importing nations who produce “like or directly competitive” products.

This Agreement on Safeguards under article 19 of the GATT, 1994 and is also referred to as the third leg of the trade measures. This agreement finds its roots in the events that took place in the 1980s when there was a rapid growth in the exports from the manufacturers of Japan and also of the Newly Industrialised Countries (NICs) of East Asia which constrained various countries and majorly the US, ultimately had to accede to the pressure built by the domestic lobbies in these nations for restricting the imports.

These grey measures also included within themselves Voluntary Export Restraints (VERs), wherein most of the exporters in Japan had agreed on limiting the exports to certain fixed quantities. VERs are kind of non-tariff barriers on the number of goods/products that can be exported out of the exporting country during a specified period of time. They are viewed as being self-imposing limits by the exporting country when actually they are imposed at the instance of importing country. These restraints are generally imposed by the importing countries for the purposes of providing protection to the ongoing domestic businesses of that country. Oftenly, the goods that are imported into the country pose to be a competitive threat to the domestic businesses producing the same goods in the importing country and for protecting the domestic businesses against the surge of such imports there restraint barriers imposed by the importing country. In order to protect its’s trade interest VERs are then offered by the exporting country for propitiating the importing country and deterring it from imposing such explicit and stringent trade barriers.

Voluntary Export Restraint, the name itself provides, is a measure adopted in international trade law for protecting business/trade interests. The term voluntary is prefixed since it is self-imposed by the exporting country for protecting itself against the deterring barriers intended to be imposed by the importing country. The imposition of this restraint widely covers many products ranging from products relating to textiles, footwear, steel, machine tools, and even automobiles. Recently, India dragged the USA into WTO on the steel and aluminum tariffs imposed by the latter. The reason cited by India was USA’s inconsistency with global trade norms. Multiple violations of the WTO norms especially relating to norms like the introduction of restrictions in the form of sanctions/ quotas, discrimination against its imports and the major one being the use of tariffs for getting other countries to agree to adopt such VERs.

These so-called “grey measures” were mostly non-transparent, arbitrary and trade-distorting, and, instead of regulating the trade in an efficient manner, the very purpose for which they were adopted stood defeated since these measures, on the contrary, led to increasing the market prices of those goods which were restricted which perversely had the effect of increasing profits of the exporters. Thus, this was a clear case where the so-called regulatory measures turned into abusive measures.

For resorting to the safeguards agreement, it is imperative that the importing country conducts a thorough, in-depth investigation with due compliance with the procedural requirements to determine whether a serious injury has occurred to the domestic industries. After the inquiry is conducted, then the authorities can accordingly choose to impose quantitative restrictions or special import duties as they consider most appropriate in view of the prevailing situation.

No doubt, these trade remedies are available to all the 164 member countries of the WTO, yet, their use is still more specific to developed nations in comparison to developing nations because of the complexity of the WTO procedural requirement or even due to the fact that huge costs are incurred in the process of dispute settlement.

Recently, in India, the Ministry of Commerce came up with Manual of Operating Practices for Trade Remedy Investigations and Handbook of Operating Procedures of Trade Defence Wing. The country has also come up with brochure pertaining to Trade Remedial Measures for the purposes of familiarising the industry about measures like anti-dumping, countervailing and safeguard measures. These publications have been brought in by the DGTR (Director General for Trade Remedies) Officials and the Trade Policy Divison, Department of Commerce, Centre for WTO studies, Centre for Trade and Investment Law and the Centre for Regional Trade.

India has actively been resorting to these trade remedies. For instance, in March 2018 India imposed anti-dumping duty on the import of Ofloxacin which was used for treatment for infections in China.

Lok Sabha Passes Consumer Protection Bill, 2018

New Delhi, December 21: The three-decade-old law, Consumer Protection Act, 1986,  is being changed.

In an effort to protect consumers’ interest, Lok Sabha on Friday passed the Consumer Protection Bill, 2018. If adopted in Rajya Sabha, it will replace archaic Consumer Protection Act, 1986.

The bill deals with product liability, class action, false advertisement, endorsement by celebrities etc. It adds various provisions for consumer protection that were absent in the 1986 Act.

To mediate consumer complaints, the new measure provides for the establishment of an executive agency, Central Consumer Protection Authority (CCPA)  and forum at the district, state, and national level. The agency devised on the lines of highly efficient US Federal Trade Commission will intervene to protect consumers from unfair trade practices. If a company is found to be indulging in any unfair practices, the agency will have authority to launch a strict action against it. It has the power to recall products found to be unsafe and to direct discontinuation of the business. These consumer commissions will be attached to consumer mediation cells so that they do not get pilled up with excessive work.

In case of any malpractice, the bill proposes that the manufacturer will not be accountable to only one or a group of consumers but toward all the consumers and they all will become beneficiaries in a class action suit.

