An Overview on Legal Issues Faced by SMEs

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LawQuest 2010. All Rights Reserved


Presented by

Poorvi Chothani, Esq.LawQuest, Mumbai

www.lawquestinternational.com

An Overview on Legal

Issues Faced By SMEs

Mumbai, May 20, 2010


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An alliance is

a working relationship

between two (or more) organizations

to fulfill mutually beneficial objectives

What Do We Mean By An Alliance?


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Allows leverage of resources and capabilities to achievestrategic business objectives

Enhance company's intellectual property (IP)

Access to additional resources

Assessment and knowledge of overseas markets Entry level strategy

Exploratory

Low entry barriers

Mitigates need to deploy people in the early stage Exposure to international culture and business terms

Opportunity to acquire new skills and insights

Benefits of the International Alliance

Approach


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Need Analysis

Identifying Relevant Capabilities

Staff Resources

Time Expectations

Personal Relationships

Determine if There is a Good "Fit"

Between Partners


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Should be in writing

Memorandum of Understanding (MOU) or acomprehensive agreement

MOU - High level of trust based on past dealings, availablefinances and human resources MoU might be appropriate

Comprehensive Agreement - If substantial investment of

capital or internal resources are involved and there is nocurrent working relationship with the alliance partner

The Alliance Agreement


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Memorandum Of Understanding Relatively informal but language can make it as

binding as a contract

Letters of Intent

Formal Contract Binding

Adds clarity

Defines goals

Provides for exit strategy

Specifies penalties, etc.

Pros and Cons to Each Approach


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What is a Contract?

Creation of a Contract Offer must be made by one party andaccepted by the other party

A contract is an agreement between two or more individuals,

businesses, organizations or government agencies to do, or to refrainfrom doing, a particular thing in exchange of something in value.

In law, a contract is a binding legal agreement that is enforceable in acourt of law.

A contract is an exchange of promises for the breach of which the lawwill provide a remedy.

As long as the goods or services provided are legal, any oralagreement between two parties can constitute a binding legal contract.



Types of Contracts

Marketing Contracts(With Dealers, Agents) Distribution Agreements(Consumer Goods, Electrical,

Electronics)

Agency Agreements(Sole Selling Agents) Procurement Agreements Sale and Purchase Contracts Job Work, Production or Manufacturing Contracts Warranty Agreements Employment Contracts Web portal Terms and Conditions Share Holder Agreements Joint Venture Agreements



Advantages of Contracts

Contracts help define the scope of services and the deliverables of aproduct

They help define expectations and obligations

Well defined expectations and obligations are imperative to manageclient or customer relationships

Written contracts mitigate ambiguities and misunderstandings

Reduce risks



Product Safety and Product Liability

Marketplace Behaviour

Product Origins

Legal Jurisdiction

Arbitration

Protection of IPR

Property Risks

Strategic-Legal Concerns



Not based on legal documentation alone

Non-legal considerations

Develop a Sound Working Relationship

Alliance teams

Commitment

Attitude

Communication

Success of the Alliance



Maintain a sound alliance working relationship

Hold face-to-face review meetings as often as possible

Spend time with your partner team in social settings suchas lunches, dinners, etc.

Create a sound personal relationship

Meeting management and organization

Positive reinforcement

Effective Communication Mitigates Legal

Problems



Overview

Member of the World Trade Organization (WTO) Trade Related Aspects of Intellectual Property Rights

TRIPS Compliant

Berne Convention

Paris Convention

Universal Copyright Convention

Patent Cooperative Treaty



Some Relevant Indian IP Laws

The Copyright Act, 1957 and the Copyright Rules, 1958

The Patents Act, 1970 and the Patents Rules, 2003 * with relevantRules and Amendments

The Trademarks Act, 1999 and the Trademarks Rules, 2000

The Biological Diversity Act, 2002

The Geographical Indication of Goods (Registration and Protection)

Act, 1999

The Designs Act, 2000and the Designs Rules, 2001* with relevantRules and Amendments.



Significant Provisions

Inalienable moral rights Waiver Concept does not apply to computer software

Work For Hire

Compulsory Licensing

Version Recordings

Broad fair use exceptions Non-commercial personal use deemed as fair use and does not

constitute infringement.



