In a world where intellectual property is considered as a high value asset for both economies and businesses, Nepal needs a vibrant IPR ecosystem to face the 21st century economic challenges.
--BY SANJEEV SHARMA AND SABIN JUNG PANDE
What is Intellectual Property?
The World Intellectual Property Organization (WIPO), a specialised agency of the United Nations, refers to IP as “creations of human intellect, such as inventions, literary and artistic works, designs, symbols, names and images used in commerce.” Traditionally, patents, designs, trademarks and copyrights have been considered major IPs. In recent times, database, trade secrets, indigenous knowledge and geographical indications along with publicity rights, rights against unfair competition and moral rights have also found place in the list of IPs. In this way, IPR refers to the legal rights obtained by institutions or individuals over the ownership and use of the IPs.
Intellectual Property Right (IPR) plays a vital role for economies to thrive in today’s competitive world. Countries have been adopting rigorous legal and technical measures to secure the intellectual properties (IPs) which they consider very important to attract investments and also to secure their national interests. For businesses, IPR has become a valuable intangible asset which is necessary for their growth and sustainability. Protecting such assets creates an environment where they can invest to expand their businesses and engage in fostering innovations which in turn generate employment, besides adding revenue to the government coffers.
Current IPR Scenario in Nepal
The history of IPR regime in Nepal can be traced back to the period of Rana Prime Minister Juddha Sumsher some 80 years ago. He enacted the Nepal Patent, Design and Trade Mark Act, 1993 BS in order to address IP related issues which had begun to surface gradually with the growing industrial and commercial activities. Eight decades after the implementation of the country’s first IP law, it is an irony that the IPR ecosystem in Nepal is still in a nascent stage. “Four factors that drive the engine of IP smoothly are creation, promotion, protection and use of IP. But Nepal’s IP ecosystem is moving at a snail’s pace due to inadequacies in the remaining three driving factors of IP. On the other hand, the quality of IPR protection and its service delivery is extremely poor,” observes IPR expert Madhu Soodan Paudyal. Paudyal who is the General Secretary of the Intellectual Property Protection Society of Nepal (IPPSON), an independent organisation formed in 2012, says that there is no dearth of creative activities here coming out from academic and research organisations as well as technical professionals who produce literary, artistic, musical and scientific creations.
At present, IP activities in Nepal are limited only to the areas of trademark, design, patent and copyright. It is because the existing legal frameworks only cover these four aspects of IP. Presently, two separate laws, namely Patent, Design and Trade Mark Act, 2022 BS and Copyright Act, 2059 BS exist. “There are some 4,000 maintained and valid trademarks but the annual application rate of patent and design ranges from zero to four which is quite disappointing,” says Paudyal. According to him, registration is not mandatory for copyright and so it does not indicate the total progress. “Copyright activities in musical and cinematographic works appear satisfactory but the creators of literary and academic works are not aware about copyright although creative activities are taking place,” he opines.
There are little or no activities seen in other forms of IP including geographical indication, trade secrets, integrated circuit design and new plant varieties due to the absence of legal frameworks to govern these IP aspects. “Many factors like traditional knowledge and indigenous technology, cultural expressions, digital data, bio-diversity and genetic resources and utility models, etc are part of our national interest,” shares Paudyal.
Besides the far too inadequate legal framework, the absence of a specialised IP office, service institutions and training centres also present difficulties in mitigating the 21st century challenges in properly managing IPR issues and fostering a favourable environment for the creators and innovators.
Insecure trade and service marks
At present, infringement of trademarks and designs is rampant in Nepal. Violation of trademarks happens generally in the form of unauthorized registration and the copying of trademarks of internationally recognised brands, also called well-known marks, by individuals and organisations. According to Janak Bhandari, founder of Global Law Associates PLC, a leading IP law firm, infringements mainly happen to take advantage of the market value of international trademarks. “Those who carry out such acts only have to make a little or no effort at all, in terms of accessing the market which has already been established by the reputed trademarks,” he says. Financial benefit is another factor Bhandari points out in trademark violation. “Many people who have registered trademarks of foreign companies bargain for the ownership of the brands in Nepal and demand large amounts of money to return the ownership,” he mentions.
