Loading ...
Sorry, an error occurred while loading the content.

Re: World Intellectual Property Report - R&D Outsourcing to India

Expand Messages
  • Joschka Fisher
    ... World Intellectual Property Report - R&D Outsourcing to India Volume 18 Number 08 Sunday, August 1, 2004Comment and Analysis Miscellaneous R&D Outsourcing
    Message 1 of 1 , Jul 31, 2004
    • 0 Attachment
      --- publicpc@... a écrit :
      World Intellectual Property Report - R&D Outsourcing
      to India
      Volume 18 Number 08
      Sunday, August 1, 2004Comment and Analysis
      R&D Outsourcing to IndiaThe continuing slump in demand
      for IT since the burst of the dotcom bubble has made
      reduction of product development costs an imperative
      and, as a result, generated much interest in the
      outsourcing of product research and development (R&D)
      to Indian companies. According to market research
      consultancy Frost & Sullivan, the R&D outsourcing
      market for IT in India will grow from $1.3 billion in
      2003 to $9.1 billion by 2010. R&D outsourcing is
      software-oriented, will involve disclosure of
      sensitive code and, as such, will necessarily require
      analysis of protection of intellectual property under
      Indian law. These issues assume tremendous importance,
      particularly in view of the 70 percent software piracy
      rate in India.
      This article examines the statutory protection of
      software and integrated circuits in India,
      particularly with respect to the protection of code
      given to an Indian service provider for development
      work and the transfer back of rights in newly
      developed code. As computer software is not patentable
      under Indian law, our analysis begins with copyright
      protection of computer software.
      Software and Screen Displays as Literary and Artistic

      The 1984 amendments to the Indian Copyright Act, 1957
      entitled software to copyright protection as a
      literary work. Under the Indian Copyright Act, 1957,
      copyright subsists in original literary, dramatic,
      musical and artistic works for a term of 60 years
      after the death of the author. Copyright also protects
      tables and compilations including computer databases,
      which may be expressed in words, codes, schemes or
      other form.
      Copyright confers the exclusive right to reproduce a
      computer program, including the right to store it, to
      issue copies, to perform the work, to make a
      cinematograph film or sound recording, to make any
      translation or adaptation of the work. Copyright also
      includes the exclusive right to sell or rent or sell
      any copy of the computer program.
      A frequently asked question is whether or not the
      copyright must be registered in order to be
      enforceable. A copyright comes into existence upon
      creation of the work. Registration is not required to
      create a valid copyright. However, it is highly
      advisable to register a copyright as registration is
      prima facie proof of the validity of the copyright.
      Copyright applies to both published and unpublished

      Little JurisprudenceInterestingly, there is a paucity
      of Indian jurisprudence on copyright protection of
      software. The only case which directly deals with the
      issue is a 2004 judgment of the Delhi High Court in
      Microsoft Corporation v. Debasish Seal, which,
      although decided two decades after the amendment of
      the Copyright Act to include computer software,
      surprisingly dilates on whether or not software in
      magnetic or electronic form is a literary work.
      Microsoft had moved the court for an injunction
      restraining the defendant from reproducing and selling
      Microsoft Office 2000 Professional and Microsoft
      Office XP for Rs. 300 (approximately U.S.$7).
      Microsoft had registered copyrights with respect to
      Microsoft Office 2000 Professional in India. The
      defendant failed to provide any evidence disputing
      Microsoft's claim that he sold pirated copies of the
      software to an investigator hired by it.
      The Delhi High Court began its analysis by raising the
      question of whether copyright protection could be
      extended to cover computer programs which generally
      exist merely in magnetic or electronic form although,
      when a computer program is converted and transferred
      to a piece of paper, it would definitely enjoy the
      protection of copyright like any other literary work.
      Notably, the Court failed to cite the relevant
      sections of the Copyright Act. It if had, it would
      have noticed that there is no statutory restriction
      which limits copyright protection to a computer
      program only if it is written on paper.
      Fortunately, the Court nevertheless concluded that
      computer software is protected by copyright as a
      literary work whether it is written on paper or
      appears in magnetic or electronic form. Observing that
      the defendant had also infringed the registered
      "Microsoft" trademark of the plaintiff which appears
      on the computer screen when the pirated software is
      used, the Court granted a permanent injunction against
      the defendant.

