In the dynamic landscape of Intellectual Property Rights (IPR) litigation, the recent judgment by the Delhi High Court in Pankaj Ravjibhai Patel v. SSS Pharmachem Pvt Ltd (“Pankaj Ravjibahi Patel”) has opened a new chapter in the interpretation and application of the Commercial Courts Act, 2015 (CCA) to IPR cases. This landmark decision comes in the wake of growing concerns about the manipulation of suit valuations to engage in ‘forum shopping,’ a practice where litigants strategically choose a court to maximize their advantages.
The relevant provisions of CCA
The CCA was enacted for “adjudicating commercial disputes of specified value” [as provided for in the preamble to the Act]. Section 2 (c) (xvii) clarifies that a commercial dispute involves a dispute arising out of “intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications, and semiconductor integrated circuits”. Section 2 (i) defines “specified value” as the valuation of the subject matter equal to or above 3 lakhs. These two sections cumulatively would mean that to attract the application of CCA, an IPR suit needs to be valued equal to or above 3 lakhs.
This raises another important question – how is this “specified value” determined? Section 12 (1) (d), CCA provides a broad answer. It specifies that where the relief sought relates to an intangible right such as IPR, the market value as “estimated by the plaintiff shall be taken into account”. Thus, there is a discretion granted to the plaintiff to value his suit (or dominus litis). The judgment of Vishal Pipes Ltd. v Bhavya Pipe Industry (“Vishal Pipes”)highlighted and dealt with the problematic consequences of this discretion.
Vishal Pipes’s reasoning and directions
Vishal Pipes recognized that plaintiffs frequently undervalue their suits deliberately to engage in “bench hunting” or “forum shopping”, and to avoid the rigors of CCA.
( ¶ 61).
The core issue before the court in Vishal Pipes was the deliberate undervaluation of IPR suits below ₹3 lakhs to sidestep the CCA. Justice Pratibha Singh, in her judgment, acknowledged the potential for abuse and laid down significant directions. The court raised two crucial questions ( ¶ 61). A summary of the issues and reasoning is as follows:
|(i) Can IPR suits be valued below Rs.3 lakhs and be listed before the District Judges who are not notified as Commercial Courts?;
1. The plaintiff’s discretion to value his suit is constrained by the enactment of CCA.
2. Not ascribing a ‘specified value’ in an IPR suit would be contrary to the scheme of the CCA which requires every suit to have a ‘specified value’
3. In the absence of a “specified value”, the valuation of the suit below Rs.3 lakhs would be arbitrary, whimsical, and wholly unreasonable
4. The intention of the Legislature in keeping a lower threshold in a ‘commercial dispute’ of Rs.3 lakhs cannot be rendered meaningless. It would only be in exceptional cases that the valuation of IPR disputes below Rs.3 lakhs could be justified.
5. At Rs.3 lakhs, the Court fee payable is minimal due to the court fee structure in Delhi. As such, avoiding higher court fees does not seem to be the primary consideration in undervaluing the suit. Rather, bench hunting and forum shopping appear to be the considerations.
6. Usually, IPR disputes are filed by business entities, and they can afford the court fees if the lower threshold for IPR suits is set at 3 lakhs.
|(ii) Whether the provisions of CCA would apply to such disputes?
(i) Usually, in all IPR cases, the valuation ought to be at least Rs.3 lakhs. All IPR suits to be instituted before District Courts, would, therefore, first be instituted before the District Judge (Commercial).
(ii) If valued below Rs. 3 lakhs, the Commercial Court shall examine the specified value and suit valuation to ensure it is not arbitrary or unreasonable and the suit is
(iii) Upon such examination, the concerned Commercial Court would pass appropriate orders following law either directing the plaintiff to amend the plaint and pay the requisite Court fee or to proceed with the suit as a non-commercial suit.
(iv) To maintain consistency and clarity, even such suits which may be valued below Rs.3 lakhs and continue as non-commercial suits, shall also continue to be listed before the District Judge (Commercial), but may not be subjected to the provisions of the CCA.
(v) All pending IPR suits before the different District Judges (non-commercial) in Delhi shall be placed before the concerned District Judges (Commercial)
The overruling of Vishal Pipes in Pankaj Ravjibhai Patel
The judgment in Vishal Pipes essentially proceeded on the assumption that IPR suits in Delhi were being deliberately undervalued to escape the rigors of the CCA. The learned Single Judge further appears to have proceeded on the premise that bearing in mind the nature of disputes that arise in IPR litigation, it would only be in exceptional cases that valuation would stand pegged at below Rs. 3 lakhs. The learned Single Judge further observed that bearing in mind the rate of court fee which would be applicable in case a suit was valued at below Rs. 3 lakhs, there would exist no valid or justifiable cause to value IPR suits as such “except for oblique motives” (¶5).
Vishal Pipes appears to have confused the aspects of specified value and valuation based on the reliefs claimed (¶ 23). The concept of “specified value” has been introduced by the CCA and which by definition is concerned with the “subject matter” of the suit as opposed to the Court Fees Act which bids one to bear in mind the amount at which the “relief” sought is valued in the plaint or memorandum of appeal (¶7). The former becomes relevant only to determine whether a particular suit is liable to be placed before a commercial court (¶ 22).
It would be incorrect to proceed on the premise that the dispute forming the subject matter of IPR suits would necessarily and invariably be liable to be valued at Rs. 3 lakhs or above. The issue of whether a particular suit has been deliberately undervalued can always be examined and scrutinized by a competent court (¶ 24).
Besides, the directions in Vishal Pipes place too many IPR suits to be dealt with by the District Judges (Commercial) due to, firstly, the transfer of all pending IPR suits to the commercial courts, and, secondly, restricting the institution of all IPR suits to the commercial side. However, neither of these directions finds any support in the precedents (as examined in Pankaj Ravjibhai Patel) or the provisions of CCA. As such, Vishal Pipes seems to be detracting from the well-established law on “specified value” and valuation based on the relief claim to formulate directions based on unfound assumptions. Admittedly, there may be malicious and negligent cases of undervaluation of IPR suits; however, painting all IPR suits below 3 lakhs with the same brush seems to be a leap of logic. Rectifying this, Pankaj Ravjibhai Patel overrules Vishal Pipes to hold that unless the twin conditions of commercial dispute and specified value are satisfied, a suit cannot be tried by a commercial court (¶27).
The principle of dominus litis vis-à-visIPR suits was a key concern addressed in Vishal Pipes. The directions issued in Vishal Pipes, mandating a minimum valuation of Rs. 3 lakhs for IPR cases, were overruled by Pankaj Ravjibhai Patel. The overruling clarified that the specified value and commercial dispute conditions must be met for a suit to be tried by a commercial court. Vishal Pipes’ assumptions were deemed unfounded, emphasizing that undervaluation should be examined on a case-by-case basis. Pankaj Ravjibhai Patel reinstates the importance of adhering to the well-established principles of specified value and valuation based on relief claims under the CCA.