Delhi High Court
Pine Labs Pvt. Ltd. vs Gemalto Terminals India Pvt. Ltd. ... on 3 August, 2011
Author: A.K.Sikri
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO (OS) 635 OF 2009
&
FAO (OS) 636 OF 2009
JUDGMENT RESERVED ON:18.11.2010
% JUDGMENT PRONOUNCED:03.8.2011
(1) FAO (OS) 635 OF 2009
PINE LABS PVT. LTD. . . APPELLANT
Through : Mr. Rakesh Tiku, Sr. Advocate
with Mr. Mritiyunjay Kumar,Mr.
Naveen Goel, Mr. Rishi
Bhatnagar, Advocates.
VERSUS
GEMALTO TERMINALS INDIA . .RESPONDENTS
PVT. LTD. & ORS.
Through: Mr. Sanjay Jain, Sr. Advocate
with Ms. Charu Mehta, Ms
Deepali Liberhan and Ms.
Prabhsahay Kaur, Advocates for
R-1.
Mr. Sudhir Chandra Agarwal, Sr.
Advocate with Mr. Jagdish Sagar
and Ms. Tanvi Misra, Advocates
for the R.2
Mr. Pradeep Kumar Jha,
Advocate for R.3.
(2) FAO (OS) 636 OF 2009
PINE LABS PVT. LTD. . . APPELLANT
Through : Mr. Rakesh Tiku, Sr. Advocate
with Mr. Mritiyunjay Kumar,Mr.
Naveen Goel, Mr. Rishi
Bhatnagar, Advocates.
FAO (OS) 635/2009 & FAO (OS) 636/2009 Page 1 of 44
VERSUS
GEMALTO TERMINALS INDIA . .RESPONDENTS
PVT. LTD. & ORS.
Through: Mr. Sanjay Jain, Sr. Advocate
with Ms. Charu Mehta, Ms
Deepali Liberhn and Ms.
Prabhsahay Kaur, Advocates for
R-1.
Mr. Sudhir Chandra Agarwal, Sr.
Advocate with mr. Jagdish Sagar
and Ms. Tanvi Misra, Advocates
for the R.2
CORAM :-
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE SURESH KAIT
1. Whether Reporters of Local newspapers may be
allowed to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the
Digest?
A.K. SIKRI, J.
1. These two appeals have been preferred against the order/
judgment dated 08/12/09 passed by the Ld. Single Judge of this
court in I.A. No. 12825/09 and I.A. No. 13030/09 in CS (OS) No.
1876/2009 whereby the ad-interim ex-parte injunction, which was
earlier granted in the favour of Appellant, has been vacated.
2. To narrate the genesis of the instant dispute, the facts are
succinctly reproduced as under:
The appellant Pine Labs Pvt. Ltd. (hereinafter referred to as
the "Pine Labs") is a software development company and also
provides related services of management of certain programmes.
The respondent no.1, Gemalto Terminals India Pvt. Ltd (hereinafter
referred to as the "Gemalto") (formerly Axalto Terminals India Pvt.
Ltd. and prior to that known as Schlumberger Measurement and
Systems India Ltd), is engaged in providing computer hardware
terminals for retail establishment.
3. Since the Gemalto does not do any software development
business, it has engaged the Pine Labs from time to time to
develop certain software applications and backend host
applications to service its various clients. In the year 2003
Gemalto was approached by the IOCL to develop a customized
fleet card system and in pursuance to this Gemalto issued a work
order dated 17.11.2003 to the Pine Labs. Under this work order
the appellant was required to develop software application for
IOCL fleet card system and provide complete gamut of services
related to operationalisation and maintenance this system. This
Work Order provided that 50% of the charges would be for host
license as agreed upon. After designing fundamental system
architecture and writing of various components of the software,
the initial trial version 1.00 was ready for trial by June 2004.
Meanwhile, keeping in view the growth of business and deepening
relationship, a "Master Agreement for Development Services"
(MSA) dated 24.06.2004 was entered into between the Pine Labs
and the Gemalto containing certain terms, on which the Pine Labs
was to provide certain services to the Gemalto. Further terms were
to be set out in the Subsidiary Agreements which were to be
agreed between the parties from time to time for each new
project.
4. After the execution of the MSA, the first complete version of
the software i.e. Version 1.03, which could be put to commercial
use, was provided to the Gemalto on 16th August 2004 along with
a written manual which set out the full system specifications and
details regarding the same. The Pine Labs continued further to
develop and write aforesaid software and accordingly updated
Versions of the same were handed over to the Gemalto from time
to time. Details are as under:
Version of Date on which it Date on which
Software was provided to the assignment is
Respondent submitted to be
expired
Version 1.03 16 August 2004 15 August 2009
Version 1.04 27 May 2005 26 May 2010
Version 1.05 24 March 2006 23 March 2011
Version 1.06 14 September 2006 13 September 2011
Version 1.07 21 January 2009 20 January 2014
Version 1.08 10 February 2009 9 February 2014
5. The relations between the Pine Labs and the Gemalto were
invigorating until the Gemalto made a bid for a card program of
HPCL invited by ICICI Ltd.(herein Respondent No.2). Vide e-mail
dated 26.06.2009, the Gemalto informed the Pine Labs that it has
been awarded the contract for HPCL Fleet Card Program and that
this program would be customizing and interacting with the
existing IOCL system, for which the software was developed by the
Pine Labs.
6. The Pine Labs vide e-mail dated 29th June, 2009 expressed its
willingness to the Gemalto to work on this project also. Though the
discussions in this regard were held however, no consensus could
ever be reached between them. Thereafter, the Pine Labs
discovered that the Gemalto had sub-contracted aforesaid
contract to the Respondent No.3 M/S QCI Technologies Pvt. Ltd. to
create and develop software for the HPCL-ICICI card program.
Since this program system was to be interacting with the existing
IOCL system, the Pine Labs apprehended that the source code of
the IOCL program would be handed over by the Gemalto to the
M/S QCI Technologies Pvt. Ltd.
