TELEFONAKTIEBOLAGET LM ERICSSON(PUBL) vs INTEX TECHNOLOGIES(INDIA) LIMITED

$~2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(COMM) 769/2016
TELEFONAKTIEBOLAGET LM ERICSSON(PUBL)
….. Plaintiff
Through: Mr. Sandeep Sethi, Sr. Adv. with Mr. Ashutosh Kumar, Mr. Vinod Chauhan, Ms. Vrinda Bagaria, Ms. Radhika Pareva, Mr. Sumer Dev Seth and Ms. Shreya Sethi, Advs.

versus

INTEX TECHNOLOGIES(INDIA) LIMITED ….. Defendant
Through: Mr. Mudit Sharma, Ms. Snigdha Sharma, Advs.

CORAM:
HON’BLE MR. JUSTICE C. HARI SHANKAR

ORDER (ORAL)
% 19.10.2023

IA 20296/2023 (Modification of interim order dt. 13 March 2015)

1. The prayer clause in this application, filed by the defendant INTEX Technologies (India) Ltd., (“Intex” hereinafter), the defendant in the suit, reads as under:
“In view of the above facts and circumstances this Hon’ble Court may graciously be pleased to:

i. modify paras 160 and 161 of the Interim Order dated 13.03.2015 passed by this Hon’ble Court by substituting the interim rates with the rates charged by the Plaintiff under the terms of settlement between the Plaintiff herein and Defendant in CS (OS) 442 of 2013 (re-numbered as CS (COMM) 155/2017) for the period from the date of institution of the Suit till 01.03.2015 and thereafter till the expiry of the Suit Patents; and

ii. pass such other or further order(s) as this Hon’ble Court may deem fit and appropriate in the facts and circumstances of the present case.”

2. Paras 160 and 161 of the interim order dated 13 March 2015, of which this application seeks modification, read thus:
“160. It is also pertinent to mention that in similar subject matter of patents having the same issues, coordinate bench of this Court on 12th November, 2014 has passed the following order in CS(OS) No.442/2013. The relevant extract of the said order is reproduced here under:

“I.A. 3825/2013 (STAY) & I.A. 4694/2013 (O 39 R 4 = By D-2)

1. Subsequent to the last order dated, 14.10.2014, the parties have appeared and made submissions. Ericsson, as per the directions of the court and upon being asked by the court has produced 26 license agreements. Micromax has asked for agreements/offers by Ericsson with other Indian parties. After hearing submissions and perusing the rates which were contained therein, the court directs as follows:

2. The Defendants shall pending trial of the suit, pay the following rates of royalty directly to the Plaintiff for sales made in India from the date of filing of suit till 12.11.2015:

i. For phones/ devices capable of GSM – 0.8% of net selling price;

ii. For phones/ devices capable of GPRS + GSM – 0.8% of net selling price;

iii. For phones/devices capable of EDGE + GPRS + GSM -1% of net selling price;

iv. WCDMA/ HSPA phones/devices, calling tablets – 1% of the net selling price.

3. The Defendants shall pending trial in the suit, pay the following rates of royalty directly to the Plaintiff for sales made in India from 13.11.2015 to 12.11.2016:

i. For phones/ devices capable of GSM – 0.8% of net selling price;

ii. For phones/ devices capable of GPRS +GSM – 0.8% of net selling price;

iii. For phones/devices capable of EDGE + GPRS + GSM- 1.1% of net selling price;

iv. WCDMA/ HSPA phones/devices, calling tablets – 1.1% of the net selling price.

4. The Defendants shall pending final trial in the suit, pay the following rates of royalty directly to the Plaintiff for sales made in India for the period from 13.11.2016 to 12.11.2020:

i. For phones/ devices capable of GSM – 0.8% of net selling price;

ii. For phones/ devices capable of GPRS + GSM – 1% of net selling price;

iii. For phones/devices capable of EDGE + GPRS + GSM – 1.3% of net selling price;

iv. WCDMA/ HSPA phones/devices, calling tablets – 1.3% of the net selling price.