The bill taking e-commerce into consideration has squashed the current law which gives power to the consumer to initiate legal action against a marketer only in the case where the transaction has taken place. The consumer will now have a choice to initiate a complaint from his/ her own residence, electronically, or at consumer court.

E-commerce platforms will also have to ask for consent from the customer at the time of checkout to be able to access their data. Apart from this, companies will have to reveal their business details and seller agreement.

The bill also addresses the issue of misleading advertisement.

‘Misleading advertisement’ is defined under Clause 2(28) of the bill as (i) falsely describes such product or service; or (ii) gives a false guarantee to or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or (iii) conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or (iv) deliberately conceals important information. According to the bill, if the manufacturer publishes misleading or fabricated advertisement, they will be penalized with imprisonment for a term which may extend to two years, with a fine of 10 lakh rupees.

Celebrities endorsing products will have a hard time now if the advertisement turns out to be frivolous. “Endorsement” is defined under Clause 2(18) as (i) any message, verbal statement, demonstration; or (ii)depiction of the name, signature, likeness or other identifiable personal characteristics of an individual; or (iii)depiction of the name or seal of any institution or organisation,which makes the consumer to believe that it reflects the opinion, finding or experience of the person making such endorsement. However, there will be penalties but no jail term.

Moreover, to curb frivolous complaints, the bill levies a penalty from Rs. 10,000 to Rs. 50,000.

Background

In August 2015, to repeal a thirty-year-old consumer protection act, 1986, the Consumer Affairs Ministry introduced the consumer protection bill in Lok Sabha. A year after that, a Parliamentary Standing Committee submitted its recommendations. Following that, on December 20, 2017, the Union Cabinet approved the bill.

A drastic change in the consumer market, false and misleading advertisement with the emergence of online shopping has necessitated the need for a new law.

 

 

 

 

Ministry of Road Transport and Highways Announces New Standard Operating Procedure (SOP)

New Delhi, December 22: The Ministry Of Road Transport and Highways (MoRTH) has issued a new Standard Operating Procedure (SOP) for presenting vehicle documents during an inquiry on demand by any police officer in uniform or any other officer authorized by the state government in this behalf.

With the new provisions in place, the Vehicle owners can now present their certificate for registration, license, certification for pollution under check (PUC), fitness, permit, and insurance in a digitalized form, rather than as hard copies.

The ministry had urged States and Union territories to adopt the SOP to warrant compliance with the provision of rule 139 of the Central Motor Vehicle Rules, 1989.

The improved provision is aimed at enabling the use of the digital platform for carrying transport documents. In order to ensure transparency and compliance of the amendments made to rule 139 of the Central Motor Vehicles Rules, 1989, the recent changes aim at notifying enforcement officers who may not know of the new provisions.

Earlier this year, the government issued a draft notification allowing e-verification, which was received with positivity by road users, who at one point in their life, were penalized for not carrying physical copies of vehicle-related documents.

With the fresh notification in place, vehicle owners can now carry and access their transport documents or other information conveniently on either their smartphones or on applications like Digilocker or mParivahan app.

The law enforcement agencies and traffic police will now be able to simultaneously access the details from the eChallan app.  These have the date of online verification of the vehicle and its license status. Off-line verification of mParivahan QR Code is also available on this platform.

This move will save the police and citizens from the trouble of collecting documents after paying compounding fees, as the challan would be automatically updated in the database. This would also improve transparency in such interactions.

 

 

Critical Analysis Of The Judgment Of The Madras High Court In Fermat Education v. Sorting Hat Technologies P. Ltd. [CS(OS) 330 of 2018]

With the budding number of online intermediaries in India, the responsibility of such online platforms, in terms of content uploaded by third parties and its legal implications have been widely discussed. In 2008, Section 79 of the IT Act was amended to provide extensive protection to online intermediaries from third party liabilities. Furthermore, in 2011, the ‘Intermediary Guidelines’ were issued for further improvement of the regulatory framework of intermediaries. The said guidelines set up a notice-and-takedown mechanism in order to avail the protection under Section 79 of IT Act. As per the mechanism, the intermediaries can avail the protection as long as they inform the users that they are not permitted to post illegal content and bring down any infringing content within 36 hours of being brought to their attention.  To ensure a balance with the freedom of speech of the citizens, the decision of the Supreme Court in Shreya Singhal v Union of India further held that a valid court order is required for a takedown of content by the intermediary.  This resulted in reducing the regulatory burden of intermediaries.

The recent decision of the Madras High Court in Fermat Education v. Sorting Hat Technologies P. Ltd. [CS (OS) 330 of 2018] clarifies the scope of online intermediaries in terms of copyright infringement and hence, has serious implications on existing online platforms that host third-party content.

