CASE SUMMARY: INTERDIGITAL TECHNOLOGY CORPORATION & ORS. VS. XIAOMI CORPORATION & ORS., DELHI HIGH COURT, 16 TH DECEMBER, 2020
Case number: CS(COMM)-296/2020
Interdigital, the plaintiff filed suit against Xiaomi, alleging infringement of patent by utilizing SEPs without taking license from Interdigital. Interdigital claims remedy against Xiaomi in form of permanent injunction or by obtaining license for use of SEPs belonging to Interdigital. Interdigital had licensed its SEPs to third parties and invited Xiaomi also for getting such license. Interdigital rejected the rate proposed by Xiaomi for not confirming to FRAND (fair, reasonable and non-discriminatory) parameters. Xiaomi, the defendant needs information regarding the identity of the third-party licensee, the exact area and scope of the license granted to such licensee, etc. which can be received from comparable license agreements. It is required by the defendant for the purpose of assessment of royalty rate in terms of being FRAND. In response to that, Interdigital advances a royalty rate but denies Xiaomi, the access to comparable license agreements for the reason that such agreement consist of confidential data and trade secret which cannot be divulged to Xiaomi, a competitor. Thus, Interdigital suggests that after getting permission from court, form a confidential club where information would be shared at two tiers. The documents, reserved for Legal Eyes Only (LEO), falling under the inner tier would be accessible only to the technical experts, ex-house advocates and attorneys of Xiaomi and not to the employees, officers of Xiaomi. This implies that advocates and technical experts of Xiaomi, without taking any suggestions from its employees, would negotiate the amount of royalty rate on the basis of third-party licensing agreements, keeping in mind that such rates confirm to the FRAND criteria and are appropriately beneficial to their client.
Whether the abovementioned arrangement of the two-tier confidentiality club is valid.
License agreements contain confidential information, crucial for business of Interdigital and third parties. Allowing access of agreements to Xiaomi would breach the confidentiality agreement between Interdigital and third parties, thus damaging their future business deals permanently.
Relying on case of Transformative Learning Solutions Pvt Ltd. v. Pawajot Kaur Baweja, advocate from Interdigital argued that in cases of infringement of patents, some documents are of such nature which need not be brought to public domain. They are secured for eyes of experts who are legally bound to not divulge the information contained in them and hence, are not filed in courts. The court addressed this argument by prioritizing the need of the defendant to access such documents.
Courts in foreign jurisdictions have allowed such confidential clubs to resolve the patent infringement disputes. But, this court rejected this argument stating the difference in causes of action, pleadings and lack of bar of res judicata which arises from final order passed by foreign courts.
Interdigital is supporting its side by documents which aren’t made available to Xiaomi. Under Civil Procedure Code its mandatory completely disclose documents. This non-disclosure is in sheer violation of principles of natural justice, fair play and due process.
Royalty rates decided by nominated advocates only and not by Xiaomi, would not necessarily be FRAND and have adverse irreparable damage to business of Xiaomi.
Advocates act as an agent to the client. “The duty of advocates to act, at all times, under instructions from their clients, was also iterated by the Supreme Court in An Advocate v. B. B. Haradara and Om Prakash v. Suresh Kumar”.
The confidentiality club arrangement is not in conformity to Annexure F of Original Side Rules which provides that both parties should mutually decide to uphold confidentiality of their documents which support their case. Another way for fair balance of interests would be attained when only the technical experts, ex-house advocates, and attorneys of both parties can access such documents and not both the parties or their employees.
The court emphasized on the principles enshrined in Advocates Act, 1961 and related rules. The relationship between client and counsel is statutorily held to be sacred and inviolable. Such arrangement of confidential club is violative of Bar Council Rules. Reliance on case of Himalayan Coop. Housing Group Society. Thus, counsel should not keep unrevealed information from his/her client. Elimination of the client from accessing the inner tier documents but enabling the advocate and attorney of that client to the same documents cannot be in correspondence to the law which directs an advocate while performing duty towards the client has to act by only following instructions of her/his client, regardless of advocate’s personal opinion about the case. Undoubtedly, if the access to any document is denied to the client, the objective of client-counsel relation would not be fulfilled.
Xiaomi needs to make an informed decision after availing the comparable licensing agreement, else it amounts to denial of fair opportunity. The fixation of FRAND rates is very crucial aspect for business of Xiaomi. Therefore, the court declared that nobody can be allowed to rely on documents, to which the other party has no access, and granting access to advocates and experts cannot substitute granting access to the parties themselves.
Participation of employees of Xiaomi is indispensable because if FRAND rates are not appropriately fixed, the business will incur irreparable losses.
Interdigital will have benefit of its most trusted in-house counsel whereas Xiaomi would have to rely on stranger ex-house counsels in such arrangement. This would be blatant injustice. Further, Interdigital cannot be allowed to redact the confidential data part out of the third- party licensing agreements as it is violation of natural justice.
The proposition of providing access only to its advocates and experts while denying Xiaomi to access them is absolutely unacceptable. The two-tier confidentiality club should be constituted only after both the parties to dispute give their consent. The court laid down that agreement, if any, between the parties to dispute will prevail over the judgment. Rather than two-tier confidential club a single-tier club should be constituted with conditions prescribed. The business interests of both the parties to dispute hold equal importance to impart justice.
*Submitted by: Khyati Sharma, Intern
As a part of Internship Under DPIIT, MCI Chair on Intellectual Property Rights & Centre for Intellectual Property Rights Research and Advocacy National Law School of India University, Bangalore.
Under: Jnana Teja Bandi, RA-IPR Chair