Chemtura Corporation v. Union of India & Others

High Court of Delhi at New Delhi | Decided: 28 August 2009 CS (OS) No. 930 of 2009 Bench: Hon’ble Dr. Justice S. Muralidhar Citation: (2009) 41 PTC 260 (Del) | 2009 SCC OnLine Del 3108

Background

Chemtura Corporation is a corporation organised under the laws of the State of Delaware, United States of America and claims to be the world leader in hot-cast urethane prepolymers and a leading manufacturer of specialty aqueous urethane dispersions and polyester polyols. Chemtura was granted Indian Patent No. 213608 on 9 January 2008 by the Controller of Patents in respect of a side bearing pad assembly a mechanical device used in the secondary suspension system of railway wagons. The side bearing pad assembly functions as part of the system that controls the lateral roll of a rail car during movement, absorbing and cushioning compression forces between the bolster and the bogie of the wagon. The invention comprises a telescopically arranged first and second housing system coupled to load bearing members, with biasing means including at least one compression spring positioned within the bore of the housing. The patent was applied for originally in the United States on 27 September 1999 and a corresponding Indian national phase application under the Patent Cooperation Treaty was filed on 21 June 2001, with the patent eventually granted with effect from 15 September 2000, the date of the PCT international application.

The patent application in India had originally been filed in the name of Uniroyal Chemical Company Inc., which underwent a series of corporate mergers and name changes ultimately resulting in the Plaintiff Chemtura Corporation becoming the patent holder. Chemtura had licensed the patented technology to three companies based in Lucknow Avadh Rubber Ltd., Aryan Exporters Pvt. Ltd. and Prag Industries who were manufacturing and supplying the subject device to the Union of India through the Ministry of Railways and its original equipment manufacturers including freight wagon builders. Two drawings for commercial use of the patented technology had been approved by the Director General, Research Designs and Standards Organisation (RDSO) of the Ministry of Railways.

Defendants 2 to 4 and an erstwhile Defendant No. 3, under an agreement dated 1 May 2008, formed a Consortium for the joint and several development and marketing of a constant contact side bearer assembly for railway bogies. The Consortium submitted manufacturing drawings to the Member Mechanical, Railway Board for approval without the consent of Chemtura and participated in a tender floated by the South East Central Railway, Bilaspur for procurement of 46,800 pieces of side bearing pad assembly. The tender opened on 9 September 2008 and the Consortium quoted a price of Rs. 2,300 per piece against the L-1 price of Rs. 3,300. In the outcome, Chemtura ‘s three licensed manufacturers were awarded 95 percent of the total quantity while the Consortium was awarded a developmental order constituting 5 percent of the total quantity. Chemtura alleged that the drawings submitted by the Consortium and the device offered for sale were substantially identical to and constituted an infringement of at least Claims 1, 3, 6 and 14 of its patent, as confirmed by the affidavit of Dr. Ajaib Singh, a chemist with over 40 years of experience in polyurethane technology.

Chemtura issued a cease and desist notice to the Consortium on 27 October 2008 and also issued notice to the Railway Board and RDSO under Section 80 of the Civil Procedure Code. Defendant No. 2’s advocate initially indicated willingness to comply but sought time on account of illness of a partner. This was followed by a letter dated 17 December 2008 informing Chemtura that the Consortium had filed a revocation application against the subject patent before the Intellectual Property Appellate Board on 4 December 2008. Chemtura thereafter filed the present suit in 2009 seeking permanent injunction, rendition of accounts, liquidated damages of Rs. 1 crore and delivery up of infringing stock. Simultaneously it sought an ad-interim ex parte injunction under Order XXXIX Rules 1 and 2 CPC. By an order dated 27 May 2009, the Court granted an interim injunction restraining Defendants 2, 3 and 4 from infringing the patent and from manufacturing, using or offering for sale any device in infringement of the patent. The defendants thereafter filed IA No. 8372/2009 under Order XXXIX Rule 4 CPC seeking vacation of the stay order. Both applications were heard together and decided by the present judgment.