7. The prospect of distribution of the source code of the
software developed by it to the third party was sufficient to raise
an alarming bell in the ears of the Pine Labs and immediately it
claimed ownership of the software developed for IOCL Card Fleet
Program. The genesis of this claim was founded upon the reason
that due to operation of section 19 (5) and (6) of the Copyright Act
the assignment of copyright in respect of Original Version 1.03 was
only for 5 years and that too within the territorial limits of India as
the terms regarding time period and territorial limit of the
assignment were nowhere provided in any of the agreements,
which deal with the subject matter in question, entered into
between the parties. These provisions of the copyright statute are
as under:
"19.Mode of assignment.-
...................................................
................................................
(5) If the period of assignment is not stated,
it shall be deemed to be five years from the
date of assignment.
(6) If the territorial extent of assignment of
the rights is not specified, it shall be
presumed to extend within India."
As far as later versions are concerned, as per the Pine Labs,
they are mere primarily adaptations of Original Version 1.03
wherein either a few new features were added or performance
aspects of the original version were improved and this was
achieved by way of creating additional software code and
incorporating the same into the source code of the original
version. The assignment in respect of the later versions was
strictly restricted to the newly created additional source code and
it cannot be construed as re-assignment of copyright in the
original version 1.03.
8 In an attempt to get a stamp of Judicial approval on its claim,
the Pine Labs filed a suit bearing No. 1867/2009 along with I.A. No.
12885/09 on the original side of this Court inter alia seeking reliefs
of declaration relating to expiry of the assignment under section
19; injunctions seeking restraint against infringement of its
copyright and mandatory injunction relating to enforcement of its
moral right under section 57. On the first date of hearing on
07.10.09, an ad-interim ex-parte injunction was granted to the
appellant. However, subsequently, after hearing both the parties,
the learned Single Judge vide order dated 8.12.2009 has vacated
the aforesaid injunction.
9 The Ld. Single Judge analyzed the matter from two
perspectives. Firstly, from the point of view that, what is the
ownership status of the Pine Labs and secondly tha,t what is the
nature of assignment. On the first issue, the Ld. Judge came to the
conclusion that it is an admitted fact that the Pine Labs has taken
the status of independent contractor and this makes the
agreement to develop the software in question a contract for
service. Section 17 of the Copyright Act provides that in the case
of contract for employment, the ownership vests with the
employee unless there is an agreement or intention to contrary.
The Pine Labs had contended before the Learned Single Judge that
this intention is to be deduced from MSA which is an assignment
agreement. It was further contended that only the MSA should be
seen for inferring the real intention of the parties and not the prior
correspondences and agreements including the email dated 20th
February, 2004 wherein the Pine Labs has stated that "the work
has been created for a valuable consideration for and on behalf of
the Gemalto and the Pine Labs has been paid in full and the
copyright and other rights vest with the Gemalto and the Pine Labs
does not claim any right in the same". While referring to the
decision of Bombay High Court in Zee Entertainment Enterprises
Ltd v. Mr. Gajendra Singh and Ors, 2008(36) PTC53 (Bom), the Ld.
Single Judge observed that the documents and their relation, by
whatever names or howsoever these are stated in the
agreements, would not preclude the court from examining the real
intention of the parties for measuring the ownership of the work by
applying the intention test. The Ld. judge, for the purpose of
interim applications, has taken a prima facie view that doubt can
be expressed over the ownership of copyright as claimed by the
Pine Labs especially when an intention to contrary can be inferred
from the email dated 20th Feb 2004 and the admission of the Pine
Labs that the MSA is an assignment and that it has assigned the
rights including the copyright to the Gemalto by virtue of the MSA.
10 The second limb of the approach, which the Ld. Judge took,
was to analyze the nature of assignment. After referring to various
authorities on Copyright, a prima facie conclusion is arrived that
MSA is, in fact, an "agreement to assign" or "assignment in
equity". It has been observed that "the equitable assignment
exists in cases involving the agreement to assign future work and
equitable assignment generally flows from contractual relations
where work is commissioned. Applying the said principles to the
present case, it can be said that a bare reading of clause 7 of the
agreement demarcates the two interests, the beneficial interest
and the equitable interest." Ld. Single Judge came to the
conclusion that the intention of the parties, under MSA was to
create influence of equitable title in favour of Gemalto. Relevant
para is as under:
"72. The usage of the expression "beneficial
owner" in context of the plaintiff makes the
intention of the parties to enter into
agreement clear and unequivocal,
demarcating the two interests. The intention
further is clarified once the agreement
provides for future obligations of the parties.
It is a matter of fact that MSA was entered
into in June, 2004 and future software was
developed between June-August, 2004 and
subsequently, at the time of agreement, the
software was yet to be created. The intention
is again reflected when the right to enforce is
accorded to the defendant. It is also not
disputed that the plaintiff was paid for the
creation of the work. Rather, the plaintiff
himself in his email acknowledged that the
plaintiff has been paid with respect to the
creation of the work. Under these
circumstances, one can say with the
certainty that the present agreement or MSA
is an agreement wherein intention of the
parties, whether express or implied, is such
so as to create inference of equitable title in
favour of defendant no1."
11 All this made the Ld. Judge came to the prima facie finding
that the MSA is an agreement to assign and that it creates an
equitable title in favour of the Gemalto. In order to decide the fate
of interim applications pertaining to the matter in hand, the Ld.
Judge relied upon the decision of the Supreme Court in Dalpat
Kumar vs. Prahlad Singh, AIR 1993 SC 276 which provides for a
threefold approach to be adopted by courts while dealing with
such cases. These are as under:
Whether the Plaintiff is able to prove a Prima Facie
case in its favour?
In whose favour Balance of Convenience lies?
Whether the denial of relief would result in
Irreparable Injury to the plaintiff?
12. In view of the aforesaid judicial reasoning, the learned Single
Judge has taken the view that not only doubt can be expressed on
the claim of ownership by the Pine Labs even on prima facie front,
though the issue involved needs to be examined at trial, the MSA
appears to be an assignment in equity or an agreement to assign
rather than actual assignment agreement and this goes against
the Pine Labs. As far as balance of convenience is concerned, the
Ld. Single Judge found it to be tilted in favour of the Gemalto as
Ld. Single Judge is of the view that if interim protection is allowed
to continue at this stage, it would cause more inconvenience and
irreparable loss to the Gemalto rather than the Pine Labs. The
Court also found support from that fact that the Pine Labs has
itself calculated the loss at Rs. 20,00,000/- which fades the
element of irreparability as far as losses to it is concerned.
