Practical approach to Non-Working Patent: High Court balances interests and industry’s needs
Introduction:
In an order dated August 04, 2023, the Hon’ble Delhi High Court (hereinafter referred to as “the Hon’ble Court’’) has modified an earlier ex-parte interim injunction order in ENCONCORE N.V. versus ANJANI TECHNOPLAST LTD. & ANR. [CS(COMM) 382/2019 and CC(COMM) 27/2019, I.A. 10142/2019, 15072/2019, 15349/2019, 2077/2020, 4851/2023, 12810/2023]. In the earlier preliminary order, the patent holder, Enconcore N.V. (hereinafter referred to as “the Plaintiff”) was granted interim injunction against Anjani technoplast ltd. (hereinafter referred to as "the Defendant"). However, keeping in minds the facts of the case and the needs of the industry, the Hon’ble Court revisited its earlier order to allow the Defendant to continue manufacture and supply products featuring the disputed honeycombs solely to governmental bodies. Additionally, the Hon’ble Court stipulated a deposit of approximately USD 30,000 (INR 25 lakhs) by the Defendant to protect the Plaintiff's interests.
Brief Facts:
A suit was initiated by the Plaintiff in 2019, seeking a permanent injunction against the Defendant for infringing its registered Indian Patent No. "260709" (hereinafter referred to as “the subject patent”) titled “Folded honeycomb and process for producing the same”, filed on April 24, 2007 under Patent Cooperation Treaty (PCT) claiming priority from European Application. The subject patent was granted on May 19, 2014. The term of the subject patent is valid till 20th November 2025 owing to the international filing date November 21, 2005. It is noteworthy that corresponding patents have been granted in Europe, the US, Russia, Japan, and China.
The Plaintiff first encountered the alleged infringing product, the Honeycomb Panel, in Mumbai in April 2013, and then again in February 2018, where the infringing product was sold under the brand name “HONCORZ” by the Defendant. Despite sending legal notices in February and March 2018, the Plaintiff received no response from the Defendants. Following an investigation that uncovered the Defendant's products being promoted on various platforms, the Plaintiff filed a suit to prohibit the Defendants from manufacturing, using, and selling these infringing products. The Defendants maintained that that the subject patent was liable to be revoked and without prejudice, that the Honeycomb Panel manufactured by the Defendants did not infringe upon the subject patent.
On July 29, 2019, the Hon’ble Court granted an ex-parte ad-interim injunction with the following terms:
“6. The plaintiff has made out a prima facie case. Balance of convenience is in favour of the plaintiff. Defendants are restrained from marketing, selling, distributing, advertising, importing, offering for sale and in any manner directly or indirectly dealing in any product that infringes the claim of the plaintiff’s Patent No. 260709 and using, the process which is also covered by the plaintiff’s suit patent. The defendants are also restrained from copying any image from the plaintiffs website www.econcore.com/en/markets/transportation.”
A subsequent contempt application was led by the Plaintiffs pursuant to the evidence collected by the local commissioner, to the fact that the Defendant's products were being supplied to the Ministry of Defence in India. The Defendant contended that they were the sole non-Government supplier for items such as Akash missiles and had exclusive agreements with entities like DRDO and Bharat Dynamics Ltd. The Defendant argued that their honeycomb panel manufacturing process differed significantly from that of the Plaintiff. They also claimed that the injunction order had led to diminishing sales over the past four years, justifying the need for its removal.
Court’s Analysis:
The Hon’ble Court took cognizance of the low sales figures of the Plaintiff's product in India and the extensive sales by the Defendant to the Ministry of Defence in India since 2012. The Hon’ble Court acknowledged that the containers produced by the Defendant relied on the honeycomb panel for various purposes, especially for sensitive military equipment.
The Hon’ble Court took note of the fact that the sales figures of the Plaintiff’s product in India are miniscule. The Plaintiff is not manufacturing its honeycomb panels in India, nor selling the same, in India. On the contrary, the Defendant is clearly selling to the Ministry of Defence, and its various companies since 2012. The containers/equipments manufactured by the Defendants use the honeycomb panels for various purposes. Clearly the containers of the Defendant cannot be sold without the panel, considering the purpose for which the containers are stated to be needed, that too by the Ministry of Defence.
In view of aforesaid, the Court was of the opinion that at this stage, instead of an injunction, which would result in complete stoppage of the production of containers/equipments only because the Defendant’s honeycomb panel has been incorporated, an interim arrangement can be put into place to balance the interest of both the parties. The Court further relied on the judgment in Franz Xaver Huemer v. New Yash Engineers (AIR 1997 Delhi 79) where the learned Division Bench held:
12. The Indian precedents in this behalf are clear and say that non-user of the patent by the patentee is a ground for refusing injunction. A learned single Judge of the Delhi High Court in N.R.D. Corporation of India v. D.C. and G. Mills Co., AIR 1980 Delhi 132 refused injunction on the ground of non-user by the plaintiff-patentee. To a like effect is the decision of the Calcutta High Court in Boots Pure Drug and Co. (India) v. May & Baker Ltd., (1948) 52 Cal WN 253 which was followed by the Madras High Court in Manicka Thevar v. Star Plough Works. We are in agreement with these decisions for the more elaborate reasons we propose to give below.
….
22. For the above reasons, the plaintiff who has registered patents in India in 1984 but has not used them in India cannot, in equity, seek temporary injunction against the respondent. Points 1 and 2 are decided accordingly.”
The Court modified the injunction order, and an interim arrangement was put in place where the Defendants were permitted to manufacture and supply honeycomb panels to the Ministry of Defence / Ministry of Home Affairs or any other governmental body. To ensure transparency, the Hon’ble Court directed CMD, Bharat Dynamics Ltd. to nominate a Senior Scientist within 10 days of the order to inspect the defendant's containers and determine the quantity of honeycomb panel used, capped at 10% to 15%. Moreover, the defendant was directed to deposit approximately USD 30,000 (INR 25 lakhs) with the Court's Registrar General to safeguard the plaintiff's interests.
The interim order by the Hon’ble Court reflects a pragmatic approach to patent infringement cases, emphasizing the need to balance the interests of both parties as well as the needs of the market/ consumers. Through authorizing controlled production and distribution of honeycomb panels exclusively to government entities, the Hon’ble Court acknowledged the significance of the Defendant's product while safeguarding the Plaintiff's rights.
