David Turns Goliath? Looking at Micromax’s injunction against OnePlus

In the latest twist to the smartphone wars, Micromax received an order (not ex-parte this time thankfully) in its favour restraining OnePlus from selling devices in India with the CyanogenMod Core Operating System and the CyanogenMod TM. The Android Operating System (“OS”) is customisable, so companies like Cyanogen make modifications to the stock Android OS and distribute it under their names and Trademarks. CyanogenMod OS is one such modification that Cyanogen had initially by means of a non-exclusive license, licensed to OnePlus globally. Subsequently it turns out that Micromax had obtained an exclusive license for the Core OS in India and a few other countries in South Asia for distribution through its newly created brand ‘YU’. OnePlus however continued to proceed with its launch plans in India, selling through Amazon.in, on an ‘invite-only’ system. Medianama has a nice timeline of the facts here.

Micromax sued in the Delhi HC seeking to injunct OnePlus from going ahead with its sales as this would necessarily frustrate their agreement with Cyanogen. It appears from the communications transcribed in the agreement that Cyanogen had themselves terminated the agreement with OnePlus a while ago. OnePlus however went ahead to launch its devices on the 2^nd of December this year. Cyanogen seemed to indicate that it would not provide support services for devices launched by OnePlus but later relented (the amazon.in listing of the OnePlus One has a number of customer comments that indicate that services are not being provided and that the UI itself might not be pre-loaded).

The suit in itself appears to be for an injunction to prevent breach. The court laid down the relevant clauses of the contract and observed that it conferred an exclusive right upon Micromax to use the CyanogenMod OS in India in supercession of other agreements. The relevant contract under which OnePlus could have sued Cyanogen for rights initially granted to it, had dispute resolution clauses making the applicable law and the courts of jurisdiction to be that of the US. Therefore, they could not have sued here, observed J. Manmohan Singh. He went on to observe that the exclusive rights having been established in the favour of Micromax, OnePlus had to be injuncted to prevent irreparable harm to the former. The order injuncted OnePlus from from marketing, selling and shipping its mobiles in India, thereby amounting to interference in Micromax’s business and from interfering and/or infringing Micomax’s license. They were however allowed to dispose off their existing stock.

What I however cannot comprehend from this order is that no TM or copyright (in the OS) claims are being asserted. This appears to be a purely contractual dispute, and as such privity of contract ought to have operated as a defence for OnePlus – that they cannot be sued to enforce a contract between Micromax and Cyanogen. The argument could be made that this was a contractual dispute in name only and that the real spirit of it was to prevent infringement of Trademarks and Copyright associated with CyanogenMod. However, if the court had indeed considered it so, they ought to have examined the claim of whether these IP rights existed in India for Cyanogen, whether a passing off claim could be established in case they did not, what the status of the license agreement between OnePlus and Cyanogen was that conferred such rights upon them, whether there was any anticipation or evidence of actual infringement etc. – none of which was actually looked into. The court even notes the flip flops in Cyanogen’s position but goes ahead to grant Micromax the injunction anyway and even notes that Cyanogen was “determined” to terminate its license with OnePlus, but does not go into questions of whether this termination is effective and therefore leaves OnePlus with no rights.

The orders of the DHC are throwing up some strange results in the ongoing battle between the smart phone companies and some real clarity and stability would be greatly appreciated.