TaxTMI 
TaxTMI 
2014 (2) TMI 703
X X X X Extracts X X X X
X X X X Extracts X X X X
....India and which are sought to be imported without the consent of the right holder or a person duly authorized to do so by the right holder. After the suspension, the Customs Authorities allow a right holder and the importer or their duly authorized representative to examine the goods, supply the information to the right holder as well as the importer and determine as to whether the goods are infringing the Intellectual Property Rights of the right holder. If on determination, it is found to be so, then such goods confiscated under Section 111(d) of the Act can be destroyed by the Customs Authorities after obtaining 'no objection' or concurrence of the right holder or his authorized representative. This is the gist and purport of the aforesaid Rules. 2. As far as Rule 7 is concerned, it deals with 'suspension of clearance of imported goods', detailed note whereof shall be taken along with other relevant Rules after stating the contextual facts of the case as that would provide better understanding. 3. The appellant herein is the registered owner of patents bearing Nos. 203036, 203034, 203686, 213723 and 234157 relating to certain models of G'Five brand of mobile phones a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t had submitted test report with respect to said models, duly verified by affidavits from an independent expert from the field of telecommunication. 5. On 30-3-2011, the Respondent No. 3 sent communication informing the appellant that M/s. Kingtech Electronics (India) Ltd. (Respondent No. 4 herein) had imported 1900 mobile phones vide Bill of Entry No. 2979282, dated 16-3-2011 which appears to infringe the said patents rights of the appellant and accordingly said consignment was suspended under Rule 7(1)(a) of the IPR Rules. The appellant was called upon to submit the requisite bond and security as prescribed under the said Rule, which the appellant furnished on 5-4-2011. The Respondent No. 3 vide another decision dated 30-3-2011 informed the Respondent No. 4 that since the models and brand of the mobile phones in the said consignment were the same which were infringing with the patent rights of the appellant herein, the release of the said consignment was suspended. Since this communication/suspension order is the bone of contention and validity thereof is the subject matter of judicial review, the same is reproduced below in entirety :- "Subject : Suspension of....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 7. Notice was issued both in writ petition and stay application. After notice, stay application was heard on 19-12-2011 and the learned Single Judge allowed the application thereby staying the operation of the impugned order and directed the Respondents Nos. 2 and 3 to release the consignment of the writ petitioner. 8. It would be pertinent to mention at this stage that the relevant IPR Rules including Rule 2(b) which defines "intellectual property" have already been reproduced above. Intellectual property covers trade mark, copyright, patent, design and geographical indications. The case set up by the Respondent Nos. 4 & 5 was that insofar as patent is concerned, the Deputy Commissioner was not the appropriate authority to determine as to whether the imported goods were infringing the intellectual patent rights of the right holder and therefore unless there was a stay order granted by civil competent Court, which is the only competent forum to decide such violations, there cannot be any order of suspension. This edifice was built on two pillars. Provisions of the Patents Act were relied upon to impress that registration of patent per se does not lead to any presumpti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arance of imported goods. 10. The learned single judge vide impugned judgment has found force in the aforesaid submissions of the Respondents Nos. 4 and 5 herein. Additionally, it has also been observed that Rule 7 stipulates that clearance of goods can be suspended only upon forming and believing that there is "reason to believe" that the goods in question infringed the patents of the right holder but the impugned order prima facie does not disclose on what basis the Dy. Commissioner of Customs entertained this belief. 11. Challenging this order of the learned Single Judge, present intra-court appeal is preferred by the appellant. 12. Mr. Jayant Bhushan, learned senior counsel argued on behalf of the appellant questioning the approach of the learned Single Judge in the impugned order. His submission was that Rule 2(b) of the IPR Rules which defined "intellectual property" specifically includes patent as well, as defined under the Patents Act. Thus, each form of the intellectual property whether it be Copy Right, Trade Mark, Patent Designs Act and Geographical Indications of Goods had to be given same treatment. It was argued that once under these Rules power was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In India the Grundnorm is the Indian Constitution, and the hierarchy is as follows : (i) The Constitution of India; (ii) Statutory law, which may be either law made by Parliament or by the State Legislature; (iii) Delegated legislation, which may be in the form of Rules made under the Statute, Regulations made under the Statute, etc.; (iv) Purely executive orders not made under any Statute. 35. If a law (norm) in a higher layer in the above hierarchy clashes with a law in a lower layer, the former will prevail. Hence a constitutional provision will prevail over all other laws, whether in a statute or in delegated legislation or in an executive order. The Constitution is the highest law of the land, and no law which is in conflict with it can survive. Since the law made by the legislature is in the second layer of the hierarchy, obviously it will be invalid if it is in conflict with a provision in the Constitution (except the Directive Principles which, by Article 37, have been expressly made non-enforceable). 36. The first decision laying down the principle that the Court has power to decl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f opposition, does not guarantee the validity of the patent, which can be challenged before the High Court on various grounds in revocation or infringement proceedings. It is pertinent to note that this position, viz. the validity of a patent is not guaranteed by the grant, is now expressly provided in Section 13(4) of the Patents Act, 1970. In the light of this principle, Mr. Mehta's argument that there is a presumption in favour of the validity of the patent, cannot be accepted" He thus submitted that there was no presumption to the validity of the patent even after registration which still has to be suspended independently and that can only be done in Civil Court. He contrasted the provisions of Section 104 of the Patents Act read with Section 31 of the Trade Marks Act which provision raises presumption about the validity of a registered trademark. His further submission was that before there could be suspension of the clearance of the imported goods on the ground that they are violating the patent rights of the right holder, two issues need to be addressed namely; (a) Grant is valid (b) Imported goods infringed that patent. On....