Loopholes in the existing law are the main reasons behind the occurrences of infringements of trade and service marks. According to the Patent, Design and Trade Mark Act, 2022 BS, the rights and ownership of foreign brands are only established after the trademarks are registered in Nepal. “Exploiting this loophole, some Nepalis register and hold the trademarks of international companies,” says Bhandari, adding, “This has caused ambiguity in terms of registration and ownership of trademarks.”
The confusion over the status of well-known marks is also due to the fact that there is no mention of any parameter so as to determine the international trade and service marks in the existing law. Countries have been using the six parameters of WIPO to determine well-known marks. The parameters are (i) determining the first user or adopter of the well-known mark, (ii) the duration, extent and geographical area in terms of any use of the mark, (iii) registration and recognition along with its promotion and advertising (iv) the duration and geographical area of any registrations (v) the record of successful enforcement of rights in the mark and (vi) brand value. “As a member of WIPO, Nepal first needs to adopt the parameters in its IPR law,” mentions Bhandari.
According to WIPO, “Well-known marks are usually protected, irrespective of whether they are registered or not, in respect of goods and services which are identical with, or similar to, those for which they have gained their reputation.”
Currently, a number of trademark disputes are pending at the Department of Industry (DoI) and courts. According to Shanker Aryal, director general of DoI, the government body under the Ministry of Industry (MoI) to oversee the registration of industrial and intellectual property, there are currently 445 pending cases of trademark disputes. “When I assumed the post around nine months ago, there were 649 cases pending at the DOI. Of them, we resolved 119 by the end of FY2073/74. In the current fiscal year, an additional 80 cases were registered while we resolved 165 more,” he says. Expressing surprise, Aryal says that there were cases pending for more than six years at the department. “There are interest groups eying leveraging benefits from certain trademarks and in the process hampering the original businesses,” he adds. The cases go to Patan High Court if DoI isn’t able to settle the disputes. In 2074 BS, a total of 23 cases of intellectual property disputes were filed at the court, out of which 19 are related to trademark and four in copyright disputes. The court has settled four cases till date. Though the exact number is not known, it is believed that dozens of such cases are currently pending at the Supreme Court. Trademark disputes of Rajanighandha, Kansai Nerolac and Havells are among the large number of high profile cases. Some of the cases have already received verdicts while many others are pending at the courts for over a considerable period of time.
Trademarks of Nepali brands, too, haven't been spared when it comes to theft and copying activities. A couple of years ago, the popular footwear brand Goldstar found itself in a legal fight over infringement of its trademark and the violators were sentenced with tough punishments for their involvement in illegal activities. A few weeks ago, another shoes brand Magic Footwear published notices in newspapers warning some manufacturers to immediately stop copying its trademark and designs of products or to face legal actions. Such notices have become a commonplace in the Nepali media in recent years. It has become a usual practice that whenever a product, be it Nepali or foreign, becomes an instant market hit, copies of the product pop up one after another. Nepali alcoholic brands in particular have been facing the problem of their brand names and packaging designs being copied.
Part of this particular problem in IPR is also due to the low trademark and brand consciousness among Nepali consumers. “This is why items that look identical to established brands are so widespread in the local market,” says advocate Bhandari. Generally, foreign FMCG, clothing and footwear brands are the victims of counterfeiting. In August 2016, police raided stores and offices of some Kathmandu-based importers and found that they had been importing and distributing various counterfeit products of the Indian FMCG major Hindustan Unilever Limited. Experts point out different ways to control such activities. “There is a need to make it mandatory to mention the brand name (trademark) and the real price of commodity in the customs clearance bill to easily identify foreign grey products,” suggests Paudyal.
