Does the IPAB have the Power to Review its Own Decisions?

The provision that vests the Intellectual Property Appellate Board (IPAB) with the powers of a civil court is Section 92 of the Trademarks Act, which is reproduced below:

92. Procedure and powers of Appellate Board.-

(1) The Appellate Board shall not be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908 ) but shall be guided by principles of natural justice and subject to the provisions of this Act and the rules made thereunder, the Appellate Board shall have powers to regulate its own procedure including the fixing of places and times of its hearing.

(2) The Appellate Board shall have, for the purpose of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908 ) while trying a suit in respect of the following matters, namely:-

(a) receiving evidence;

(b) issuing commissions for examination of witnesses;

(c) requisitioning any public record; and

(d) any other matter which may be prescribed.

(3) Any proceeding before the Appellate Board shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860 ), and the Appellate Board shall be deemed to b a civil court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974 ).

This provision is largely identical to Section 77 of the Patents Act and Section 127 of the Trademarks Act. However, the power of review is conspicuous by its absence. Can it be argued that the power of review is an inherent one? 

This issue was addressed in the IPAB’s order no. 134/2009 dated August 21, 2009 in OA/1 /2007/PT/CH. In this decision, the IPAB held that since the Board was the creation of a statute, it could not vest itself with powers of substantive review unless the statute expressly provided for it. The power of procedural review, however, being ancillary to its function, was inherent in it. To support this, the Board cited a few decisions of the Supreme Court, the Grindlays decision being a prominent one.

Reproduced below is the relevant extract from the Grindlays decision:

The decision in Narshi Thakershi v. Pradyumansinghji is distinguishable. It is an authority for the proposition that the power of review is not an inherent power, it must be conferred either specifically or by necessary implication. Sub-sections (1) and (3) of s. 11 of the Act themselves make a distinction between procedure and powers of the Tribunal under the Act. While the procedure is left to be devised by the Tribunal to suit carrying out its functions under the Act, the powers of civil court conferred upon it are clearly defined. The question whether a party must be heard before it is proceeded against is one of procedure and not of power in the sense in which the words are used in s. 11. The answer to the question is, therefore, to be found in sub-s. (1) of s. 11 and not in sub-s. (3) of s. 11. Furthermore, different considerations arise on review. The expression 'review' is used in two distinct senses, namely (1) a procedural review which is either inherent or implied in a court or Tribunal to set aside a palpably erroneous order passed under a misapprehension by it, and (2) a review on merits when the error sought to be corrected is one of law and is apparent on the face of the record. It is in the latter sense that the Court in Narshi Thakershi's case held that no review lies on merits unless a status specifically provides for it. 

Summary Procedure for Grant of a Compulsory License under Section 92 in Special Circumstances

Section 92 of the Patents Act provides a summary/accelerated mechanism under which Compulsory Licences (CL) may be issued by the Controller of patents pursuant to a notification by the Central/Union Government. Here’s the provision:

Section 92. Special provision for compulsory licences on notifications by Central Government

(1) If the Central Government is satisfied, in respect of any patent in force in circumstances of national emergency or in circumstances of extreme urgency or in case of public non-commercial use, that it is necessary that compulsory licenses should be granted at any time after the sealing thereof to work the invention, it may make a declaration to that effect, by notification in the Official Gazette, and thereupon the following provisions shall have effect, that is to say—

(i) the Controller shall, on application made at any time after the notification by any person interested, grant to the applicant a licence under the patent on such terms and conditions as he thinks fit;

(ii) in settling the terms and conditions of a licence granted under this section, the Controller shall endeavour to secure that the articles manufactured under the patent shall be available to the public at the lowest prices consistent with the patentees deriving a reasonable advantage from their patent rights.

(2) The provisions of sections 83, 87, 88, 89 and 90 shall apply in relation to the grant of licences under this section as they apply in relation to the grant of licences under sec. 84.

