Saturday, January 26, 2013

Can a Plaintiff/Patentee Withdraw a Suit for Patent Infringement At Will?

The instinctive response to the question is that a Patentee/Plaintiff must not be permitted to withdraw a suit for patent infringement at will. Our sense of fairness might tell us that by suing the Defendants, the Plaintiff has caused the Defendants to incur costs. Also, if the Defendant has suffered due to grant of an ex parte order or an interim injunction against him, the Defendant has a right to expect compensation/restitution for the loss suffered by him.

What are the relevant provisions of the law which help us address the issue? A combined reading of Order 23, Rule 1 and Section 144 of the Code of Civil procedure, 1908 is called for. Order 23 of the CPC deals with Withdrawal and Adjustment of Suits. Rule 1 of Order 23 states thus:

“At any time after the institution of a suit, the Plaintiff may, as against all or any of the Defendants, abandon his suit or abandon a part of his claim”

Clearly, the Plaintiff has the right to withdraw the suit at will, and there is nothing under the law that prevents him from doing so. That said, does this mean that Defendant is left without any recourse to seek restitution of the costs incurred by him during the course of and as a consequence of the litigation?

Section 144 of the CPC provides for a remedy to such a Defendant. The provision reads thus:

Application for restitution:-- (1) where and in so far as a decree (or an order) is varied or reversed in any appeal, revision or other proceeding or is set aside or modified in any suit instituted for the purpose, the Court which passed the decree or order shall, on the application of any party entitled to any benefit by way of restitution or otherwise, cause such restitution to be made as well, so far as may be, place the parties in the position which they would have occupied but for such decree (or order) or such part thereof as has been varied, reversed, set aside or modified and, for this purpose, the Court may make any orders, including orders for the refund of costs and for the payment of interest, damages, compensation and mesne profits, which are properly consequential on such variation, reversal, setting aside or modification of the decree or order.

Explanation:-- For the purposes of sub-s. (1), the expression "Court which passed the decree or order" shall be deemed to include -
(a) where the decree or order has been varied or reversed in exercise of appellate or revisional jurisdiction, the Court of first instance;

(b) where the decree or order has been set aside by a separate suit, the Court of first instance which passed such decree or order;

(c) where the Court of first instance has ceased to exist or has ceased to have jurisdiction to execute it, the Court which, if the suit wherein the decree or order was passed were instituted at the time of making the application for restitution under this section, would have jurisdiction to try such suit"

Sub-section 1 of Section 144 essentially envisages restitution when a decree or order undergoes variation or reversal in an appeal or revision or “any other proceeding”. The sub-section also envisages restitution upon setting aside or modification of the decree or the order passed in the first suit in a counter-claim/counter-suit instituted for the purpose of setting aside or modifying the decree or the order in the first suit. However, there is no express mention of whether or not such restitution is available in the event of withdrawal of the suit.

That said, the provision is broad enough to accommodate such an eventuality since it refers to variation or reversal in....”other proceeding”. This captures the spirit of the provision which is to provide for a remedy to a Defendant who has suffered losses as a consequence of the Plaintiff’s suit.

When can an application for Section 144 be filed? And who can it be filed before? Sub-section 1 answers both these questions- The Court which passed the decree or the order which was subsequently varied or reversed shall be the Court before which an application under Section 144 may be filed.

Also, such an application must be naturally filed after such variation or reversal of the decree or the order. This also means that once the decree has been varied or reversed by an appellate Court and rendered final, a stand-alone application under Section 144 may be moved before the Court of first instance which passed the original decree or order. This application would stand independent of the Suit and the Court shall be seized of such an application by virtue of being the Court that passed the decree or the order.

A Calcutta High Court decision in Dilip Kumar Dey v. Vishwamitra Ram Kumar throws light on the Section as follows:

50. Under Order 8, Rule 6D a counter claim is permitted to survive a suit where the suit is discontinued, stayed or dismissed. Similarly, a cross-objection is to survive an appeal in certain circumstances under Order 41, Rule 22(4). In either of these the cross-objection -- or the counter-claim is heard in the very proceedings of the appeal or the suit and unless there was a provision to the contrary once the appeal or the suit stand terminated, there would be no proceeding in which the cross-objection or counter-claim could be adjudicated. They, however, being independent claims of the respondents or the defendant cannot be permitted to become infructuous on the appellant or the plaintiff withdrawing the suit on appeal.

51. In contra-distinction to the aforesaid proceedings, proceedings under Section 144 are not heard in the suit and, therefore, termination of the suit would not ipso facto result in conclusion of the proceedings under Section 144, C.P.C. These proceedings are not proceedings in the suit and they are not heard as a part of the proceedings in the suit and cannot be interlocutory proceedings in the sense implied above. These proceedings are taken distinctly from the suit and as pointed out above may not necessarily be even contemporaneous with the suit. They, therefore, do not need any separate provision to save them after a suit ends.”