Some Cases of Trademark Infringement in Nepal
- A number of trademarks have faced different challenges relating to trademark infringement. The cases of Dhara Oil, Panparag, Rajanigandha, Pepsico, Havells, Loreal, and Kansai Nerolac are among the high profile trademark disputes.
- One of the most talked about cases of trademark infringement in Nepal is a trademark dispute between Kansai Nerolac Paint and a Nepali business group. When Kansai Nerolac Limited, the Indian subsidiary of Japan’s Kansai Paint, came to Nepal, it was surprisingly compelled to wage a legal battle against a local firm. The company which entered Nepal in 2012 in a joint venture partnership with a Nepali company Shalimar Paints, was denied trademark registration as a firm named ‘Kansai Nerolac Paints Pvt Ltd’ was already registered here along with the trademark of the India-based Kansai Nerolac. Eventually, the Japanese-Indian JV was bound to shed its individuality and operate in the name of KNP in Nepal. While Japanese paint brand Kansai has presence in about 17 countries, Kansai Nerolac Paint is one of the largest industrial and decorative paint companies in India.
- Almost 14 years ago, a Nepali company, Swastik Fragrance, registered the trademark of Rajnigandha in its name. Rajnigandha, a famous Indian panmasala brand produced by Dharmapal Satyapal Limited, fought a legal battle against Swastik but in vain. Eight years later, the then Patan Appellate Court (now Patan High Court) issued a verdict in favour of Swastik Fragrance.
- Years ago, Pepsico India had accused a Nepali producer of infringing its snacks brand name.
- Reportedly, Reliance refused to invest in Nepal after it discovered that its trademark is already owned by someone else.
- Likewise, grey and counterfeit products of established national and international brands are rampant in the Nepali market. Products bearing similar brand names and logos, especially food items and alcoholic beverages, nicotine and cosmetic products are widespread. Himalayan Distillery Limited has complained that the company’s brands such as Royal Treasure, Blue Diamond, Golden Oak and Virgin were copied in terms of not only their appearances (color and design) but also taste. 40 brands in the market resembling Blue Diamond Dry Gin and counterfeit products such as Golden Yak and Blue Demand resembling the names of Golden Oak and Blue Diamond, according to the company.
- Reportedly, Swastik Fragrance holds the trademark rights of over 100 international brands and most of them aren’t produced at all while almost all the trademarks of Indian products advertised in the Indian media are registered in Nepal.
Dismal Patent Record
Nepal’s patent registration record is awfully low. According to WIPO, there were 62 patent applications in Nepal in the last 15 years (2002-2016). DOI Director General Aryal says that around 74 patents were registered in Nepal in the last eight decades. Of them, hardly 10-12 are valid. He also shares that the department has received only one patent application in the last nine months and the applicant has been granted the patent right.
The negligible number of patent registration in Nepal shows that the development of scientific and technological creation and innovation is mediocre in Nepal. According to Aryal, “A patent is a new creation which is difficult to achieve and has larger economic implications. Nepal lags behind in terms of invention, creation and discovery because its research and development is too poor. That is why there is not much happening around patent registration.”
In other parts of the world, individuals and corporations fight legal battles to obtain and seek revocation of patent rights - something quite common in the sectors of technology, biotechnology and pharmaceuticals. In fact, some of them are gruesome considering their litigation claim. Whether it is Oracle Vs Google, Samsung Vs Apple or Yahoo Vs Facebook, patent battles have reined the headlines whenever they have occurred. Novartis, a Swiss multinational pharmaceutical company fought a seven year long legal battle in India to patent Glivec, a life saving drug used to treat cancer, that if patented could have resulted in the Swiss company’s monopoly over the drug. But the Indian Supreme Court rejected the patent application citing lack of novelty. That’s about the world which makes billions by patenting innovations and where stakes are too high.
For an economy like Nepal, where there is almost nothing happening around modern science, technology and innovation, it makes more sense to be vigilant about the protection of its indigenous knowledge, practices, technology and bio-diversity which have been at the risk of encroachment. According to WIPO, indigenous knowledge is often referred to as traditional knowledge (TK) and ‘encompasses the content or substance of traditional knowhow, innovations, information, practices, skills and learning, of TK systems such as traditional, agricultural, environmental or medicinal knowledge.’