(3) Notwithstanding anything contained in sub-section (2), where the Controller is satisfied on consideration of the application referred to in clause (i) of sub-section (1) that it is necessary in—

(i) a circumstance of national emergency; or

(ii) a circumstance of extreme urgency; or

(iii) a case of public non-commercial use,

which may arise or is required, as the case may be, including public health crises, relating to Acquired Immuno Deficiency Syndrome, human immune deficiency virus, tuberculosis, malaria or other epidemics, he shall not apply any procedure specified in section 87 in relation to that application for grant of licence under this section:

PROVIDED that the Controller shall, as soon as may be practicable, inform the patentee of the patent relating to the application for such non-application of section 87.

Based on a reading of the provision, it is clear that the provision is to be invoked in extra-ordinary circumstances involving “national emergency” or “extreme urgency” or “public non-commercial use”. The mechanism under this provision is set in motion by and when the Central Government notifies in the Official Gazette that such extra-ordinary circumstances have necessitated the grant of compulsory licences in relation to patents which help to address the exigency.

However, Section 92(2) still requires a person interested to apply to the Controller for grant of a compulsory licence. That said, the primary differences between CL under Sections 84 and 92 are as follows: 

1.       Under Section 84, an application for a CL may be made only after expiration of 3 years from the date of grant of the patent, whereas under Section 92 the Central Government may notify for issuance of a CL anytime after the sealing of the patent.

2.       The grounds for grant of a CL under Section 84 are different from the exigencies dealt with by Section 92.

3.       Under Section 92(3), the procedure for opposition by the patentee and hearing prescribed in Section 87 may be given a go by if the Controller is satisfied that the situation demands it.

The question that could arise is what is the distinction between “national emergency and extreme urgency”? National emergency clearly refers to a nation-wide crisis or at least a public crisis, whereas “extreme urgency” could refer to an individual crisis where the condition is extremely rare and restricted to an individual or a few individuals, both of which requiring immediate action.

The point that emerges is that a sense of immediacy appears necessary for Section 92 to be invoked by the Central Government citing national emergency or extreme urgency. Consequently, if a health condition is rare but is not immediately fatal or there is no outbreak of an epidemic (in other words there is no “national emergency” or “extreme urgency”), but the drug is exorbitantly priced or is not adequately available, Section 92 may not be the appropriate remedy. One would think Section 84 may be the apt provision for such a situation if the primary grievance is with respect to the pricing of the drug or its availability.

The third ground for grant of a CL under Section 92 is a case of “public non-commercial use”. This provision, on the face of it, does not have other restrictions which help us understand the nature of the situation when Section 92 may be invoked for public non-commercial use of patented inventions. In the absence of such indicators, the provision is capable of capricious use. To avoid this, it may be necessary to apply the spirit of the first two grounds under Section 92 to public non-commercial use. Simply put, the situation must be serious enough to warrant the grant of a CL for non-commercial use of a patented invention at a public scale.

If such a cautious approach is not adopted, Section 92 could become the option of first resort rendering Section 84 secondary, more so since Section 92 envisages waiver of the opposition and hearing procedure prescribed in Section 87.

I look forward to comments and corrections from readers. 

Teva v. NATCO: Analysis of the Delhi High Court’s decision

Earlier in the day, I had broken the news that the Delhi High Court had returned Teva Pharma’s plaint in its suit, C.S. (O.S) 3193/2012, for alleged infringement of its process patent 190759 on the manufacture of glatiramer acetate (sold under the name “Copaxone”) by Hyderabad-based NATCO Pharma. The decision was passed in an application under Order VII, Rule 10 of the CPC filed by NATCO seeking return of the plaint on grounds that the Delhi High Court was not the appropriate court to be seized of the matter. Here's a link to the decision

The 2007 Litigation- First Indian Suit

Teva had filed its first Indian suit against NATCO in 2007, CS (OS) No. 1708 of 2007, seeking injunction against infringement of its process patent 190759. One of the prayers sought was to restrain NATCO from exporting the allegedly infringing drugs, formulations/bulk drugs outside India. Issues were framed in this suit in May 2012, and trial is underway in it.

