Court holds Micromax guilty of contempt of the injunction order since its subsidiary Yu Televentures continued to use the patents in question without permission
New Delhi: The Delhi high court on Wednesday said its November 2014 injunction that stopped Micromax Informatics Ltd from violating Ericsson’s patents applies to Micromax subsidiary Yu Televentures as well.
The court, which held Micromax guilty of contempt of the injunction order since its subsidiary continued to use the patents in question without permission, will hear the case next on 15 December.
Swedish telecom equipment maker Ericsson had sued Micromax in 2014 for using its patents in manufacturing Micromax phones without any payment to them. The court ruled in favour of Ericsson, and directed Micromax to pay a specific amount of royalty to Ericsson. The amount was fixed at ₹ 55 crore after negotiation by the two parties.
Subsequently, Ericsson found that a Micromax subsidiary Yu Televentures continued to make and sell phones using the same patents without any payments. The Swedish firm went to court again, but Yu Televentures claimed it was a separate legal identity under the law and the injunction did not apply to it.
Rejecting the argument, Justice Nazmi Waziri on Wednesday issued bailable warrants to three common directors and principal promoters of Yu Televentures and promoters of Micromax, returnable on 15 December.
Ericsson’s lawyers identified the three directors as Sumeet Kumar, Rahul Sharma and Vikas Jain.
“These were common directors who were well aware of the import of the operative injunction order and tried to circumvent it under the garb of a subsidiary company," Justice Waziri held.
The order said the 2014 injunction was on use of Ericsson’s patents and the non-payment of royalty for its use, and the contention of Yu Televentures being a subsidiary of Micromax was not sustained.
“They have been dishonest while saying that Yu Televentures was not a wholly-owned subsidiary of Micromax as they had themselves stated this in their reply," senior advocate Neeraj Kishan Kaul appearing for Ericsson said told the court.
It was also pointed out that in a statement of sales which was filed, it was seen that the agent for both Micromax and Yu Televentures was the same and that their contention of it being a separate legal identity cannot be sustained.
He further said that when a case of contempt is made out by the court, it was the court’s duty to pierce the corporate veil and determine if the subsidiary company had been formed only for such purpose.
The court noted that Yu Televentures was incorporated in 2014, which was prior to passing of the order of injunction.