What does it mean to infringe on third party Intellectual Property rights?

This piece is a part of our series of articles on IP rights for startups...

In our last article, we highlighted few facts about knowing or identifying your own Intellectual Property Rights and also understanding the importance of the same. This article will address the issues based on Third Party Intellectual Property Rights, throwing light on what it means to infringe on Third Party Rights and the consequences of the same. In plain words, this almost relates to issues based on trespassing on someone else’s “property” without their permission. In the case of trespassing of Third Party IP Rights, it may cause civil disputes and may be a criminal offence in the case of Copyrights, which eventually leads into financial losses ending up making one’s solutions to such disputes very expensive.So what exactly does it mean when one is accused of infringing on a Third Party’s IP right? Each type of Intellectual Property has its own rules and regulations, and trespassing on these IP rights also has different consequences based on the type of IP. When a person/organization knowingly or unknowingly uses the Intellectual Property of a Third Party without their permission, it qualifies as an infringing activity. To get a more practical understanding of how this may play out in certain situations, here are a few cases of infringement and their consequences.

Here is a famous trademark infringement case of HORLICKS Limited whose trademark and copyright of the 'HORLICKS' label was registered in India as early as 1943. Kartick Confectionery started manufacturing a similar look-alike toffee under the trademark ‘HORLIKS’ and also reproduced the label amounting to an infringement of the copyright and trademark of 'HORLICKS'. HORLICKS claimed that products made under the trademark HORLICKS were compliant with strict hygienic conditions and argued that Kartick is misleading people by using the goodwill and reputation of HORLICKS, and filed for a suit to permanently restrain Kartick from illegally using the trademark. The court ruled that HORLIKS is likely to cause confusion among people and therefore barred Kartick Confectionery from reproducing, printing or publishing any label which was a mere reproduction or imitation of the HORLICKS label. Therefore incurring a loss for Kartick Confectionery due to negligence of trespassing of Third Party Intellectual Property

In another recent trademark infringement case, Mr. Kurapathi Babu filed for a trademark application for “Microsoft Multimedia” under services related to education and training, and also registered a domain name ‘www.microsoftmultimedia.com’ assuming that Microsoft trademark protection is limited to software and IT. Microsoft Corp filed for an opposition of the trademark application following which the defendant abandoned the application. Microsoft Corporation also filed for a suit of permanent injunction, restraining infringement, and dilution of trademark against the defendant, claiming damages worth 20 Lakhs.   It was finally ruled that Microsoft is a well known mark and the rights can be enforced even if the trademark is filed in any other class, and the defendant had to pay 2 Lakhs as compensatory damages and 3 Lakhs as punitive/exemplary damages, therefore incurring substantial financial consequences.

With the two above cases it can be understood that certain cases may incur higher losses than the other. So it is always important to take the right steps to ensure that one is not infringing on a Third Party IP right. Trademark rights are generally territorial, however in the case of famous trademarks; they possess rights in many countries under the subject matter of “well known marks”, due to the goodwill and recognition that the brand has achieved over the years with the help of extensive exports, channel partnerships, etc. A Trademark is very important for any company in the long run, so it is important to ensure that ones’ trademark is not similar to, or related to any other existing trademark, which may lead into consequences in the future.

Another type of consequence of using Third Party IP Rights is often seen in patent infringement suits, i.e., royalties and licensing fees. Often, the licenses are forced or coerced onto the companies, as the companies may not have had a chance to formulate a workaround solution or many times the companies wish to follow a defensive policy in patent litigation matters. It is always important to be aware of the patents in one’s respective field of business and one must ensure that a Third Party Right is not being infringed.

An additional notable aspect is that many people have the misconception that a patent right gives them the right to make, use or sell products based on their invention. But in fact a patent right is a ‘negative right’ which gives the owner the right to stop others from making, using or selling products based on the invention. Therefore a patent may not necessarily give a person/organization full authority to commercialize a product that uses their own patented invention if it also involves other steps, processes, methods, etc., for which any other Third Party possesses patent rights for.

There is also certain Intellectual Property that is available for public use. One such example is open source software codes. These are copyrighted codes, but are available in the public domain for any person/company to make use of. But at the same time, each of these copyrighted materials have a few mandatory compliance measures that have to be followed, which may involve specific open source guidelines, policies, regulations and legal obligations. Therefore it is the responsibility of the user to ensure that these guidelines are identified and followed when using such material. If such compliances are not followed, the use of such source codes may result in copyright infringement having both civil and criminal offences aligned to it.

What are the measures one can take to ensure non-infringement of IP Rights? One of the most important and essential tool to check whether any Third Party IP Rights are preventing one from commercializing their product is a Freedom To Operate study. This study will provide a clearance signal to go forward, or point out what may come as a hurdle in the future. If one, in fact identifies a hurdle, there are few possible solutions. One solution may be to license the IP rights and get permission to use those rights. In another case, the user may strategize to work around the goals/products, in order to be able to commercialize their own products without infringing on Third Party IP Rights. Another possible yet tough solution would be to challenge the rights in the case of patents for invalidation. Therefore a Freedom To Operate study will give the individual/organization the possible consequences in the case of commercialization of a product with respect to infringing on possible Third Party IP Rights.

All startups have several priorities which may seem more important than ensuring that there is no form of Third Party infringement. This is understandable for many companies but may be unexpectedly risky in few cases. A third party infringement suit can cost a company their whole business given that a startup may not be financially sound in the first few years of their business and hence making it unfeasible to tackle or cope with infringement suits, damages, forced licenses, royalties, etc.

In conclusion, you may continue to retain your priorities but at the same time ensure that your radar towards Third Party IP rights is always on check.

About the authors:

This post is co-authored by Gaurav Singhal and Ananya Dhuddu. Gaurav is the Director and Principal IP Attorney at Patracode Services Pvt Ltd. A B. Tech in Computer Science, LLB from IIT-Kharagpur and Masters in Business Laws from National Laws School of India University, Gaurav has been working in the IPR field since many years. Ananya Dhuddu is an Intellectual Property Analyst at Patracode Services Pvt. Ltd. She is a Life Sciences graduate from Pennsylvania State University, USA. She holds a PG Diploma in Medical Law and Ethics from National Law School of India University, Bangalore and a PG Diploma in Intellectual Property Rights and Patent Management from GIIP, Bangalore.

image credit: cultofmac