13. Consequently, the learned Single Judge vacated the interim
order on the condition that the Gemalto shall deposit a sum of Rs.
20,00,000/- with the registry of this court within two weeks.
Challenging this order, these two appears are preferred by the
Pine Labs.
14. When these appeals came up for hearing on 17th December,
2009, counsel for Gemalto as well as the respondent no.2
appeared on caveat. After hearing the counsel for the parties, the
appeal was admitted and in the stay application filed by the Pine
Labs seeking stay of the operation of the orders of the learned
Single Judge, notice was issued for 24th February, 2010 and
operation of the impugned order dated 8th December, 2009 was
stayed on certain specific terms as contained in the said order.
Since this order passed in the said application broadly reflects the
arguments/ stand taken by parties, we deem it proper to
reproduce the said order:-
"Notice.
Learned counsel accept notice on behalf of
Respondent Nos. 1 and 2 and seek some time
to file a reply. They may do so within four
weeks. Rejoinder thereto be filed within four
weeks thereafter.
Notice may now be issued to
Respondent No.3, returnable on 24th
February, 2010.
The Appellant is aggrieved by an order
dated 8th December, 2009 passed by a
learned Single Judge in CS(OS) No.1876/2009
vacating an ex parte ad interim injunction
granted in favour of the Appellant.
Broadly, the facts of the case are that
the Appellant had entered into an agreement
with Respondent No.1 to develop software for
the use of Respondent No.1 in the IOCL Fleet
Card Program. The version eventually
launched was version 1.03 and the parties
also entered into an Agreement called the
Master Agreement for Development Services
dated 24th June, 2004.
According to the Appellant, in terms of
Clause 7.1 of the Agreement, the
copyright and other intellectual property
rights in the software program were assigned
to Respondent No.1. Clause 7.1 of the
aforesaid Agreement reads as
follows:-
"7.1 Axalto shall be entitled to all property,
copyright and other intellectual property
rights in the Project Materials which
property, copyright and other intellectual
property rights Pine Labs as beneficial
owner assigns to Axalto. Pine Labs shall
advise Axalto in writing and ensure that the
Project Materials do not infringe the
intellectual property rights of any third
party."
Despite the "assignment", the learned
Single Judge concluded that Clause
7.1 did not mean that the copyright was
assigned to Respondent No.1,on the
other hand, the entire Agreement read as a
whole indicated that it was only an
agreement to assign. Prima facie, we are not
in agreement with this conclusion
of the learned Single Judge because of the
plain language of Clause 7.1
reproduced above.
It is also submitted by learned counsel
for the Appellant that Clauses 18
and 20 of the Agreement have been ignored
by the learned Single Judge. It is
submitted that both these Clauses indicate
that the relationship between the
Appellant and Respondent No.1 was on a
principal to principal basis and that any
understanding that the parties had prior to
the aforesaid Agreement would not
bind either of them. Clauses 18 and 20 of
the Agreement read as follow:-
"18.RELATIONSHIP
Nothing in this Agreement shall be taken to
create any joint venture,
partnership or other similar arrangement; the
parties shall at all times stand
in relation to each other as independent
contractors. Neither party is or may
hold itself out to any third party as being the
agent of the other.
20.WHOLE AGREEMENT
This Agreement constitutes the entire
understanding of the parties with respect to
its subject matter and supersedes any prior
agreements or understandings or
representations (unless fraudulent), whether
written or oral. The parties agree
that it will not have any right of action against
each other arising out of or
in connection with any such representation
unless fraudulent. All warranties,
conditions and other terms implied by statute
or common law are excluded to the
fullest extent permitted by law."
It is submitted that the learned Single
Judge relied upon some e-mail
correspondence exchanged between the
Appellant and Respondent No.1 (despite
Clause 20 of the Agreement) and concluded
that the relationship between the
Appellant and Respondent No.1 was a master-
servant relationship.
Prima facie, we are of the opinion that
the learned Single Judge erred
in relying upon the e-mails exchanged
between the Appellant and Respondent No.1
for arriving at a finding adverse to the
Appellant in view of Clause 20 of the
Agreement. We are also of the view that the
learned Single Judge erroneously ignored
Clause 18 of the Agreement which clearly
indicates that the relationship
between the Appellant and Respondent No.1
was a principal to principal
arrangement.
It is submitted by learned counsel for
the Appellant that even though
Clause 7.1 of the aforesaid agreement does
not mention any period of
validity of the assignment, reliance is placed
on Section 19(5) and 19(6) of the
Copyright Act, 1957 to contend that the
assignment would be valid only for a
period of five years that is till 24th June, 2009
and will not have any extra
territorial application.
Our attention has also been drawn to
paragraph 7(ii) of the Written
Statement filed by Respondent No.1 before
the learned Single Judge (page 224 of
the paper book) wherein it is specifically
stated by Respondent No.1 that
version 1.03 of the software application is not
in use at present in any of the
systems of Respondent No.1 and in any of its
projects including IOCL, BPCL or
the HPCL-ICICI Bank projects.
Taking all these facts into
consideration, we are of the prima facie view
that the Appellant has made out a case for
interference with the order passed by
learned Single Judge.
We, therefore, stay until further orders
the operation of the impugned
order dated 8th December, 2009 and restrain
Respondent No.1, their assigns,
licensees, agents, contractors, employees
from in any manner infringing the
copyright of the Appellant in the software
known as Version 1.03 for the IOCL
Fleet Card Program and further restrain them
from reproducing the work in any
material form including the storing of it in any
medium by electronic means, making or
issuing copies of the work to the public, or to
make any translation or adaptation of the
work or to sell or give on commercial
rental or offer for sale or for commercial
rental any copy of the work.
We clarify that the interim order is only
with respect to version 1.03 of
the software application and does not affect
the relationship that the parties
have with respect to subsequent versions of
the software application."
15. After service of notice to other respondents, the aforesaid
application came up for hearing. It was agreed that instead of
hearing the application, the appeal itself can be argued finally.