The 2009 US Litigation

In 2009, Hyderabad-based Mylan Labs filed an abbreviated new drug application (‘ANDA’) in the US seeking approval to manufacture and sell glatiramer acetate before the expiration of Teva's US patents. Teva sued Mylan and NATCO in the Southern District Court of New York alleging infringement of US Patent Nos. 7199098, 6939539, 6054430, 6620847, 5981589, 6342476, 5800808, 6048898 and 6362161. 

The US District court came to the conclusion that the product sought to be sold by the defendants in the US infringed the process claims of US6054430 and 6048898. However, the Federal Circuit invalidated the process claims in both these patents last year, which surprisingly has not been dealt with in the decision of the Delhi High Court.

The 2012 Litigation- Second Indian Suit

Teva filed its second Indian suit, C.S. (O.S) 3193/2012, on grounds that NATCO’s manufacture of glatiramer acetate in India for sale in the US and elsewhere infringed its Indian Patent 190759. Teva admitted that its suit was a quia timet action which was based on the apprehension that NATCO, having tied up with Hyderabad-based Mylan labs for manufacture of the drug and having secured regulatory approval, was bound to use its patented process in India. Reliance was ostensibly placed on The Hindu Business Line article of January 17, 2012 and NATCO’s annual report for 2010-2011 which referred to the tie up between Mylan and NATCO.

If NATCO’s annual report for 2010-11 already disclosed this tie up according to the plaintiff, which is the stated basis for filing of the second suit, why was the suit filed in November 2012, and not earlier? Also, since one of the prayers in the 2007 suit was to restrain NATCO from exporting drugs which infringe the process patent, where was the need to file the second suit again seeking a cognate prayer with respect to the same patent?

From Para 8 of the decision, it also appears that the second Indian suit was filed on the basis of the US District Court’s finding of infringement of process claims of the US patents, and parity was sought to be drawn between the US patents and the Indian patent 190759. In other words, according to the plaintiff, since the US District Court had come to the conclusion of infringement of process claims of the US patents by the defendants, the Indian Court had to apply the US District Court's findings to the corresponding Indian patent as well..... To me, this goes against the very grain of territoriality of patent rights. After all, every national Court has the right to come to a different conclusion with respect to infringement based on national standards.

Also, if the US Federal Court had ultimately invalidated the US process claims, wouldn’t it have a bearing on the maintainability of the 2012 Indian suit given that the plaintiff’s prayers in the suit were based on the findings of the US District Court which were no longer valid? If yes, why did the plaintiff not deem it fit to bring the US Federal Court's decision to the Delhi High Court's attention?...

Anyways, on the issue of jurisdiction, according to the plaintiff:

A.      The defendants had secured regulatory approval for glatiramer acetate; 

B.      They had distribution networks in New Delhi;

C.      Glatiramer acetate was being sold in New delhi by the defendants

Consequently, the plaintiff invited the Court to assume that glatiramer acetate being sold in New Delhi was manufactured using the plaintiff’s patented process. The question that comes to my mind is, if the patent is admittedly over the process, is it sufficient for a patentee to institute a suit for infringement of the process patent in Delhi merely on the basis of the above ingredients?

Importantly, the plaintiff's product patent application on glatiramer acetate, 93/Del/2003, was rejected by the Indian Patent Office in March 2009. In light of this, doesn’t the 2012 suit have the effect of circumventing the rejection of the product patent application since the suit was based on a mere assumption that the product being sold was manufactured using the patented process? Doesn’t the plaintiff have the burden of proving that the patented process was being worked within the territory of Delhi, particularly when the act of manufacturing took place in Hyderabad according to the defendant?