Brief Facts:

The plaintiffs, M/s Fermat Education and its Partner, Mr. Rajesh Bala Subramaniam provides coaching for Common Admission Test (CAT) aspirants. The first defendant is a company incorporated in India which operates the website www.unacademy.com. The said website offers course materials by collaborating with independent tutors or educators who upload online tutorial videos. The 13 other defendants are educators, who uploaded educational contents on the website.

The Plaintiffs approached the Madras High Court, aggrieved by the fact that more than 200 videos containing questions of the plaintiffs were uploaded in the website of the first defendant by the educators. Hence, the plaintiff filed a suit under Sections 51, 54, 55 and 62 of the Copyright Act, 1957 seeking:

  1. A judgment and decree restraining the defendants from using the literary work of the plaintiff in the literary form or video form.
  2. A decree for Rs. 25,00,000 as damages for infringement of plaintiff’s copyright
  3. Preliminary decree to remove the infringing materials from the website www.unacademy.com
  4. Preliminary decree for the first defendant to render accounts of profits earned through infringement of the plaintiff’s copyright.

Issues dealt with by the Court:

The Court dealt with the defenses taken by the first defendant against the plaintiff’s allegations of copyright infringement. i.e:

1. Whether the first Defendant is an intermediary and hence, protected from third party liability?

The Defendant argued that it only provides access to a platform to upload educational materials and hence is an intermediary as defined under Section 2(1)(w) of the IT Act, 2000. Consequently, they would be exempted from liability under Section 79 of the IT Act.

Section 2(1) (w) of the IT Act is produced herein below:

“intermediary”, with respect to any particular electronic records, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online auction sites, online marketplaces, and cyber cafes”

Consequently, Section 79 of the IT Act protects intermediaries from any liability arising due to third party information, data, or communication link hosted by the intermediary. Section 79 of the IT act provides the safe harbor provisions for intermediaries in India. Under sub-section 1, it explicitly states that an intermediary will not be liable for third party information hosed in its platform. However, Subsections 2 and 3, add certain conditions to the safeguard under sub-section 1. S 79 (2) lays down the precondition for application of S79 (1). The intermediary should limit itself to providing access to a communication system to third parties. The intermediary itself cannot initiate transmission, select receiver of transmission or select or modify the information that is transmitted. S 79 (3) exempts intermediaries from the protection granted under S. 79(1) if the intermediary has conspired/abetted/aided/induced in the commission of an unlawful act. The intermediary will also be held liable if it fails to remove or disable access to any information after being notified by the appropriate government

In order to determine whether the first defendant would fall under the definition of an intermediary provided under Section 2(1) (w) of the IT Act, 2000, the court analyzed the terms and conditions of the first defendant. As per their terms and conditions of the first defendant, they retained a right to disapprove videos submitted for uploading. They also paid a fee/ consideration to the tutors who uploaded the videos. Thus, the court was of the view that the first defendant does not fall under the purview of the definition of an intermediary as the materials are not uploaded simpliciter by the tutors. The first defendant exercises their discretion and decides upon the contents uploaded on the website. Furthermore, the fact that the educators are paid consideration for uploading their content n the websites further corroborates the fact the first defendant is not an intermediary.

The Court also referred to the exclusivity clause provided by the first defendant in its terms and conditions. The said clause prohibits the educators from uploading the contents uploaded in the defendant’s website on any other offline mode or any other parallel media. Hence, the court took the view that the exclusivity clause is completely against the definition of an intermediary.

The Court then put forward the rationale that the first defendant exercises complete discretion in terms of the videos uploaded in their website and also pays the educators for providing such materials. Hence, it is only reasonable that the plaintiffs are entitled to protection from copyright infringement of the educational content.

The first defendant also relied on the judgment of the Honourable Supreme Court in the case of Myspace Inc. vs. Super Cassettes Industries Limited, wherein, defendants who operated a social network platform which enabled the users to upload entertainment video and uploaded music works, entertainment videos etc. without paying any fee were protected under Section 79 of the I/T Act. The Madras High Court was of the opinion that in the above instance the defendants could only upload a song as it is. However, in the instant case, the first defendant retained a right to examine the contents that were to be uploaded in their website. Furthermore, they also paid consideration to the users for uploading the materials.

2. Whether the Defendant is entitled to the defense of fair use under S. 52(1)(i) of Copyright Act, 1957?

The Defendant claimed that it is entitled to protection under Section 52(1)(i) of the Copyright Act, 1957 which provides a defense against infringement of copyright in case of production of any work by a teacher or a pupil in the course of instruction. For this purpose, the defendant referred to the Delhi High Court’s judgment in the case of Chancellor, Masters &Scholars of the University of Oxford and others v Rameshwari Photocopy Services and another wherein the Delhi High Court had given a wider interpretation to Section 52 (1) (i) and held that the protection is not merely to individual teachers or pupils. However, the Madras High Court differentiated the above case from this situation. According to the court, since the first defendant paid consideration to the educators and also exercised a discretion to upload, edit and reject study materials, the first defendant is engaged in a commercial activity with a motive to accrue profits. Hence, Section 52(1)(i) of the Copyright Act would not be applicable to the first defendant.:

Once consideration is paid for uploading materials, then it becomes a business venture and responsibility is imposed on the defendants to ensure that they do not infringe the copyright of any other person.

