Division Bench of the Delhi High Court on Section 8 of the Patents Act and Judgment on Admission of its Violation

On November 7, 2014, the Division Bench of the Delhi High Court pronounced its 23-page verdict in Sukesh Behl & Anr vs. Koninklijke Phillips Electronics. The issue before the Division bench in this case may be broken down as follows:

a. In assessing compliance or alleged violation of Section 8 of the Patents Act, 1970 by a patentee in the context of a revocation proceeding under Section 64(1)(m), does the Court have the power to exercise its discretion to delve into the materiality of the violation and the bona fides of  the patentee?

b.   Does the presence of “may” in Section 64(1) vest the Court with the power to not revoke a patent despite arriving at the conclusion that the patentee has not complied with the requirements of Section 8? In other words, is the “may” a “may” or a “shall”?

c.    Can an admission of violation of Section 8 lead to a judgment on admission under Order 12 Rule 6 of the CPC?

This context is important since the Court was not seized of the effect of prima facie non-compliance of Section 8 by a patentee on his entitlement to an interim injunction under Order 39 Rules 1 and 2 of the CPC. Simply stated, the standards applied and the considerations that go into are significantly different when analyzing the issue of Section 8 compliance in the context of judgment on admission and an application for interim injunction, and this is a view that I agree with.  

To this extent, there is no inconsistency between the earlier decision of the Delhi High Court on Section 8 in Chemtura Corporation vs. Union of India (2009), wherein Justice Muralidhar had held that a prima facie violation of Section 8 poses a credible challenge to the validity of the patent and hence disentitles a patentee to the grant of an interim injunction. This view has been endorsed by the Division Bench in paragraph 39 of the Phillips decision, which is reproduced below

“39. In Chemtura Corporation Case (supra), this Court was dealing with grant of injunction under Order XXXIX Rule 1 and 2 of CPC. Having recorded a prima facie satisfaction that there had been a failure by the plaintiff to comply with the mandatory requirement of Section 8(1), this Court held that the interim injunction in favour of the plaintiff cannot be continued. The question whether the power conferred under Section 64(1) of the Patents Act for revocation of the patent is discretionary or mandatory neither fell for consideration nor adjudicated by the Court in the said decision. Therefore, the learned Single Judge had rightly distinguished Chemutra Corporation Case (supra) relied upon by the learned counsel for the appellants/defendants.”

Now let’s proceed to the Division Bench’s discussion on the issues enumerated above.

In the facts of this case, the Defendant/ Appellant, Maj. (Retd) Sukesh Behl, alleged in his written statement that Plaintiff’s patent IN218255 was liable to be revoked under Section 64(1)(m) for failure to disclose to the Controller of Patents, information relating to its corresponding foreign patent applications required under Section 8.

In response to this allegation, the Patent agent of the Plaintiff in his letter dated 14.09.2012 (subsequent to the institution of the suit on 24.07.2012) informed the Controller of Patents that certain details regarding the corresponding foreign patents applications had not been disclosed during the prosecution of the Indian patent and requested that the said information be taken on record. Along with the said letter, an affidavit was filed stating that the agent had received documents relating to the status of the said foreign applications way back in 2004. However, he had inadvertently failed to take note of information which was printed at the back of the first page of the documents received by him. In other words, according to the Plaintiff, the omission was not deliberate and certainly not at the behest of the Plaintiff. 

As a consequence of the admission of omission made by the Plaintiff’s patent agent, the Defendant/Appellant moved for a judgment on admission under Order 12 Rule 6, seeking a decree of revocation in the Counter-claim filed by him under Section 64. The submission of the Defendant was that in light of the unequivocal admission by the Plaintiff, contravention of Section 8 was manifest which must lead to revocation of the patent in the Counter-claim without the need for further examination at trial. Further, since there is no room for exercise of discretion under Section 64(1)(m) where the situation relates to failure to disclose information (as opposed to a situation where false information has been furnished), there is no discretion available to the Court to not revoke a patent if failure to disclose information is established. Since the Plaintiff itself had admitted to this failure in an affidavit, the patent deserved to be revoked all the more without any need for enquiry on the aspects of willful suppression and the materiality of the information suppressed.

