ROLE AND EFFECTIVENESS OF TRADEMARKS ACT (1999) ON THE

INDIAN ECONOMY

BY

Name of the Student: P. MAHESH BABU

Roll No.: 20LLB083

Semester: 3rd

Name of the Program: 5 year (B.A., LL.B./LL.M.)

Name of the Faculty Member: ABHISHEK SINHA

Subject: ECONOMICS II

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

NYAYAPRASTHA, SABBAVARAM,

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 VISAKHAPATNAM - 531035, ANDHRA PRADESH
ACKNOWLEDGEMENT
Thanks to the Almighty, who gave me the power with sheer hard work and honesty to
accomplish the research paper.

I would like to thank my Economics II faculty, ABHISHEK SINHA sir for giving me this topic
and directing me during the research paper. Through this research paper, I learned a lot about the
topic, and this in turn helped me to grow as a student. I also extend my sincere gratitude to the
DSNLU staff and administration for the facilities in the form of our library, which was a great
source of support in the completion of this research paper. I would like to express my sincere
gratitude to my parents and friends who have driven me and helped me at every step possible.

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 ABSTRACT
In India, trademark rights are constitutionally protected by the Trademark Act, 1999 and also by
the recourse of handing off under common law. The Controller General of Patents, Designs and
Trademarks is responsible for the administration of any rights under the Act. The 1999
Trademark Act deals with the protection, licensing and prohibition of the use of trademarks
through illegitimate means. It also deals with the protection of the trademark owners, the penalty
for misuse, the remedies for the affected party and the means of transition of the trademark.

In the Trademark Act, 1999, trademark is defined as meaning a mark capable of being
graphically depicted and capable of separating one person's products or services from those of
others, and may include the form of the goods, their packaging and the combination of colors.
Numerous items such as signatures, addresses, marks, headings, etc. may be used in such a mark.

Table of Contents
ACKNOWLEDGEMENT..............................................................................................................2
ABSTRACT...................................................................................................................................3

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SYNOPSIS.....................................................................................................................................5
Introduction.................................................................................................................................5
Objective of the study.................................................................................................................5
Scope of study.............................................................................................................................6
Literature review.........................................................................................................................6
Research methodology................................................................................................................6
Significance of the study............................................................................................................6
TRADEMARK REGISTRATION IN INDIA...............................................................................7
About Trademark........................................................................................................................7
Meaning and Definition of Trade Mark......................................................................................7
OWNER OF TRADEMARK.........................................................................................................9
REGISTRATION OF TRADEMARK...........................................................................................9
INFRINGEMENT OF TRADE MARK.......................................................................................10
Protection against Infringement of Trade Mark.......................................................................11
Case Law on Infringement........................................................................................................11
Differences between Passing of and Infringement...................................................................12
ECONOMIC DIMENSIONS IN THE TRADEMARKS LAW...................................................14
MARKET FAILURE IN THE DEMAND AND SUPPLY OF TRADEMARKS.......................15
CASES RELATING TO ECONOMIC ASPECTS OF THE TRADEMARK LAW...................15
ECONOMIC BENEFITS OF INTELLECTUAL PROPERTY RIGHTS....................................17
CONTRIBUTION OF IP IN GROWTH OF FDI’S IN INDIA...................................................18
Strong IP regime helps the growth of FDI in INDIA:..............................................................18
Initiative in it act:......................................................................................................................19
Challenges regarding intellectual property rights:....................................................................20
The relationship between FDI and economic growth:..............................................................21
CONCLUSION.............................................................................................................................23
BIBLIOGRAPHY.........................................................................................................................24

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 SYNOPSIS

Introduction
Under the TRIPS Agreement, India's trademark rights obligations include, among other things,
the protection of distinguishing symbols, the recognition of service marks, the indefinite yearly
renewal of registration, the abolition of forced trademark licences, and so on.

The globalisation of business has placed a high value on brand names, trade names, trademarks,
and so forth, necessitating consistent minimum safety standards and suitable compliance
methods as agreed upon under TRIPS. Despite this, the old Indian Trade and Goods Marks Act
of 1958 was implemented, and the new “Trade Marks Act, 1999 was enacted in view of the
comprehensive review and subsequent repeal. The Act of 1999, with subsequent amendments,
complies with the provisions of the TRIPS and is compliant with international frameworks and
practices.”1

The Trade Marks Act allows, “inter alia, for the identification of service marks, the filing of
multi-class applications, the extension of the trademark registration period to 10 years, the
acknowledgment of the definition of well-known marks, etc. As shown in the seminal cases of
Tata Sons Ltd. v Manu Kosuri & Ors 2 and Yahoo Inc. v Akash Arora 3, the Indian judiciary has
been vigilant in defending trademarks and has expanded protection under trademark law to
domain names.”

