By Sagarika Chandel, KIIT School Of Law, Bhubaneswar.
A legal battle has been waging in India between one of the largest Indian mobile handsets company, Micromax Informatics ltd. and the Chinese smartphone start-up company Shenzen OnePlus Technology Co. ltd. over the rights to distribute the commercial version of the Android based open source operating system called ‘CyanogenMod’. The crux of the case lies in the fact that a U.S based company engaged in developing mobile software, one of which is Cyanogen entered into an exclusive use agreement with Micromax when it already had an agreement with OnePlus. To understand the case, it is necessary to delve into the agreements of the respective companies.
The Agreement between Micromax and Cyanogen
Micromax and Cyanogen entered into an agreement termed as ‘Ambient Services And Application Distributions Agreement’ to be effective from 26th November 2014. As per the agreement, Micromax was afforded a licence for the purpose of integrating and distributing core operating system CyanogenMod in India. Clause 3.2 and clause 4 of Schedule A (Special Terms) of the said agreement states that even though the licence granted to Micromax is non-exclusive but for certain countries namely India, Bangladesh, Sri Lanka, Nepal, Pakistan and Myanmar, the exclusivity with respect to Ambient Services would be maintained. Further, as per 4(b) of the abovementioned clause, Cyanogen undertook to not collaborate with another Original Equipment Manufacturer (OEM) for the purpose of integrating core operating system with devices distributed by such OEM in India1.
In the plaint, Micromax has submitted that in or around August 2014, it came to the notice of Micromax that OnePlus intended to enter the Indian market with the devices that supported Cyanogen for which Micromax had exclusive rights. In an email dated 20th August, Micromax requested Cyanogen to take preventive measures against the same, to which Cyanogen responded confirming the exclusive rights vested in Micromax which were to be effective post the date of the agreement between the two parties. Also, Cyanogen stated that the agreement it had with OnePlus was subject to the rights created by Cyanogen qua a third party. The plaintiff (Micromax) also alleged that clause 6 (a) of the purported Trademark Licence Agreement provided the required exclusivity to Micromax by virtue of which OnePlus could not infringe or obstruct the Agreement between Cyanogen and Micromax and as per clause 10, this agreement was supposed to supersede any prior or contemporaneous agreement on this subject.
Agreement between OnePlus and Cyanogen
OnePlus had entered into a Trademark License Agreement dated 1st February 2014 and a Collaboration Agreement dated 28th February, 2014 with Cyanogen which is valid till 31st January, 2016. Further, OnePlus was granted a non-exclusive license for the entire world except Mainland China to use Cyanogen’s Trademark and software (Operating system labelled CM 11S)2.
As per the said agreement, Cyanogen developed the Operating system and was to provide the same for the duration mentioned in the agreements. Subsequently, OnePlus launched ‘OnePlus One’ mobile device in sixteen countries that supported CM 11S. The device was to be launched in India on the 2nd December, 2014 and a fortnight prior to the launch, OnePlus was informed by Cyanogen that the relationship between them had been terminated and was requested by Cyanogen to stop using its brand name for purposes of marketing in India. By means of a press release, it was informed to OnePlus about the exclusive agreement between Cyanogen and Mircomax in India and about Cyanogen not providing support to OnePlus. On 27th November, 2014 despite agreeing to provide OTA to OnePlus devices at first, Cyanogen backed out of the same by mentioning in its press release that its operating system would exclusively support Micromax mobile devices in India and no other device shipped to India.
Prior to the suit filed by Micromax, OnePlus filed a suit [CS (OS) No. 3688 of 2014] on the basis of the purported Trademark License Agreement, for injunction against Micromax and Cyanogen as per which an injunction restraining the defendants from instituting court proceeding against OnePlus in India was sought. This was filed by OnePlus as it rightly anticipated a suit that might be filed by Micromax or Cyanogen restricting it from infringing its copyright in their software or trademark in the brand name which would disrupt the launch of its device in India on 2nd December, 20143. The said suit is also listed before the court.
