Latest in Maggi Fiasco: Government Sues Nestle for Unfair Trade Practices

The recent twist in the Maggi fiasco has again landed Nestle in troubled waters as the Government has sued Nestle for Rs. 639 crores over alleged unfair trade practices.

Indian Daily, The Hindu on August 12 reported that the Government had filed a class action suit against Nestle seeking Rs. 639 Crores in damages for alleged unfair trade practices, false labelling and misleading advertisements.

Since April, 2015 Nestle has been in rumpus over allegations of Maggi noodles containing lead and monosodium glutamate (MSG) in excess of permissible limits. Subsequently, Maggi noodles have been banned in several Indian states. Moreover, Bollywood superstars like Madhuri Dixit, Amitabh Bachchan and Preity Zinta who endorsed Maggi noodles were also served with legal notices for misleading advertisements.

Reportedly, the recent move of Government comes as a result of the impugned product misleading public by claiming Maggi to be healthy for children and the claimed damages include penal damages and takes into account annual profit and sales of the company through its entire range of Maggi products.

As per the reports, if the Government wins the case then the entire amount of damages would be assigned to the Consumer Welfare Fund under the Consumer Affairs Department which would be used for the welfare of consumers.

Bombay High Court Lifts Ban on Maggi

On one hand where Government is suing Nestle and claiming hefty penalty from it on the other hand Bombay High Court has ruled in favour of Maggi on August 13 in the case of M/s Nestle India Limited v. The Food Safety and Standards Authority of India and Ors. (Writ Petition (L) No. 1688 of 2015). The Court in the case set aside the ban order imposed by FSSAI on Maggi noodles and remarked the impugned order as ‘arbitrary, unjust and violative of Article 14 of the Constitution’.

The Bench has also directed re-testing of Maggi samples on the grounds that labs in which samples were earlier tested were not authorized to test for lead and mandatory testing procedure were also not followed.

Conclusion

Nestle definitely has reasons to cheer as well as weep. Nestle Maggi noodles a leading edible product in India has faced a lot of turbulence in the recent months and its fate still remains undecided. Though the recent order of Bombay High Court raises significant concerns regarding testing procedures and methods followed by the food regulator in India.

Indian Daily, Indian Express reports that if re-testing of Maggi noodles as directed by the Bombay High Court is cleared by the Court then Nestle may consider filing a defamation suit against FSSAI for allegedly acting in an arbitrary and non-judicious manner in the matter.

Sources:

http://www.thehindu.com/news/bombay-hc-lifts-ban-on-maggi/article7534326.ece

http://www.thehindu.com/news/national/govt-sues-nestle-for-rs-639-crore/article7527353.ece

http://indianexpress.com/article/blogs/the-maggi-verdict-could-be-bad-news-for-fssai-heres-why/

Supreme Court of India: Section 85 of the Trademarks Act held Unconstitutional!!

Vide order dated July 27, 2015, the Hon’ble Supreme Court of India, has upheld the judgement dated March 10, 2015 of the Hon’ble Madras High Court in writ petition, W.P No. 1256 of 2011, declaring Section 85 of the Trade Marks Act, 1999 regarding the qualification and selection of members appointed to the Intellectual Property Appellate Tribunal (IPAB) as unconstitutional, being contrary to the basic structure of the Indian Constitution.

The Union of India filed Special Leave to Appeal (C) No(s). 18142/2015 (hereinafter “the SLP”) against the judgement/order dated March 10, 2015 in W.P No. 1256 of 2011 passed by a division bench of the Hon’ble Madras High Court, praying for the said judgement to be have quashed/set aside. However, the Hon’ble Supreme Court was pleased to dispose of the SLP by the following order;

“We do not find any legal and valid ground for interference. The special leave petition is dismissed.”

Vide our newsletter dated April 13, 2015 we have given an analysis of the aforementioned judgement dated March 10, 2015 of the Hon’ble Madras High Court in W.P No. 1256 of 2011 which may be accessed here for further information.

Conclusion

Hence, the Supreme Court has upheld the Madras High Court’s order declaring the provisions regarding appointment of members to the IPAB as unconstitutional, it is now up to the legislature to take the necessary steps to bring the law in line with the Indian Constitution and the functionality of the IPAB may be temporarily affected due to this shift in the law.

What the future holds is yet to be seen.