(The Net Selling Price means with respect to each company product sold by the company or any of its affiliates the Selling Price charged by the company or its affiliate for such company product unless such sale has not been made on arms length basis in which case the net selling price will be the selling price which the seller would realize from an unrelated buyer in an arms length sale of an equivalent product in an equivalent quantity and at the equivalent time and place as such sale.

Selling Price shall mean the selling price charged by the company for the company product in the form in which it is sold whether or not assembled and without excluding therefrom any components or sub-assemblies thereof (gross price) less 3% representing a deduction which shall cover usual trade discounts actually allowed to unrelated buyers on a regular basis, actual packing costs actual costs of insurance and transportation etc.,)

5. Micromax has submitted that it has negligible operations outside India and agrees to negotiate the FRAND global rates if and when it expands internationally.

6. Both the parties agree that for the period prior to the filing of the suit, the payments, if any, by the defendant shall be as per the judgment of the court post-trial of the suit.

7. Insofar as the deposits already made by Micromax in the court, the rates specified above shall be applied from the date of filing of the suit till the present date, for all sales made by Micromax in India. Upon applying the said rates, the computation of the amounts shall be submitted jointly by the parties. Upon receipt thereof, payments shall be made to Ericsson directly by way of demand draft drawn by the Registrar, Delhi high Court, subject to Ericsson furnishing a surety bond for the exact amount in favour of Micromax, to the satisfaction of the Registrar. The banking details shall be submitted to the Registrar by counsel for Ericsson. The remaining amount shall be released to Micromax.

8. The Defendants shall continue to make payments to Ericsson as per the rates specified above on a quarterly basis for sales made after the date of this order. The defendant shall continue to give intimation to the plaintiff of the arrival of the consignments at customs and seek NOC of the Plaintiff. Post inspection, the Plaintiff will forthwith inform the Customs that it has no objection to the release of the consignment so that the consignment could immediately be handed over to the Defendants. In respect of royalty payments made by Micromax after the passing of this order, Ericsson undertakes to furnish surety bonds in favor of Micromax for the amounts received on quarterly basis with advance copies to Micromax.

9. It is made clear that the above order is purely an interim arrangement and is not a determination of the FRAND rates for the Ericsson portfolio. The defendant shall not rely upon the above rates before the competition authorities or any other forums as it is not final in nature.

10. The trial of the suit is expedited. It is directed that the trial in any event will be completed not later than 31st December, 2015. Final arguments will commence immediately thereafter. The parties have no objection to the aforesaid arrangement and shall remain bound the same.”

161. The facts in the present case are similar so as the defence, rather the case of the plaintiff is on better footing in view of admissions made by the defendant before various authorities. Thus, I am also not inclined to take the different view but to take the same view which is already taken in Suit No.442/2013 and the stay order passed in the two applications i.e. I.A. No.3825/2013 (for stay) and I.A. No.4694/2013 (for vacation of stay order). The aforesaid same royalty amount is fixed in the present matter also, but the same be paid in the following manner by disposing of the present interim application:

i) That 50% amount of royalty in the same manner as per details mentioned in Suit No.442/2013 from the date of filing of suit till 1st March, 2015 shall be paid to the plaintiff directly by way of bank draft within four weeks from today. For the remaining 50% amount, the defendant shall furnish the bank guarantee within the same period with the Registrar General of this Court who would invest the said amount in FDR initially for a period of twelve months.

ii) For future period, every six months the same terms would apply till the disposal of the suit in the same manner. The proceedings of the suit are expedited.

iii) As regard the previous period i.e. prior to suit is concerned, the defendant shall furnish true accounts from the date of user till the date of suit within four weeks by filing of an undertaking that in case of decretal of suit, the defendant shall pay the amount for the said period as fixed by the Court while issuing direction at the final stage of the suit when the objection of defendant on limitation also would be considered as per law.

iv) Liberty is also granted to both the parties to seek further direction or modification order in case of change of circumstances and subsequent events.”