Instead of an application under Section 144, can a counter-claim for damages/costs be instituted by the Defendant? Sub-section 2 of Section 144 bars such a counter-suit:

(2) No suit shall be instituted for the purpose of obtaining any restitution or other relief which could be obtained by application under sub-section(1).

1. Although the Plaintiff may withdraw the suit at will, the Defendant is not without remedy to seek restitution, courtesy Section 144 of the CPC which may be filed as an independent application, notwithstanding the withdrawal of the suit.
2. A remedy which may be sought under Section 144 cannot be sought by way of or as part of a counter-claim or a counter-suit.

I thank Ms.Sneha Jain for her discussions with me on the provision. 

Sunday, January 13, 2013

Kamal Hassan Moves CCI on Blockade Against his Film “Vishwaroopam”

If news reports are to be believed, Kamal Hassan has filed a complaint before the Competition Commission of India (CCI) against theatre owners for allegedly collectively stalling the release of his magnum opus “Vishwaroopam”.

 Kamal Hassan, whose home production Vishwaroopam is, had originally planned to release the movie on Direct-to-Home (DTH) platforms on January 10, 2013 on the eve of the Tamil harvest festival “Pongal” (also celebrated as “Makar Sankranti”). The plan was to charge INR1000 for single viewing of the movie on TV via 6 DTH partners, namely Tata Sky, Airtel, Sun, Dish, Videocon and Reliance.
After a collective threat issued by Tamil Nadu theatre Owners Association and Ramanathapuram United Film Distributors to not make their cinema halls available for the release of the movie, Kamal has been forced to push the release of the movie on big screens to January 25, 2013.

Made at a budget of INR 100 Crores, Vishwaroopam is probably Kamal’s most ambitious project to date. Kamal’s argument supporting the simultaneous release on DTH was that only 3% of the people in Tamil Nadu had access to DTH signals/broadcasts. However, the flip side of the idea is that it could be possible for people to make camcorder recordings of the movie, and thereby undermine the interests of theatre owners and distributors in the first week, which is crucial for box-office collections.
That said, the question that would need to be addressed as part of the CCI complaint is, whether there was indeed cartelization on the part of theatre owners? And if theatre owners have a legitimate defense under the law or the contract governing the distribution rights? It would be interesting to see the CCI’s take on the matter.

Tuesday, January 1, 2013

Presumption under Section 3 of the Competition Act, 2002

First things first, I wish all readers of the blog a Happy New Year! May we learn more this year, and may we get opportunities to apply what we learn!

The first post of this year will be on Competition law since it is an area I am interested in, and which is expected to feature more in IP disputes in the near future (I have earlier written a few posts on the subject).

Last January, I had written two posts on legality of collective bargaining arrangements in light of Section 3(3) of the Competition Act. Interpreting Section 3(3), I had written as follows:

(3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which—
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development, investment or provision of services;
(c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding;

shall be presumed to have an appreciable adverse effect on competition:

Provided that nothing contained in this sub-section shall apply to any agreement entered into by
way of joint ventures if such agreement increases efficiency in production, supply, distribution,
storage, acquisition or control of goods or provision of services.

The provision deals with cartel-like conduct. Like most provisions of the Competition Act, 2002, it raises rebuttable presumptions of anti-competitive conduct. This is clear from the phraseology of Section 3(3) which says “shall be presumed to have an appreciable adverse effect on competition in India”.

Precisely because the presumption is rebuttable, a strict “per se” approach to the behaviour of a party under Section 3(3) would be wrong in law. Stated otherwise, a narrow view of an allegedly anti-competitive action/agreement would run counter to legislative intent.”

I’d like to re-visit the above underscored conclusion. Section 3(3) of the Act says if any agreement has any of the effects enumerated thereunder, it “shall be presumed to have an appreciable adverse effect on competition”. I had earlier taken the view that the presumption is rebuttable and hence a “per se” view under Section 3(3) may be wrong in law. However, on comparison with the language in Section 3(4), it is possible to arrive at a different conclusion.

Section 3(4) reads as follows:

(4) Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including-
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance,

Shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

What is evident is that unlike sub-section 3, there is no “shall be presumed” in sub-section 4. This could mean that the standard of proof required under sub-section 4 to prove violation of sub-section 1 is higher than under sub-section 3.

Further, it could also be said that the presumption under sub-section 3 is not meant to be rebuttable, and that upon establishment of any of the effects enumerated thereunder, the appreciable adverse effect on competition shall be presumed. This probably is the basis for the association of the “per se” rule with sub-section 3.

The Proviso to sub-section 3 also seems to support this line of interpretation since it is meant to be an exception to the presumption under sub-section 3. In other words, the two possible defenses to the allegation of cartelization could be to prove that the agreement does not attract any of the effects enumerated under the sub-section, or that the agreement is covered by the Proviso.

Comments and corrections are welcome!