V V SIVARAM Vs. FOSECO INDIA LIMITED

JUDGEMENT

(1.) THE defendants are in appeal, challenging the grant of an order of temporary injunction restraining them from manufacturing or selling or in any manner dealing with any product similar or identical to a product of the plaintiff, respondent herein, known as Turbostop, a contoured impact pad which is used in steel plants to withstand the impact of molten steel that is poured into a vessel called. Tundish, in casting and processing of steel. The contoured impact pad prevents the molten steel from perforating the tundish and enables the controlled containment and flow of steel.

(2.) THE parties are referred to by their rank before the Trial Court for convenience.

(3.) THE facts of the case as narrated by the parties are as follows. The plaintiff is a company incorporated under the Companies Act, 1956 and was established in the year 1958. It is engaged in the manufacture of specialty chemicals and allied products pertaining to Foundry and steel industry. It has its own research and development wing engaged in developing newer processes and innovative technologies. The plaintiff is part of the FOSECO group of Companies, which carry a worldwide reputation. The group, including the plaintiff, holds patents for several products. One such product is "turbostop", which is a specially designed and engineered "contoured Impact Pad" (CIP ). Till the invention of "turbostop" the normal process in casting of steel was that molten steel would flow from a ladle and hit a flat impact pad kept at the bottom base of the vessel known as Tundish. The flow of steel after hitting the impact pad was not susceptible to control, this affected the time upto which the molten steel could be retained in the Tundish. Unless the molten steel could be retained for an ideal time - the non-metallic inclusions would not float and would not be capable of removal, resulting in poor quality steel. With Turbostop this difficulty was overcome. It is a novel product developed after original research work over several years. The FOSECO group of companies have developed the capability to manufacture Turbostop to cater to the needs of any kind of steel plant. As the size and shape of Tundishes vary, the temperature of molten steel, casting speed and grades of steel depending upon the particular plant. This knowledge is available after extensive research. The design specifications and materials going into the manufacture are usually unique and not available in the public domain. "turbostop" was invented in the year 1990 and patent was granted in the United States of america. For newer versions, patent applications are said to be pending both in the USA and india. Turbostop was introduced in India in the year 1992. Defendants 1 and 2 are ex-employees of the plaintiff. Defendant 1 was employed as Senior product Manager in the year 1988. He left the Company in the year 2002, opting for voluntary retirement. He was by then Group Product Manager. In the course employment he had access to confidential information pertaining to several products, including Turbostop. Even though he was engaged in marketing - he was possessed of detailed information of the products and had access to the data. Defendant 2 joined the plaintiff in the year 1988 as Senior Product Engineer. He resigned voluntarily in May 2002. At that point of time he was Group Product Manager Tundish Products. He had worked as Market Development Manager of the plaintiff and had detailed knowledge and information about the products of the plaintiff, including Turbostop. There was a contractual obligation on the part of defendants 1 and 2 not to make use of the confidential information acquired by them in the course of employment. They were also not to compete with the plaintiff in any of its businesses for a period of 5 years after cessation of their employment. Defendants 1 and 2 worked at Bangalore, where a branch of the plaintiff is situated. Defendant 3, the Proprietor of Ravitejus Industries, was introduced by defendant 1 to the plaintiff and defendant 3 recommended that part of the manufacturing process of plaintiffs products could be contracted out to defendant 3. Accordingly, there was a manufacturing contract between defendant 3 and the plaintiff. Defendant 3 was hence provided with detailed information pertaining to the products of the company, such as specifications, formulae, manufacturing process, quality parameters etc. Therefore, defendant 3 was bound under the contract with the plaintiff, to maintain confidentiality regarding information gathered by him during the tenure of the contract and that he would not compete directly or indirectly with the plaintiff, in its business during the period of the contract and for 5 years after expiry of the agreement. It is the plaintiffs case that in May 2002 defendant 2 resigned from the Company. In the same month the manufacturing contract with defendant 3 came to be terminated, in view of the plaintiffs Tundish product line business being transferred to one Vesuvius India Limited. Immediately, thereafter the plaintiff-company had introduced a Voluntary Retirement Scheme for its employees. Defendant 1, as it was seen in retrospect, with a definite design of carrying out a master plan of establishing a rival business organisation marketing products identical to that of the plaintiff, in conspiracy with defendants 2 and 3, opted for voluntary retirement on 22-10-2002. And on 28-10-2002 defendant 4-Company was incorporated with the wives of defendant 1 and defendant 3 as promoters. For all purposes it was run by defendants 1 to 3. This is apparent from the fact that defendant 3. Defendant 1 along with defendant 2 and his wife soon were appointed as directors of the Company. The main objectives of defendant 4-Company was to carry on business in metallurgical industries and as dealers in metallurgical chemicals and products, same as that of the plaintiff. Jindal Vijayanagar Steel Limited (JVSL) was a major customer of the plaintiffs products. All the tundishes in the entire steel plant of JVSL were fitted with Turbostop. The same were specially designed for JVSL after sustained study and trial. Defendants 1 and 2, by virtue of their employment with the plaintiff were closely associated with the marketing of the product to JVSL and were privy to detailed information in this regard. Significantly, just prior to the suit the plaintiff had learnt that defendants 1 to 3 as part of defendant 4 have offered to supply the very product, at a much cheaper price, to suit JVSL's requirements and have in fact started supplying the same. The plaintiff has learnt that the product supplied to JVSL is identical in all respects to turbostop. It would be phenomenal for such a product to be developed, manufactured and supplied by a company within months of its incorporation. The unerring presumption therefore is that the defendants are blatantly manufacturing with the know-how obtained from the plaintiff and selling Turbostop under a different name. The surreptitious manner in which the defendants are marketing the product is apparent from the fact that the website of the defendants does not disclose that any product similar to Turbostop is manufactured by them. In the exchange of notices however, it is not denied that such a product is in fact marketed by them. However, it is sought to be contended that information about the product is available in the public domain and it cannot be held to be exclusive to the plaintiff. The plaintiff contends that defendant 4 is promoted by defendants 1 to 3 and is only a facade for them to carry on the business utilising confidential information pertaining to the plaintiff defendants 1, 2 and 3 have breached their contractual obligations to maintain confidentiality of information. Defendants 3 and 4 in association with defendants 1 and 2, manufacturing products based on information acquired through them is illegal. Plaintiff has reserved its right to claim relief against defendant 3 in respect of violation of contractual obligations in arbitration proceedings -in the suit the relief claimed is outside the contract and is in equity. The plaintiff alleges violation of copyright, in that the design and drawings of Turbostop supplied to JVSL are original works, belonging to the plaintiff. The defendants contend that defendant 4 is an independent entity and the alleged cause against it cannot be pleaded synonymously with the plaintiff. Defendant 1 is said to have filed a suit in o. S. No. 5040 of 2003 challenging the dominant marketing position of the plaintiff. The defendants claim misjoinder of action. As defendant 3 again has his own status as an independent contractor who was engaged by the plaintiff and the contract terminated midway. It is contended that patents are strictly territorial and existence of foreign patents is of no relevance. In any event the plaintiff is existing from the steel operation business and the fact that services of many of its employees are terminated, including that of defendants 1 and 2, is a case in point, the information as regards CIP is a matter of public knowledge and all the more obvious to skilled persons in the industry. The naming of the product as Turbostop is only an attempt to appropriate a generic name for the product. Even before the plaintiff introduced Turbostop in the indian market during 2000 similar products were being sold worldwide. The plaintiff has not produced any Indian patent. The existence of a foreign patent in the name of the plaintiffs foreign patent is irrelevant.