The defendants contested the injunction on multiple grounds including lack of territorial jurisdiction, the absence of a valid licence in favour of Chemtura ‘s three manufacturers, the applicability of Section 47 of the Patents Act since the device was being manufactured for use by the Ministry of Railways and most significantly a serious challenge to the validity of the patent on the ground that Chemtura had failed to comply with its statutory obligations under Section 8 of the Patents Act, 1970 by not disclosing to the Controller of Patents in India the adverse examination outcomes and repeated rejections in the United States Patent and Trademark Office and the European Patent Office, both of which had found the broad claims of Chemtura ‘s patent anticipated by prior art and had compelled Chemtura to narrow its claims to the toroidal or torus shape of the compression spring a shape that had itself been disclosed in Chemtura ‘s own earlier US Patent No. 3932005 dated 13 January 1976.

Issues for Determination

Whether the defendants had raised a credible prima facie challenge to the validity of Patent No. 213608 sufficient to render the patent vulnerable and thereby disentitle Chemtura from the grant or continuation of an interim injunction, specifically whether the non-compliance with Section 8 of the Patents Act, 1970 rendered the patent prima facie vulnerable to revocation under Section 64(1)(m) of the Act.
Whether Chemtura had complied with its obligations under Section 8(1)(b) and Section 8(2) of the Patents Act, 1970 by keeping the Controller of Patents informed from time to time of the detailed particulars of the processing of its patent applications before the USPTO and EPO, including the adverse office actions and forced narrowing of claims and whether the statement made by Chemtura in its letter of 19 October 2005 that there had been no further development since the filing of Form 3 was false or misleading.
Whether the defence under Section 47 of the Patents Act, 1970 which conditions the patent grant on the Government’s right to use or have made the patented device for its own purposes operated to bar the grant of an interim injunction against the defendants who were manufacturing and supplying the device pursuant to a tender floated by the Ministry of Railways using drawings supplied by the Railways.
Whether the balance of convenience favoured the grant or continuation of the interim injunction, having regard to the fact that the defendants had been awarded only a 5 percent developmental order under the tender while Chemtura ‘s licensed manufacturers had been awarded 95 percent of the total quantity.
What is the standard to be applied by a court in assessing a challenge to the validity of a patent at the interlocutory stage and whether a defendant is required to establish actual invalidity or only a substantial question of invalidity or vulnerability at this stage.

Key Holdings of the Court

The Court held that the defendants had raised a credible prima facie challenge to the validity of Patent No. 213608 on the ground of non-compliance with Section 8 of the Patents Act, 1970. The Court found that the ground for revocation under Section 64(1) (m) failure to disclose to the Controller information required by Section 8 or furnishing false information was prima facie attracted on the facts of the case. This rendered the patent vulnerable at the interlocutory stage and was sufficient to disentitle Chemtura from the continuation of the interim injunction.
The Court held that Section 8(1)(b) of the Patents Act, 1970 imposed a positive and periodic duty on the patent applicant to keep the Controller informed from time to time of all developments in its patent applications filed in other countries not merely to furnish a one-time disclosure of the fact of filing. The expression from time to time in the statute required periodic updating of the Controller on the status of foreign applications and was not satisfied by the mere filing of the international search report at the time of the national phase application.
The Court held that Section 8(2) of the Patents Act imposed a mandatory obligation on the applicant to furnish to the Controller, upon the Controller’s direction, the details of the processing of the application in any country outside India including search and examination reports. The Controller’s letter of 20 October 2004 expressly directed Chemtura to furnish details of search and examination reports in respect of the same or substantially the same invention filed in major patent office is including the USPTO and EPO. Chemtura ‘s response that there had been no further development since the filing of Form 3 was false between June 2001 and October 2005 there had been multiple rounds of rejection and amendment before the USPTO including final office actions, appeals and a substantial narrowing of claims. These material facts were withheld from the Controller.
The Court held that the information withheld had direct relevance to the examination of the Indian patent application. Had the Controller been informed of the adverse USPTO and EPO office actions and the extent to which Chemtura was compelled to restrict its claims to the torus shape of the compression spring, the Controller would have been required to examine whether that specific shape was itself disclosed in Chemtura ‘s own earlier US Patent No. 3932005 dated January 1976 a patent that was not brought to the Controller’s attention and which prima facie taught the use of a toroidal shape for the compression member. The non-disclosure therefore had the potential to have affected the grant of the patent.
The Court held, following the Division Bench judgment in F. Hoffmann-La Roche Ltd. v. Cipla Ltd. that at the interlocutory stage the defendant need not establish actual invalidity of the patent it is sufficient to show that the patent is vulnerable, that is, that there is a substantial question of invalidity to be tried. The mere grant of a patent does not guarantee its validity and a credible challenge to validity operates as a bar to the grant of interim injunctive relief.
The Court held that Section 47 of the Patents Act, 1970 which makes the grant of every patent subject to the condition that the patented device may be made by or on behalf of the Government for the purpose of its own use operated as an additional and independent bar to the grant of an injunction in the specific circumstances of this case. The Ministry of Railways had itself supplied the drawings for the device to all tenderers and the defendants were manufacturing the device exclusively for supply to the Railways pursuant to a contract. In these circumstances, the manufacture was being done on behalf of the Government for the Government’s own use and Section 47 operated to immunize the defendants from a charge of infringement. The Court further held that Chemtura, by participating in the very tender alongside the defendants and accepting 95 percent of the contract, must be taken to have consented to the use of its patent by any supplier to whom a portion of the contract was awarded.
The Court found that the balance of convenience did not favour the continuation of the interim injunction. The defendants had been awarded only 5 percent of the total quantity as a developmental order. Chemtura retained 95 percent of the commercial benefit of the contract through its licensed manufacturers. Refusing the injunction while directing the defendants to maintain accounts would adequately protect Chemtura ‘s interests in the event it ultimately succeeded at trial. The interim injunction granted on 27 May 2009 was accordingly vacated.

