The 56-year-old companies act has been overhauled.

        The 56-year-old companies act has been overhauled

The Lok Sabha today passed the Companies Act 2012 that tightens disclosure norms for companies, makes it mandatory to rotate auditors every five years and seeks to regulate related-party transactions to check corporate frauds.

The new legislation also attempts to provide better protection to minority shareholders and makes it mandatory for companies to spend every year at least 2 per cent of their average net profits made during the three immediately preceding financial years on corporate social responsibility (CSR) projects.

The CSR proviso will apply to companies that have a net worth in excess of Rs 500 crore, or a turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more.

If a company fails to spend the amount, its board of directors will have to spell out why it couldn't do so.
The provision is hugely controversial since it is the first time that any government anywhere in the world has tried to make CSR spending mandatory, sparking a debate over ethics, social obligations and the basic principle of voluntarism in the act of giving. Many governments do, however, insist on mandatory CSR reporting.

The legislation does not precisely define what constitutes CSR though it does give companies the freedom to make the desired spending in the local areas where they operate.

Among other things, the act also proposes to tighten the laws for raising money from the public ' a move that could especially hit chit funds. Only banking companies, NBFCs and other companies allowed by regulators will be permitted to accept deposits from the public.

Deposits may be accepted only after (a) obtaining credit rating; (b) providing deposit insurance; and (c) depositing at least 15 per cent of the amount of deposits maturing during the current and next financial year in a scheduled bank

The legislation also grants statutory powers to the Serious Fraud Investigation Office (SFIO) which will look into acts of malfeasance, big corporate frauds and other corporate shenanigans. The SFIO, which has already started investigations into illegal chit funds operating in Bengal, will get a big fillip once the legislation comes into force.

Replying to the debate on the bill, minister of state for company affairs Sachin Pilot said though "chit funds are regulated by state governments, wherever we find that they have been using fraudulent means, we will take strict action".

Surprisingly, the act was supported by Trinamul Congress's MP Saugata Roy who made a case against chit funds and raised questions about the Sahara group's spending. "I want the bill to be stronger … I support giving the SFIO even more powers," Roy added.

The act also comes several years after the first version was introduced in Parliament. Hectic lobbying by top corporate honchos saw the bill get delayed and watered down over the years. However, with the Rs 7,000-crore Satyam fraud bursting upon the Indian corporate scene, the bill was reworked to build proper defences against large-scale frauds.

The act provides that: "Shareholders associations or group of shareholders are to be enabled to take legal action in case of any fraudulent action on the part of company and to take part in investor protection activities and class action suits."

It also seeks to treat insider trading by company directors as a criminal case. In the Satyam case, it was alleged that the promoters had rigged profits to ramp up share prices and make windfall gains on stock sales.
The new law also aims to strengthen corporate governance in firms and makes it mandatory for independent directors to constitute at least one-third of the board.

In case a company has one or more subsidiaries, it shall in addition to stand-alone financials, prepare a consolidated financial statement of all subsidiaries. Pilot also made it clear that the new law would mandate that a director's remuneration would be capped at 5 per cent of profits It also bans buy back of shares within one year of the last buyback of shares.

The number of layers of subsidiaries a firm can have will normally be restricted. Section 186 of the legislation says a company ought not to make investments through more than "two layers of investment companies" but some exceptions have been built in.

It also facilitates joint ventures and relaxes restriction on the number of partners in entities such as partnership firms and banks.

Audit firms cannot take up more than 20 assignments at any time. Independent directors will no longer be eligible for stock options but will get fees and profit linked commission, subject to rules.

The new Act also provides for a new corporate entity in the form of one-person company (OPC). It also gives powers to the government to bring a simpler compliance regime for small companies.

Officials said the new Act has drafted a single comprehensive legal framework that would govern everything corporate - from incorporation to liquidation and winding up - to be administered by the Centre. The bill also harmonises the company law framework with the imperative of specialised sectoral regulation, an official release said.

The new law has also modified provisions for audit of government companies by Comptroller and Auditor General of India (CandAG). The modification has been made to enable CandAG perform such audits more effectively.