Court’s decision

In view of the above, the Court then concluded that the defendants cannot enjoy the fruits of infringed materials prepared by the plaintiffs and the plaintiffs are entitled to the protection of the originality of their educational materials.

Conclusion

The Court has rightly interpreted the provisions of law relating to intermediaries to hold the defendant liable for copyright infringement and transposed the principles of copyright infringement to the virtual space. By doing so, the court has served a warning to the existing online platforms that host contents uploaded by third parties. The Judgment also serves as a caution bell to online business models that render services relating to the hosting of information that they claim to be their intellectual property to take advantage of the virtual space.
The Court has put forward a clear and strict interpretation of ‘intermediaries’. Under Section 2(1)(w), for one to qualify as an “intermediary”, one would have to: (a) receive, store or transmit any electronic record on behalf of another person; or (b) provides any service with respect to an electronic record, on behalf of another person. However, the Judgment strictly lays down that if (i) the online platform retains editorial control over the content or (ii) pays consideration to the users for uploading content on the platform, such online platforms cannot avail the protection under Section 79.
Hence, it is all the more important for online platforms to ensure that they fall under the purview of an ‘intermediary’ strictly so that they can avail protection under Section 79. The Judgment also adds additional obligations on such online platforms to take precautions to ensure that no infringing content is uploaded on the platform. The implications of the Judgment on companies that claim themselves to be intermediaries is yet to be seen.

Lok Sabha Passes Surrogacy (Regulation) Bill To Outlaw Commercial Surrogacy

New Delhi, December 20: Amidst frequent disruption and chaos, the Lok Sabha on Wednesday passed the Surrogacy (Regulation) Bill which was introduced in 2016.

The Bill attempts to effectively outlaw commercial surrogacy but allows surrogacy for non-commercial or altruistic needs. It also ventures to end the exploitation of surrogate mothers and ensures the rights of children born out of surrogacy. The bill attempts to regulate surrogacy by constituting surrogacy boards at national and state level.

India is called as a surrogacy hub for couples from across the world. According to a report by the Scroll.in, Assisted Reproductive Technology (ART) industry has grown from Rs. 3,000 crores in 2014 to Rs. 20,000 in 2018.

Clause 2(F) of the bill outlines “commercial surrogacy” as commercialisation of surrogacy services or procedures or its component services or component procedures including selling or buying of human embryo or trading in the sale or purchase of human embryo or gametes or selling or buying or trading the services of surrogate motherhood by way of giving payment, reward, benefit, fees, remuneration or monetary incentive in cash or kind, to the surrogate mother or her dependents or her representative, except the medical expenses incurred on the surrogate mother and the insurance coverage for the surrogate mother.

Altruistic surrogacy to infertile Indian married couple

The bill outlines “couple” as legally married Indian man and woman above the age of 21 years and 18 years, married for a period of at least five years. This means that couples from outside India, same-sex partners or couples living together can not opt for surrogacy. Also, only the couple who is certified clinically as infertile can legally avail the service. They should not have any child of their own but if the surviving child is medically certified to be mentally or physically challenged, or as having life-threatening diseases, the couple can avail surrogacy services.

The bill permits only “altruistic surrogacy” which is defined in the clause 2(b) as the surrogacy in which no charges, expenses, fees, remuneration or monetary incentive of whatever nature, except the medical expenses incurred on surrogate mother and the insurance coverage for the surrogate mother, is given to the surrogate mother or her dependents or her representative.
However, the surrogate mother can not be a close relative of the intending couple. Moreover, she would be allowed to act as a surrogate mother only once in her lifetime.

Prohibition to abandon child born out of surrogacy

The bill prohibits intending couple from abandoning the child born out of surrogacy procedure. The child will be deemed as a legal offspring of the intending couple.

To protect the right of the surrogate mother, the bill states that the mother cannot be forced to abort the child by any person or agency.

Registration of surrogacy clinics

The surrogacy clinics shall be registered only after the appropriate authority is satisfied that such clinics are in a position to provide facilities and can maintain equipment and standards including specialized manpower, physical infrastructure, and diagnostic facilities in the manner provided in the bill.

Surrogacy board

The bill seeks to constitute surrogacy board at both national level and state level. The work of the board will be to advise the government on surrogacy policy, review and monitor the implementation of the law.