Significant Provisions

Patents

Joint Owners- Consent- Accounting- Rights

- Infringement- Responsibilities

Computer Programs and businessmethodsper se not patentable

Protect Computer Programs astrade secrets

Controller of Patents

First to File vs. First to Invent

Compulsory License

Research and Experimental Use



Assignment of IP Rights

Of Copyright

Territory

Term

Lapse

Consent

Of Patents

Joint Owner Needs Consent of other owner (s) toassign rights

Valid only if in writing and registered in India



Indian Patent Applications

Patent Applications for:

inventions originating in India; or

involving an Indian resident inventor

must first be filed in India, unless a foreign filing

license has been granted by the Indian PatentOffice



Patents - Some Special Provisions

Compulsory licenses for export of medicines tocountries which have lack of infrastructural orproduction capacity for meeting public health

emergencies.

In case of Infringement - Only civil remedy ofinjunction, damages, and accounts for profits.



Penalties

Imprisonment up to 2 years or with fine or with both. Amount of fineis not specified.

Unauthorized claim of patent rights - fine up to Rs.1,00,000.

Wrongful use of words, "patent office" - imprisonment for a term upto 6 months, or with a fine, or with both.

Refusal or failure to supply information - fine up to 10,00,000.

Furnishing false information knowingly - imprisonment up to 6months or with fine or with both.

Offences by companies the company as well as every person incharge of and responsible to, the company shall be liable.



Data Privacy and Protection

No Specific Statute

Existing legislation provides limited protection

Information Technology Act - limited protection againstcertain types of data misuse or computer offencesinvolving unauthorized access to data on computers andnetworks

E.g. hacking, damage to computer source code, virusintroduction

Civil and criminal remedies available



Legal Framework for Data Privacy

The Constitution of India

The Information Technology Act, 2000 Protects against computer offences Provides for both civil and criminal remedies

The Specific Relief Act, 1963 To enforce specific performance provisions in the contract against the

Indian service provider

The Indian Penal Code, 1860 and

Criminal Procedure Code of 1973 (corporeal property) To prosecute incidents of theft and criminal breach of trust and fraud


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Legislative Action

Amendment to the Information Technology Act of2000:

Negligence in implementing and maintainingreasonable security practices damages payable INR1 Crore (approximately US$ 243,902 at USD1 = INR 41)

Disclosing personal data without the data subjects

consent - damages are limited to INR 25 lakhs(approximately US$ 60,976 at USD1 = INR 41)


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Data Privacy Pending Legislation

An amendment to the ITA to expressly address dataprivacy approved by Indian cabinet of ministers in 2006(Executive branch)

The new bill: Stipulates security practices to be followed bycorporations that handle personal data

Impose civil and criminal penalties for negligenthandling or intentional misuse of personal data

Permits private enforcement for civil remedies


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Other Protection

Specific Relief Act to Enforce Protective ContractualProvisions

Indian Penal Code: Limited criminal recourse available:

To prosecute incidents of theft, criminal breach of trust and fraudinvolving data

Laws extend to offenses against corporeal property only

Common Law Remedies: Civil damages and injunctive

relief available: Breach of contract

Breach of confidence


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Enforcement

In India, the enforcement system for IP rights includes: Civil remedies Criminal penalties Settlement out of court without trail

Compensatory damages

No punitive damages

Registration of copyrights

Criminal prosecution in trademark and copyright and incertain cases for patents, but not in designs cases


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Recommendations

Practices to Safeguard Trade Secrets and ConfidentialInformation between:

Comprehensive operative contracts, specificallyproviding for ownership of IP

Non-disclosure agreements directly with the Indian

service providers employees and consultantsassigned to the project wherever practicable


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LawQuests Areas of Practice

Areas of Practice

Corporate Law

Intellectual Property Law

Real Estate Law

Employment Law

Global Work Permits andBusiness Visas

The U.S. The U.K.Canada IndiaPoland Mauritius

Australia New ZealandSingapore The Philippines

About LawQuest

Provides Client Centric Legal Solutions

Member of the NY State Bar Association, theABA, IBA

Member of the American ImmigrationLawyers Association

Founder Member of the Global MigrationAction Group in AILA

Former Member of the Alliance of Business

Immigration Lawyers (ABIL) Member of the European Association of

Attorneys A Worldwide Network of Lawyers


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An Overview on Legal Issues Faced by SMEs