by Zen Webnet | Feb 7, 2024 | Blog
Article by Rakesh Yadav
In the intricate landscape of intellectual property, the term “patent trolls” has emerged as a contentious issue, sparking debates on the detrimental effects on innovation and economic growth. Patent trolls, often operating as individuals or companies, acquire patents not with the intent of producing or utilizing the inventions or ideas they protect but rather to exploit legal avenues for financial gain. This practice involves suing other entities that allegedly infringe on these patents, creating a litigious environment that poses significant challenges to genuine innovators and disrupts the normal course of business.
The impact of patent trolls on innovation is multifaceted. By wielding patents as weapons in legal battles, these entities make the process of creating and improving inventions more arduous and costly for individuals and companies alike. The very essence of patents, designed to incentivize innovation by providing legal protection and exclusivity, is subverted when wielded as tools for litigation rather than fostering genuine invention. This article delves into the various dimensions of the patent troll phenomenon, examining its drawbacks, consequences for innovation and economic growth, and potential strategies for mitigation.
The Patent Troll Landscape: Understanding the Menace
At the heart of the patent troll problem lies the exploitation of intellectual property rights. Patent trolls often acquire patents from inventors or companies that may not have the resources or intent to implement the patented ideas. Armed with these acquired patents, they proceed to target other entities, asserting patent infringement claims and demanding financial settlements. This aggressive approach disrupts industries and stifles innovation by diverting resources towards legal battles rather than constructive research and development.
Drawbacks and Disadvantages of Patent Trolling
The negative consequences of patent trolling are widespread and profound. Firstly, it introduces an element of uncertainty and fear within the business landscape. Companies and individuals may hesitate to innovate or introduce new products, fearing the specter of patent infringement lawsuits. This fear can result in delayed or canceled projects, impacting the overall pace of technological advancement.
Moreover, the financial toll of patent trolling is significant. Entities facing patent infringement lawsuits from trolls incur substantial legal fees, settlements, and judgments. The financial burden can cripple smaller companies, diverting funds that could have been allocated to research, development, and market expansion. The sheer cost of litigation and settlements often forces companies to reassess their innovation strategies, potentially curtailing their ability to compete and thrive in the market.
The economic ramifications extend beyond individual businesses. In a broader context, patent trolls contribute to a strained legal system, clogging courts with frivolous lawsuits. This not only burdens the legal infrastructure but also results in an inefficient allocation of resources that could be better utilized elsewhere.
Impact on Innovation and Economic Growth
Innovation is the lifeblood of economic growth, driving productivity, creating jobs, and fostering global competitiveness. Patent trolls, by virtue of their litigious practices, cast a shadow over this fundamental process. The mere threat of patent litigation can deter inventors and companies from exploring new ideas, launching products, or entering emerging markets. The resulting climate of apprehension stifles creativity and hinders the natural evolution of industries.
Economically, the consequences are palpable. The resources diverted towards defending against patent trolls could have been used for genuine research, development, and market expansion. Instead, these resources are absorbed in legal battles, impeding economic growth and hindering the potential for job creation. The cumulative effect is a drain on the economy, with billions of dollars spent annually on litigation and settlements that could otherwise fuel innovation.
Mitigating Patent Trolling: Strategies and Solutions
Addressing the patent troll problem requires a multifaceted approach, encompassing legal reforms, collaborative initiatives, and heightened awareness within the innovation ecosystem.
Addressing the patent troll problem requires a multifaceted approach, encompassing legal reforms, collaborative initiatives, and heightened awareness within the innovation ecosystem.
- Legal Reforms:
- Stricter Patent Standards: Implementing clearer and more stringent criteria for granting patents can reduce the likelihood of vague or overly broad patents falling into the hands of trolls.
- Shorter Patent Durations: Reducing the duration of patent protection can limit the window of opportunity for trolls to exploit patents for litigation purposes.
- Increased Hurdles for Lawsuits: Introducing measures to make it more challenging and expensive for trolls to sue for patent infringement can act as a deterrent.
- Specialized Courts and Judges:
- Establishing specialized courts or appointing judges with expertise in patent law can expedite the resolution of patent cases, making the process faster, more efficient, and cost-effective.
- Collaborative Initiatives:
- Patent Pools and Alliances: Creating alliances or pools among entities with patents can discourage litigation within the group, fostering collaboration and collective protection against trolls.