As a country of common law, “India complies not only with codified law but also with the rules
of common law and, as such, allows for infringement as well as the dismissal of actions against
trademark infringement.”4 Both misuse and handing off acts are recognized by section 135 of the
Trade Marks Act.

Objective of the study

The primary objectives of this research paper are:
1. The researcher will try to find the importance of trademarks act (1999).

1 Vijay Pal Dalmia, Vaish Associates Advocates, India: Trademarks Law In India - Everything You Must Know
2 “Tata Sons Ltd. v Manu Kosuri & Ors, [90 (2001) DLT 659]”
3 “Yahoo Inc. v Akash Arora [1999 PTC 201]”
4 Section 135, Trademarks act 1999

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 2. The researcher also wants to determine the economical aspects and economical benefits
of trademarks act.
3. The aim of this research paper is to study impact of trademarks act on the Indian
economy.

Scope of study
The scope of the research paper is limited to the impact of trademarks act on the Indian economy.

Literature review
The researcher has taken information from various websites, books, articles, acts, journals and
cases.

Research methodology
In nature, this research project is doctrinal and historical. Since it is primarily focused on
secondary source, and while making this project, no analytical method or field study has been
performed. Both references and materials were taken from different websites and from some of
the articles referred from the internet.

Significance of the study

The study helps us to understand the importance of trademarks act (1999) and its contribution in
growth of FDI’s in India.

TRADEMARK REGISTRATION IN INDIA

The most significant part of modern business is intellectual property. Any company's important
properties are intellectual property, which is a mix of copyright, trademark, concept,

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geographical indication, patent, industrial design, and integrated circuit. IP can produce healthy
market competition, meaning suppliers and traders can produce their goods more efficiently.

About Trademark

The trade mark is a subset of the right to intellectual property. A trademark shall contain any
word, name, emblem or device, or any variation thereof, used or intended to be used in
commerce in order to recognize and differentiate between the products produced or sold by one
manufacturer or seller and those produced or sold by another manufacturer or seller and to
signify the source of the goods. A trademark is, in short, a brand name. A trade mark is a mark or
emblem capable of distinguishing one's products or services from those of others.

Meaning and Definition of Trade Mark

A trademark is an authentication method. In order to demonstrate to the buying force that they
are the products made or handled by other people, they have a visible mark in the form of the
term, device, or label attached to articles of trade. Trademark is a mark used for the purpose of
being used in relation to products5 and is not a trade mark nor may be a trade mark in relation to
goods.6 In other words, we may conclude that trademarks are visual representations applied to
items for the purpose of showing the origin of the trader.7

By referring to the meaning of the trade mark in Section-2 (1) (zb) of the Trade Mark Act 1999,
the legal term of the trade mark can be understood. A trade mark means a mark which is capable
of being depicted graphically and which is capable of separating the products or services of one
individual from those of another and which may include: the form of the goods, their packaging
and the mixture of colours.8
With respect to “Chapter XII (other than section 107), a licensed trade mark or trade mark used
in relation to products or services for the purpose of showing or indicating, as the case may be, a
connection in the course of trade between goods or services and those persons who, as the
proprietor, are entitled to use the mark. According to different arrangements of this Act, an
imprint utilized or proposed to be utilized corresponding to products or administrations to show

5 Section 2 (v) (31) Trade Mark Act 1958

6 KT Pavanny v/s K.T. Mathew, AIR 1982. Ker 309: 1982 ker LT 399: ILR (1982) 2 ker 250.
7 Ibid.
8 Section-2 (1) (zb), Trade Mark Act 1999

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or in order to demonstrate an association throughout Trade between the merchandise or
administrations, all things considered, and some individual having the right, either as owner or
via allowed client, to utilize the imprint whether with or with no sign of the character of that
individual and incorporates an affirmation Trade Mark or aggregate imprint.”

For both registered and unregistered trademarks, this description is valid. There are more
substantive criteria for becoming a trade mark inserted in the current definition of a trade mark
than the definition of the 1958 Act. The meaning of the trade mark, which was historically read
from the scheme of the Statute and Common Law, now includes some of the substantive criteria
for registration.

Clearly, Section 2 (1)(zb) states that:9

1. The trade mark shall be a mark comprising the device, the heading of the mark, the label, the
ticket, the name, the word of the signature, the text, the members, the form of the goods, the
packaging or the combination of colours or any combination thereof: S2 (I) (m)
2. The Trade Mark must be capable of being interpreted graphically.
3. It must be capable of distinguishing products or services from those of others, or one person.
4. It can include the shapes, packaging and colour variations of the products.
5. It must be used or proposed to be used for products or services in the selection process.
6. Usage must therefore be the object or intent of suggesting a link between goods or services in
the course of trade. And certain individuals are allowed to use the label as the owner.
7. The right to trade mark possession can be obtained by registration in compliance with the Act
or by use in relation to unique goods or services.
8. The right of possession gained by registration is a contractual right acquired only by the desire
to use the mark and not by an actual person. In the other hand, in relation to specific products
or services, the privilege obtained by the individual customer is a common law right
connected to the goodwill of the company in question.

