Delhi High Court Division Bench Revisits Intellectual Property Litigation Directives

December 19, 2023
Delhi High Court India

By Shilpi Sinha and Tanvi Bhatnagar

In a significant development likely to impact intellectual property (IP) litigation, the Hon’ble Division Bench of the Delhi High Court has overturned key directives of the Vishal Pipes Ltd. v. Bhavya Pipe Industry case. In the recent case of Pankaj Ravjibhai Patel v. SSS Pharmachem Pvt. Ltd, the Hon’ble Division Bench disagreed with the earlier Vishal Pipes judgment, which mandated that all IP suits filed at the District Court level be automatically listed before a District Judge (Commercial), irrespective of their valuation.

The Past: Vishal Pipe Judgment

Intellectual Property R suits are categorized as commercial disputes, as per Section 2(c)(xvii), but whether they can be listed before a commercial court depends on the specified value.

The Vishal Pipes judgment was driven by the concern that some parties deliberately undervalue their IP suits to have them heard in non-commercial courts. While acknowledging the plaintiff’s authority to choose the forum and remedy, the court argued that this flexibility should not permit deliberate undervaluation to avoid the strict provisions of the Commercial Courts Act (CCA) or engage in forum shopping.

The CCA imposes various procedural requirements, such as mandatory pre-institution mediation, case management hearings, and detailed documentation submission. The Hon’ble Court contended that undervaluing a suit allows the plaintiff to evade these checks and place it before non-commercial courts that do not require such measures. The CCA, designed not only to adjudicate commercial disputes but also to expedite their resolution, could lead to faster trials if implemented efficiently. Efficient trials, in turn, could diminish the importance of interim injunctions, a crucial aspect of IP litigation strategy due to prolonged trial durations.

The valuation of suits became a crucial aspect in the context of Intellectual Property disputes before commercial courts. Matters are typically listed based on subject matter and valuation. According to the CCA, the specified value, determined by the market value of the IP estimated by the plaintiff, needs to be more than INR 3 lakhs for the dispute to be listed before a commercial court. However, the Vishal Pipes judgment highlighted instances where parties did not state the specified value and merely estimated the relief sought under the Court Fees Act and the Suit Valuation Act. This could lead to situations where a suit, despite having an unstated high specified value, was valued at less than the INR 3 lakhs threshold based on the relief sought. The court found this anomaly problematic and issued the following directives to address these concerns:

1. All IP disputes should be valued at INR 3 lakhs or more.
2. If a suit is valued below INR 3 lakhs, it should be placed before a commercial court, which will assess the specified value and suit valuation to ensure the suit is not deliberately undervalued.
3. For consistency, every IP suit, even if valued below 3 lakhs, should be placed before the District Judge (Commercial), although it would not be governed by the CCA.

The Present: Pankaj Rajivbhai Patelv. SSS Pharmachem Pvt. Ltd. 

The appellant appealed against the vacation of an ex-parte interim injunction by the commercial court. The commercial court had ordered the submission of additional documents to support the specified value, seemingly relying on Vishal Pipes. The appellant argued that the commercial court, by assessing the specified value and suit value based on Vishal Pipes, overlooked that the suit was already valued at 10 lakhs, surpassing the 3 lakhs threshold.

The Hon’ble Division Bench while setting aside the trail court’s order clarified that it would be inaccurate to presume that IP suits must be valued at INR 3 lakhs or more. The Hon’ble Division Bench suggested that the concerned court should assess the specified value if the valuation falls below INR 3 lakhs. To place the responsibility on the plaintiff, the court directed them to explicitly declare that they have not taken an inconsistent stand on the specified value in any past or present litigation. Additionally, the Hon’ble Division Bench instructed the reversion of all IP matters transferred to commercial courts following the Vishal Pipes judgment back to the competent court.

Key Highlights

While setting aside the Single Judge’s Vishal Pipes judgement, the Hon’ble Division Bench laid the following guidelines:
1. The competent non-commercial court can examine the declared specified value and relief valuation if pegged below the threshold of INR 3 lakhs.
2. Plaintiffs in matters where valuation is less than 3 lakhs must file an affidavit of declaration that they have not taken an inconsistent position about their specified value in any other pending or instituted litigation.
3. Matters transferred to commercial courts due to the Vishal Pipes judgment should be reverted back to competent courts.

Author’s Observations

The Hon’ble Division Bench’s judgment seeks to strike a balance between ensuring that the CCA’s provisions are respected and preventing undue forum shopping or undervaluation.

The Vishal Pipes judgment aimed to enforce the CCA for all IP disputes, suspecting that parties undervalue their suits to avoid its rigorous provisions. However, Hon’ble Division Bench in Pankaj Ravjibhai Patel challenged this rationale. The Hon’ble Division Bench disagreed with the presumption in Vishal Pipes that Intellectual Property suits should ordinarily be valued at more than INR 3 lakhs and that undervaluation is an attempt to escape the CCA.

The Hon’ble Division Bench adopted a flexible approach, stating that competent courts “will be open” to examining declared specified values and relief valuation below INR 3 lakhs. The use of “will be open” suggests that this safeguard is more of a guideline than a strict directive, leaving it to the discretion of the concerned court. This may be effective when a court actively investigates the issue but could allow deliberate undervaluation to go unnoticed otherwise

The Hon’ble Division Bench’s ruling reinstated the status quo before the Vishal Pipes judgment, emphasizing that competent non-commercial courts should be open to examining declared specified values and relief valuations below INR 3 lakhs. While the Hon’ble Division Bench introduced a mandatory declaration by plaintiffs in cases with valuations less than 3 lakhs, the effectiveness of this safeguard remains uncertain. The Hon’ble Division Bench directive, leaving the matter to the discretion of the concerned court, may not entirely address the problem of deliberate undervaluation.

In conclusion, the Hon’ble Division Bench has brought much-needed clarity to the valuation of IPR suits and the application of the CCA. However, the cases transferred by the outcome of Vishal Pipe now leaves the litigants in ambiguous situations as changing the forum repeatedly becomes difficult and time-consuming. While the judgment addresses some of the concerns raised in the Vishal Pipes case, it leaves room for further refinement and clear yet final instructions. By considering legislative amendments and offering clearer guidelines, the legal system can better balance the protection of Intellectual Property rights and the prevention of undue forum shopping or undervaluation in IP disputes. Ultimately, a fair and efficient resolution of IP matters will benefit all stakeholders in the legal system.

Tanya Sharma, Assessment Intern at S.S. Rana & Co. has assisted in the research of this Article.

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