Thus, the appeals were listed for hearing and heard finally.
16. Mr. Rakesh Tiku, learned Senior Counsel who appeared for
the Pine Labs advanced four proposition to placate the case of the
Pine Labs with simultaneous attempt to find fault in the impugned
order of the learned Single Judge. These are:-
(1) Clause 7 of the MSA has clear language which
assigns in presenti, software to be developed, in
future by the Pine Labs to Gemalto. As period
or territory of assignment is admittedly nowhere
stated in the MSA or in any other document, by
virtue of the deeming provisions of Section 19
(5) and 19(6) of the Copyright Act, the
assignment is deemed to be for five years and
for territory of India only.
(2) Although the language of clause 7.1 is
abundantly clear and in presenti, even if the
Gemalto's contention that it was only an
"agreement to assign", then the agreement to
assign would be void for uncertainty under
Section 29 of the Contract Act. If not, as the
period of assignment or territory is not stated in
the agreement to assign, the agreement would
also be subjected to the deeming provisions of
Section 19 (50 and 19 (6).
(3) Version 1.03 is the fundamental and basic
version and other versions (1.04 onwards) are
merely adaptations of Version 1.03 and only a
minor new code has been written to improve
performance or add new features to version
1.03. Each subsequent version is a "derivative
work" of version 1.03 and new literary work
created is only the incremental source code and
there is no "reassignment" of the source code of
version 1.03.
(4) The injunction order has been in force for well
over a year and the Gemalto has nowhere
shown how any loss or prejudice is being caused
to it. In fact, Gemalto has categorically stated
that it is not using the version 1.03 in any of its
programs including BPCL, IOCL, HPCL etc. so the
balance of convenience is clearly in favour of
the Pine Labs.
Use of the Software by the Gemalto is different
from rights as an assignee. Gemalto is entitled
to use the software as a licensee, but cannot be
permitted to modify, adapt or reproduce the
same.
As recorded in the order dated 9th October,
2009, the Pine Labs had itself consented to let
the Gemalto continue to use the version 1.03 or
its variants in the IOCL program. The Pine Labs
grievance was and is that the Gemalto have
modified the version 1.03 for use in the HPCL
programme which is a clear infringement of
copyright and this infringement continues. If
injunction were to be vacated now, Gemalto
may adapt/modify this software for other
programs or enter into arrangements which
numerous third parties, which would cause
grave loss and prejudice to Pine Labs.
17. In addition, the related argument advanced was that
reliance on the email of February, 2004 which was written before
entering into MSA was totally misconceived in view of Clause 20 of
the MSA which categorically provided that all prior communication
stood superseded. Additionally, it was also submitted that the
conduct of Gemalto was blameworthy as inspite of injunction order
dated 17th December, 2009 issued by this Court, the Gemalto had
continued with HPCL Drive Track Plus Program forcing the Pine
Labs to file two contempt proceedings before the Trial Court which
were pending.
18. We have taken note of the aforesaid arguments in brief
which were forcefully refuted by Mr. Sanjay Jain, learned Senior
Counsel who appeared for Gemalto as well as Mr. Sudhir Chandra
Agarwal, learned Senior Counsel who appeared for Respondent
no.2.
19. We would proceed to deal with the aforesaid proposition of
the learned counsel for the appellant and while doing so, we will
take note of the detailed submissions advanced by the counsel for
the parties.
PROPOSITION NO.1
20. To buttress his argument that Clause 7 of the MSA in
presenti, assigned the software to be developed in future, Mr. Tiku
referred to the language of Clause 7 which reads as under:-
"7.1Ownership of Project Materials: Axalto
shall be entitled to all property, copyright and
other intellectual property rights in the project
materials which property, copyright, and other
intellectual property rights Pine Labs as
beneficial owner assigns to Axalto. Pine Labs
shall advise Axalto in writing and ensure that
the project materials do not infringe the
intellectual property rights of any third party.
7.2 At the request and the expense of
Axalto, Pine Labs shall do all such things and
sign all such documents or instruments
reasonably necessary to enable Axalto to
obtain, defend and enforce its right in the
project materials.
7.3 Upon request of Axalto, and in any
event, upon expiration or termination of this
Master Agreement, Pine Labs shall promptly
deliver to Axalto all copies of the project
material then in Pine Labs custody, control or
possession.
7.4 The provisions of this clause shall
survive the expiration or termination of this
Agreement".
21. The submission of Mr. Tiku was that the language, i.e. the
use of the present tense in the word "assigns" clearly, and without
doubt conveys the meaning that assignment is in presenti. No
further reference to anything else is required as the meaning is
clear on a plain reading of the clause. He referred to the decision
in the case of St. Clair Intellectual Property Consultants Inc. Vs.
PALM Inc. et Al (Civil Action no. 06-040JJF-LPS} wherein it was
held:-
"The present assignment of a future invention
divests the investor assignee of ownership in
the invention and automatically vests
ownership in the invention when invented in
the assignee"
".... If the contract expressly grants rights in
the future inventions, "no further act is
required once invention comes into being" and
"the transfer of the title occurs by operation of
law".
He also took sustenance from the judgment of Federal Court
in Speedplay Inc. Vs. Bebop Inc. 211 F3rd 1245 wherein the Court
concluded that a present assignment was effectuated by language
which provided "that inventions "shall belong to Speedplay and
that Bryne "hereby conveys, transfers and assigns" the inventions
to Speedplay.
His submission was that in the present case, the MSA uses
language more akin to the language used in Speedplay and Filmtec
(supra), there is no use of futuristic words "will assign" but the
word "PineLabs as beneficial owner assigns...." Is used, which is a
clear assignment in the present. In any case, no further act of the
parties is needed to complete the assignment and neither has
Gemalto pleaded that the assignment was not complete
automatically by operation of law on the day the works were
created or that something else was required to complete the
assignment.
22. On this interpretation which Mr. Tiku seeks to give to clause
& of the MSA, he referred to the legal provisions contained in
Section 18 & 19 of the Copyright Act. His submission in this
behalf was that Section 18 deals with assignment of future work
"...or the prospective owner of the copyright in a future work may
assign to any person the copyright". Proviso to Section 18 states
that assignment in respect of future works comes into effect when
the work is created. This enabling language for future works was
added in the 1957 Act as it was not therein the 1914 Act.