9 Section 2 (1)(zb), Trademarks act 1999

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 OWNER OF TRADEMARK
Trademark shall offer rights to the proprietor of the mark by guaranteeing the exclusive right to
use the mark in order to distinguish the products or services or by allowing another mark to use
the mark in exchange for payment. It serves as a weapon in the possession of the registered
proprietor or trademark owner to avoid the unauthorized use of the trademark by the registered
proprietor by other traders. Under section 28 of the Act, “when a trade mark is licensed, the
registered proprietor of a trade mark shall have the exclusive right to use the mark in relation to
the goods for which the mark is registered and to seek relief from the registered proprietor of the
mark in the manner provided for in the Act. A trade mark proprietor has the right to bring a claim
for violation of his right and to obtain:10

1. Injunction,
2. Damages,
3. Account of profits”

REGISTRATION OF TRADEMARK
In accordance with “section 18(1) of the Trade Mark Act 1999, any individual claiming to be the
owner of a mark used or proposed to be used by him can apply in writing for registration in the
prescribed manner.11 The name of the mark, goods and services, the class of goods and services,
the name and address of the claimant and the date of use of the mark must be included in the
application.”12

10 Section 28, Trademarks act 1999

11 Section 28, Trademarks act 1999
12 T.R. Srinivasan Ivengrar, The Trade Marks Act, 4th edition, 2011, revised by Dr. H.K. Saharay, Universal
Publication, page1

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Any entity means a trust, central or state government, a partnership firm, an association of
individuals, a corporation, whether or not incorporated. Steps for trademark registration-

1. Find a name, device, emblem and label that is supposed to be used as a trademark.
2. Apply for trademark approval.
3. Review of the registry's application. Examination summary of objections raised by the
Registry under the various parts of the Trademark Act, 1999.
4. Responding to official objections and calling for a hearing, if necessary. In support of the
trademark application, the applicant needs to file proof.
5. Advertising of a label filed by the public in the official gazette/trademark journal for
opposition purposes within 3 months of the date of publication.
6. A certificate of registration shall be given in favour of the applicant if no objection has been
received. The period of validity of the certificate of registration shall be 10 years and may be
extended thereafter, subject to the payment of renewal fees.13

INFRINGEMENT OF TRADE MARK

Infringement is a violation or breach of the right of another person.
Infringement is an act that “interferes with one of the exclusive rights of a patent, copyright and
trademark holders, as per Black's Law Dictionary. According to the Trademark Act, 'a person is
infringed by a registered trade mark when he uses a registered trade mark, such as his trade name
or part of his trade name, or the name of his company name or part of his trade name, in relation
to the products or services for which the trade mark is registered. Trademark infringement
implies the use of such a label by an individual other than the licensed proprietor of that mark.”

As per Trademark Act, a mark shall be deemed to be infringed mark if:

1. A copy of the entire recorded mark with a few additions and alterations has been found,
2. During the process of trade, the infringed logo is used,

13 Ibid.

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3. The use of the infringed mark is either written or the normal commercial depiction of the
mark. Any oral use of the label does not constitute an infringement.
4. The logo used by the other party is so similar to matching the mark of the licensed proprietor
that it is likely to be deceptive or ambiguous in relation to the products for which it is
registered.14

Protection against Infringement of Trade Mark

According to Section 29 of the Trade Mark Act, 1999, “the use of a trade mark by a person who
is not a registered proprietor of a trade mark or a registered user of a trade mark which is
identical to, or disappointingly similar to, a registered trade mark amounts to an infringement of
the trade mark, and the registered proprietor may take action or seek relief for an infringement of
that trade mark. In a case the Supreme Court held that, in an action for infringement, if the two
marks were similar, the infringement had occurred,” otherwise the Court had to equate the two
marks with the degree of similarity expressed by the registered proprietor in phonetic, visual or
basic terms, if the essential characteristics of the mark of the registered proprietor were to be
considered to be used by another person.15165

Case Law on Infringement

 Hearst Corporation Vs Dalal Street Communication Ltd.,

“The Court held that a trade mark is infringed when, in the course of trade, an individual uses a
trade mark which, in relation to the products for which the trade mark is registered, is identical or
disappointingly similar to that mark.” The usage by such an individual of a mark must be in a
manner that is likely to be considered to be used as a trademark.17

