A Standard is defined as "a set of technical specifications and/or procedures set by a recognized body to provide a common design for a product or process existing in the same field of technology". Standards offer consistency, compatibility and inter-operability among similar products. A Standard Essential Patent (SEP) is a "patent claiming/protecting one or more features of a technology which has been established as a standard", for e.g., patents covering Wi-fi, 2G (GSM/GPRS), 3G (UMTS), 4G (LTE), USB drive, compact disc etc,. A single technology can be encumbered with numerous SEP's and then SEPs differ from normal patents by way of non-availability of alternative solution for the problem addressed by the SEP. While in the case of normal patents which has numerous alternatives for solving the same problem. This makes the manufacturer unfeasible to produce a standard complaint product without infringing one or more SEP's. In contrast to conventional patenting, where the patents are primarily used to exclude other prominent players from the market, SEPs are used to develop and improve upon industry standards and their application to provide a standard compliant product with enhanced operability and compatibility between symbiotic technologies.

The Standard Setting Organizations (SSO's) are industry groups comprising of experts from competing companies, governments, academia and civil society, structured for setting the common standards pertaining to a technical area. Few prominent SSO's in the field of telecommunications includes European Telecommunications Standards Institute (ETSI), International Telecommunication Union (ITU), Institute of Electrical and Electronics Engineers (IEEE). Once a patent has been adopted as an SEP, it becomes mandatory for the SEP holder to "disclose" complete details regarding the patent to the concerned SSO and to grant licenses on "Fair, Reasonable and Non-discriminatory" (FRAND) terms to the licensees. FRAND terms was introduced to ensure that the standardized technology is available to all the market players at uniform reasonable price. This promotes application of the standards and also benefits the SEP holders financially based on their technology contribution to the standard. However, none of the SSO's get involved in formulating the "FRAND" terms nor resolving any patent licensing disputes between parties. The discretion of determining FRAND terms subsists with the parties involved. This results in anti-competitive behavior of SEP holders including patent hold-up, exorbitant royalty rates, patent ambush, getting injunctions, unacceptable cross licensing terms, royalty stacking etc.

Most of the SEP litigation or the so called "smartphone patent wars" involves violation/breach of "FRAND" contract terms, for demanding exorbitant or unacceptable royalty rates which is non-compliance with the "FRAND" terms. Notably in Microsoft Corp. v Motorola (2013) litigation on H.264 video coding and 802.11 Wi-Fi standards, the royalty rates demanded by motorola was 2.25% on the price of end product; in Samsung Vs Apple's (2011) litigation over the SEP's of 3G technology, the royalty rates demanded by samsung was 2.4% on the net sale price of the product. Such a demand of royalty rates based on net sale price of the product for a single component/technology in a multi-component product is considered irrational which may lead to royalty stacking, a term used to define "accumulation of royalty rates in a multi-component product exceeding the final product price ". This sort of royalty payments for SEPs which are invalid or not used may unduly increase the production costs, which in turn may lead to higher prices for consumers.

In India the first SEP related litigation was initiated by one of the giant telecommunication player encumbered with high-end patent portfolio Telefonaktibolaget LM Ericsson suing Indian player Micromax for infringing its eight SEP's on wireless technology standards such as GSM, EDGE and 3G. The compensatory damage claimed by Ericsson, apart from claiming permanent injunction on the micromax products, was 1.25 % to 2% of sale price of the product.

Now the question arises, how and who takes control over such kind of "patent hold-up" activities by SEP holders? Are the key players trying to exploit their dominance? The stand taken by these giants cannot be questioned and necessarily may not be unethical in the light of global practice on the SEP issues. The national laws governing patents have neither addressed about SEP nor laid down any rules on the FRAND terms. Further the judgments in SEP litigations are unclear and differs from territory to territory. Hence there is a need to establish a constitution to include provision relating to SEP and FRAND terms in the national IPR legislations, in particular the Patents Act, 1970. If feasible the rules shall also provide possible parameters for arriving at the FRAND terms. In addition, the legislation should also include exclusive regulations dealing with anti-competitive behavior of the SEP holders and remedies for the same.