23. Section 19 (5) and 19(6) have been inserted in 1994
whereas in 1984, the Act only provided that the identity of the
work, period and territory should be specified, but did not provide
for any consequence of not specifying the same. By a deliberate
insertion of such sections 5 and 6, legislature has provided for a
deeming consequence, which is absolute, without any exception
and de hors any alleged intention or conduct of parties. No
further action of either party was required to be taken to
"complete" the assignment. Assignment for future works stood
complete on the date of execution of MSA and parties understood
it as such.
24. The attempt of the learned counsel for the respondents, on
the other hand, was to demonstrate that Clause 7 was not to be
read in the manner attempted by Mr. Tiku. It was argued that on
the contrary, that clause 7.1 on which the Pine Labs were
harping was to be read alongwith Clause 1 and 7.2 of the MSA. It
was submitted that as per Clause 1 of the MSA, "Project Materials"
means any and all works of authorship, products and materials
developed, written or prepared by Pine Labs in relation to the
Projects (whether alone or jointly with Axalto or any other
independent contractor of Axalto and on whatever media)
including, without limitation, any and all computer programs,
data, diagrams, charts, reports, specifications, studies and
inventions and all drafts hereof and working papers in relation
thereto. It is thus submitted that a complete reading of the
Clause 7 reaffirms that Clause 7.1 of MSA was an :Agreement to
Assign" and not an "Assignment Deed". In fact, the plain and
literal meaning of Clauses 7.1 and 7.2 clearly establishes that Pine
Labs had agreed to assign to Gemalto all copyright and
intellectual property rights in the works that Pine Labs was hired to
develop and no actual assignment thereof can be assumed from
the said clauses. It was envisaged that Pine Labs shall entitle
Gemalto by doing all such things and sign all such documents or
instruments reasonably necessary to enable Gemalto to obtain,
defend and enforce its rights in the Project Materials, which means
that, while actual assignment was yet to take place, equitable
ownership was created by Pine Labs in favour of Gemalto under
the MSA.
25. Mr. Sanjay Jain also pointed out that in paragraph 14 of the
Plaint filed in CS (OS) 1876/2009 (page nos. 102-123 of the appeal
paper book filed by the Pine Labs), Pine Labs admitted that under
Clause 7.1, the Pine Labs plaintiff had agreed to assign the
copyright in the software development developed by it to the
Gemalto to Gemalto. Mr. Jain also argued that the statements of
the Pine Labs based on the judgment in St Clair Intellectual (supra)
was clearly misconceived and on reading of the relevant portion
of the said judgment in entirety, it would be clear that the said
judgment goes in favour of the Gemalto. To buttress this
submission, Mr. Jain drew our attention to the following paragraphs
of the said judgment:-
"...I must next determine whether praragraph 6
contains the required present language of
assignment to achieve what would have been
an automatic assignment of the Roberts
Patents to Mirage. The question of whether a
contract creates a present assignment
governed by federal law... To determine if a
contract creates a valid present assignment,
the contractual language governs:-
[W]hether an assignment of patent rights in an
agreement.. is automatic, or merely a promise
to assign, depends on the contractual
language. If the contract expressly grants
rights in future inventions, "no further act (is)
required once an invention (comes) into being,"
and "the transfer of title (occurs) by operation
of law." Contracts that merely obligate the
inventor to grant rights in the future, by
contrast, "may vest the promise with equitable
right in those inventions once made, " but do
not by themselves "vest legal title to patents
on the inventions in the promise."
...Prargraph 6 provides that "all such
inventions...shall be the sole and exclusive
property of Mirage..." there is no language of
present conveyance.....
In addition, under paragraphs 5 & 6 several
steps are required to effectuate an assignment
even after an invention comes into being.
.......Thereafter, the employee must "assist
Mirage...to obtain.... Patents, copyrights, and
other statutory or common law
protections...together with any assignments
thereof to Mirage or to persons designated by
Mirage." These additional steps emphasize that
the assignment contemplated in paragraph 6
does not occur automatically and inexorably to
operation of law..."
26. Mr. Jain also made an endeavour to distinguish the cases of
Speedplay and Filmtech (supra) by arguing that these very cases
were distinguished in the case of St. Clear Intellectual (supra),
since the agreement in question in such cases did not contain an
analogous Clause 7.2 requiring further acts/steps for transfer of
legal title. On the other hand, argued the learned Senior Counsel,
in St Clear Intellectual (supra) wherein agreement in issue
contained a provision akin to Clause 7.2 of the MSA, the Court
held that the language used in the MSA did not constitute a
present assignment, inasmuch as, further steps were required to
be effectuate an assignment under the agreement.
27. After giving the aforesaid interpretation to Clause 7 of the
Agreement, the learned Senior Counsel submitted that Section 19
of the Copyright Act was not applicable to the instant case
because of the following reasons:-
(a) In the absence of execution of an actual
assignment document, that Section 19 cannot
have any applicability in the facts of the case
at hand. Conditions of Section 19 (1) that the
"assignment" should be expressly and clearly
in writing are not met out, for Section 19 (5)
to be considered in the first place. Further,
Section 19 (2) of the MSA requires that "the
assignment of copyright in any work shall
identify such work, and shall specify the rights
assigned and the duration and territorial or the
subject matter, inasmuch as per the own
submissions of the Pine Labs, MSA is an
omnibus or umbrella agreement providing for
ownership of all types of intellectual property.
Therefore, Section 19 (2) not fully complied
with, since the MSA does not outline the
particulars of the work, whether present or
future, the same cannot be treated as an
assignment document and Section 19 (5) and
(6) do not arise for consideration.
(b) Under Clause 7.2, Pine Labs agreed to sign all
documents/instruments necessary to enable
Gemalto to obtain, defend and enforce its
rights n the project materials. The
understanding of the parties was that, when
called upon, Pine Labs would sign such
assignment deeds, applications or affidavits
which may be required to formally assign the
legal ownership or title in such work to
Gemalto.