Background
In order to regulate surrogacy in India, the Indian Council of Medical Research (ICMR) issued a few guidelines in 2005. It stated that the surrogate mother should be entitled to a compensation decided by the commissioning couple and the mother carrying the child. The Supreme Court of India in Baby Manji Yamada Vs. Union of India Highlighted the lack of regulation for surrogacy in India. The issue caught the national attention in 2009 when the Law Commission of India in its 229th report recommended a prohibition on commercial surrogacy. A government notification in 2015 prohibited surrogacy for non-Indians. Finally, in 2016, the Surrogacy (Regulation) Bill was introduced in Lok Sabha.

Due to the rising incidents of unethical practices of surrogacy, exploitation of surrogate mothers, abandonment of child born out of surrogacy and import of human embryos and gametes, it has become necessary to enact legislation to put a blanket ban on commercial surrogacy and regulate “altruistic surrogacy”.

Pharmacy Fiasco: Online Pharmacies To Seek Legal Recourse As Madras High Court Bans Online Sale Of Drugs & Medicines

Chennai, December 19: Six e-pharmacy companies approached the Madras High Court to appeal against the recent order directing a blanket ban on the online sale of medicines till the Government of India comes out with a new regulation. A common platform formed by these six major players have impleaded in the petition filed by the Tamil Nadu Chemists and Druggists Association (TNCDA).

TNCDA also urged the government to notify the regulations at the earliest and not later than 31st  January as stated in the order given by the Madras High Court this week.

Last week, as reported by the Law Chronicles, a bench of Chief Justice Rajendra Menon and Justice V K Rao of Delhi High Court ordered a complete ban on online pharmacies selling medicines across the country as the same is not permitted under the Drugs and Cosmetics Act, 1940 and the Pharmacy Act, 1948.

After Delhi High Court decision, the Madras High Court ordered a complete ban on the sale of medicines and requested the government to pass draft regulations passed by the Drug Technical Advisory Body (DTAB) in September. It also requested the e-retailers to obtain license within two months from the date of notification of the new regulation.

In order to tighten the leash on the e-pharmacies which were selling counterfeit medicines and with an aim to regulate the online sale of drugs, the Union Health Ministry in September came out with draft rules on “sale of drugs by e-pharmacy”. The rules stated that no person should offer, exhibit or keep a stock of drugs and sell them through an unregistered online platform. According to the draft guidelines, e-pharmacies have to register for a license with the Drug Controller General of India (DCGI), which will be valid for three years. However, it did not specify any penalties on the violation.

According to a report by BloombergQuint, e-pharmacies have raised over $100 million in funding this year. The recent order by two these two courts have come as a shock to the e-retailers but the experts believe that the new regulations will bring about more transparency and will encourage more entrepreneurship and FDI interest in this sector. But protesting against the same, pharmabiz tweeted out stating

This issue arose after a writ plea was submitted by several traders and Tamil Nadu Chemists and Druggists Association stating that medicines sold by these retailers online are fake, expired, contaminated and unapproved. It also contended that the law does not allow the shipping, mailing or door delivery of prescribed medicines and even though the Government has made several amendments to the law for pharmacies, not much has been done to regulate the same. The court has now given online pharmacies four weeks to file a counter affidavit.

Regulation of online sale of medicines in India
As many as 250 online pharmacies have sprung up in India in recent years. To woo customer, these online platforms, just like any other e-commerce website, sell medicines at discounted prices with free home delivery. To this, traditional pharmacists have time and again contended that if such websites remain unregulated, their business will be affected. According to a report by Deloitte, the Indian e-commerce industry is estimated to grow at a compounded annual growth rate of 34% by 2020. Currently, e-pharmacy portals in India operate on the inventory or marketplace model which is in compliance with the IT Act, 2000 and the guidelines of the Government of India.

According to the draft rules published by the government, “e-pharmacy” means the business of distribution or sale, stock, exhibit or offer for sale of drugs through a web portal or any other electronic mode and “e-pharmacy portal” means a web or electronic portal or any other electronic mode established and maintained by the e-pharmacy registration holder to conduct business of e-pharmacy.

As affirmed in the notification by the Office of Drugs Controller General through its notification dated 30 December 2015, there is no specific legal regime governing e-pharmacy business in India. Drugs and Cosmetics Act, 1940 does not distinguish between medicines sold offline and online. In the absence of a legal framework, e pharmacies are not able to secure their foot in the marketplace.

It is still to be seen how the implementation of regulations will address the aforementioned challenges and concerns.

 

 

 

IP Audit & Its Importance In Effective Management Of IPR

Intellectual property (“IP”)  assets can be defined as “Things of value that are not tangible but can be measured and managed and to which a value may be attached“. On the other hand, IP auditing can be defined as a systematic review of collated IP: owned, acquired, utilized or needed by a business in order to identify – under-utilized IP assets; any unrealized threats to an organization; and to enable bus inesses to form wholesome strategies that will manage and enhance the organizations’ market position.