- Licensing Agreements: Encouraging entities to license their patents to each other can reduce the risk of infringement claims, promoting a more cooperative approach to intellectual property.
- Education and Awareness:
- Raising awareness about patent trolling and its consequences is crucial. Educating inventors, companies, and the public about the risks and rights associated with patents can empower them to navigate the landscape more effectively.
- Providing support mechanisms such as legal and financial assistance for those facing patent lawsuits can level the playing field and encourage continued innovation.
- Global Cooperation:
- International efforts to harmonize patent laws and procedures can create a more cohesive and consistent framework for addressing patent trolling on a global scale.
In conclusion, patent trolls pose a significant threat to innovation and economic growth. The disruptive impact of litigation, financial burdens on businesses, and the overall chilling effect on creativity necessitate concerted efforts to curb this menace. Legal reforms, collaborative initiatives, and enhanced education are vital components of a comprehensive strategy to mitigate the adverse effects of patent trolling. By fostering an environment that prioritizes genuine innovation and protects inventors and businesses, we can safeguard the future of technological progress and economic prosperity.
by Zen Webnet | Feb 6, 2024 | Blog
Article by Jagrati Maru and Anshuman Arha
Introduction
Recently, the Hon’ble Delhi High Court in MBL Infrastructures Ltd. v. Delhi Metro Rail Corporation[1] has held that clauses which restrict the right of a party to claim damages are restrictive as such clauses defeat the purpose of the sections 55 and 73 of the Indian Contract Act, 1872 (hereinafter “Contract Act”) which entitle an aggrieved party to claim damages. Furthermore, as per Section 23 of the Contract Act, such clauses are opposed to public policy as they aim at restraining the aggrieved party from claiming damages. In this article, the authors will be analysing this case to highlight the arbitration jurisprudence on such clauses which restrict parties from claiming damages and whether the contractual contours can be transgressed in case the contract itself limits such right from being invoked by aggrieved parties to such contracts thereby limiting the very entitlement to claim damages.
Analysis of MBL Infrastructure
The Arbitral Tribunal was dealing with the Claimant MBL’s claim for damages due to inaction and delays on part of respondent DMRC. Tribunal observed and held that the Claimant suffered certain damages on account of idling and machinery and loss of overheads because there was a default on the part of the Respondent in fulfilling the obligations under the Contract. However, after referring to the relevant clauses of the contract and relying on Clause 8.3 of the General Conditions of Contract (hereinafter “GCC”), the Tribunal concluded that the Claimant was entitled only to reasonable extension of time and the Respondent is not bound as per the contract for any compensation to the Claimant. Clause 8.3 of GCC therein provided that any delay on account of the Respondent shall entitle the contractor to a remedy of reasonable Extension of Time as deemed reasonable by the Engineer and there can be no monetary claims payable for delays including handing over of site, providing necessary notice of commencement of work, providing necessary drawings or instructions or clarification or supply of any material, plant or machinery which were the obligations of the employer as per the contract. Tribunal held that it is acting in accordance with Section 28 of the Contract Act as per which the Tribunal shall take into consideration the terms of the agreement and trade usages of relevant industry. It is with this rationale that the Tribunal held that the Respondent was not bound as per the contract for any compensation to the Claimant.
It is pertinent to note that herein the Tribunal clearly held that the Claimant was not responsible for the delay in mobilization and the start of the work as alleged by the Respondent, and further the termination of the contract along with the forfeiture of the performance security by the Respondent was held untenable.
The Hon’ble Delhi High Court has clearly pointed out these pivotal aspects and award and opined that a clause which restricts the right of a party in claiming damages is a restrictive clause and such a clause defeats the purpose of the Contract Act. The court held that no party can restrict or prohibit the claim for damages under Section 55 and 73 as the same is the right of the aggrieved party. The Court also observed that such kind of clauses are not in public interest as they hinder the smooth operation of the commercial transactions and create an environment which is not conducive for the business transactions.
The Court further went on to discuss the power of the Tribunal to award damages for delay on the part of the employer when the same is not provided in the contract and contractor is only entitled to extension of time. The court after referring to a number of judgements concluded that it is a settled law that the Arbitral Tribunal can award damages when the clause of the contract contemplates that only extension of time can be given as remedy when there is a delay on the part of the employer. Hence the act of awarding the damages to the aggrieved party does not amount to transgression from the terms of the contract[2].
