Saturday, May 29, 2010

Companies Act, 1956

Copyright Act, 1957 — Section 61
Contract Act
HELD The question which arises is that should this court come to the rescue of a plaintiff whose case is steeped in such illegality. The answer necessarily has to be in negative. The present is a case where the plaintiff as well as the defendant against whom the relief has been claimed are both not entitled to the property which is of a company in litigation. The witness of the plaintiff in his affidavit by way of examination in chief also supports the said view. From his affidavit, it is not borne out and is not believable that the plaintiff at the time of entering into the agreement was not aware of the illegality of the transaction. The plaintiff as a trade person is presumed to know of proceedings for winding up having been initiated against Magnasound and it is unbelievable that the plaintiff while acquiring the copyrights of Magnasound under the agreement dated 17th June, 2004 but through the defendant No.3 was not aware of the reason therefore.

Doctrine of pari delicto potiar est conditio
" the courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud, in detail."
Suit dismissed with exemplary costs copy forwarded to Official Liquidator.
Patents Act, 1970
Section 8
A detailed chart has been produced by the Defendant, which the Plaintiff has been unable to counter, which shows the history of the processing of the application by the Plaintiff in the US Patent Office. It shows that after the filing of Form 3 in India i.e. on 21st June 2001 and prior to the date of filing of reply i.e. on 19th October 2005 there were a series of developments in the US patent application. The examination report in the US is called as an Office Action. The final Office Action was prepared on 26th July 2001 whereby claims 1 to 8 and 10 to 16 were rejected. In response thereafter on 25th September 2001, the Plaintiff carried out a preliminary amendment of the claims. On 15th January 2002 some of these claims were rejected. A response was filed thereto by the Plaintiff on 8th February 2002. There was another non-final Office Action on 2nd July 2002 where again Clauses 1, 3 to 8,10 to 15 and 17 to 22 were rejected. There was yet another final office action on 19th November 2002 after the Plaintiff had sought to respond to the rejection by the earlier Office Action. The Plaintiff also filed an appeal on 18th February 2003 while simultaneously responding to the final Office Action of 19th November 2002. There was a final Office Action on 21st December 2004. From the Examiner Report of 20th June 2005 it is apparent from the chart that there were several developments in the US Patent Office Action which obviously did have a bearing on the examination of the application by the Indian authorities. When, by the letter dated 13th September 2004 (delivered to the Plaintiff on 20th October 2004), the Controller of Patents was asking for "details regarding the search and I or examination report in respect of same or substantially same invention filed as referred to in Rule 12(3) of the Patents Rules 2003 in respect of same or substantially same inventions filed in any one of the major patent offices, such as USPTO, EPO and JPO etc." the Plaintiff obviously was required to furnish the above details. The Plaintiff itself does not deny that it did not do so. The filing of the international search report in June 2001 was not in compliance with the above requirement. [Para 44]
It is not possible to accept the submission, made by referring to the Halsburyfs Laws of England, that since the omission to furnish particulars is not serious enough to affect the grant of the patent, it did not impinge on its validity. Section 64 (1) (j) and (m) indicate to the contrary. Further under Section 43 (1) (b) a patent can be granted only when the application has been found not to be contrary to any provision of the Act. It cannot be said that the omission to comply with the requirement of Section 8 (2) was not serious enough to affect the decision of the Controller to grant the patent to the Plaintiff. The information, if provided, would have enlightened the Controller of the objections raised by the US patent office and the extent to which the Plaintiff had to limit its claims to the torus shape of the compression spring, which was a key feature of the subject device. Had the Controller been informed of the Plaintiff?s own patent No. 3932005 dated 13th January 1976, he would have been called upon to examine if that patent taught the use of a toroidal shape of a compression member and whether therefore the subject device was an inventive step within the meaning of the Act. [Para 45]
Under the amended Section 48 (1) of the Act, the patent granted shall, where the subject matter of the patent is a product, give the patentee the exclusive right to prevent third parties, who do not have his consent, from the act of making, using, offering for sale, selling or importing for those purposes that product in India. Likewise, where the subject matter of the patent is a process, the patentee would have the exclusive right to prevent third parties, who do not have his consent, from the act of using that process, as well as from the act of using, offering for sale, selling or importing any product obtained directly by that process in India. The change is therefore, that under the amended Section 48 a right is given to the patent holder Plaintiff, to prevent third parties from making, selling or offering for sale, the product for which such patent has been granted without the prior consent of the patent holder. The amended Section 48, however, does not in any manner change the position as regards the validity of the patent itself. It would still be vulnerable to challenge in terms of Section 13 (4) read with Sections 64 and 107 of the Act. A similar conclusion has been arrived at in Bajaj Auto Ltd. v. TVS Motor Company Ltd. (supra). [Para 48]
A plain reading of the above provision is that the patent in respect of the subject device "may be used by or on behalf of the Government for the purpose merely of its own use." This is an implied condition of the grant of patent. In the circumstances, if the government through the Ministry of Railways has itself supplied the drawings to the prospective suppliers and asked them to supply side bearing pads in conformity with those drawings, it cannot possibly be said that there is an infringement by either the Railways or its contractor of the patent. In the present case, the Plaintiff has also participated successfully in the very tender in which the Consortium of the defendants has been awarded a small percentage of the contract for supply of side bearing pads. It knew of the above stipulation and has not chosen to question it till the tender was finalised and the contract awarded. The Plaintiff, by participating in such tender, must be taken to have consented to the use of its patent by both the Railways as well as any supplier of the Railways to whom the contract for supply was to be awarded. It is also not in dispute that the Defendants have formed their Consortium only for supplying the subject device to the Railways. Although Section 156 of the Act states that patent will bind the Government, that provision has also been made "subject to the other provisions contained in this Act." A harmonious reading of Sections 47 and 156 of the Act would indicate that the object is not to involve the Government or its department or a contractor acting on its behalf in any litigation involving infringement of patent when the product or process in question is for the "own use" of the government. This is a price that the patent holder pays for getting a sizeable chunk of the contract, in this case 95%, which is virtually a monopoly. Where it is not for the governments own use, or where the Government supplies the drawings of c. patented product without the knowledge or consent of the patent holder, then Section 156 would permit enforcement and protection of the patent even against the govern ment. [Para 52]
For the above reasons, this Court is not satisfied that the Plaintiff has been able to make out a prima facie case for the continuation of the interim injunction in its favour. As will be seen hereafter, the balance of convenience at this stage also appears to be in favour of the Defendants 2, 3 and 4 for not granting an interim injunction in favour of the Plaintiff. Balance of convenience 55. The finalised tender document has been placed on record. What has been awarded to the Plaintiff is 95% of the total, quantity of the device to be supplied to the Railways. In fact Clause 7 of the "instructions" appended to the tender itself made it clear that "Item is reserved for bulk procurement for RDSO approved sources. Others can be considered for developmental order." What the Consortium has been awarded is the "developmental order" which is barely 5% of the total quantity. If the object of the Act is to ensure that the patent holder has the exclusive right to commercially exploit the patent, then that object is more or less achieved in the present tender as well, notwithstanding Section 47 of the Act. By refusing an injunction, while still imposing conditions on the Defendants 2, 3 and 4 to maintain accounts, the Court would be ensuring that in the event of the Plaintiff succeeding, it will be compensated even as regards the quantity. In the above circumstances, the balance of convenience is not in favour of grant of an interim injunction as prayed for by the Plaintiff. [Para 54]

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