3. It would be necessary to reproduce para 162 of the order dated 13 March 2015, as well, thus:
162. The defendant is granted two weeks’ time to file an affidavit of compliance of directions issued at i) to iii) stating that they are agreeable to comply the said order within four weeks, otherwise, in failure to file the said affidavit about compliance, after the expiry of said two weeks it would be presumed that they are not interested to use the technology of suit patents and to pay the royalty amount fixed by the Court. Under these circumstances, the interim orders shall operate against the defendant in the following terms:-

i) the defendant, its officers, directors, agents, distributors and customers to be restrained during the pendency of the suit from manufacturing/assembling, importing, selling, offering for sale, advertising including through their and third party websites, products (telephone instruments, mobile handsets, tablets, hand-held devices, dongles etc.), including the models mentioned in paragraph 12 of this application and any future or other devices or models, that include the AMR, 3G and EDGE technology/devices/apparatus as patented by the plaintiff in suit patents IN 203034, IN 203036, IN 234157, IN 203686, 213723 (THE AMR PATENTS), IN 229632, IN 240471 (THE 3G PATENTS) and IN 241747 (THE EDGE PATENT).

ii) Issue the directions to the Central Board of Excise and Customs to issue appropriate instructions directing the customs authorities at every port including airports in India not to allow the import of mobiles, handsets, devices, tablets, etc. including the models specified in paragraph 12 of this application, by the defendant or its agents/affiliates that are infringing the plaintiff’s registered patents.

iii) A direction is also issued directing the Commissioner of Customs, New Custom House, Near IGI Airport, New Delhi not to allow the import of mobiles, handsets, devices, tablets etc. including the models specified in paragraph 12 of this application, by the defendant or its agents/affiliates that are infringing in nature of the plaintiff’s registered patents.

iv) The defendant to file an affidavit of a director or other person, on behalf of the defendant duly authorized by a specific resolution of its Board of Directors, disclosing the following information:

a) Quantum of devices (handsets, tablets etc.) sold by it in India till date that are AMR, EDGE and 3G compliant thereby rendering them infringing in nature;

b) Revenue earned from the sale of mobile devices (handsets, tablets etc.) till date.”

4. Mr. Mudit Sharma, learned Counsel for the applicant/defendant, does not dispute the fact that no affidavit, in compliance with the directions issued at serial nos. (i) to (iii) of para 161 of the order dated 13 March 2015 was filed by his client either within the period of four weeks stipulated in para 162, or even thereafter. The sequitur would, therefore, be that the interim directions contained in para 161, including direction (iv), would stand substituted by directions (i) to (iv) in para 162. This is apparent from the words “Under these circumstances, the interim orders shall operate against the defendant in the following terms” contained in para 162.

5. The plaintiff (“Ericsson”, hereinafter) and the defendant, Intex both appealed against the above order dated 13 March 2015, vide FAO (OS) (COMM) 297/2018 and FAO (OS) (COMM) 296/2018 respectively.

6. During the pendency of the said FAOs, the operation of the order dated 26 March 2015, of the learned Single Judge, was placed in abeyance by order dated 9 April 2015 of the Division Bench.

7. Both FAOs were disposed of, by the Division Bench, by judgement dated 29 March 2023. The concluding paragraph of the judgment of the Division Bench reads as under:
“151. Accordingly, the appeal of Intex being FAO (OS) (COMM) 296/2018 is dismissed while the appeal filed by Ericsson being FAO (OS) (COMM) 297/2018 is allowed and Intex is directed to pay the entire royalty amount to Ericsson within four weeks. The interim orders passed by this Court stand vacated. However, there shall no order as to costs. This Court clarifies that the observations made by it are prima facie in nature and the learned Single Judge shall dispose of the suit finally without being influenced by any of the observations made by this Court.”
(Emphasis supplied)

The interim order dated 9 April 2015 of the Division Bench, thus, stood vacated.

8. It is clear from para 151 of the judgment of the Division Bench that the interim directions as granted by the learned Single Judge in paras 161 and 162 of the judgment dated 26 March 2015 stand modified by the Division Bench, to the extent that Intex was directed to pay the entire royalty amount to Ericsson within a period of four weeks.