The intellectual property forms a substantial part of a company’s net resources. While IP exists and is owned by companies in various forms and not all its forms are germane to every company, but, indisputably,  intellectual property in some form is certainly important to virtually every company. An organization needs to efficiently manage its IP’s by maintaining up-to-date collated IP records, protecting IP by taking deterring steps against infringers in several jurisdictions, prosecution, maintenance, etc., all of which requires sizeable time, money and manpower. Furthermore, management and preservation of intellectual property assets may seem like a demanding task for both: companies that have been at it before and for companies whose IP is in major disarray. Irrespective, efficient management of intellectual property is fundamental and often crucial for a wide array of businesses to succeed and that an IP audit is the most effective and at times the only first step toward achieving said goal.

A well-maintained and up-to-date inventory of all IP assets aid businesses in making a multifarious informed decision for its future ventures and vision. Thus, once all the IP assets are inventoried and all existing IP procedures are documented, the future vision for development and venturing can be made parallel with respect to a company’s business policies and this helps them to formulate long-term, business-oriented strategies. Sorting out the nitty-gritty of IP assets is also a pre-requisite to get finance and adequate IP audits facilitate towards formulating a proposal for obtaining desired finances, improving loan rates and escalating share prices.

TYPES OF IP AUDIT AND THEIR SIGNIFICANCE

  1. General Purpose IP Audit

General or broad IP audit is undertaken in order to manage and control the IP assets of a business. This type of IP audit helps in maintaining the overall health of the IP of any business by reviewing and assessing for any statutory requirements for maintaining patent/trademark applications.

A general or broad IP audit is done in the following situations:

  • Before establishing a new company it is always important for a start-up Company to be aware of intangible assets it owns and/or needs to protect.
  • When a business is considering implementations of new policies, standards, or procedures relating to IP.
  • When a business is considering implementing a new marketing approach or direction or is planning a major reorganization of the company.
  • When a new person becomes responsible for IP management.

Once a comprehensive IP audit has been undertaken, a smaller effort and expense is desired at regular intervals, such as on an annual basis, so that IP assets are reviewed and appropriate decisions taken, depending on the current and emerging needs of a company.

  1. Event Driven IP Audit

Event-driven IP Audit is generally much narrower in scope than a broad or general purpose IP audit. Further, the nature and purpose of such an audit are reflective of the event in question, and the time and resources available for the same. It is often referred to as “IP Due Diligence”, when it is done to assess, as objectively as possible, the value and risk of all or a part of a target company’s IP assets. It is undertaken by a third party before an IP portfolio is bought or invested in and it provides information that affects the course of the proposed transaction.

Few events that require Event Driven IP Audit/IP due diligence are:

  • Merger & Acquisition or Joint Venture
  • Financial transactions
  • IP licensing
  • Launching a new product or service
  • Buying or selling a business division or IP transfer
  1. Limited Purpose Focused Audit

A limited purpose audit is typically much narrower in scope than the aforementioned two and is performed under highly constrained time schedules. These audits tend to be situational in nature. They are typically used to justify a certain legal position or the valuation of a particular IP. It is majorly done in the following cases:

  • Foreign IP Filings:

Before a company takes up an aggressive program of filing IP applications in other countries, that is, before entering a new market abroad (by way of, say, exporting, or expanding overseas through off‐shoring/outsourcing some of its activities, or by licensing, franchising or merchandising) an IP audit helps to sensitize the company to market‐specific IP laws, rules, customs and practices affecting IP rights.

  • Significant changes in IP law and practice:

Where there is a significant change or development in IP case law or statutory law in a relevant market it may necessitate the review of existing products for possible infringement of the IP rights of others.

  • Personnel turnover:

Before a major personnel turnover of in‐house research and development or marketing, especially if it involves disgruntled employees, an IP audit should be done to secure the status of a company’s IP assets.

  • Clean room procedures:

The clean room procedure seeks to avoid infringement by ensuring that there is no “access” to copyrighted material of unrelated parties during the software development project. Thus, an audit might be necessary to institute or to review the adequacy of, clean room procedures used in the development of software products so as to reduce the risk of infringing third party copyright.

  • Preparing for litigation:

When considering or facing litigation, a company is required to show non‐infringement and no access to the work, complete or confirm the chain of title of the underlying IP rights or otherwise complete the documentation of the relevant IP rights.