The court highlighted that keeping the sanctity of contracts and its bindingness is a matter of public policy and the same must be given precedence over the entitlement to breach of the said contract vide clauses rendering no remedy of damages to the aggrieved party[3].
The Hon’ble Delhi High Court therefore set aside the Tribunal’s rejection of the Claimant’s claim holding that the Claimant was entitled to damages due to inaction and delays by the Respondent. The Bench held that the Tribunal erred by not awarding damages to the Petitioner despite holding that the delay was attributable to the Respondent which rendered the Petitioner remediless.
Conclusion
In infrastructure disputes’ landscape, it is often seen that claim restricting clauses stipulate that there can be no monetary claims payable for delays including handing over of site, providing necessary notice of commencement of work, providing necessary drawings or instructions or clarification or supply of any material, plant or machinery etc. which are primarily the obligations of the employer as per the contract. In such a scenario, there exists an imbalance of interest between parties to such a contract. The Hon’ble Delhi High Court’s decision in MBL Infrastructure is a welcome step as it has emphasised that aggrieved parties cannot be deprived of monetary damages even when there are contractual bars to such a relief and thereby upheld the sanctity of the settled principles of the Contract Act.
[1] MBL Infrastructures Ltd. v. Delhi Metro Rail Corporation, 2023 SCC OnLine Del 8044.
[2] Para 54, MBL Infrastructures Ltd. v. Delhi Metro Rail Corporation, 2023 SCC OnLine Del 8044.
[3] Asian Techs Ltd. v. Union of India (2009) 10 SCC 354, Simplex Concrete Piles v. Union of India 2010 SCC OnLine Del 821 and Delhi Metro Rail Corporation Ltd. v. J. Kumar-Crtg JV 2022 SCC OnLine Del 1210.
by Zen Webnet | Feb 5, 2024 | Blog
Article by Preeti Puri
Section 245 of the Income Tax Act 1961 provides that if income tax refund is found due to any person, by the Assessing Officer, the Deputy Commissioner (Appeals), the Commissioner (Appeals), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner, as the case may be, it can be adjusted in whole or in part against any outstanding income tax demand pertaining to earlier previous years, after giving an intimation in writing to such person (i.e assessee) of the action proposed to be taken in accordance with this section.
To exercise the powers u/s Section 245 it is mandatory on the part of the Assessing Officer to send intimation under section 245 notifying the taxpayer about adjustment of income tax refund against outstanding income tax demand pertaining to earlier years. In response, the taxpayer has the option to agree, disagree, or partially agree with the outstanding demand and its adjustment against the refund. In case the taxpayer does not respond, the Assessing Officer can adjust refund against the outstanding demand.
Quite often, tax officials make an adjustment without giving a prior intimation as required by the law. There are various judicial pronouncements which affirm that Assessing Officer cannot adjust a demand outstanding for an earlier assessment year against the amount of refund due to the taxpayer, without following the procedure prescribed under section 245, i.e., an advance intimation and opportunity of hearing. If such an unlawful adjustment is made the same is required to be set aside.
Judicial Rulings on issue that prior intimation is necessary u/s 245 before set off of refund against outstanding demand
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The Honble High Court of Mumbai in the matter of Jet Privilege (P.) Ltd v Deputy Commissioner of Income tax – Mumbai [2021] 131 taxmann.com 119 (Bombay)
Para 9 of the Judgment order says
“The fact that respondent has not followed the mandatory prior requirement of intimation under section 245 of the Act would make the adjustment wholly illegal and therefore, respondent was clearly in error in not refunding the amount”
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The Honble High Court of Kolkatta in the matter of Commissioner of Income-tax v JK Industies [2000] 111 Taxman 369 (Calcutta)
Para 9 of the Judgment Order says
The proceedings for adjusting an amount towards tax liability under section 245 out of any sum due to an assessee by way of refund, are quasi-judicial in nature. Without anything more, the assessee is entitled on the principles of the natural justice to a reasonable notice to represent his case before the authority before an order of adjustment is passed.
Provision of section 245 requires that an intimation should be given in writing to a person if the tax authorities want to set off any refund due against any sum payable by the assessee under this Act. No such intimation was given.
