Hindusthan Lever Limited v. Godrej Soaps Limited and Others

Court: High Court of Calcutta | Date of Decision: 11 April 1996 Citation: AIR 1996 CAL 367; (1997) 1 CALLT 123 (HC); 100 CWN 562; (1996) 100 Cal WN 562; (1997) 2 CivLJ 302

BACKGROUND

The plaintiff, Hindusthan Lever Limited, is a leading Indian manufacturer of soaps, detergents, cleaning preparations, chemicals and fertilisers, holding over one hundred and seventy active patents granted by the Government of India across various fields including detergents, soaps and their processes of manufacture. The first defendant, Godrej Soaps Limited, is likewise engaged in the manufacture and sale of various soap and detergent brands and is a direct competitor of the plaintiff. The second defendant, Procter and Gamble Godrej Limited, is a recently incorporated company formed as a collaboration between the first defendant and Procter and Gamble India Limited, the latter being a subsidiary of an American parent company. The third defendant is a distributor of the products of the first and second defendants in and around Calcutta.

The subject matter of the dispute is Patent No. 170171, a composition patent held by the plaintiff covering detergent bars suitable for personal bathing or fabric washing. The patent originated from two applications made by the plaintiff on or about 21st September 1988 Application No. 275/BOM/88, directed to the composition of detergent bars and Application No. 274/BOM/88, directed to an improved process for preparing such bars. The composition application, accepted under Serial No. 170171, proceeded to sealing after the disposal of opposition proceedings under Section 27 of the Patents Act, 1970, initiated by the first defendant before the Deputy Controller of Patents, Bombay. The Deputy Controller directed the application to proceed to sealing and the patent was accordingly granted and sealed on 23rd April 1993. The plaintiff had duly deposited all overdue and current renewal fees and the patent was stated to be valid and subsisting at the time of the hearing. The process application, published under Serial No. 170480, remained the subject of pending opposition proceedings before the Deputy Controller of Patents, Bombay.

Upon acceptance, the specifications and related documents of both applications were published and made available to the public. The plaintiff’s internal quality review committee, observing that the respondents’ bathing bar sold under the trade mark “VIGIL” bore the legends “ALL NEW” and “THE LONGER LASTING SOAP,” caused samples of VIGIL soap manufactured in January, February and April 1993 to be chemically analysed at its own laboratories. The analysis was alleged to disclose that the composition of VIGIL soap fell within the range of all or some of the claims of Patent No. 170171. The patent covers a composition consisting of twenty-five to sixty percent by weight detergent of which at least fifty percent by weight is soap, forty to fifty-five percent water-insoluble structurant including starch with a particle size of between 0.2 to 30 micrometres and eight to fifteen percent by weight water.

The plaintiff alleged that the defendants, having had access to the specification since its notification after acceptance on 15th February 1992, had wrongfully and illegally copied and reproduced the composition of Patent No. 170171 in manufacturing VIGIL soap and that the defendants had deliberately suppressed the Total Fatty Matter content on the product wrapper in order to conceal the low TFM character of the soap, which was precisely the subject of the plaintiff’s patent. The plaintiff contended that compensation in money would not afford adequate relief and that its loss was irreparable.

The first defendant, in opposition, contended that it had been manufacturing and selling VIGIL soap since 1987 and had been marketing a variant with a “Pink” label since November 1991 and that the soap was distributed nationally through a network of approximately two thousand stockists. The first defendant further contended that the alleged invention was a mere admixture not constituting a patentable invention within the meaning of Section 3(e) of the Patents Act, 1970 and that the patent was a recent one whose validity had not been established in any legal proceeding, with a challenge to the Deputy Controller’s order pending before the Bombay High Court in Misc. Petition No. 24 of 1993. The first defendant also disputed the accuracy of the plaintiff’s analysis reports, pointing to discrepancies between references to “water insoluble matter,” “matter insoluble,” and “alcoholic insoluble” matter across the different reports and denied that the analysis established the presence of water-insoluble particulate structurant as specified in the patent claims. The second defendant additionally raised the plea of forum inconveniens, contending that the appropriate forum was Bombay, where the registered offices of the parties, the patent office and the pending appeal were all located.

