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  1. 1. Patent Infringement & Litigationin IndiaIPpro Services (India) Pvt. Ltd02/06/2009
  2. 2. IPpro Services (India) P. Ltd. Table of Contents1. WHAT CONSTITUTES A PATENT INFRINGEMENT? .................................................. 42. DETECTING PATENT INFRINGEMENT ................................................................... 53. STEPS TO ESTABLISH INFRINGEMENT ................................................................. 64. PATENT LEGAL SYSTEM OF INDIA ....................................................................... 75. PATENT INFRINGEMENT DISPUTES IN INDIA ........................................................ 9 5.1 PATENT CLAIM INFRINGEMENT ......................................................................... 10 5.2 INJUNCTION ................................................................................................... 116. PROCEDURE FOLLOWED BY JUDGES IN PATENT INFRINGEMENT CASES IN INDIA ... 12 6.1 METHODS ON JUDICIAL PROCEDURE ................................................................. 12 6.2 FACTS FINDING AND APPLICATION OF SUBSTANTIVE LAW ................................... 147. LANDMARK PATENT LITIGATION CASE IN INDIA: BAJAJ AUTO LTD. Vs. TVS MOTORCOMPANY LTD. ........................................................................................................ 15 7.1 THE CASE ....................................................................................................... 15 7.2 THE TECHNOLOGY ........................................................................................... 15 7.3 THE ARGUMENTS ............................................................................................. 16 7.4 THE VERDICT .................................................................................................. 16REFERENCES: .......................................................................................................... 17 2
  3. 3. IPpro Services (India) P. Ltd. PATENT INFRINGEMENT & LITIGATIONCompanies around the globe thrive on technology and innovation for their success.Patents provide protection to these innovations and grant exclusive rights to theinnovator to practice his/her invention. In terms of money, it is simply amazinghow much an invention can generate. U.S Patents 4,681,893 and 5,273,995protect Atorvastatin, better known as Lipitor, invented by Bruce D. Roth. PresentlyLipitor is the largest selling drug in the world accounting for sales of $12.7 billionin 2007. In another example, University of California generated more that $500million in last five years in patent royalties.Significant revenues may be generated by out-licensing the patents and throughsales of products protected by patents. However, this is not the only source ofrevenue through patents. Patent litigations may also act as another source ofrevenue from a patent, if the patent is knowingly or unknowingly infringed by anindividual or a company. In one such example, as a plaintiff alleging patentinfringement, University of California settled a claim against Genentech (of whichBruce D. Roth is a Senior Director) for $200 million, secured a payment of $185million from Monsanto, and won a $30 million settlement from Microsoft.On the other hand, patent litigations have also cost millions of dollars tocompanies in legal expenses and awarded damages due. For example, on Oct 12,1990, Eastman Kodak had to pay U.S $909,457,567 to Polaroid in a patentinfringement case and almost went bankrupt. By way of another example, on April22, 2005 Medtronic, the worlds largest medical technology company, paid U.S$1.35 billion to settle a patent lawsuit.Thus, it is not only important to protect innovations through patents, it isextremely important for companies to check, potential patent infringement bythem or their competitors. 3
  4. 4. IPpro Services (India) P. Ltd.1. WHAT CONSTITUTES A PATENT INFRINGEMENT?A patent granted to a person bestows exclusive right to the person to make,distribute, mortgage, or sell the invention. Patents are jurisdictional rights, andare therefore restricted to a country that grants the patent. Patents are analogousto Real-estate property. Both grant exclusive rights to the owner. Violation of theexclusive rights of a Real-estate property by someone who unlawfully uses anarea of the real-estate property is called “encroachment”. Similarly, anencroachment upon the invention patented by the owner is called "infringement".Patent infringement is the unauthorized making, using, offering for sale, selling ofany patented invention within a jurisdiction, or importing into the jurisdiction ofany patented invention during the term of a patent. In India, Section 104 tosection 114 of the Indian Patents Act 1970 provides guidelines relating to patentinfringement.Patent infringement occurs when a product infringes one or more patents. Todetermine patent infringement, firstly a product or a process is analyzed andcompared with all relevant patents that may claim an invention similar to theproduct. Secondly, the product or the process is scrutinized to see if the product orthe process “reads on” one or more patents and is substantially described by theclaims of the one or more patents.There are three basic types of patent infringements:  Direct patent infringement “Direct patent infringement” is the most obvious and the most common form of patent infringement. In the most basic definition, direct patent infringement occurs when a product that is substantially close to a patented product or invention is marketed, sold, or used commercially without permission from the owner of the patented product or invention.  Indirect patent infringement and contributory patent infringement: 4