In an action for infringement of trademark:

(a) the applicant must be a registered proprietor of a trademark

14 J.P. Mishra, A Introduction to Intellectual Property Rights, 2005, Central Law Publication, Page-176 3. Supra
note
15 , page 2-3
16 Section 29, Trademarks act 1999
17 Hearst Corporation Vs Dalal Street Communication Ltd., 1996 PTR 1 (Cal)

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(b) a symbol deceptively similar to the mark of the claimant must be used by the defendant.
(c) the usage must be in relation to the products for which the label of the complainant is
registered,
(d) the defendant's use shall not be inadvertent, but in the course of trade.18

 Amritdhara Pharmacy Vs Satya Deo Gupta,

In the said case, the Supreme Court claimed that the test for evaluating the similarity in two
terms related to an infringement action was: You must take the two words. You've got to judge
them, both by their look and sound. The products on which they are to be applied must be
considered. You need to understand the essence and type of consumer who is likely to purchase
such items. In fact, all the surrounding situations must be taken into account and “you must
further consider what is likely to happen if one of those marks is usually used as a trade mark for
the products of the respective owners of the marks. If you take all these situations into account,
you come to the conclusion that there will be a misunderstanding-that is, not necessarily that one
person will be harmed and the other will benefit unlawfully, but that there will be a confusion in
the mind of the public that will lead to confusion in the goods-then you can refuse to register, or
rather you may refuse to register in that case.”19

Differences between Passing of and Infringement

“The action for passing off is distinct from an action for infringement. The violation action is a
statutory remedy, while the action for passing off is a remedy under common law. In order to
claim an infringement with respect to a registered trademark, it is therefore important to show
only that the infringing mark is identical or deceptively similar to the registered mark and that no
further evidence is needed. Proving that the marks are identical or deceptively similar alone is
not sufficient in the case of a passing off action.” It is probable that the use of the mark would
mislead or generate uncertainty. Furthermore, it is important to show in a passing off action that
the use of the mark by the defendant is likely to cause harm or damage to the goodwill of the

18 Ibid
19 Amritdhara Pharmacy Vs Satya Deo Gupta, AIR 1963 SC 449

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plaintiff, while the use of the mark by the defendant in an infringement suit does not need to
cause any injury to the plaintiff. However, once a trademark is registered, approval is only issued
in respect of a specific category of products. Therefore, protection is afforded only to such items.
The products of the defendant should not be the same in a passing off action; they may be allied
or even different.

• Kaviraj Pandit Durga Dutt Sharma Vs. Navaratna Pharmaceutical laboratories,

The Apex Court held that there were some differences between the action for transfer and the
action for trademark infringement. American Home Goods Corp. Vs. Lupin Laboratories
Ltd.,20 the Court held that when considering the infringement of a registered trademark, it is
well defined legislation. The disparity between the test for infringement and the test for passing
off action should be taken into account. In a passing off proceeding, the courts aim to
determine if there is a misrepresentation, while, in the case of an infringement, it is necessary
to remember that the Trademark Act grants the proprietor an exclusive right to use the mark
which is infringed in the case of the same mark and, in the case of similar marks, even though
there is a misrepresentation, there could also be an infringement.21

• Satyam Infoway Ltd. Vs Sifynet Solutions (P) Ltd.

The Court held that it was appropriate to create an action for the transfer of three items, which
are as follows, in order to set up an action:
(a) As the term passing off itself suggests, the first factor of an action for passing off is to restrict
the defendant from passing on his goods or services to the public as that of the claimant. Not
only is it an attempt to maintain the integrity of the complainant, but also to protect the
public. The defendant must have sold his goods or given his services in a way that has been
misled or is likely to trick the public into believing that the complainants are the goods or
services of the defendant.

20 American Home Goods Corp. Vs. “Lupin Laboratories Ltd., 1996 PTR 7 (Bom)”
21 “Kaviraj Pandit Durga Dutt Sharma Vs. Navaratna Pharmaceutical laboratories, AIR 1965 SC 980”

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(b) The second factor to be identified by the complainant is that the defendant is misrepresented
to the public by the defendant and what must be established is the possibility of doubt in the
public's mind that the products or services provided by the defendant are the goods or
services of the complainant. The court must permit the imperfect remembrance of an
individual or ordinary memor' in determining the probability of such uncertainty.
(c) Failure or the probability of it is the third aspect of a passing off action.22

Trade mark registration under the Act, however, is valid only in India. In order to gain trademark
rights and protection in other countries, the use and/or registration of a trade mark in those
countries is required. Protecting trademarks is territorial in nature. In each of the countries where
security is required, a separate registration would have to be made. In order to gain security
outside India, it is important to individually file applications in the countries concerned. You
should also be careful to apply for registration in a country before starting to use your trade mark
in that country. In certain nations, such as Continental Europe, China, Japan and Indonesia,
trademark rights may be granted to the first person to apply for registration, rather than to the
person who first uses the trade mark. Therefore, even though you were the first individual to use
the trade mark, another party could legally "steal" your trade mark by applying for registration.