The Patentee/Plaintiff on the other hand contended that that the revocation of a patent is not warranted unless the Court finds that the omission was deliberate and the information not submitted was material to grant of patent. Since such adjudication requires a detailed examination, at trial, the Plaintiff contended that the Single Judge was right in dismissing the application under Order 12 Rule 6. 

In this context, readers may recall my earlier post on Section 8 in the context of the Roche vs. Cipla decision of Justice Manmohan Singh, wherein I had said the following:

“1. Is there any room for exercise of discretion under Section 64(1)(m) once violation of Section 8 is established to the satisfaction of the Court or the IPAB?

2. Assuming there exists room for exercise of discretion, did the Learned Single Judge take a reasoned approach in exercising his discretion to not revoke the patent? In other words, has the Single Judge sufficiently reasoned as to why he was of the opinion that the patent on Erlotinib did not deserve to be revoked “solely on the ground of non-compliance” of Section 8?”

  

I had further gone on to say the following:

“Section 64(1)(m), when read with the preamble, reads as follows:

64. Revocation of Patents: (1) Subject to the provisions contained in this Act, a patent, whether granted before or after the commencement of this Act, may, [be revoked on a petition of any person interested or ofthe  Central  Government  by  the  Appellate  Board  or  on  a  counterclaim  in  a  suit  for infringement of the patent by the High Court] on any of the following grounds, that is to say—

(m)  that the applicant for the patent has failed to disclose to the Controller the information required by section 8 or has furnished information which in any material particular was false to his knowledge;

The Learned Single Judge placed reliance on the “may” in the preamble to sub-section (1) to conclude that the “may” provided for exercise of discretion by the Court or the IPAB. The question is, is the “may” to be interpreted as “shall”, or as “may”?

It needs to be pointed out that the preamble, and consequently the “may” in Section 64(1) is applicable equally to all 14 grounds of revocation which are enumerated under Section 64(1). Therefore, it would be difficult and probably even untenable to argue that certain grounds are more serious (or more equal) than the rest.

In other words, it may not be possible to argue that violation of Section 8 is a minor ground compared to other so-called “substantive” grounds such as novelty or obviousness. Specifically, it may not be possible to argue that the “may” is a “shall” for certain grounds, but remains a “may” for certain other grounds.

Further, there are two sub-grounds within Section 64(1)(m) itself, namely:

A. that the applicant for the patent has failed to disclose to the Controller the information required by section 8; or

B. that the applicant has furnished information which in any material particular was false to his knowledge

These two grounds refer to two different circumstances. In the first circumstance, there is a failure on the part of the applicant to disclose information sought under Section 8. Specifically, the failure must relate to details of foreign application sought in Form 3. Such failure need not be deliberate or calculated. There just needs to be failure to disclose. Therefore, it could be said that the scope of analysis is restricted to establishing whether or not there was a failure to disclose by the applicant.

Before we jump to any conclusion, it needs to be pointed out that what amounts to “failure to disclose” is a subjective enquiry based on what constitutes sufficient disclosure under Section 8. It could also be argued that subjectivity allows for exercise of discretion. However, the exercise of discretion is limited to evaluating the adequacy of disclosure, and no more. If the applicant has disclosed the details sufficiently as sought in Form 3, there is no question of violation of Section 8.

However, if the disclosure is less than adequate, it must be concluded that the applicant/patentee has indeed violated Section 8. Once this conclusion is reached, there appears to be no more room for exercise of discretion. In other words, once failure to disclose is established, the “may” in the preamble to sub-section (1) of Section 64 cannot be used to further exercise discretion. Revocation appears to be the only legal and  logical course of action.

