Patent Rules Amendment 2016: Tatkal Patents, Benefits for Startups and US Victory.

The Office of the CGPDTM has on 14th May 2016 issued a public notice on the publication of amended Patent Rules, 2003. Accordingly, the Patent (Amendment) Rules, 2016 (Amended Rules) were published (and came into force) on 16th May 2016. Earlier, the government had released the Draft Patent (Amendment) Rules, 2015 (Draft Rules) for public comment and consideration.

There are quite a few positive changes to the patent rules. Among these, I will be dealing mainly with the inclusion of startups, refund of fees for withdrawn applications and the new expedited process for patent examination. The Amended Rules also provide for an upper limit of two adjournments going up to maximum of 30 days each. Additionally, they also provide for video-conferencing as an option for hearings in case of anticipation by prior publication.

Withdrawal Benefits

Fees once paid for any proceeding will not be refunded irrespective of whether the proceeding has taken place or not. However, they may be refunded if the Controller is satisfied that the fee was paid more than once for the same proceeding. Furthermore, an applicant is entitled to a 90% refund of the fees upon withdrawal of an application in respect only if it is before issuance of first statement of objection. Earlier this year, Commerce and Industry Minister Nirmala Sitharaman submitted to the Rajya Sabha that there are as many as 2.37 lakh applications with the IPO; mainly due to shortage of man-power. Further, the Economic Times has reported that “…more than 2 lakh [200,000] applications are in the examination stage”. Clearly, the government intends to use the above refunding provision as one of the ways to unclog the IPO and employ resources for more appropriate purposes. Patent pendency ought to also drop comparatively faster due to the  hiring of 459 new patent examiners last year.

Startup Bonanza

The patent rules have been brought in line with the government’s ‘Startup-India’ initiative and as also with the recently released National IPR Policy. (Prof. Basheer’s critique of the latter can be found here). To achieve this, the Amended Rules treat startups legally at par with natural individual persons. Any reference to startups was completely missing from the Draft Rules. The Amended Draft Rules have defined ‘startups’ in accordance with the Startup India Action Plan; Essentially, an entity will be eligible as a ‘startup’ has to be less than 5 years old, with an annual turnover less than INR 25 crore in any financial year and must be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Tatkal Patents

An important highlight is the introduction of an expedited patent examination on request. The newly added Rule 24C aims to fulfill the government’s endeavor of reducing the application period from the prevailing 5-7 years to 18 months by March 2018. This service can be enjoyed only by (a) applicants who have listed India in their international application (in accordance with the Patent Cooperation Treaty) as the competent International Searching Authority or elected as an international Preliminary Examining Authority or by (b) applicants that are startups. The expedited examination service is available only through the electronic route. DIPP Joint Secretary Rajiv Aggarwal told The Hindu that this move is intended “to popularize India as a patent filing hub so that more companies file applications in India. Now many applications for the initial examination are filed abroad, in places like Europe, the US or Japan“.

This also means that startups will have it reasonably cheap at Rs. 8,000/- for an expedited examination. Interestingly, the government has on the whole drastically reduced the fees payable for the expedited process as against those under the Draft Rules. Here’s a table of comparison:

Entity Fees under Draft Rules (2015) [In Rs.] Fees Under Amended Rules (2016) [In Rs.]
Electronic Physical Electronic Only
Natural Persons / Startups[1] 50,000 55,000 8,000
Small Entities 1,25,000 1,37,000 25,000
Other than Small Entities 2,50,000 2,75,000 60,000

Rule 24C requires the examiner to make the report under Section 12(2) ordinarily in 1 month (but not exceeding 2 months) from the date for reference of the application to him by the Controller. The Controller must then dispose of the examination report within in 1 month from receipt and issue the first objections within 15 days such disposal.

Thereafter, the applicant has to put the application in order for grant (under Section 21) within 6 months from the receipt of the first statement of objections. The applicant may request an extension of 3 months. Subsequently, the Controller shall dispose of the application within a period of 3 months from the date of receipt of the last reply to the first statement of objections or within a period of 3 months from the last date to put the application in order for grant under Section 21. Importantly, the Controller has been empowered to limit the number of requests for expedited examination to be received during the year.