The reason why Nepal’s traditional knowledge is at the risk of piracy can be learnt through some of the significant legal battles that neighboring country India undertook against individuals, MNCs and international patent offices. In 1995, when two Indian nationals at the University of Mississippi Medical Center were granted a US patent on the use of turmeric in the healing of wound, the U.S Patent and Trademark Office (USPTO) reexamined the case at the request of the Indian Council of Scientific and Industrial Research (CSIR). The CSIR produced evidences including Sanskrit texts and an Indian medical journal that led to the revocation of the patent in 2002.
In another case, USPTO granted patent rights for a number of Basmati rice variants to a Texas-based hybrid rice seed company RiceTec in 1997. Following a huge protest in India that labeled the case as bio-piracy of indigenous wealth of LDCs and emerging nations, India challenged the decision to not only protect its plant wealth but also protect its export of basmati products. Eventually, the patent rights granted to RiceTec for a number of Indian variants including the use of the word ‘Basmati’ were revoked. RiceTec still uses the brand such as Texmati and Calmati for its rice products.
In 1995, the European Patent Office granted patent to an anti-fungal product derived from neem seeds to the US Department of Agriculture and a chemical multinational WR Grace. The patent was revoked on the grounds that the knowledge about the neem seeds had been a traditional knowledge inherited by Indian farmers for ages. These events compelled India to adopt strong measures to protect its plant wealth including introducing reformation in patent laws which was also evident in the case of Glivec.
In all these episodes of biopiracy, Nepal was a mute spectator although basmati, neem and turmeric are being produced and used in Nepal as well for centuries. While basmati is produced across the Indian subcontinent including in Nepal under different varieties, it was India followed by Pakistan who took the initiatives to prevent unauthorised use of basmati.
Copyright on the Brighter Side
Interestingly, the situation of copyright is satisfactory in Nepal in spite of the overall weak IPR regime. The Copyright Act, 2059 BS and the Copyright Rule, 2061 BS have been providing exclusive rights to the authors and the creators of artistic and literary creations. The first copyright law came into force in 2022 BS and the legislation has gone through subsequent amendments. “Copyright has a stronger regulatory mechanism and enforcement compared to trademarks and patents,” opines Bhandari. As per the current provision, registration is not compulsory for copyrights and in case of violation, the right holder is simply required to prove the date of creation of his/her works. “For violation of copyright, there is imprisonment and fines which have worked sufficiently to discourage violations. Police officials also speedily enforce the law in case of copyright violations. We have observed it in the case of recent disputes related to various Nepali songs,” he says.
Inability to Reform Law
The increasing IP insecurity is tied to Nepal’s inability to reform or update laws in accordance with various international treaties which it signed many years ago. The country became a member of WIPO in 1997 and a signatory to the Paris Convention for the Protection of Industrial Property in 2001. The country signed the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement after its ascension to the membership of the World Trade Organization (WTO) in 2004. Similarly, Nepal joined the Berne Convention for the Protection of Literary and Artistic Works in 2006. Nevertheless, the government has not been able to reform or update the existing IPR laws in line with the landmark global deals. Nepal has been continuously receiving extension of deadlines to update or reform its existing IPR laws and policies to meet its commitments. For instance, the deadline for implementing the convention for Nepal has been extended thrice. The country, after missing the first deadline in 2006, was provided the period of 2007-2015 to update and reformulate its existing IPR law which has now been extended to 2021. This indicates the apathy of the government and lawmakers towards the importance of the international treaties and conventions signed by the country. Nonetheless, Section 9 of the Nepal Treaty Act, 2047 BS, clearly states that global treaties signed by Nepal shall be enforceable as any Nepali law. “In this respect, the treaties are legally binding for us,” argues Bhandari.
