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* Disclosure norm mandatory on Traditional Knowledge (TK) patenting   [International news]

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The government has revised the norms for merger between telecom companies within a circle, making consolidation among existing players more difficult and expensive, and, in the process, facilitating entry by new players that have not acquired a license so far. Specifically, merger conditions have been made more stringent in four areas: pre-approval by the Department of Telecom (DoT) is required for any merger; the threshold market share of merged entity beyond which a merger will be prohibited has been lowered from 67% to 40%; a licensee must complete three years of operations before it can contemplate merger; and, finally, the merged entity will have to pay extra for spectrum.

The new guidelines deviate from regulator Trai’s recommendations in two ways. The regulator had ruled out M & As till rollout obligations were met. In the revised guidelines, there is no mention of rollout obligations— they seek three years of operations—and the word acquisition has been dropped.
 
However, new entrants in the telecom space can bring in strategic investors—this implies they can sell a maximum of upto 74% stake to new global majors or other domestic companies that are looking to enter the communications market in India. The government’s objective is to ensure that the world’s fastest growing telecom market will continue to have over eight operators in all circles in the upcoming future, thus leading to increased competition.

In the case of existing operators prior approval is required for any merger and acquisition while also imposing a rider that M&As could only take place only if the combined market share of the merged entity is less than 40% in terms of subscriber base and revenue. This eventually rules out any merger or buyout among the top three service providers in any circle.

The new M&A guidelines are a tightening of the earlier regulations, which stated that the market share of the merged entity cannot be more than 67%. DoT planned to impose a ‘spectrum transfer charge’ that will be based on the market valuation of spectrum, in case of M&As. The department has also specified a slew of clauses to ensure that M&As do not result in the hoarding of spectrum. In the case of an M&A, the post-merger entity can be entitled to the total amount of spectrum held by the merging entities only if it has the subscriber numbers required for that quantum of spectrum.

“In case of failure to meet the spectrum allocation criterion within a period of three months, the post-merger licensee shall surrender the excess spectrum, if any, failing which it may be treated as violation of terms & conditions of the license agreement and action shall be taken accordingly. In addition, after the expiry of the three-month period, the applicable rate of spectrum charge shall be doubled every three months in case of excess spectrum held by the post-merger licensee,”   TOP                                                                  

Tax breather for realty Mutual Funds on the cards  TOP

The government will exempt from tax, income generated by mutual funds that float schemes to invest mainly in realty stocks. Not only this, even mutual funds (MFs) that invest in shares of realty companies also be spared of tax on income. The dividend income of unit holders will also be tax-free. Real estate investment trusts (REITs), which can directly buy and sell property, including apartments and shopping malls, could be denied such benefits.

Sebi-registered real estate as well as other mutual funds will be given a tax pass-through status if they invest in real estate stocks. Though the market regulator had approved real estate MFs almost two years ago, the operational guidelines are yet to be unveiled. Now, with greater clarity on valuation norms and calculation of net asset value (NAV), the regulator may soon prepare the ground for the launch of these MFs,   Realty MFs are expected to be close ended, and the units of these funds will be listed on the exchanges. Such funds invest in both listed and unlisted securities of realty firms. They offer an opportunity to investors to take an exposure to a sector that offers reasonably attractive capital gains and steady dividend income. However, the central bank has not been comfortable with more investments flowing into realty, given the dangers of an asset price bubble.

The income-tax law now provides for a pass-through status for mutual funds, and all income earned by them is tax-free. But any income distributed by an MF attracts a dividend distribution tax (DDT), depending on the nature of the fund. TOP

Underwriting could become mandatory for initial public offerings (IPOs). The proposal is part of the initiatives that the regulator is considering to discipline the primary market and ensure quality paper. An underwritten issue would also give confidence to investors that the issue has been vetted by domain experts after considering risks. It could help obtain better pricing as institutions would not want to underwrite issues that are exorbitantly priced and run the risk of devolving.

At present, underwriting is optional. Bankers prefer soft underwriting in which the underwriter agrees to buy the shares at the offer’s latter stages, after book-building and pricing are complete. Moreover, the underwriter has to put in money only if investors default on payment on allotment.

The move comes against the backdrop of big IPOs like Emaar MGF and Wockhardt being called off. TOP

Interest on Non Resident Ordinary (NRO) deposit may be taxed at the rate of 20%, instead of the prevailing practice of levying 30%, according to an order from the Authority for Advance Ruling (AAR), a quasi judicial body for tax disputes.

NRO deposits are rupee account of NRIs from the money they earn and save in India. The earnings could be in the form of salary drawn in India, rent received from properties here, dividend or transfer from resident account. The interest on this account is repatriable after payment of applicable taxes in India.

