Compulsory registration of NGOs: Proposed Law

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As there are 3.17 millions of NGOs registered in India as on date 31^st March 2011, and many NGOs are unregistered. The numbers of NGOs are growing day by day, tracking each and every NGO has become tedious process. There are various sources from where money is flowing to these NGOs. I.e. From donations, grants, foreign donations, income from other operations. Many amongst these NGOs carry activities, for which they should be paying taxes, but they avoid this in the name of Non-profit organizations. When such huge money is flowing to these NGOs, the question that arises here is that …..

To whom they are accountable…..?

Therefore the proposed law I.e. Charitable and other voluntary organizations (VO) regulation bill, under which registration of VOs, I.e. Trust and societies working beyond the state limits or outside India has been made compulsory, as under companies act, under section 25 registration is compulsory for non-profit making organizations. This law also states that for all others voluntary organizations migrating to the new law will have to surrender original registration. In order to avoid tapping of public money, there are categorized according to types of organizations. I.e.  Categorizing them into Big and small, privately-funded outfits.

There are certain exemptions which are being granted to Universities, literary, scientific and other such societies. These sections are exempted from compulsory registration.

The proposed law also states that there will be an autonomous body to oversee implementation, address and redress grievances of the people.

Hope this law will bring transparency and accountability, which was lacking in NGOs.

Competition Commission of India lays down M&A Regulations

The Competition Commission (“CCI”) has laid down Regulations wef 1^st June 2011 to address the procedural aspects in relation to notifying the CCI of any combination which have/may have an appreciable adverse effect on competition and therefore shall require the prior approval of the CCI. Experts suggest that “It will have a greater Impact on M&A activities in India which will see a significant development in this regard”.  

This image is taken from Here

Under this Regulation, any company (with combined assets of Rs. 1,000 crore or more, or a turnover of Rs. 3,000 crore or more.) intending for a combination, is required to give a notice to CCI. Even in the case where a transaction is contemplated by way of a number of steps, or individual smaller transactions, a single notice describing the entire transaction can be filed. In case of failure of compliance by parties, CCI has power to inquire. In case where CCI finds that the combination can cause an adverse effect, it may ask the party to submit information as required for examination.

For CCI’s intervention, the target company’s must have net assets of at least Rs. 200 crore or it should at least have a turnover of Rs. 600 crore.  

CCI will issue its prima facie opinion within 30 days of filing of the merger clearance application. The Regulations stipulate the CCI to pass a final order within 180 days of filing the merger clearance application. The Competition Act, 2002 prescribes a time period of 210 days during which, if the parties do not receive an order from the CCI, the parties can go ahead with the transaction. CCI has power to prohibit any combination, which have or is likely to cause appreciable adverse effect on competition in relevant market or can approve the condition if it doesn’t have or likely to have appreciable adverse effect on competition in relevant market or it may pass an order approving the combination with modifications or conditions. It can also pass appropriate directions in case the parties fail to implement modifications.

Under the Regulations, Form I includes transactions such as (1) acquisitions of not more than 15 percent of the total shares solely for an investment purpose or in the ordinary course of business (2) where the acquirer is already in control of the enterprise; (3) acquisition of assets where the assets of the parties are not directly related to the business activities of the party acquiring (4) acquisitions taking place within the group. (5) An acquisition results from a gift or inheritance. All other kinds of transactions are to be notified by way of filing Form II. Further, minimum fees to be paid by the companies is Rs. 50,000.00 (Form I), which is significantly lower than the earlier fee proposed by the commission, in certain cases the fee could go up to Rs. 10 lakhs (Form II). Companies may even consult with the CCI prior to filing with them in order to facilitate the procedural requirements.

Business transactions such as acquisitions of stock in trade, assets or investments in ordinary course of business, bonus issue, stock split would be exempted from seeking CCI clearance. The Regulations are welcomed by the market since it is believed more likely to protect consumer welfare on a sustainable basis.

Section 39 of Indian Patent Act

Residents not to apply for patents outside India without prior permission

Marginal note of this section of Patent Act clearly states that:  No person resident in India can file patent outside India without prior permission of the controller. I.e. every resident of this country needs to apply to controller of patent before filing patent outside the country.