The plaintiff also claimed that two processes were used by the defendants to manufacture the drug. Here’s the extract from the plaintiff’s reply to the 7/10 application on its stance with respect to the two processes allegedly employed by the defendants:

“The Defendants have two different Glatiramer Acetate (GA) products – one for sale within India and the other for export to Mylan, and are using two different manufacturing processes to make these products. The Defendants admit this in paragraph 5 of their Written Statement as well as in the affidavit dated 6th July 2013 filed by Dr. AKS Bhujanga Rao. This suit does not concern the process used by Defendants for making the Glatiramer Acetate product sold by them for the Indian market (hereinafter referred to as the “GA-first product”). The present suit concerns the process for making the Glatiramer Acetate product that the Defendants are manufacturing in India on behalf of Mylan for sale outside India (hereinafter referred to as a “GA-second product”). This submission is without prejudice to the Plaintiffs’ reasonable apprehension that the Defendants might also be selling the “GA-second product” in India including New Delhi....

....Therefore, the cause of action in suit CS (OS) No. 1708 of 2007 is different from that of CS (OS) No. 3193 of 2012 and also the prayers contained therein are clearly distinct. As explained above, the earlier suit pertained to the GA – first product, sold in India, and the present suit pertains to the separate and distinct GA - second product made in India for export to the US and other countries. This necessitated the filing of the present suit.”

However, nowhere in the Plaint was it alleged that the process was being used by the defendants within the Delhi High Court’s jurisdiction. It wasn’t even alleged that the plaintiff apprehended the use of the patented process in New Delhi. It is worthwhile to note here that NATCO had categorically denied the use of the patented process within the Court’s jurisdiction, and had also denied export of the drugs from New Delhi. In light of this categorical rebuttal, which reportedly was never countered by the plaintiff, there was not enough material for the Delhi High Court to entertain the suit.

Following are the relevant observations of the Court:

22. At the outset, it must be stated that it was repeatedly stressed by learned Senior counsel for the Plaintiffs that CS (OS) No. 3193 of 2012 is a quia timet action. Only an apprehension has been expressed that Natco, having tied up with Mylan, is likely to export the infringing Copolymer-I to US and other countries....

28. It is, therefore, clear that the case of the Plaintiffs concerns the infringement of the process involved in the GA-second product, which the Plaintiffs term as the ‘Mylan process’ and about the possible infringement for the purposes of ‘export’ of the said product to the US and elsewhere.

30. In light of the above legal position, the averments in the plaint in the instant case would have to be examined to ascertain if there is any specific plea that there is a violation of the process patent within the jurisdiction of this Court. The Court finds that there is no such specific averment. There is no averment that the process patent i.e. Indian patent No.190759, or for that matter the ‘Mylan process’, is being practised/infringed by Natco within the jurisdiction of this Court. 

This has also to be seen in the context of the fact that there is no denial by the Plaintiffs that there is no manufacture of the GA- second product in Delhi. There is also no denial by the Plaintiffs that Natco has at present its manufacturing facilities only in Hyderabad.

31. Since the suit concerns a process patent, the pleadings as regards the product being sold in Delhi or elsewhere, or the possibility of it being launched in Delhi or elsewhere cannot justify the jurisdiction of this Court. To recapitulate, in para 40 of the plaint it is averred that “The US Court decision leads to an incontrovertible conclusion of infringement of rights of Plaintiffs No. 1 and 2 in IN ‘759 based on the manufacture of glatiramer acetate by Defendant No.2 for export and sale in the United States.” 

In para 41 it is stated that Natco’s act of manufacturing the glatiramer acetate product “for sale in the US and elsewhere” amounts to infringement of the process patent. The averment is not that such manufacturing of the product for export to the US and elsewhere is happening or is apprehended to happen within Delhi. In the circumstances, the invocation of Section 48(b) of the Patents Act 1970 by the Plaintiffs to urge that the product obtained as a result of infringement of process is sold or apprehended to be sold in Delhi appears to be misconceived. 

