Supreme Court recently examined interplay between copyright and design protection in a dispute concerning infringement of intellectual property rights regarding the design and manufacturing of internal parts of cryogenic storage tanks and distribution systems used for transporting industrial gases and liquefied natural gas (LNG). The judgement addresses the maintainability of the appeals and the application of the Copyright Act and the Designs Act in the context of intellectual property rights related to cryogenic storage tanks.

The core dispute revolves around whether the ‘Proprietary Engineering Drawings’ qualify as drawings under Section 2(c) of the Copyright Act or whether they fall within the definition of a ‘design’ under Section 2(d) of the Designs Act.

Brief Facts:

1. Inox India Limited (Inox), filed Trademark Suit No. 3/2019 (Suit) before the Commercial Court in Indore against the Appellants, i.e. Cryogas Equipment Private Limited (Cryogas) and LNG Express India Private Limited (LNG Express). Inox primarily alleged that Cryogas, LNG Express, and others had infringed two distinct types of copyright:
   1. the drawings of LNG Semi-trailers developed by Inox (Proprietary Engineering Drawings); and
   2. the details, processes, descriptions and narrations written by Inox employees in creating the Proprietary Engineering Drawings (Literary Works).

Inox claimed that these IPs were developed to meet the specific requirements for storing and transporting sophisticated LNG Semi-trailers suitable for Indian roads. In this Suit, Inox sought relief in terms of: (i) a declaration that Cryogas, LNG Express and others have infringed Inox’s Proprietary Engineering Drawings, IP and Literary Works; (ii) a permanent injunction restraining Cryogas, LNG Express and the other associated parties from using or reproducing any drawings or works similar to that of Inox’s Proprietary Engineering Drawings or Literary Works; (iii) a permanent injunction against the use of any IP or know-how associated with manufacturing the impugned products; (iv) an order directing Cryogas, LNG Express and others to surrender all infringing materials for destruction, including drawings, trailers, labels and other items using the Proprietary Engineering Drawings; and (v) an award of damages amounting to Rs. 2 Crores for copyright infringement.

1. In response, LNG Express filed an application under Order VII Rule 11 of the CPC, seeking rejection of the Suit on the grounds that the Proprietary Engineering Drawings fell within the definition of a ‘design’ under the Designs Act, 2000, and that Inox had lost copyrights by failing to register them under the Designs Act. They argued that copyright does not subsist in any design that is registered or capable of being registered under the Designs Act once it has been reproduced more than fifty times by an industrial process.
2. The Commercial Court initially allowed the application filed by LNG Express, rejecting Inox’s plaint and application for interim injunction. However, the High Court set aside the Commercial Court’s order and remanded the matter for fresh consideration. The Commercial Court again rejected Inox’s plaint, leading Inox to approach the High Court once more. The High Court set aside the Commercial Court’s orders, reinstating Inox’s interim injunction application and directing the Commercial Court to decide the matter on its merits independently.
3. The Supreme Court heard the appeals arising from the High Court’s judgement (dated October 22, 2024), which had set aside the Commercial Court’s order and restored the Suit filed by Inox.

The Supreme Court in the context of IP rights examined the following issue

• What are the parameters for determining whether a work or an article falls within the limitation set out in Section 15(2) of the Copyright Act, thereby classifying it as a ‘design’ under Section 2(d) of the Designs Act

The Court while examining the above issue observed

• Distinction Between Artistic Work and Design: The Court clarified that the distinction between a ‘design’ under the Designs Act and an ‘artistic work’ under the Copyright Act is crucial. The intent of producing an original artistic work is not determinative of its protection under the Copyright or Designs Regime. Instead, the legislative intent is to harmonize the two statutes so that while an ‘artistic work’ qualifies for copyright protection, its commercial or industrial application—i.e., the ‘design’ derived from the original work for industrial production—is subject to the limitations set out in Section 15(2) of the Copyright Act. The court noted Section 15(2) of the Copyright Act serves as a limitation on the protection granted to artistic works under the Act. Allowing Inox’s claim may result in a cascading effect, potentially allowing every tracing or drawing to receive copyright protection while simultaneously being industrially or commercially exploited through its application to an article. Such an outcome would likely contravene the intent of the Legislature.

