Wednesday, May 13, 2015

Delhi High Court Dismisses Writ Petition by AIDS NGO Seeking Directions against Abuse of Divisional Patent Applications

In a crisp judgment dated May 7, 2015, the Chief Justice of the Delhi High Court dismissed a writ petition filed by a Delhi-based HIV/AIDS NGO, The Delhi Network of Positive People, in which directions were sought to amend the procedure under Patents Act, 1970 to prevent abuse of the process of filing divisional patent applications by patent applicants.

As our readers are aware, Section 16 of the Patents Act, 1970 permits filing a divisional patent application either suo motu by the applicant or in response to an objection raised or direction issued by the Patent Office, only when the basic patent application discloses multiple inventive concepts which are not cognate. The Petition (rightly) raises the issue of abuse of the process of suo motu filing of divisional patent applications by applicants who anticipate rejection of their patent applications, in the hope that they might get lucky the second time around, even when they are fully aware that they do not satisfy the requirement of Section 16 (this issue was dealt with in a post I wrote four years ago elsewhere).

To remedy the mischief, the Petitioner prayed for directions to the Ministry of Commerce requiring it to amend Form 1 of the Patents Act so as to include an undertaking by the patent applicant at the time of filing of a divisional application that the parent application discloses multiple inventions not constituting one single inventive concept and that the claims of the divisional application are not identical to those of the parent application. A second direction was sought which required the Controller of patents to take an ex parte decision on the maintainability of a divisional application before examining it for patentability. Finally, a provision for action against mischievous patent applicants was sought.

Although the Court recognized the validity of the concerns raised in the petition, it was dismissed on grounds that a Court could neither legislate nor issue a direction to the Legislature to enact in a particular manner. Further, in the absence of a constitutional challenge to the legislation, it would be equally impermissible for a Court to expand the scope of the legislation or recast it through interpretation. In this regard, reliance was placed on the Supreme Court’s decision in V.K. Naswa v. Home Secretary, Union of India (2012) 2 SCC 542. The High Court also observed that it could not direct the Controller of Patents to exercise his power in a manner contrary to the framework of the Act.

The other reason for dismissal of the petition was the Court’s view that it could not adjudicate on the issue in vacuum without their being a specific cause of action or without the impleadment of an errant patent applicant as a respondent to the petition. I am not sure the absence of these two ingredients is fatal to a writ petition which challenges the Patent Office's handling of divisional applications as opposed to targeting any patent applicant in particular. The Petitioner may seek consolation from the Court’s direction to the Ministry of Commerce and the Controller of Patents to treat the petition as a representation and consider taking appropriate measures to address the issue.

I agree with the Court on the impropriety of directing the Executive or the Legislature to amend a statute or to interpret it in a manner not envisaged by it. That said, I think that the current declarations sought from an applicant in Form 1 already have the effect of declaring that a divisional application is not identical in its claims or scope to the parent application. In Para 9 of Form 1, which is titled “Declarations”, a patent applicant is required to declare that there is no lawful ground of objection to the grant of the patent. Further, when a divisional application is filed, the applicant has to furnish the details of the parent application and declare that the divisional has been filed pursuant to Section 16 of the Act.

It could be argued that if an applicant knowingly files a divisional patent application which is identical to the parent, he is in violation of his own declarations in Para 9 for having knowingly filed an application which does not satisfy the ingredients of Section 16. If a patent is ultimately granted pursuant to the divisional, it may be revoked under Section 64 on the same substantive grounds on which the parent was rejected, apart from the ground of having obtained the patent on a false suggestion or misrepresentation under Section 64(1)(j) of the Act. Upon revocation, the IPAB or a Court in a counterclaim, as the case may be, could impose exemplary costs for having committed fraud on the Patent Office. That said, the issue remains that there is no mechanism as on date to address the issue right at the stage of examination of the divisional application. One possible solution may be for the Controller General of Patents to issue a practice direction requiring:
A.      patent applicants to submit a copy of the parent application when a divisional is filed;
B.      patent examiners to scrutinize the issue of maintainability of a divisional before examining it for patentability

Comments and corrections are welcome.