The order without intimation was non est and unless the statute prohibits, the pre-decisional hearing should be given to the person whose right is affected by that order. Moreover, there is no provision of appeal against the set-off order under section 245. Therefore, it was all the more necessary to give intimation to the assessee before set-off of his amount of refund due. In the result, the appeal was to be dismissed.
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Honble High Court of Delhi in the matter of Jindal Stainless Ltd.v Deputy Commissioner of Income tax – [2023] 154 taxmann.com 649 (Delhi)
Para 9 of the Judgment Order
The impugned action of the Assessing Officer in adjusting the refund due to the petitioner/assessee for assessment year 2022-23, against the disputed demands for assessment years 2011-12, 2012-13, and 2014-15 was not only hasty, but was also contrary to law.
Para 10 of the Judgment Order
Under the Office Memorandum (‘OM’) dated 29-2-2016, as amended by OM dated 31-7-2017, the Assessing Officer should have, ordinarily, in terms of para 4A adjusted not more than 20 per cent of the disputed demand, considering the fact that an appeal concerning the disputed demand was, admittedly, pending before the Commissioner (Appeals). Higher amount can only be retained, only if, as per the aforementioned OMs, the assessee’s case falls in the situation captured in para 4B(a)
No material has been furnished by the respondent/revenue which would suggest that the petitioner/assessee’s case would fall within 4(B)(a) which provides that In a situation where, (a) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15 per cent is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of revenue or addition is based on credible evidence collected in a search or survey operation, etc.)
Para 11 of the Judgment Order
Given this position, the writ petition is disposed of with the direction to the respondents/revenue to release the amount, along with applicable interest, which is in excess of 20 per cent of the disputed demand, concerning the aforementioned Assessment years.
Steps to be taken by taxpayer upon Receiving Intimation u/s 245
Once the taxpayer receive the Intimation under section 245 of the Income Tax Act 1961, he is suppose to check the timeline mentioned in the intimation(generally, it’s 30 days reduced to 15 days from AY 2024-2025) and accordingly respond towards the outstanding demand as appearing in the Income Tax Portal.
Failure to take action within 30 days of receiving this notice under Section 245 will lead to the consideration of the outstanding demand for adjustment against your refund. This adjustment will take into account the interest on the demand, and interest charges will be applied to the principal demand pending for the relevant assessment year. The adjustment of interest demand against the refund will be done without requiring confirmation from the assessee.
Amendment brought in by Finance Act 2023
Before the amendment brought in by the Finance Act of 2023 , there were two sections in the Income Tax Act that is section 241A and Section 245 , on the issue of withholding of refunds.
While Section 245 of the Income tax Act empowers the tax officials to set off refund against outstanding demand Section 241A enables the tax officials to withhold refund where refund if granted may adversely affect the recovery of revenue . The memorandum accompanying Finance Act 2023 noted an overlap between these two provisions and proposed their integration by eliminating Section 241A and consolidating the relevant provisions into Section 245 of the Income tax Act .
Section 245, sub-section (2), stipulates that if a portion of the refund is offset under sub-section (1), or if no amount is offset, and a refund is owed to the taxpayer, the Assessing Officer, considering the ongoing assessment or reassessment proceedings, and anticipating adverse effects on revenue from granting the refund, may, with written justification and prior approval from the Principal Commissioner or Commissioner, withhold the refund until the completion of the assessment or reassessment.
The Central Board of Direct Taxes (CBDT) has specified a monetary threshold of Rs. 10 lakh or higher for the withholding of refunds under section 245(2) of the Income Tax Act through its Instruction No. 02/2023 dated 10/11/2023. The CBDT has observed that the provision of section 245(2) will be applicable when the refund amount reaches or exceeds Rs. 10 lakh.
Interest on Refund – Section 244A of the Income tax Act 1961
The provisions outlined in Section 244A of the Income Tax Act pertain to the interest applicable to income tax refunds. According to this section, when a taxpayer qualifies for a refund, they are entitled to receive interest in addition to the refund amount. The calculation of interest under Section 244A of the IT Act is detailed as follows:
- TCS, TDS, or Excess Advance Tax Paid: In the case of excess tax paid through tax deducted at source (TDS), tax collected at source, or excess advance tax payment, the taxpayer is entitled to 0.5% interest for each month or part of a month for the following periods: (i) From April 1 of an assessment year until the date on which refund has been granted (provided the income tax return is filed before the due date). (ii)From the date of filing the income tax return until the date on which refund is granted in case if it is not covered by (i)
- Excess Payment of Self-Assessment Tax: For an excess payment of self-assessment tax, the taxpayer becomes eligible for interest at a rate of 1.5% per month. The calculation considers the date of filing the income tax return or the date on which the tax refund is granted, whichever occurs earlier.