9. Alleging non-compliance with the said directions, Ericsson filed contempt applications by way of CM. APPL. 22222/2023 in FAO (OS) (COMM) 297/2018 and CM. APPL. 22224/2023 in FAO (OS) (COMM) 296/2018, on which the Division Bench has passed a detailed order on 13 October 2023, paras 8 to 18 and 20 and 21 of which read thus:
“8. It is the aforesaid order which was continued from time to time till the appeal of the respondent itself came to be dismissed on 29 March 2023. The applicants allege that once the interim order operating on the instant appeal came to be vacated and discharged, it is only then that the respondents became liable to act in accordance with the directions as framed by the Division Bench in its order of 29 March 2023. It was their submission further that the issue of compliance with the order of the learned Single Judge would arise only thereafter.

9. It becomes pertinent to note that the learned Single Judge had in its order of 13 March 2015 required the respondents herein to pay royalty in accordance with the conditions as stipulated in paragraph 161. In terms of those directions, the respondents were held liable to pay 50% amount of the royalty in a manner identical to the provisions made in CS(OS)442/2013 from the date of institution of the suit till 01 March 2015 by way of a bank draft within four weeks. The balance amount of royalty was to be securitized by the respondents by furnishing a Bank Guarantee within the same period. The aforesaid Bank Guarantee amount was to be invested in the shape of an FDR initially for a period of twelve months.

10. The learned Single Judge had further provided that the aforesaid procedure would be replicated every six months till the disposal of the suit. Insofar as the period prior to institution of the suit is concerned, the order of 13 March 2015 required the defendant to furnish accounts from the date of user of the patented products till the date of the institution of suit.

11. The Single Judge while framing the aforenoted directions in para 161 had further provided for the respondents to file an appropriate affidavit in evidence of them being agreeable to comply with the directions within four weeks. It was further observed that in case such an affidavit is not filed, it would be presumed that the respondents are not interested in the use of the technology of the suit patents and to pay royalty amounts fixed. In such a contingency, the injunctions as set out in the latter parts of para 162 were to come into play.

12. It is further pertinent to note that in terms of the para 162(iv), the respondents were also required to file an affidavit of a Director or other person disclosing all information relating to the quantum of “mobile devises” (handset, tablet etc.) sold by it, and the revenue earned from the sale of such mobile devises. Post the present appeal coming to be disposed of on 29 March 2023, the respondents are stated to have filed such an affidavit of compliance referable to the directions contained in para 162(iv) on 20 April 2023.

13. The applicants allege that despite the peremptory directions framed by the Division Bench and embodied in the order of 29 March 2023, there has been a contemptuous failure on the part of the respondents to pay the entire amount of royalty which had become due. The respondents, on the other hand, while opposing the instant applications and controverting the allegations of non-compliance take the position that once they had decided not to file an affidavit accepting the conditions which stood imposed in para 161, they are not liable to pay any amount towards royalty. According to the respondents, the only consequence of a failure to file an affidavit of compliance and acknowledging the obligations as set out in para 161 (i) to (iii) was that the injunction as framed in paragraph 162 (i) to (iii) would operate.

14. We find that the aforesaid contention is not only misconceived but clearly amounts to a blatant attempt to overreach the unambiguous directions as framed by the Division Bench.

15. As would be evident from the order of 09 April 2015, the Court had merely extended the date of compliance with the order of the learned Single Judge dated 13 March 2015. This clearly would be referable to the filing of an affidavit in terms of para 161 and acknowledging and accepting the terms and conditions as framed by the learned Single Judge for payment of royalty. The respondents stood absolved of the obligation to effect compliance with the aforesaid in light of the aforenoted interim order and which ultimately came to be vacated on 29 March 2023.

16. However, while dismissing the appeal of the respondents, the Division Bench framed an unambiguous and unequivocal direction for all amounts of royalty being paid within four weeks. Undisputedly, the said order has attained finality since it was neither questioned by the respondents nor was any appeal preferred. Since the aforesaid direction continues to operate, we find ourselves unable to appreciate or countenance the specious defence that has been proffered.