Succumbing to Pressure

India has been getting flak for its IP regime from developed countries. The US is the undisputed front-runner of this endeavor to get India to amend its IP laws in accordance with American standards. The US imposes upon itself the burden to conduct an annual IP review of its trading partners to ensure their adherence US IP policy.  This culminates in the preparation of the Special 301 Report by the United States Trade Representative (USTR). Incidentally, India has been placed on the Priority Watch List for the 2016 version of the USTR’s Special 301 Report (Special Report). The review process includes a Special Hearing for the 301 Review (Hearing), where governments and stakeholders can make their submission towards the same. These procedures have been covered on SpicyIP here and here.

This year’s Special Report displays a stark contradiction. On the one hand the US has applauded Prime Minister Modi’s high level initiatives such as “Make in India” and “Start-up India”, which are intended to encourage domestic innovation and manufacturing activities by foreign investors. On the other hand, the US has severely criticized India’s proposal in the Draft Rules to offer expedited patent examination for applicants that manufacture or commit to manufacture their inventions in India.

Now, the Draft Rules provided that the expedited procedure could be availed by applicants or assignees or prospective manufacturers (licensees) who have either already started manufacturing the invention in India or those who have undertaken to do so within 2 years of the patent grant. This was aimed at promoting local working of global inventions and boosting technology transfer in India. However, the Amended Rules have done away with this incentive for local working and instead made it available to all startups.

The US clearly expressed in the Special Report that such an “incentive to localize manufacturing goes against international patent norms and runs counter to increasingly globalized trade and sourcing trends.” (Not) Coincidentally, AFTI executive director Brian Pomper had stated in the Hearing that “There are parts of Make in India… there was a suggestion… that entities that commit to manufacturing in India would get expedited review with the patent office. Those sorts of things I think we would not support. We think that’s the negative aspect of Make in India.” And voilà! India has indeed adhered to this demand and washed out the above-mentioned incentive from the Amended Rules.

P.S. Image from here.

[1] Startups are mentioned only in the Amended Rules.

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7 thoughts on “Patent Rules Amendment 2016: Tatkal Patents, Benefits for Startups and US Victory.”

  1. “nearly 237 patent applications are pending at present” is certainly incorrect.
    Is it 237 lakh ?
    You have simply copied and pasted from the Economic Times without even reading.

  2. Thanks Ritwik, very useful analysis here.
    But the Patent (Amendment) Rules have defined start-ups as an ‘entity’ under Explanation 2 of Principle Rule 2, which is a partnership under Partnership Act, or a private limited company under the Companies Act. These therefore necessarily have to be incorporated in India. This definition of startups was missing in the draft rules.
    Does this limit the incentives at least only to new( less than 5 years old), small(turnover less than Rs. 25 Cr) Indian companies?

  3. P.S. The other angle is, why force Indian start ups to immediately commence manufacturing of the patented technology? Or conversely, why limit their ability to patent their technology upon their ability to commence immediate commercial manufacturing which would require many other resources and infrastructure.
    Just a thought.

  4. The new rules are “Patent Office friendly”.
    The “one month” time lines in earlier Rule 24B(2)(i) have been completely removed.
    As a result:
    1) Nitto Denko had filed a writ petition against the Patent Office for not complying to those time lines. This writ petition and Delhi High Court decision thereafter has been nullified by the removal of the time period.
    2) The Controller can now take any time, 3 months, or 6 months, 48 months to refer the application to an Examiner and there cannot be any writ petition as Nitto Denko.

  5. Hi all,
    This is very pathetic situation of Indian IP regime and IP administration in India. No research has been carried out n no genuine survey has been done before enacting new amended rules like other major patent office ..JPO USPTO..KOREAN PATENT OFFICE used to carry out. These rules have been drafted haphazardly by 2-3 Parent officials and ex employee to please the PMO. These recent amendments in rules are superficial and pseudo-developmental as inner system of patent office still un organized, messy and corrupt unlike JPO n USPTO. Current IP administration will be forced to grant BAD Patents which will unnecessarily increase burden on Judiciary n increase corruption in IP system n IP administration in hands of IAS Babus to shine their records. It will take another 100 years to match infrastructure and capabilities of Developed countries in IP field n in IP administration in India as we have forgotten or made to forget Grassroots Levels…n acting only on superficial level.
    So congratulations to Vinit Bapat n all…..Bahati Ganga me Hath Dho Lo….

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