- Other Cases :- Interest will be computed at the rate of 0.5% for every month or part of a month comprised in the period from the date of payment of tax/penalty till the date on which refund is granted .
Conclusion
Following the integration of Section 241A and Section 245 brought in by Finance Act 2023 , the withholding of refunds is not confined solely to instances where they become due after a summary assessment under Section 143(1). Refunds may now be withheld when they become due through processes such as the reconciliation of TDS, appeal effects, etc. The Assessing Officer (AO) is required to provide prior notification before setting off refunds and is under an obligation to consider the objections raised by the taxpayer/assessee before doing so. The AO has to record the reasons in writing for withholding the refund and obtain prior approval of Principal Commissioner of Income tax (PCIT) or Commissioner of Income tax (CIT ). The Assessing Officer must hold the opinion that the approval of refund is detrimental in the interests of the Revenue.
In CBDT Instruction No. 02/2023 issued on 10th November 2023, the Central Board of Direct Taxes (CBDT) has introduced a monetary threshold. Refunds with a value of Rs. 10 lakhs or more are subject to the provisions of Section 245(2) of the Income Tax Act, 1961. As per this notification reasons recorder by the Jurisdictional Assessing Officer (JAO) shall not be cursory and such reasons should reflect the factual analysis of the case.
by Zen Webnet | Feb 4, 2024 | Blog
Article by Smita Singh & Megha Tewari
Foreign trade has a substantial role in the economic growth of a country, hence the policies and guidelines for governing import and export play a pivotal role towards economic development of India. Foreign Trade Policy of the Government of India lays the foundation of promotional measures to boost India’s exports with an intent to overcome infrastructural inadequacies, focusing on the ease of doing business and forming a favourable environment for businesses to access export benefits.
The Government has from time to time introduced multiple export promotion schemes such as the EPCG Scheme, MEIS, SEIS, DFIA, RoSCTL, RoDTEP, MOOWR, etc., targeting at providing a level-playing field for the exporters, shielding them from external competition.
For the purpose of this article, we will discuss a few amongst them.
Advance Authorization Scheme
Advance Authorization Scheme allows duty free import of inputs, which are used in the manufacture of products exported out of India. Any packaging material, fuel, oil, catalyst which is consumed / utilized in the process of production of the export product, is allowed the benefit under this scheme[1]. The exporter is required to fulfill export obligation as a condition for issuing Advance Authorization, within 18 months of the date of issue of Authorization or as notified by the Directorate General of Foreign Trade.
Advance Authorization is issued either to a manufacturer exporter or a merchant exporter tied to a supporting manufacturer and is valid for 12 months from its issuance date. The inputs imported are exempt from duties like Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping duty, Safeguard Duty and Transition Product-Specific Safeguard duty, Integrated tax, and Compensation Cess, wherever applicable, subject to certain conditions. Advance Authorization comes with an actual user condition, which means that the actual user alone may import such goods.
Upon introduction of GST, exemption from payment of IGST as well as Compensation Cess was allowed subject to fulfilment of ‘pre-import condition’ and ‘physical exports’ and accordingly, Foreign Trade Policy was also amended. This amendment saw investigations initiated against various manufacturer-exporters, on the ground that pre-import condition was not satisfied. This amendment was challenged before the Gujarat High Court[2], which held that the pre-import condition, for availing IGST exemption under the Scheme, is ultra vires on the ground that the same does not meet the test of reasonableness and is also not in consonance with the Advance Authorization Scheme.
However, the Apex Court[3] overturned decision of the Gujarat High Court and held that inconvenience caused to exporters by paying IGST and claiming refund thereafter could not be a ground to hold the ‘pre-import’ condition as arbitrary. Further, with respect to the argument on retrospective effect of the Notification[4] vide which pre-import condition was removed on January 10, 2019 as a condition for granting IGST exemption on import of goods, the Apex Court, held that the Government has no power to issue retrospective notification.
Thus, manufacturer-exporters are required to examine and identify non-fulfilment of pre-import condition while replying to notices received from authorities in this regard.
