Delhi High Court Adopts an Expansive Interpretation of Cause of Action; Holds that it has Jurisdiction to Decide Legality of Cancellation of Compulsory Licenses

While legal contestations between plaintiffs and defendants as regards the infraction of the former’s intellectual property rights make for interesting analysis, a large portion of an IP litigator’s career is spent on getting the procedural issues right.

Ascertaining with surgical precision the cause of action upon which the suit is founded, establishing that a court does possess the territorial jurisdiction to adjudicate upon a dispute and complying with the myriad procedural prerequisites for a suit to stand in court are the principal issues that an IP lawyer has to confront on an everyday basis.

This being the case, a recent verdict by the Delhi High Court offers some clarity on what constitutes the cause of action in a suit founded upon the allegedly illegal termination of copyright compulsory licenses. We have covered judicial pronouncements dealing with the cause of action in the domain of IP law here, here and here.

The Facts

The Appellant, Music Broadcast Limited, obtained a voluntary license from the second Respondent in accordance with which it was empowered to broadcast the sound recordings of which the second Respondent was the copyright owner. The Appellant was one amongst many private radio stations which entered into such an arrangement with the second Respondent subject to judicially determined licensing fees.

Pertinently, clause 33 of the Agreement made it unambiguously clear that the High Court of Bombay (now Mumbai) would have exclusive jurisdiction to adjudicate upon any disputes flowing from this agreement.

On 25.08.2010, the Copyright Board, in accordance with Sec. 31(1)(b) of the Copyright Act, 1957, which empowers it to issue a compulsory license if the copyright owner refuses to allow the public broadcast of sound recordings on reasonable terms, ordered the second Respondent to issue a compulsory license in favour of the Appellant subject to certain caveats.

On 21.06.2013, the second Respondent cancelled the compulsory licenses granted to the Appellant on 5 grounds which essentially pertained to the latter’s failure to comply with the terms in accordance with which the Board had issued the license.

Subsequent to this, the Appellant filed a suit in the Delhi High Court, challenging the legal tenability of the cancellation of compulsory licenses by the second Respondent. After some procedural developments which are not relevant for our purposes, the single judge, vide an order dated 09.02.2016, came to the conclusion that the Delhi High Court does not have jurisdiction to adjudicate upon this matter and consequently returned the plaint in exercise of his powers under Order 7, Rule 10 of the CPC.

Arguments of parties

In support of its contention that the conclusion arrived at by the single judge was erroneous, the Appellant advanced three main arguments.

First, it argued that the single judge wrongly invoked clause 33 of the voluntary license, as per which the High Court of Bombay had exclusive jurisdiction, while dealing with the maintainability of a suit dealing with the cancellation of compulsory licenses. Since the two agreements were entirely distinct and separate, argued the Appellant, the action of the single judge was clearly legally untenable.

Second, arguing that the single judge erred in proceeding upon the assumption that the present suit and a suit pending in the Bombay High Court were founded upon the same cause of action, the Appellant stated that the latter was based on adjustments that were to be made between the parties under the voluntary licensing agreement. Therefore, the Court could not have relied upon the pending suit to buttress its holding that the Bombay High Court was the appropriate forum for the present suit.

Finally, relying on the Supreme Court’s judgment in Om Prakash Srivastava versus Union of India, the Appellant argued that the phrase ‘cause of action’ includes, not only the infraction of a right, but also the right in question. On this basis, it argued that the cause of action arose in Delhi, inasmuch as the license was granted to it in Delhi which gave rise to its right to broadcast the second Respondent’s sound recordings.

On the other end of the spectrum, the second Respondent sought to support the finding of the single judge on two main grounds.

First, arguing that the compulsory licenses were nothing but a continuation of the arrangement effectuated through the issuance of voluntary licenses, the second Respondent argued that the jurisdictional clause embodied in the latter agreement would apply with full force to the former agreement as well.

Second, it argued that each of the points set forth by the Appellant in the plaint in support of the argument that the Delhi High Court was vested with the jurisdiction to adjudicate upon the matter was misconceived. More specifically, it argued that the place at which the compulsory licenses were granted was irrelevant and, inasmuch as the notice of cancellation was sent and received in Mumbai, the Bombay High Court was the appropriate forum for the adjudication of the dispute.

Holding of the court:

Agreeing with the arguments advanced by the Appellant, the Division Bench held that the single judge was wrong in holding that the jurisdictional clause under the voluntary licensing agreement would operate as an embargo on the Delhi High Court’s authority to adjudicate upon the matter, inasmuch as the dispute in question is entirely based on the compulsory licensing agreement.

Holding that the place at which the compulsory licenses were granted would be of immense relevance in ascertaining the jurisdiction of the High Court, the Court held that the grant of the licenses was the material event which gave rise to the rights whose infraction the Appellant contends was committed by the second Respondent when it cancelled the licenses.

Ruling that the suit pending in the Bombay High Court is founded upon a cause of action flowing from the voluntary licensing agreement, the Court held that the same is in no way relevant for deciding the Court’s jurisdiction to adjudicate upon a cause of action flowing from compulsory licenses that are independent statutory licenses.

In sum, this judgment is significant from the standpoint of determining the width and amplitude of the phrase ‘cause of action’ for ascertaining a court’s jurisdiction to adjudicate upon copyright disputes.

For those who may think that this procedural clarity is not of much relevance, it would be apposite to quote Karl Llewellyn : “What substantive law says
should be means nothing except in terms of what procedure says that you
can make real.”

Rahul Bajaj

Rahul Bajaj is a fourth year law student at the University of Nagpur. His interest in intellectual property law began taking a concrete shape when he pursued Professor William Fisher's online course on copyright law in the second year of law school. Since then, Rahul has worked on a diverse array of IP matters during his internships. He is particularly interested in studying the role of intellectual property law in facilitating access to education.

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