ZTE gets a breather from Delhi High Court : Removal of ex-parte interim injunction

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Many readers would already be aware of the ongoing lawsuit going on between the Chinese telecom equipment and mobile phone manufacturer ZTE Corporation and Vringo Inc., a company engaged in the development and commercialization of intellectual property and mobile technologies. On November 7, 2013, Vringo had filed this suit against ZTE Corp., along with ZTE Telecom India Pvt. Ltd. and its CEO Xu Dejun, at the Delhi High Court, alleging infringement of its patent, titled “Mobile Station Operable with Radio Access Network and a Packet Data Serving Node and a Method for Operating Such Mobile Station”.

This suit had resulted into the High Court granting Vringo an ex-parte ad-interim injunction on November 8, 2013, restraining ZTE from manufacturing, importing, selling, offering for sale, using, or advertising (either directly or indirectly including through third party websites) any infringing products, including mobile handsets, dongles, tablets, and infrastructure equipment compliant with the CDMA2000 technology that is associated with the patent under consideration, as we have covered earlier here.

This injunction had subsequently been challenged by ZTE and following a hearing on December 12, 2013, the Delhi High Court Bench comprising Justices Ravindra Bhat and Najmi Waziri, came up with an order, the salient features of which are mentioned below:

  1. ZTE was directed to file its written statement/counter claim within 4 weeks and Vringo was given another 4 weeks’ time to respond to the same. Both the sides were directed to file all relevant documents within 4 weeks and another 2 weeks’ time was allotted for exchange of affidavits of admission/denial. The exhibition of documents has been scheduled on March 11, 2014 and the framing of issues on March 27, 2014.
  2. In exercise of its power u/S. 115 of the Patents Act, 1970, the Court would also be appointing a scientific advisor to evaluate the technical and scientific evidence produced by both the sides.
  3. An expedited trial of the suit has also been ordered and both the parties have been directed to split the fees of the local commissioner appointed for recording of evidence. Within 6 months of the day the matter would be listed before the commissioner, the trial is to be completed.
  4. While the injunction itself has been lifted, ZTE Corp. has been directed to furnish bank guarantee of Rs. 5 crores in lieu of the same and also to furnish all relevant accounts of the quantum of CDMA devices sold by them in India and the revenues resulting therefrom.
  5. The Court also directed the Indian Customs authorities to intimate Vringo about all imported ZTE shipments, so as to give Vringo a chance to inspect the goods and take inventories.

Shen Jianfeng, Chief Intellectual Property Officer at ZTE, has meanwhile vigorously denied all the allegations and upheld the company policy of respecting others’ IP rights and entering into FRAND agreements with the holders of the patents relating to its products. At the same time, he emphasized on ZTE’s strict stance in opposition of the anti-competitive use of patents by holders as leverage for issuing unreasonable demands.

While ZTE will no doubt breathe a sigh of relief at the removal of the ex-parte injunction, one does tend to wonder whether the original decision of imposing the injunction in the first place had not been something akin to ‘jumping the gun’. If infringement is subsequently proven, the perpetrator can always be directed to provide adequate compensation and damages, especially if he is directed to furnish all relevant accounts of his earnings during the relevant period, as has now been instructed. However, a mere allegation without weighing carefully all scientific and technical evidence furnished in matters such as these, does not seem to merit compelling the business operations of a functioning corporation to come to a grinding halt by way of an injunction. One can only hope that the court would continue to exhibit such restraint in subsequent cases as has been indicated in the new order.

Incidentally, this is not the first time Justice Bhat has ordered an expedited trial. In fact, as most of our readers who have followed our earlier coverage of the Bayer-Cipla decision (here and here) would know, he is considerably renowned to come up with judgments even in complicated and technical patent adjudications in a lightning-fast pace! He is, as we had also pointed out in our coverage earlier, also considered one of the most prolific judges when it comes to writing judgments.

While Justice Bhat might have been consistent in his desire to provide a speedy resolution to matters before him, one can not unfortunately, attribute such consistency to the Delhi High Court in general when it comes to considering appeals from ex-parte ad-interim injunctions issued in patent infringement cases. Take for instance the Ericsson-Micromax dispute, wherein Micromax’s appeal to set aside the ex-parte interim injunction issued against it had been summarily dismissed by the same court this year, a fact that we had pointed out to the readers in considerable detail. Given the obvious similarities between the two situations, one can only wonder whether the Delhi High Court has deliberately opted to buck the trend set by its own self earlier! If such is indeed the case, that makes for an unfortunate uncertainty that nobody would perhaps welcome.

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