Here’s the second of Saahil Dama’s guest posts on interim injunctions in patent cases. Here, he examines cases in which the judiciary has attempted to lay down safeguards against the misuse of ex parte orders. [Warning: This is a fairly long post.]
Saahil is a student at National Law University, Jodhpur. He is currently in the fourth year and is pursuing Intellectual Property Law Honours at the University. You can find his previous post here.
Interrogating Interim Injunctions: The Curious Case of Standards for Ex Partes
By Saahil Dama
Introduction
Our Interrogating Interim Injunctions (I-3) series was flagged off by Shamnad Basheer to highlight the potential inequity of ex parte patent injunctions.
Balaji then examined the Vifor and Issar cases. The ex parte orders in these cases have been in force for a startling forty-four months and thirty-six months, respectively. Balaji’s posts explain the many arbitrary reasons for such extraordinary delays.
Similarly, Rupali extensively analysed the Symed ‘linezolid’ saga in her three posts (here, here and here). She highlighted how our entire ecosystem was geared towards granting ex parte injunctions and then dragging them to the detriment of the defendant.
This is despite two judgements that lay down clear guidelines to mitigate the harsh impact of ex parte injunctions. These judgements establish safeguards to protect the defendants’ interests as well. In this post, I plan to examine these two cases and distill out the guidelines/standards enumerated therein for the benefit of our readers and for future discussion on these cases. The cases are as follows –
FDC Limited v. Sanjeev Khandelwal, 2007 (35) PTC 436 (Mad)
The facts briefly are thus – the plaintiff (Sanjeev Khandelwal) sued the defendant for infringement of five of its process patents and two trademarks. An ex parte interim injunction was granted for a period of one month pending the disposal of the suit by the Principal District Judge, Thiruvallur District. The defendants (FDC) filed a revision petition under Article 227 before the HC against this order of the trial court. Article 227(2) allows for High Courts to call for returns from lower courts (clause 2(a)) and gives High Courts the power to issue general rules for regulating the practice and proceedings from lower courts (clause 2(b)).
The defendants forcefully argued that due to the ex parte injunction, they had to shut down their manufacturing operations and this resulted in extensive losses to them.
The Madras HC ruled that prior to granting ex parte ad interim injunctions the following guidelines must be complied with. However, the judgement is not terribly clear, so I’ll try filling in through my interpretation where possible.
i) ‘Where the plaintiff and the primary defendant are residing outside the State and their identity, addresses etc., are easily known,’ the court would have the jurisdiction to grant an ex parte injunction.
The court has left the sentence hanging at ‘are easily known…’ without explaining how courts are supposed to implement this guideline. I believe that it means that an ex parte injunction can be granted when the identity/address of defendants residing outside the states is known. This interpretation is derived from how the principle was applied in the present case.
It was contended by the defendants that the injunction was granted by the trial court in Thiruvallur district despite the plaintiffs and the primary defendant being residents of Bombay and Delhi. Jurisdiction was vested in the trial court because the second defendant, which was a small medical shop, was situated within the territorial jurisdiction of the trial court. It was submitted by the defendants that the trial court had exercised ‘an arbitrary and capricious exercise of authority’ in granting the injunction.
Applying section 20(c) of the CPC, the court held that since a part of the cause of action arose within the territorial jurisdiction of the trial court (by infringement of patents and trademark by the medical shop), the plaintiffs are entitled to sue before the trial court. Therefore, if an ex parte injunction is sought from a court under whose territorial jurisdiction the primary parties do not reside or conduct business, the same can still be granted by the court if –
- A part of the cause of action arises within the territorial jurisdiction of the court (under section 20(c) of the CPC), and
- The identity, address, etc. of the parties living outside the state is known.
ii) ‘Where sales of the offending products are not on a commercial scale’ injunction can still be granted.
The court does not explain how the ‘scale’ at which the impugned product is sold at would affect the grant of an ex parte injunction. Instead, the court went onto hold that even if the products are not being sold on a ‘commercial scale,’ but are being made available on a small-scale, the court within whose territory such a sale took place would have jurisdiction to pass an injunction in the matter.
It was contended by the defendant that unless the sale from which the cause of action arose was in a commercial quantity, no jurisdiction would lie with the court. The court justified the jurisdiction of the trial court by stating that only a part of the cause of action had to arise within the territory of the court. The violation of the patent did not have to be on a ‘commercial scale.’
The court fails to assess the impact this would have on the grant of an ex parte injunction itself. What is ‘commercial scale’ is a question of fact and the court does not provide guidelines on how the same can be defined. This determination is important because if the impugned product is not being sold at a ‘commercial scale’ then an ex parte would not be justified since no substantial loss is being caused to the plaintiff. The court provides no analysis on this.
iii) ‘If the grant of interim injunction is going to result in closure operation/business of the defendant, injunction should not be granted.’
