Issue XII : The “Bajaj Auto – TVS motors” patent controversy

Introduction

The “Bajaj Auto – TVS Motors” patent controversy erupted when Bajaj Auto Ltd. (“Bajaj”) sought and was granted an interlocutory injunction by the Madras High Court on February 16, 2008 restraining TVS Motor Co. Ltd. (“TVS”) from launching their 125 cc motorcycle under the trademark “Flame.” This stirred up the Indian two-wheeler industry; with the two parties being fierce competitors locked in a battle over the market share, and caught widespread media attention. TVS lodged an appeal before the Division Bench, and on May 18, 2009 the order of the Single Bench was overturned. Bajaj preferred an appeal before the Supreme Court, which while broadly affirming the decision of the Division Bench, vide its decision dated September 16, 2009 directed that TVS shall be entitled to sell its motorcycle ‘Flame,’ subject to an accurate record of all its domestic and international sales being maintained, and directed the Madras High Court to appoint a receiver for this purpose.

This Bulletin examines the “Bajaj Auto Ltd. vs. TVS Motors” case which is currently pending in the Madras High Court. It examines the circumstances in which the orders of the Single Bench and the Division Bench came to be passed. It finally analyzes the order and the directions passed by the Supreme Court and how it may impact the IPR litigation pending in the various courts in the country.

1.0 Facts of the case

On July 7, 2005, Bajaj was granted a patent1 with a priority date of July 16, 2002. The title of the patent application was “An improved Internal Combustion Engine working on four stroke principle.” The invention was called “DTS-i Technology” and it related to the use of twin spark plugs located diametrically opposite to each other in a small displacement engine with the cylinder bore diameter ranging between 45 mm to 70 mm. Per Bajaj, this placement of the spark plugs enabled a better control over the ignition timing and lesser time was taken for the flame to travel during the process of combustion. The novelty also lay in the use of a sleeve to protect the spark plug which prevented exposure of the plugs to the lubricating oil.

In 2003, Bajaj launched “Pulsar,” a motorcycle which employed the DTS-i Technology in respect of which the patent was then pending. In the first eight months of that financial year itself, Bajaj manufactured and marketed 814,393 two-wheelers with the “DTS-i Technology” out of a total of 1,501,241 two wheelers were sold by it, which amounted to 54.25% of its total sales.

In 2007, TVS announced the launch of a 125 cc motorcycle under the trademark “Flame” which was to be powered by lean burn internal combustion engine of bore size 54.5 mm with a twin spark plug configuration just like Bajaj. TVS also stated that on September 1 & 3, 2007, Bajaj had issued certain groundless threats to dissuade TVS from launching “Flame.” Hence in October 2007, TVS filed a suit under section 105 & 106 of the Act in the Madras High Court, alleging that the statements made by Bajaj on September 1 & 3, 2007 constituted groundless threats, and sought the intervention of the court to restrain Bajaj from interfering with the launch of “Flame.” Further, TVS also filed an application for the revocation of Bajaj’s patent before the Indian Patents Appellate Board under section 64 of the India Patents Act, 1970 (“Act”).

Upon the announcement by TVS, Bajaj filed a suit for permanent injunction under section 108 of the Act in the Madras High Court to restrain TVS from using the internal combustion technology patented by Bajaj and from employing the same in marketing 2/3 wheelers, including TVS’s proposed 125-cc “Flame” motorcycle.

2.0 Principles for the grant of an interlocutory injunction

The principles for the grant of an interlocutory injunction may be summarized as follows:

  • that the plaintiff must establish that it has a prima facie case, that its patent is valid and that its rights have been infringed;
  • that the balance of convenience is in favor of the plaintiff;
  • that the plaintiff would suffer irreparable loss and injury, if the interlocutory injunction, as sought, is not granted.

2.1 Order of the Single Bench of the Madras High Court

Vide its Order dated February 16, 2008, the Madras High Court restrained TVS from launching the proposed 125-cc Flame motorcycle with the twin spark plug engine technology, as Bajaj prima facie enjoyed the right of exclusive usage of the patent, granted to it by the Patent Office. The Madras High Court held that Bajaj had succeeded in establishing a prima facie case for the grant of an injunction, and while granting the injunction was pleased to observe:

“…. Suffice it to say now at this stage, prima facie there is novelty which means an invention and the same has been registered under the Patents Act… novelty has been on the face of it proved by the applicant by marketing the product to such a large extent and also without objection fairly for long…”

2.2 What constitutes “a prima facie case for the grant of an injunction”

For an invention to be patentable, it must satisfy the triple tests of novelty, non- obviousness and be capable of industrial application and exploitation. While considering the facts of the case, the court found that the invention satisfied the triple tests and was patentable.