The procedural history before the Court is as follows. On 12th July 1993, a learned Judge of the Calcutta High Court granted an interim order in terms of prayer (c) restraining the defendants from manufacturing, selling, marketing or advertising VIGIL soap with the words “ALL NEW” and “THE LONGER LASTING SOAP” which utilised the composition of the plaintiff’s patent. On 21st July 1993, this order was modified to permit the defendants to sell soaps on which the TFM percentage was mentioned, subject to a prohibition on selling any soap infringing the composition of the plaintiff’s patent. Two appeals were filed by the defendants and the Appellate Court set aside both orders and declined to grant temporary injunction, while directing the defendants to maintain separate monthly accounts of manufacture and sale of the impugned product and to furnish statements to the plaintiff’s Advocate-on-Record. Against the Appellate Court’s order, a Special Leave Petition being SLP (Civil) No.(S) 13082/93 was filed before the Supreme Court. The Supreme Court declined to interfere with the Division Bench’s interim order but requested the trial Judge to dispose of the petition within three months and provided that if the petition was not so disposed of, the further continuance of the interim order would fall to be reconsidered by the trial court on the basis of the affidavits on record, uninfluenced by observations of the Division Bench. The matter thereafter came before the Court for final disposal of the petition for temporary injunction, which is the subject of the present order.

ISSUES FOR DETERMINATION

1. The Court was required to determine whether the plaintiff had established a prima facie case for the grant of an interlocutory injunction, which encompassed the question of whether, under Indian law, the mere grant and sealing of a patent gives rise to a presumption of its validity and whether the plaintiff’s patent was prima facie valid.
2. The Court was required to determine whether there was prima facie evidence of infringement of Patent No. 170171 by the defendants through the composition of the VIGIL soap, having regard to the conflicting expert evidence on record, the discrepancies in the analysis reports and the respondents’ Gillette defence, namely, that the alleged infringement was not novel at the date of the patent.
3. The Court was required to determine whether the balance of convenience and inconvenience favoured the grant or refusal of interlocutory injunction, taking into account the plaintiff’s non-exploitation of the patent, the defendants’ established trade in VIGIL soap and the nature and quantifiability of the alleged damage.
4. The Court was required to consider whether the plea of forum inconveniens raised by the second defendant warranted examination at the interlocutory stage.

KEY HOLDINGS OF THE COURT

1. on the question of prima facie validity of the patent, the Court held that under Indian law, as settled by the Supreme Court in Bishwanath Prasad Radhey Shyam v. H.M. Industries, there is no presumption in favour of the validity of a patent arising from the mere grant or sealing thereof and that this position is now expressly provided in Section 13(4) of the Patents Act, 1970. The Court further held that, in consequence, the ratio of the House of Lords decision in American Cyanamid Company v. Ethicon Limited that the grant of a patent in modern times constitutes good prima facie reason for supposing the patent to be valid cannot govern the field of Indian patent law. The plaintiff’s contention that the grant of its patent demonstrated prima facie validity was accordingly not accepted. The Court additionally noted the established position in pre-American Cyanamid Indian jurisprudence, reflected in the Division Bench decision of the Calcutta High Court in Boots Pure Drug Co. (India) Ltd. v. May and Baker Ltd. and the Delhi High Court’s Division Bench ruling in Niky Tasha India Pvt. Ltd. v. Faridabad Gas Gadgets Pvt. Ltd., that where a patent is new and its validity has not been established and there is a serious challenge to its validity, no interlocutory injunction ought to be granted.
2. on the question of prima facie infringement, the Court found that the Gillette defence had been properly pleaded by the respondents specifically, the contention that the composition claimed in the plaintiff’s patent was not novel at the date of the patent, there being a prior United States Patent No. 2438169 dated 23rd March 1948, whose basic compositional pattern the Court found to be more or less the same as the plaintiff’s patent, though the percentages were not identical. The Court observed that a mere arrangement or rearrangement of known devices each functioning independently in a known way is not prima facie an invention under Section 3 of the Patents Act, 1970. Having regard to the conflicting expert evidence, the respondents’ denial of the analysis reports and the Gillette plea, the Court did not find a conclusive prima facie case of infringement established on the materials before it.
3. on the balance of convenience, the Court held that the balance of convenience did not definitively favour the grant of interlocutory injunction. The Court noted that the plaintiff had not yet exploited the patent, so there was no question of loss of employment or fall in revenue. Additionally, the Court observed that in the plaint itself the plaintiff had averred that the damage suffered could be provisionally quantified, which implied that there was some basis for assessment of damages and that it could not therefore be said that the damage was entirely incapable of pecuniary assessment.
4. on the plea of forum inconveniens, the Court held that it was not appropriate to examine this plea at the interlocutory stage, since entertaining it would prevent compliance with the Supreme Court’s direction and the plea had not been raised before the Supreme Court when that opportunity was available.
5. on the operative order, the Court dismissed the petition for temporary injunction on contest. However, the Court directed the defendants to maintain monthly accounts of the sales of VIGIL soap, to furnish the same to the Court and to provide a copy to the plaintiff on a quarterly basis until the disposal of the suit, with the first statement of accounts to be filed by 30th June 1996.