However, in the agreement between Cyanogen and OnePlus, it was stipulated in clause 8.12 that in case of a dispute, the governing laws of State of California would be applicable and in case of breach, the courts of Northern District of California would decide the claim or controversy arising out of the agreement. By inducting another licensee in India in the form of Micromax, Cyanogen had breached its agreement with OnePlus. But, as a result of the exclusive jurisdiction clause, no action against Cyanogen was maintainable in India.
Analysis of the emails exchanged
On analysing the emails exchanged between Cyanogen and OnePlus, it is evident that the parties shared a good business relation in many countries, with Cyanogen supporting the business of OnePlus and acknowledging its quality services worldwide. This could be the reason for OnePlus agreeing to remove Cyanogen from the press release while marketing its product as was marked in the email conversation dated 24th November, 2014. Despite this, OnePlus was preparing to launch its phone in India on the 2nd December 2014 while Cyanogen tried to clear its stand of the exclusive deal it had only with Micromax determined to terminate the licence of OnePlus in India. As of now, OnePlus has not taken any action against Cyanogen for the breach of contract which, even so, would not be maintainable in India due to the above-mentioned clause 8.12.
The Delhi High Court, considering the exclusive license of Micromax and the supersedence of its agreement with Cyanogen, granted ad-interim injunction against OnePlus, thereby restraining OnePlus from marketing, selling and shipping its mobile devices in India from 16th December, 2014. However, the OnePlus stock already lying in the market was allowed to be disposed of by the court.
On 24th December, 2014, a bench headed by Justice Pradeep Nandrajog raised the 16th December ban on OnePlus due to certain reasons such as-
- It was not a case for the grant of ad-interim injunction because Micromax served the mid-segment consumer as its product costs Rs. 8999 per piece while OnePlus served the high-end consumers with its product costing Rs. 22000 per piece. Thus, prima facie, neither of the two competed or entered into the territory of the other4.
- It was observed by the bench that it was unfair for OnePlus and Cyanogen as no time had been provided to them for filing their pleadings before the single judge decided the case basing on the application of Micromax.
- There was a need of a proper debate before the single judge on all issues including the terms of the agreements of the two companies with Cyanogen, which had lacked previously.
- The bench felt that certain arguments made by OnePlus needed to be given proper consideration before reaching a conclusion. For instance, OnePlus argued that its version of Cyanogen Operating System was different than the one for which Micromax had acquired the exclusive license and that since OnePlus had “no privity of contract”5 with Micromax, a suit for injunction could not be sought by Micromax against it. Also, Senior Advocate Mr. Kapil Sibbal appearing on OnePlus’ behalf stated that the exclusivity clause between Micromax and Cyanogen only meant that Cyanogen could not collaborate with any other mobile maker, but it did not stop OnePlus from doing business in any way.
The bench after effectively allowing OnePlus to resume its imports and sales, also decided that the case “shall be heard and decided afresh”6 on January 7th, 2015. The court also observed that Cyanogen had not been fair to either Micromax or OnePlus for entering into an exclusive use agreement with the Indian Company Micromax when it already had arrangements of using the operating software for OnePlus handsets in the entire world including India but excluding China7.
It would not be incorrect to state that OnePlus had been ‘wronged’ and suffered a breach of agreement at the hands of Cyanogen. The initial judgement, in my opinion, was correct because there existed no relation between Micromax and OnePlus and by virtue of the agreement between Cyanogen and OnePlus, the two parties were required to take legal actions only within California and this prevented their initial claim from going anywhere. However, the bench by revoking the judgement had taken into account the irreparable losses that OnePlus was subject to too, besides Micromax and upheld the belief system of justice in the judiciary which indeed is, laudable.
- Micromax Informatics ltd v Shenzen OnePlus Technology Company ltd and others [CS (OS) 3761/2014]
- The Economic Times