Novenco v. Xero: Do IP Cases Get a Free Pass to Bypass Sec 12-A?
Yogesh Byadwal
The recent decision of the SC in Novenco Building and Industry v. Xero Energy Engineering seems to have been well taken. Comments online have showered praised over the decision for striking the right balance between procedural lapse and substantive justice. Writing on this blog for over 2 years now, I have learnt one important lesson- the outcome must never shift one’s focus away from the reasoning.
To gauge how much off the mark reasoning in this judgement was, please read this- “the public interest element, need to prevent confusion in the market and to protect consumers from deception further imparts a colour of immediacy to the reliefs.”
Using the language of confusion and deception in a patent infringement case is not the only thing wrong with this statement. This also displays a very flawed presumption- that the urgency of relief is equal for all spokes in the IP wheel- copyright, patent, TM, TS, Designs, GI etc. I elaborate on this in later sections.
This post, thus, throws the light back on the reasoning used to reach the so-called balance and how it was applied to reach the conclusions.
Tracing the (Confusing) Facts
The facts of the case, to say the least, are confusing. For detailed facts, refer here. The parties, in 2017, had entered into a dealership agreement for marketing and sale of Novenco’s fans. Novenco had two registered patents (IN 312464 and IN 400863) as well as a registered design (246293) over the Fan. In July 2022, however, the arrangement broke down- the Defendant, along with a third entity, had started manufacturing competing fans which, according to the plaint, were “identical and had deceptively similar name and appearance.”
Here is my first doubt. Novenco has a registered TM ‘Zerax’ (TM. No. 3541053) under classes 7 and 11 which relates to Fans. If the Defendants were selling industrial fans under the name ‘Novenco Zerax” (brand name of Novenco’s industrial fans), why did the Plaintiff not allege infringement of their registered trademark? As of writing this post, TM no. 3541053 is a valid and subsisting on the TM register. There is no mention of the registered TM in either the HC judgements (SB and Appeal) as well as the SC. Without a doubt, adding that Novenco’s TM, in addition to Patents and Design, was being infringed would have made it easier to make out a case for urgency.
Now comes the second confusion. It is mentioned in the Plaint that after discovering infringing good were being manufactured and sold in July 2022, Novenco kept sending clarifications till 14 October, 2022. After a lapse of two months, on 23.12.2022, Novenco sent a cease-and-desist notice to the Defendant. Then, a year later, on 06.12.2023, it appoints a technical expert to inspect the Defendant’s fan and confirm infringement of both patents and design.
Two questions- First, why did Novenco send a cease-and-desist without first confirming infringement relying on a technical expert? Patent infringement, as opposed to TM and Design, is never apparent from mere appearance. Was the cease-and-desist letter a mere threat tactic? Conversely, if it was clear that they were using their trademark, why was this not raised here? I’ve not seen the cease and desist notice but this assumption seems fair since it doesn’t seem to have been raised at any later point.
Second, why did Novenco wait for a whole year (23.12.2022 to 06.12.2023) to finally get the infringement verified from a technical expert? Let’s not forget that even after verifying the infringement, Novenco again waited six months to institute the suit for infringement. (June, 2024) It raises a very simple but relevant question- what was the urgency now to bypass mediation u/s. 12A? The implications of prolonged delay in filing infringement suits is something I elaborate on in the last section. But surely, an unexplained delay of over year could be relied on to infer that there is no urgency in the relief sought, IP-related or not.
HP HC: Urgency not inherent in IP suits
Both the SB and appeal order of the Himachal Pradesh HC had rejected the plaint under Order 7 Rule 11 for not complying with Section 12-A under CCA. The reason was simple- that the Plaint could not explain the delay of nearly six month in filing the suit (from December 2023 to June 2024) Another reason offered by the Appeal order was that the Plaintiff, instead of filing a suit, chose to issue a cease-and-desist letter. It drew inference from the conduct of the Plaintiff to deny exemption u/s. 12-A.
However, the most notable finding of the appeal order can be found in Para 26- “The CC Act does not draw a distinction or provide for a different procedure relating to infringement of “trade mark” or “copy right” cases.” In essence, while deciding whether the suit contemplates urgent relief or not, it is irrelevant whether the suit or application is IP-related or not.