      Both Copyright and Trademark IssuesThe Microsoft case
      involved both registered copyrights and trademarks.
      However, it is important to note that registration of
      intellectual property rights in India can take up to
      six years due to bureaucratic delays. Therefore, in
      order to prevail in an infringement action, it is
      important to apply for copyright and trademark
      registrations well before transferring any sensitive
      code to any persons in India.
      Screen displays are protectable by copyright as an
      artistic work unlike computer programs which are a
      literary work. Therefore, a computer program and the
      screen display cannot be registered in the same
      application. A separate application giving the graphic
      representations of all copyrightable elements of the
      screen display must be filed. However, unlike in the
      United States, there is no Indian jurisprudence to
      date on the "look and feel" of screen displays or any
      other guidance on what may be protectable.
      There are several exemptions from infringement of
      software copyrights. First, fair dealing with a
      literary, dramatic, musical or artistic work, not
      being a computer program for private use including
      research does not constitute infringement. The making
      of copies or adaptation of a computer program by the
      lawful possessor in order to make back-up copies or
      for non-commercial personal use is also permissible.
      Any act necessary to obtain information essential for
      the inter-operability of two computer programs does
      not constitute infringement. Finally, the observation,
      study or test of functioning of the computer program
      in order to determine the ideas and principles which
      underlie elements of the program is also exempt from

      Deposit RequirementsAn important question is whether
      the source code must be deposited along with the
      registration application or not. The Copyright Act and
      Rules require the deposit of three complete copies of
      the work. The Copyright Office takes the view, through
      telephonic communications and not in written guidance,
      that it is not necessary to deposit the entire source
      code. There is a view taken by industry bodies that
      the first 25 pages and last 25 pages of the source
      code should be deposited in line with U.S. practice.
      However, there is no specific requirement in law
      regarding the deposit of source code at the present
      It may also be possible to deposit the object code
      instead of the source code. The problem is that there
      are currently no written procedures or guidance
      regarding whether the object code should be deposited.
      Reliance must be placed on oral guidance from the
      Copyright Office. Accordingly, it is possible to apply
      for copyright registration of a computer program
      without depositing the source code thereby protecting
      the confidentiality of the same.

      Work for Hire DoctrineAnother important issue is
      whether the work for hire doctrine exists in India.
      Under the work for doctrine principle, the copyright
      in a work developed by an employee will vest by
      operation of law in the employer exists in India.
      Unlike in the United States, Indian courts have not
      articulated a work for hire doctrine which applies
      generally to all work done by an employee in the
      course of employment; however, there is a statutory
      work for hire principle in the Copyright Act, 1957.1
      Section 17 provides that, in the case of a work made
      in the course of the author's employment under a
      contract of service or apprenticeship, the employer
      shall, in the absence of any agreement to the
      contrary, be the first owner of the copyright therein.

      However, where a work is commissioned for creation by
      a third party under a contract for services, the
      copyright does not vest in the commissioning party and
      a deed of assignment would have to be executed. This
      means that, if an Indian service provider develops
      software under a service contract for a U.S. client,
      the copyright will vest by law in the Indian service
      provider. The service provider will then have to
      execute a deed of assignment in favour of the U.S.
      client in order to transfer the copyright to it.
      Accordingly, the provisions on assignment assume
      tremendous importance in ensuring that an Indian
      developer transfers the new software code to the U.S.

      AssignmentUnder the Copyright Act, the owner of a
      copyright may assign the copyright to any person
      provided the assignment is in writing.2 The deed of
      assignment should identify the work, specify the
      rights assigned, the duration and territorial extent
      of the assignment. In the case of assignment of
      copyright in any future work, the assignment shall
      take effect only when the work comes into existence.
      Therefore, the assignment of the future developments
      by the Indian developer back to the overseas client
      can be executed at the time of the original
      outsourcing contract. An important requirement to keep
      in mind is that the assignee must exercise the rights
      within one year from the assignment or else the rights
      will deem to lapse.
      An important issue is whether the Indian developer
      would have to register the copyright in his newly
      developed code before assigning it to his overseas
      client. As discussed above, copyright comes into
      existence upon creation, not registration. Therefore,
      it would not be necessary for the Indian service
      provider to register the copyright on the new code
      before assigning it to his client who commissioned the
      development work. Instead, the assignment may be
      effected at the time of creation of the work.
      Mask Works

      While computer software is protected by copyright law,
      India follows international practice by protecting
      semiconductor chips as a mask work, in local parlance,
      a lay-out design. A lay-out design means a layout of
      transistors and other circuitry elements and includes
      lead wires connecting such elements and expressed in
      any manner in a semiconductor integrated circuit.
      Layout designs are registrable under the Semiconductor
      Integrated Circuits Layout Design Act, 2000 for 10
      years from the date of filing of the application or
      commercial exploitation. The registered proprietor is
      conferred with the exclusive right to the use of the
      layout design whether or not incorporated in an
      article. Registration is required in order to file a
      case for infringement of a layout design.