THANJAVUR VEENA TO BE FIRST INDIAN INSTRUMENT TO GET 'MADE IN THANJAVUR' TAG

Since from yearly sangam age the Thanjavur veena marks a important place in music history of Tamilnadu. For long, musicians playing the Thanjavur veena made news. Now the veena and the artisans of Tamil Nadu have a chance. The veena is likely to get a 'Geographical Indication' registration, making it the first musical instrument to get such a registration in the country.Goods having specific geographical origin and possessing "distinct qualities, reputation or characteristics essentially attributable to that place of origin" are usually given the GI tag. The registration will help the famous veena get the tag Made in Thanjavur. Such a recognition would prevent the misuse of its name/reputation. Chinnaraja G Naidu, Assistant Registrar of Trade Marks and GI Registry told The Hindu that for the first time his registry had received application for registration of a musical instrument.According to Intellectual Property Rights (IPR) attorney P Sanjay Gandhi, who has obtained GI tags for a record 10 products unique to the state, the GI protection for Thanjavur Veena is to be given in favour of the Thanjavur Musical Instruments Workers Cooperative Cottage Industrial Society Limited, reported Times of India.The veena's history records back to the Vedic times. Identified with goddess Saraswati, the veena also finds mention in the Ramayana and the Mahabharata. But the current form of the Saraswathi Veena with 24 fixed frets evolved in Thanjavur during the reign of Raghunath Nayak.The veena is about four feet in length consisting of a large resonator (kudam), a wooden bridge (kudurai), a tapering hollow neck (dandi) and a small resonator. And is it unique to Thanjavur because the instrument is made from a particular strain of matured jack fruit tree found only in that area.The body of the Thanjavur Veena is painted and engraved with delicate wood work, which usually consists of picture of god and goddess, motifs of flowers or birds. Great art and craftsmanship are required in the making of the Veena, and even a minute flaw can spoil the tone of the instrument.In Chennai, the creation of sabhas attracted a lot of musicians. But with the disintegration of feudalism in Thanjavur, temples there fell on bad days and lack of patronage forced musicians to migrate to cities in search of career avenuesToday, there are few musicians in the district, and only festivals and concerts serve as reminders of the days when music flourished in every village.The only link between music and Thanjavur was carried forward by the makers of the musical instruments. The craftsmanship in making the instrument was handed over from one generation to the other of Viswakarmas. But gradually, the younger generation stopped coming forward.And today, even less than 100 artisans in Thanjavur are involved in the profession.If granted, Thanjavur Veena would become the 19th product to obtain GI recognition from Tamil Nadu. And maybe, this would encourage many many craftsmen across the country.

CYBERSQUATTING – THE DIGITAL VERSION OF PASSING OFF

Introduction

In this large and tangled web of the internet called “Cyberspace” the most common way for consumers to find what they are looking for is to type the Domain name of the brand or company they looking for, the natural connection between trademarks and domain names has been explored by some who have the trademarks of others as domain names and then tried to sell those domain names back to the trademark owners or third parties at a high price, which is known as “Cybersquatting”[1]. Cyber squatting is the most crucial type of domain dispute prevalent around the world. It is summarized well in Manish Vij v. Indra Chugh,[2] the court held that “an act of obtaining fraudulent registration with intent to sell the domain name to the lawful owner of the name at a premium”. This is an abusive practice which is a form of trafficking domain names.

Types of Cyber Squatting

Cyber squatting can be of various types, most common type is typo squatting, when a cyber squatter registers domain names containing variant of popular trademarks. Typo squatters mainly rely on a fact that Internet users will make typographical errors when entering domain names into their web browsers. Some common examples of typo squatting include: The omission of the “dot” in the domain name: wwwindia.com;

A common misspelling of the intended site: india.com, A differently phrased domain name: indias.com, A different top-level domain: india.org.

Trade mark

Trade mark means a mark capable of being represented graphically and which is capable of being represented graphically and which is capable of distinguishing goods and services from one person of others and may include shape of goods, their packing and combination of colours.[3]

Deceptive similarity

Deceptive similarity[4] generally means one person using any Trade mark which is identical or deceptively similar to the Trade mark which is already in use, whether registered or unregistered, it can also be called as Passing off when one tries to pass off his goods with the Trade mark or name of another and it is an offence punishable under relevant law, but this is in regular format when it comes to cyber space.?

Deceptive similarity in Cyber space

The domain name is simply the address of an individual computer connected to the Internet. From a user's point of view, a domain name is an IP address in a human-friendly form and if the human-friendly form of the IP address coincides with the name of a business or a trademark, it becomes a valuable asset. Domain names can incorporate trademarks in a number of ways. The most obvious is the verbatim adoption of the mark followed by a gTLD, such as addidas.com. A person who is not the trademark owner and registers the trademark as a domain name engages in relatively straightforward trademark infringement. However, trademark infringement can also take the form of trademark dilution, which is prohibited under the U.S. Federal Trademark Dilution Act (FTDA). The purpose of this act is to protect owners of famous marks against dilution and tarnishing of their mark.