This is a very useful point since one of the major issues with ex parte injunctions is that they harm defendants’ businesses, sometimes irreparably so. Protection against this is of utmost importance.
In this case, the fact that the injunction had resulted in the closure of the operation of the defendants, thus causing them huge financial losses, convinced the court that the balance of convenience rested in the favour of the defendant.
iv) ‘Where the dispute involves patent/trade mark issues, the trial court should carefully peruse the certificates, offending marks etc.’
This requirement comes across as obvious, as no prima facie case can be made out without establishing the validity of the patent itself. The court probably added this as a reminder for trial courts to be careful in deciding the validity of the patent and to not treat it as a matter of mere formality.
This was important in the present matter because it was contested by the defendant that the plaintiff had produced a certified extract from the Register of Patents obtained prior to the lapse of the patent. Therefore, it was important for trial courts to peruse documents concerning the validity of the patent carefully.
v) ‘An ex parte injunction should not be granted in cases where no evidence or proof of infringement has been filed by the plaintiff.’
The burden of proof to adduce evidence of infringement rests with the party alleging such infringement. A mere allegation without any cogent evidence would not secure an injunction. This is a direct application of section 101 of the Indian Evidence Act, 1872, which requires that a party asserting a certain fact must also prove it. Therefore, when the plaintiff claims that his patent is being infringed, he must also provide evidence to substantiate that claim. If he fails to do so, injunction will not be granted.
vi) ‘In patent cases, the trial court has to carefully note the distinction between a product patent and a process patent. If the plaint alleges violation of process patent, then ex parte injunction should not be granted unless the plaintiffs have adduced the evidence of an independent scientist/other technical expert who has tested the plaintiff’s and defendant’s product and arrived at an independent finding as to the identity of the processes used. In process patent cases, opportunity must be given to the defendant to explain how their process does not constitute infringement within the meaning of Section 104-A of the Patent Act.’
The court holds that an ex parte injunction cannot be granted in cases of process patents. The threshold for an injunction would only be satisfied after –
- The defendant has been given the opportunity to distinguish their patented process from that of the plaintiffs.
- An independent scientist/expert has verified the similarity between the two processes.
More protection in such cases is warranted owing to the complex technicalities that are likely to arise in process patents. This is so because processes, by their very nature, are ‘invisible’ and hence cannot be compared by mere judicial scrutiny.
- Venkatasubbiah Naidu v. S. Chellappan and Ors., AIR 2000 SC 3032
The facts are as follows – the plaintiff (Naidu) claimed to be a lessee of a property under one of the defendants. Naidu also claimed to be in possession of the property. He alleged that the defendants had been threatening to dispossess him. Accordingly, the plaintiff went to the civil court to obtain an ex parte injunction to prevent dispossession. Though the injunction was granted, it was subsequently quashed by the High Court. This decision of the High Court was challenged before the Supreme Court.
The case discusses Order 39 Rule 3A of the Civil Procedure Code which stipulates guidelines for courts to follow in granting ex parte injunctions. The Supreme Court states that this rule provides a three-prong protection to the party against whom the ex parte injunction is passed.
- First, the court is obligated to give notice to the party before passing an ex parte order. A notice can only be avoided in an ‘exceptional contingency.’ Since ‘exceptional contingency’ has not been defined, it is a question of fact that must be determined by the court.
- After an ex parte injunction is passed, courts are required to pass final orders on the application within a period of thirty days. Again, this can only be bypassed in exceptional cases.
- Finally, if the final order is not passed within thirty days, then the court needs to record adequate reasons for the same in writing.
If the provisions under Order 39 Rule 3A are flouted, then the party adversely affected (i.e. the party against whom the injunction is granted) can bring the matter to the appellate court. The judgement notes – ‘In appropriate cases, the appellate Court, apart from granting or vacating or modifying the order of such injunction, may suggest suitable action against the erring judicial officer…’ Besides allowing the appellate court to vacate or modify the injunction, this provision provides a sanction against the judicial officer himself to ensure that no delays arise from the court.
Given the detrimental impact delays have on defendants, taking all steps necessary to prevent such losses becomes important. Therefore, courts are mandated to adjudicate in a swift and diligent manner to minimize the harms of injunctions on the defendant. This provides a safeguard from delays arising due to lethargy of courts.
However, this does not mean that an order of extension is ipso facto void merely because it goes beyond thirty days; but it gives rise to a cause of action for the aggrieved party to file an appeal.
