Opening Up ‘Effects’ Jurisdiction: Dr Reddy’s v. Controller of Patents

In this story, I cover off a couple of points of interest coming out of last week’s Delhi High Court decision in Dr Reddy’s Laboratories v. Controller of Patents.

In it, the Court returns two findings of note.

First, the Court rules that original cancellation actions against patents must opt into any one of three sets of High Court venues. They must (a) follow the underlying patent, (b) follow the infringement suit, if there is one, or (c) make a showing of the commercial effect of the patent in the territory where the cancellation is instituted.

Second, the Court, consistent with statute and litigation practice at the now-defunct IPAB, assigns first appeals to High Courts from Patent Office decisions to the High Court in whose territorial jurisdiction the relevant branch of the Patent Office lies.

Jurisdiction for Original Cancellation Actions

Let us take up the first finding.

It offers three potential jurisdictions in which to challenge a patent.

To simplify it, let us consider it this way. At the time a cancellation action against a patent is instituted, there either will or will not be a suit for infringement under the patent already in place.

If there is, a combination of the statute and Supreme Court precedent makes clear that a cancellation can be tacked onto the High Court in whose jurisdiction the infringement suit sits. There has never, even historically, been much controversy on this position.

In the event that there is no infringement suit in place, the cancellation action, to rights, should go to the High Court in whose jurisdiction the Patent Office branch which issued the patent sits. To the Court’s credit, its understanding of the conditions where this jurisdiction kicks in is close to perfect.

However, the Court goes further.

It volunteers the position that patent cancellation jurisdiction ought also to be open to High Courts within whose territorial limits the commercial effects of the target patent are felt.

“Person Aggrieved”

The Court offers three sets of reasons for this.

The first is that cancellation actions are instituted by “persons aggrieved”. Under Indian patent law, this is a broad and inclusive definition of potential litigants whose interests may be diffused across domestic territories. In characterizing the locus standi requirement as a liberal one, the Court is undoubtedly correct. Patent cancellations are widely accommodated and, unlike cancellations under trade mark law, few locus standi disputes go the distance.

However, I will carefully distinguish what this accommodation is. The accommodation I speak of on this front— and, indeed, the accommodation the case law under the Patents Act permits — is to the litigant. This is accommodation in the sense of, even if you do not have a competing interest in the patent itself but are a commercial rival of the patentee, you qualify as a “person aggrieved” to institute a cancellation action.

Near as I can tell — and certainly as far as the case law travels — there is no accommodation for, say, a Delhi-based commercial rival of a patentee to move a cancellation action at the Delhi High Court against a Mumbai patent on the basis that the open “person aggrieved” requirement dilutes the requirement for territorial jurisdiction.

The accommodation the Court assumes, on the other hand, is very much to the institution of the action. It is very much an extension of the Court’s position to say that the grievance of the “person aggrieved” in my example above can draw into itself a patent cancellation action in Delhi.

These are pointedly different positions.

The Court’s best justification for its position is that the cause of action trailing the grievance can, indeed, extend beyond the local territory in the manner it contemplates.

This is unconvincing.

Can a grievance alone extend across territories in the manner the Court suggests? Sure. But that is not the purpose of opening up the “person aggrieved” requirement. It never has been. Its true purpose is to enable more litigants to qualify as persons aggrieved, not to permit already qualified litigants to claim an extension of their grievance to other territories.

If permitted to do so, its effect will be indistinguishable from a de facto rule of litigant convenience being read into a locus standi requirement. This litigant preference — let us call it what it is — has already deeply crippled trade mark and copyright law. Efforts to set it right, including by the Supreme Court, have turned a circle and returned where they started. (There is a small indication, even in Dr Reddys, that the potential for this nexus with territory idea spiralling out of control was not entirely outside the Court’s field of vision.)

The bottom line is that there is no good doctrinal reason why this extension should be permitted based on the stated reason i.e. the locus standi of the Petitioners in a cancellation action. The only justification apparent to me is that patentees themselves, as Claimants in patent infringement actions, have already extended faint territorial nexuses to the limits of their tolerance.

I am not sure permitting Petitioners in cancellation actions the same liberty is any more justified or does much good.

Different Branches in Prosecution

The second reason offered by the Court to permit cancellations to track the commercial effects of a patent is the thin justification that the domicile of a patent is not fixed.

This plank rests almost entirely on the limited situation where, for administrative reasons, patent applications may be marked for examination to a branch office other than the receiving office.

On its own, this justification has little to commend it. Why it is unconvincing is explained by the Court itself elsewhere — that the application, for this period, is merely out on loan to the examining office, and never actually permanently moves out of the receiving branch’s jurisdiction. This cannot, then, be good enough to permit a cancellation to be brought to a High Court where the patent was once examined.

Static & Dynamic Effects

The final reason offered by the Court is the one with the greatest potential:

It suggests that the liberty to institute a patent cancellation action ought to follow the commercial effects of the patent because a patent’s effects may be static and dynamic.