SC- ‘Mere’ Delay?
The SC held that in cases of continuous infringement, urgency is inherent. In such cases mere delay or time-lag does not negate the plea of urgency. (to reject delay as a ground, it relied on Midas Hygiene Industries v. Sudhir Bhatia)
There is no mention of the unexplained gaps in the timeline before institution of the suit. With due respect, this was not case where there was “mere” delay. The cause of action arose on July 2022 when infringing articles were discovered by Novenco. It took two years for Novenco to eventually institute the suit!
Even in cases involving continuous and recurrent cause of action, the delay in institution of the suit is counted from the date when cause of action arose. The approach is different for applications seeking temporary relief (such as injunctions)- delay is counted from when the cause of action last arose. This distinction, however, is lost in this case.
Seen this way, ‘mere’ delay is gross understatement in this case.
Further, the timeline before institution of suit had unexplained delays. The issue was not limitation but rather the conduct of the Plaintiff themselves- waiting for nearly two years before deciding to file a suit for infringement. The conduct per se does not demonstrate any urgency of relief.
If this remains the position, as I highlight in later sections, there is great potential for misuse.
Potential of Misuse
The SC has not mentioned how much delay should be condoned before granting exemption from pre-suit mediation in cases of continuous infringement. What could this mean?
A TM owner could, despite knowledge of recurring infringement, may choose not to file a suit immediately. Rather, he may opt to file the suit after the Defendant has established his business and thereafter put it to a complete stop. In Power Control Appliances v. Sumeet Machines, the SC had observed – “where a trader allows a rival trader to expend money over a considerable period in the building up of a business with the aid of a mark similar to his own he will not be allowed to stop his rival’s business.”
Although the ground of acquiescence is available, the same is available only after five years of continuous use despite knowledge. The SC ruling, thus, could allow such a TM owner to bypass the mediation requirement and secure an injunction. My fear is further substantiated by the fact that the SC failed to account for the fact that the Plaintiff had an unexplained delay of over two years before choosing to file a suit.
Uniform Standard of Urgency?
As I highlighted in the initial paras, the judgements conflates the standard of urgency for all cases of IP- irrespective of whether it implicates TM, Copyright or Patents.
With due respect, to my mind, these observations are unwarranted as well as erroneous.
Why unwarranted? This was a case relating to Patent and design infringement, not trademark. Trademark infringement, as opposed to Patents and Design, directly implicate public interest since it may lead to confusion as to the identity goods. The question of deception and confusion (as mentioned in the judgement) is quite different if a patent or design is infringed. There is no immediate harm to public interest in terms of consumer confusion. Arguably, it may have an impact on innovation. But that is not the discussion going on here.
The question of public interest getting implicated in a case relating to infringement of industrial fans, frankly, does not make sense to me.
Why erroneous? To have a generalised standard of urgency of all cases relating to IP, be it Patents, Copyright, Designs, Trademark, is without basis. Can one case relating to patent infringement of an Essential Drug have the same level of public interest involved as industrial fans? Urgency has to ascertained from the facts of each case. All cases falling under the umbrella cannot be brushed under the same hue of public interest.
The holding will allow for most IP cases to bypass the requirements of Sec. 12A notwithstanding the conduct of the Plaintiff in filing the suit after a prolonged period. This could not have been the intention of the legislature.
Resolving Divergence
Without going into merits, the Court seems to have resolved an emerging divergence in jurisprudence. One strand of emerging jurisprudence from DHC (here, here and here), BHC (here and here) and Telangana HC (here) was holding that urgency was ipso facto contemplated in IP suits involving continuous and recurring infringement. On the other hand, Calcutta HC (here, here, and here) had held that there is no presumption of urgency of relief in IP cases and the same will tested on touchstone of when the cause of action arose.
As evident, the SC has resolved this divergence in favor of the first approach i.e. IP cases, particularly involving recurrent and continuous infringement, make out a case of urgent notwithstanding the delay in filing the suit.
But, as said in the beginning, can reasoning be sacrificed at the altar of desirable conclusions? I leave it to the readers to decide.
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