The fact that Natco may have an office in Delhi or a distributor in Delhi is not relevant given the fact that the subject matter of the suit is a process patent, and the action brought forth is for alleged infringement of that process for the purposes of export to the US and elsewhere.

Breaking News: Delhi High Court Returns Teva Pharma’s Suit for Patent Infringement against NATCO for Want of Jurisdiction

Based on information from reliable sources, it is learnt that the Delhi High Court has today returned Teva Pharmaceutical’s plaint in its suit for infringement of the process to manufacture the multiple sclerosis drug Copaxone  against NATCO Pharma (C.S.(O.S) 3193/2012). The plaint was returned by Hon’ble Justice S.Muralidhar for want of jurisdiction under Order 7 Rule 10 of the Code of Civil Procedure, 1908, considering that NATCO is a Hyderabad-based entity.

Reproduced below is the said provision of the CPC:

10. Return of plaint.- (1) Subject to the provisions of rule 10A, the plaint shall at any stage of the suit be returned to be presented to the court in which the suit should have been instituted.

Explanation: For the removal of doubts, it is hereby declared that a court of appeal or revision may direct, after setting aside the decree passed in a suit, the return of the plaint, under this sub-rule.

(2) Procedure on returning —On returning a plaint, the Judge shall endorse thereon the date of its presentation and return, the name of the party presenting it, and a brief statement of the reasons for returning it.

Late last year, NATCO had won the right to introduce the generic version of Copaxone in the US.  We will undertake a detailed analysis of the Delhi HC’s decision as soon as we have a copy of it. I thank the blog's well-wishers for bringing this development to my attention.

Delhi High Court declares “Brahmos” as a Well-known Mark and restrains FIIT JEE from using it

On February 24, 2014, in a 32-page decision delivered in a suit for trademark infringement instituted by Brahmos Aerospace Private Limited against FIIT JEE limited, the Delhi High Court declared the plaintiff’s mark “BRAHMOS” as well-known and granted an interim injunction restraining the defendant from using the trademark BRAHMOS in relation to educational activities or as part of its domain name and in any manner which could cause confusion and deception.

As most of our readers must be aware, the plaintiff is a joint venture between the Defence Research and Development Organization (DRDO) of India and the Federal State Unitary Enterprise of Russia, with DRDO being the majority shareholder. The plaintiff is popularly known as the manufacturer of the world’s fastest supersonic cruise missile, Brahmos.

The first defendant is a popular private institution which coaches students who aspire to successfully crack the Joint Entrance Examination (JEE) conducted by the prestigious Indian Institutes of Technology (IITs). The second defendant is USA University Quest (UUQ) which partners with the FIIT JEE to help Indian students secure admissions to US universities.

It was the plaintiff’s case that its well-known trademark BRAHMOS was being used by the defendants in connection with their aptitude tests, which had led to actual confusion. Further, according to the plaintiff, the mark BRAHMOS was being used by the plaintiff in connection with its training and education programmes as well. Consequently, according to it, the likelihood of confusion was higher. To this end, the plaintiff cited instances wherein it had received queries from students asking if taking the Brahmos aptitude test of the defendants would improve their chances of securing employment with the plaintiff.

The defendants contended that:

A.       the mark BRAHMOS was not being used as a trademark, but was used only to indicate a connection in the course of trade. Further, FIIT JEE continued to be used by the first defendant as its flagship trademark, and BRAHMOS was being used only in connection with one of the several aptitude tests conducted by it.

B.      the plaintiff and the defendants were in entirely different spheres of activity. Consequently, there was no possibility of confusion and deception and that the use was bonafide.

C.      BRAHMOS was not a distinctive mark since terms such as “Brahmo Samaj” have been in vogue for a long time.

D.      the Plaintiff was using Brahmand and not Brahmos, for its training programmes. Therefore, there could be no confusion/deception in the field of education/training.