  5. 5. IPpro Services (India) P. Ltd. “Indirect patent infringement” suggests that there was some amount of deceit or accidental patent infringement in the incident. For e.g. a person A holds a patent for a device and a person B manufactures a device which is substantially similar to the person A’s device. The person B is supplied with a product from a Person C to facilitate manufacturing of the person B’s device. If the device so manufactured by the person B infringes on the Person A’s patent, then the person C indirectly infringes the Person A’s patent. Further, if such a product is knowingly sold or supplied, it may lead to “contributory patent infringement”. For example, in the above example if the person C knowingly supplies the product to the Person B then the infringement is construed as “contributory patent infringement”.2. DETECTING PATENT INFRINGEMENTDetermining patent infringement is very crucial for a company. A company mayhold patents and may have products and/or processes in the market which may beprotected by these patents. However, patenting an invention or a product is notthe last stop. To reap complete benefits of patent system, these patents should beenforced by the company. Thus, the company should make sure that competitor’sproducts and/or processes are not infringing on their patents and are notdamaging the company’s revenues, market share, and market position. Thecompany should also make sure that none of its products and/or processes areinfringing patents granted to others. This is important because, in a scenario thecompany may have a product and/or a process in the market which has break-through invention at its core and generates a significant amount of revenues forthe company. However, if that product infringes on some patents, then thecompany may end up incurring significant financial losses in the litigation processdue to the infringement.Therefore, it is always advisable to keep a tab on competitor’s patents andproducts. A direct way to determine patent infringement is to keep a market-watch for all products released in the market in a particular technology domain,especially for competitors. All these products can then be closely examined to 5
  6. 6. IPpro Services (India) P. Ltd.determine what features of these products read onto the inventions patented by acompany. To facilitate this, the company can avail some patent analytic services tocreate a patent portfolio for the company, especially, if the company has a hugenumber of patents across various technological domains.Secondly, the company should keep an eye on all the published patent applicationsof its potential competitors. This can be done by doing a patent-watch in thetechnology area and for the competitors to analyze patenting activity in lastcouple of years. The portfolios generated using patent-watch help in anticipatingthe product that a competitor may be launching. A comparison with the company’spatent portfolio may establish that some of these anticipated products mayinfringe on one or more of its patents. This gives an early idea about competitor’smoves and helps the company prepare in advance to take further appropriateaction. For example, to save litigation costs, the company may try toinvalidate/oppose the patent/patent publication before hand, so that thecompetitor never launches the product in question.3. STEPS TO ESTABLISH INFRINGEMENTHaving detected that one of the patents of the company might be infringed by acompetitor’s product or process, a detailed analysis should be performed toestablish patent infringement. The product or the process need not infringe allclaims of a granted patent, in fact it is merely enough even if the product orprocess in question is found to infringe even a single claim of the granted patent.To perform this analysis, a complete description of all products or processes of acompetitor, which will include all product brochures or promotional materials, website pages, instructions or directions for use, advertisements, and productpackaging should be compared with patents that are being infringed. Theinfringement analysis may be depicted in the form of a claim chart, whichhighlights the features, of a competitor’s product or process that read onto one ormore claims of the patents granted to the company.The usual strategy of a defendant will be to try to invalidate the patent in questionand if the defendant succeeds in invalidating the patent, then the litigation suit 6
