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Wednesday, Feb 11, 2004

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`But I am the original'

Vishwanath Kulkarni

Why would sales of certain chips decline drastically in a short time, Analog Devices India asked itself. It found the answer in what the company considered counterfeit chips from China. Here's how it addressed the issue.

WHAT will a company do when its sales take a hit of close to 50 per cent over six months? Well, the natural reaction would be to take stock of why the sales fell and try boosting them by taking various measures. However, Analog Devices India Private Limited, after finding out why sales of its certain chips were declining went to seek a legal remedy.

Because, cheaper chips — that it alleges are counterfeit — from China had eaten significantly into its market share in India and the company thought of legal re-course as it had become a victim of violation of intellectual property rights (IPRs). The semiconductor chip in question — ADE 7751, is one among the range of chips that Analog Devices sells in India. This particular chip is used in manufacturing electronic metering systems.

Analog had about 80 per cent market share for these chips in India especially from mid-to-late 2000, says Ashok Kamath, Managing Director, Analog Devices India. The annual market size in India for energy meters is estimated to be 30 million and almost half of them use the semiconductor chips. The demand for electronic metering systems gained momentum especially after the power sector reforms were set in motion.

Analog's chip makes these electronic metering systems tamperproof and catered close to 25 manufacturers in the country. In fact, some of the tenders for manufacturing the electronic metering systems are stipulated and funded by the World Bank. However, in 2001 the number of units shipped by Analog started declining.

Over a period of six to seven months, the sales fell by as much as 50 per cent, Kamath says. The declining sales forced the company to probe the reason, which suggested that chips - that it claims were counterfeits - from China had invaded the Indian market and that its copyrights were violated.

"For over 20 years, Analog Devices has worked closely with the Indian technology community and built a reputation for high-quality products in India.We are committed to ensuring our customers are protected against counterfeiters of our chips and technology. ," says Kamath. The company went to the Delhi High Court against the Chinese semiconductor manufacturer Shanghai Belling Company and its distributor in India, HiTek Electronics alleging violation and infringement of copyrights. Analog's suit states that Belling had copied its energy metering chips and was wrongfully trying to pass-off Belling's chips as substitutes for Analog's. The suit alleged that chips manufactured by Belling violated the intellectual property of Analog Devices in India, where millions of digital energy metering chips are used in meters to measure the use of electricity in homes, apartments, and businesses.

Belling, the suit maintains, pirated the technology and sold the counterfeit devices to meter manufacturers throughout India.

The Delhi High Court appointed a commissioner to probe the product and granted an interim injunction pending further hearings. The court ordered the distributor to immediately stop importing and distributing energy-metering semiconductor chips by Belling because the chips were counterfeits. Analog claims that the even the application notes, a usage document for customers, had been copied word-for-word.

Only the part-numbers were different, it adds. Says cyber law expert and Supreme Court lawyer Pawan Duggal, "I personally believe that this order is in sync with India's commitment towards protecting the IPR of a legal entity. We already have appropriate Intellectual Property Right laws in the country including Copyright Act, Trademark Act, 1999 and the Patent Act. In addition, in the specific context of semiconductors we have a Semiconductor Act, 2002. Since Semiconductor chips are original Intellectual Property creations, they attract the application of patent law as well as Copyright law. Counterfeit chips indeed violate the Intellectual Property Rights of the owner of the Intellectual Property."

The passing of the interim order of the Delhi High Court is a welcome move from the perspective of the Indian Technology sector, he says. This would also send positive signals to the companies outside India who want to increasingly outsource their R&D activities to India, Duggal adds. This judgment shows that the courts here are ready to apply the IPR laws in respect of complicated technical devices and processes including semi conductor chips.

Orders such as this point to corporates outside India of the country's commitment to protecting technical IPRs.

"However, we need to take more measures to protect Intellectual Property. We need to have specialised technology Intellectual Property courts across the country, which would enable quick dispensation of justice. Unfortunately, filing of criminal action for criminal liability for copyright infringement under the Copyright Act is a harrowing experience for all companies," opines Duggal.

He also believes there is a need for creating enough sensitisation amongst the law enforcement agencies across India regarding taking effective and quick action against infringers of IPRs. Further, India needs to enact more enabling legislation for protecting Intellectual Property in the country. This is all the more pertinent given the rampant and buoyant growth of technological application in different parts of India, he adds.

Picture by Sandeep Saxena

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