Manufacturing & Other Operations in Warehouse (MOOWR)
Another popular scheme introduced is the MOOWR Scheme, way back in 1966, revamped in the year 2019[5], to provide significant benefit to the manufacturers in India. Under the MOOWR Scheme, manufacturing and other operations are allowed to be carried out in a bonded warehouse. Under said Scheme, deferment of Customs duty (BCD, IGST and Compensation Cess) is allowed on import of inputs and capital goods used in the manufacture of goods in India. Accordingly, in case manufactured goods are exported, no customs duty is payable. However, if the goods manufactured are cleared for domestic consumption, the deferred customs duties are required to be paid. Similarly, when capital goods are removed from the bonded warehouse, the customs duties deferred on import of such capital goods are required to be paid. The MOOWR Scheme thus, aims to provide a working capital advantage to provide impetus to domestic manufacturing. It is relevant to note that the MOOWR Scheme is not specific to any Industry. With benefits like no export obligation, no restriction on physical location of the warehouse, facility to send inputs and capital goods outside bonded warehouse for job work and repairs respectively, duty free bond to bond transfer of goods, no time limit or interest for storage and manufacturing of goods, etc. has made this scheme one of most attractive scheme among the Indian manufacturers.
An amendment was proposed vide the Finance Act, 2023, by virtue of which exemption from IGST and GST Compensation cess has been proposed to be withdrawn, meaning thereby that deferment of duty has been proposed only for the payment of BCD. This amendment shakes the entire basis on which manufacturers sought to take advantage under the MOOWR Scheme, as post the amendment, they would be required to pay IGST and Cess. While the amendment has still not been notified, it has created doubt in the minds of manufacturers exporters and had made the MOOWR Scheme less attractive as compared to other benefits like Advance Authorization or EPCG Scheme.
Remission of Duties or Taxes on Exported Products (RoDTEP Scheme)
RoDTEP was introduced in January 01, 2021, replacing the erstwhile MEIS Scheme in a phased manner. The RoDTEP scheme aims to refund all the hidden taxes and levies, which were earlier not refunded under any export incentive scheme, for example, mandi tax, coal cess, central excise duty on fuel, duty on electricity used during manufacturing of the exported items. The rebate under the RoDTEP Scheme is allowed, based on the allowed percentage of FOB (Freight on Board) value of exports and issued in the form of a transferable duty credit/electronic scrip (e-scrip). All sectors, including textile sectors are covered under the RoDTEP Scheme. Both manufacturer exporters and merchant exporters can avail themselves of the benefit of the RoDTEP Scheme. The RoDTEP Scheme initially notified until September 30, 2023, has been extended until June 30, 2024.
However, the US government initiated various investigations imposing anti-subsidy duties against goods exported from India availing benefit of the RoDTEP, on the ground that the scheme was not compatible with the WTO guidelines. In this regard it is important to note that the RoDTEP scheme replaced the WTO-incompatible MEIS scheme, that faced several challenges from countries at the WTO as it the benefit thereunder was not transparently established. However, both the US and the EU imposed countervailing (anti-subsidy) duties on Indian exported products such as paper file folders, common alloy aluminum sheets, forged steel fluid end blocks, certain graphite electrode systems[6], against RoDTEP benefits availed. Inspite on such investigations, RoDTEP is one of the sought after schemes availed under the Foreign Trade Policy and fully supported by the Government.
Taking forward the “Make in India” initiative of the Government of India and making India a manufacturing hub, the Foreign Trade Policy – 2023 lays down a blueprint to integrate India with the global markets and make it a reliable and trusted trade partner. It supports various export promotion schemes which involve either exemption or remission of customs duty. With a strong digital infrastructure, encouraging government policies, and an upward consumer base, the country is well-positioned to tap into the immense capacity of the global market. However, the international guidelines must also be adhered to keeping in the long-term goal of India’s export potential.