Innocent squatting

A trademark is not infringed by a domain name unless the trademark existed at the time of domain name registration. This kind of cybersquatting is speculative and legitimate. John D. Mercer also identifies "innocent" cybersquatting,[5] whereby the registrant does infringe a trademark "based on some unrelated interest in the word itself, without intending harm to a trademark owner" and "concurrent" cybersquatting, whereby the registrant uses the same trademark as another commercial entity, but not within a competing industry.

Intentional squatting

The harmful kind of cybersquatting involves intentional bad faith trafficking in domain names that are the same as, or a dilution of, existing trademarks. Mercer offers a fitting definition: "an illegal cybersquatter should be one who acquires a domain name for the sole purpose of obtaining money or other advantage from the trademark owner, with no intent or desire to use the domain name, except as an instrument toward this purpose.

Creating Likelihood of Confusion

The main function of a trademark is to prevent consumer confusion. A consumer knows that he or she can get the same quality food in a McDonald’s in Chennai as he or she can from a McDonald’s in Bangalore. Given our global economy, the importance of trademarks cannot be overstated. The law of trademarks is designed to prevent competitors from confusing customers into thinking that they are buying products and services from a trusted, known source when in reality, this is not the case. A competitor who uses a trademark that is confusingly similar to an existing trademark can be prevented from doing so by the application of trademark law. This usually occurs when the holder of the trademark raises a claim or sues the alleged infringer.

In order to prove trademark infringement, the owner of the trademark must show that there is a “likelihood of confusion”[6] between his or her trademark and the allegedly infringing mark. Over many years and many cases, the courts have set forth a list of eight to 13 elements that are relevant to this determination. This article will discuss the two or three most important of these elements and provide examples of how each element is applied in practice. The most important element of the likelihood of confusion analysis is a comparison of the appearance, pronunciation, meaning, and commercial impression of the respective marks. Obviously, if the marks are exactly the same in spelling and how they are pronounced, there is a greater chance of likelihood of confusion between the marks. It is important to note that slight misspellings or changes in an established mark will not enable a competitor to use his proposed mark. For example, a beverage manufacturer could not adopt the mark “Koka Kola,” because although this mark is spelled differently from the famous Coca-Cola mark, it is still pronounced the same.

Factors for Likelihood Confusion

1. the similarity in the overall impression created by the two marks (including the marks' look, phonetic similarities, and underlying meanings);

2. the similarities of the goods and services involved (including an examination of the marketing channels for the goods);

3. the strength of the plaintiff's mark;

4. any evidence of actual confusion by consumers;

5. the intent of the defendant in adopting its mark;

6. the physical proximity of the goods in the retail marketplace;

7. the degree of care likely to be exercised by the consumer; and

8. the likelihood of expansion of the product lines

Legal Issues

As stated in the above headings the Cybersquatting cannot be brought within a purview of a single Law. It can be brought under Trademark infringement in some cases, Deceptive similarity in some cases, passing off in some cases, but regarding my concern the Deceptive similarity and passing off suits it more even it is a Trademark infringement, though there are no proper provisions to punish Cyber squatters across world, but developed countries like U.S, Canada, U.K are having provisions in their respective laws for this.

Legal resolution in different countries

The domain name disputes involving alleged bad-faith registration are typically resolved using the (UDRP)[7] process developed by the Internet Corporation for Assigned Names and Numbers (ICANN)[8]. Critics claim that the UDRP process favors large corporations and that their decisions often go beyond the rules and intent of the dispute resolution policy. A UDRP complaint may be initiated at UDRP proceeding with an approved dispute resolution service provider. A victim of cybersquatting may also file an InterNIC Registrar Problem Report regarding a cybersquatter posing as a registrar.

Some countries have specific laws against cybersquatting beyond the normal rules of trademark law.

In U.S

The United States, for example, has the U.S. Anticybersquatting Consumer Protection Act.[9] This expansion of the Lanham (Trademark) Act (15 U.S.C.) is intended to provide protection against cybersquatting for individuals as well as owners of distinctive trademarked names.

Australia

Any citizen of Australia over the age of 16 can obtain an ABN[10] (which is free) and use it to register as few or as many domain names as they like but they need to have a "close and substantial" connection to the name or it needs to be an "exact match, abbreviation or acronym" of their name.

Internationally

The copyright agency of United Nations, WIPO[11] has provided an arbitration system since 1999, wherein a trademark holder can attempt to claim a squatted site. In 2006, there were 1823 complaints filed with WIPO, which was a 25% increase over the 2005 rate. In 2007 it was stated that 84% of claims made since 1999 were decided in the complaining party's favor.