Likewise, Nepal is yet to become a signatory to other international agreements related to IPR. Despite being a member, the country hasn’t signed the WIPO’s Copyright Treaty and Performances and Phonograms Treaty.
Main Highlights of Existing IP Laws and Policies
National Intellectual Property Policy, 2073 BS
The National Intellectual Property Policy, 2017 incorporates wide issues relating to IP with a view to develop balanced IP management system in Nepal. The policy seeks to:
- develop new legal framework or revise the existing ones for copyright, patent, industrial design, trademark, geographical indication, plant species, trade secrets, integrated circuit, layout design, traditional and indigenous knowledge, traditional cultural expression and folklore, biodiversity and genetic resource in line with the country’s needs
- use existing traditional knowledge, biodiversity and geographical indication as a tool for national development
- use IP as a source for environment-friendly technology transfer, foreign investment, research promotion and development of technical capacity and knowledge
- increase awareness about IP and its importance for the economic, social and cultural progress of the society
- encourage commercialisation of all forms of IP
- Develop strong laws and institutional and human resources to enforce protection of IPR
- Develop a separate institutional mechanism namely National Intellectual Property Council to enforce effective execution of policies set out in the National Intellectual Property Policy, 2017
- Develop a separate and integrated IP Office under DoI to look after the promotion, protection and recording of IPR
Patent, Design and Trademark Act, 2022
According to the Patent, Design and Trademark Act, 2022, the department of industry shall register the trademark in the name of the applicant based on necessary examination of a trademark application. The department shall conduct necessary investigation and provide sufficient opportunity to the applicant to defend his/her case and also conduct further inquiry before registering it.
- The refusal of trademark application are based on following, if the applied trademark
- hurts the prestige of any individual or institution
- affects the public conduct or morality or undermine the national interest
- affects the reputation of the trademark of any other person
- is already registered in the name of another person
- The registered trademark will remain valid for seven years from the year of registration and can be renewed every seven years for any number of times.
Copyright Act, 2022
- Extends to the work of book, pamphlet, article, thesis, drama, dramatic-music, musical notation with or without words, audio visual works, architectural design, fine arts, painting, works of sculpture and woodcarving, lithography, and other works relating to architecture, photography, applied art, illustration, map, plan, 3-D work relating to geography and scientific article and work and computer programme.
- Grants the author of the work with the exclusive right to reproduce, translate and revise or amend the work, sell, distribute or rent the original and copy of the work for the general public, transfer or rent the right of audiovisual work, work embodied in sound recording, computer program or musical work in graphic form conferred to that author or owner, to publicly exhibit or communicate or perform the original or copy of the work in public and broadcast the work.
- Registration of a work, sound recording, performance or broadcasting is not mandatory to acquire the right.
- Enables reproduction of work by library and archives and for personal use, citation appropriate with referencing and teaching and learning purpose and for the purpose of information to the general public. But any of such reproductions shouldn’t be detrimental to the economic rights of the work’s author or owner.
After years of dillydallying, the government is seemingly opening its eyes to realise the importance of IPR in the modern context. The endorsement of the National Intellectual Property Policy, 2073 BS by the cabinet in March last year indicates that the reform process of the existing IP legislations has finally begun. The policy mainly aims to:
- Develop new legal framework or revise the existing ones for copyright, patent, industrial design, trademark, geographical indication, plant species, trade secrets, integrated circuit, layout design, traditional and indigenous knowledge, traditional cultural expression and folklore, biodiversity and genetic resource in line with the country’s needs
- Increase awareness about IP and its importance for the economic, social and cultural progress of society
- Encourage commercialisation of all forms of IP
- Develop a separate institutional mechanism namely National Intellectual Property Council to enforce effective execution of policies set out in the National Intellectual Property Policy, 2073 BS
- Develop a separate and integrated IP Office under DoI to look after the promotion, protection and recording of IPR
In the meantime, the drafting of the umbrella IPR law which will cover most of the IP aspects is also moving ahead, albeit slowly. The process which started some two years ago is said to have been restarted from a new point in the recent months as an earlier draft was scrapped due to issues related to legal and technical discrepancies. “It is in the process of drafting and is currently being overseen by Nepal Law Commission. DoI is one of the members in the act formulation committee while other various stakeholders are also being consulted,” informs DOI director general Aryal. According to him, the progress in the formulation of the act must have stalled due to the elections held last year. The government has been receiving assistance from the United States to formulate the new IP legislation.