The Court took the view that the trademark BRAHMOS was not a dictionary word, but a coined word, a portmanteau formed from the names of the rivers Brahmaputra and Moskva.

Citing the decisions in Bloomberg Finance LP vs. Prafull Saklecha & Ors and Rolex Sa vs. Alex Jewellery Pvt. Ltd. and Ors, the Court relied upon Section 29(4) to conclude that the mark BRAHMOS was well-known and that the defendants’ use of the mark was “without due cause”/valid justification. The Court rejected the defendants’ contention that their use of the mark was not in a trademark sense given that it was being used in the course of trade. Consequently, the defendants were restrained from the using the mark in any manner which could cause confusion/deception.

It is to be noted that sub-sections (1)-(4) of Section 29 do not require the mark to be used as the flagship mark for it to be infringing. Only Section 29(5) deals with use of the mark as a trade name, or part of the trade name, or as the name of his concern or a part thereof by the defendant in respect of identical goods or services. However, "use in the course of trade" being broader in scope, includes use of the mark as a tradename or as part of the tradename or business concern by the defendant.

Section 111 of the Patents Act: “Innocent” Infringement

In suits for patent infringement, Section 111 of the Patents Act appears to place certain restrictions on the power of the Court to award damages or account of profits against defendants in three limited situations which are spelt out in the provision. Following are the three situations (which however do not limit the power of the Court to grant injunctions):

1.   If the defendant proves that at the date of infringement, he was not aware and had no reasonable grounds to believe that a patent existed on the subject-matter/technology used by him

2.  If the act of infringement is committed after a failure by the patentee to pay renewal fee for his patent within the prescribed statutory period (which does not include the period of extension sought, if any, by the patentee to pay the renewal fee)

3.    If a patent specification is amended by way of a disclaimer, correction or explanation after the publication of the specification, no damages or account of profits may be granted until the date on which the amendment is allowed, unless the Court is satisfied that the specification as originally published was “framed in good faith and with reasonable skill and knowledge”.

A few questions come to my mind. Can ignorance of publication of the patent specification be legitimately argued as a defence under the first situation? I am not sure since publication of a patent specification is treated as constructive legal notice to all third parties. Further, under Situation 3, precisely because publication is deemed as constructive notice, any changes made to the published specification by way of amendment deprives the patentee from claiming damages for the period between the publication of the un-amended specification and date of allowance of the amendment.

Under Situation 3, how would a Court satisfy itself that the originally published un-amended specification was “framed in good faith and with reasonable skill and knowledge”, and not with a mischievous intent to hold back enabling disclosure from all third parties?

The broader question that could also be asked is, unless the existence of a patent is specifically brought to the notice of an alleged infringer/future defendant, can constructive notice by publication be deemed to give rise to the allegation of “wilful infringement” by the defendant? Also, is it fair and reasonable to expect all third parties to proactively look up every patent office journal to scan for and inspect published patent applications which they might be infringing?

Enercon India v. Enercon GmBh: Supreme Court Directs Parties to Arbitrate and Cloaks Indian Courts with Exclusive Jurisdiction

In a recent decision dated February 14, 2014, the Supreme Court of India has partly upheld the decision of the Bombay High Court in the contractual litigation between Enercon India (Indian entity) and Enercon GmBh (German entity) by holding that there exists a valid arbitration agreement entered into by and between the parties. However, the Supreme Court differed with the Bombay High Court in that it took the view that merely because the venue of arbitration is London, it did not follow that UK Courts could be approached by either party to seek interim measures during the course of arbitration.

In other words, according to the Supreme Court, “venue” of arbitration is not the same as “seat” of arbitration. While the former is merely the geographical location of the arbitration proceedings which is chosen based on convenience, the latter decides the appropriate court which shall be cloaked with exclusive jurisdiction to support the arbitration proceedings. Consequently, it is the seat of arbitration, and not the venue that must be considered in resolving the issue of appropriate Court. The exception to this approach is when the agreement is completely silent on the “seat”. In such a situation, venue may not only be a critical factor, but may also be conclusive in deciding the appropriate court.

