Patent

Patent Infringement & Litigation
in India

IPpro Services (India) Pvt. Ltd
02/06/2009

IPpro Services (India) P. Ltd.

Table of Contents

1. WHAT CONSTITUTES A PATENT INFRINGEMENT? .................................................. 4

2. DETECTING PATENT INFRINGEMENT ................................................................... 5

3. STEPS TO ESTABLISH INFRINGEMENT ................................................................. 6

4. PATENT LEGAL SYSTEM OF INDIA ....................................................................... 7

5. PATENT INFRINGEMENT DISPUTES IN INDIA ........................................................ 9

5.1 PATENT CLAIM INFRINGEMENT ......................................................................... 10

5.2 INJUNCTION ................................................................................................... 11

6. 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 ................................... 14

7. LANDMARK PATENT LITIGATION CASE IN INDIA: BAJAJ AUTO LTD. Vs. TVS MOTOR
COMPANY LTD. ........................................................................................................ 15

7.1 THE CASE ....................................................................................................... 15

7.2 THE TECHNOLOGY ........................................................................................... 15

7.3 THE ARGUMENTS ............................................................................................. 16

7.4 THE VERDICT .................................................................................................. 16

REFERENCES: .......................................................................................................... 17

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PATENT INFRINGEMENT & LITIGATION

Companies around the globe thrive on technology and innovation for their success.
Patents provide protection to these innovations and grant exclusive rights to the
innovator to practice his/her invention. In terms of money, it is simply amazing
how much an invention can generate. U.S Patents 4,681,893 and 5,273,995
protect Atorvastatin, better known as Lipitor, invented by Bruce D. Roth. Presently
Lipitor is the largest selling drug in the world accounting for sales of $12.7 billion
in 2007. In another example, University of California generated more that $500
million in last five years in patent royalties.

Significant revenues may be generated by out-licensing the patents and through
sales of products protected by patents. However, this is not the only source of
revenue through patents. Patent litigations may also act as another source of
revenue from a patent, if the patent is knowingly or unknowingly infringed by an
individual or a company. In one such example, as a plaintiff alleging patent
infringement, University of California settled a claim against Genentech (of which
Bruce D. Roth is a Senior Director) for $200 million, secured a payment of $185
million from Monsanto, and won a $30 million settlement from Microsoft.

On the other hand, patent litigations have also cost millions of dollars to
companies 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 patent
infringement case and almost went bankrupt. By way of another example, on April
22, 2005 Medtronic, the world's 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 is
extremely important for companies to check, potential patent infringement by
them or their competitors.

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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, and
are therefore restricted to a country that grants the patent. Patents are analogous
to Real-estate property. Both grant exclusive rights to the owner. Violation of the
exclusive rights of a Real-estate property by someone who unlawfully uses an
area of the real-estate property is called “encroachment”. Similarly, an
encroachment upon the invention patented by the owner is called "infringement".

Patent infringement is the unauthorized making, using, offering for sale, selling of
any patented invention within a jurisdiction, or importing into the jurisdiction of
any patented invention during the term of a patent. In India, Section 104 to
section 114 of the Indian Patents Act 1970 provides guidelines relating to patent
infringement.

Patent infringement occurs when a product infringes one or more patents. To
determine patent infringement, firstly a product or a process is analyzed and
compared with all relevant patents that may claim an invention similar to the
product. Secondly, the product or the process is scrutinized to see if the product or
the process “reads on” one or more patents and is substantially described by the
claims 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:

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“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 INFRINGEMENT
Determining patent infringement is very crucial for a company. A company may
hold patents and may have products and/or processes in the market which may be
protected by these patents. However, patenting an invention or a product is not
the last stop. To reap complete benefits of patent system, these patents should be
enforced by the company. Thus, the company should make sure that competitor’s
products and/or processes are not infringing on their patents and are not
damaging the company’s revenues, market share, and market position. The
company should also make sure that none of its products and/or processes are
infringing patents granted to others. This is important because, in a scenario the
company 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 for
the company. However, if that product infringes on some patents, then the
company may end up incurring significant financial losses in the litigation process
due to the infringement.

Therefore, it is always advisable to keep a tab on competitor’s patents and
products. 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

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determine what features of these products read onto the inventions patented by a
company. To facilitate this, the company can avail some patent analytic services to
create a patent portfolio for the company, especially, if the company has a huge
number of patents across various technological domains.

Secondly, the company should keep an eye on all the published patent applications
of its potential competitors. This can be done by doing a patent-watch in the
technology area and for the competitors to analyze patenting activity in last
couple of years. The portfolios generated using patent-watch help in anticipating
the product that a competitor may be launching. A comparison with the company’s
patent portfolio may establish that some of these anticipated products may
infringe on one or more of its patents. This gives an early idea about competitor’s
moves and helps the company prepare in advance to take further appropriate
action. For example, to save litigation costs, the company may try to
invalidate/oppose the patent/patent publication before hand, so that the
competitor never launches the product in question.