As regards the second circumstance which refers to willfully furnishing false information, it is clear that there must be a positive act on the part of the applicant to supply information which he knows to be false in a “material” way. Simply put, the false information must necessarily have a bearing on the decision of the Controller to grant or refuse a patent. Obviously, in this circumstance, the Controller has the power to exercise his discretion to understand whether the false information was “material” in any way to the outcome of the examination process.

To summarize, on a strict reading of relevant portions of Section 64(1)(m), it could be argued that there does not exist a room for exercise of discretion once failure to disclose information under Section 8 is established. Therefore, since the Learned Single Judge had arrived at a finding of contravention of Section 8 by the patentee, I don't think the Court had the option of not revoking the Erlotinib patent.”

  

Applying this logic to the Phillips case, it could be said that the Plaintiff’s patent is liable to be revoked for failure to disclose information in light if its own admission. However, it must also be noted that such revocation was being sought summarily under Order 12 Rule 6. Therefore, given the grave implications for the patentee, a Court would not be wrong in coming to the conclusion that the issue deserved deeper analysis at trial.

Now let us see what the Division Bench had to say. In paragraph 25, the Court notes, based on the affidavit of the Plaintiff's patent agent, that certain information was inadvertently omitted/not disclosed by the Plaintiff’s patent agent to the Indian Patent Office, despite having received the information from the Plaintiff. In such a situation, the Court ought to have held that only at trial it may be understood as to whether the failure of a patent agent to disclose information amounts to failure of the patentee to furnish information under Section 8. This would have been a better issue to frame and decide. Instead, in paragraph 27 of the decision, the Court goes on to observe that the issues that need to be looked into at trial are the alleged suppression and the materiality of the suppressed information. In my humble opinion, although the Court was perhaps correct in taking the view that the issue deserved a trial, it has erred in its appreciation of Section 64(1)(m) and the latter's application to the facts of the case. Simply put, the conclusion may be correct but the reasoning is flawed.

The Division Bench then dwelt on the interpretation of the word ”may” in Section 64(1). Based on a host of precedents, the Court took the view that the “may” was indeed a may which has the consequence of conferring discretion upon the Court while exercising the power of revocation. On this too, I humbly disagree with the Court as stated in my earlier post, the “may” in Section 64(1) is applicable equally to all 14 grounds of revocation which are enumerated under Section 64(1). Therefore, it would be difficult and probably even untenable to argue that certain grounds are more serious (or more equal) than the rest. In other words, it may not be possible to argue that violation of Section 8 is a minor ground compared to other so-called “substantive” grounds such as novelty or obviousness. Specifically, it may not be possible to argue that the “may” is a “shall” for certain grounds, but remains a “may” for certain other grounds.

    

Although testy, I’d like to volunteer with another argument. The Indian Patents Act, 1970 perhaps is inspired by its British counterpart and the use of “may” in certain instances in British English is synonymous with “shall”. In other words, the use of the word “may” is meant to be assertive or in the form of a directive, with no room for exercise of discretion. This must be considered in interpreting the language of the Indian statute. Therefore, given that the “may” used in Section 64(1) applies to both substantive and procedural grounds, it may not be possible to selectively construe the “may” as “shall” for substantive grounds and “may” for procedural grounds.

From the above, it is clear that although in the facts of the case perhaps a trial was necessary, the DB’s interpretation of Sections 8, 64(1) and 64(1)(m) do not do justice to the express language of the provisions and intent of the Legislature. Critically, this is bound to affect the adjudication of the appeal in the Roche-Cipla case where Section 8 has been agitated vigorously by the defendant Cipla. In that case, although the Learned Single Judge concluded that the patentee had violated Section 8, his Lordship ruled that the "may" in Section 64(1) allowed him to not revoke the patent despite the violation. Therefore, the DB's decision could deprive Cipla of an otherwise legitimate ground of appeal. I, for one, will wait to see how the DB's decision is applied in pending matters by Courts and the IPAB.