1. Two-Pronged Approach: The Court formulated a two-pronged approach to ascertain whether a work is qualified to be protected by the Designs Act:
   1. First Prong: Determine whether the work in question is purely an ‘artistic work’ entitled to protection under the Copyright Act or whether it is a ‘design’ derived from such original artistic work and subjected to an industrial process based on the language in Section 15(2) of the Copyright Act.
   2. Second Prong: If the work does not qualify for copyright protection, apply the test of ‘functional utility’ to determine its dominant purpose and ascertain whether it would qualify for design protection under the Designs Act.

In summary, the suggested two-pronged approach involves a detailed examination of the work’s nature, its industrial application, and its functional utility to determine whether it falls within the limitations set out in Section 15(2) of the Copyright Act and qualifies as a ‘design’ under the Designs Act

1. Functional Utility Test: The Court emphasized the importance of the ‘functional utility’ test, which requires an assessment of whether the article serves a functional purpose beyond mere artistic expression. If the primary characteristic of the work is its functional utility rather than aesthetic appeal, it would not qualify to seek protection under the Designs Act.
2. Visual Appeal vs. Functionality: The test, as observed by the Supreme Court, distinguishes between features that are aesthetically appealing and those that exist purely for functional purposes.
   1. Visual Appeal:
      1. Visual appeal refers to the aesthetic aspects of a design that make it pleasing to the eye. These features are judged solely by their appearance and are not related to the functional aspects of the article.
      2. For a design to qualify for protection under the Designs Act, it must have features that appeal to the eye and are judged based on their visual appearance.
   2. Functionality:
      1. Functionality, on the other hand, refers to the practical aspects of a design that serve a specific purpose or function. These features are essential for the article to perform its intended function.
      2. If the primary characteristic of a work is its functional utility rather than its aesthetic appeal, it would not qualify for protection under the Designs Act.

Application of Functional Utility test

• In Smithkline Beecham Plc. v. Hindustan Lever Ltd., the Delhi High Court examined whether the ‘S’-shaped design of a toothbrush was primarily functional or aesthetic. The court determined that while the design offered some aesthetic appeal, its primary purpose was functional, and therefore, it did not qualify for design protection.
• In Tractors and Farm Equipment Ltd. v. Standard Combines Pvt. Ltd., the Madras High Court applied the functional utility test to determine whether specific parts or shapes of tractor models were functional or aesthetic. The court ruled that the plaint could not be rejected at the threshold and required a full trial to assess the functional utility of the designs
• Case-Specific Inquiry: The Court highlighted that the inquiry must be case-specific, guided by statutory provisions, judicial precedents, and comparative jurisprudence. The overarching objective is to ensure that rights granted under either regime serve their intended purpose without unduly encroaching upon the domain of the other. The court noted It cannot be assumed that what does not qualify as an ‘artistic work’, within the meaning of the Copyright Act, would automatically receive protection under the Designs Act. While protection under the Designs Act is not as enduring as that under the Copyright Act, it is not granted by default and requires specific criteria to be met.

Our comments

The dominant test, as laid down by the Supreme Court, will have significant implications for future cases involving the intersection of copyright and design protection. We believe it will affect such cases going forward in the following manner:

1. Clarification of Legal Standards – The dominant test provides a clear framework for distinguishing between artistic works and designs. This will help courts consistently apply the law and reduce ambiguity in intellectual property disputes. By establishing a two-pronged approach, the test ensures that both the nature of the work and its functional utility are considered in determining the appropriate protection regime.
2. Harmonization of IP Laws – The dominant test aims to harmonize the Copyright Act and the Designs Act, ensuring that the legislative intent behind both statutes is respected. By clearly delineating the scope of protection under each regime, the test prevents overlaps and conflicts between copyright and design protection. This harmonization will provide greater certainty for creators and businesses, enabling them to better navigate the legal landscape.
3. Encouragement of Innovation – By providing clear guidelines for protection, the dominant test would encourage innovation and creativity. Creators will have a better understanding of the legal protections available to them, which can incentivize the development of new and original works. This, in turn, can lead to increased investment in creative industries and the growth of intellectual property assets.