3. STEPS TO ESTABLISH INFRINGEMENT
Having detected that one of the patents of the company might be infringed by a
competitor’s product or process, a detailed analysis should be performed to
establish patent infringement. The product or the process need not infringe all
claims of a granted patent, in fact it is merely enough even if the product or
process 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 a
competitor, which will include all product brochures or promotional materials, web
site pages, instructions or directions for use, advertisements, and product
packaging should be compared with patents that are being infringed. The
infringement analysis may be depicted in the form of a claim chart, which
highlights the features, of a competitor’s product or process that read onto one or
more claims of the patents granted to the company.

The usual strategy of a defendant will be to try to invalidate the patent in question
and if the defendant succeeds in invalidating the patent, then the litigation suit

6


will have to be withdrawn. Therefore, before filing a patent infringement suit, it is
very essential to get an invalidation search conducted for the patents to evaluate
the strength of the patents. It is advisable to establish validity of the patents
before filing a patent infringement suit against a competitor, because, if a
competitor succeeds in invalidating the patents in question, the company may
incur significant legal costs and also market prestige, position, and market share
will be at stake.

4. PATENT LEGAL SYSTEM OF INDIA

The courts in India receive (a) Patent Administrative Cases and (b) Patent
Infringement Cases. In patent administrative cases, the Indian Patent Office is the
defendant. These types of cases includes dispute on grant of a patent, patent
invalidation and upholding, and compulsory licensing. In patent infringement
cases, patentee or patent assignees pursue damages against willful infringement
conduct by the alleged infringer. These cases includes infringement of patent,
disputes relating to ownership of patent, disputes regarding patent rights or right
for application, patent contractual disputes, contractual disputes of assignment of
patent right, patent licensing, and dispute relating to the revocation of patents.

Fig. 1 below shows the hierarchy of courts in patent administrative cases. As
regards to the administrative cases the appeal is made to the Appellate Board
under Sec. 117-A of the Patents Act, 1970.

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Fig. 2 below shows the hierarchy of courts in patent infringement cases.
Regarding the disputes pertaining to infringement, Section 104 of The Indian
Patents Act 1970 states that the patent infringement suit shall not be instituted in
a 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.

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5. PATENT INFRINGEMENT DISPUTES IN INDIA

Patent infringement disputes in India starts with a suit that a plaintiff files in the
District 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 of
the witness etc. After considering the defenses put by defendants the District
Court decides the dispute and award the damages or prescribe the penalties,
provided the infringement is found. If any of the plaintiff and the defendant are
not satisfied, they can approach the High Court under Article 226/227 and further
to 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 infringement
and invalidity simultaneously. A specialized forum, i.e., Intellectual Property
Appellate Board (IPAB) has now been established. Provisions related to IPAB were
introduced into the Act in 2002 and are enforced now. Also, all pending appeals
from Indian High Courts under the Patents Act were to be transferred to the IPAB
from April 2, 2007. The IPAB has its headquarters at Chennai and has sittings at
Chennai, Mumbai, Delhi, Kolkata and Ahemdabad. The IPAB is the sole authority to

9


exercise the powers and adjudicate proceedings arising from an appeal against an
order or decision. Also, all the cases pertaining to revocation of patent other than
a counter-claim in a suit for infringement and rectification of register pending
before the Indian High Court shall be transferred to the IPAB. In case of a
counter-claim in a suit for infringement, the Indian High Court continues to be the
competent authority to adjudicate on the matter. The IPAB also has exclusive
jurisdiction 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 from
the stage where the proceedings were transferred to it.

5.1 PATENT CLAIM INFRINGEMENT

As described above, patent infringement may occur where the defendant has
made, used, sold, or imported in India any invention that has been patented in
India.

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 show
the 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 determine
infringement of a patent, based on “Biswanath Prasad Radhey Shyam v. Hindustan
Metal 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;

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(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 INJUNCTION

Injunction is as an equitable remedy in the form of a court order, whereby a party
is required to do, or to refrain from doing, certain acts. An injunction may be
preliminary or permanent. A preliminary injunction is a provisional remedy
granted to restrain activity of a defendant on a temporary basis until the Court can
make a final decision after trial and a permanent injunction is one which is
granted after the trial. Preliminary (temporary or interim) injunction and
permanent injunction are provided under Order 39, Rule 1-2 of Code of Civil
Procedure, 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 that
the defendants’ product infringes the plaintiffs’ patent. In Dhanpat Seth Others
(plaintiffs/ patentee) Vs. Nil Kamal Plastic Crates Ltd (Defendants); the plaintiffs
solicited grant of permanent injunction restraining the defendant from infringing
Indian Patent No. 195917, granted in their favor on July 11, 2005. As the case

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progressed the defendants successfully proved to the Court that the Kilta
(patented article of the plaintiffs) is a mere imitation of traditional Kilta made by
bamboos and has been in use since times immemorial. As a result, the Court not
only rejected the plaintiffs request for permanent injunction but also revoked that
granted Indian Patent No. 195917. Thus, the plaintiff was not able to establish the
case at a prima facie level, as the patent in question was revoked.

6. PROCEDURE FOLLOWED BY JUDGES IN PATENT INFRINGEMENT CASES
IN INDIA
In India judges of District Courts, High Courts and Supreme Court deal with patent
infringement cases. Described below are general methods used by Indian judges
in 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

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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

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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.

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