But, as marginal note cannot guide the meaning of the main part of a section (As held in His Holiness Kesavananda Bharati v. The State of Kerala and Others, AIR 1973 SC 1461,In Para 1407, this clearly goes to state that every resident has either to apply for patent in India or take permission from controller for applying patent outside India.

This image is taken from Here

Moreover, the other conditions are, firstly, It should have been filed in India secondly, if its 6 months prior to the applications filed in India, then it is not necessary to apply to the Controller. And thirdly, there should be no secrecy condition according  to s.35 (1). 

The person seeking permission under section 39 of the Indian Patents Act should approach the controller with the following documents:

1. An application in Form-25 in duplicate;

2. A brief write up of the invention in duplicate;
3. Prescribed Fee under Rule 71(1)

4. Power of Authority (If required)

Under rule 71(2) of the prevailing Indian Patents rules, the permission from the Controller shall ordinarily be issued within 21 days from the date of receipt of request by the Indian Patent office.But in practice, the disposal of foreign filing request within a period of 21 days is strictly not followed due to bureaucratic process followed at Indian patent offices. 

As discussed by my Senior, J.Sai Deepak, rightly in his blog, that for the purpose of "Resident of India", section 6 of the Income Tax Act, where the definition is clearly defined,can be considered for the same purpose, but the implications of the expression, "caused to be made" in section 39 is not defined in the Act, whether it depicts case of multiple inventors, wherein at least one inventor or the company is residing or registered in India, and others from foreign Country.

However, considering the subject matter, permission is mostly granted if it is not found to be relevant for defense or atomic energy or any issues related to security of India.

Drafting And Negotiating Software License Agreements: Checklist

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I.          Rights Granted under the License[1]

A.        Exclusive vs. non-exclusive - primarily an issue for custom-made software

B.        Revocable vs. irrevocable - more a breach issue

C.        Right to use the user manual and related documentation

                              Exclusive Software Licence

 

II.        Term of License

A.        Perpetual or defined time period?

B.        Renewal rights and terms

III.       Scope of License[2]

A.        Licensee internal operations only?

B.        Number of users - named users/concurrent users and variations

C.        Number of sites/number of computers ("boxes")

D.        Copying rights/backup - copyright rights

E.         Use by subsidiaries and affiliates

F.         Right to modify and combine with other products/who owns modifications?/Copyright issues

G.        Prohibited uses

IV.       Transferability and Sublicensing Restrictions

A.        Typically, license may not be assigned, transferred, sublicensed, or pledged

B.        Typically, licensee may not use the software for third party training, commercial time sharing, rental, or service bureau use

C.        Restrictions on use at a particular location?

V.        Right to Source Code

A.        Does licensee need to obtain or have access to source code? How practical even if obtained?

B.        Stability of licensor

C.        Source code escrow and alternatives

D.        Limitations on when source code could be accessed or used

E.         Updating the source code available to the licensee

VI.       Ownership of the Software

A.        Express statement that licensor owns and retains all title, copyright, and other proprietary rights in the software and documentation

B.        Trade secret acknowledgement

C.        Limiting access of employees, consultants, or third party

D.        Representation of licensor as to ownership of the software

E.         Ownership issues with respect to licensee modifications

F.         Ownership of user-created copies

VII.     Payment Provisions[3]

A.        Schedule of payments

B.        Discounts

C.        Payments linked to licensee accepting test of the software

D.        Late fees

E.         Shipping charges

F.         Sales, use, property, value added or other taxes to be paid by licensee, other than tax based on licensor income

VIII.    Acceptance Procedures

A.        Right to test for some designated period of time

B.        Right to reject software and results of rejection

IX.       Training

A.        Scope of training to be provided by licensor

B.        Cost

C.        Location of training sessions

D.        Number of trainees

E.         Training of new employees after initial training

X.        Warranties[4]

A.        Licensor will want to give very limited warranties, e.g., the software media is free from physical defects in material and workmanship for a 90 day period

B.        Licensee may demand a warranty that at least the software performs the functions described in the related documentation

C.        Length of warranty

D.        Procedure for notifying licensor of defects

E.                 Procedure and response time for licensor correction of problems

F.                  Modification of software terminates warranty?

G.        Explicit disclaimers by licensor as to:

1.         Merchantability

2.         Fitness for particular purpose

3.         Error-free operation

4.                  Any other warranties, express or implied, except as explicitly set forth in agreement

XI.       Limitations on Licensor Liability

A.        No liability for indirect, special, incidental, consequential damages, whether in tort, contract, or product liability

