In CS(OS) 3775/2014, as we understand from multiple sources, Xiaomi has been injuncted from manufacturing its line of smart phones for it has been prima-facie found to be infringing on certain standard essential patents of Ericsson. Although the order is not uploaded as yet, we understand that the patents used against Xiaomi, by Ericsson, are the same essential patents on which Ericsson had also earlier filed an infringement suit against Micromax, not too long back ago. The question being examined is if it was actually necessary to issue the order ex-parte or whether a short date could have been given to Xiaomi to be served the plaint and summoned for the hearing. Also, we surely would expect Xiaomi to file an appeal to vacate the order quite soon.
We also understand from sources (such as Spicy IP) that the ex-parte order injuncts Xiaomi from selling, advertising, manufacturing or importing devices that infringe the SEPs in question. The judge also directed the Customs officials to stop the imports under the IPR Rules, 2007. Moreover, local commissioners have been appointed to visit Xiaomi officers to ensure the implementation of these orders. There are presumed to be around eight valid Ericsson declared standard patents in context, based on which interim injunction/Custom enforcement/IPR enforcement rules were also issued against Micromax. During the appeal in the Micromax case as well, it was argued by the counsel appearing for the appellant that there is no presumption in favour of a patent holder on the strength of a patent being registered, and had also urged that normally the rule of law is not to grant injunction when issues pertaining to violation of patents arises for consideration before the Courts for the reason damages would be a good measure. We earnestly believe the same to a very strong argument keeping in context that damages/accounting of profits can always be retrospectively granted/ordered to be paid for, and moreover to a company as huge as Ericsson, how can the loss be irreparable, as the same can always be regained even if the defendant is given an opportunity to present its arguments. Furthermore, even in the Micromax case (CS(OS) 442/2013)), if just within a span of around 10 days, an initial licensing arrangement could be agreed to between the parties (Ericsson and Micromax) through an initial royalty rate of 1.25% of sale price for GSM phones, 1.75% of sale price for GPRS + GSM phones, 2% of sale price for EDGE + GPRS + GSM phones, and 2% for WCDMA/HSPA, couldn't the same have been taken as a precedent and Xiaomi been ordered to start paying the same royalty instead of simply granting a blanket injunction against the company, which makes it even harder to impose on the existing set of products/devices out there in the market, and making it a hazy picture even for the current distributors/vendors/suppliers. In fact, in the same case (CS(OS) 442/2013)), a recent order on 12'th Nov 2014 further revised/lowered the royalty rates, which would be applicable retrospectively from the date of the suit, wherein the rates have now come down to .8% for GSM and GPRS and GSM devices, and around 1% for other devices. Furthermore, in the same very case, in the order of 14'th Oct 2014, the plaintiff (Ericsson) agreed to produce six agreements with different operators containing the terms and conditions, in a sealed cover, which according to them are somewhat similarly placed as the current Defendant company. The question in context that comes in mind is then why couldn't a similar arrangement been asked for, having already had such a strong precedent, wherein the same plaintiff (Ericsson) could have been asked to submit agreements/arrangements with few other similar Indian parties, and then an initial royalty rate could have been imposed on Xiaomi till the next hearing.
Having seen a growing number of ex-parte interim injunctions being issued by the High Courts, it gives visibility to a disturbed atmosphere where no opportunity whatsoever is being given to the Defendant to make an argument and try to arrive at a settlement, and instead a strong push back is created against the Defendant that makes it much harder for them to file an appeal, get the interim vacated, and in the meanwhile, although for a short period, comply with the harsh interim orders, which may have a long term impact on its hard-built reputation/sales, all especially in cases where the only injury to the plaintiff is monetary in nature and not actual products/services/customers being disturbed. We earnestly hope that the Micromax case could have been taken as a strong precedent and anticipating an appeal, a higher royalty rate could have been imposed.
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