ECONOMIC DIMENSIONS IN THE TRADEMARKS LAW

Basically, the Trademarks Act deals with the protection of commercial rights from economic
offences. The rules of the Act deal with crimes such as handing off, violation, dishonest
resemblance, and the like. It is well known that, in the event of a breach of a registered
trademark, a trademark can be registered or unregistered; a lawsuit for infringement may be filed.
Similarly, in the case of a non-registered trademark, the paperwork for a move must be upheld.
With the aid of case laws, all such crimes were consequently addressed in the necessary details.22

22 Satyam Infoway Ltd. Vs Sifynet Solutions (P) Ltd. 2004 (6) SCC 145
22
legalservicesindia.com

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 MARKET FAILURE IN THE DEMAND AND SUPPLY OF
TRADEMARKS.
The topic of market failures is focused on theoretical hypotheses as to whether acceptable
outcomes are generated by competitive markets. Those results are defined in economic theory in
terms of whether the optimum quantity of products is generated by a competitive market. In the
case of trademarks, the question is whether there is a need for government interference in the
market for the supply of trademarks to include the optimum quantity of search details. Orthodox
researchers accept that some of the issues associated with unregulated open markets are covered
by trademark legislation. Without a certain degree of government regulation of trademark rights,
the availability of search information would result in free riding synonymous with
nonexclusivity. This business loss is related to public and private commodities and is not central
to the study of market failure related to the non-rival existence of referential use. The dynamic
utility half of the static/dynamic problem is not resolved without the potential of trademark
owners to regain their investment in labels, which reinforces either the origins or commodity
information content of the mark.23 This problem is resolved by Mark owners' right to charge a
premium that includes the expense of trade marking operations. If the price is adequate to cover
costs is dictated by customer desires which, once trademark rights become enforceable, are
properly exposed in a competitive market. The unaddressed industry failures are the non-
rivalryrelated static productivity problem and the non-excludability-related demand disclosure
problem.24

CASES RELATING TO ECONOMIC ASPECTS OF THE TRADEMARK

LAW

Passing Off
• Weston Electronics v. Rajesh and Co.,

23 David W. Barnes, A New Economics of Trademarks, 5 Nw. J. Tech, & Intell. Prop. 22 (2006)
24
Ibid.

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In this case, the appellant co. developed and marketed electronic products under Weston's
registered trademark. As for the appellant, the defendant was selling off his merchandise. Kept,
the defendant's use of the trademark ¡§Weston¡ ̈ is likely to result in the defendant's products
being passed off as those of the plaintiff and it is not possible to eliminate at least the risk of
misunderstanding arising in the minds of unwary customers of imperfect capital. Thus, the crime
of selling off on the defendants is simple.24

• Smithkline Beecham v. Hindustan Lever ltd,

In this case, it was held that trans-border credibility could not be created by the mere publishing
of advertising in a journal. If any, such prestige is limited to a small class of individuals, i.e. the
user submits to the aforementioned specialist journals and ca not be said to be applied to general
customers. Therefore, in such a situation, any detrimental impact on the corporation should not
be equated to the crime of "passing off" There's a similar opinion of English law.25

• Reckitt and Colman v. Borden

It is clear from this condition that the appellant sold lemon juice in a bottle shaped like a yellow
plastic lemon. On the foot, Jiff was embossed and written on the neck tab. There was clear
evidence that if approached with the defendant's lemon juice in a comparable box, the buying
public would believe they were buying a Jiff lemon. It was held that the planned get-up of the
defendant would constitute a threat of passing off against which an injunction could be issued.
The decision of the court in the Gillette Corporation case is also noteworthy.26

• Gillete UK ltd. v. Edenwest ltd.

The plaintiffs created and marketed a disposable razor blade called Gillette G-II in this lawsuit.
Without understanding that they were not legitimate products, the defendants bought and resold
imitation Gillette G-II blades. The claimants were guilty of passing away and demanding an
injunction. The defendant argued that he never attempted to hurt the economic interests of the
claimants and was ignorant of the fact that the blades were counterfeit. It was held that the