(c) In view of the above, it was submitted that
Gemalto is the rightful owner of the copyright
in the software application(s) created by Pine
Labs for Gemalto's various programs in
question and thus has the right to call for
formal assignment of such copyright,
according to Clause 7.2 of the MSA.
(d) In paragraph 18 of the Plaint filed in CS (OS)
No. 1876/2009, Pine Labs admits that "MSA
continues to be in force". Therefore, as per
Pine Labs admission, MSA continues to be in
force and Clause 7 of MSA needs to be given
full effect, including the execution of all
necessary documents such as Assignment
Deed for formal assignment of copyright in the
work(s) in question in favour of Gemalto.
28. We are of the opinion that it is not necessary to go into the
niceties of the arguments developed by either parties. The answer
rests on the plain meaning that has to be assigned to the language
used in Clause 7. It clearly suggests that agreement is in presenti
whereby Pine Labs assigned the copyright and other intellectual
right in the project material with the use of the words "assigns"
and it makes clear that the Gemalto "shall be entitled" to all such
rights which Pine Labs again "assigns". Clause 7.2 on which
reliance has been placed by the counsel for the respondent, to
buttress their submissions, would be of no avail to them. This
Clause enables the Gemalto to obtain, defend and enforce its right
in the project material assigned by the Pine Labs and only
mandates that for proper defence enforcement of its right in the
project material, if Pine Labs is required to do certain things or
assigns certain documents or instruments, that shall be done by
Pine Labs for which expenses shall be borne by Gemalto. Thus, it
only secures the Gemalto by mandating the Pine Labs to take
certain further steps or assign certain documents if they are
required by Gemalto in any proceedings or otherwise to defend
and enforce its rights. The only purpose of this Clause is that in
case in future for the aforesaid purposes cooperation of the Pine
Labs is needed that would be extended by Pine Labs to Gemalto.
That has no bearing to Clause 7.1 which is to be construed
singularly to ascertain as to meaning which is to be assigned and
to decide as to whether the agreement is in present or it is in
agreement to "assign" only. As stated above, the language of
Clause 7.1 clearly suggests that it was an agreement in presenti
29. That apart, there is another significant aspect of the matter
which needs to be highlighted at this stage. It is a matter of
common knowledge that before assigning the MSA, two projects
were developed by the Pine Labs for Gemalto on the basis of work
orders. These softwares developed for Gemalto were meant for
BPCL Programme and City-Maruti Program. They relate to the
period prior to the signing of the MSA. Even when work order for
IOCL Fleet Program was issued (with which we are concerned),
there was no MSA. The MSA was entered into on 24 th June, 2004.
However, IOCL Fleet Program in the first workable version 1.03
was handed over to the Gemalto by the Pine Labs on 16th August,
2004 i.e. within a couple of months after the execution of the MSA
on 24th June, 2004. In such circumstance, when the work order
was placed prior to the execution of the MSA, a question could
have arisen as to whether IOCL Fleet Program is covered by the
MSA or not. This poser need not detain us for long for the simple
reason that both the parties proceed on the basis that IOCL Fleet
Program developed in the form of version 1.03. All thereafter are
covered by the MSA.
30. At this stage, we would like to comment upon the findings of
the Learned Single Judge to the effect that relationship between
the parties was that of Principal and agent and which means that
Pine Labs undertook the exercise for and on behalf of Gemalto.
This finding, prima facie, appears to be contrary to clause 18 and
20 of the agreement. Clause 18 defines "the relationship between
the parties" and categorically makes it clear that the agreement is
not to be taken to create any joint venture, partnership or other
similar agreement. On the contrary, both the parties are
specifically leveled as "independent contractors" with further
specific clarification that "neither party is or may hold itself out to
any third party as being the agent of the other". Even otherwise,
it seems to us that this discussion in the impugned order of the
learned Single Judge is superfluous inasmuch as it was no where
the case of the Gemalto that from very beginning copyright in the
project developed by the Pine Labs belonged to Gemalto. On the
contrary, even Gemalto has relied upon and proceeded on the
premises that as per the MSA, the copyright in the version 1.03
was to be "assign" to Gemalto. Thus, even Gemalto proceeds on
the basis that copyright belonged to the Pine Labs, the original
creator and it has come in the Labs of the Gemalto by way of
assignment.
31. We thus proceed further in the matter taking into
consideration the legal consequences that are provided under the
Copyright Act. Since IOCL Fleet Program is developed by Pine
Labs, which is the creator of the said Program as per Section 17 of
the Copyright Act, Pine Labs would be the first owner of the
copyright in this work. Section 18 of the Act, however, permits the
copyright owner to assign the copyright either wholly or partially
and either generally or subject to limitation and either for the
whole term of the copyright or any part thereof. Section 19 of
the Act stipulates the mode of assignment. Sub Section (1)
thereof provides that in no uncertain term that assignment has to
be in writing signed by the assignor or by his authorized agent.
As per sub Section (2) of Section 19 of the Act, the assignment of
the copyright, any such work is to identify such work and also
specify the rights assigned and the "duration and territorial
extent of such assignment". Thus by agreement the assignment
can be for a limited duration and limited territory. What happens if
the agreement is silent on the duration and territorial extent of the
assignment? Answer is provided by sub Section (5) and sub
Section (6) of Section 19 of the Act which reads as under:-
"19. Mode of assignment
(1)..........
(2).........
(3)........
(4).......
(5) If the period of assignment is not stated, it
shall be deemed to be five years from the
date of assignment.
(6)If the territorial extent of assignment of the
rights is not specified, it shall be presumed to
extend within India"
32. In the present case, after analyzing the documents in
question, we come to the conclusion that as no duration or
territorial extent is provided in agreement or any assignment
deed, provisions of Section 19 (5) (6) of Copyright would be
attracted. In fact, as would be demonstrated hereinafter, this
would be the situation even if we accept the contention of the
respondent that Clause 7 of the MSA was an agreement to
"assign" and not the "assignment" itself.