B.        No liability for loss of profits, revenue, data or use or cost of substitute software, whether in tort, contract, or product liability

C.        Limitation on the total amount of damages, e.g., all or a portion of the license fee paid

D.        Shortened statute of limitations to commence action from when damage occurred (e.g., six months or one year)

E.         Enforceability issue

XII.     Inspection Rights of Licensor to Monitor Licensee's Compliance with Agreement

XIII.    Support and Maintenance Services

A.        Scope of support and maintenance

B.        Response times by licensor to cure problems

C.        Payment

D.        Price increases allowed

E.         May be subject to separate agreement or support policy

XIV.    Nondisclosure of Confidential Information[5]

A.        Agreement to hold various information confidential

B.        Period of confidentiality

C.        Scope of protected information - terms of agreement, pricing, other information identified or marked confidential

D.        Exclusions:

1.         Information that is or becomes part of the public domain through no act or omission of the other party

2.         Information that was in the other party's lawful possession prior to the disclosure

3.         Information that is lawfully obtained from a third party without restriction on disclosure

4.         Information that is independently developed

E.         Covenant to use reasonable steps to make employees comply with confidentiality restrictions

XV.     Indemnity for Infringement

A.        Scope of indemnity

B.        Notification to licensor of claim of non-infringement

C.        Control of action and settlement by licensor

D.        Option of licensor to replace or repair software

XVI.    Termination[6]

A.        Right of licensor to terminate

B.        Right of licensee to terminate

C.        Failure to pay and disputes concerning whether payment required

D.        Effect of termination - survival of rights and payment obligations

E.         Return of software, documentation, and copies to licensor on termination

F.         Obligation of licensee to cease using software after termination

G.        Certification by licensee regarding the cessation of use of software after termination and the return of the software, copies and documentation

XVII.  Other Special Issues

A.        Most favored nation clause

B.        Price protection

C.        Installation

D.        Hardware configuration

XVIII. Miscellaneous

A.        Governing law

B.        Jurisdiction, e.g., causes of action may only be brought in the county where the licensor's principal office is located

C.        Notice

D.        Severability

E.         Waiver

F.         Export laws

G.        Relationship between the parties

H.        Integration/complete agreement

I.          Agreement to be construed as to its fair meaning and not strictly for or against either party

J.          Attorneys' fees

K.        Force majeure

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[1] Sample pro-Licensor language:

“License. Subject to the terms and conditions herein, Licensor hereby grants to Licensee a limited, revocable, non-exclusive, non-transferable license to use the software listed on the first page hereof (the “Software”) for Licensee’s own internal business uses at the localities identified on the first page hereof, together with the associated manual and other related printed material (“Documentation”) provided with this package for the term indicate don the first page hereof. The fees for the license hereunder are set forth on the first page hereof.”

[2] Sample pre-Licensor language:

“Prohibited Uses. Licensee may not (a) make copies of the Software, Documentation or program disks, except for back-up proposes, which back-up copies are subject to the terms of this Agreement; (b) re-sell, loan, rent, pledge, assign, sub-license or otherwise transfer the Software, Documentation , or any related data, except as provided above; (c) alter, modify or adapt the Software of Documentation, including, but not limited to, translating, reverse engineering, decompiling, disassembling or creating derivative works; (d) utilize the Software in conjunction with any automated valuation software system, or (e) use the Software for commercial time-sharing, rental, or service bureau use.”

[3] Sample pro-Licensor provision:

“Payment and Taxes. All fees and other charges stated herein are due and payable within fifteen (15) days after the date of invoice. A charge of no more than one and one-half percent (1-1/2%) per month will be assessed on the late payments until paid in full. Amounts payable to Licensor as specified are payable in full to Licensor without deduction and are net of taxes; in addition to such amount, Licensee shall pay sums equal to all taxes (including, without limitation, sales, use privilege, ad valorem or excise taxes) however designated, levied or based on amounts payable to Licensor under this Agreement or on Licensee’s use or possession of the Software and/or Documentation under this Agreement, but exclusive of United States federal, state and local taxes based on Licensor’s net income.”