24 Weston Electronics v. Rajesh and Co., 1995 PTR 70 (Del)

25 Smithkline Beecham v.Hindustan Lever ltd, 2000 PTC 83 (Del)
26 Reckitt and colman v.Borden, [1990] 1 WLR 491, HL

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innocence of the defendant on such a charge does not shield them from a "passing off" action in
order to harm the plaintiffs' economic interests.27
ECONOMIC BENEFITS OF INTELLECTUAL PROPERTY RIGHTS
The topic of how Intellectual Property Rights impact monetary change processes and their
production is mind-blowing and based on multiple factors. More grounded mechanisms for
insuring licensed creativity may, in theory, either promote or constrain monetary growth.
Eventually, the evidence is growing that more grounded and more definite licensed innovation
laws could well create monetary growth and foster beneficial reform, strengthening formative
possibilities along these lines, on the off chance that they are structured in a manner that
advances persuasive and dynamic challenges.28
Because of Trade-Related Issues of Intellectual Property Rights, as the worldwide assurance
mechanism improves, diverse inquiries arise about the effect on financial growth possibilities. It
is unimaginable to claim unhesitatingly, for a lot of reasons, that the current system would
increase monetary growth and boost the process of progression. There are two substantial
explanations. First of all, various variables affect the creation of ways that can monitor the
effects of TRIPS. Second, the monetary theory indicates that licensed invention rights could have
multiple, some positive and some negative, effects for growth.
For any organization to cut a specialty for itself, growth, especially in today's serious situation,
has become the spine. Creation opens the way for approved invention to be produced and the
utilization of this secured innovation gives your organization a serious advantage while still
adding immensely to its success. For any single company, protected creativity is an essential
commodity, specifically those who devote tremendous quantities of cash to creative work in
order to make products and administrations one of a kind.
Organizations can proactively conduct approved invention agreements to obtain the financial
incentives of IPR.30 This helps them to differentiate and maximize their profits from novel,
oneof-a-kind embodiments. It is also important to specifically characterize the aims of permitted
innovation as it will help companies meet their business objectives.

27 Gillete UK ltd. v. Edenwest ltd., [1994] RPC 279

28 M Anulekha, Role of IPR in Economic Development
30
Ibid.

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As business livelihoods evolve, IP engineers may develop methods to ensure the unique
components of their operations. In addition, innovations can be cultivated by studying more
upto-date geologies. To do this, companies should enter into agreements or potentially joint
ventures to establish new structures that can satisfy the needs of their target customers.
CONTRIBUTION OF IP IN GROWTH OF FDI’S IN INDIA
Due to the rising economy, “India has been one of the desirable destinations for investment in
recent years. India's GDP is still rising at a rate of 6.5 percent in 2011-12, according to estimates,
even after the recent slowdown in economic growth. As one of the world's largest consumer
markets, it is still on the investor's radar and one of the most sought-after investment hubs.” A
young and increasing brand is always searching for the region in which its product is in demand
and the best place to sell a new product is always India as a consumer market. Many brands in
the Indian market have grown and benefited from it. Along with all these benefits, in terms of
intellectual property rights, Indian markets still have some problems that need to be taken care of
before entering the market.29

Strong IP regime helps the growth of FDI in INDIA:

A solid structure of intellectual property rights will definitely lead to good business conditions
for FDI invitations in India. The US Chamber of Commerce's study 'India: Foreign Outlier on IP'
said that if India improved its intellectual property regime and raised its GIPC IP Index score by
14.9 points,30 it might achieve the level of FDI comparable to Brazil, Russia and China. It was
also noted in the study that, since the 1980s, India has been less able to draw FDI than its BRIC
peers (Brazil, Russia, China). India is also notably poorer with respect to FDI than other
emerging markets, which began at similarly low investment levels and had comparable IP rights
environments to those of India in the 1980s.31
Certainly, a robust IP system must provide practical defense of intellectual property rights, along
with a mechanism for upholding rights in the event of infringement of those rights. In India,
intellectual property such as trademarks, trademark, copyright, architecture, geographical

29 Singh & Associates, INDIAN LEGAL IMPETUS, vol. VIII, issue IV

30 Ibid.
31 Ibid.

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indication, plant range, semiconductor and integrated circuits layout design are protected by IP
properties responsible for more than one-third of the net worth of firms in the United States and
Europe, making important IP security essential for many would-be investing businesses. Indians
do not have trade secrets with clear safeguards and therefore do not have a proper data protection
rule. These two are regulated by the law on trademarks and information technology and, thus,
there is a clear law provision for these two in order to create a stable atmosphere in which a
holder of intellectual property rights will be secure spending more. In order to cope with other
countries, the current regulations on IP rules should also be kept close to international norms.