  7. 7. IPpro Services (India) P. Ltd.will have to be withdrawn. Therefore, before filing a patent infringement suit, it isvery essential to get an invalidation search conducted for the patents to evaluatethe strength of the patents. It is advisable to establish validity of the patentsbefore filing a patent infringement suit against a competitor, because, if acompetitor succeeds in invalidating the patents in question, the company mayincur significant legal costs and also market prestige, position, and market sharewill be at stake.4. PATENT LEGAL SYSTEM OF INDIAThe courts in India receive (a) Patent Administrative Cases and (b) PatentInfringement Cases. In patent administrative cases, the Indian Patent Office is thedefendant. These types of cases includes dispute on grant of a patent, patentinvalidation and upholding, and compulsory licensing. In patent infringementcases, patentee or patent assignees pursue damages against willful infringementconduct by the alleged infringer. These cases includes infringement of patent,disputes relating to ownership of patent, disputes regarding patent rights or rightfor application, patent contractual disputes, contractual disputes of assignment ofpatent right, patent licensing, and dispute relating to the revocation of patents.Fig. 1 below shows the hierarchy of courts in patent administrative cases. Asregards to the administrative cases the appeal is made to the Appellate Boardunder Sec. 117-A of the Patents Act, 1970. 7
  9. 9. RQWUROOHU )LJ+LHUDUFKRIRXUWVLQ3DWHQW$GPLQLVWUDWLYHLVSXWHVFig. 2 below shows the hierarchy of courts in patent infringement cases.Regarding the disputes pertaining to infringement, Section 104 of The IndianPatents Act 1970 states that the patent infringement suit shall not be instituted ina court lower than District Court in India. Further, if the defendant files a counter-claim against revocation of the patent, then the suit, along with the counter-claim,shall be transferred to the High Court for decision. 8
  12. 12. )LJ+LHUDUFKRIRXUWVLQ3DWHQW,QIULQJHPHQWLVSXWHV5. PATENT INFRINGEMENT DISPUTES IN INDIAPatent infringement disputes in India starts with a suit that a plaintiff files in theDistrict Court, which is followed by a reply to the suit by the defendant.Subsequently, a hearing is held as per the Patent Rules 2003 in the District Court,taking into consideration evidences, scientific expert’s testimony, statements ofthe witness etc. After considering the defenses put by defendants the DistrictCourt decides the dispute and award the damages or prescribe the penalties,provided the infringement is found. If any of the plaintiff and the defendant arenot satisfied, they can approach the High Court under Article 226/227 and furtherto the Supreme Court under Article 32,133,136,or 142, as shown in fig. 2.In India only High Courts have the power to deal with matter of both infringementand invalidity simultaneously. A specialized forum, i.e., Intellectual PropertyAppellate Board (IPAB) has now been established. Provisions related to IPAB wereintroduced into the Act in 2002 and are enforced now. Also, all pending appealsfrom Indian High Courts under the Patents Act were to be transferred to the IPABfrom April 2, 2007. The IPAB has its headquarters at Chennai and has sittings atChennai, Mumbai, Delhi, Kolkata and Ahemdabad. The IPAB is the sole authority to 9
  13. 13. IPpro Services (India) P. Ltd.exercise the powers and adjudicate proceedings arising from an appeal against anorder or decision. Also, all the cases pertaining to revocation of patent other thana counter-claim in a suit for infringement and rectification of register pendingbefore the Indian High Court shall be transferred to the IPAB. In case of acounter-claim in a suit for infringement, the Indian High Court continues to be thecompetent authority to adjudicate on the matter. The IPAB also has exclusivejurisdiction on matters related to revocation of patent and rectification of register.The IPAB in its sole discretion may either proceed with the appeals afresh or fromthe stage where the proceedings were transferred to it.5.1 PATENT CLAIM INFRINGEMENTAs described above, patent infringement may occur where the defendant hasmade, used, sold, or imported in India any invention that has been patented inIndia.In India, no infringement action may be started until a patent has been granted.In India, a right to obtain provisional damages requires a patent holder to showthe following: (1)The infringing activities occurred after the patent application was published; (2)The patented claims are substantially identical to features of the process or the product infringing the patent; and (3)The infringer had actual notice of the published patent application.The Supreme Court of India has laid down the following guidelines to determineinfringement of a patent, based on “Biswanath Prasad Radhey Shyam v. HindustanMetal Industries”: (1)Read the description and then the claims; (2) Find out what is the prior art; (3) What is the improvement over the prior art; 10