Pecuniary Jurisdiction of the Delhi High Court raised to 2 crores

On August 05, 2015, the Parliament of India passed the Delhi High Court (Amendment) Bill, 2015 to enhance the pecuniary jurisdiction of civil suits in the High Court of Delhi from the existing Rs. 20 lakh to Rs. 2 crore. The purpose of the Bill is to reduce the workload of the High Court and distribute the burden to the lower courts.

Pecuniary jurisdiction refers to the jurisdiction of a court over a suit based on the amount or value of its subject matter/ damages claimed.

The aforesaid Bill was already passed by the Rajya Sabha (Upper House) earlier this year on May 06, 2015. It has now been adopted by a voice vote in the Lok Sabha (Lower House).

General Implications of the Bill

The implication of the amendment Bill is three-fold:

1. Once the Bill is implemented, the Chief Justice of the High Court will be empowered to transfer any pending suit valued upto Rs 2 crore to the concerned lower court. According to the information submitted by the Registrar General of the Delhi High Court to the Parliamentary Standing Committee, there are 12,211 such pending cases at present. They will be transferred to the concerned district courts, and eight judicial officers who are on deputation as Joint Registrar (Judicial) to the High Court will be repatriated to district courts to deal with the cases.
2. The implementation of the Bill would also considerably reduce the workload, pendency of cases and backlogs of the High Court of Delhi.
3. Most importantly, people hailing from distant areas will also get relief as they will no longer have to travel all the way to the High Court, and can now seek relief in the concerned district courts itself. It will bring the judiciary closer to the litigant public and cut the cost of litigation, as the cost of hiring a district court lawyer is much less than that of engaging a High Court counsel.
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Valganciclovir Patent Revoked after Post-Grant Opposition

Facts of the case

• Valganciclovir, manufactured by Hoffman- La Roche, is an anti-retroviral drug used for the treatment of active cytomegalovirus retinitis (CMV) infection.
• Roche was granted patent (207232) entitled “2- (2-AMINO-1,6-DIHYDRO-6-OXO-PURIN-9-YL)METHOXY-1,3-PROPANEDIOL DERIVATIVE’ on July 27, 1995 covering L- Valinate Ester of Gancyclovir and all acceptable salts in oral form with increased bioavailability.
• In May 2010, Controller had revoked the patent on grounds that it was obvious and did not satisfy the requirements of Section 3(d) of the Patents Act, 1970 in response to the oppositions filed by the Indian Network of Positive People (INP), the Tamil Nadu Network of Positive People (TNNP), the Delhi Network of Positive People (DNP) and generic companies. The details of the Post-grant opposition can be found on our website.
• Roche challenged the decision by filing an appeal with the Intellectual Property Appellate Board (IPAB). INP and TNNP also filed an appeal against the some of the Controller’s findings. Both appeals came up for hearing on January 30, 2014.
• The IPAB then set aside the Patent Controller’s  decision to revoke the patent relating to valganciclovir on technical grounds and remanded it to the Controller for re-consideration.
• The controller revoked the Indian Patent No. 207232 pertaining to Valganciclovir in the order dated July 01, 2015.

The Controller’s order

i)     Experts’ opinion

The patentability of the drug was the issue in the Controller’s order. The Controller noted that the three main aspects of determining patentability were disclosure, relevant prior art and judgments available at the time of deciding the case. The issue before the Controller was whether expert evidence was prior art publications or disclosures. The Controller held that the view of the expert is only a personal opinion on the given subject matter, but it is never a conclusion arrived after continuous research work in the specific area.

Therefore, expert evidence is not a prior art document to be relied upon for deciding a case, but it may be considered for understanding the prior art documents,

ii) Prior arts cited- EP 0375329 (EP’329)

1. Acyclovir and Gancyclvovir are similar in structure and function targeting similar diseases (anti-viral). It is known that acyclovir is poorly absorbed and large doses are required to increase its bioavailability. If Acyclovir is esterised, its bioavailability is increased when administered orally. EP’329 mentions several amino acids which can be used to result in the L-valinate ester of Acyclovir called Valacyclovir. Adding Hydrochloride to acyclovir yields L-valinate ester of Acyclovir called Valacyclvoir (sold as Valtrex, an anti Herpes drug by GSK).
2. L-Valinate ester of Gancyclvovir in the intra-venous form is already in the market against anti-viral diseases (mainly HIV infections).
3. In order to increase the bioavailability a person skilled in the art would have been motivated to come up with an oral form of the compound by following the step of esterization of Gancyclvovir resulting in the L-valinate ester of Gancyclovir (namely Valgancyclovir) and later, a combination with hydrochloric acid to result in Valgancyclovir Hydrochloride (sold as Valcyte by Roche).

iii)                Bioavailability

The next issue to be discussed is whether the improvement of oral bioavailability constitutes enhancement of the known efficacy of that substance. The Controller ruled that while bioavailability is one of the factors affecting efficacy, it cannot be directly equated to efficacy. The Controller ruled that the present patent was a ‘mere use of a known process’ which was not patentable under S. 3(d) of Indian Patents Act.