      Requirements for RegistrationA layout design cannot be
      registered if:

      it is not original;
      it has been commercially exploited for at least two
      years anywhere in India or a convention country;
      it is not inherently distinctive; or
      it is not inherently capable of being distinguishable
      from any other registered layout design.

      A layout design shall be considered to be original if
      it is the result of the creator's own intellectual
      efforts and is not commonly known to the creators of
      layout designs and manufacturers of semiconductor
      integrated circuits at the time of its creation.
      However, a layout design consisting of such
      combination of elements and interconnections that are
      commonly known among creators of design layouts shall
      be considered as original if such combination taken as
      a whole is the result of its creator's own
      intellectual efforts. There is no case law in India on
      registration of layout designs, therefore, it remains
      for future courts to apply and interpret the foregoing

      Work for HireAs in the case of copyrights, a statutory
      work for hire doctrine exists under the Semiconductor
      and Integrated Circuits Layout Design Act, 2000. If an
      original layout design has been created in execution
      of a contract of employment, the right of registration
      to such layout design belongs, in the absence of any
      contractual provision to the contrary, to the
      employer.3 However, as in the case of copyrights, work
      commissioned under a service contract does not fall
      within this provision. Therefore, an Indian service
      provider commissioned to create a layout design would
      have to assign the rights to the same back to the
      client. The client would not have any right to the
      same by virtue of the fact that the layout design was
      commissioned by it.

      AssignmentA layout design may be assigned with or
      without the goodwill of the business. If no goodwill
      is assigned, the assignee must advertise the
      assignment in six months as Registrar may direct.

      In sum, software is protectable under Indian copyright
      law as a literary work while screens are protected as
      artistic works. Importantly, it is not necessary to
      deposit the source code with the Copyright Office
      along with the registration application. While an
      employee who develops a new code will not have any
      right to a copyright in the same, the reverse is true
      for a contractor who performs the work under an
      outsourcing service contract. Therefore, companies
      outsourcing to India must take care to request the
      Indian developer assigns the rights in the newly
      developed code back to the client. Similar provisions
      apply to semiconductor chips which are protectable as
      layout designs. Once again, care must be taken to
      ensure that the proprietary rights to the new designs
      developed in India flow back to the overseas client
      through an assignment executed by the Indian
      developer. However, in view of the extraordinarily
      long time required for registration of intellectual
      property rights in India, a foreign company
      contemplating handing over valuable code to an Indian
      service provider should apply for copyright
      registration of such code at the very earliest.

      ________________________________________1 Copyright
      Act, 1957, s. 17.
      2 Copyright Act, 1957, ss. 18, 19.
      3 Semiconductor and Integrated Circuits Layout Design
      Act, 2000, S. 7(3).

      By Aparna Viswanathan, Viswanathan & Co., Advocates,
      New Delhi; e-mail: legaleagle@...

      Contact customer relations at: customercare@... or

      Copyright © 2004, The Bureau of National Affairs, Inc.
      Copyright FAQs | Internet Privacy Policy | BNA
      Accessibility Statement | License

      Reproduction or redistribution, in whole or in part,
      and in any form,
      without express written permission, is prohibited
      except as permitted by the BNA Copyright Policy,

      Vous manquez d’espace pour stocker vos mails ?
      Yahoo! Mail vous offre GRATUITEMENT 100 Mo !
      Créez votre Yahoo! Mail sur http://fr.benefits.yahoo.com/

      Le nouveau Yahoo! Messenger est arrivé ! Découvrez toutes les nouveautés pour dialoguer instantanément avec vos amis. A télécharger gratuitement sur http://fr.messenger.yahoo.com
    Your message has been successfully submitted and would be delivered to recipients shortly.