  14. 14. IPpro Services (India) P. Ltd. (4) List the broad features of the improvement; (5) Compare the said broad features with the defendant’s process or apparatus; and (6) If the defendant’s process or apparatus is either identical or comes within the scope of the plaintiff’s process or apparatus, there is an infringement.5.2 INJUNCTIONInjunction is as an equitable remedy in the form of a court order, whereby a partyis required to do, or to refrain from doing, certain acts. An injunction may bepreliminary or permanent. A preliminary injunction is a provisional remedygranted to restrain activity of a defendant on a temporary basis until the Court canmake a final decision after trial and a permanent injunction is one which isgranted after the trial. Preliminary (temporary or interim) injunction andpermanent injunction are provided under Order 39, Rule 1-2 of Code of CivilProcedure, 1908.For the court to order an injunction, the plaintiff has to fulfill the following criteria: (1)Establish his case only at a prima facie level, i.e., the plaintiff has to show that he has some possibility of success and that his claim is not vexatious; (2)Demonstrate irreparable injury if a temporary injunction is not granted; and (3)Demonstrate that the balance of convenience is in favor of the plaintiff (i.e. the plaintiff will be more disadvantaged because of the non-grant of the injunction that the defendant will be disadvantaged because of the grant of one).Permanent injunction is granted only after the trial when the Court concludes thatthe defendants’ product infringes the plaintiffs’ patent. In Dhanpat Seth Others(plaintiffs/ patentee) Vs. Nil Kamal Plastic Crates Ltd (Defendants); the plaintiffssolicited grant of permanent injunction restraining the defendant from infringingIndian Patent No. 195917, granted in their favor on July 11, 2005. As the case 11
  15. 15. IPpro Services (India) P. Ltd.progressed the defendants successfully proved to the Court that the Kilta(patented article of the plaintiffs) is a mere imitation of traditional Kilta made bybamboos and has been in use since times immemorial. As a result, the Court notonly rejected the plaintiffs request for permanent injunction but also revoked thatgranted Indian Patent No. 195917. Thus, the plaintiff was not able to establish thecase at a prima facie level, as the patent in question was revoked.6. PROCEDURE FOLLOWED BY JUDGES IN PATENT INFRINGEMENT CASES IN INDIAIn India judges of District Courts, High Courts and Supreme Court deal with patentinfringement cases. Described below are general methods used by Indian judgesin deciding such type of cases:6.1 METHODS ON JUDICIAL PROCEDURE(1)Concerned parties, plaintiff and defendant, are notified in advance of the judicial rights and the judicial obligations they shall comply with during lawsuits.(2) The parties are required to exchange the evidence before the trial begins. When the plaintiff accuses the defendant of infringement, the plaintiff is responsible for providing the proof. During trial, parties concerned are required to verify and cross-examine disputed facts and evidences. If the defendant is accused of infringing a process patent, then reversal of burden of proof is implemented. In other words, the party who is accused of infringement is responsible for providing evidences for the manufacture process of such product.(3) Either of the plaintiff and the defendant may appeal to the Appellate board against the decision of the Controller and other matters within three months from the date of the decision.(4) The plaintiff should bring the suit in the court within three years from the date of infringement (which is called the limitation period). The limitation period for 12
  16. 16. IPpro Services (India) P. Ltd. the suit starts from the date of infringing act and not from the date of the grant of the patent. The limitation period is defined by the Section 40 of the Indian Limitations Act,(5) Section 77 of the Patents Act, 1970 confers powers of a Civil Court on the Controller in following matters: a. The Controller can summon and enforce the attendance of any person and examine him on oath; b. Every party is entitled to know the nature of his opponent’s case. The Controller can direct and obtain the documents from plaintiff for handing it to defendant or vice versa; c. The Controller can receive evidence on affidavits from the plaintiff or defendant; d. During the proceeding of suit some people are exempted from appearing in person. In such circumstances, the Controller is empowered to issue Commissions for the examination of witnesses or documents; e. The Controller can award costs which are reasonable with regard to all the circumstances of the case; f. The Controller can be requested to review his decision. This can be done by filling form 24 along with prescribed fee within one month from the date of decision; g. The Controller can set aside an order passed in absence of any party at the hearing. However, the affected party should make a request to set aside an order. This can be done by filing form 24 along with the prescribed fee within one month from the date of communication; and h. The Controller also has the power of taking oral evidence. He may also allow any party to be cross-examined on the contents of his 13