This theory is rooted in a couple of old Delhi precedents: a 1977 Full Bench in Gupta v. Jain & Co and a 1983 Division Bench in Ajay Industrial Corp v. Shiro Kanao.

However antiquated, it takes no small effort to endorse theory. For one, any theorizing about static and dynamic effects of jurisdiction is — as the Indian trade mark experience in particular shows us — generously speaking, halfway between conjecture and hypothesis. For another, it requires, by its very architecture, the establishment of facts to support the static or dynamic effects claimed.

The other conditions as to jurisdiction of a patent cancellation present a simple, indisputable binary: Was the patent registered here or not? Is there an infringement suit pending here or not? The effects theory, however, adds another, foundational factual impediment in the way of deciding a preliminary issue.

Further still, contextual difficulties abound. The biggest is that Gupta was offered under Section 51A of the Patents & Designs Act of 1911 in a design cancellation case, while Ajay Industrial was under the current Patents Act.

Disappointingly, the Court offers up a fairly anaemic discussion of the effects idea. The impression I carry is that, in the effort to distance itself from some rogue precedent still stuck to the shoes of the 1911 Act from its early days, the Court goes too far the other way.

I will limit myself to pointing out two shortcomings of the Court’s discussion.

The first is that the Court runs roughshod over pre-Gupta precedent to have contextualized the expression “the High Court” in Section 51A of the 1911 Act. Indeed, it entirely overlooks a fairly significant disagreement in terms between this precedent and Deshpande J for the Gupta Full Bench, who, in speaking of opening up High Courts to cancellation jurisdiction, openly warned that “it could not be the intention of the legislature to arm the [cancellation] Petitioner under Section 51A with powers to harass the Respondent [the registration holder].”

Second, the Court entirely fails to engage with Section 51A precedent post-Gupta that swims against its findings. This includes a High Court decision that found that the Gupta ratio was of no help in deciding an equivalent issue under patent law, one which stood behind the position that High Courts’ assumption of wide cancellation powers is not a principled position of any description but one forced upon them “by reason of unavoidable necessity”, and one which plainly concludes that the static and dynamic effects theory of cancellation jurisdiction emerging from Ajay Industrial Corp (and Gupta, by extension) is bunkum since cancellation actions are to be restricted to the place where the underlying registration sits or the place where the infringement occurs.

It is hard to deny that these are stark oversights.

At most, they may be saved by an extension of the Court’s ratio beyond the findings by the Gupta Full Bench. However, unless I am greatly deceived, there is no attempt by the Court to do so. It endorses, in as many words, the static and dynamic effects idea in Gupta, and leaves it at that.

High Court Jurisdiction for Patent Appeals

The Court’s second finding on appeals being tethered to the Patent Office issuing the impugned order. To be honest, this is a finding of very little significance.

Section 117A, which is best understood as a traffic light system for appeals out of Patent Office, does not permit much wiggle room on this. For its part, the Court first mechanically and dryly examines every instance where the phrases “Patent Office” and “appropriate office” occur in the Patents Act. It then concludes — more out of lack of juice in the query than anything else — that location-neutral administrative exigiencies such as patent applications occasionally being marked to other Patent Office branches do not change the controlling branch of the Patent Office for a patent application. (This, of course, was one of three reasons originally endorsed by the Court for why original cancellation actions should be allowed to leave the jurisdiction of the receiving branch of the Patent Office.)

All told, the Court offers five reasons for this preference. These reasons are fine as far as they go. In substance, though, they amount to little more than regularizing the administrative convenience built into the idea of Patent Office appeals going from branch offices to High Courts in the same territory.

Interestingly, the Court also makes passing mention of past IPAB practice where parties used a glorified mentioning system to get revocations listed before the principal bench in Chennai. What it neglects to acknowledge is that this effectively amounted to a waiver of jurisdiction rules. Nor does it acknowledge that this footloose approach to jurisdiction was met — at least as far as anecdotal accounts I can stand behind will allow me to say — by no sanctions against the litigants. Given the disparity in prospective disposal rates at High Courts, a formal case could easily be made that litigants with cancellation actions stuck in Kolkata, for instance, might want those actions moved to Delhi. Something tells me, however, that the Dr Reddy’s Court might not be quite so enthusiastic about entertaining a reprisal of the ‘list before principal bench by mutual consent’ IPAB practice at High Court level.

All in all, then, Dr Reddy’s offers us one finding that leaves a lot of explanation on the table, and another that it could scarcely have got wrong if it tried.

More importantly, it throws the doors to ‘effects’ jurisprudence in patent cases widely, unapologetically open. Barring an appeal, which seems desperately unlikely to stick on these issues of law, it appears as though the onus is on litigants — and their lawyers — to use these ‘effects’ freedoms judiciously.