Weak IPR laws bane for foreign investment

Owing to trademark dispute with a local firm, Kansai Paint mulling over pulling out from Nepal

Kathmandu, March 13

At a time when the government has been harping on foreign investment in a bid to advance Nepali economy, one of the reputed foreign joint ventures is mulling over retracting its investment from Nepal as a consequence of intellectual property rights (IPR) dispute with a local firm.

A Japanese foreign investment in Nepal, Kansai Paint, which entered Nepal in 2012 in joint venture with Nepal’s Shalimar Paints, has failed to obtain trademark from the Department of Industry (DoI). This is because capitalising on the weak intellectual property rights (IPR) laws in the country, a local investor had registered a firm under the name ‘Kansai Nerolac Paint Nepal Pvt Ltd’ at the Office of Company Registrar and had applied for trademark before the foreign joint venture.

The local firm — Kansai Nerolac Paint Nepal Pvt Ltd, which is run by Goyal Group — is in no way related to the Kansai Paint.

Since Nepal is a member of World Intellectual Property Organisation (WIPO), it is a pity that the country was unable to identify even a globally reputed brand like Kansai. The country may lose foreign investment worth Rs 350 million of the Kansai Paint, which entered the country through its Indian subsidiary Kansai Nerolac Paints India, as the DoI has scrapped the application of the foreign joint venture to obtain trademark of its own name.

As per Pradip Koirala, director general of DoI, the authorised agency under the Ministry of Industry to enforce Patent, Design and Trademark Act, the department had scrapped the application of the foreign venture as per the provision of law that provides favourable treatment on ‘first come, first served’

basis. He, however, admitted that the laws need to be amended to lure foreign investment citing foreign firms are sensitive in regard to intellectual property rights.

The globally renowned Kansai Paint had purchased 68 per cent stake of Nepal’s Shalimar Paints through its Indian subsidiary Kansai Nerolac Paints India and registered a company Kansai Paints Nepal Pvt Ltd.

However, the foreign joint venture had faced a court case from the local company — Kansai Nerolac Paints Nepal Pvt Ltd. The Supreme Court, some four months back, had issued a verdict in favour of the local firm citing that it had registered the company prior to the foreign joint venture.

The local firm, which is producing paints under the brand of Nerolac and Kansai, again filed a case at the DoI and the DoI also scrapped the application of foreign joint venture and refused to issue the trademark it had sought.

The foreign joint venture also faced unfavourable decision from the Patan High Court, where it had filed a case seeking protection of its trademark. As per the court’s decision, the company has to change the name of its product because the local firm has already captured the brand of reputed Kansai Nerolac Paint in the Nepali market.

Due to all these reasons, the foreign investors are now thinking about exiting from Nepal, according to sources. Nepali partners of the foreign joint venture have also backed this claim.

“Kansai Paint, which came to Nepal through its Indian subsidiary after signing of bilateral investment promotion and protection agreement (BIPPA) with India during the premiership of former prime minister Baburam Bhattarai, has been left red-faced in Nepal,” said Ashok Vaidya, who is a Nepali partner of the foreign joint venture.

Kansai Paint, originally from Japan, has set up factories in 25 countries and is selling its product under its own name. Due to the country’s weak IPR laws, this case will establish a false precedence among potential foreign investors in Nepal, according to Vaidya. “The country will not only lose foreign investment, there are chances it will also lose its reputation across the globe if the foreign investors withdraw investment from Nepal.”

The foreign joint venture Kansai has been providing direct employment to 100 individuals and contributing revenue worth Rs 500 million to the government every year.

Kailash Chandra Goyal, who has been operating the local firm under the name of ‘Kansai Nerolac Paint Nepal Pvt Ltd’ and producing paints under the brand name of Nerolac and Kansai refused to comment on the matter.