JINDAL MOOT COURT COMPETITION CASE 2017

Dates: 24th to 26th March, 2017

Venue: O.P. Jindal Global University

Email: jindalmoot@jgu.edu.in with a CC to cs.jgls@jgu.edu.in

 Before the Grand Panchayat of Mogamboland
A. Introduction

1. The following problem is set in the fictional Republic of Mogamboland, whose laws and
international treaty obligations are in pari materia with that of the Republic of India. While
the judicial decisions of India and other common law countries have persuasive value
before the Courts of Mogamboland, these judicial decisions are not binding on the courts
or administrative authorities of Mogamboland.

2. The Grand Panchayat of Mogamboland is the apex court of the Republic of Mogamboland
equivalent to the Supreme Court of India.

3. The High Court of Mogamboland is equivalent to High Courts in the Republic of India.
The Competition Commission of Mogamboland is equivalent to the Competition
Commission of India. The Patent Office of Mogamboland is equivalent to the Indian
Patent Office.

B. Facts & Backgrounds

4. Hannibal Inc. is a leading telecommunications company incorporated in a fictional foreign

country called Republic of Bates. It has been responsible for path breaking innovation
which has revolutionised the global telecommunication industry. Particularly impressive is
its development of a technology that vastly increases the quality of VoIP (Voice over
internet protocol) calls made through smartphones. Hannibal files a patent application for
this technology in June, 2009. This patent application was allowed in January, 2012 after
due examination by the Patent Office and Hannibal was granted a patent bearing no. 22245.

5. The invention covered by 22245 was recognised as an essential standard for smartphones
in June 2012 by the national technical standard setting authority of Mogamboland.
Although there is no legal requirement for smartphone manufacturers to incorporate this
standard, past market behaviour has indicated that once a technology is declared an
essential standard it is very difficult for any manufacturer to survive in the market without
licensing the patent declared a standard although there exists a possibility to circumvent
the patent through innovation.

6. Hannibal also owned another patent for a new hardware component. This was patent no.
21345 and was granted in September, 2008. While there were significant advantages to
using the invention covered by patent no. 21345, this technology was not adopted as a
standard by either the regulator or the industry.

7. Mogamboland is a developing country with a small but growing market for low cost smart
phones. As per the govt. statistics, smartphones constitute around 25% of the market while
regular phones are around 75% of the market. The smartphone market is growing at an
average of 20% per year while the regular phone market is growing at only 5% per year. In
 a policy document put out by the government, it clearly states that it is in public interest
for smartphones to be reasonably priced.

8. The three biggest domestic manufacturers for smartphones in Mogamboland are Sher
Khan Pvt. Ltd., Gabbar Pvt. Ltd. & Loin Pvt. Ltd – the market for smartphones is almost
equally divided between all three companies. All three companies were using the invention
covered by Hannibal’s patent number 22245 in their smartphones since 2010 when
Hannibal’s patent application was first made public.

9. Soon as Hannibal was granted patent no. 22245 in January 2012, it issued legal notices to
Sher Khan, Gabbar & Loin informing them that they were required to pay royalties
amounting to 5% of the price of the end product. In response to the legal notices, Sher
Khan, Gabbar and Loin, made individual counter-offers in confidential negotiations at
0.5%, 0.8% & 1% of the price of the smartphone in which the invention was incorporated.
In negotiations neither party could agree on a reasonable rate of royalty.

C. The legal proceedings between Hannibal & Sher Khan

10. Finally in March, 2015 after several rounds of failed negotiations, Hannibal filed a patent
infringement lawsuit against Sher Khan alleging a violation of its patent no. 22245.

11. As a part of its legal strategy, the only remedy sought by Hannibal was a permanent
injunction. It did not seek damages. While conceding on the issue of patent infringement
and patent validity (because it wanted a speedy resolution to the dispute for business
reasons) Sher Khan argued before the High Court that patent no. 22245 was a ‘Standard
Essential Patent’ (SEP) and that the grant of an injunction in such a case would have an
anti-competitive effect. In particular Sher Khan argues that although it could manufacture
smartphones if it was restrained from using patent no. 22245, there would be no market
for the same because the functionality of the invention covered by 22245 was required by
most smartphone consumers. Sher Khan thus requested the Court to only determine a
reasonable royalty rate for patent no. 22245 for future licensing.

