India’s Latest Foreign Direct Investment Rules

Francisco A. Laguna

Last month, India further relaxed its laws governing foreign direct investment in various sectors.  This article summarizes the more significant amendments to the FDI Policy.

Broadcast Carriage Services & Cable Networks

Foreign investment in Broadcast Carriage Services and Cable Networks is now permitted up to 100% under the automatic route.  Previously, FDI above 49% required Government approval. However, change of control of the Indian company will require prior approval from the Government unless the same is subject to approval by the relevant sectoral regulator.

Civil Aviation

100% FDI is now permitted in existing airports and air transport services. Government approval is required for FDI above 74% in existing airports and 49% in air transport services. There is some debate as to whether airlines operated by Indian companies which are majority foreign owned will be permitted to fly international routes, but this should be resolved in a short while.

Defense

Until now, Foreign direct investment in the defense industry has be permitted up to 49% under the automatic route and above 49% with Government approval if such higher investment was likely to result in access to technology within India. The Press Note clarifies that defense products include small arms and ammunition and confers discretion on the Government to consider any other reasons deemed relevant for granting approval for FDI above 49%. All other conditions continue as before.

Hong Kong Kinder Joy - Made in India.  By Okstartnow (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

Hong Kong Kinder Joy – Made in India. By Okstartnow (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)%5D, via Wikimedia Commons

Foods “Made in India”

With government approval, 100% FDI is now permitted for companies selling food products wholly manufactured or produced in India, including sales through e-commerce.  This should allow for in-store cafés or shops in food courts and will add to the overall retail experience for Indian consumers.  Note, however, that the 100% FDI is only for foods manufactured or produced in India.  Foreign investors are hopeful that this liberalization will soon be applied to other food products.

Pharmaceuticals

While foreign investment in brownfield projects has been permitted up to 74% under the automatic route (it was earlier capped at 49% for the automatic route), the following new conditions are applicable to any investment in brownfield projects. These projects involve the purchase or lease by a company or government entity of existing production facilities to launch a new production activity.

  • Maintenance of production level of items falling within the National List of Essential Medicines for 5 years post investment at an absolute quantifiable level (bench marked to the highest production in the 3 financial years preceding the FDI);
  • Maintenance of R&D expenditure for 5 years post investment at an absolute quantifiable level (bench marked to the highest production in the 3 financial years preceding the FDI); and
  • Complete information on technology transfer, if any, must be provided to the relevant Ministry.

Private Security Agencies

The cap on FDI has been increased to 74%; FDI between 49% & 74% requires Government approval.

By Nazrila - Originally from en.wikipedia; description page is/was here, Public Domain, https://commons.wikimedia.org/w/index.php?curid=5843058

By Nazrila – Originally from en.wikipedia; description page is/was here, Public Domain, https://commons.wikimedia.org/w/index.php?curid=5843058

Technology Products

The new rules allow the Government discretion to relax sourcing norms for single-brand retailers that sell products using “state-of-art” or “cutting-edge” technology, in cases where local sourcing is not possible (Technology Products). The Department of Industrial Policy and Promotion (DIPP) issued Press Note 5 of 2016 Series on 24 June 2016 that states that sourcing norms will not apply for 3 years as of the commencement of business for such Technology Products. The Government’s approach of relaxing the norms, rather than providing a waiver, promotes its “Make in India” program.  It will be interesting to track whether FDI increases as a consequence of this provision, and, specifically, whether Apple and other tech companies will make FDIs in the country as a result.

All of the reforms discussed in this post are important and underline the incremental policy change which has long been hoped for. There is also a fair case to be made for the proposition that the FDI Policy is now fairly liberal and that the Government is open to considering proposals for FDI even more favorably where investment is coupled with capacity development and manufacturing.

TransLegal represents companies doing business in India in the biotechnology, foods and industrial sectors.  Call us with your questions related to doing business in India and how these new FDI rules may affect your business.

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US Passes Trade Facilitation and Enforcement Act

Francisco A. Laguna

After more than two years of debate, last week, the United States Senate passed the Trade Facilitation and Enforcement Act of 2015 (2015 Trade Enforcement Act). The legislation contains the most far reaching set of changes since the Customs Modernization (MOD) Act. Of particular significance is the inclusion of brand new measures to protect intellectual property rights and to combat antidumping and countervailing duty violations, including a mandate that Customs and Border Protection (CBP) establish its own program for these purposes.