Statutory Provisions Involved

Section 8(1)(a) of the Patents Act, 1970 requires an applicant for a patent who is prosecuting an application for the same or substantially the same invention in any country outside India to file along with the application a statement setting out the detailed particulars of such foreign application. The Court examined the scope and content of this provision and the corresponding Form 3 obligation.

Section 8(1)(b) of the Patents Act, 1970 requires the applicant to give an undertaking that up to the date of the grant of patent in India, he will keep the Controller informed in writing from time to time of the detailed particulars of every other application relating to the same or substantially the same invention filed in any country outside India subsequent to the filing of the statement referred to in clause (a). The Court held that this provision imposed a continuing, periodic duty of disclosure and not merely a one-time obligation.

Section 8(2) of the Patents Act, 1970 empowers the Controller to require the applicant at any time after filing and before grant to furnish details relating to the processing of the application in a country outside India. Where so required, the applicant shall furnish the information available to him within the prescribed period. The Court held that compliance with this provision is mandatory and that the Controller’s direction in para 8 of the First Examination Report dated 20 October 2004 constituted a clear requirement under this provision.

Section 47 of the Patents Act, 1970 provides that the grant of every patent is subject to the condition that any machine, apparatus or other article in respect of which the patent is granted may be imported or made by or on behalf of the Government for the purpose merely of its own use and any process in respect of which the patent is granted may be used by or on behalf of the Government for the purpose merely of its own use. The Court applied this provision to hold that manufacture of the patented device by the defendants pursuant to a Ministry of Railways tender using drawings supplied by the Railways and exclusively for supply to the Railways was exempt from the scope of the patent.

Section 48 of the Patents Act, 1970 as amended in 2002, which confers on the patentee the exclusive right to prevent third parties from making, using, offering for sale, selling or importing the patented product without consent, was considered in the context of its express subordination to Section 47 and the other provisions of the Act. The Court held that the amendment of Section 48 in 2002 did not alter the position as regards the validity of patents or remove the conditions imposed by Section 47.

Section 64(1)(j) of the Patents Act, 1970 provides as a ground for revocation that the applicant for the patent has failed to disclose to the Controller the information required by Section 8 or has furnished information which in any material particular was false to his knowledge. The Court found this ground prima facie attracted on the facts.

Section 64(1)(m) of the Patents Act, 1970 provides as a ground for revocation that the patent be obtained on a false suggestion or representation. The Court found this ground also prima facie attracted given the false statement in the letter of 19 October 2005 that there had been no further development in the foreign applications.

Section 107 of the Patents Act, 1970 provides that every ground on which a patent may be revoked under Section 64 shall be available as a defence in proceedings for infringement. The defendants relied upon this provision to raise the validity challenge as a defence in the infringement suit.

Section 156 of the Patents Act, 1970 provides that a patent shall bind the Government, subject to the other provisions contained in the Act. The Court read this provision harmoniously with Section 47 to hold that where the manufacture of the patented device is for the Government’s own use, neither the Government nor its contractor acting on its behalf could be enjoined under the patent.