As a result, for all these reasons, the Controller revoked the patent granted to Valganciclovir.

The Controller’s order can be found on the below link:

https://drive.google.com/file/d/0B0gcTBXFLYKULUJtQ0s4YTJlcERKNDhk

Ry1uQy1Qb29pcWk4/view?pli=1

Hyundai slapped with a fine of Rs. 420 crore by Competition Commission of India

The Competition Commission of India (CCI) on July 27, 2015 passed an order imposing a hefty penalty of Rs. 420 crore  on leading automobile company Hyundai Motors India Ltd., for violating the provisions of Competition Act 2002.

Brief Facts of the Case

Shri Shamsher Kataria (hereinafter referred to as the Informant) initially filed an information under Section 19 (1) (a) of the Competition Act 2002, against automobile manufacturers Honda Seil Cars India Ltd., Volkswagen India Pvt. Ltd and Fiat India Ltd. alleging anti-competitive practices on the grounds that the genuine spare parts of automobile manufacturers by them were not made freely available in the market;

• The CCI after considering the matter directed the Director General (DG) to conduct an investigation and submit the report;
•  During the said investigation the DG was of the opinion that other automobile manufacturers may also be indulging in unfair practices, and they all should also come under the ambit of the said investigation;
•  CCI after the completion of the said investigation imposed a penalty of Rs. 2545 Crores on 14 car manufacturers in India in August last year. However, no order was passed against Mahindra Reva Electric Car Company (P) Ltd. (hereinafter, referred to as “Reva”), Premier Ltd. (hereinafter, referred to as “Premier”) and Hyundai Motors India Ltd. (hereinafter referred to as Hyundai) as Reva and Premiere had filed applications for striking out of their names from the array of parties and Hyundai had filed a writ petition in the Madras High Court, challenging the jurisdiction of CCI, wherein the Court granted Hyundai an ex parte stay in the matter;
• In view of the aforesaid, CCI in the matter could not proceed against Reva, Premiere and Hyundai and the order of CCI remained pending against them and held that it would pass separate order in respect of three car manufacturers, viz., Hyundai, Reva and Premier after affording them reasonable opportunity to make their submissions in respect of the findings of the DG report and queries raised by the Commission.

Findings of the DG with respect to Hyundai

1. That Hyundai entered into a technology and royalty agreement with HMC (Hyundai Motor Company, South Korea) for supply of spare parts for its operations in India and the fact that the overseas supplier is the parent company of Hyundai and only supplies spare parts to MIL (a group company of Hyundai for dealing with aftermarket requirements in India), indicates the existence of an arrangement between Hyundai and the overseas supplier for not supplying spare parts directly into the Indian aftermarket;
2. That Hyundai’s basic purchase agreement (entered with the OESs for supply of spare parts) indicate restriction on OESs (Original Equipment Suppliers) from supplying spare parts directly to the aftermarket;
3. That dealers refused to sell spare parts in the open market and spare parts of only certain car models were made available over the counter;
4. That authorized dealers were being permitted to source spare parts from Hyundai directly or from its authorized vendors but not from the OESs;
5. That during the warranty period, owners of Hyundai cars are totally dependent on its authorized network as the warranty extended is liable to be invalidated if a Hyundai car is repaired by an independent repairer;
6. That Hyundai’s dealers are not permitted to deal with competing brands without seeking the prior permission of OEM (Original Equipment Manufacturer);
7. That Hyundai has justified its restrictions on the basis of IPR and safety issues but it has failed to establish that it possesses valid IPRs in India, with respect to its spare parts for which restrictions were being imposed upon OESs.
8. That refusal to supply diagnostic tools and spare parts by Hyundai to independent repairers amounts to denial of access to an “essential facility”;
9. That the restrictions imposed upon the OESs and the authorized dealers, coupled with the restrictions on independent repairers amounts to not only imposition of unfair terms under section 4(2)(a)(i) of Competition Act but also denial of market access under section 4(2)(c) of the Act;
10. That in view of aforesaid, the acts of Hyundai are in violation of Section 3(4)(c) and 3(4)(d) of the Act, for not allowing its authorized dealers to deal with competing brands of cars and not allowing them to sell spare parts and diagnostic tools to the independent repairers;