12. After considering arguments from both sides, the High Court granted Hannibal a
permanent injunction in January, 2016. The High Court reasoned that the Patents Act did
not require it to assess the possible anti-competitive effects of an injunction and that only
the Competition Commission of Mogamboland (CCM) had the jurisdiction to adjudicate
on issues covered under the Competition Act. The court further ruled that under the
Patents Act, it was the patentee’s prerogative to seek the kind of remedy that it saw fit. As
a result, the High Court granted a permanent injunction on 15th March, 2016 restraining
Sher Khan from infringing patent no. 22245. There was no award of damages.

13. In March, 2015 soon after Sher Khan was sued by Hannibal for patent infringement, the
former filed a complaint with the CCM alleging an abuse of dominant position by Hannibal.
The specific allegation against Hannibal was that patent no. 22245 was a standard essential
patent and by seeking unreasonable royalties, Hannibal had abused its dominant position.
 14. After conducting an investigation and hearing both sides, the CCM pronounced its order
on 20th March, 2016. In its order, the CCM concluded that Hannibal had a dominant
position in the smartphone market and that it had abused its dominant position by claiming
unreasonable royalties for patent no. 22245.

15. Exercising its power under S. 27 of the Competition Act, the CCM fixed the royalty rate
for patent no. 22245 at 0.9% of the sale price of the smartphone in which the invention
was incorporated. This determination was based on expert witness evidence led by both
parties. Finally, the CCM also restrained Hannibal from enforcing the injunction granted
by the High Court on 15th March, 2016 and also from seeking injunctive relief against Sher
Khan in the future.

16. Thus while the High Court granted Hannibal an injunction, the CCM had restrained
Hannibal from enforcing the injunction or seeking injunctive relief in the future. And while
the High Court had declined to fix a royalty rate, the CCM had fixed a royalty rate at 0.9%.

17. Given the importance of the questions of law raised in this case, the High Court grants
leave to Sher Khan to file an appeal before the Grand Panchayat of Mogamboland.
Hannibal files an appeal against the CCM before the Grand Panchayat of Mogamboland
under Article. 136 of the Constitution so that both matters could be heard together.

D. The legal proceedings between Hannibal and Gabbar

18. On hearing of the patent infringement lawsuit against Sher Khan and fearing a similar
lawsuit, Gabbar immediately signs a patent licensing agreement with Hannibal in April
2015. This licensing agreement fixes the royalty rate for patent no. 22245 at 5% of the
smartphone’s selling price. Hannibal also pressurises Gabbar to licence patent no. 21345
as part of the licensing deal. Hannibal makes it clear to Gabbar that it has to licence both
technologies failing which it can have neither. Therefore Gabbar reluctantly agrees to
jointly licence both patents at 6% of the smartphone price. Other terms of this patent
licence included a clause where Gabbar agrees to not challenge the validity of the patents
that it has licensed and also a clause requiring Gabbar to waive its rights under Section
84(2) of the Patents Act.

19. After agreeing to and signing the patent licensing agreement, Gabbar goes ahead and files
an application, in June 2015, for a compulsory license (CL) under Section 84 of the Patents
Act despite having contractually waiving its right to do so under Section 84(2). It argues
that the clause waiving of S. 84(2) in the patent licensing agreement is void under Section
23 of the Contracts Act.

20. Gabbar raises two specific points in its CL application. First, it argues that a 5% royalty
rate being charged by Hannibal for patent no. 22245 is extremely high and will make
smartphones very expensive for the Indian market (when calculated vis-à-vis per capita
income) thereby fulfilling the criteria laid down in Section 84(b) of the Patents Act. Second,
it argues that because Hannibal has failed to fulfil the reasonable requirements of the public
because it has violated the provisions contained in Section 84(7)(c) of the Patents Act.
 21. In response Hannibal argues that a voluntary waiver of Section 84(2) cannot be declared
void by the Patent Office under Section 23 of the Contracts Act, 1872.

22. The Patent Office, after considering the law and facts issues an order in June, 2016
dismissing Gabbar’s application for a CL, on the grounds that the contract between
Hannibal and Gabbar was valid under the law and that the clause waiving Section 84(2)
was valid in the eyes of the law because it was voluntary.

