India: Delhi High Court Knocks Out Monsanto And Its Claims For Higher License Fee

Last Updated: 16 June 2017
Article by Infini Juridique

The Plaintiff, Monsanto Technology LLC had filed a Commercial Suit Number CS Comm No. (132 of 2016) before the Hon'ble Delhi High Court alleging that Nuziveedu Seeds Ltd and others were infringing their Patent also the Trademark attached to the technology i.e. Bollguard and Bollguard II. The submission of Monsanto was that it had filed Patent Application No. 214436 with respect to CRY 1 and CRY 2 Gene which was protected in the US and even a domestic phase application was also filed in India under the PCT. The Patent was granted and was valid and subsisting. Monsanto further claimed that it had the trademark, associated with the Technology, registered in India namely methods for transforming plants to express BACILLUS THURINGIENSIS DELTA -ENDOTOXINS. Monsanto filed the case for infringement of Patent and Trademark alleging that defendants (Nuziveedu Seeds as well as other Companies) were using their Bollguard as well as Bollguard II technology and also the Trademark associated with the technology even after the Sub-License Agreement was terminated on November, 2015. Monsanto claimed a relief for a permanent injunction against Defendants, Directors, Partners, Principles, from using Bollguard and Bollguard II from selling, exporting and/or using seeds/Hybrid seeds containing the said trademarks. Monsanto further sought permanent injunction against the Defendants from selling exporting or using seeds or hybrid seeds containing the Patented technology or violating the patented rights under the Patent number 214436.

An interim injunction was granted on February 19, 2016 by Hon'ble J. Vipin Sanghi allowing defendants to sell seeds, manufactured up to January 30, 2015 while injuncting the Defendant from selling seeds manufactured thereafter. Further, the Hon'ble Court also appointed Local Commissioners to visit the Defendants premises and to collect samples of packed and unpacked seeds and also prepare a detailed list of inventories. Thereafter on March 1, 2016 fourteen Local Commissioners were further appointed for the same purpose by the Hon'ble Delhi High Court on the plea of Monsanto. On May 18, 2016 the Hon'ble High Court further modified its February 19, 2016 order on an application of the Defendant's with respect to payment of security amount since there was dispute on the higher Trait Fee/value claimed by Monsanto and the trait value fixed by Central Government which was much lower.

The Defendants (Nuziveedu Seeds) filed an application for revocation of the interim orders on the ground that the :

  1. The technology Patented by Monsanto when introgressed with the seeds, such seeds do not enjoy the protection under the Patents Act in India. It also submitted that 50g Cocker seeds were sold to the Defendants by Monsanto and the same was used to develop Hybrid Seeds or GM Seeds. Hybrid Seeds or GM Seeds containing the Trait were protected under PPV and FR Act and thus Monsanto cannot seek an injunction on such protected varieties of Nuziveedu Seeds. Nuziveedu raised an objection on the grounds that Section 3(h) and 3(j) of Patents Act excluded agricultural methods and seeds as not an invention. Therefore, any order of infringement on a matter related to seed would be contrary to the provisions of Patent Act. Another argument of Nuziveedu Seeds Ltd was that Monsanto was indulging in Forum shopping as it had already invoked arbitration in Bombay and had also filed an application under Section 9 of the Arbitration Act, 1996 seeking interim relief and that till date no such relief was granted to Monsanto despite the application having been filed atleast a year prior to the present suit.
  2. Another defense was that the Sub-License Agreement was illegally terminated as Nuziveedu Seeds had raised a dispute on the trait value demanded by Monsanto as Monsanto was demanding the License Fee which was much higher than the Trait Value fixed by the Government of India. Nuziveedu disputed the illegal demands of Monsanto and also questioned the action of Monsanto, which were in violation of Government of India's orders on fixation of MRP on seeds.
  3. After a prolonged hearing, consuming about 40 hours of Court's time, the Hon'ble Delhi High Court held that the Sub-License Agreement was illegally and arbitrarily terminated. Justice Gauba of the Hon'ble High Court of Delhi observed

    "Conversely put, it can be said that the use of the suit patent, or trademarks of the plaintiffs by the defendants becomes unauthorised so as to give rise to a valid cause of action for infringement only if it can be held that the sub-license agreements have been legally terminated by the plaintiffs, such termination naturally rendering continued use of the sub-licensed technology or trademarks without consent or permission of rightful owner."

