The telecom patent battles that have rocked the telecom sector world-wide have finally made a debut in India with the recent Rs 100 crore lawsuit filed by Ericsson against the Indian company, Micromax for violating eight of its essential standards patents relating to third-generation wireless (3G), EDGE and adaptive multi-rate audio (AMR) technology. Ericsson is involved in similar litigation against Samsung in the United States before a federal district court in Texas.
However, unlike the Texas court, which is yet to issue an injunction against Samsung, the Delhi High Court has already issued an ex-parte (without hearing the opposite side) interim injunction restraining Micromax from infringing Ericsson's patents, on the very first day on which it heard the lawsuit. This order of the Delhi High Court essentially shuts down the entire business of Micromax, a company which employs close to 1,500 people, since the patents in question are essential patents without which their mobile phones cannot be manufactured.
Granting an ex-parte interim injunction on the very first day of the hearing is part of a troubling trend. The most compelling ground for issuing an ex-parte interim injunction is 'urgency'. Usually an 'urgent' situation is where the plaintiff will suffer irreparable injury if it waits for the courts to issue notice to the opposite side, hear arguments and subsequently pass an order. Such ex-parte orders are an exception to the general rule, which is to issue injunctions only after hearing both sides to the dispute.
In the present case, the Delhi High Court's order does not disclose any reason for granting an interim injunction without hearing Micromax. What exactly was the urgency to excuse the cardinal rule of natural justice, which is the right to be heard? Why is there any 'urgency' to issue an interim injunction when, by Ericsson's admission, it had been trying to negotiate a licence with Micromax for the last three years? Would a one-week notice to Micromax cause irreparable injury to Ericsson? These questions become all the more critical given the fact that a patent can always be revoked, especially patents granted by the Indian patent office. There is no presumption of validity in favour of a patent under Indian law and, if anything, statistics reveal that it is in the rare instance that the Intellectual Property Appellate Board (IPAB) actually upholds a patent which has been challenged.
Worries about the interim injunction in this particular case were highlighted by the fact that, within two weeks - i.e., on March 19, 2013 - both parties appeared before the Delhi High Court with an interim settlement, where Micromax, faced with closure of its entire business, reluctantly agreed to pay Ericsson an interim royalty until the matter was disposed on its merits. In the language of law and economics, Micromax was facing a "patent holdup" problem - which is a situation where, faced with the threat of a shutdown, it would end up paying Ericsson more than the actual value of the patents in question. The issue of "patent holdups" has plagued patent litigation around the world, especially in the context of "essential patents" which are used as standards throughout the industry. However, most courts around the world would refuse to issue any order without hearing the opposite side.
There are also other questions about the order, such as the ordering of a court-appointed Commissioner to accompany Ericsson's representatives to conduct an inspection of Micromax's books, most of which is confidential business information. The Court even directs the Commissioner to "to break open locks and seek police assistance, if necessary." Yet, in the civil context, the Supreme Court has time and again held that a court cannot compel any person to produce evidence, much less sanction the forceful extraction of such documents. The only remedy against a party who refuses to submit documents is an adverse inference during the trial. To force a company to share confidential business information with a company, with which it is going to negotiate a legitimate licence, is a very dangerous precedent - since such negotiations are based on the premise that both parties do not have complete data about the opposite side.
In conclusion, Indian courts must certainly protect intellectual property rights but they must remember that patent infringement cases are incredibly complicated cases which must be decided only after a trial where both parties are allowed to produce evidence to assert their claims. Issuing interim injunctions on the very first day of hearing is a practice which is causing untold misery to Indian companies.
The writer is at Stanford Law School