Initiative in it act:

As a developing world, India needs both technology and investment to grow itself. For this
cause, excessive constraints on the flow of capital and technologies have been curbed by India.
Previously, businesses could pay royalty caps on royalty fees, including international technology
transfer, only up to 5 percent on domestic revenues and 8 percent on exports.32 If the payments
were to reach this cap, sufficient permission was necessary. The government withdrew these
restrictions in 2009 in order to enhance the flow of technologies between institutions, which
subsequently tends to improve the overall growth of the country.
For developed countries, FDI is one of the most vital drivers of development for them. India
attempted to raise FDI in the nation across a number of modes such as sectoral and regional
rewards to 29/44. Laws have been amended and requirements have been relaxed so that the
expansion of foreign investment can be easily accomplished in the region. In the case of
knowhow, patents, etc, which seems to be relevant, a depreciation rate of 25 percent is given.33 In
comparison, only 20 percent would be paid as tax34 to any Non-Resident Indian or International
Corporation receiving revenue by way of royalty from the government or an Indian concern. This
rate is ostensibly competitive in the provision of investment to foreign companies in India. India
also has a Double Taxation Avoidance Arrangement (DTAA) with 84 countries 35 to discourage
the same income from being taxed in another region. This was also a good sign for consumers to
invest without any issues.
32 “http://rbi.org.in/scripts/NotificationUser.aspx?Id=5677&Mode=0”
33 “section 32(1)(ii) of the IT Act”
34 “115A: Tax on dividends, royalty and technical service fees in the case of foreign companies:”
35 “http://law.incometaxindia.gov.in/DIT/intDtaa.aspx”

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On the other hand, as in the 2013-14 General Budget, the Minister of Finance proposed to raise
the rate of tax on payments by way of royalties and fees for non-resident professional services
from 10% to 25%.36 However, this is only where the foreign parent is formed in a country for
which India has no DTAA. The prices will be valid as per the arrangement for the countries for
which India has a DTAA. If, on the one hand, the government is seeking to increase India's
Foreign Direct Investment by easing conditions and regulations, this may seem like a step
backward. Is it?
In percentage terms, the fight to raise royalty rates can seem inconsequential, but every year they
result in massive money outflows from the region. MNCs have recently started using the royalty
route to obtain erratic returns from their Indian weapons, especially after the government relaxed
the remittance curbs (After the press note of 2009). In 2012-13, around $4.4 billion went out of
India as dividend payments, about 20 percent of the country's $22.4 37 billion in foreign direct
investment earned in the year. Such substantive statistics demonstrate how, considering the
recently depreciated value of the Indian currency, the elimination of one standard can have a
dramatic effect on the overall economy.
So the time to re-impose the limits on royalty payments could be near. It may not be a welcoming
gesture by buyers, but it is a much needed one. Given the arbitrary movement in the currency
market, the government is considering such a move to put in some power. Its effect on economic
development has yet to be seen.

Challenges regarding intellectual property rights:

Trademark infringement/passing-off: Trademarks have gained a radically new significance in
this electronic era. Today, in a world where the brand's products have not yet been sold, a brand
popular in one nation will quickly be recognised. This new market characteristic has contributed
to the issue of piracy and passing-off of products that are internationally recognized but have not
penetrated a specific market. A local businessman would start producing his own goods under
the same name to take advantage of the existing popularity of the foreign brand. Therefore, in
order to curb this issue, “foreign brands can take action against local merchants under the

36 “http://pib.nic.in/archieve/others/2013/feb/benglish.pdf”
37 Ibid.

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provisions of trademark law, in which one of the ingredients for taking action against
infringement and passing-off” has been recognized as a trans-border reputation.

Indian collaborator treating the brand as its own:

The abuse of the brand by the Indian counterpart in the relationship is one of the most common
problems faced by international collaborators in India. The controversy linked to brand usage is
more frequently than not involved with the case of partnership between an international company
and an Indian corporation. After a period of time, the Indian party to the collaborator continues
to assert the international collaborator's name as its own even though it is explicitly specified in
the Act that the usage rendered by the trademark licensee must only be counted as the licensor's
use. The foreign investor is also expected to constantly be mindful of the violation of his brand
and to take prompt action against any misuse by the employee or other third party.

Compulsory licensing:
Even though the Indian Patent Office has its own reasons to provide the same, the recent award
of compulsory e-licensing to the generic pharmaceutical Natco Pharma has generated a lot of
negative publicity for the Indian IP environment. As a patent is awarded for a fixed time span of
20 years, and just a few years out of these 20 years 38 are productive years for a patent to make
money. An atmosphere in which investors are afraid to risk their patent due to compulsory
licensing will definitely not boost India's FDI.
There are many other challenges that an investor in India will face, such as counterfeiting, piracy,
data theft, etc., for which a strong IP regime is required. A robust IP regime would help to win
foreign investors' trust in inviting FDIs.39

The relationship between FDI and economic growth:

With the recent move by the Indian Government to loosen the normal FDI requirements, the FDI
influx is a significant factor for economic development. The recovery of the economy, which
developed at a positive pace during the 2005-2010 period, will benefit.

