DELHI HIGH COURT REFUSES TO ENFORCE FOREIGN JUDGMENT THAT RESTRAINS A PARTY FROM INITIATING LEGAL PROCEEDINGS

The #DelhiHighCourt has in a recent case of Interdigital Technology Corporation and Others vs Xiaomi Corporation and Others, passed a Judgment dated 09-10-2020 and held that a #foreigncourt cannot compel a party to #refrain from initiating #legalaction or withdraw pending #legalproceedings filed in another foreign court.

In this case, Wuhan Intermediate People’s Court (the Wuhan Court) passed an Order dated 23-09-2020 in favor of Xiaomi Corporation and held that InterDigital, Inc., InterDigital Holdings, Inc. and their affiliates shall refrain from filing any suit or application for permanent injunction, etc against Xiaomi Corporation and others before any court in India, China or other countries, seeking adjudication of royalty rates charged by Xiaomi Corporation for 3G and 4G Standard Essential Patents (the Anti-Suit Injunction Order). Failing which, InterDigital, Inc., InterDigital Holdings, Inc. and their affiliates would be liable to pay RMB 1 Million Yuan per day of violation.

Standard Essential Patents (SEPs) are the common technology standards set for technical requirements or specifications that have to be followed by manufacturers of mobile phones, tablets and other electronic devices. These SEPs are set and owned by entities (SEP Holder) in terms of the globally applicable standards formulated by Standard Setting Organizations (SSOs) such as European Telecommunications Standard Institute (ETSI).

The SEP Holder is under an obligation to grant license of the SEP to third parties on fair, reasonable and non-discriminatory terms. In return, the third parties have to pay reasonable royalty rates to the SEP Holder. The purpose of granting license is to ensure that the third parties manufacture, sell, lease, repair or dispose of equipments in accordance with the technology standards set by the SEP.

In this case, InterDigital, Inc., InterDigital Holdings, Inc. and their affiliates, being aggrieved by the Order dated 23-09-2020 passed by the Wuhan Court, moved an Application before the Delhi High Court seeking injunction to restrain Xiaomi Corporation and Others from enforcing the Anti-Suit Injunction Order of the Wuhan Court dated 23-09-2020.

The Delhi High Court made the following observations in this case:

1. That the Defendants had failed to serve a copy of the Application for Injunction filed in the Wuhan Court to restrain the Plaintiffs from filing a suit or other application in any court in India, China or other countries. This establishes the fraudulent intention of the Defendants to supress material facts about the litigation preferred in China.

• That the purpose of filing the Anti-Suit Injunction Application by the Defendants in the Wuhan Court without the knowledge of the Plaintiffs, seems to exclude them from interfering with the hearing and adjudication regarding fixation of global royalty rates between the Parties.

• That the proceedings initiated by the Plaintiffs in the Delhi High Court are maintainable in law and the Plaintiffs were entitled to file this Suit in the Delhi High Court. Therefore, the Defendants cannot be allowed to enforce the Anti-Suit Injunction Order dated 23-09-2020 passed by the Wuhan Court, otherwise it would defeat the right of the Plaintiffs including the right to address the issue of royalty rates.

• That the Wuhan Court, being a foreign court, cannot pass an Anti-Suit Injunction Order and compel the Plaintiffs to withdraw proceedings or initiate proceedings against the Defendants in India. The right to initiate prosecution and legal proceedings is a right granted by the law. Moreover, the Wuhan Court did not even provide any reasonable justification for passing such an Anti-Suit Injunction Order.

• Further, an anti-suit injunction cannot be granted to restrain a person from instituting proceedings in a court not subordinate to that court, or to restrain any person from applying to any legislative body, or to restrain any person from instituting or prosecuting any proceeding in a criminal matter, etc, under Section 41 of the Specific Relief Act 1963.

Based on the aforesaid grounds, the Delhi High Court held that the Defendants did not act fairly with the Plaintiffs and that the Order of the Wuhan Court violated the public policy of India. Therefore, the Delhi High Court did not allow the Anti-Suit Injunction Application of the Defendant.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer