OP. ED.

The Trade Marks Rules, 2017 (New Rules), which repeals the Trade Marks Rules, 2002 (Repealed Rules), have come into effect from 6 March 2017. The key highlights of the new Rules are broadly set out below:

New applicant category

>Under the New Rules, a new category of applicant has been introduced viz: Start-up / Small Enterprises / Individual.

Increase in official fees

>There is a steep 100% increase in fees for most applications / requests. The New Rules provide for a 25% increase in trade mark application fee in case of an individual / start-up/small enterprise applicant. For other applicants, the trade mark application fee has increased by 150%. With a view to encourage electronic filings, there is 10% concession on official fees for e-filings.

Forms simplified

> The Repealed Rules had more than 70 forms / applications for various purposes whereas the New Rules have consolidated the same and the number of forms / applications has been reduced to 8 (eight). The new forms have been simplified further and are now named using alphabets. For example: (i) Form TM-A for applications: (ii) Form TM-O for oppositions; etc.

Electronic communication

>The New Rules set out the modalities for service of documents through electronic communications, from the Trade Mark Registry (TMR) to the applicants. While providing the address for service in India, the applicant is necessarily required to provide an email address as well. Any written communication from the TMR to the postal address or email address as provided shall be deemed to be properly addressed.

User claim made stringent

>When a trade mark application is to be filed for the purposes of claiming ‘prior user’, the same has to be supported by an affidavit along with relevant user documents.

Expedited registration process

>On an application for expedited examination, the examination stage as well as subsequent stages including oppositions will be expedited. The Repealed Rules provided for an expedited examination process which at times led to stalling of an application, subsequent to the examination stage.

No extension of time

>The Repealed Rules allowed for additional time for filing evidences in case of oppositions and rectifications / cancellation proceedings. The New Rules do not provide for any additional time as the legislative intent is to mainly curtail prolonged opposition/rectification proceedings.

Expeditious Hearing

>The applicant / opponent shall be given only 2 (two) adjournments in respect of a hearing and each adjournment shall not be for more than 30 days.

>Hearings at the TMR may also be held through video-conferencing or audio-visual communication devices.

Renewal

>Under the New Rules, fees for the renewal of a mark can be paid 1 (one) year prior to the expiration of its registration whereas in the Repealed Rules it was 6 (six) months prior to the expiration of registration.

Applications for Well-Known Marks

> This application will now be possible at a steep fee of INR 100,000.

>Under the New Rules, any person can file an application with the TMR to include a mark in the list of well-known marks maintained by the TMR. Such a request has to be supported by necessary documents. However, before determining a trade mark as “well-known”, the Registrar may invite objections from the general public.

>Notably, the Registrar of trade marks now has the power to remove a trade mark from the list of well-known marks if it is found that the same has been (i) erroneously or inadvertently included; or (ii) no longer justified to be, in the list of well-known trade marks.

Khaitan Comment: The New Rules are certainly a step towards expeditious trade mark registration process in India. The other notable takeaways of the New Rules are: (i) increase in fees; (ii) simplified forms; and (iii) provisions for determining a mark as a well-known trade mark.

Smriti Yadav (Counsel), Rajeevkumar Nambiar (Senior Associate) and Raj Rao (Senior Associate)

Note by Khaitan & Co., Advocates since 1911. For more information, please contact editors@khaitanco.com

 

OP. ED.

The United Kingdom has voted to leave the European Union (EU) in its recent referendum on continued EU membership (Brexit). This has significant implications for trade between India and the UK as well as for Indian businesses with operations located in the UK. The immediate market shock is still being felt, but in this briefing note, we assess the emerging considerations for Indian businesses with exposure to the UK and the EU.

Key emerging thoughts

Economic and market consequences: The market is still absorbing the news and there is the immediate currency and stock exchange volatility.  There are also the wider consequences for the UK economy, with experts highlighting the downside risks (at least in the short term), which will need consideration by the boards of any companies with significant UK or EU exposure.

Brexit is not an immediate event and will take time to work through: The timing of Brexit is not clear and it may be some time before Brexit is fully implemented; until then, much of the current regulatory regime in the UK may continue in force.  This gives useful breathing space to Indian businesses seeking to assess their strategic options.

Much of the consequences depends on what the UK does from here on: The shape and form of the likely changes is still unclear as much of it will depend on the arrangements, if any, that the UK negotiates with the EU. For example, if it were to leave the EU and join the European Economic Area (EEA) and the European Free Trade Area (EFTA) in a manner similar to Norway, then a number of EU laws will continue to apply. If, on the other hand, the UK elects to pursue a path outside of this (or outside of only EFTA membership), then the regulatory impact will be greater.

Key regulatory touch points: Much of UK company and contract law will likely continue to remain in place, as well as the UK’s public takeover regime. However, there are a number of other areas, in particular, employment laws, laws affecting visas and migration and financial services regulation, where a number of more significant changes are likely to occur. Competition law is also likely to see some change, for example, the larger M&A deals will be likely subject to both UK as well as EU competition clearance processes.

Regulatory impact on the City of London as a global financial centre: There are concerns over the implications for the City of London as a financial centre. From a regulatory perspective, there are a number of quite difficult issues that market participants will need to consider. For example, financial services regulation is likely to need considerable re-working to disentangle UK regulation from the EU regulation as a result of previous implementation of the EU’s financial services action plan in the 2000s.  One of the key issues here is the potential loss of “passporting” provisions which facilitates access to investors in other European markets, will be a concern to Indian businesses in the longer term.

Potential tax consequences: This is not clear yet. Without the need to comply with EU law, there may well be a number of changes both in relation to direct and indirect tax.

Indian businesses that have Brexit exposure: Those with UK operations (which may be affected both by any downturn in the UK economy, but also changes to employment laws and the ability to hire talent from outside the UK. Businesses which have used the UK as a hub for a European presence will also be affected.  Finally, exporters to the UK will be affected by the currency volatility. However, it is difficult to say at this stage what the precise impact will be as a lot depends on what pat the UK takes from here.

Questions and answers on Brexit

  1. How is Brexit going to be implemented and what is its likely timeframe?

One possibility is for the UK to invoke the EU exit process under Article 50 of the EU Treaty, which sets into motion a two year transitional period. That period can be extended if all the member states agree. News reports suggest that senior members of the “leave” campaign do not currently favour this approach and would prefer a special and negotiated exit. However, that is not an approach favoured by EU officials who have suggested that the next step should be a quick departure for the UK.

  1. How will Brexit affect my company’s operations in the UK?

At this stage, there are more questions than answers.  However, some of the key issues that Indian businesses will need to consider are set out below:

Ø                 Revenue exposure: The impact of sterling revenues on the overall business performance will need strategic consideration at a board level.

Ø                The ability to hire non-UK employees and the terms of employment: Given that immigration was at the centre of the “leave” campaign, Indian businesses should expect some restrictions to be imposed here. Will Indian businesses be able to hire skilled employees or otherwise import their skills through secondment arrangements? Obvious stress points include IT, where there is a skills shortage in the UK, or senior management or skilled technicians continental Europe. There are a number of aspects to this issue:

  • As far as the ability to hire EU nationals is concerned, the shape and form of any changes as far as EU migration is concerned will depend very much on the path the UK takes and its future visa policies as well as whether or not it accepts EEA membership (which is likely to mitigate the consequences).
  • As far as the ability to hire non-UK nationals is concerned, the political mood is not encouraging, although there has been discussion of a “points based” migration system to fill skills gap.
  • On the other hand, in the longer term, Brexit may result in the relaxation of various EU employee protection measures (but that will depend on the political leaning of the party in power in the UK).

Ø                 Impact on imports and exports into and out of the UK: Exports to the UK and trade between the UK and other countries, including the EU remains a question mark. The likely outcome is not clear. If the UK were to remain part of the EEA and EFTA, in many respects, trading with the EU would continue unaffected. If, on the other hand the UK elects to “go it alone” and rely on its WTO membership and negotiate bilateral deals with other jurisdictions, there could be a period of protracted uncertainty. At this stage, all that Indian businesses can do is to watch and plan for the various possible scenarios.

Ø                Intellectual property: To the extent that intellectual property is being created in the UK, Indian businesses will want to seek UK legal advice on the likely impact of any EU community wide protections sought in the longer term. This is a larger issue that will probably unfold as part of the exit arrangements.

Ø                 Tax impact? This is not clear yet. There may be changes to both the direct and indirect tax regimes as the UK removes the linkages to EU law.

This is not an exhaustive list and there are a number of issues that an Indian company with operations in the UK will need to consider. However, given that it is likely that Brexit will be a process that unfolds over a few years, Indian businesses are likely to have the time to put in place appropriate strategic plans.

  1. How will Brexit affect inbound M&A into the UK? There are a number of aspects that an Indian buyer will need to bear in mind:

Ø                 No short term impact: If an Indian company were to make a commercial decision to acquire a UK target or business in the near term, there is likely to be little immediate regulatory impact of Brexit as the current regulatory regime will continue until a plan to give effect to Brexit is formulated, agreed with the EU and then actually implemented. Of course, any M&A decision will need to factor in the longer term outlook for the UK and from that strategic perspective Brexit is very relevant.

Ø                 MAC clauses: There are two aspects to this:

  • To the extent that an Indian purchaser has entered into a purchase agreement that has not yet completed, the question may arise as to whether any termination clauses such as material adverse change (“MAC”) clauses can be used to terminate the arrangement.  The answer will depend on the commercial intention of the parties and how the clauses have been drafted. That said, MAC provisions are not traditionally seen as being easy to enforce in the UK (and the Takeover Panel was reluctant to allow its usage post 9/11).
  • To the extent that Indian buyers are still negotiating purchase agreements, they may wish to pay particular intention to the drafting of these provisions and any carve outs.  The intention of the parties must be clear and practice may evolve so as to tie these events to certain definitive triggers, as otherwise, they tend to be difficult to enforce.

Ø                 Change of law risk: Indian parties entering into M&A transactions in the UK would be well advised to consider “change of law” risk allocation provisions. Again, this is more relevant to the longer term when the effects of Brexit begin to bite on the regulatory side, rather than in the immediate term.

Ø                Employee transfers: Indian purchasers of businesses in the UK will be familiar with the Transfer of Undertakings (Protection of Employees) Regulations 2006 (“TUPE”), which regulates the transfer of employees in a business acquisition and which was originally based on the EU’s Acquired Rights Directive.  In the short term, before Brexit is implemented, there will be no impact, but it remains to be seen as to whether TUPE will change post Brexit.  There may potentially be some softening of employee protections, but this is an issue for the longer term rather than for the near term.

Ø                 Pensions related issues: Pensions and unfunded pension liabilities are a significant issue in UK M&A deals. Indian parties would be well advised to seek the advice of their English legal counsel on any changes which may flow through to their deals.

Ø                Competition issues: The UK has its own self-standing competition regime which is very similar to the EU regime. The main impact on M&A transactions, which again will be post-Brexit rather than in the short term, will be the likelihood of parties undergoing competition clearance processes in both the UK as well as the EU.

  1. Should we reconsider English law as the governing law of our contracts? English contract law is very different from that in continental Europe and is favoured for its certainty, the UK approach of enforcing the parties’ contractual intentions and the speed and sophistication of its judicial process. None of that will change with Brexit and, in our view, there is no reason for this alone to cause parties to re-consider the choice of English law as the governing law of their contracts.

That said, it is likely that the enforcement of UK contracts in EU jurisdictions becomes more time consuming and potentially more difficult in practice, because it would also result in the loss of the benefit of EU legislation on the enforcement and recognition of judgments.  The outcome here will depend on whether the UK becomes a signatory to other international treaties in relation to this subject matter or whether it signs, for example, the Lugano convention. The fall-back will of course be for contracting parties to rely on international principles of conflicts of law to enforce UK awards in the EU, which may make their enforceability more time consuming, but not impossible.

In any event, international arbitration relating to Indian parties, where the proceeding are based in London, will be unaffected because both India and the UK (and many other jurisdictions) are the signatories of the New York Convention, which ensures the enforceability of international arbitral awards.

  1. What is the likely regulatory impact on securities issuances by Indian companies in the UK? As with a number of other aspects of Brexit, this is an issue that is more likely to have a longer term impact rather than an immediate one (as the current regulations will continue to remain in place for now). The one short term point of note is that parties may wish to consider including Brexit and market dislocation related risk factors in any offer documentation.

However, the longer term regulatory picture is quite complicated. Broadly, the UK implemented the EU’s financial services action plan in the 2000s aligning English securities laws with pan-European legislation to create common standards across the EU.  The regulatory aim was to create a broader European securities market with market participants regulated in any one “home state”, being able to passport themselves to other EU jurisdictions.

Unravelling this will be particularly difficult in practice. The regulatory challenge will be in ensuring that issuers listing in London are not precluded from marketing their securities to investors elsewhere in Europe (or do not face onerous requirements in doing so).  This is a critical issue, given the importance of financial services to the UK economy, and is an issue that will be no doubt carefully considered in the exit arrangements.

  1. Will there be any immediate adverse personal impact for promoters based in the UK? Not in the short term. In the longer term, Indian promoters may face increased visa and migration issues (both for themselves as well as for their employees) and will need to keep a close eye on any tax changes that may unfold.

Comment

Brexit is a landmark event. Everyone agrees on the challenges that it has thrown up, but the answers are not obvious to policymakers in the UK or to market participants and may not reveal themselves until discussions between the UK and the the EU on the terms of exit begin and until the UK makes a number of subsidiary political choices, such as whether or not to remain in the EEA and/or EFTA.

Once agreed, the changes will probably be phased in in a sensible manner. Therefore, apart from the immediate impact on any sterling revenues as a result of the volatility of the pound or any downturn in the UK economy that may or may not arise, Indian businesses will have some time to evaluate their strategic alternatives. However, our advice is that they do so as soon as possible and keep abreast of political developments in the UK for an orderly transition as far as their businesses are concerned.

–    Nikhil Narayanan  (Partner)

Note by Khaitan & Co, Advocates since 1911. For more information contact editors@khaitanco.com

Picture Credits: neogaf.com

 

Legislation UpdatesNotifications

Definitive anti-dumping duty imposed on imports of measuring tapes originating in, or exported from Chinese Taipei, Malaysia, Thailand and Vietnam for a period of five years.

[Ref: Notification No 16/2016- Cus (ADD) dated 13 May, 2016]

Note by Khaitan & Co, Advocates since 1911. For more information contact editors@khaitanco.com

Legislation UpdatesNotifications

Definitive anti-dumping duty imposed on imports of Digital Versatile Discs Recordable originating in, or exported from Vietnam and Thailand for a period of five years.

[Ref: Notification No 17/2016- Cus (ADD) dated 13 May, 2016]

Note by Khaitan & Co, Advocates since 1911. For more information contact editors@khaitanco.com

Legislation UpdatesNotifications

The mega exemption Notification No. 12/2012 CE dated 17 March, 2012 has been amended. The important changes are:

  1. Excise duty on manufacture of gold bars and silver dore bars has been reduced from 9.5% to 9.35%.
  2. Exemption from excise duty on manufacture of Populated Printed Circuit Boards(PPCBs) as parts/components of either lithium ion batteries, broadband modems, routers, Digital Video Recorder/ Network Video Recorder, CCTV cameras/ IP Cameras has been removed.
  3. A new entry has been inserted providing, inter alia, a concessional excise duty of 4 % for manufacture of PPCBs for all the products noted above. Further, excise duty on inputs required for manufacture of such PPCBs is now 2% subject to conditions.
  4. Exemption from excise duty on manufacture of speakers for mobile phones and their inputs has been removed.
  5. Exemption from excise duty on manufacture of parts, testing equipment and the like required for MRO operations has been extended to from not only those required for the aircraft but has also its components or parts including the engine.
  6. Exemption on excise duty on RBD Palm Stearin, Methanol and Sodium Methoxide for the manufacture of bio-diesel (alkyl ester of long chain fatty acids obtained from vegetable oils, commonly known as biodiesels) on actual user basis for a period upto and inclusive of 31March, 2017

[Ref: Notification No 22/2016- CE dated 5 May, 2016 and Notification No 23/2016- CE dated 17 May, 2016]

Note by Khaitan & Co, Advocates since 1911. For more information contact editors@khaitanco.com

Legislation UpdatesStatutes/Bills/Ordinances

The Government affirms determination to introduce Goods and Services Tax (GST) in the coming year to replace existing multiple taxes. A milestone is accomplished as the Empowered Committee of State Finance Ministers have in principle approved model GST law. The current political consensus appears to be favourable in Rajya Sabha leading to passage of Constitution Amendment Bill facilitating introduction of GST.

Certain business processes like registration, tax payment, refund and filing of return were already released earlier. The Ministry of Finance has now released the Model GST Law, the salient features of which are set out below:

  • GST shall comprise of Central GST (CGST), State GST (SGST) and Integrated GST (IGST) levied on the same taxable value. Taxable event under GST is ‘supply of goods and services’ instead of the existing multiple taxable events like manufacture, rendering of service and sales of goods. ‘Supply’ includes all forms of supply such as sale, transfer, barter, exchange, license, rental, lease or disposal of goods and services, import of service as well as specified deemed supplies such as works contract.
  • GST law retains the distinction between goods and services. Supply of intangible goods will be considered as supply of service eliminating scope of litigation. The law provides separate principles for determination of time and place of supply of goods and services.
  •  All persons supplying goods and services having aggregate turnover exceeding INR One million (in case of North-East states- INR Five hundred thousand) would be liable to pay GST. Aggregate turnover would be computed on an all India basis and shall include all supplies including exempted and non-taxable supplies. Import and inter-state supplies shall be taxable without any threshold limit. Small suppliers with turnover upto INR Five million can opt for composition scheme at lower rate. Only agriculturists have been kept out of GST net. Rate schedule is aligned with HSN code.
  • GST law permits seamless tax credit. However, cross-utilisation of credit between CGST and SGST is not permitted.
  • GST law provides special provisions concerning e-commerce. E-commerce operator is required to pay amount at specified rate from the collection directly to the Government. This will capture all e-commerce transactions bringing them into GST net. Aggregator providing goods and services under their brand would be liable to pay GST. GST law also provides for collection of tax at source.
  • Further, the law also provides for appointment of SGST officers as CGST officers to simplify administration. Three classes of officers, viz., (i) CGST officers (ii) SGST officers and (iii) IGST officers shall administer the respective GST law. Suppliers are liable to be registered in each State from where supply of goods and/ or services is made.
  • It also provides for demand of tax within five years in cases involving suppression, etc. and in other cases within three years.
  • GST law contains transition provision for registration, carry forward of tax credit (CENVAT & VAT), claim of tax credit on stocks by new tax payers, etc.

Comment

Introduction of GST will be the biggest tax reform in the history of independent India. GST is expected to simplify tax administration, ensure ‘Ease of Doing Business’ and promote ‘Make in India’. This is the time when businesses ought to try and align their business model/structure with the proposed tax structure to plug potential tax losses and improve profitability.

Note by Khaitan & Co, Advocates since 1911. For more information contact editors@khaitanco.com