STATUTORY PROVISIONS INVOLVED

Section 13(4) of the Patents Act, 1970 provides, as noted in the judgment, that the grant of a patent does not guarantee its validity. The Court applied this provision to hold that the mere grant and sealing of Patent No. 170171 did not give rise to any presumption of validity in favour of the plaintiff and that the validity of the patent remained open to challenge before the High Court in revocation or infringement proceedings. This provision was central to the Court’s rejection of the plaintiff’s reliance on the American Cyanamid principle of presumptive validity.

Section 27 of the Patents Act, 1970 was referred to in the context of the opposition proceedings initiated by the first defendant before the Deputy Controller of Patents, Bombay, against Patent Application No. 275/BOM/88. The Deputy Controller’s disposal of those proceedings and the direction to proceed to sealing formed part of the procedural history of the patent’s grant and the challenge to that order was pending before the Bombay High Court.

Section 48 of the Patents Act, 1970 was the subject of textual analysis by both learned counsel. This provision confers upon the patentee the exclusive right to use the patented invention. The Court noted the substitution of the expression “exclusive privilege” used in Section 12(1) of the Indian Patents and Designs Act, 1911 with the expression “exclusive right” in Section 48 of the 1970 Act and recorded submissions on whether this change affected the nature of the patentee’s entitlement. This analysis was relevant to the framing of the plaintiff’s claim but did not determine the outcome of the interlocutory application.

Section 3(e) of the Patents Act, 1970 was referred to in connection with the first defendant’s contention that the plaintiff’s claimed invention was a mere admixture of known substances and did not constitute a patentable invention. The Court noted this contention in the context of the Gillette defence analysis and its observation that a mere arrangement or rearrangement of known devices functioning independently in a known way is not prima facie an invention.

REASONING OF THE COURT

The Court’s reasoning proceeded through three principal steps corresponding to the established conditions for interlocutory injunction in patent cases: prima facie validity of the patent, prima facie infringement and balance of convenience.

