Patent

Enercon: High Court directs IPAB to decide validity of resolution


 

investigationWe had previously reported that orders passed by the IPAB revoking Aloys Wobben’s patents have been challenged by Dr. Wobben by writ petitions before the Madras High Court. On 20th September, the Madras High Court passed a common order relating to these petitions (here). The HC has set aside the orders of revocation until the IPAB returns with a determination on the validity of the resolution of 26.4.2007.

The High Court was mainly concerned with whether and to what extent the IPAB has jurisdiction while entertaining an application under Section 64 of the Patents Act, 1970, specifically with regard to the validity of the resolution dated 26.04.2007 which authorized Mr. Yogesh Mehra to represent Enercon India Ltd.

The High Court held that the IPAB has the power and jurisdiction to go into the validity of the resolution in order to satisfy itself about the maintainability of the application. The Court was of the view that it would be improper to remit the entire matter to the IPAB since the exercise on merits was duly done, therefore, it directed the IPAB to decide the validity of the resolution alone within a period of two months from the date of the receipt of the order.

Background

Prashant’s post throws light on the facts and litigation background of the dispute, especially with regard to the validity of the resolution here.

To contextualize the discussion, the second respondent (Enercon India Ltd) is a joint venture between the Mehras (Mr.Yogesh Mehra and Mr.Ajay Mehra) and Enercon GmbH. The petitioner is the chairman of Enercon India. And Enercon India is the licensee of the petitioner.

Mr. Yogesh, representing Enercon India, filed revocation petitions under S. 64 of the Patent Act, 1970. A Board resolution dated 26/4/2007 authorizing him to represent Enercon India was produced before the IPAB. The petitioner challenged the maintainability of the petition and questioned the validity of the resolution.

While considering the issue of maintainability, the IPAB held that the scope of enquiry under Section 64, is limited and in the absence of any power it could not go into the question of validity of the resolution. Therefore, in the absence of a prohibitory order by an appropriate authority, the resolution, was deemed to be valid. The IPAB therefore relied on the validity of the resolution and then proceeded to revoke the petitioner’s patents on merits.

Meanwhile, proceedings were initiated before the Company Law Board (CLB) seeking a stay on the resolution. However, the CLB refused to interfere due to the limitations on the scope and ambit of its powers as provided under Sections 397 and 398 of the Companies Act.

Petitioner:

The Petitioner primarily challenged the validity of the resolution. It was argued that the resolution did not have the consent of the petitioner and other Directors, who formed the majority.

It was also contended that the jurisdiction of the IPAB and the CLB are different and the IPAB has the power and authority to decide the validity of the resolution. Since the IPAB failed to exercise the jurisdiction vested in it, the orders passed should be set aside.

Respondents:

The respondents (IPAB, Controller of Patents and Enercon India) contended that though the IPAB has the jurisdiction to go into any question at the time of entertaining an application under S. 64, the said jurisdiction is limited. The IPAB can only go into the question of existence of the document of authorization but cannot question its validity. Since questions of validity are adjudicatory facts and not jurisdictional facts and the IPAB being a creature of a Statute, it cannot exceed the powers conferred on it by S. 64. Therefore, since there was no dispute as to the existence of the document the IPAB was correct in proceeding to the merits.

It was also argued that the doctrine of election and estoppel would apply. Since the Company Law Board was approached to determine the validity of the resolution and since it had refused to exercise its power in favour of the petitioner, the same could not be agitated before the IPAB.

Madras HC:

The HC held that the doctrine of election and res judicata will not apply in the present case since the IPAB and CLB operate is different fields. Moreover, CLB did not specifically return a determination on the validity of the resolution.

After highlighting the important provisions of the Patent Act and the IPAB rules, the Court held that the powers of the IPAB are wide and in order to decide its own jurisdiction it can go into the validity of documents produced before it. Moreover, since an authorization is construed as evidence and is a fact under enquiry, the IPAB was bound to consider the same. Moreover, the IPAB rules define an authorized agent as a person ‘duly authorized’. This read with the Act, shows that the IPAB is obligated into assessing whether the agent was ‘duly’ authorized.

The court also observed that since Section 92, declares the proceedings of the IPAB to be judicial proceedings, the IPAB has the power to go into the questions of validity of an authorization. Since this was not done, it amounted to a failure to exercise jurisdiction.

The court observed “Like a surgeon perusing the medical records and examining a patient before touching his knife, the Board has to perform its role before getting into the issues on merit. The question as to whether a “lis” is maintainable or not has to be decided by the Court before which it is laid. Hence, we hold that a harmonious construction of all the provisions discussed by us at length would lead to vesting of power with the Board.”

This decision throws open many questions. One being the inconsistency in the decisions of IPAB when it comes to questions of the ambit of its powers. On the one hand, the IPAB reads in a power to grant interim measures (The IPAB recently decided that it has the power to grant interim reliefs, both in equity as well as under the Act, even though a plain reading of the Act does not provide for such a power) and on the other hand, the IPAB seeks to avoid going into jurisdictional questions citing absence of power.

Also, given that the law is ambiguous and is capable of being interpreted either way, policy questions that arise are: Is the IPAB, an IP tribunal, suited to go into questions of company law: Can Wobben even challenge the resolution given that the shareholders of EIL(a joint venture) are EnerconGmbH and the Mehras? Courts generally dont interfere in the internal affairs of a company unless there is fraud etc. and this a fact based inquiry, can the IPAB actually look into all of this? Should the IPAB be given the power to make referrals for matters that fall outside its strict competence? And more importantly, given that the IPAB has already found the patents to be invalid, what happens if it finds the resolution to be invalid? Will this just be an mere procedural irregularity not affecting jurisdiction and merits of the decision?

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Aparajita Lath

Aparajita graduated from the WB National University of Juridical Sciences, Kolkata. She was formerly an editor of the NUJS Law Review. She is a lawyer based in Bangalore. All views expressed by her on the blog are her personal views.

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