The new constitution also necessitates the formulation of the integrated IPR law. The statute promulgated in 2015 has enshrined intellectual property among the fundamental rights of the Nepali citizens. Article 25 of the constitution reads, “Every citizen shall, subject to law, have the right to acquire, own, sell, dispose, acquire business profits from, and otherwise deal with, property.” In the explanation of the Article, “property” has been mentioned as any form of property including movable and immovable property including the intellectual property.
Attracting FDI has been the focus of each successive government over the last few years. However, the absence of appropriate IPR laws and policies has hindered their approaches to making Nepal a prime FDI destination in South Asia. One of the main concerns of foreign investors here has been the lack of an effective IPR regime in Nepal. They primarily seek exclusive protection and right for their IPs in which they invest a huge amount of money. The importance of IPs is highlighted by the fact that large global companies have been doing whatever they can to cash in on and secure this particular asset class. The US tech giant Apple, for instance, was reported late last year to have off-shored it’s IPs worth USD 200 billion in Ireland. As mentioned in the “Paradise Papers” leak, Apple took the advantage of an Irish law that offers tax relaxations on sheltering foreign trademarks and patents in the country. Not only Apple, other large global corporations including Facebook, Uber, Nike and the Irish pharmaceutical giant Allergan are also said to have off-shored their important IPs in shell companies in tax haven locations including Bermuda and Grand Cayman.
Nepal can also benefit economically and socially by securing its specific IP aspects such as indigenous knowledge, traditional art and craft, crops and plants and geographical indications that have remained part of the history, culture and identity of the Himalayan nation since long. Now the time has come for the government and lawmakers to realise the importance and possibilities in IPR to ensure the country’s better future.
International Treaties and Conventions
Paris Convention for the Protection of Industrial Property
- Under the Paris Convention, each member state must grant similar protection to nationals of other member countries that it grants to its own nationals.
- Article 6bis of the Paris Convention seeks its member countries to refuse or cancel the trademark registration, and to prohibit the use of a trademark which constitutes a reproduction, an imitation or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods.
- The article 6bis allows at least five years timeframe to request the cancellation of such a mark from the date of registration.
Trade-related Aspects of Intellectual Property Rights (TRIPS)
- TRIPS came into effect on January 1995 as a multilateral agreement between WTO countries. Its major objective is to provide strong and comprehensive protection for various forms of IP throughout the world. It lays down certain minimum standards for national governments for the regulation of copyright, trademarks, geographical indications, industrial designs, patents including the protection of new varieties of plants, layout designs of integrated circuits and undisclosed information including trade secrets and test data.
- The agreement requires compliance of the most recent amended version of WIPO, Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention). The TRIPS principally mandates member countries to formulate domestic IPR enforcement procedures to allow right holders to exercise their IPR rights and remedies for the contravention of the agreement
- Under the TRIPS, disputes are subject to the WTO’s dispute settlement procedure.
- The agreement requires developed countries to provide incentive to their enterprises to facilitate transfer of technology and forge technical and financial cooperation with LDCs to enable them to implement the agreement
- The article 27.3 (b) of the TRIPS agreement enables the patentability of seeds and plants other than non-biological and micro-biological processes. The provision is contentious as it may lead to appropriation of indigenous knowledge and resources.
Berne Convention for the Protection of Literary and Artistic Works
- The Berne Convention governs copyright law thus protecting works and rights of authors, musicians, poets, photographers, painters, etc. The convention provides them authority to have control over the reproduction or any other form of use of their works.
Experts Views on Intellectual Property Rights