The SSO's which are purely into technical aspect, responsible for monitoring and establishing a particular technology as a standard, scrutinizing and determining the importance of the SEP's for that standard, should also get involved in determining the royalty rates based on the FRAND terms for the SEP's. So far the SSO's ensure only whether SEP's are licensed based on FRAND terms but do not get involved in arriving at the royalties. However under the current situation of "smart phone wars" there exists a necessity for a quasi-governmental setup to determine the FRAND terms, which equally benefits both the licensee and the licensor. SSO's can act as such a decisive setup in arriving at the FRAND terms, whose intervention can avert the patent hold-up and other anti-competitive activities of the SEP holder. Further the royalty rate estimation should be based on the actual value of the SEP or the technology to the product and not on the entire value or sale price of the product. It is a right of licensee to pay royalty only for the claims which he infringes on the SEP and not for the non-infringing components/technology. Another crucial point which needs much attention is the granting of injunctions in SEP litigations, which may not be beneficial to local manufactures and consumers. This is could also pose a major threat to the local manufacturers who are not well equipped to handle such patent litigations. In Indian context, this may even create a huge impact on the 'Make in India' and 'Startup India' initiatives by the Indian government.

Once the IPR legislation and IPR policies of SSO's are put in place to include the process of fixation of royalty rate for SEP's, there may be far more less disputes between parties on FRAND term commitments. This may further create a business friendly atmosphere for local manufactures to foster innovation and growth.

E. Bhuvaneswari
Patent Agent, Surana & Surana

It is usual that pharmaceutical trademarks contain commonly used terms, so they are formed by the combination of elements such as prefixes, suffixes or commonly used words that evoke somehow an idea about the properties of the product, its active principles, and its therapeutic function. They also may refer to a component of the medicine or the organ for which they are prescribed.

Terms are considered commonly used for two reasons: either for being part of the several marks or for being evocative of the product or any of its features. By common usage anyone is free to include them in a mark, provided that it is not confused with other marks of other owners.

For example, a prefix commonly used in Class 5 is the prefix CORTI that evoke the active substance corticosteroid or the word “cortisone”. The prefix CORTI is present in the formation of numerous registered trademarks owned by different owners, such as: CORTIFLEX, CORTIDERM 10, CORTIMED, CORTICREM, CORTIFENOL1, etc.

The Court of Justice of the Andean Community has established in a precedent that the prefixes, suffixes, roots or endings commonly used in the marks cannot be subject to monopoly or exclusive use of a single person since they are usual words which its use by the general public can’t be prohibited.

Usually it is argued that because the signs identify products that directly affect health and have consequences on the human body, the consumer will have a higher level of attention and special care when purchasing the pharmaceutical products. This has been recognized in diverse jurisprudence of INDECOPI where stated that "in the case of pharmaceuticals referred to the signs in question, it is reasonable to assume that the consumer, when purchasing such products, would make a close examination based on their needs"1.

However this is not enough to dismiss the risk of confusion because in the pharmaceutical trademarks that share commonly used terms, whose names could prove to be very similar, the consumers themselves might be induced to confusion, i.e., it may acquire a product in the belief that it is purchasing another, which is known as direct confusion or might think that the product has a distinct commercial origin than the real one, what is called indirect confusion.

The Court of Justice of the Andean Community in the Process 08-IP-2013 has noted that:

“What comes to protecting, by avoiding trademark confusion, is the health of the consumer who for confusion when asking for a product and negligence of the dispatcher, he may receive one with similar phonetic but different composition and purpose. If the requested product is intended for flu treatment and the delivered one is for the amebatic treatment, the consequences for the consumer can be dire.We must consider that what has been dominating in our countries is the culture of the ‘personal healing’, according to which a large number of patients self-medicate because they have heard about a product in advertisement or received an indication from a third person. It is not considered that every human body has a different reaction to the same drug, and the self-medication can lead to misleading or confusion at the time of acquisition because the similarity between the two signs."

This approach has been reiterated in several sentences of the Andean Court, such as the Process 30-IP-2000, where is stated:

"This Court is inclined to the thesis that when regarding pharmaceutical trademarks, the examination of confusing similarity should have a more exhaustive study and analysis, avoiding the registration of trademarks whose names has a close similarity to avoid precisely the consumer requests a product instead of another, which in certain circumstances can cause irreparable damage to human health, especially when in many establishments, even drugs of delicate use, are dispended without a prescription and only with just the advice of the pharmacist on duty”.