At present banks consider such income as interest income or income from other sources and deduct tax at the rate of 30%. NRIs have been asking for years that this should be lowered to 20%, the rate at which interest from foreign currency accounts are taxed. AAR observed that since NRO deposits are in the nature of convertible foreign exchange, these deposits are similar to foreign exchange assets. AAR also held that such deposits can be considered as investment under section 115 C of the Income-Tax.  TOP

All patent applications involving traditional knowledge (TK) and genetic resources should comply with a mandatory disclosure norm. Brazil, Bolivia, Colombia, Cuba, Dominican Republic, Ecuador, Peru, Thailand had earlier pledged their support to the proposal, which, if taken on board by the world body through an amendment to its TRIPS agreement, would benefit India which has rich TK and immense genetic diversity.

In 2007, the Africa Group and the LDC Group joined the proposal, and January 22, the ACP group extended its allegiance to the proposal. At the last meeting of the TRIPS Council, with a clear majority of the membership on their side, the main proponents India and Brazil insisted that the issue therefore be included as part of forthcoming negotiations in the “horizontal process”.

The chances of the disclosure proposal amendment to the TRIPS Agreement being accepted is greater as part of the horizontal process package. A text-based negotiation should now commence, with developing countries already having submitted the draft of such a text, said India. The proponents of the proposal want the TRIPS Agreement to be so amended that it would be compulsory for the national laws of countries have a requirement for applicants of patents to disclose the countries of origin of biological materials and traditional knowledge used in inventions, as well as give proof of prior informed consent, and benefit sharing arrangement with the countries of origin and relevant local communities.

The opponents of the proposal, Australia, Japan, South Korea, New Zealand, and the US to name some, still insist that the problems of biopiracy and wrong patenting will not go away. However India’s representative told the TRIPS Council that since the Doha Round is a Development Round, without the imbalance in the TRIPS agreement for the protection of genetic resources and traditional knowledge being corrected, the results of the Round would be incomplete.

According to the Doha mandate, India stated, negotiations on outstanding implementations issues shall be an integral part of the Work Programme. The relationship between the TRIPS Agreement and CBD is a critical implementation for developing countries. It pointed out that the objectives of the Disclosure Proposal are shared by all members TOP

Two dentists have won a second legal battle over the right to use a toothy crocodile on the sign outside their surgery. Dentists Dr Simon Moore and Dr Tim Rumney said they chose a crocodile for their logo because the reptile is famous for having a mouth full of teeth.

But Lacoste the French fashion giant alleged that the dentists' sign was too similar to their own emblem, a green crocodile that is applied to T shirts around the world. After losing the first round of its trademark fight last year, Lacoste appealed to the UK Appellate Authority. The original decision was upheld, saying that consumers were unlikely to confuse dental practice and the clothing company.

The dentists' logo includes the words "The Dental Practice" and does not share the Lacoste crocodile's knobbly back and red tongue. The Lacoste logo comes from the French tennis player Rene Lacoste, who was nicknamed "The Alligator" or "The Crocodile" in the 1920s. He struck a deal with a manufacturer to make clothes with a crocodile logo.

The dentists, from Cheltenham, southwest England, said Lacoste's action was like "using a sledgehammer to crack a nut." "We liked the crocodile design because of the natural association with teeth," Dr Moore said. "They have little birds that pick bits out of their teeth."

Lacoste was ordered to pay a total of 1,450 pounds in legal costs.  TOP

The Controller of Patents is seized with the matter of granting permission to permit export of pharmaceuticals which have been patented in India to countries outside India where patients are in dire need of these drugs. The Delhi Patent Office is hearing proceedings filed by Hyderabad based Natco Pharma for the grant of a license to export certain drugs used in the treatment of cancer to Nepal.

The WTO's Trade-Related Aspects of Intellectual Property Rights agreement (TRIPS) permits governments to grant licenses for drug patents and allow the production of patented drugs deemed critical to public health in poor countries. Since the agreement, several countries have used TRIPS to produce generic AIDS therapy drugs for their domestic markets.

In October, last year Canada became the first to allow one of its companies to make and export a generic version of a patented drug, sending AIDS therapy drugs to Rwanda. Thereafter Thailand was the first to override patents for drugs to treat diseases other than AIDS, issuing licenses for patented cancer drugs despite intense industry resistance and criticism from the United States for disrespecting patents.

Natco has a license from Nepal to import Erlotinib, patented in India by Swiss firm Roche under the brand name Tarceva, and Sunitinib, patented by U.S. firm Pfizer Inc under the name Sutent. It says it can make generic versions of these drugs and sell them at about a fifth of the price through a private distributor in Nepal.

Drug research companies and public health activists argue over how much patents hinder poor countries from getting hold of new and improved drugs for AIDS and other public health issues.

Drug makers say tight patent laws stimulate vital research; activists say the ensuing price monopolies prevent the drugs from reaching people in developing countries.

Natco has offered 5 percent royalties on sales it makes to Roche and Pfizer, in keeping with TRIPS guidelines.

Last year it must be recalled that the firm Novartis lost its challenge in a Chennai court in August to a law disallowing patents for minor improvements to existing drugs. Last month the Delhi High Court refused to grant an interim injunction in favor of Roche and against Cipla inter alia on the grounds, that such an injunction would prevent the patented drug from being available to Indian patients at a reasonable cost. TOP

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