L'Oreal takes MyDollarStore to High Court over illegal imports [India]

French cosmetics and toiletries giant L’Oreal has hauled discount retailer MyDollarStore to court over issues relating to intellectual property rights (IPR) and illegal imports, it is learnt. The company has filed a case against MyDollarStore in the Delhi High Court recently.

In recent times, MNCs have been upset over the move by retailers to import top global brands, claiming that this leads to loss of business opportunity, unfair competition and product cannibalisation. However, sources said hectic parleys are on between the two parties and the talks could lead to an out-of-court settlement.

MyDollarStore is a discount store chain which set up shop in 2004 and now has 47 stores across several cities. Most of the stores are located in malls and near Big Bazaar outlets. The chain plans to scale up presence across most Big Bazaar outlets. The discount store is associated with basement bargains in the US. MyDollarStore formats price products at Rs 99 and above in India, and are perceived as expensive by bargain seekers. While products are priced at $1 (approximately Rs 48.9) at a MyDollarStore outlet in the US, the same products sell at a higher rate in India owing to transportation costs and import tariffs. L’Oreal source said the company was concerned about protecting the properties of its brands, which include quality and consumer perception. “We distribute the brand in a way that ensures a certain value around it. An unplanned distribution creates confusion or leads to an unpleasant consumer experience which may work against our brand,” the source said. L’Oreal India has recorded an attractive growth rate of over 40% plus in the country, and globally it has identified India as one of its top five markets. Sources said the company fiercely guards its right to market and distribute its brands in India.

Several MNCs have invoked the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007 Act to stop retailers from importing their foreign brands. Companies like Hindustan Unilever, L’Oreal, Lancome Perfumes, Oakley, Nivea and Mico have already registered several brands under notification No.47/2007 of the IPR Act with the Customs. Recently, Future Capital picked up 28% in Sankalp Retail Value Stores, a franchisee of the US-based discount format MyDollarStore. The format is expected to help scale up profit margins at Big Bazaar and is being set up as a ‘shop-in-shop’ concept. MyDollarStore outlets usually stock limited top brands like Coke and generally sell other lesser-known brands. But lately they have been stocking well-known brands, including that of L’Oreal like Garnier, etc. Big Bazaar & Food Bazaar, Reliance Retail, Spencer’s and MyDollarStore import sizeable consignments of top consumer brands and their variants from markets like Taiwan, Thailand, Gulf and the US. L’Oreal operates in India through its wholly-owned subsidiary L’Oreal India and has four divisions—consumer products, professional products, active cosmetics and luxury products.

Patent officers should coordinate to bring uniformity in standards [India]

Many of India’s pharma companies, including even the big and transnational ones who themselves have some stake in innovation and R&D, are alleging that patent authorities in India have become very liberal when it comes to grant of patents. Many frivolous patents have been granted and even bogus applications are being entertained, they say. The Indian Pharmaceutical Alliance, a group of big India-born drug companies, is mulling a thorough study of the patents granted since 2005 to find out how many of these are in fact ‘bad patents.’ At the other end of the scale, the foreign pharma companies not only brush aside the allegation of granting patents for ‘trivial inventions’ but also aver that “a lot of important applications” have in fact been turned down by India’s patent authorities. The question that underlies this row is what’s a ‘patentable invention’. At a very general and non-codified level, the newness or rather the surprise element of an invention should be the deciding factor.

The World Trade Organisation’s Trade-Related Intellectual Property Rights (TRIPS) agreement defines the term ‘patentable subject matter’ with due considerations to present-day commercial realities—it says an invention should be “new, involve an inventive step and capable of industrial application” to be deserving of a patent. National governments have drawn a lot of freedom from the TRIPS agreement itself and even autonomously to elaborate on the TRIPS definition. However, national laws of many countries, including the US, are framed in such a way that even “incremental, adaptive or cumulative” inventions could qualify for patents if such invention has a definitive industrial use and thereby considerable commercial value. Indian government has been chary about unfair patenting—thanks to lobbying by domestic industry and the unrelenting stand of leftist outfits. It introduced an additional provision—Section 3(d)—in Patents Act to make patenting criteria more stringent in the pharmaceutical space. This provision was introduced through the third amendment to the Act, which also introduced product patenting for pharma and agrochem inventions.

While the Big Pharma—the large pharmaceutical companies based in the US and EU who hold most of the patents—have been a strident critic of Section 3(d), international organisations like the World Intellectual Property Organisation endorsed it and termed it TRIPS-compliant. According to this provision, incremental inventions (like salts, isomers etc of known molecules) can be patented only if they have contributed to improve the efficacy of the (known) substance. And the patent authorities—read the examiners—would decide if efficacy has really been improved. The current strife over the allegation of the patent authorities practically becoming very liberal in grant of patents would need to be viewed in this context. The fact is India’s Patent Act, even with the fairly elaborate rules notified under it including those to support the Section 3(d), bestows substantial discretionary authority with the patent authorities. Patent examiners in India are still grappling with the complexity of the world of pharmaceutical inventions—the area is abstruse and dynamic enough to baffle even the seasoned examiners. Leaving a lot of things to the discretion of a group of patent examiners is therefore bound to generate conflicts. Here, what the government can do is to create many layers of examiners so that the probability of genuine error can be minimised. But the patent examination, search and grant system in India is currently highly unorganised. The four patent offices—Delhi, Mumbai, Kolkata and Chennai—are yet to achieve a fair degree of cohesiveness among them. These offices, manned by patent controllers and scores of patent examiners who assist them, are allegedly employing separate yardsticks and this is what caused the current allegations and counter-allegations. Clearly, there is a case for a very high degree of coordination between the four patent offices. Patents are anyway prone to contestation. Some disputes would inevitably reach the courts. Such disputes can however be minimised by bringing as much uniformity as possible in standards of patent grant. The Patent Act already provides for pre and post grant opposition and making a review plea before the controller who granted/denied the patent. And there’s the intellectual property appellate board, which is the body for the aggrieved to appeal to. What is lacking is proper coordination among the patent controllers and examiners. The government would do well to address the issue immediately.