The deposit orders in Ericsson’s patent lawsuits are neither “middle-path” nor “innovative” – these orders are flawed and illegal

A few weeks ago we carried a guest post by Professors Chien and Contreras. It’s nice to see foreign academics engaging and writing on Indian IP law. Over the last year, a lot of foreign law professors have been attending the numerous conferences hosted by the IP centres in NLU-Delhi and Jindal Law School on the issues of on Standard Essential Patent (SEP) litigation. Both law schools have received very generous grants from Qualcomm for research in IP and competition issues.

Industry funded IP research and conferences, even when midwifed by universities have been unfairly demonised in India. In the past, GWU used to host a conference in India and a whole range of NGOs protested against the GWU conference on the grounds that the industry was sponsoring them – last year some other NGOs protested against a conference sponsored by Ericsson. Justice Bhandari was forced to recuse himself from the Novartis case because he attended one such conference sponsored by the IP Owner’s Association. Last year the organisers of the Global Congress on Intellectual Property and the Public Interest went to the absurd extent of disallowing Oxford University Press (OUP) from hosting a stall at the conference to display its latest catalogue of IP scholarship featuring work by Indian authors who were speaking at the conference!

At least some of these NGOs, like the Centre for Internet & Society in Bangalore which has opposed several of these industry sponsored conferences in the past appear to have made their peace with such conference. Earlier this year, I saw some of their people at a NLU-D conference on SEPs and they weren’t protesting as usual. Hopefully more NGOs will understand that it is perfectly possible to conduct meaningful research and conferences even with industry funding.

But coming back to the main topic of this post, I wanted to disagree with one of the assertions made by Chien and Contreras. In their post, they describe the practice of requiring deposits from defendants in SEP disputes as an innovative “middle-path” solution by Indian courts. To provide some context, over the course of the last three years there have been several high-profile patent lawsuits by Ericsson against a range of Indian hand phone manufacturers such as Micromax, Lava etc. The patents at dispute are Standard Essential Patents (SEPs). The “deposit” orders that Chien and Contreras refer to are orders where the High Court ordered the defendants in the Ericsson lawsuits to deposit royalties with the court even before the trial on the questions of infringement and damages concluded. However these “deposits” quickly converted into damages when the Delhi High Court in a series of controversial orders transferred the sums deposited with the court to Ericsson. In some cases, the court dropped the façade of deposits and ordered defendants to pay the money directly to Ericsson. I had written about the first of such orders two years ago over here.

As I had explained earlier, there is no such concept of interim damages in Indian law and even deposits, while allowed in some cases, have never been ordered in patent cases. In the past Indian courts on occasion have required defendants to deposit certain sums with the court. For example in tax litigation, after one level of adjudication has been completed, Indian courts sometimes requires assesses to deposit a percentage of the amount prior to appeals – these technically aren’t damages. In IP litigation there have been cases, especially copyright cases related to movies, where courts have ordered defendants to make deposits but those amounts are never handed over to the plaintiff because under Indian law, courts are required to assess evidence before deciding on damages.

The present series of “interim damages” orders in the Ericsson patent lawsuits boggle the mind, more so when judges fail to give any reasons explaining the legal basis for these extraordinary remedies. Patents are invalidated all the time in India and courts around the world have been struggling with determining a reasonable royalty rate in FRAND cases even after assessing evidence through trials. How and why then the judges of the Delhi High Court embarked on this path of “interim damages” even before trials are concluded, remains a mystery. Every time the defendants pay out money to Ericsson it hurts their finances – interest rates for businesses in India are very, very high.

Only Ericsson’s lawyers and the judges passing these orders can explain the logic for such orders because I haven’t been able to find anybody who could explain the legality of such orders. These orders are neither the “middle path” nor “innovative” – they are flawed and illegal. If anything, these orders demonstrate the danger of introducing complicated IP regimes in countries like India and cause even people like me, who are slotted in the pro-IP camp, to question whether India is ready for a complex patent regime.

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