1. The Court undertook a careful comparative analysis of the English and Indian legal positions on the presumption of validity arising from patent grant. The Court acknowledged the transformation wrought by American Cyanamid, which overruled the older English rule in Smith v. Grigg that a mere challenge at the bar was sufficient to defeat an interlocutory injunction application in respect of a new patent. Under American Cyanamid, Lord Diplock had held that the elaborate modern procedure for examination and opposition before grant made the grant itself a good prima facie reason to suppose a patent valid. However, the Court found this principle inapplicable in India by reason of a binding Supreme Court pronouncement. In Bishwanath Prasad Radhey Shyam v. H.M. Industries, the Supreme Court had expressly held that the grant and sealing of a patent and the decision of the Controller in opposition, do not guarantee validity and that this is now positively enacted in Section 13(4) of the Patents Act, 1970. The Court held that this Supreme Court dictum “clearly spells out the law in India on the point,” with the consequence that the American Cyanamid principle of presumptive validity from grant cannot operate in the Indian legal system. The plaintiff’s argument that its patent was prima facie valid by virtue of having been granted was accordingly rejected.
2. Concerning infringement, the Court examined the competing analyses and expert opinions placed on record. The plaintiff had produced analysis reports and expert affidavits purporting to establish that the composition of VIGIL soap fell within the claims of Patent No. 170171. The defendants countered with an expert affidavit from Dr. V.V.R. Subrahmanyam asserting that the technology of making detergent bars with varying proportions of soap, non-soap detergent, water-insoluble fillers including starch and varying moisture ranges by plodding was not new but was state-of-the-art technology. The defendants further highlighted discrepancies in the plaintiff’s analysis reports, pointing out that three different reports variously referred to “insoluble matter of alcohol,” “matter insoluble,” and “alcoholic insoluble,” whereas the patent specification used the term “water insoluble particulate structurant.” The Court noted that the first defendant had not produced its own chemical analysis of VIGIL soap’s composition, choosing instead to rely on the Gillette defence. The Gillette defence, as explained in Gillette Safety Razor Co. v. Anglo-American Trading Co. Ltd., proceeds on the basis that where what the defendant is doing was already in the public domain before the priority date of the patent, the defendant must succeed either on the ground that the patent is invalid for want of novelty or on the ground of non-infringement. The Court found that the Gillette plea had been properly pleaded. It then examined a comparative table of the plaintiff’s Patent No. 170171 and the prior United States Patent No. 2438169 of 1948 and observed that the basic compositional pattern of the two was “more or less the same,” though the percentages were not identical. Against this background, the Court applied the principle that a mere arrangement or rearrangement of known devices each functioning independently in a known way is not prima facie an invention under Section 3 of the Patents Act, 1970. The combination of contested expert evidence and the Gillette plea rendered a finding of clear prima facie infringement unavailable.
3. The balance of convenience, the Court reasoned that since the plaintiff had not yet exploited the patent commercially, there was no existing business, employment or revenue stream of the plaintiff that an injunction could be said to protect. More significantly, the plaintiff had itself averred in its plaint that the damage suffered could be “provisionally quantified,” which the Court took as an implicit concession that a monetary measure of loss was available, thereby militating against the proposition that the damage was irreparable and incapable of being adequately compensated by an award of damages at trial.
4. Finally, on forum inconveniens, the Court declined to examine the merits of the plea at this stage, holding that to do so would undermine compliance with the Supreme Court’s direction that the trial court dispose of the petition and noting that the plea had not been raised before the Supreme Court when the SLP was heard.

DOCTRINAL SIGNIFICANCE

This judgment makes a specific and considered contribution to Indian patent law on the question of the presumption of validity in interlocutory injunction proceedings. The Court’s most significant holding is its clear affirmation that the principle established in American Cyanamid that the grant of a patent in the modern era constitutes good prima facie evidence of validity does not apply in India. The Court grounded this conclusion firmly in the Supreme Court’s pronouncement in Bishwanath Prasad Radhey Shyam v. H.M. Industries and in the express statutory provision of Section 13(4) of the Patents Act, 1970. This is a distinction of practical importance for patent litigation in India: unlike in England post-American Cyanamid, an Indian patentee seeking interlocutory injunction cannot rely on the fact of grant as establishing prima facie validity; it must independently demonstrate such validity having regard to the challenge raised.

The judgment also represents a relatively early Indian judicial treatment of the Gillette defence in a patent infringement context. The Court’s observation that Narayanan’s treatise had noted the absence of Indian precedent on the Gillette defence at the time of writing and the Court’s own willingness to engage with and apply the defence on the facts, marks the case as an early instance of the Gillette plea being seriously considered at the interlocutory stage in Indian patent litigation.

The case must, however, be read as a single-judge interlocutory order declining to grant temporary injunction on the specific facts before the Court, including the newness of the patent, the pending challenge to its validity in the Bombay High Court, the non-exploitation of the patent by the plaintiff, the conflicting expert evidence on infringement and the provisional quantifiability of damages. Its significance is accordingly confined to the propositions described above and must not be read as a final adjudication on the validity or infringement of the patent in question.

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