Saturday, May 9, 2015

Compensatory Costs for False or Vexatious Claims or Defenses in IP Disputes

Picture yourself as a new entrant to a field of business who intends to launch a product which strikes the right balance between performance and cost-effectiveness. Just a week before the launch of your product, you get sued for infringement of a patent or a design by a better-placed competitor (“X”) who succeeds in securing an ex parte ad interim injunction which kills the launch of your product. During the course of the litigation, you manage to establish before the Court that X’s suit was malicious and false/vexatious i.e. it was instituted with the specific object of thwarting the launch of your product despite his knowledge that he had no real cause of action against you. Does the law address this situation?

Now put yourself in the shoes of an IP holder, say a patentee, who discovers that a former licensee (“Y”) is continuing to sell the patented invention despite the termination of the license (which has not been challenged by the licensee). Upon being sued, the former licensee Y contests infringement knowing fully well that his product is identical to the product that was sold by him during the subsistence of the license. Further, Y challenges the validity of your patent on multiple substantive grounds despite having satisfied himself of its validity prior to obtaining the licensee from you. You, the patentee, ultimately convince the Court of the false/vexatious nature of Y’s defense of non-infringement and patent invalidity (notwithstanding the fact that Section 140 of the Patents Act does not prohibit Y from the challenging your patent’s validity). Does the law address this situation?

Section 35A of the Code of Civil Procedure, 1908, which governs the conduct of civil suits specifically provides a remedy. Extracted below is the provision:

35A. Compensatory costs in respect of false or vexatious claims or defenses.
(1) If any suit or other proceedings including an execution proceedings but excluding an appeal or a revision, any party objects to the claim of defence on the ground that the claim or defence or any part of it is, as against the objector, false or vexatious to the knowledge of the party by whom it has been put forward, and if thereafter, as against the objector, such claim or defence is disallowed, abandoned or withdrawn in whole or in part, the Court, if it so thinks fit may, after recording its reasons for holding such claim or defence to be false or vexatious, make an order for the payment the object or by the party by whom such claim or defence has been put forward, of cost by way of compensation.
(2) No Court shall make any such order for the payment of an amount exceeding three thousand rupees or exceeding the limits of it pecuniary jurisdiction, whichever amount is less:
Provided that where the pecuniary limits of the jurisdiction of any Court exercising the jurisdiction of a Court of Small Causes under the Provincial Small Cause Courts Act, 1887 or under a corresponding law in force in any part of India to which the said Act does not extend and not being a Court constituted under such Act or law, are less than two hundred and fifty rupees, the High Court may empower such Court to award as costs under this section any amount not exceeding two hundred and fifty rupees and not exceeding those limits by more than one hundred rupees:
Provided, further, that the High Court may limit the amount or class of Courts is empowered to award as costs under this Section.
(3) No person against whom an order has been made under this section shall, by reason thereof, be exempted from any criminal liability in respect of any claim or defence made by him.
(4) The amount of any compensation awarded under this section in respect of a false or vexatious claim or defence shall be taken into account in any subsequent suit for damages or compensation in respect of such claim or defence.

A reading of the provision makes it clear that the remedy of compensatory costs is equally available against a plaintiff’s false/vexatious claim and a defendant’s false/vexatious defense. However, what renders the remedy illusory is the paltry amount of INR 3000 prescribed as the upper limit. This defect in the provision has been pointed by the Supreme Court in several decisions and has been the subject-matter of cogitation by the Law Commission of India in its 240th Report.

What is also to be noted is that unless the affected party raises the objection of false/vexatious claim or defense, a Court cannot suo motu embark on such an enquiry or grant the remedy provided for under the provision. This aspect too has been addressed by the Law Commission which, among other things, has sought to rechristen ‘compensatory costs’ as ‘exemplary costs'. Following are the amendments to the provision recommended by the Commission:

(1)    Ceiling limit of Rs. 3,000/- prescribed in the year 1976 needs to be enhanced to Rs. 1,00,000/-.

(2)    Out of the costs awarded under Section 35-A (maximum being Rs. 1,00,000/-), part of the costs should be allowed in favour of the party who has been subjected to frivolous or vexatious litigation and a part of the amount of costs should be directed to be deposited in the Judicial Infrastructure Fund to be created by each High Court

(3)  The expression ‘exemplary’ should be substituted for the word ‘compensatory’ wherever it occurs in Section 35-A.

(4) Every Court, on its own, even without an application from one of the parties, shall be empowered to award exemplary costs under section 35-A if the Court is satisfied that the claim or defence is false or vexatious to the knowledge of the party. However, before passing such order, opportunity of hearing shall be given to the party against whom such order is proposed to be passed on the date of pronouncement of judgment