The court was of the view that, upon the amendment of the Act in May, 2003, when a patentee files a suit for infringement based on the patent granted to him, the patent should be prima facie presumed to be valid, until the same is revoked or set aside under any of the grounds set out in the Act or in any other manner. The court was of the view that prior to the amendment, the patentee was conferred an exclusive right to use himself, through agents or licensees and also to exercise or sell or distribute the inventions in India. However, after the amendment, the patentee enjoys an exclusive right to prevent third parties from using or selling, or offering for sale etc.

On the question whether Bajaj’s invention involved an inventive step, the court was satisfied that the invention involved a technical advance as compared to the existing knowledge and that it had economic significance. The court was prima facie satisfied that the invention had found a special place in the Indian market and had established a significant market share.

The court found that even though Pulsar had been introduced in the market in 2003, TVS had for the first time raised an objection only on August 24, 2007, by which time Bajaj’s DTS-i technology based product had been sold in large numbers across the country. The Single Judge found that the petition for revocation of a patent granted to Bajaj had been filed a mere six days prior to the launch of Flame, and as such the conduct of TVS was not entirely bona fide. The court was of the view that till such time, TVS succeeded in its petition for revocation, the patent granted to Bajaj could not be viewed with suspicion, considering that it had been in existence for more than five years and as such the patentee Bajaj must be treated as an actual user and the presumption of the validity of its patent was thus established.

On the above basis, the court recorded its satisfaction that Bajaj had succeeded in establishing a prima facie case for the grant of an injunction. The court also recorded that having exploited the patent for five years, the patentee had a further period of fifteen years to exploit the patent, and hence the balance of convenience was also in its favor. Accordingly, the Madras High Court granted an interlocutory injunction in favor of Bajaj.

3.0 Order of the Division Bench in Appeal

Aggrieved by the Order of the Single Judge, TVS preferred an appeal before the Division Bench of the Madras High Court. The appellate bench of the Madras High Court held that Bajaj had not succeeded in establishing a “prima facie” case of infringement in respect of its patented twin spark technology. The Division Bench observed that having regard to the nature of operation of the DTS-i engine by virtue of twin spark plugs and that

of TVS by virtue of receipt of air fuel mixture through two different intake valves, their points of emphasis differed considerably, notwithstanding the use of twin spark plug in both the technologies. The Division Bench further observed that the operation of the invention as claimed by the Bajaj appears to be plug centric and that of TVS was valve centric, and on scrutiny of the claim as set out in the final complete specification it held that it found it difficult to countenance Bajaj’s claim that the TVS’s product specification infringed Bajaj’s patented right. Accordingly, the Division Bench set aside the order of the single bench.

4.0 Order of the Supreme Court

Aggrieved by the Order of the Division Bench, Bajaj preferred an appeal before the Supreme Court. The Supreme Court, while prima facie agreeing with the order of the Division Bench, ordered that although TVS shall be entitled to sell its motorcycle ‘Flame,’ but it shall maintain an accurate record of its entire domestic and international sale and directed the Madras High Court to appoint a receiver in this connection.

In its interim order, the Supreme Court reiterated that in matters relating to trademarks, copyright and patents, the provisions of the Code of Civil Procedure which mandate that civil disputes should be heard on a day to day basis without any adjournments, except in circumstances beyond the control of the parties. It also directed that the final judgment should be given normally within four months from the date of the filing of the suit. The Supreme Court directed that the timeline stipulated above be adhered to “punctually and faithfully” by all courts and tribunals in the country.

Conclusion

The most salutary effect of this case has been the guidelines passed by the Supreme Court directing that once the hearing of the suit has commenced, it shall be continued from day-to-day until all the witnesses in attendance have been examined, unless for exceptional reasons, an adjournment of the hearing beyond the following day is necessary. Only circumstances which are beyond the control of the parties would justify such an adjournment. The direction of the Supreme Court, seeks to enforce a provision2 under which, an adjournment on the ground that the pleader of a party is engaged in another court, shall not constitute a ground for an adjournment. This cause of adjournments is the biggest bane and obstacle in overcoming judicial delays, and if these guidelines are actually implemented by the courts and tribunal below, all IPR cases would have to be decided on a priority basis. This augurs well for the holder of IP rights in India and should be a heartening note for the international community while affording an opportunity for the restoration of faith in Indian judiciary.

Authored by:
Naresh Sahai Mathur

1 Indian Patent No. 195904

2 The proviso to Order XVII Rule (2) of the Code of Civil Procedure, 1908

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