Section 13(4) of the Patents Act, 1970 provides that the grant of a patent shall not guarantee its validity. The Court applied this provision in the context of the standard for challenging validity at the interlocutory stage.

Rule 12(3) of the Patents Rules, 2003 prescribes the contents of the information to be furnished under Section 8(2), specifying that the applicant shall furnish information relating to objections if any in respect of novelty and patentability of the invention and any other particulars as the Controller may require. The Court found that this rule required furnishing of examination and search reports including those containing adverse findings on patentability, not merely documents evidencing the grant of a patent in a foreign country.

Order XXXIX Rules 1 and 2 of the Civil Procedure Code, 1908 govern the grant of temporary injunctions and require the applicant to establish a prima facie case, demonstrate that the balance of convenience lies in its favour and show that refusal of the injunction would cause irreparable harm. Order XXXIX Rule 4 CPC empowers a court to discharge or vary an interim order on application by the party against whom it was made.

Reasoning of the Court

The Court commenced its analysis by identifying the central legal question whether the defendants had raised a credible challenge to the validity of the Chemtura patent sufficient to render it vulnerable and thereby disentitle the plaintiff from interim injunctive relief. In doing so the Court applied the standard articulated by the Division Bench in F. Hoffmann-La Roche Ltd. v. Cipla Ltd. that a defendant challenging the validity of a patent at the interlocutory stage need not establish actual invalidity but is required to show that the patent is vulnerable, in the sense that there is a substantial question of invalidity to be tried. This standard drawn from Australian and American jurisprudence on the subject is more favourable to the defendant than the traditional prima facie case standard and reflects the recognition that at the interlocutory stage, the evidence is incomplete and the full merits of the validity challenge cannot be assessed.

The Court then examined in considerable detail the history of the prosecution of Chemtura ‘s patent application before the USPTO and the EPO and found it deeply troubling. After the filing of the Indian national phase application on 21 June 2001 and before the submission of Chemtura ‘s reply to the First Examination Report in October 2005, the USPTO had issued multiple rounds of rejection final office actions, non-final office actions, appeals all of which had compelled Chemtura to progressively narrow its claims. The broad original claims had been found anticipated by the closest prior art, US Patent No. 4566678 and Chemtura had been compelled to surrender its broad claims and restrict protection to the torus shape of the compression spring. The European patent authorities had similarly compelled Chemkata to restrict its claims to at least one spring element being a compression spring of solid resilient material formed as a toroidal shape. Neither the USPTO adverse actions nor the EPO examination reports had been disclosed to the Indian Controller.

The significance of this non-disclosure was reinforced by the Court’s analysis of what the Controller would have been required to examine had the information been provided. Chemtura ‘s own US Patent No. 3932005 dated 13 January 1976 which Chemtura had itself not brought to the Controller’s attention made clear reference to the use of a toroidal shape for the elastomeric or compression member in a similar application. Had the Controller been aware of this, he would have been required to examine whether the toroidal shape of the compression spring the very feature to which Chemtura ‘s claims had been narrowed after the US and European rejections was itself an inventive step or merely a new use of a known form within the meaning of Section 3(d) of the Act. The concealment of the adverse foreign prosecution history had therefore directly deprived the Controller of information that could have materially affected his decision to grant the patent.

The Court rejected Chemtura ‘s argument that Section 8(2) required disclosure only of claims that had been allowed in foreign countries. It held that the word including in the relevant provision indicated that search and examination reports were to be additionally furnished where claims had been allowed it did not restrict the obligation to those circumstances alone. The obligation to disclose was coextensive with the Controller’s ability to examine the application with the benefit of the closest prior art as identified by other major patent offices. To accept Chemtura ‘s narrow construction would be to hollow out the purpose of Section 8 entirely since it would permit applicants to obtain patents in India in respect of broad claims that had been rejected everywhere else, by simply declining to disclose the adverse outcomes.

On the Section 47 analysis, the Court reasoned carefully about the relationship between the holder’s rights under Section 48 and the Government use exemption under Section 47. The Court found that the Ministry of Railways had itself supplied the engineering drawings of the patented device to all tenderers including the defendants as the specification for what was to be manufactured and supplied. The defendants had no independent commercial purpose in manufacturing the device and were doing so exclusively pursuant to a contractual obligation to the Railways under the tender. The end use was entirely for the Ministry of Railways’ own operational purposes. In these circumstances, the making of the device was on behalf of the Government for the purpose of its own use within the meaning of Section 47(1) and accordingly fell outside the scope of the infringement.