23. Gabbar files an appeal against this order of the Patent Office before the Grand Panchayat
of Mogamboland.

E. Legal proceedings between Hannibal and Loin

24. After several failed rounds of negotiations between Hannibal and Loin, the former files a
patent infringement lawsuit against the latter in April, 2015 before the High Court. The
patent in question is 22245. Like in the lawsuit against Sher Khan, Hannibal prayed for
only injunctive relief and not damages.

25. Loin raised two arguments in its defence. It first argued that Hannibal had failed to disclose
the extent to which it had worked its patent as required by S. 146 of the Patents Act. It
provided incontrovertible evidence that Hannibal had consistently failed to file the
‘statement of working’ required under S. 146 of the Patents Act. Loin argued that the
failure by Hannibal to disclose these essential ‘statements of working’ was inequitable and
that such non-disclosure disqualified Hannibal from seeking injunctive relief.

26. Hannibal responded by immediately disclosing the information required under S. 146 and
also by arguing that the Patents Act clearly specified a penalty for not disclosing the
information required by S. 146 and that it is prepared to pay the penalty if required.

27. After considering arguments from both sides the High Court in an order dated April, 2016
declines to grant an injunction on the grounds that Hannibal’s conduct in suppressing
information required under S. 146 was inequitable. The suit if thereafter dismissed.

28. Given the importance of the questions of law raised in this case, the High Court grants
leave to both Hannibal and Loin to file an appeal before the Grand Panchayat of
Mogamboland.

F. Question of law in appeals before the Grand Panchayat of Mogamboland

29. Given the significance of the questions of law raised in the above cases, the appeals filed
by all of the parties are admitted by the Grand Panchayat of Mogamboland. Given the
extraordinary circumstances of these cases, the Grand Panchayat informs the parties that
it will conduct a de novo hearing on the following questions of law i.e. it is open to
considering new arguments not raised before the lower courts or administrative authorities:
(a) In the case of Hannibal v. Sher Khan did the High Court commit an error in law, by
not considering the possible anti-competitive effects of granting Hannibal an
injunction that restrained Sher Khan from infringing a standard essential patent?

(b) In Sher Khan v. Hannibal, did the CCM err in its conclusion that it has the power
under Section 27 of the Competition Act to restrain Hannibal from seeking injunctive
relief before a High Court? Similarly did the CCM commit an error while determining
that it has the power to restrain Hannibal from enforcing the injunction already granted
to it by the High Court, on the ground that the grant of an injunction as a remedy is
anti-competitive?

(c) In Sher Khan v. Hannibal, did the CCM have the power to set the reasonable rate of
royalty for a standard essential patent in the case where Sher Khan complained that
the patentee is demanding an unreasonably high royalty OR does this power to fix a
reasonable rate of royalty vest only with the Patent Office under Section 84 OR does
that power lie with the High Court while determining damages in a patent infringement
lawsuit? Can all three forums simultaneously exercise this power to fix reasonable
royalties?

(d) In Gabbar v. Loin, did the Patent Office err in its determination that Section 84(2) of
the Patents Act can be contractually waived in a patent licensing agreement?

(e) In Hannibal v. Loin, did the High Court commit an error in law while denying
Hannibal an injunction on the grounds of inequitable conduct because of its failure to
file and disclose the statements of working required under Section 146 of the Patents
Act every year?

Preferred outcomes:

Sher Khan, Gabbar and Loin are putting together a joint defence through a single
law firm. Their joint goal is to ensure an outcome where all three forums i.e. the
High Court, the CCM and the Patent Office have the power to set the rate of
reasonable royalty of SEPs. They also want Questions (a) & (d) answered in the
affirmative.

Hannibal also wants to ensure that neither the Patent Office nor the CCM exercise
any jurisdiction in this particular dispute i.e. it wants the case to be litigated only
before the High Court. Hannibal also wants the complete and absolute power to
seek and enforce an injunction in cases of infringement of its SEPs because of its
belief that an injunction is the only effective relief to protect its investment in its
R&D. Hannibal also wants Questions (b) & (e) answered in the affirmative.