  17. 17. IPpro Services (India) P. Ltd. affidavit. The Controller may also accept documentary evidence unaccompanied by an affidavit.6.2 FACTS FINDING AND APPLICATION OF SUBSTANTIVE LAW(1)To make conclusions for infringement actions against patents, the courts generally adopt the following steps: a. The protection scope of patent right are determined; b. Relevant technical characteristics of products which are accused of infringing the patent is determined; and c. The essential technical characteristics of the claims of the patent and that of the products accused of infringement are compared.(2) The Courts may apply the Estoppel Principle in patent litigation. In other words, during prosecution, the contents abandoned by the patentee can no longer be used against the party accused of infringement.(3) To calculate the amount of compensation for losses due to patent infringement, the court uses following methods: a. The actual economic loss incurred to the patentee due to infringement is considered as the amount of compensation against such a loss; b. The total profit obtained by the infringer through infringement is regarded as the amount of compensation against such a loss. The arithmetic formula could be expressed as: profit obtained from each piece of infringed product X total number of infringed products sold = infringement profit; and c. A reasonable amount not less than the royalty of patent licensing is regarded as the amount of compensation against such a loss. 14
  18. 18. IPpro Services (India) P. Ltd.7. LANDMARK PATENT LITIGATION CASE IN INDIA: BAJAJ AUTO LTD. Vs. TVS MOTOR COMPANY LTD.7.1 THE CASEIn 2007 Bajaj Auto Ltd. (hereafter referred to as Bajaj) filed a patent litigation suitagainst TVS Motor Company Ltd. (hereafter referred to as TVS) in court. Bajajalleged that CC-VTi technology used by TVS in manufacturing, marketing, selling,offering for sale or exporting 2/3 wheelers, including the proposed 125-CC FLAMEinfringes on one of Bajaj’s granted Indian Patent No. 195904.7.2 THE TECHNOLOGYBajaj was granted Indian Patent No. 195904 in respect of a patent applicationtitled An Improved Internal combustion engine working on four stroke principlewith a priority date of 16th July 2002.According to Bajaj, they invented a unique technology of using two spark plugs forefficient burning of lean air fuel mixture in a small bore engine in the size between45 mm and 70 mm. The use of two spark plugs in large bore engines or in highperformance/racing bikes was known in the Automobile industry. However, theabove invention of the Bajaj was not known. The Bajaj’s invention which is calledDTS-i Technology is a step of providing a second spark plug in a small boreengine running lean, was never thought of or implemented in the automobileindustry. Further, according to Bajaj, it results in better combustion in acomparatively shorter duration of time leading to reduction in emission andimproved fuel consumption while maintaining the predetermined level ofperformance.According to Bajaj the essential features of its invention are: (1)Small displacement engine as reflected by a cylinder bore diameter between 45 mm and 70 mm; (2)Combustion of lean air fuel mixtures; 15
  19. 19. IPpro Services (India) P. Ltd. (3)Using a pair of spark plugs to ignite the air fuel mixture at a predetermined instant.7.3 THE ARGUMENTSBajaj argued that they applied for the grant of the patent on 16.07.2002 and thepatent was granted on 07.07.2005, which was published in Issue No. 28/2005dated 29.07.2005. According to Bajaj, there was no opposition filed by anyoneincluding TVS either before or after the grant of patent.However, TVS questioned the validity of Bajaj’s patent just 7 days before thelaunch of its proposed 125-CC motorcycle by filing an application for revocation ofBajaj’s patent No. 195904 before Indian Patents Appellate Board (IPAB).Bajaj argued that the TVS’s 4 stroke combustion engine in small bore lean burnengine of size 54.5mm x 53.5mm and combusting lean air fuel mixture infringesits patent. Bajaj stated that TVS using 3 valves in the engine does not dilute theinfringement as the number of valves is not an essential feature of its invention.In counter-attack, TVS argued that the use of two spark plugs in an IC engine withthree valves was well known in the art and that Bajaj cannot seek patent for theuse of two spark plugs in an IC engine. TVS further argued that in order to avoidthe said situation, Bajaj misled by introducing a limitation of bore size to the USHonda patent. TVS also argued that Bajaj had full knowledge that US Honda patentdid not have any such limitation. Along with US Honda Patent No. 4534322, TVScited number of prior arts against Bajaj’s DTS-i Technology in an attempt torevoke Baja’s patent. TVS also added that Bajaj’s claim is two spark plugs withtwo valves, whereas it technology is about having two spark plugs with threevalves.7.4 THE VERDICTIn this case Madras High Court denied injunction against TVS. However, the courtordered that TVS shall not receive any further booking for TVS Flame containingthe disputed engine technology patent. The court also allowed TVS the liberty to 16
  20. 20. IPpro Services (India) P. Ltd.deliver the already booked TVS Flame motor-cycles provided they maintainaccounts for the motorcycles so delivered.This article is prepared by Atul Dixit and Ankush Bedi. Please feel to reach them in case of any feedback or comments.REFERENCES: 1. Laxmi Dutt Roop Chand v. Nankau and Ors. (AIR1964 All 27) 2. AIR 1982 SC 1444 3. ipab.jsp 4. Godrej Soaps Ltd Ors v. Hindustan Lever Ltd. Ors PTC (Suppl) (1) 501 (Cal) (DB) 5. Alok Aggarwal, Patenting In The Land of Saraswati and Lakshmi 6. Patent Litigation Trend In India by Tarun Mathur 8. 17