Clearing the way (clearing) or a declaration of non-infringement refers to an application to the court for a declaration that a new business does not infringe an existing patent. The power of a court to make a declaration of non-infringement is contained in section 105 of the Patents Act, 1970. This provides that “any person may institute a suit for a declaration that the use by him of any process, or the making, use or sale of any article by him does not, or would not, constitute an infringement of a claim of a patent against the patentee or the holder of an exclusive licence under the patent, notwithstanding that no assertion to the contrary has been made by the patentee or the licensee”.
The applicant cannot challenge the validity of the patent but must show that he has written to the patentee or licensee giving full particulars of the process or article in question, that he has asked for a written acknowledgement as to the effect of the declaration and that the patentee or licensee has refused to do so. The applicant must pay the costs of all parties.
Patentees often makes an application to the court for an interim injunction against the alleged or would-be infringer. Courts will usually decide such applications on the balance of probabilities with the chances of obtaining an interim injunction decreasing the nearer to the date of trial. The Supreme Court has shown itself to be more in favour of early trials than of interim orders. These approaches together with the increasing use of mediation have reduced the number of applications for interim injunctions.
This not been the case, however, in disputes over pharmaceutical patents. In order to counter the increasing use of applications for interim injunctions in this field, potential defendants have resorted to making applications for declaration of non-infringement. Success in such applications will avoid the disadvantages of defending applications for interim injunctions such as applying to lift an ex parte order with the possibility of having to give guarantees for large sums in lieu of an injunction. The Delhi High Court in Communication Components Antenna Inc. and Ace Technologies Corp. And Ors ordered the defendants to give a bank guarantee and pay ₹400,000 into court.
Increasing use of negative declaration: In a dispute relating to the drug Apixaban, Natco has applied to the City Civil Court in Hyderabad for a declaration of non-infringement on the ground that its product has the international nonproprietary name Apixaban which does not therefore infringe an existing patent. The strategic benefits of a clearing order are obvious. However, the Delhi High Court in Bajaj Auto Ltd vs TVS Motor Company Ltd. reminded applicants that the statutory requirements are to be strictly observed. As there was total non-compliance with those requirements no declaration was granted to the applicant.
Benefits and conclusions: It is settled law that obvious improvements of an existing patent are not patentable except by way of a patent of addition. Therefore, where an applicant for a declaration of non-infringement wishes to launch a product which is an obvious improvement and for which no patent can be granted he may in theory immediately do so. However, it may be that a clearing order will save him the trouble of having to defend applications for interim injunctions or apply to discharge ex parte injunctions with the associated risk of financial orders. Even if such an applicant were to be successful in defending an application for injunction the time and expense that he would have to incur might discourage him from continuing with production and deter him from entering his target market.
An application is a declaration of the applicant’s right to make and sell its own products. It is particularly useful in the crowded technology field where the maker of generic pharmaceutical drugs wishes to enter a particular marker before the expiry of the basic patent It is better for the generics manufacturer to clear its intended activities in advance rather than simply launching his product and thereby alerting the patentee to a probable decline in prices and profit.
If the potential infringer walks into the infringement trap with their eyes open to the risk they are taking they can do so at their own peril. However, the better option when you know the risk is to remove the danger by obtaining a declaration of non-infringement under section 105 before you attempt to launch the generic product. Such orders may well become as common in India as in other jurisdictions, such as England and Wales.
Article was 1st published in the India Business Law Journal