The following are some of the reasons why IP audits are conducted:

  • Identify the IP owned by a particular company – every successful business requires well-managed resources and that includes the intangible IP resources held by a company. For businesses to be able to efficiently manage, protect and utilize their IP, they need to be aware of the IP assets they own. Being aware of the nature of the IP owned by a company can ensure that proactive steps are taken towards protection, development, licensing, exploitation etc. of the valuable IP. An audit may also bring to light any defects in title and can help outline the steps to correct them. Any existing IP-related agreements including licensing agreements; assignments; employment and independent contractor agreements; joint venture agreements; tech transfer agreements; and settlement agreements, can be reviewed to help ensure that IP rights have not been hindered or compromised.
  • Preserve and increase the value of existing IP – IP of a company is protected by a matrix of laws. This said a company can still make mistakes that may diminish or destroy the protections provided by law. Additionally, formal patent applications have to be filed to protect inventions and product designs, and patent rights are irretrievably lost if a company lapses proactiveness regarding the same. An audit narrows down such requirements and other kinds of steps that can be taken to prevent IP loss and enhance the value of a company’s existing IP.
  • Prevent avoidable hurdles such as costly legal disputes – IP litigations are complex and expensive. An IP audit can make companies aware of any possible disputes that may arise and thereby, help to plan successful avoidance and resolution strategies. An audit can further help recognize weaknesses in the audited company’s IP rights that can be addressed with timely corrective actions, resulting in stronger rights that are less likely to be challenged when those rights are asserted.
  • Facilitate and optimize business transactions –  An IP audit gives a company the most up-to-date understanding of its IP assets and their estimated value. It places the company in a pre-emptively prepared position to deal with opportunities that might arise, such as a third-party offer to buy the company or a new sales or expansion venture that may require financing.
  • Can help identify new ventures to benefit from with company’s existing IP – Audits can help identify new commercial opportunities that can be exploited in both domestic and international market via IP licensing.

Broadly, IP audit helps businesses do a SWOT analysis – a study that determines:

  • Strengths (Company’s owned and licensed IP);
  • Weaknesses of the organization (inadequate preservation of the company’s IP as elaborated above);
  • Opportunities for the company in the marketplace (licensing opportunities) and;
  • Threats that are perceived from the market (from competition and from within the organization).

IP audit further helps to make and update the inventory of the IP assets, and to analyze:

    • How the IP assets are being used and/or are certain, unknowingly, being left unused?
    • Which IP assets are owned by the company and which ones are licensed?
    • That IP assets are not infringing the rights of others and are also rather not being infringed by others?
    • What actions are required to be taken immediately with respect to each IP asset, or a portfolio of such assets, to serve the relevant business goals of the company?

CONCLUSION

In this date and age of knowledge-based economy, sizeable economic value is locked into intangible assets of companies, particularly their IP. A fundamental issue for a company’s feat is to completely realize the IP owned by it and manage it in a fashion as to capitalize on its real value which usually is much more than a company might comprehend on its own. Precisely why, often companies underestimate the value of their IP and thereby fail to effectively protect it. IP protection, through registrations, infringement prevention actions, etc., is not treated as a priority and the management of IP and related rights is regarded as a mere formality adding on to the company’s costs, rather than something that contributes immensely towards strategic corporate growth. Such misinformed approach could have serious drawbacks, which could be detrimental to the company’s future, including – missed opportunities, third party infringement, unavoidable and unforeseen expenses and efforts in developing new business models, fighting prized litigations, etc. At times, companies end up spending more finances in protecting their own IP rights which are being misappropriated by third parties due to the company’s personal folly in effectively protecting their IP in the first place. Hence, it becomes particularly important to have a thorough knowledge of one’s own IP and the need to protect it in a timely and effective manner.

An IP audit collates all information on the nature and strength of IP as well as the method to fully utilize these important resources. An IP audit is a relatively simple exercise, but it has a powerful role in avoiding various circumstances, such as violation of others’ rights, protecting one’s IP, reducing the risks of third-party IP violation, clarifying IP ownership issues, etc. It also serves as a directional tool for maintenance, management and protection of IP rights throughout the life cycle of the intangible asset. As companies are made conscious, time and again, of the value of their IP and rights associated thereto, the importance of IP will naturally grow, and thus the need audits.

Union Cabinet Approves Amendments To Make Aadhaar Card Optional For Mobile Connections, Banking

New Delhi, December 18: The Union Cabinet headed by Prime Minister Narendra Modi has approved the amendment to the two existing laws pertaining to the use of Aadhaar card by private entities. It has advocated amendments to the Telegraph Act and the Prevention of Money Laundering Act to give legal backing for linking of Aadhaar number with bank accounts and mobile number.

On September 26, the Supreme Court upheld the constitutional validity of Aadhaar card but read down certain sections of Aadhaar act, including section 57. The key part of the section, as stated in the act, was:

“Nothing contained in this Act shall prevent the use of Aadhaar number for
establishing the identity of an individual for any purpose, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect..”

An order by the Supreme Court imposed a restriction on the use of Aadhaar number by private companies. It was a provision in the Act that authorizes private entities like online platforms, telecom companies, and banks to ask for Aadhaar details from the customers for identification purposes. A five-judge bench headed by Justice AK Sikri had also struck down the requirement of Aadhar card by the school administration. It also said that linking of Aadhar card with mobile numbers is unconstitutional.