Worldwide Specific Resolution Systems

ICANN

To reach another person on the Internet you have to type an address into your computer -- a name or a number. That address must be unique so computers know where to find each other. ICANN coordinates these unique identifiers across the world. Without that coordination, we wouldn't have one global Internet.

In more technical terms, the Internet Corporation for Assigned Names and Numbers (ICANN) coordinates the Domain Name System (DNS), Internet Protocol (IP) addresses, space allocation, protocol identifier assignment, generic (gTLD) and country code (ccTLD) Top-Level Domain name system management, and root server system management functions. These services were originally performed under U.S. Government contract by the Internet Assigned Numbers Authority (IANA) and other entities. ICANN now performs the IANA function.[12]

Uniform Domain Name Dispute Resolution Policy

For coordinating the assignment of Internet domain names, ICANN has established the Uniform Domain Name Dispute Resolution Policy (UDRP). The UDRP is “an alternative form of dispute resolution [designed] to combat cybersquatting”.[13] As such, dispute resolution under the UDRP provides a quick and less expensive solution to cybersquatting.

To bring a successful claim under the UDRP, a complainant must establish that the domain name is “identical or confusingly similar to a trademark or service mark in which the complainant has rights,” the registrar has “no rights or legitimate interests” in the domain name, and the “domain name has been registered and is being used in bad faith.”[14] Mark owners can bring UDRP administrative proceeding claims against registrants of domain names; as long as the registrants have registered the domain names through an ICANN accredited registrar.[15] These are the two main dispute resolution system for Cyber squatting issues globally.

U.S the leading protector

Anticybersquatting Consumer Protection Act[16]

The U.S is the leading country to enact specific law for protecting consumers from Cyber squatting. This expansion of the Lanham (Trademark) Act (15 U.S.C.) is intended to provide protection against cyber squatting for individuals as well as owners of distinctive trademarked names.

A victim of cyber squatting in the United States has two options:

a. sue under the provisions of the Anti cyber squatting Consumer Protection Act (ACPA), or

b.use an international arbitration system created by the Internet Corporation of Assigned Names and Numbers (ICANN).

In court system, jurisdiction is often a problem, as different courts have ruled that the proper location for a trial is that of the plaintiff, the defendant, or the location of the server through which the name is registered.

Indian Scenario

In India victims of cyber squatting have several options to combat cyber squatting. These options include: sending cease-and-desist letters to the cyber squatter, bringing an arbitration proceeding under ICANN’s rules, or bringing a lawsuit in state or federal court. Whatever strategy a victim of cyber squatting elects to use, that person should not dismiss the serious effects that cyber squatting can have if left unchecked.

A case could be filed with the .in registry handled by National Internet Exchange of India(NiXI) who brings the matter to fast track dispute resolution process whereby decisions are transferred within 30 days of filling a complaint.

Like always our legal system is silent on this matter too, there is no provision in the current or proposed Information Technology Act in India to punish cyber-squatters, at best, the domain can be taken back. Though there is no legal compensation under the IT Act, .in registry has taken proactive steps to grant compensation to victim companies to deter squatters from further stealing domains. Most squatters however operate under guise of obscure names.

Case study

In U.S

Intermatic Inc. v. Toeppen[17]

Plaintiff Intermatic, owner of the trademark INTERMATIC in connection with electronic equipment, sought to enjoin defendant Toeppen from using the domain name “intermatic.com.” In addition to registering “intermatic.com,” Toeppen had registered over 200 domain names containing names of well-known companies. Toeppen never used the domain name “intermatic.com” to sell or promote any goods or services over the Internet. His “intermatic.com” website initially contained information about a software program he was developing called “Intermatic,” but after a week he replaced the contents of the site with a map of Champaign-Urbana, Illinois. Toeppen did, however, intend to profit by selling or licensing the domain name to Intermatic. Intermatic filed a motion for summary judgment. Although the court found that certain factors weighed in favor of Intermatic on its infringement claim, summary judgment was inappropriate on that claim because of factual disputes on other factors (similarity in products, no evidence of actual confusion, and whether Toeppen willfully intended to pass his products off as those of Intermatic). The court, however, granted summary judgment to Intermatic on its dilution claim under the Federal Dilution Act, finding that INTERMATIC was a famous mark and that Toeppen’s intent to arbitrage the “intermatic.com” domain name constituted a “commercial use” under the Act. The court permanently enjoined Toeppen from using the mark INTERMATIC, from taking any action to prevent Intermatic from obtaining the domain name “intermatic.com,” and from asserting any further interest in that domain name.