In this case, although the venue of arbitration is London, the seat of arbitration is India since the law governing the contract as well as the arbitration clause are Indian. Further, the subject-matter of the agreements entered into between the parties pertain to setting up of Enercon India, allocation of shares of Enercon India, and transfer of know-how from the German entity to the Enercon India. Considering the India-centric nature of the transactions, the dispute between the parties too have the closest intimate connection with India. Consequently, according to the Apex Court, Indian Courts alone have jurisdiction over the arbitration proceedings.

The Apex Court further differed with the Bombay High Court on the latter’s vacation of the anti-suit injunction granted by the Daman Trial Court which restrained the German entity from pursuing judicial remedies in UK Courts. According to the Supreme Court, the anti-suit injunction was rightly granted since having decided that there exists a valid arbitration clause between the parties with India as the seat of arbitration, the German entity being a party to arbitration proceeding cannot not be allowed to pursue litigation in UK Courts.  

Severability of the Parent Contract and the Arbitration Clause

Extracted below are the relevant portions of the Intellectual Property License Agreement (IPLA), which according to the Indian entity, had not been entered into and consequently there was no concluded contract on the issue of arbitration as well. To address this issue, the Court relied on the following clauses of the agreement:

“3. Governing Law and Jurisdiction

3.1 This paragraph is legally binding.

3.2 This Heads of Agreement is (and all negotiations and any legal agreements prepared in connection with the IPLA shall be) governed by and construed in accordance with the law of Germany.

3.3 The parties irrevocably agree that Clause 18 of the proposed draft IPLA shall apply to settle any dispute or claim that arises out of or in connection with this memorandum of understanding and negotiations relating to the proposed IPLA.

...Clause 18.3---- All proceedings in such arbitration shall be conducted in English. The venue of the arbitration proceedings shall be London. The arbitrators may (but shall not be obliged to) award costs and reasonable expenses (including reasonable fees of counsel) to the Party(ies) that substantially prevail on merit. The provisions of the Indian Arbitration and Conciliation Act, 1996 shall apply

Based on the above clauses, the Apex Court took the view that the existence of an agreement on the issue of arbitration is incontrovertible. Also, extracted below is Section 16 of the Indian Arbitration and Conciliation Act, 1996:

16.Competence of arbitral tribunal to rule on its jurisdiction.- (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose------

(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and

(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause

The clear and express mandate of Section 16, according to the Supreme Court, is “that the main contract and the arbitration agreement form two independent contracts." The Court further observed as follows:

"Commercial rights and obligations are contained in the underlying, substantive, or the main contract. It is followed by a second contract, which expresses the agreement and the intention of the parties to resolve the disputes relating to the underlying contract through arbitration. A remedy is elected by parties outside the normal civil court remedy. It is true that support of the National Courts would be required to ensure the success of arbitration, but this would not detract from the legitimacy or independence of the collateral arbitration agreement, even if it is contained in a contract, which is claimed to be void or voidable or unconcluded by one of the parties.”

Further, according to the Court, since the scope of the arbitration clause extends to even disputes “in connection with”/relating to the very existence of a valid IPLA, and not just disputes “arising out of” the IPLA, the arbitral tribunal is capable of deciding whether there exists a valid IPLA.

The net result for both parties to the litigation is that, the Indian entity which did not wish to take part in the arbitration will now have to be party to it, and the German entity which wanted UK Courts to be vested with simultaneous jurisdiction over the arbitration proceedings, cannot have recourse to UK Courts since Indian courts have exclusive jurisdiction over the arbitration proceedings.

I strongly recommend a reading of this decision to understand various aspects of arbitration and contractual litigation since these issues are bound to present themselves in contractual disputes relating to patent licenses as well.