Also in Process No. 68-IP-2001, the same rigorosity was followed for the comparison between signs in the examination of confusing similarity, concluding that:

"In respect to pharmaceutical products, it is very important determine their nature, since some of them correspond to products of delicate application, which can cause irreparable damage to consumer health. Therefore, the recommendation in these cases is to apply, a rigorous approach in the analysis of the opposing marks that seeks to prevent any confusion in the consuming public because of the nature of the products identified with them."

These arguments are based on the fact that the average consumer is not usually a specialist in chemicals and pharmaceutical issues and the acquisition and use of these products will usually lack of a permanent professional assistance.

The fact that the Specialized Chamber in Intellectual Property of INDECOPI considers that when dealing with pharmaceutical products, the consumer will take a decision following a careful consideration based on his/her needs, that is, that he or she will pay more attention when purchasing these products, doesn´t mean that there isn´t a possibility of confusion, even more if we put ourselves in the place of an average consumer, who doesn´t necessarily have knowledge of the components or properties of pharmaceutical products offered in the market, so he or she can easily fall into confusion when buying such products, in that sense, the consumer could buy in the drugstore a pharmaceutical product in the belief that he or she is buying another product, certainly because the phonetic similarities between the signs are so strong that lead to confusion and do not allow him/her to differentiate a product from another. In this case, not only the consumer would fall into confusion but also the same pharmacist, who may be confused by dispensing one product for another, precisely because of the phonetic and / or visual similarities between the marks.

An example of this is illustrated by the case of the application of the word mark "CORTIDEX". This mark was applied by Inversiones Awl S.A.C. to distinguish pharmaceutical and veterinary products; etc. in Class 5 of the International Classification. Against this application, Laboratorios Chile S.A. files an opposition based on the ownership of the mark CORTIPREX that distinguishes products of class 5. In the opposition, Laboratorios Chile S.A. indicates that from the graphic and phonetic point of view, the marks are very similar because they share the word CORTI, and this term will be more easily remembered by the consumer public.

The Commission of Distinctive Signs, by Resolution No. 1085-2009/CSD-INDECOPI, declared unfounded the opposition and consequently granted the registration of the mark applied, stating that from the graphic and phonetic point of view the signs have a different sequence of consonants (C-R-T-D-X / C-R-T-P-R-X), thus they also differ in their final syllables (DEX / PREX), which determines that said signs generate a different pronunciation and a different overall visual impression. It is noted that the fact that the signs share the particle CORTI, this is not decisive to establish some kind of similarity between them, since this particle is part of the conformation of various registered trademarks in class 5.

By Resolution No. 0107-2010/TPI-INDECOPI, the Specialized Chamber in Intellectual Property confirms the first instance decision stating that "the initial particle CORTI present in the signs may refer to the term cortisone, which explains its frequent use in the conformation of registered marks in class 5 of the International Classification, as shown in the background Report. In this sense, it can hardly indicate a particular commercial origin".

From our point of view the marks CORTIDEX and CORTIPREX themselves are confusingly similar, because in addition to distinguish some of the same products, from a graphic and phonetic point of view, the marks are similar since they share the prefix CORTI, which significantly affects the appearance of the opposing marks, even more taking into account that they share the same ending (EX) and the same sequence of vowels (O-I-E), generating a sound and a visual impact very similar, so this could lead to consumer confusion.

It is therefore very important that pharmaceutical trademarks have additional elements added to the common term, whether figurative or verbal, with sufficient distinctiveness to identify and distinguish the commercial origin of the product to avoid the risk of confusion, as also prevent the sign to become descriptive because that would make it not distinctive and therefore in consideration of the prohibition of registration of the Article 135 subparagraph e) of Decision 486 from the Andean Community which would make impossible their protection, but mainly because we must safeguard the health and life of the consumers, fundamental rights that are superior to any intellectual property registration.

Author: Marietta Flores / Kelly Sánchez – IP Lawyer
Law firm: OMC Abogados & Consultores