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, based on the notice given by the right holder has a reason to believe that the imported goods are suspected to be goods infringing intellectual property rights, he shall suspend the clearance of the goods. (b) The Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, may, on his own initiative, suspend the clearance of goods, in respect of which he has prima facie evidence or reasonable grounds to believe that the imported goods are goods infringing intellectual property rights. (2) The Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, shall immediately inform the importer and the right holder or their respective authorized representatives through a letter issued by speed post or through electronic mode of the suspension of clearance of the goods and shall state the reasons for such suspension. (3) Where clearance of the goods suspected to be infringing intellectual property has been suspended and the right holder or his authorised representative does not join t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... extension shall not affect the goods. (8) Notwithstanding anything contained in these Rules, in the case of suspension of clearance of perishable goods on the basis of notice of the right holder or his authorized representative, the right holder or his authorized representative shall join the proceedings as required under these Rules within three working days or the extended period as provided in sub-rule (7) and in case of suspension of clearance of perishable goods by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, on his own initiative, the right holder shall give notice, execute a bond and join the proceedings as required under these Rules within three working days or the extended period as provided in sub-rule (7), as the case may be, failing which the goods shall be released. (9) If within ten working days or the extended period under sub-rule (6), as the case may be, and within three working days or the extended period as provided in sub-rule (7) of this rule in the case of perishable goods, the right-holder or his authorized representative joins the proceedings, the Deputy Commissioner of Customs or Assistant Commiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and analysis to assist in determining whether the goods are pirated, counterfeit or otherwise infringe an intellectual property right, without prejudice to the protection of confidential information. The right holder is also entitled to seek additional relevant information relating to the consignment which has been suspended for clearance as per the provisions of Rule 9 of the IPR Rules. The additional relevant information relating to consignment which has been suspended for clearance is also to be supplied to the importer. Once it is determined that the goods suspended from clearance are infringing goods, the same can be disposed of in accordance with the provisions of Rule 11 of the IPR Rules which reads as under :- "11. Disposal of infringing goods. - (1) Where upon determination by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, it is found that the goods detained or seized have infringed intellectual property rights, and have been confiscated under Section 111(d) of the Customs Act, 1962 and no legal proceedings are pending in relation to such determination, the Deputy Commissioner of Customs or Assistant Commissioner of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d under these Rules. In these circumstances, if the conditions contained in Rule 7 of the IPR Rules are satisfied, the authority mentioned in those Rules has adequate jurisdiction to exercise power to suspend the clearance of goods even in respect of those cases where the goods inspected are, in the opinion of the competent authority, suspected to be goods infringing the patent right of the patentee. Notwithstanding the aforesaid plain reading of the Rule, the problem has arisen because of the complexities involved in the nature of the patent rights even when the right holder is having a patent which is duly registered under the Act. It is correct that even in such a situation, in a suit infringement of patent, the defendant can raise a counter claim for revocation of a patent and in these circumstances, when such a counter claim is made, the matter is to be dealt with by the High Court alone for adjudication/decision. As per Section 13(4) of the Act, the validity of a patent not guaranteed by the grant and there is no presumption in favour of the validity of the patent. [see M/s. Bishwanath Prasad Radhey Shyam (supra)]. 24. So far so good. However, what follows from the afor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted to Copyright and Trade Marks infringement only. However, it also recognizes that notwithstanding this position insofar as IPR Rules are concerned they deal with the Patents, Design and Geographical Indications violations as well, which have been framed in conformity with the practice prevailing in some countries, notably EU countries. Thus, in the opening portion of Clause 4, there is a recognition to the effect that the Rules also deal with the patents violations as well. In the later portion, however, it is recognized that though for a Custom Officer determining the Copyright and Trade Marks infringements may not be difficult based on available data/inputs, it may not be that easy in case of other three violations including Patent, unless the offences have already been established by a judicial pronouncement in India and the Customs is called upon or required to merely implement such order. However, at the end what is mentioned is that the Custom Officers has to exercise extreme caution "at the time of determination of infringement of these three intellectual property rights". Thus, no doubt, it is emphasized that the case of patent violation may pose problem for Custom Offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sdiction to deal with the matter. In fact if it is incumbent for the patentee to just approach the Court and obtain a judicial order, there is no need to invoke the machinery under these rules as the purpose of the patentee would be served by getting that judicial order enforced. 27. The second aspect which needs consideration now is as to whether the impugned order dated 30-3-2011 passed by the competent authority was in accordance with Rule 7 of the IPR Rules. As per Rule 7(1)(a) the competent authority can suspend the clearance of goods if he has a "reason to believe" that imported goods are suspected to be goods infringing "intellectual property rights". It is held by the learned Single Judge in the impugned order that no such satisfaction/reason to believe have been recorded in the impugned order. The order dated 30-3-2011 of the competent authority is as follows :- "M/s. Telefonaktiebolagat LM Ericsson (PUBL), Sweden has registered their five Intellectual Property Rights as given in Annexure-I at this Commissionerate under Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. The right owner has stated that 18 models listed in Annexure-II, of G'Five b....