    It is against the above backdrop that the Hon'ble High Court of Delhi examined the issue of validity of termination by the Plaintiff Monsanto. It was the Courts view that the case of infringement of Patents as well as of Trademark can be an issue only if the agreement has been terminated. Plaintiff's entire case was that it had terminated the Sub-License Agreement in November 2015 and that the Defendants were using the technology even after termination. Thus the Hob'ble Delhi High Court deemed it fit to examine the legality & validity of termination. The Hon'ble Court observed that the Plaintiff cannot bring home their case unless they prove valid termination.
  4. It was in this background that the Court went on to examine the validity of termination and it found that the Sub-License Agreement was illegally terminated. Accordingly the honorable Court gave the following direction:-

    "(1) The parties shall remain bound by their respective obligations under the terms and conditions of the 2015 Sub-License Agreements (except as indicated hereinafter) for the period(s) stipulated therein, or till the same are lawfully terminated, the post contractual obligations continuing to be effective even beyond, as mutually agreed;

    (2) The plaintiffs shall :-

    1. be entitled to all the rights under the 2015 Sub-License Agreements except as to the rate of trait value payable thereunder;
    2. suitably inform the defendants within four weeks of this order :-

      1. modification of terms as to the rate of the trait fee payable by the defendants (sub-licensees) bringing it in accord with the prevalent local laws, as in force or revised from time to time; and
      2. the proposal for modification of the contract(s) so as to render the same to be in accord with "GM Technology (GM Trait) Licensing Agreement", as prescribed under the "Licensing and Formats for GM Technology Agreement Guidelines, 2016", notified by the Government of India.
    (3) The defendants shall :-

    1. be entitled to all the rights under the 2015 Sub-License Agreements except as to the rate of trait fee payable thereunder;
    2. be liable to tender, and pay, the trait fee to the plaintiffs, for the use of the suit patent and trademarks, at such rates as are in accord with the prevalent local laws, as in force or revised from time to time; and
    3. upon being suitably notified, be obliged to execute necessary documents so as to render the contract(s) in accord with the "GM Technology (GM Trait) Licensing Agreement" as prescribed under the "Licensing and Formats for GM Technology Agreement Guidelines, 2016", notified by the Government of India;

    (4) In the event of the plaintiffs not accepting the tender of the trait fee in terms of the above directions, the defendants will have the liberty to deposit the same, in the court, from time to time, in terms of the periodicity stipulated in the Sub-License Agreements, and notify the plaintiffs simultaneously;

    (5) In the event of the trait fee being deposited in the court, as per the liberty granted above to the defendants, the plaintiffs will have the liberty to withdraw the amount(s) thus deposited in the court, from time to time;

    (6) In the event of default on the part of the plaintiffs, to withdraw the amount(s) as above, within one month of such deposit(s), the Registrar General shall keep each such deposit in interest bearing fixed deposit receipt in a nationalized bank, initially for a period of six months with provision for auto-renewal;

    (7) The defendants shall be obliged to maintain and render accounts - including of month-wise sales, for each quarter of every financial year for which this order ordains, with further liability to place on record of the court duly-audited accounts within two months of the close of each financial year, making available copies thereof to the plaintiffs;

    (8) The directions about payment, or deposit, of trait fee or rendition of accounts shall presently pertain to the period beginning with financial year 2016-2017;

    (9) The defendants shall make due compliance with directions concerning payment or deposit, and rendition of accounts for the period ending with March 2017 by 31st May, 2017 and would be entitled to adjust amounts, if any, already paid on such account in terms of earlier interim orders in this case, or in terms of orders of arbitral tribunals, or otherwise;

    (10) All acts undertaken in terms of these directions, including in the nature of payment(s) or deposit(s) of the trait fee shall be without prejudice to the rights or contentions of all parties in the main suit; and

    (11) The default, if any, by the defendants in strict compliance with the above directions would render them disentitled to the continued use of the suit patent or trademarks of the plaintiffs, consequent whereupon, in such event they would stand injuncted against continued use of suit patent and registered trademarks of the plaintiffs for the pendency of the suit.

Defendants were represented by Adv. Abhishek Saket (Partner), Adv. Rahul Dubey, Adv. Vijaya Singh from Infini Juridique and also other firms.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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