The Court also found that Chemtura ‘s conduct in participating in the very tender in which the defendants participated and in accepting 95 percent of the total contract through its licensed manufacturers, constituted an implicit consent to the use of its patent by any supplier to whom a portion of the contract was awarded by the Railways. It was not open to Chemtura to simultaneously benefit from the patent monopoly by receiving the bulk of the contract and then seek to restrain the small developmental order awarded to the defendants on the ground of patent infringement.

On the balance of convenience, the Court applied a practically grounded analysis. The defendants had a mere 5 percent developmental order the very purpose of which was to enable the Railways to test and evaluate alternative suppliers and technologies. Granting an injunction would effectively extinguish this developmental purpose without any commensurate benefit to Chemtura, whose commercial position was already protected by the 95 percent allocation. Refusing the injunction while requiring the defendants to maintain detailed accounts would adequately protect Chemtura ‘s interests if it ultimately succeeded at trial, since the quantum of the developmental order was readily calculable and compensable in damages.

Doctrinal Significance

The Chemtura judgment is one of the most important Delhi High Court decisions on the Section 8 disclosure obligation in Indian patent law and has been consistently cited in subsequent patent litigation and revocation proceedings as establishing the mandatory and continuing character of the disclosure duty. Its significance extends across several distinct doctrinal domains.

On Section 8, the judgment provides authoritative guidance on the scope and content of the applicant’s disclosure obligation. By holding that Section 8(1)(b) imposes a continuing, periodic duty to update the Controller on all developments in foreign patent applications including adverse examination outcomes and forced claim amendments rather than a one-time disclosure of the fact of filing, the Court gave full effect to the legislative purpose of Section 8 as identified in the Ayyangar Committee Report. The judgment establishes that the obligation is not discharged by the filing of an international search report at the national phase entry stage and that subsequent developments particularly adverse office actions and claim amendments forced by prior art citations must be communicated to the Controller throughout the prosecution of the Indian application.

The judgment’s analysis of the relationship between Section 8(2) compliance and the potential impact on the grant decision is also important. The Court’s reasoning that non-disclosure of the adverse US and European prosecution history had the potential to affect the Controller’s decision to grant the patent because it concealed both the prior art citations and the extent of the claim narrowing required to overcome them provides a principled basis for assessing materiality in Section 8 violation cases. The judgment thus establishes that the relevant question is not merely whether information was withheld but whether, had it been provided, it could have affected the outcome of the examination.

The judgment makes a significant contribution to the law on interlocutory injunctions in patent infringement suits by applying and elaborating the vulnerability standard articulated in the Roche v. Cipla Division Bench judgment. By holding that a Section 8 violation renders a patent prima facie vulnerable to revocation under Section 64(1)(m) without requiring the defendant to establish actual invalidity the Court confirmed that procedural irregularities in the patent procurement process are capable of generating a credible validity challenge sufficient to defeat an injunction application at the interlocutory stage. This is significant because it ensures that the Section 8 obligation has practical enforcement consequences and cannot be treated by applicants as a purely technical requirement.

The Court’s treatment of Section 47 is also doctrinally significant. The analysis of the scope of the Government use exemption distinguishing between direct use by a Government department and manufacture on behalf of the Government for the Government’s own operational purposes provides useful guidance on the application of Section 47 to the practically important category of Government procurement contracts. The Court’s harmonious reading of Sections 47, 48 and 156 to ensure that the Government use exemption extends to contractors acting on behalf of the Government in manufacturing a patented device for the Government’s own use is consistent with the economic and policy rationale of the provision and prevents the patent system from being used to frustrate legitimate Government procurement.

Finally, the Chemtura judgment occupies an important place in the broader development of Indian patent litigation practice as one of the early post-2005 amendment decisions to grapple seriously with the procedural integrity of the patent grant process. It has been cited extensively in subsequent IPAB revocation proceedings and in the Delhi High Court’s own subsequent decisions on Section 8 compliance and the principles it established have become foundational to the Indian Patent Office’s approach to examining the adequacy of applicants’ Section 8 disclosures. The judgment is thus not merely a case about one patent it is a defining statement about the standards of candour and disclosure that the Indian patent system demands of applicants who seek the significant commercial benefits of patent monopoly.

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