By U.S. Customs and Border Patrol

By U.S. Customs and Border Patrol

Surprisingly, the major provisions of the Act received almost universal support from the trade community. The House had passed the bill last year, but it got bogged down in the Senate because of an unrelated internet sales tax provision. While the provision remains in the final version of the law passed by the Senate, the Senate leadership in return has agreed to take up new Internet sales tax legislation this year. President Obama is anticipated to sign the legislation into law this week.

The 2015 Trade Enforcement Act makes some significant changes to the operations and programs of CBP, adds new provisions to the antidumping and countervailing duty laws, including new procedures to combat evasion of AD/CVD orders, and revamps the drawback laws.

This week, we begin a short summary of the more significant changes. We will continue our summary next week.

Trade Facilitation and Trade Enforcement (Title I)

Title I establishes a various trade facilitation and enforcement programs. It:

By WestportWiki - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=34507625

By WestportWiki – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=34507625

  • requires CBP to work with the private sector and other federal agencies to ensure that all CBP partnership programs provide meaningful trade benefits to program participants;
  • authorizes CBP programs, including customs modernization efforts such as the Automated Commercial Environment (ACE) and the International Trade Data System (ITDS), also known as the “Single Window” approach to collecting trade data;
  • formalizes the Commercial Customs Advisory Committee (COAC) and the Centers of Excellence and Expertise (CEEs);
  • creates a National Targeting Center (NTC) within the Office of Field Operations that will gather data and assess risk on each of CBP’s Priority Trade Issues (PTIs): 1) agricultural programs; 2) antidumping and countervailing duties; 3) import safety; 4) intellectual property rights; 5) revenue; 6) textiles and wearing apparel; and 7) trade agreements and preference programs;
  • requires CBP to develop criteria for assigning importer-of-record identification numbers; and
  • establishes a new importer program that directs CBP to adjust bond amounts for new importers based on the level of risk assessed by CBP for revenue protection. CBP is required to develop risk-based guidelines and procedures to ensure increased oversight of imported products of new importers, including new non-resident importers.

Import Health and Safety (Title II)

Title II creates an interagency import safety working group, chaired by the Secretary of Homeland Security. The group is responsible for developing a joint import safety rapid response plan to establish protocols and practices that CBP, in conjunction with other federal, state and local authorities, must use when responding to cargo that poses a threat to the health or safety of US consumers. Title II also requires joint exercises with these entities and training for CBP port personnel in enforcement of import health and safety laws.

Import-Related Protection of Intellectual Property Rights (Title III)

Enforcement of intellectual property rights remains one of CBP’s highest priorities. Accordingly, the provisions of Title III will be one of the most scrutinized areas of the 2015 Trade Enforcement Act. Specifically, Title III:

  • authorizes and directs CBP to share information with rights holders so that they could help to quickly identify whether a product entering the United States is in violation of a copyright or trademark. Rights holders could even examine and test the merchandise;
  • authorizes CBP to seize merchandise if it is found to be in circumvention of IPR laws;
  • requires CBP to notify an injured right holder if they are included on an annually revised, CBP-maintained list (i.e., if rights are recorded with CBP);
  • establishes a National Intellectual Property Rights Coordination Center within CBP to coordinate actions with other agencies and conduct outreach to importers; and
  • calls for an increase in IPR enforcement personnel.

Enforcement of Trade Remedy Laws (Title IV)

The Act adds significant new provisions to deter evasion of antidumping (AD) and countervailing duty (CVD) orders. Directed largely at steel imports, the new provisions, called the “Enforce and Protect Act of 2015” are likely to be invoked frequently by US producers combating imports under an AD or CVD order.

U.S. Customhouse, 555 Battery St, San Francisco

U.S. Customhouse, 555 Battery St, San Francisco

In particular, the new law establishes a whole new procedure within CBP which allows US producers or wholesalers, unions, foreign manufacturers or exporters, or trade associations of a covered product to file an allegation that a party has entered covered merchandise through evasion. Importers beware!  As soon as CBP can get this procedure up and running, it is likely to be very active.

Once a complaint is filed and accepted, CBP is required to conduct a formal investigationwith specific deadlines.

CBP can issue questionnaires just like in a trade remedy cases to importers and foreign producers.

Failure to respond will result in “adverse inferences” regarding the alleged evasion.

If evasion is found, CBP can suspend liquidation, order payment of duties owed, and pursue an enforcement action.