[1] Foreign Trade Policy – 2023
[2] Shri Jagdamba Polymers Limited & Ors. v. UOI – 2019-VIL-80-GUJ
[3] UOI v. Cosmo films Limited – 2023- VIL-47-SC
[4] Notification No. 01/2019-Cus., dated 10 January 2019
[5] Manufacture and Other Operations in Warehouse Regulations, 2019
[6] https://www.thehindubusinessline.com/economy/centre-not-to-re-work-rodtep-scheme-as-it-is-wto-compliant-say officials/article67765837.ece#:~:text=However%2C%20earlier%20this%20fiscal%2C%20both,electrode%20systems%20by%20the%20EC
by Zen Webnet | Feb 4, 2024 | Blog
Article by Priyanka Rastogi
INTRODUCTION:
Section 3(d) of the Indian Patents Act, 1970 has a special place in India’s patent system. It requires more inspection of patent applications pertaining to methods in this area. Patents cannot be issued for the bare use of a known process as per Section 3(d), unless it yields a novel end-product or uses at least one novel reactant. In Tapas Chatterjee v. Assistant Controller of Patents[1], the Hon’ble Delhi High Court (hereinafter referred to as “the Hon’ble Court”) upheld the Controller’s refusal order and conducted a thorough analysis of the claimed subject matter’s inventive step and patentability in accordance with Section 3(d) of the Indian Patents Act in an order dated March 10, 2023.
FACTS:
Appellant Tapas Chatterjee filed an appeal in which she contested the Assistant Controller of Patents’ s decision to deny a patent for a patent application. According to Sections 3(d) and 2(1)(ja) of the Indian Patents Act, the refusal was made for lack of patentability and absence of inventive step, respectively. The current appeal was filed in accordance with Section 117A of the Patents Act of 1970 (hereinafter referred to as “the Act”) and challenges the refusal of Indian Patent Application for the invention made by Respondent No. 1. The subject application was evaluated by the Indian Patent Office, which then issued a First Examination Report (FER) on February 25, 2020, in which the Patent Office raised a number of objections. The main objections were related to the Claims which were falling under Section 3(d) of the Act and lack of inventive steps under Section 2(1)(ja) of the Act.
ISSUES:
- The contested order’s two reasons for rejection were as follows: In accordance with Section 3(d) of the Act, non-patentability and According to Section 2(1)(ja) of the Act, the submitted patent application lacks innovative step.
- Regarding Section 3(d), Assistant Controller of Patents and Designs (Respondent) contended that neither a new reactant nor a new product was produced throughout the process of the subject application. The Respondent argued that the subject invention did not deviate from the principles of D2 with regard to Section 2(1)(ja). “Merely because the appellant uses the thermal decomposition process to split one compound into two or more new compounds would not result in any technical advancement when compared to the cited prior art references,” they claimed. The final product in all the cited prior art publications D1–D4 is the same, i.e., potassium sulphate, indicating that the claimed technique does not result in the production of a novel product.
COURT’S ANALYSIS AND RULING:
- The Delhi High Court’s ruling in the matter of “Tapas Chatterjee vs. Assistant Controller of Patents and Designs and Anr.[2] provides insight into how Section 3(d) of the Indian Patents Act should be interpreted and applied in respect to well-known processes. The Court’s ruling highlights the necessity of novelty and inventive step in order to grant a patent and reiterates the stringent conditions for patentability.
- The Court carefully considered Section 3(d)’s requirements in this case and noted that a patent for a known process can only be issued if it yields a new product or includes at least one new reactant. The conditions for patentability are not met by simple combinations of well-known techniques without any extra components resulting in innovation or inventive step. The Court’s ruling emphasizes the significance of the “new product” or “new reactant” criteria in figuring out whether established techniques can be patented. It makes it clear that procedures have a smaller range of patentability than substances do. While the development of a new form of a substance that is already known needs improvement of that substance’s existing efficacy, no similar requirement exists for procedures that are already known.
- Both of the reasons given by the Controller for rejecting the subject patent application under Section 15 of the Act have been sustained in light of the overall facts and circumstances of this case. According to Section 3(d) of the Act, the subject patent application is not patentable, and Section 2(1)(ja) of the Act’s requirements for innovative step are not met by it.
CONCLUSION:
The Delhi High Court’s ruling establishes a precedent for determining whether known methods are patentable and offers helpful direction on how Section 3(d) should be interpreted. It emphasizes how important it is to satisfy the legal requirements, such as those relating to novelty and inventive step, and it serves as a warning to those involved in the biological sciences to carefully consider their claims before applying for patent protection. This decision encourages innovation and makes sure that patents are only issued for real technological improvements that advance society by respecting the high standards for patentability.
[1] 2023 SCC OnLine Del 1444.
[2] 2023 SCC OnLine Del 1444.