After it was struck down, private firms were not able to ask their customers to “mandatorily” link their Aadhaar card number. Now, the customer can voluntarily provide their 12-digit unique identity number to these private entities.

In order to overcome the lacuna and provide legal backing, the cabinet has approved the necessary changes required to make the need for Aadhaar card as “optional” while linking to the aforementioned services.

Changes expected

After the bill passes, it is foreseen that the updated law will be further amended in the interest to safeguard personal data and make sure the privacy of the cardholder is not jeopardized. According to a report by NDTV, the UIDAI will be turned into an independent authority, with powers to penalize those who demand Aadhaar details without approval.

The idea of Aadhar card was conceptualized under the regime of UPA government back in 2009.  It was envisioned as a tool to save cost in order to improve the delivery of subsidies to the poor by eliminating sham intermediaries.

 

Delhi HC Refuses To Consider Johnson &Johnson’s Plea

New Delhi, December 15: The Delhi High Court has refused any interim relief to Johnson and Johnson, which has, on the basis of reports of the two Committees, challenged the formula approved by the Union government to determine compensation for the patients who had received faulty hip implants. The Court further said that the plea is neither important nor urgent.

India’s top advisory board in its meeting on 29 November constituted a sub-committee of ten experts to deliberate on the issue of amendment of Medical Devices Rules, 2017, to include provisions for compensation by the manufacturer and importer in case of injury or death due to device malfunction.

In a press release, the government informed the general public about the formula worked out by the expert committee to compensate patients. According to the committee report, compensation payable to patients would be determined in terms of the disability by the faulty hip implants in relation to their age. According to the press release,  Indian patients suffering because of the hip implants sold by Johnson and Johnson would get as much as ₹1.2 crore each and an additional ₹10 lakh for nonpecuniary losses. The minimum compensation according to the formula in case of a disability would be ₹33 lakh.

US-based pharmaceutical giant in a statement said that the formula for compensation needs to be reformulated after proper hearing of the facts and positions of all the parties. As reported by Bloomberg,  Johnson & Johnson has begun settling consumers’ claims and has settled about 3,300 of 10,000, marking the first settlements in the seven-year-old litigation.

Another PIL in the same matter is pending before the Supreme Court. According to a report by the mint, with no specific legal provisions in the existing Drugs and Cosmetics (D&C) Act, 1940, or rules to provide compensation to patients in such cases, there is thought to be no way for the government to force the company to pay up.

The company had used a lacuna in the law because of which the government cannot compel it to compensate. For now, to put down this prolonged fire, the government is traversing all legal angles to make the company pay up to the patients affected by the faulty acetabular surface replacement hip implants.

 

 

SC stalls Sale Of Fortis To IHH Over Daiichi’s Plea

New Delhi, December 15: IHH Healthcare Berhad, a Malaysian-Singaporean private healthcare group, which had earlier this year won the bidding war for India’s second-largest hospital chain, fortis, will have to wait now. A three-judge bench headed by Justice Ranjan Gogoi maintained a Status Quo on the sale of Fortis Healthcare to IHH Healthcare.

This came after a contempt plea was filed by Daiichi Sankyo against Fortis’ former promoters.

BACKGROUND
Earlier this year this year, IHH was shortlisted to take control of Fortis. A bidding war kicked off after its founders, brothers Malvinder and Shivinder Singh, lost their shareholding due to debt, and allegations that they had improperly taken funds from the company. Soon after IHH won the bidding war, Daiichi-Sankyo of Japan approached the Delhi High Court to block the sale and enforced an arbitration award against the Singh brothers.

The Japanese Company alleged that the brothers concealed information of their generic drug firm, Ranbaxy laboratory while selling its shares to Daiichi back in 2008. In January this year, the Delhi High Court ruled that the Singh brothers must pay Daiichi $550 million awarded in an arbitration. As the case proceeded, it sought an injunction preventing the Singh brothers from selling assets to ensure the brothers have the funds to fulfill their potential liability, as reported by the BloombergQuint.

WHAT DID THE PETITION SAY?
According to a report by the Business Standard, Japanese drugmaker Daiichi-Sankyo had moved a contempt plea against Malvinder and Shivinder Singh (Singh brothers) and Indiabulls, alleging that the two had pledged 1.7 million shares of Fortis Healthcare held by Fortis Healthcare despite the Supreme Courts order of February 15, in which it forbade any fresh encumbrances unless it decides on Daiichi’s petition.

Daiichi alleged that the Singhs and their holding company, RHC, were in violation of their undertakings to the court that they had sufficient unencumbered assets to satisfy the award.

According to a report by moneycontrol, shares of Fortis uproared as the news hit the streets.