38 Mikhaelle Schiappacasse, Intellectual Property Rights in China: Technology Transfers and

EconomicDevelopment,note 14, at 174.
39 Ibid.

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FDI includes not just the purchasing of capital properties, including mergers and acquisitions,
joint partnerships, the purchase of land, and investment in plants and facilities, but FDI may
entail the transfer of management experience, technical capabilities, 40 and access to the global
network of the investing business, even more important to developing countries. One of the most
powerful factors behind sustainable growth is the transition of technologies from industrialized
to emerging nations.41 The most significant mechanism by which modern technology is passed to
developed countries is FDI, experts argue.
The Organisation for International Cooperation and Development (OECD) stated in a
communication to the World Trade Organization (WTO):
“Direct investment by MNEs has the ability to quickly restructure markets at the regional or
global level and to turn host economies into prodigious exporters of manufactured goods or
services to the global market. In so doing, FDI will help to incorporate national economies” even
more efficiently into the global economy than conventional exchange flows alone might have
done. In an atmosphere marked by a free trade 44 and investment system, an aggressive market
agenda, macroeconomic stability and privatization and deregulation, the advantages of FDI are
increased, as is more broadly the case for private sector investment. “In this context, FDI will
play a key role in enhancing the host country's ability to adapt to the opportunities provided by
global economic integration, an objective that is increasingly recognized as one of the key goals
of any growth strategy.”
“The decision to allow 100% FDI in the telecommunications sector and the shift in the
preposition of FDI in other sectors is a positive step in encouraging investors to invest in India,
even though the policies for granting and safeguarding intellectual property rights should also be
parallel to international standards.”42

40 Ibid
41 Press Release, WTO, Trade and Foreign Direct Investment (Oct. 9, 1996)
44
Schiappacasse, supra note 14, at 167.
42 WTO Working Group on the Relationship Between Trade and Investment, Foreign Direct Investment and
Economic Development, WT/WGTI/W/26, at 4 (Mar. 23, 1998).

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 CONCLUSION
As long as the trade itself continued, it was a trademark. It is specified in compliance with
section 2(1) (zb) of the 1999 Trade Mark Act. This means a label which is capable of being
graphically depicted and which is capable of separating one person's goods or services from
those of another and which may include the form of the goods. Their packaging and colour mix,
a trademark, is a marketing asset meant for commercial use by merchants. The word trademark is
also used for the phrase "brands" in business and economic matters. However, in regards to
brands, when and where regulatory concerns are addressed, the selling men use the word
trademark. A trademark as established by the Trademarks Act 1999 should be capable of
distinguishing between products or services 52 and should be capable of creating, in the course
of trade, a relation or indication between the goods or services and the individual pretending to
have a right to use the trade mark as the proprietor. The preservation of trademark rights would
undoubtedly stimulate the production of new goods and services, with an enormous rise in the
size of industry. Trademarks have been the weak link of the intellectual property family for the
last few years, undervalued and misused by most of the corporate world. Time and perceptions
have changed now. Trademark law is moving through a phenomenal and revolutionary process
in India. India has given substance to the various provisions since the entry into force of the
TRIPS Agreement by amending current trademark laws or by legislating new ones. The new Act
extends the scope of the "trademark" concept to include visual representation, packaging of
shapes and colour variations, including all products and services.

BIBLIOGRAPHY

BOOKS:
• T.R. Srinivasan Ivengrar, The Trade Marks Act, 4th edition, 2011, revised by Dr. H.K.
Saharay, Universal Publication
• J.P. Mishra, A Introduction to Intellectual Property Rights, 2005, Central Law
Publication

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 • Singh & Associates, INDIAN LEGAL IMPETUS, vol. VIII, issue IV

ARTICLES:

1. Vijay Pal Dalmia, Vaish Associates Advocates, India: Trademarks Law In India -
Everything You Must Know
2. David W. Barnes, A New Economics of Trademarks
3. M Anulekha, Role of IPR in Economic Development
4. Mikhaelle Schiappacasse, Intellectual Property Rights in China: Technology Transfers
and EconomicDevelopment
5. Press Release, WTO, Trade and Foreign Direct Investment (Oct. 9, 1996)
6. WTO Working Group on the Relationship Between Trade and Investment, Foreign Direct
Investment and Economic Development, WT/WGTI/W/26, at 4 (Mar. 23, 1998).

ONLINE RESOURCE:
1. ipleaders.in
2. lexis nexis.com
3. Jstor.org
4. Heinonline.org
5. legalservicesindia.com
6. http://law.incometaxindia.gov.in/DIT/intDtaa.aspx
7. http://pib.nic.in/archieve/others/2013/feb/benglish.pdf

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