[4] Sample pro-Licensor provision:

“Limited Warranty. The sole warranty regarding the Software and Documentation is that the original disks (or CD-ROMs) are free from physical defects in material and workmanship, assuming proper use, for a period of thirty (30) days after delivery, and provided Licensee returns the item within thirty (30) days of delivery. Licensor will either, at its discretion, (I) replace the defective media or Documentation or (ii) refund the license fee paid for the defective disks. These are the Licensee’s sole remedies for any breach of any representation or warranty.”

[5] Sample pre-Licensor provision:

“Nondisclosure. The Software and the Documentation are agreed to be Licensor’s proprietary information, intellectual property and trade secrets, whether or not any portion thereof is or may be validly copyrighted or patented. Licensee shall take all reasonable steps necessary to ensure that the Software and Documentation, and any portion thereof, are not made available or disclosed by Licensee or by any of its employees to any other person, form or corporation. Licensee agrees that all those individuals having access to the Software under this Agreement shall observe and perform this nondisclosure covenant, and that, upon Licensor’s reasonable request, it will advise Licensor of the procedures employed for this propose.”

[6] Sample pro-Licensor provisions:

“Termination. This license and Licensee’s right to use the Software and Documentation automatically terminates if it fails to comply with any provision of this Agreement. Upon termination. Licensee shall immediately return all Documentation and the Software.”

“Survival. Termination of this Agreement shall not affect any of Licensor’s right, remedies, and protections hereunder.”

State's secret doctrine and contract claims: No remedy for anyone

In a recent decision by the US Supreme Court, the state secrets doctrine and enforceability of contracts were discussed. Facts of the case goes like this, General Dynamics Corp. was given a contract by the US government to make stealth airplanes. Corp. failed to deliver in time and made little progress in its work. As a result govt. terminated the contract and asked for a sum more than US $1billion which was given as advance amount. On the other hand, Corp. asked for US $ 1.85 billion for work which was not received by the US govt. Corp. also invoked a provision wherein a govt is required to share its superior knowledge in a govt contract, with the contractor. In the lower court, govt. took the defence the it cannot allow the plaintiff to check its records whether govt had superior knowledge because such documents are state secret and can pose national security threat if disclosed. After various rounds of litigation before Federal Court case reached before the Supreme Court.

By a unanimous decision, Supreme Court held that defense of state secret doctrine can be taken by govt. in a suit instituted by it. If prima facie evidence exists that damages evaluation would require disclosure of classified documents then such a claim is non- justiciable in court of law.Hence, the proper remedy that court could give is to leave the parties in the position they were on the day before they firs knocked the doors of the court. 

With this observation case was remanded back to district court.

Standard of Proof in Patent Invalidity cases

Recent litigation going on between Microsoft and i4i corp in Supreme Court can bring a drastic change in way the patent is invalidated in US courts. In US, standard of proof in all civil cases is prepoderance of probabilities. But, in cases challenging the validity of patents, a little more stringent standard "clear and convincing evidence" is used. It is nowhere written in 35 USC that courts must employ a higher standard in patent cases. But over the period of time Federal Courts in US have employed this standard by interpreting 35 USC 282 which says that a presumption of validity will exist in all patents issued by USPTO.

In the present cases, Microsoft is trying to invalidate a i4i patent by arguing that the invention was already on sale before the patent application was filed.

Microsoft's argument is that when a prior art is not considered by PTO then there is no point in employing the clear and convincing evidence standard.

Arguments are over before the Supreme Court and decision is pending. U can listen to the arguments by clicking on the link pasted above.

Glenmark balms Triax and Astellas

In yet another pharmaco agreement, Glenmark Pharma entered into an agreement with Triax and Astellas in order to resolve a patent infringement case in the US. The chemical in question was the generic hydrocostisone butyrate cream, used to treat skin infections.

Hydrocortisone butyrate cream is a generic version of Triax's Locoid Lipocream.

Under the settlement and licence pact, "Glenmark will be permitted to market and distribute its 0.1 per cent hydrocortisone butyrate cream under a royalty-bearing license from Astellas and Triax in the US near the end of 2013."

Environment Tidbit

Believe it or not, the 2G scam proceedings has an environment aspect to it. The chargesheet runs into 80,000 pages and has 17 accused. Each of them is to be provided with a copy. If you include the judges and the lawyers it goes upto at least 20 lakh pices of paper. Now, a standard tree gives us 8500 sheets of paper implying that one chargesheet is was basically ten (erstwhile) trees!

