Wednesday, February 16, 2011

Counterclaim and the High Court's Jurisdiction Over a Suit for Patent Infringement

In the last post, I had discussed the possibility of excluding a counterclaim under limited circumstances. Continuing with that discussion, what is the consequence of a counterclaim being excluded from the suit for infringement of a patent?

If the suit for infringement was filed before a District Court and was subsequently transferred to the High Court only because a counterclaim was filed (such transfer being the consequence of the proviso to Section 104), then, upon exclusion of the counterclaim, the suit must be remanded to the District Court for trial. Why? Since Section 104 of the Patents Act mandates that a suit for infringement of a patent is to be filed in a District Court. 

Here’s Section 104: 

104. Jurisdiction- No suit for a declaration under section 105 or for any relief under section 106 or for infringement of a patent shall be instituted in any court inferior to a district court having jurisdiction to try the suit:

PROVIDED that where a counter-claim for revocation of the patent is made by the defendant, the suit, along with the counter-claim, shall be transferred to the High Court for decision.

In other words, if the counterclaim of revocation is no more treated as a counterclaim, the suit must be adjudicated by a forum which has the power to do so under Section 104 of the Act, namely the District Court (of course, in the case of Courts such as the Delhi High Court, the High Court would be the Court of first instance if the suit is valued for Rs.20,00,000).

To my surprise, there is a short order on this issue that was delivered by the Allahabad High Court in Fabcon Corporation v. Industrial Engineering Corporation (AIR 1987 All 338). In this case, the Plaintiff claimed that since a defence of invalidity of the patent under Section 107 (1) was taken by the Defendant, such a defence must be deemed as a counterclaim under Section 64 of the Act. This meant that the suit for infringement had to be transferred along with the deemed counterclaim to the High Court.

The High Court disagreed with the Plaintiff and took a view, which I fully agree with and have always believed in, that a defence as envisaged under Section 107(1) is not the same as filing a counterclaim of revocation under Section 64 of the Act. What does Section 107(1) provide for?

 The provision basically says that every ground of revocation which is available under Section 64 of the Act can be used as a defence by the defendant. That said, merely because such a defence has been raised by the defendant, it does not translate to filing a counterclaim for revocation of the patent. This is precisely what the Allahabad High Court observed in the Fabcon order. Following is the Court’s observation on the issue:

It is urged that since the defendant has asserted that the patent in question be held invalid, this be taken to be a counter-claim for revocation within the meaning of the aforesaid proviso. This is not acceptable. According to Section 107(1) in any suit for infringement of a patent, every ground on which it may be revoked under Section 64 shall be available as a ground defence. Section 64 enumerates the grounds for revocation of patent.

 Under the scheme of the Act itself, therefore, there is a distinction maintained as between the defence raised to a suit for infringement of a patent (vide Section 107) on the one hand and the revocation sought of a patent on the other (vide Section 64). The grounds may be the same, but still there is no inconsistency on account of the suit being defended as liable to dismissal in a particular case and a case where the defendant seeks also that the patent asserted by the plaintiff be revoked."

Consequently, since a defence under Section 107(1) cannot be treated as a counterclaim, the Court held that the Plaintiff’s suit for infringement cannot be transferred to the High Court, and must be decided by the District Court. Following are the relevant observations of the Court:

It is only when there is a counterclaim seeking revocation of the patent that the jurisdiction of the District Court is ousted. The proviso to Section 104 being in the nature of an exception to the general rule, it has to be strictly construed. There is no express claim on the part of the defendant for revocation of the where of infringement is alleged by the plaintiff.

That the defendant pleads that the patent set up by the plaintiff is invalid amounts only to the defendant raising a ground for the relief sought by the plaintiff being declined; it does not follow necessarily that the defendant also seeks by way of a counterclaim that the patent be revoked. The defendant has not asserted in the pleadings anywhere that they are the patentee or that they are entitled to be registered as such, The grounds raised are cumulatively and also individually by way of defence to the plaintiffs action.

I think our Courts understood the law of patents (or for that matter any law) better in the past...

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