The new anti-evasion measures of Title IV also include various directives for CBP to target and investigate potential evasion of AD and CVD orders, including setting up a new Trade Remedy Law Enforcement Division to more aggressively investigate possible evasion cases, and conducting aggressive auditing of firms at high risk. Failure to cooperate in an investigation by an importer or foreign exporter may result in a finding of evasion.

Contact TransLegal with your questions concerning the Trade Facilitation and Enforcement Act of 2015.

Remedies in Patent Infringement Cases in Taiwan

Francisco A. Laguna & Jimmy Wang

Last week, we discussed some general aspects of direct patent infringement cases in Taiwan.  Today, we look at the specific issue of remedies.

Satellite picture of Taiwan Photo Credit: Jeff Schmaltz via Wikimedia Commons

Satellite picture of Taiwan
Photo Credit: Jeff Schmaltz via Wikimedia Commons

In Taiwan, two basic remedies exist for patent infringement cases: damages; and injunctive relief. If damages are awarded, the court may calculate the amount applying any of the following methods:

  • the method provided by Article 216 of the Civil Code – If the patent holder cannot prove the amount of damages definitively, the owner may claim damages determined by subtracting the profit earned through the legal exploitation of the patent post-infringement from the profit such legal exploitation would normally be expected to generate;
  • the profit earned by the infringer; or
  • the amount of royalties that may have been collected pursuant to a licensing agreement. Continue reading

Direct Patent Infringement in Taiwan

Francisco A. Laguna & Jimmy Wang

Map of Taiwan Photo Credit: U.S. CIA via Wikimedia Commons

Map of Taiwan
Photo Credit: U.S. CIA via Wikimedia Commons

Patent infringement is an area of concern for many companies, including those in the agriculture, biotechnology, cosmetics and pharmaceutical sectors. In a two part-series, we will look at patent infringement cases in Taiwan.

Taiwan is a civil law country. When practicing patent law in-country, it is critical to refer to statutory law. The legal system in Taiwan places emphasis on patent law statutes rather than case law. Previous patent-related court decisions, except Supreme Court decisions, do not serve as precedents and are not binding on other cases.  Therefore, although case law can be instructive, it is essential to focus on the law. Continue reading

Brazil – The Most Powerful of the Southern Cone Countries

Francisco A. Laguna

This week, we resume our series on the Southern Cone, focusing on Brazil. Brazil is the largest and most economically powerful of the Southern Cone countries and the members of Mercosur.

In 2012, Brazil was the 8th country in terms of GDP (purchasing power parity). It is the only Latin American country to be within the top 10. Of the BRIC countries, Brazil was the last of the group, falling behind China, India and Russia. The Brazilian Central Bank has just lowered estimated growth figures for 2013 to 3.03% despite increasing GDP numbers. In comparison with other Latin American countries, these numbers continue to be impressive.

Photo Credit: Jason Auch via Wikipedia Commons

Photo Credit: Jason Auch via Wikipedia Commons

Brazil realizes that to remain competitive, it has to encourage continued innovation of its vital sectors – including petroleum, biofuels and agriculture – and it must proceed with poverty reduction and increased health care for the working class and indigenous peoples. The country also knows that it must also develop sectors that have been traditionally lagging in Latin America, such as science and engineering. With the upcoming 2014 World Cup and the 2016 Rio Olympics, Brazil is actively seeking engineers and computer scientists, and it is promoting industries such as information technology. It is also working toward developing in-country expertise in such areas as biotechnology, including genetically modified organisms. Continue reading

India – Efforts Taken to Protect Against the Bio-Piracy

Francisco A. Laguna & Priya Lamba

Despite the challenges it still faces, India has made considerable progress in a short period of time when it comes to the protection of its biodiversity and traditional knowledge. As a member of the Convention on Biological Diversity (CBD), India identified the following as some of its main goals in its National Policy and Macrolevel Action Strategy on Biodiversity (1999): securing the participation of State Governments, local communities and people, NGOs, industry and other interested parties; realizing the value of biodiversity through research and development; and ensuring that India gets the benefits as being the country of origin of biological resources, and that its indigenous communities and people get the benefits as being the conservers of biodiversity, creators and holders of traditional knowledge systems, innovations, and practices. This week’s blog will focus on the legislative and proactive steps India has taken in recent years.