In India

Yahoo! Inc. v. Akash Arora and another,[18]

CASE FACTS

Yahoo Incorporation is the owner of the well known trade mark, Yahoo and of the  domain name Yahoo.com; both the trademark and the domain name acquired a distinctive name, good will and reputation. Yahoo.com had been registered by Yahoo Inc with Network Solution Inc since 1995 and offers a whole range of web based services.

The trade mark Yahoo had been registered or was close to being registered in 69 countries. Yahoo Inc had not registered its domain name in India. Akash Arora started to offer web-based services similar to those offered by Yahoo.com under the name of Yahoo India. Yahoo Inc had sued Akash Arora for using a trade mark deceptively similar to its own and passing off his services as those offered by Yahoo Inc.

ISSUE:

Whether the act of Akash Arora in registering the domain name Yahoo India, to offer services similar to those offered by Yahoo Inc, is an infringement of the trade mark of Yahoo Inc and amounts to passing-off under the relevant sections of the Trademark and Merchandise Act?

RULE OF LAW

When a defendant does business under a name which is sufficiently close to the name under which the plaintiff is trading and that name has acquired a reputation and the publicat large is likely to be misled that the defendant's business is the business of the plaintiff, or is a branch or department of the plaintiff, the defendant is liable for an action in passing off.

ANALYSIS:

Yahoo Inc contended that Akash Arora adopted the domain name of Yahoo to offer services similar to those of Yahoo Inc and had attempted to cash in on the good will generated by Yahoo Inc. because there was every possibility of an Internet user getting confused and deceived, believing that both the domain names, Yahoo and Yahoo India belong to Yahoo Inc.. Therefore, Yahoo Inc. argued that Akash is liable for passing off.[19]

As the two trade marks/domain names 'Yahoo!' and 'Yahoo India!' were almost similar and the latter offered services similar to those offered by the former and as the latter passed them off as being offered by Yahoo Inc., the court held Akash liable for passing off and restrained him from using the deceptively similar domain name.

The decision of the court in this case is based on the rationale that where the value of a name lies solely in its resemblance to the name or trade mark of another organization, the public is likely to be deceived by the use of such name and such act would amount to passing off.

Critical Analysis

By analyzing the above cases the courts gave same decision both in India and in U.S that Cybersquatting amounts to Trademark dilution and Passing off, it seems that Cyber squatting is a serious case of Trademark infringement and there are legal remedies available for the persons who affected. Though it is a newly developed scenario in IP law and most of the IP laws not having enough provisions to punish the Squatters the courts are acting brilliantly and doing a good job in making good decisions.

Conclusion

The current situation prevailing in the world is certain that cybersquatting is a menace. It is a menace which has no boundaries. In my opinion, it is similar to terrorism. The only difference is that in the latter human life is affected. Cybersquatters have robbed businesses of their fortune. Looking from the Indian perspective cybersquatting has been prevalent since internet came to the subcontinent. The courts in India have decided many cases related to cybersquatting. It is the imperitive for the parliament to enact a law which would deal with this Cyber terrorism. As for as now there is no specific law which prohibits cybersquatting like that of the United States.

Cybersquatting has opened the eyes of governments globally and has prompted them to look into this phenomenon in a serious manner. The United States by enacting the ACPA, has taken a encouraging step in protecting domain names in its cyberspace. It is high time India and other countries come out with legislations to protect this virus from spreading. If India enacts a specific law for protecting Trademarks from Cyber squatting then it will be “One small step for a man, a gaint leap for the Mankind” as said by Neil Armstrong.

Refernces:

Bibiliography:

1. guide to cyber laws – Rodney R. Ryder

2. Trademarks act, 1999

3. The Economic structure of IPR – William M. Landens

4. Commentary on Information Technology Act – Apar gupta

5. Inside Cyber Warfare : Mapping the Cyber World – Jeffrey carr

6. Indian Law Journal

7. Brain league Journal

Webiliography:

1. www.wipo.int/

2. Cybersquatting.com

3. http://www.tms.org/pubs/journals/JOM/matters/matters-0212.html

4. www.icann.org

5. www.indiakanoon.org

6. www.internetlibrary.com

[1] Guide to Cyber laws by Rodney D Ryder

[2] All India reporter 2002 Del 243

[3] Trade marks act,1999

[4] Trademarks act, 1999

[5] John D. Mercer, "Cybersquatting: Blackmail on the Information Superhighway" (2000) 6 Boston University Journal of Science and Technology Law, 11.

