Delhi HC on Customs Order restricting the clearance of consignments

The Delhi High Court, in its recent judgment in Kingtech Electronics (India) Pvt. Ltd v. Union of India and Ors, once again stayed the Order of the Commissioner of Customs restricting the clearance of consignments which, as per the latter’s determination allegedly violated the patent rights of Ericsson (Respondent No. 4). In coming to this conclusion, the Delhi High Court relied on the earlier flawed judgment by Justice Manmohan Singh in the LG case which was analysed here.
The petitioner, in the instant case, was in the process of importing a consignment of mobile phone instruments. The Respondent No. 4, Ericsson, filed an application before the Commissioner of Customs objecting to the said import on the ground of infringement of its patent. The Deputy Commissioner of Customs, relying on Rule 7 (1) (a) of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 (“Rules”) and Clause 4 of No.305/96/2004-FTT videCircular No.41/2007-Customs dated 29.10.2007 (“Notification”) issued an order dated 30.03.2011, in favour of Ericsson, restricting the clearance of consignments. This Order was challenged by the petitioner.

[Note: According to Rule 7(1)(a), the Deputy Commissioner of Customs or Assistant Commissioner of Customs can suspend the clearance of goods if he/she has a reasonable belief based on the notice given by the right holder that the imported goods are suspected to be goods infringing intellectual property rights. Further, clause 4 of the Notification inter alia states that: While it is not difficult for Customs officers to determine Copyright and Trade Marks infringements at the border based on available data/inputs, it may not be so in the case of the other three violations, unless the offences have already been established by a judicial pronouncement in India and the Customs is called upon or required to merely implement such order. In other words, extreme caution needs to be exercised at the time of determination of infringement of these three intellectual property rights.”]

The Court relied on the earlier order by Justice Manmohan Singh, where it was held that the Customs Dept. could not initiate any action in case of infringements pertaining to patents, design and geographical indications unless the offences were established by judicial pronouncements. As there wasn’t any judicial pronouncement restraining the petitioner from infringing the impugned patent, it was held that the Commissioner violated Clause 4 of the Notification and therefore, exceeded his jurisdiction. Further, the impugned order did not evince application of mind by the Deputy Commissioner of Customs. Considering the aforesaid, the operation of aforesaid impugned order was stayed and the Commissioner was directed to release the consignment of the petitioner. The case is now listed for 06.03.2012.

Ericson appealed against the HC judgment vide Letters Patent Appeal 1104/2011. The Court, however, refused to stay its aforesaid judgment [available here]. Rejecting Ericson’s contention for imposition of security as a safeguard against infringement of its patent, Court held that the aforesaid condition could be pressed before the civil court where it intended to file injunction against release of consignment in case of non-grant of stay.

Prashant had critically analysed the earlier judgment dated 30.11.2011 which was relied upon in the instant case.In his analysis, he inter alia rightly noted that the IPR Import Rules, 2007 did not distinguish patents, trademarks, copyrights, designs & G.I.s. from each other and applied equally to all classes of IPRs. The Notification was only a circular issued by CBEC for the implementation of the Rules.Further, he noted that it was doubtful whether a circular could be used to interpret statutory rules which derived its legality from a statute. Moreover, the usage of “extreme caution” in the Notification did not preclude the customs authorities from determining infringement. This judgment is, therefore, a step backwards and hopefully, will be rectified soon.

Mathews P. George

Mathews is a graduate of National University of Juridical Sciences, Kolkata. His interest in intellectual property was kindled when he bagged the second position in his second year of Law School (in the prestigious Nani Palkhiwala Essay Competition on Intellectual Property). His stint as a student of Prof. Shamnad Basheer further accentuated his interest in intellectual property. Winner of almost a dozen essay competitions in his Law School days, he was involved in various research and policy initiatives relating to intellectual property. Mathews is, currently, based out of Munich, Germany. He had earlier done his LLM in 'IP and Competition Law' from Munich Intellectual Property Law Centre (jointly run by Max Plank Institute for Innovation and Competition, University of Augsburg, Technical University of Munich and George Washington University, Washington).

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