Photo Credit: Nivedita Patil via Wikipedia Commons

Photo Credit: Nivedita Patil via Wikipedia Commons

India passed the Plant Varieties Protection and Farmers’ Rights Act (PVPFR) 2001, followed by the PVPFR Rules 2003. These two pieces of legislation ensure the protection of plant breeders’ rights over new varieties they develop and give farmers the entitlement to register new varieties and also to save, breed, use, exchange, share or sell the plant varieties that farmers have developed, improved and maintained over many generations. India also ratified the Patent Second Amendment Act 2002 and Patent Third Amendment Act 2005, amending its Patents Act 1970. These amendments prohibit the granting of patents for plants, animals, and traditional knowledge. Furthermore, India’s patent laws now require “mandatory disclosure of source and geographical origin of the biological material in the specification when used in an invention.” Should a party fail to disclose this information, or participate in wrongful-disclosure, then the amendments permit opposition to, or revocation of, the patent. Continue reading

India – Biodiversity, Patents & Bio-Piracy

Francisco A. Laguna & Priya Lamba

India – a land of diversity. As the seventh-largest country in the world, and the second-most populous, it has more than: 1.2 billion people; 400 languages; 30 religions; 45,500 species of plants; and 91,200 species of animals on record. With such diversity, it is not difficult to see why this BRIC nation has been receiving much attention in recent years. This first blog series will explore the development of intellectual property rights in India when it comes to the patenting of biodiversity resources and related traditional knowledge.

Attribution - Mink, httpwww.flickr.comphotosmink7170229192

Attribution – Mink, httpwww.flickr.comphotosmink7170229192

Home to four of the world’s richest biodiversity hotspots (Eastern Himalaya, Indo-Burma, Western Ghats and Sri Lanka), India has much to gain, and arguably lose, when it comes to the patenting its genetic animal and plant resources and traditional knowledge. Justifications for creating a property rights system include providing an incentive to invent, stimulating investment of additional capital needed for further development and marketing, encouraging disclosure of technological information for the public welfare, and promoting the exchange of products and information across national boundaries by providing protection for the industrial property of foreign nationals. All of these are applicable in India’s case. As a developing country, India’s need for foreign investment and financing are important for its maturity. At the same time, foreign nations will only make sound financial investments; they will only make those investments in which their money, interests and rights are protected.

Attribution-Some rights reserved by CIAT International Center for Tropical Agriculture (2)

Attribution-Some rights reserved by CIAT International Center for Tropical Agriculture (2)

Both India and the global community have much to benefit from the development of biotechnology and other products resulting from India’s diverse portfolio of resources and traditional knowledge. This has been particularly evident in the pharmaceutical industry. The process, however, means granting companies – Indian and foreign – access to the country’s genetic resources for purposes of research and development. India has been striving to achieve a balance between these two sometimes conflicting priorities.

Of major concern in India is that the creation of an intellectual property rights system may threaten or undermine the rights and interests of indigenous peoples and communities. The existence of intellectual property rights laws do not necessarily ensure that the indigenous communities will receive the benefits for being “natural resource managers” or developing and adapting the traditional knowledge “from experience over the centuries.” This has become known as bio-piracy, which “relates to industrial patents that exploit indigenous biodiversity and traditional knowledge for the profit of (often foreign) companies without recognizing or compensating the source community.”

SDC10702Culturally and socially, the promotion of indigenous peoples and their rights has been a focal point in the development of the country’s laws regulating bioprospecting and the use of Indian genetic materials. One point of discussion is that locals can experience an increase in the cost of native resources/traditional knowledge which may be subject to exclusive-use patents owned by foreign investors. Another area of concern is the genetic modification of the native resources, thereby making them “novel”. The novelty allows for the patenting of once-native materials. Investors then sell the modified version, which may impact the market for products made by indigenous communities or, again, it may increase costs. In either case, the argument is that cost increases either because they no longer have free and unrestricted access to the native resource – there is now a price tag on what used to be free – or because they must now pay a higher price set by the patent holder (see, e.g., India Rejects Boehringer’s AIDS Drug Patent Plea.) Indirect costs can include losses of market share for farmers who harvest the native species of plant/seed and have to compete with genetically modified versions of the naturally-occurring crop. (see, e.g., India-U.S. Fight on Basmati Rice is Almost Settled).

U.S. patents on the neem plant, turmeric, basmati rice, and karela are examples of these issues. Next week, we will discuss these patents and how they were challenged by Indian organizations.

TransLegal has assisted clients obtain the approval by the Genetic Engineering Approval Committee of products derived from genetically modified organisms for industrial use and labeling issues related to vegetarian foods. We also represented a group of US and Indian investors vying for the exclusive franchise for a US food chain, traveling to India 4 times in 2012. Contact us with questions related to doing business in India.