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TMI Blog2011 (8) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. Meanwhil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lto 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame". While referring to the decision of Bombay High Court in Zee Entertainment Enterprises Ltd v. Mr. Gajendra Singh and Ors. 2008 (36) PTC 53 (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 equitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 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 Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionally, 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: 7.1 Ownership 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 right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aded 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. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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 paragraph 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork, 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 copyri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 v. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scretion 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 and Manufacturing Company 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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