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07 October 2013
As patent litigation increases, so too does the importance of understanding the nuances of those provisions of the Patents Act 1970 that deal with suits for patent infringement, and the defences that can be raised therein. When a suit for patent infringement is instituted under Section 104 of the act, a defendant has the right to raise defences under Section 107 and institute a counterclaim under Section 64, seeking invalidation of the asserted patent.
As rightly interpreted by a division bench of the Delhi High Court in Franz Xaver Huemer v New Yash Engineers,(1) the scope of the defences that may be raised under Section 107 is strictly circumscribed by the grounds of patent revocation exhaustively provided for under Section 64. In other words, no ground of revocation that is not provided for in Section 64 may be raised as a defence to infringement under Section 107. However, is the consequence of raising a defence of invalidity the same as instituting a counterclaim to invalidate the patent under Section 64? In Fabcon Corporation v Industrial Engineering Corporation(2) the Allahabad High Court rightly held that raising a defence of invalidity under Section 107 is not the same as filing a counterclaim seeking revocation of the asserted patent. As the act uses the separate terms 'defence' and 'counterclaim', these should clearly be given distinct meanings.
This opinion, apart from being logical and consistent with the intention of the Patents Act, also finds support when viewed through the prism of the Code of Civil Procedure 1908, which prescribes the procedure for conducting civil cases in India. A counterclaim is one that is instituted in accordance with Order VIII, Rule 6A of the code, not merely a defence that is raised in the defendant's statement of defence in a suit. This distinction has a jurisdictional consequence.
Under Section 104 of the act, the court of first instance for patent infringement is a district court. The proviso to Section 104 states that when a counterclaim for revocation of a patent is filed, the suit and the counterclaim must be transferred to the high court. Therefore, unless a counterclaim is instituted in accordance with the code, the transfer of the infringement suit and the counterclaim for a combined adjudication by the high court, under the proviso to Section 104, will not kick in. Merely raising a defence of invalidity under Section 107 does not necessitate the transfer of the suit to the high court, unless a counterclaim for invalidation under Section 64 has been filed in accordance with the act and the code.
Is there a critical difference in outcome between raising a defence of invalidity and filing a counterclaim for invalidation? This question was also answered in Fabcon. If a court sees merit in the defendant's defence of invalidity of patent, although the patentee's suit for infringement will be dismissed, the patent cannot be revoked by the court. However, if a counterclaim for revocation is instituted, a court will revoke the patent if it sees merit in the counterclaim, and dismiss the suit for infringement as well.
Critically, according to Paragraph 289 of the Report on the Revision of Patent Law submitted by Justice Ayyangar in 1959 (on the basis of whose recommendations the act was largely crafted), the decision of a court that a patent is invalid based on a defence of invalidity will operate as res judicata only between the litigating parties, and shall not be a decision in rem. In contrast, the revocation of a patent based on a counterclaim for invalidation will be a decision in rem. Therefore, unlike revocation of a patent in a counterclaim, the finding that a patent is invalid based on a defence is not conclusive with respect to third parties that are not party to the litigation. This is an interesting distinction, because although a court may conclude that a patent is invalid on the basis of a defence of invalidity, it technically does not prevent the patentee from asserting the patent against third parties. In other words, assertion of the same patent in a subsequent suit is not barred at the outset, although the previous decision may be relevant for the purpose of the grant of an interim injunction and at trial. Critically, the court in the subsequent suit may reach a different conclusion on the issue of patent validity even when the grounds raised and the documents used to support such grounds are identical to those in the earlier suit.
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