17. While during the course of hearing which ensued today, we had provided an opportunity to learned counsel appearing for the respondents to make a statement with respect to the compliances being effected within a reasonable time, the same was chosen not to be availed of. We are thus prima facie of the opinion that the respondents are in breach and in contempt of the judgment and order dated 29 March 2023.

18. We note that the respondent is a corporate entity. However and in the context of Order XXXIX Rule 2A not only the said entity but also all individuals who are found to be in charge and control of its affairs would become liable to be proceeded against for deliberate and wilful violation of orders passed by a Court.

*****

20. On an overall consideration of the aforesaid, we hereby place the respondents upon notice to show cause why it should not be held guilty of a wilful and deliberate disobedience of the order of the Court dated 29 March 2023.

21. We additionally accord liberty to the applicant to move an appropriate impleadment application bringing on record the persons in charge of and responsible for the affairs of the respondent and against whom appropriate proceedings for contempt may be drawn parallelly. The respondent may file its response in light of the above within a period of three weeks from today.”
(Emphasis supplied)

10. The present application was filed on or around 9 October 2023. The prayer clause in this application already stands reproduced in para 1 supra.

11. It is obvious that the present application is an abuse of process of the court. The interim order passed by this Court on 13 March 2015 already stands modified by judgment dated 29 March 2023 of the Division Bench. The directions for payment of royalty as contained in the order dated 13 March 2015 stand superseded by the directions contained in para 151 of the judgment of the Division Bench, which required Intex to pay the entire amount of royalty to Ericsson.

12. If any clarification regarding the rates of royalty was required, therefore, Intex ought, if at all, to have approached the Division Bench.

13. Adverse observations regarding the manner in which the defendant has been acting already stand captured in the passages from the order dated 13 October 2023, reproduced in para 9 supra.

14. It is extremely unfortunate that, even after passing of the order dated 13 October 2023, the defendant has pressed the present application before this Court. Apparently, the defendant is straining every sinew to avoid complying with the direction for payment of royalty as contained in para 151 of the judgement of the Division Bench.

15. To me, it appears that the defendant has sought to take a chance before this Bench only because, quite clearly, the Division Bench is unhappy with the manner in which the defendant is proceeding. This is nothing, therefore, but forum shopping.

16. The Court is, therefore, constrained to take a serious view in the matter.

17. IA 20296/2023 is, accordingly, dismissed with costs of ? 5 lakhs, to be paid by the defendant to the plaintiff within a period of four weeks from today.

IA 20290/2023 (Reconstitution of Confidentiality Club)

18. This is an application seeking reconstitution of the confidentiality club constituted by order dated 5 July 2018, passed by this Court in I.A 5578/2017.

19. Mr. Sharma, learned Counsel for the defendant/applicant, submits that, after the confidentiality club was constituted, the Counsel for the defendant have changed and that, thereafter, the Counsel who were earlier representing the defendant, and who were part of the confidentiality club, are no longer their Counsel.

20. After some discussion, learned Counsel for the parties are agreeable to a modification of the confidentiality club to the extent that the defendant could suggest the names of three lawyers, who could be co-opted as members of the confidentiality club. Let an affidavit be filed by the defendant accordingly.

21. Mr. Sandeep Sethi, learned Senior Counsel for the plaintiff, has no objection to the said three lawyers being inducted in the confidentiality club, subject to filing of an affidavit as aforesaid.

22. The affidavit would be filed in terms of para (ii) of the directions contained in the order dated 5 July 2018 within one week from today.

23. The application stands disposed of in the aforesaid terms.

24. Needless to say, the said lawyers would be entitled to the same access to the confidentiality club of the defendant as was available to the members of the confidentiality club as earlier constituted.

25. Renotify on 6 November 2023, the date already fixed.

C. HARI SHANKAR, J.
OCTOBER 19, 2023
dsn
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CS(COMM) 769/2016 Page 1 of 13