33. Let us examine the issue on the presumption that clause 7
of the MSA is an actual assignment agreement. Now since the
prior communications and agreements cannot be referred to in the
light of the language of clause 20 as the IOCL Fleet Card Program
is now a subject matter of the MSA, Section 19(5) and (6) are
bound to be attracted. Here plaintiff seems to win over the
argument. Learned Single Bench has observed that to find the
real intentions, the court has power to go beyond the language of
clause 20 and has referred to prior communications to cast a
shadow of doubt over the original ownership of the original author
i.e. plaintiff. Here the learned Single Bench is not talking about
intention as to the assignment but the intention as to the original
ownership. But ownership from the inception is not even the case
of the defendant. The Main thrust of the defendant is that the MSA
is an agreement to assign. It is not the case of the defendant that
a contrary intention, which could nullify the effect of natural
vesting of copyright with the original author in case of a contract
for services, can be found. The issue as to the original ownership
hardly seems to be in defendant's mind. Had it been the case, it
would have raised the issue during the time when the MSA was
being formalized. There is nothing on record to suggest that. The
process of formalization of MSA seems to be a smooth one the
same was a result of growing mutual business and deepening
relationship between the parties, as per the defendant's version of
story itself. Even Clause 7 of the MSA talks about the plaintiff as a
"beneficial owner". Thus, bypassing of the language of clause 20,
in order to infer the real intention, can be done,(that too, if it is
legally correct) only for the drawing some inference regarding
assignment and not for the ownership.
34. Now, let's presume that the MSA is an agreement to assign
as argued by the Gemalto. In this case, since MSA is just an
agreement to assign, there must have been a subsequent
execution of actual assignment agreement in writing as per the
requirement of section 19(1) of the Copyright Act. The question is
when did it happen? There is nothing on record to suggest a
subsequent execution of assignment agreement in writing. It is
not even pleaded. It this case, two things are possible. Either we
can presume that there was no valid assignment of copyright in
the software developed for IOCL Fleet Program in the favour of the
defendant; or, the work order is the assignment agreement within
the requirement of section 19(1). If former is the case then the
defendant hardly have any chance to succeed and if later is
correct then section 19(5) and (6) would automatically be
attracted as the work order is silent on the time and territorial
limits of assignment as we cannot beyond the work order, in the
light of clause 20 of the MSA to deduce the intentions. This shakes
the foundation of the defendant's position.
35. Thus, it can be concluded that whatever be the nature of the
MSA, the provisions contained in section 19(5) and (6) would
inevitably be triggered.
36. Once we clear these cog webs and make the legal position
obvious, the next question would be as to what should be the
approach of the Court, in law, while dealing with the injunction
petition. The legal position is fairly settled now.
37. The Supreme Court had an occasion to summaries the law
on this point in a recent case titled Zenit Mataplast P. Ltd Vs State
of Maharashtra and Ors. (2009) 10 SCC 388.
"25. Grant of temporary injunction is
governed by three basic principles, i.e.
prima facie case; balance of convenience;
and irreparable injury, which are required to
be considered in a proper perspective in the
facts and circumstances of a particular
case. But it may not be appropriate for any
court to hold a mini trial at the stage of
grant of temporary injunction (Vide S.M.
Dyechem Ltd. v. Cadbury (India) Ltd. AIR
2000 SC 2114; and Anand Prasad Agarwalla
(supra).
26. In Colgate Palmolive (India) Ltd. v.
Hindustan Lever Ltd. AIR 1999 SC 3105, this
Court observed that the other
considerations which ought to weigh with
the Court hearing the application or petition
for the grant of injunctions are as below:
(i) Extent of damages being an adequate
remedy;
(ii) Protect the plaintiff's interest for
violation of his rights though however
having regard to the injury that may be
suffered by the defendants by reason
therefor ;
(iii) The court while dealing with the matter
ought not to ignore the factum of strength
of one party's case being stronger than the
others;
(iv) No fixed rules or notions ought to be
had in the matter of grant of injunction but
on the facts and circumstances of each
case- the relief being kept flexible;
(v) The issue is to be looked from the point
of view as to whether on refusal of the
injunction the plaintiff would suffer
irreparable loss and injury keeping in view
the strength of the parties' case;
(vi) Balance of convenience or
inconvenience ought to be considered as an
important requirement even if there is a
serious question or prima facie case in
support of the grant;
(vii) Whether the grant or refusal of
injunction will adversely affect the interest
of general public which can or cannot be
compensated otherwise.
27. In Dalpat Kumar and Anr. v. Prahlad
Singh and Ors. AIR 1993 SC 276, the
Supreme Court explained the scope of
aforesaid material circumstances, but
observed as under:
The phrases `prima facie case', `balance of
convenience' and ` irreparable loss' are not
rhetoric phrases for incantation, but words
of width and elasticity, to meet myriad
situations presented by man's ingenuity in
given facts and circumstances, but always
is hedged with sound exercise of judicial
discretion to meet the ends of justice. The
facts rest eloquent and speak for
themselves. It is well nigh impossible to find
from facts prima facie case and balance of
convenience.
28. This Court in Manohar Lal Chopra v. Rai
Bahadur Rao Raja Seth Hira Lal AIR 1962 SC
527 held that the civil court has a power to
grant interim injunction in exercise of its
inherent jurisdiction even if the case does
not fall within the ambit of provisions of
Order 39 Code of Civil Procedure.
29. In Deoraj v. State of Maharashtra and
Ors. AIR 2004 SC 1975, this Court
considered a case where the courts below
had refused the grant of interim relief.
While dealing with the appeal, the Court
observed that ordinarily in exercise of its
jurisdiction under Article 136 of the
Constitution, this Court does not interfere
with the orders of interim nature passed by
the High Court. However, this rule of
discretion followed in practice is by way of
just self-imposed restriction. An irreparable
injury which forcibly tilts the balance in
favour of the applicant, may persuade the
Court even to grant an interim relief though
it may amount to granting the final relief
itself. The Court held as under:
The Court would grant such an interim relief
only if satisfied that withholding of it would
prick the conscience of the court and do
violence to the sense of justice, resulting in
injustice being perpetuated throughout the
hearing, and at the end the court would not
be able to vindicate the cause of justice.