So what is the environment aspect? 2G scam accused Asif Balwa got the court to agree to using his iPad thus saving ten trees.

Copyright Amendment Bill : A quick look

Following are the important changes brought through Copyright Amendment Bill (2010).

1. The director of the cinematograph film is included in the definition of author. The producer used to be the only author before the amendment. The Cinematographic film is further deemed to be “work of joint ownership”

2. The law brought out by United States 11^th Circuit in Martin Luther King Case[1] where it was held that the distribution of work by “choosing” doesn’t lead to the fall of work in public domain, is incorporated by insertion of words at places and times chosen individually in clause ff of Section 2.

3. The definition of performer is restricted by excluding the “incidental” or “ancillary” roles. (Roles which are not acknowledged in credits of film).

4. Rights Management Information is adopted. Section 65B is a penal section for the violation of RMI."Rights Management Information", means, —

(a) the title or other information identifying the work or performance;

(b) the name of the author or performer;

(c) the name and address of the owner of rights;

(d) terms and conditions regarding the use of the rights; and

(e) any number or code that represents the above information;

but does not include any device or procedure intended to identify the user;

5. The protection of technological measures is statutorily mandated and any person violating the same shall be penalized under section 65A of the Act.

6. The “visual Recording” is introduced separately from Cinematographic Film Section 2(xxa).

7. Storage of copyrighted work is also deemed to be a right of owner and hence he may prevent others from holding or storing the work in any medium.

8. The rental of the copyrighted work is broadened by putting “commercial rental”.

9. Retrospective recognition of principle Director’s right on the cinematographic film except according to the agreement between producer and director in this regard. Moreover, the director is provided with duration of 70 years of copyright in the cinematographic film. (Sec 26, proviso)

10. Right of assignment of the author of the literary or musical work is restricted to the legal heirs or copyright society when such work is utilized for non cinematographic purposes {Section 18(3), proviso}. However, the author rights shall not be affected by such assignment and she still can demand royalties for exploitation of such work. {Sec 19(9)}.

11. Copyright Board’s power is extended in cases of disputes in relation to assignment of copyright to order implementation or in relation to consideration payable for enjoyment of rights. {Sec 19A(2) Proviso}

12. Relinquishment of copyright can be done by public notice in addition to notice to registrar {21(1}.

13. The Notice is mandated to be in public domain for at least three years for the relinquishment of copyrights.

14. The compulsory license can be granted for any work (Indian or Foreign). License shall be provided to such persons as deemed fit by the copyright board and might not be provided to complainant. {Section 31}. Compulsory License under Section 31A (when author can’t be found or traced) is extended to published work as well. The compulsory licenses for the organization registered under Section 12A of the Act and working primarily for the benefit of persons with disability, and recognized under Chapter X of The Persons With Disabilities (Equal Opportunities, Protection of Rights, and Full Participation) Act, 1995 is provided. (Sec 31B)

15. The rights of original music author are recognized by curtailing the right of production of “cover music” by third party and prohibition of any altercation in such original creation without prior consent of owner of original work. Similar provisions are proposed for broadcasting of literary, musical and sound recording.(Sec 31C and 31D).

16. The Copyright (Amendment) Bill, 2010, aims to completely restructure the working of and the eligibility criteria for membership in copyright societies by various amendments to Chapter VII of the Copyright Act, 1957, which would make it possible for only authors of works to become members of copyright societies and to manage them. (Sec 33, 34, 35).

17. New provision replacing the substantial portion of provision relating to performer’s right is included. The moral rights of performer are acknowledged and others are prevented from mutilating his or her performance. Moreover, the right of performer to prevent others to use copyrighted work is broadened. (Section 38A).

18. The fair use of the copyrighted work for personal use is recognized. Reporting of current events and lecture delivered in public shall not be deemed as an infringement.

19. Any person holding any right (earlier only owner of copyright) can complain to the Registrar of Copyright for prohibition of importation of goods which are infringing copyright. (Section 53).

20. Author’s right to restrain distortion, mutilation or modification or any other act in relation to work is recognized if such act would be prejudicial to his honor or reputation. Such right can also be exercised by legal representative of the author (Section 38B).

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[1] 194 F.3d 1211 (11^th Circuit)