Justice Trivedi on Rule 3A
Justice R. K. Trivedi of the Allahabad High Court notes in an article on Laws of Injunction that Order 39 Rule 3A provides stringent conditions for granting injunctions. Such laws seek to prevent hardship, loss or harassment to the opposite party.
However, this has created further problems by making courts, which are already overflowing with cases, bear responsibility. Justice Trivedi states – ‘The situation in High Courts has become so grim and difficult that the pendency of the cases has crossed five lakhs and the time taken in deciding the writ petitions is now more than ten to fifteen years…’ According to him, these provisions have not been able to achieve their object.
We’ve shown through our previous posts (here and here, amongst others) that the practical implementation of statutory provisions and Supreme Court and High Court guidelines has been an abysmal failure. We’ll illustrate the same through further case studies in the future.
Dear Sahil,
Your posts are very insightfull for a law student but show a lack of practice obviously.
You argue that assesing commercial scale is important “because if the impugned product is not being sold at a ‘commercial scale’ then an ex parte would not be justified since no substantial loss is being caused to the plaintiff.”
But then that means you don’t understand the factors for a preliminary injunction.
Prima facie case – which according to you cannot be proved by the grant of a patent because it does not carry a prima facie validity must therefore be proved by evidence and experts at the interim stage??!! In view of Biswanath Prasadh, I’ll even forget that point.
What about balance of convenience and irreparable loss?
Balance of convenience requires you to show that the plaintiff will be more inconvenienced if the interim injunction is not granted, than the defendant if it is granted. Therefore “substantial loss” means nothing. In fact, the court is absolutely right : if it shuts down a company’s whole business, even if illegal, at the interim stage it may not be correct to stop them. However, especially where the product being sold is not of a large commercial scale, as long as it is infringement as per s.48 of the Patents Act, the plaintiff is more likely to be inconvenienced if there is no injunction than if the defendants full business depended on it.
Irreparable loss – All of you talk about mitigation of losses. But what does that really mean? You are taking into account the price of the product. What about the R&D costs – ok, they maybe inflated by Big Pharma but of course money was spent on it. What about clinical trials? What about the fact that there is a statutorily granted limited protection for a patent which every infringer decides to eat into and which you are also advocating.
Don’t talk rhetoric. And don’t talk in theory. Rewrite this post after you practice. No matter which party you will represent at the end of the day it is about how much money they can make from the product – only difference is: legally only one of them is entitled to do it.
Dear Arun,
Thank you for your insightful comments. However, I do beg to differ on a couple of key issues.
Prima face case:
To quote Bishwanath Prasad – ‘It is noteworthy that the grant and sealing of the patent, or the decision rendered by the Controller in the case of opposition, does not guarantee the validity of the patent, which can be challenged before the High Court on various grounds in revocation or infringement proceedings. It is pertinent to note that this position, viz. the validity of a patent is not guaranteed by the grant, is now expressly provided in Section 13(4) of the Patents Act, 1970. In the light of this principle, Mr. Mehta’s argument that there is a presumption in favour of the validity of the patent, cannot be accepted.’
According to my reading of the judgment, a mere grant of a patent does not validate it. Hence, I fail to see how a prima facie case can be made out through a mere grant.
Balance of convenience – I completely agree with your understanding of what balance of convenience means. However, I think that an assessment of ‘substantial loss’ is important in judging the balance; since if substantial loss was being caused to either of the parties, then it would be a strong argument for them to prove that the balance of convenience rests with them. A substantial loss can be assessed through whether the products were being sold on a ‘commercial scale.’ Therefore, if the goods are being sold commercially, thus gravely affecting the plaintiffs’ right to commercial exploitation, a strong case for balance of convenience could be made out for him.
Irreparable loss – Sir, I think that the loss in most circumstances is not ‘irreparable.’ A line of cases (most notably the Bilcare case) has highlighted that the defendants can be made to keep records of all the sales made which can be produced before the court. Hence, after the final application is disposed, and if the defendant is held to be infringing about the plaintiff’s patent, these recorded values can then be compensated for.
Looking forward to hearing from you.
Prima facie case: Agree about the ruling of Biswanath Prasadh which is why I did not argue the point even if i do not agree with it.
Balance of convenience: You have missed the point again. If there was extensive commercial exploitation, of course the Plaintiff would be inconvenienced. But so would the Defendant specially if that exploitation was a great or primary source of income for him commercially.
In any case any practitioner will tell you that where the infringer in patent litigation is a big and prominent entity they will appear in the court. I can tell you the various reasons but the important point for this discussion is that it will most likely not be an ex parte injunction!
Irreparable loss: You have overlooked my points about factors which cannot be recompensed in monetary terms.