30. Such a course is permissible when the
case of the applicant is based on his
fundamental rights guaranteed by the
Constitution of India. (vide All India Anna
Dravida Munnetra Kazhagam v. Chief
Secretary, Govt. of Tamil Nadu and
Ors.(2009) 5 SCC 452)
31. In Bombay Dyeing & Manufacturing Co.
Ltd. v. Bombay Environmental Action Group
and Ors. (2005) 5 SCC 61, this Court
observed as under:
The courts, however, have to strike a
balance between two extreme positions viz.
whether the writ petition would itself
become infructuous if interim order is
refused, on the one hand, and the enormity
of losses and hardships which may be
suffered by others if an interim order is
granted, particularly having regard to the
fact that in such an event, the losses
sustained by the affected parties thereby
may not be possible to be redeemed.
32. Thus, the law on the issue emerges to
the effect that interim injunction should be
granted by the Court after considering all
the pros and cons of the case in a given set
of facts involved therein on the risk and
responsibility of the party or, in case he
loses the case, he cannot take any
advantage of the same. The order can be
passed on settled principles taking into
account the three basic grounds i.e. prima
facie case, balance of convenience and
irreparable loss."
38. Now, let's examine the case of plaintiff on the touchstone of
three criterion discerning from aforestated well summarized legal
position. These are:
1. Prima Facie Case;
2. Balance of Convenience; and
3. Irreparable Injury.
39. On the first point i.e. "Prima Facie Case", the Ld. Single
Bench was of the view as under:
"On a prima facie case view, I have
expressed my doubts on the ownership on
the copyright over the works in the manner
pleaded by the plaintiff. It is a matter which
is to be considered at the trial i.e. whether
the plaintiff's contention that there has
been an actual assignment is valid or not,
although prima facie, the said agreement
appears to an assignment in equity or an
agreement to assign rather than
assignment."
However, prima facie case does not mean that the plaintiff
has a better chance to win the case but it means that a substantial
question of law and a triable issue can clearly be made out from
the facts of the case. In In Burn Ltd. v. R.N. Banerjee, 1958 SCR
514 the Apex Court made the following observations:-
"A prima facie case does not mean a case
proved to the hilt but a case which can be
said to be established if the evidence which
is led in support of the same were believed.
While determining whether a prima facie
case had been made out the relevant
consideration is whether on the evidence
led it was possible to arrive at the
conclusion in question and not whether that
was the only conclusion which could be
arrived at on that evidence."
40. In the light of our aforesaid observations, in conjunction with
the discussion on the proposition we have dealt with, a prima
facie case appears from the facts of the case in the favour of
plaintiff. The credibility of the defendant's arguments, at this
stage, seems crumbling as its main defence that the MSA is an
"agreement to assign" may not have any bearing at all upon the
instant dispute. It tilts the scales in favour of the Pine Labs which
has fair chance to succeed in the suit. We, therefore, hold that it
has successful made out a prima facie case in favour.
41. As far as balance of convenience is concerned, the Ld. Single
Bench was of the view that:
"the balance of convenience at this stage
tilts towards defendant as the intention of
the parties being the defendant shall
remain the owner and further there is an
equitable right which vests with the
defendant and the plaintiff thus be not
inconvenienced but the defendant will more
inconvenienced at this stage if the
injunction is granted/ continued against the
prima facie equitable"
42. The question, which arises here, is that what is the subject
matter of the convenience which we are referring to? Is it the
business being carried on by the defendant regarding IOCL Fleet
Card Program by way of using different versions of the software
developed by the plaintiff? Or; it is the future venture of HPCL
Fleet Card Program for which the software is being developed by a
third party on the basis of source codes of the software developed
by the plaintiff for IOCL Fleet Card Program. As for as the IOCL
Fleet Card Program is concerned, it would be pertinent to note that
order dated 09/10/09 has been passed in IA No. 13030/09
regarding continuation of IOCL card system on the concession of
Pine Labs itself. Therefore, no question of hardship to the
defendant would arise regarding IOCL Fleet Card Program.
43. As far as inconvenience to the defendant regarding HPCL
Fleet Card Program is concerned, we can look into the matter from
two perspectives- firstly from the defendant's and then plaintiff's.
From the defendant's perspective it can be said that since the
software for HPCL Drive Track Plus Program is already out there in
the market and is being used by the defendant therefore any
adverse order will eventually stop the oprationalization of this
program. At the same time, technically, a de novo development
of new software of HPCL Drive Track Plus Programme which is not
born out of the source codes of IOCL Fleet Card Program is always
possible. Once it is found that the plaintiff has a strong prima
facie case and the defendant has no right to use any subsequently
developed version except version 1.03, in balancing the
convenience, the inconvenience to the plaintiff would be much
more.
44. As far as irreparable loss to the plaintiff is concerned, it
appears that since the plaintiff itself has calculated damages till
that point of time at ` 20,00,000/- the learned Single Judge formed
an opinion that the loss to the plaintiff cannot be termed as
irreparable and in the eventuality of plaintiff succeeding at the
stage of trial any loss which could have occurred to the plaintiff
can be calculated in monetary terms and the same can be
awarded to then plaintiff as compensation. This according to us is
not a correct appreciation of pleadings. If one reads the prayer
carefully, the plaintiff has prayed for passing, a decree for
rendition of accounts for damages tentatively assessed at `20
lacs". Thus, not only the damages at ` 20 lacs are assessed
tentatively, the plaintiff has sought specifically and separately also
made a prayer seeking a decree for rendition of accounts. It is
obvious expectation that the actual damages may be much more.
Moreover, once it is found that there is no assignment of the
impugned version of the programme by the plaintiff to the
defendant and the use of this programme by the defendant
amounts to violation of the plaintiff's copyright, the irreparable
loss/injuries would be suffered by the plaintiff if the defendant is
not prevented from using this programme.
45. In view of this, other arguments advanced by the learned
counsel for the appellant need not even been addressed to as the
present appeal warrants to be allowed on the aforesaid reasons.
Accordingly, we set aside the impugned order passed by the
learned Single Judge and direct that the injunction order dated 17th
December, 2009 passed in this appeal shall operate during the
pendency of the suit.
46. There shall, however, be no order as to costs.
(A.K. SIKRI)
JUDGE
(SURESH KAIT)
JUDGE
AUGUST 3,2011
Skb