[6] http://www.tms.org/pubs/journals/JOM/matters/matters-0212.html

[7] Uniform Domain Name Resolution Policy

[8] Internet Cooperation for Assigned Names and Numbers

[9] ACPA of 1999

[10] Australian Business Number

[11] World Intellectual Property Organization

[12] http://www.icann.org/en/about

[13] Dara B. Gilwit, Note, The Latest Cybersquatting Trend: Typosquatters, Their Changing Tactics, and How to Prevent Public Deception and Trademark Infringement, 11 WASH. U. J.L. & POL’Y 267, 282 (2003).

[14] ICANN, Uniform Domain Name Dispute Resolution Policy, ¶ 4(a)(i)-(iii),

[15]ICANN, FAQs, supra note 15.

[16] ACPA, 1999

[17] 947 F. Supp. 1227 (N.D. Ill. 1996) decided by ANN CLAIRE WILLIAMS, District Judge

[18]Arb. L. R. 620 (Delhi High Court).

[19] Brain league journal

THE NEEM PATENTS - AN IP THEFT

The Issues




The United States and India are currently involved in a biopiracy dispute over the rights to a tree indigenous to the Indian subcontinent, the neem tree. While the neem tree has been used in India for over 2000 years for various purposes such as pesticides, spermicides and toothbrushes, a US company has been suing Indian companies for producing the emulsion because they have a patent on the process. The dispute is over the rights of companies to conduct research and development by using patents against the interest of the people who live at the source of the resource. To what extent can multinational companies claim and patent resources from the develping countries, like India? The movement around the issue of the neem tree and trade-related aspects of intellectual property rights (TRIPS) represents a challenge to the developing countries.





Case Study




A classic case of biopiracy by transnational corporations is that of the neem tree in India. Vandana Shiva provides the background to this attempt to appropriate an invaluable biological resource of the South.


DURING 1994, Indian farmers staged one mass demonstration after another against the proposed GATT Uruguay Round agreement. In March about 200,000 gathered in Delhi demanding, among other things, that the draft treaty - known colloquailly as 'the Dunkel draft' after chief negotiator, Arthur Dunkel - should be translated into all Indian languages. On 2 October, about half a million converged upon Bangalore to voice their fears about the impending legislation, aware of the threat that GATT poses to their livelihoods, by allowing multinational organisations to enter Third World markets at their expense.



In particular, many of them began to question the Dunkel Draft's call for an international harmonisation of property rights legislation. In their demonstrations, protesters carried twigs or branches of neem, a tree found throughout the drier areas of India.


Several extracts of neem have recently been patented by US companies, and many farmers are incensed at what they regard as intellectual piracy. The village neem tree has become a symbol of Indian indigenous knowledge, and of resistance against companies, which would expropriate this knowledge for their own profit.



A tree for all seasons



Of all the plants that have proved useful to humanity, a few are distinguished by astonishing versatility. The coconut palm is one, bamboo another. In the more arid areas of India, this distinction is held by a hardy, fast-growing evergreen of up to 20 metres in height - Azadirachta indica, commonly known as the neem tree.



The neem's many virtues are to a large degree attributable to its chemical constituents. From its roots to its spreading crown, the tree contains a number of potent compounds, notably a chemical found in its seeds named azadirachtin. It is this astringency that makes it useful in so many fields.



Medicine


Neem is mentioned in many ancient texts and traditional Indian medical authorities place it at the pinnacle of their pharmacopeia. The bark, leaves, flowers, seeds and fruit pulp are used to treat a wide range of diseases and complaints ranging from leprosy and diabetes to ulcers, skin disorders and constipation.



Agriculture



The Upavanavinod, an ancient Sanskrit treatise dealing with forestry and agriculture, cites neem as a cure for ailing soils, plants and livestock. Neem cake, the residue from the seeds after oil extraction, is fed to livestock and poultry, while its leaves increase soil fertility. Most importantly, neem is a potent insecticide, effective against about 200 insects, including locusts, brown plant-hoppers, nematodes, mosquito larvae, Colorado beetles and boll weevils.


These properties, and others, known to Indians for millennia, have led to the tree's being called in Sanskrit Sarva Roga Nivarini, the curer of all ailments', or in the Muslim tradition, Shajar-e-Mubarak, the blessed tree'. Access to its various products has been free or cheap: there are some 14 million neem trees in India and the age-old village techniques for extracting the seed oil and pesticidal emulsions do not require expensive equipment. A large number of different medicinal compounds based upon neem are commonly available.