Reply of Hyundai:-

1. That the DG has drawn incorrect conclusions and erred in the application of competition law and established competition law principles;
2. That Hyundai is not dominant in any of the relevant markets and has not engaged in any conduct which would be an abuse of dominant position under the Act.
3. In addition, Hyundai has not imposed any condition or engaged in any conduct that would constitute an infringement of Section 3 of the Act relating to anti-competitive agreements;
4. That Hyundai had a large and one of the most accessible service and sales network as compared to other car manufacturers in India with 412 dealers and more than 1,087 service points located across India;
5. That the unorganized sector in India is characterized by a lack of skills and proper training because independent repairers are averse to investing in training themselves for repairing of high end and executive premium cars. Further the absence of any effective government regulation and the problem of counterfeits are the major challenges being faced by the OEMs like Hyundai in the Indian market;
6. That DG had incorrectly relied upon the developments in USA and EU, with respect to after-market services without considering the differences and dynamics of Indian Automobile Industry;
7. That Hyundai’s agreements with its OESs are basically subcontracting arrangements and as such exclusivity in such arrangements fall outside the purview of Section 3 of the Act as such exclusivity is required to protect Hyundai’s significant investments in developing its OESs and contributions to the manufacture of spare parts;
8. That even if the sub-contracting agreements are found to fall within the scope of Section 3, the designs, specifications, drawings and technologies provided by Hyundai to its OESs are protected by unregistered copyright and trade secret;
9. That Hyundai’s drawings/know-how/specifications would also be conferred with IP protection by virtue of them being confidential information and reference could be made to the case of Cattle Remedies and Anr. vs. Licensing Authority/Director of Ayurvedic and Unani Services, wherein it had been observed that apart from specific statutes relating to trade mark, copyright, design and patent, even trade secrets are also a form of IP;
10. That Hyundai encourages over the counter sale of spare parts and diagnostic tools by authorized dealers, dealer’s branch and Hyundai’s authorized service centres and does not prohibit its dealers from taking competing dealerships and that a number of its dealers have competing dealerships;

Decision of the Commission:-

The CCI passed its order with respect to the automobile manufacturers Hyundai, Reva and Premier (hereinafter referred to as ‘car manufacturers’) and made the following observations in the matter:

1. That considering the technical compatibility between the products in the primary market and the secondary market, car manufacturers hold 100% market share and are dominant in the aftermarket of their respective genuine spare parts and diagnostic tools and correspondingly in the aftermarket of their respective repair services for their brand of automobiles;
2. That warranty conditions that the car manufacturers impose on their consumers dissuade them from availing the services of independent repairers, therefore, they hold a position of strength which enables them to affect their competitors in the secondary market and limiting consumer choice;
3. That conduct of car manufacturers amounts to denial of market access to independent repairers to procure genuine spare parts in the aftermarket;
4. That the practice of car manufacturers in denying the availability of its genuine spare parts severely limits the independent repairers and other multi-brand service providers in effectively competing with the authorized dealers of the OEMs in the aftermarket which amounts to denial of market access by the OEMs under section 4(2)(c) of the Act;

IPR exemptions under the Act

That the license agreement entered into between Hyundai and HMC did not specify the technologies, patents, knowhow, copyrights and other IPRs which are being granted to Hyundai.That as per the observations of the DG and submissions made by car manufacturers, none of them own any registered IPR on any of their spare parts as such in India. It has been admitted by Hyundai and MIL that they do not possess any valid IPRs in India except for its trademark/logo.

That though registration of an IPR is necessary, the same does not automatically entitle a company to seek exemption under section 3(5) (i) of the Act. The important criteria for determining whether the exemption under section 3(5)(i) is available or not is to assess whether the condition imposed by the IPR holder can be termed as “imposition of a reasonable conditions, as may be necessary for the protection of any of his rights”.

That mere selling of the spare parts, which are manufactured end products, does not necessarily compromise upon the IPRs held by the OEMs in such products. Therefore, the OEMs could contractually protect their IPRs as against the OESs and still allow such OESs to sell the finished products in the open market without imposing the restrictive conditions.

