The continuing patent litigation between joint venture Enercon (India) and foreign partner Enercon GmbH has stirred media attention in India, and in Germany where wind energy market leader Enercon GmbH was founded. Key to the dispute is the struggle for management control of the JV between Enercon GmbH and domestic partner the Mehra Group. Market commentators share mixed views over the importance of this matter and have urged a measured perspective on the issues involved.
Enercon (India) was incorporated in 1994 by Enercon GmbH and the Mehra group, with the two entities holding 56% of shares and 44% respectively. At the onset of the partnership, the JV entered into a non-exclusive licensing agreement with Enercon GmbH for use of its equipment and technology, know-how and inventions of foreign parents. With the expiry of this agreement over time, negotiations were undertaken in 2005 and 2006 to replace it with an intellectual property licensing agreement. Disagreements arose from these negotiations, and the dispute subsequently grew increasingly bitter.
For example, two Enercon GmbH executives were questioned by police in Mumbai in 2008 for allegedly conspiring to undermine the JV. Meanwhile, in 2009, Enercon GmbH started nine IP infringement suits while, in late 2010, the Intellectual Property Appellate Board (IPAB) revoked 12 of the 19 registered Enercon patents. The revocation petitions were signed by Yogesh Mehra, who was acting as managing director of the JV. Dr Aloys Wobben, the main shareholder and founder of Enercon GmbH, has appealed these revocations.
This case entered the media spotlight when Enercon GmbH made some public statements suggesting that the decisions by the Indian authorities were made in the ‘national interest’. Lall Lahiri & Salhotra partner Rahul Chaudhry says: “It is rather perplexing that Enercon GmbH made these statements. There was much media and public attention drawn, which threw a rather bad light on the Indian IP landscape.”
Certain elements of the German press accused the IPAB of bias, even suggesting that this case and dispute might deter foreign companies from investing in the company. But Luthra & Luthra partner Ameet Datta disagrees. “Quite simply, I see this as another patent litigation case and nothing more. It is easy to drum up emotion in such a case. Parties may complain about the lack of protection being afforded to patents in India, but the great thing is that any such gap can be challenged through the courts in India.”
He adds: “I feel the ‘foreign party versus Indian party’ aspect has been drawn to the fore, no doubt the result of some deft PR work.”
Among the many issues at stake is whether Mehra even had the authority to sign the petitions. Chaudhry says: “Enercon (India) claimed that a board resolution had authorised the managing director to sign revocation petitions against Enercon Gmbh. The IPAB decided that it was not the authority to decide the legality of the board resolution authorising the signature, and since the board resolution was not yet struck down it proceeded to hear the matter.”
Some IP practitioners have suggested that the dispute over licensing and patents could have been avoided altogether with a more comprehensive audit process prior to signing the licensing agreement. Lex Orbis managing partner Manisha Singh Nair says: “This dispute has indicated the significance of foreign investor parties conducting audits. This identifies what parts of a company’s IP would be exposed to the Indian market, and allow investors to then take appropriate measures for protection including mentioning it through a properly-worded clause in the joint venture agreement.”
Chaudhry adds that the key lesson to be learned from this case is that “commercial disputes may be prevented to some extent by ensuring, in the IP rights agreement, that the IP rights are acquired jointly by both of the partners or in the name of the JV itself”.
With valuable wind turbine technology at the core of Enercon (India) and Enercon GmbH’s businesses, this case has served to illustrate the importance of IP in commercial matters. The outcome of the case is still in flux, with IP matters in the High Courts and in appeal, and the fate of this JV, and with it Enercon GmbH’s interest in India, hangs in the balance.