In the last 70 years, there has been considerable research upon the properties of neem carried in institutes ranging from the Indian Agricultural Research Institute and the Malaria Research Centre to the Tata Energy Research Institute and the Khadi and Village Industries Commission (KVIC). Much of this research was fostered by Gandhian movements, such as the Boycott of Foreign Goods movement, which encouraged the development and manufacture of local Indian products.


A number of neem-based commercial products, including pesticides, medicines and cosmetics, have come on the market in recent years, some of them produced in the small-scale sector under the banner of the KVIC, others by medium-sized laboratories. However, there has been no attempt to acquire proprietary ownership of formulae, since, under Indian law, agricultural and medicinal products are not patentable.



Patent appeal


For centuries the Western world ignored the neem tree and its properties: the practices of Indian peasants and doctors were not deemed worthy of attention by the majority of British, French and Portuguese colonialists. However, in the last few years, growing opposition to chemical products in the West in particular to pesticides, has led to a sudden enthusiasm for the pharmaceutical properties of neem.


In 1971, US timber importer Robert Larson observed the tree's usefulness in India and began importing neem seed to his company headquarters in Wisconsin. Over the next decade he conducted safety and performance tests upon a pesticidal neem extract called Margosan-O and in 1985 received clearance for the product from the US Environmental Protection Agency (EPA). Three years later he sold the patent for the product to the multinational chemical corporation, W R Grace and Co. Since 1985, over a dozen US patents have been taken out by US and Japanese firms on formulae for stable neem-based solutions and emulsions and even for a neem-based toothpaste.


At least four of these are owned by W R Grace, three by another US company, the Native Plant Institute, and two by the Japanese Terumo Corporation.Having garnered their patents and with the prospect of a licence from the EPA, Grace has set about manufacturing and commercialising their product by establishing a base in India. The company approached several Indian manufacturers with proposals to buy up their technology or to convince them to stop producing value-added products and instead supply the company with raw material.


In many cases, Grace met a rebuff. M N Sukhatme, Director of Herringer Bright Chemicals Pvt. Ltd, which manufactures the neem-based insecticide Indiara, was put under pressure by Grace to sell the technology for a storage-stable neem extract, which does not require heating or any chemical change. Sukhatme refused their offers, stating: 'I am not interested to commercialise the product.'


But Grace eventually managed to arrange a joint venture with a firm called P J Margo Pvt. Ltd. They are now setting up a plant in India which will process neem seed for export to the US. Initially, the plant will process 20 tons of seed a day. They are also setting up a network of neem seed suppliers, to ensure a constant supply of the seeds and a reliable price. Grace is likely to be followed by other patent-holding companies. In 1992, the US National Research Council published a report designed to 'open up the Western world's corporate eyes to the seemingly endless variety of products the tree might offer'.


According to one of the members of the NRC panel, 'In this day and age, when we're not very happy about synthetic pesticides, [neem] has great appeal.'


This appeal is blatantly commercial. The US pesticides market is worth about $2 billion. At the moment biopesticides, such as pyrethrum, together with their synthetic mimics, constitute about $450 million of this, but that figure is expected to rise to over $800 million by 1998. 'Squeezing bucks out of the neem ought to be relatively easy,' observes Science magazine.



Plagiarism or innovation?


Grace's aggressive interest in Indian neem production has provoked a chorus of objections from Indian scientists, farmers and political activists, who assert that multinational companies have no right to expropriate the fruit of centuries of indigenous experimentation and several decades of Indian scientific research. This has stimulated a bitter transcontinental debate about the ethics of intellectual property and patent rights.


In April 1993, a Congressional Research Service (CRS) report to US Congress set out some of the arguments used to justify patenting:


'Azadirachtin itself is a natural product found in the seeds of the neem tree and it is the significant active component. There is no patent on it, perhaps because everyone recognises it as a product of nature. But ... a synthetic form of a naturally occurring compound may be patentable, because the synthetic form is not technically a product of nature, and the process by which the compound is synthesised may be patentable.'


However, neither azadirachtin, a relatively complex chemical, nor any of the other active principles have yet been synthesised in laboratories. The existing patents apply only to methods of extracting the natural chemical in the form of a stable emulsion or solution, methods which are simply an extension of the traditional processes used for millennia for making neem-based products. The biologically active polar chemicals can be extracted using technology already available to villages in developing countries, says Eugene Schulz, chair of the NRC panel. Villagers smash'em [the seeds] up, soak [them] in cold water overnight, scoop the emulsion off the top and throw it on the crops.'

W R Grace's justification for patents, therefore, pivots on the claim that these modernised extraction processes constitute a genuine innovation:

'Although traditional knowledge inspired the research and development that led to these patented compositions and processes, they were considered sufficiently novel and different from the original product of nature and the traditional method of use to be patentable.'

'Azadirachtin, which was being destroyed during conventional processing of Neem Oil/Neem Cake is being additionally extracted in the form of Water Soluble Neem Extract and hence it is an add-on rather than a substitute to the current neem industry in India.'


In short, the processes are supposedly novel and an advance on Indian techniques. However, this novelty exists mainly in the context of the ignorance of the West. Over the 2,000 years that neem-based biopesticides and medicines have been used in India, many complex processes were developed to make them available for specific use, though the active ingredients were not given Latinised scientific names. Common knowledge and common use of neem was one of the primary reasons given by the Indian Central Insecticide Board for not registering neem products under the Insecticides Act, 1968. The Board argued that neem materials had been in extensive use in India for various purposes since time immemorial, without any known deleterious effects. The US EPA, on the other hand, does not accept the validity of traditional knowledge and has imposed a full series of safety tests upon Margosan-O.


The allegation that azadirachtin was being destroyed during traditional processing is inaccurate. The extracts were subject to degradation, but this was not a problem since farmers put such extracts to use as and when they needed them. The problem of stabilisation arose only when it needed to be packaged for a long time to be marketed commercially. Moreover, stabilisation and other advances attributable to modern laboratory technology had already been developed by Indian scientists in the 1960s and 1970s, well before US and Japanese companies expressed interest in them.



Dr R P Singh of the Indian Agricultural Research Institute asserts:


'Margosan-O is a simple ethanolic extract of neem seed kernel. In the late sixties we discovered the potency of not only ethanolic extract, but also other extracts of neem ... Work on the neem as pesticide originated from this division as early as 1962. Extraction techniques were also developed by a couple of years. The azadirachtin-rich dust was developed by me.' The reluctance of Indian scientists to patent their inventions, thus leaving their work vulnerable to piracy, may in part derive from a recognition that the bulk of the work had already been accomplished by generations of anonymous experimenters. This debt has yet to be acknowledged by the US patentors and their apologists. The CRS report claims that 'the method of scattering ground neem seeds as a pesticide would not be a patentable process, because this process ... would be deemed obvious' - a statement that betrays either lamentable misjudgement or a racist dismissal of indigenous knowledge. The discovery of neem's pesticidal properties and of how to process it was by no means 'obvious', but evolved through extended systematic knowledge development in non-Western cultures. In comparison to this first non-obvious leap of knowledge, it is the subsequent minor derivatives that are 'obvious'.



From waste to wealth?



W R Grace and P J Margo also claim that their project benefits the Indian economy. It does so, they say, by'providing employment opportunities at the local level and higher remuneration to the farmers as the price of Neem Seeds has gone up in the recent times because value is being added to it during its process. Over the last 20 years the price of neem seed has gone up from Rs300 a ton to current levels of Rs3000-4000 a ton.'


In fact, the price has risen considerably more than this: in 1992 Grace was facing prices of up to $300 (over 8,000 rupees) per ton.


This increase in the price of neem seeds has turned an often free resource into an exorbitantly priced one, with the local user now competing for the seed with an industry supplying consumers in the North. As the local farmer cannot afford the price that the industry can, the diversion of the seed as raw material from the community to industry will ultimately establish a regime in which a handful of companies holding patents will control all access to neem as raw material and all production processes. P J Margo claims that this is 'a classic case of converting waste to wealth and beneficial to the Indian farmer and its economy'. This statement is in turn a classic example of the assumption that local use of a product does not create wealth but waste; and that wealth is created only when corporations commercialise the resources used by local communities.


There is a growing awareness throughout India that the commoditisation of neem will result in its expropriation by multinational companies. On 15 August, Indian Independence Day, farmers in the state of Karnataka rallied outside the offices of the District Collector in each district, to challenge the claims of those multinational companies such as W R Grace demanding 'intellectual property rights'. The farmers carried neem branches as a symbol of collective indigenous knowledge.



Last but not Least



Their campaign has been supported by many noted Indian scientists. Dr R P Singh expressed his 'whole [hearted] support [for the] campaign against the globalisation of the neem.' Dr B N Dhawan, Emeritus Scientist at the Central Drug Research Institute, maintains: 'It is really unfortunate that the benefits of all this work should go to an individual or to a company. I sincerely hope that .. the neem will continue to remain available for use by people all over the world without paying a high price to a company.'