In CS(OS) 3775/2014, as we understand from
multiple sources, Xiaomi has been injuncted from manufacturing its
line of smart phones for it has been prima-facie found to be
infringing on certain standard essential patents of Ericsson.
Although the order is not uploaded as yet, we understand that the
patents used against Xiaomi, by Ericsson, are the same essential
patents on which Ericsson had also earlier filed an infringement
suit against Micromax, not too long back ago. The question being
examined is if it was actually necessary to issue the order
ex-parte or whether a short date could have been given to Xiaomi to
be served the plaint and summoned for the hearing. Also, we surely
would expect Xiaomi to file an appeal to vacate the order quite
We also understand from sources (such as Spicy IP) that the
ex-parte order injuncts Xiaomi from selling, advertising,
manufacturing or importing devices that infringe the SEPs in
question. The judge also directed the Customs officials to stop the
imports under the IPR Rules, 2007. Moreover, local commissioners
have been appointed to visit Xiaomi officers to ensure the
implementation of these orders. There are presumed to be around
eight valid Ericsson declared standard patents in context, based on
which interim injunction/Custom enforcement/IPR enforcement rules
were also issued against Micromax. During the appeal in the
Micromax case as well, it was argued by the counsel appearing for
the appellant that there is no presumption in favour of a patent
holder on the strength of a patent being registered, and had also
urged that normally the rule of law is not to grant injunction when
issues pertaining to violation of patents arises for consideration
before the Courts for the reason damages would be a good measure.
We earnestly believe the same to a very strong argument keeping in
context that damages/accounting of profits can always be
retrospectively granted/ordered to be paid for, and moreover to a
company as huge as Ericsson, how can the loss be irreparable, as
the same can always be regained even if the defendant is given an
opportunity to present its arguments. Furthermore, even in the
Micromax case (CS(OS) 442/2013)), if just within a span of around
10 days, an initial licensing arrangement could be agreed to
between the parties (Ericsson and Micromax) through an initial
royalty rate of 1.25% of sale price for GSM phones, 1.75% of sale
price for GPRS + GSM phones, 2% of sale price for EDGE + GPRS + GSM
phones, and 2% for WCDMA/HSPA, couldn't the same have been
taken as a precedent and Xiaomi been ordered to start paying the
same royalty instead of simply granting a blanket injunction
against the company, which makes it even harder to impose on the
existing set of products/devices out there in the market, and
making it a hazy picture even for the current
distributors/vendors/suppliers. In fact, in the same case (CS(OS)
442/2013)), a recent order on 12'th Nov 2014 further
revised/lowered the royalty rates, which would be applicable
retrospectively from the date of the suit, wherein the rates have
now come down to .8% for GSM and GPRS and GSM devices, and around
1% for other devices. Furthermore, in the same very case, in the
order of 14'th Oct 2014, the plaintiff (Ericsson) agreed to
produce six agreements with different
operators containing the terms and conditions, in a
sealed cover, which according to them are somewhat similarly placed
as the current Defendant company. The question in context that
comes in mind is then why couldn't a similar arrangement been
asked for, having already had such a strong precedent, wherein the
same plaintiff (Ericsson) could have been asked to submit
agreements/arrangements with few other similar Indian parties, and
then an initial royalty rate could have been imposed on Xiaomi till
the next hearing.
Having seen a growing number of ex-parte interim injunctions
being issued by the High Courts, it gives visibility to a disturbed
atmosphere where no opportunity whatsoever is being given to the
Defendant to make an argument and try to arrive at a settlement,
and instead a strong push back is created against the Defendant
that makes it much harder for them to file an appeal, get the
interim vacated, and in the meanwhile, although for a short period,
comply with the harsh interim orders, which may have a long term
impact on its hard-built reputation/sales, all especially in cases
where the only injury to the plaintiff is monetary in nature and
not actual products/services/customers being disturbed. We
earnestly hope that the Micromax case could have been taken as a
strong precedent and anticipating an appeal, a higher royalty rate
could have been imposed.
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