That trade secrets and confidential knowledge, are not among the listed categories of IPR laws and hence Hyundai cannot claim any exemption under section 3(5)(i) of the Act;

In view of the aforesaid observations, the CCI held that the car manufacturers have restricted the sale of spare parts over the counter, thereby resulting in prescribing exclusive distribution agreements and refusal to deal in terms of Section 3(4) (c) and 3(4) (d) of the Act and these agreements were found to be in the nature of exclusive supply agreements in terms of Section 3(4)(b) of the Act.

The CCI directed the car manufacturers to cease from indulging in such restrictive trade practices and imposed a penalty of Rs. 420 Crores on Hyundai.

Conclusion

The present order condemns the prevalent conduct of car manufacturers of entering into exclusive supply agreement for supply of spare parts which limits the choice of customers and also leads to unfair trade practices in the relevant market.

TKDL: Worthiness Proven Once Again!

Pangaea Laboratories Limited, a UK-based company is a cosmeceutical research and development giant. In February, 2011 Pangaea filed a patent application in the European Patent Office (EPO) for a medicinal composition containing turmeric, pine bark and green tea for treating hair loss.

However, once the patent application was published on the website of the EPO, the Council of Scientific and Industrial Research (CSIR) with the help of the Traditional Knowledge Digital Library (TKDL), which is a Indian digital repository of the myriad traditional knowledge, especially medically based, that is part of India’s tradition and culture since ancient times, filed an objection with evidence on January 13, 2014.

CSIR in its submissions proved to the EPO that turmeric, pine bark and green tea are being used as hair loss treatment in the Indian medical systems like Ayurveda and Unani since the time of the Vedas.

Based on the evidence and submissions by CSIR, the said application was “deemed to be withdrawn” on June 29, 2015.

This comes soon after TKLD recently also led to the down-fall of a patent application by Colgate-Palmolive in respect of a mouthwash formula containing ‘Jayaphal’ (Nutmeg).

TKDL is a one of a kind Indian database which has proven to be a strong deterrent against the misuse/misappropriation of our country’s traditional knowledge in Patent Offices around the World.

TKDL has successfully brought down nearly 200 such patent applications that were based on Indian Traditional Knowledge not only in Europe but also in the United States of America and other countries, being a vast and structured database that has classified the Indian traditional medicine system in approximately 25,000 sub-groups for Ayurveda, Unani, Siddha and Yoga. 

Indian Sweet ‘Rosogolla’ turns sour over GI Debate

The Odisha state government has recently expressed its plans to obtain geographical indication (GI) for the Rosogolla (also popularly known in India as “Rasgulla”), an age-old sweet which the Odisha government is claiming to be its own, spurring a bitter debate as to the true ownership over the world-renowned sweetmeat.

The step is being taken to boost the Rasgulla, one of the most delectable traditional sweets of the state, particularly in the National Highway No. 5 between Bhubaneswar and Cuttack, a small settlement of Pahala housing around 120 sweet shops. A special purpose vehicle is being formed for channelising funds to facilitate the proposed GI registration.

Image Source: http://foodviva.com/desserts-sweets-recipes/rasgulla/

The MSME Department, to develop the cluster and make it ready for the GI application, plans to appoint a consultant to suggest necessary changes required in terms of quality, packaging and others, alongwith judging the preparedness among the sellers. The department will also take steps to tie up with the sellers and educate them on how the GI registration has helped promotion of goods in various parts of the country. A diagnostic study report will also be conducted to indicate the strengths and weaknesses for the cluster.

Meanwhile, most food historians in the neighbouring state of West Bengal have challenged the aforesaid proposition as they believe that the world-famous sweet was invented in Kolkata (formerly, Calcutta) in the year 1868 by the iconic confectioner Nobin Chandra Das, whose son consequently founded the renowned sweetmeat chain K.C. Das. In fact, a declaration has also been made on the official website of K.C. Das that Mr. Nobin Chandra Das is the inventor of the Rosogolla.

Implication of grant of GI

The issue appears to be a hotly debated, and an interesting one at that, as the GI tag will confer legal protection and ensure that no entity other than those registered as authorized users (those residing within the geographical territory) are permitted to adopt or use the popular product name, thereby promoting the rightful producers of the sweet on a global platform and boosting their economic prosperity.

Darjeeling tea was the first GI tagged product in India back in 2004–05, and since then around 208 goods have been added to the list.

The first item to receive the GI tag from Odisha was the Kotpad handloom fabric followed by Ikat and the Konark stone carvings. As of today, there are around 14 goods from Odisha in the list, the latest addition being the Pattachitra textile.