Vitasta Publishing Private Ltd. vs Georg Thieme Verlag KG

V.K. Jain, J.

IA No. 10286/2011 (u/O 7. Rule 14 Code of Civil Procedure) & IA No. 10287/2011 (Under Section 151 Code of Civil Procedure) in CS(OS) No. 2152/2010 IA No. 6590/2010 (u/O 39 Rule 1&2 Code of Civil Procedure), IA No. 11430/2010 (u/O 39 Rule 4 Code of Civil Procedure), IA No. 11431/2010 (u/O 39 Rule 1 Code of Civil Procedure) and IA No. 14337/2010 (u/O 39 Rule 1&4 Code of Civil Procedure) in CS(OS) No. 973/2010

The Plaintiff and the Defendant entered into a Cooperation Agreement dated 19th December 2005, whereby the Plaintiff was granted exclusive rights to market and promote, throughout the territory specified in the agreement, the then current publishing programme (excluding the on-line products) of the Defendant to the extent they were available for sale in the specified territory. This was followed by a second Cooperation Agreement effecting from 1st January 2008, for a fixed tenure of three years.

The parties also entered into separate Exclusive Reprint Agreements in respect of 27 titles mentioned in para 4.8 of the plaint. Under the agreements for reprint rights, the Plaintiff was required to pay an agreed sum, mentioned in each agreement, to the Defendant as licence fee, within 90 days from the date of the invoice. Para 12 of the agreement provided that in the event of the publisher i.e. the Plaintiff failing to comply with any of the terms and conditions of the agreement, and such breach or default remaining unremedied for a period of 30 days after notice thereof by the Defendant/owner to the Plaintiff/publisher, then, at the option of the Defendant/owner to be exercised in writing, the rights granted to the Plaintiff/publisher were to revert back to the owner/Defendant without prejudice to its rights to damages for such breach or breaches.

The case of the Plaintiff is that being the exclusive licencee for India it is the owner of copyright in those 27 titles, subject matter of the Reprint Agreements, and these Reprint Agreements could be terminated only in the event of Plaintiff committing breach of any of their terms or conditions and further on its failing to remedy the breach within 30 days of the receipt of the written notice from the Defendant. This is also the case of the Plaintiff that the Defendant was importing, printing, publishing, selling and distributing the "Subject Works" without its permission which amounts to infringement of its copyright in those works.

Suit CS(OS) No. 973/2010 has been filed seeking injunction against infringement of copyright of the Plaintiff and injunction against breach of the Cooperation Agreement 2008, besides seeking delivery up of all the infringing copies of publications that violate the right claimed by the Plaintiff in "Subject Works". In particular, the Plaintiff is seeking injunction restraining the Defendant from printing, publishing, selling or importing any of the aforesaid 21 titles in India.

The suit has been contested by the Defendants. With respect to licences for reprints, it is alleged that as per arrangement between the parties, the Plaintiff would secure an order from a pharmaceutical company for customized bulk supply, then obtain a quotation from a printer for printing the specified quantities as per that order, and then produce a profit and loss account as per a mutually agreed format. On the basis of such accounting, an amount was agreed and put into the Reprint Licence Agreement. This amount was equivalent to the net sales proceeded, minus printing cost and the Plaintiff was paid 16.5 % commission based on the amount arrived at and this amount was included in the Reprint Licence Agreement. It was always understood and agreed that such reprints were to be of a onetime fixed quantity to a specified customer, within a specified time and were not for sale in the open market. A clause was accordingly inserted on the reprints stating therein that they were for pharmaceutical market and not for resale in the trade market. It was also alleged in the Written Statement that a sizeable amount was due to Defendant No. 1 from the Plaintiff towards licence fee as well as towards unpaid invoices for the books which the Plaintiff had taken to resell on its own account. Vide interim order dated 17th May, 2010 this Court restrained the Defendants from importing and/or selling directly or indirectly the books covered in the agreement with the Plaintiff.

Vide notice dated 22nd September 2010 sent to the Plaintiff through counsel, the Defendant, referring to the agreement for reprint, informed the Plaintiff that it had not paid the licence fee in respect of the agreements referred in para 1 of the notice, despite more than 90 days having expired from the invoice and thereby committed breach of the terms of the agreements. The Plaintiff was called upon to comply with the terms of the agreements to pay the invoiced amount in respect of each of the agreements mentioned in para 1 of the notice, to the Defendant, within 30 days of the receipt of the notice, failing which the rights granted to the Plaintiff under the aforesaid agreements were to stand reverted to the Defendant automatically without further notice and without prejudice to its rights to claim damages for the breach alleged to have been committed by it. As many as 21 titles were mentioned in para 1 of the notice.

Suit CS(OS) No. 2152/2010 has been filed by the Plaintiff seeking declaration that notice dated 22nd September, 2010 is illegal and also seeking injunction restraining the Defendant from revoking exclusive rights granted to the Plaintiff under the Reprint Agreements mentioned in the notice.

In the Written Statement the Defendant has alleged that a sum of Euro 73835 was due from the Plaintiff towards licence fees as claimed in the notice. It is further alleged that out of 27 agreements between the parties, 21 have already been terminated by the notice dated 22nd September 2010, whereas the remaining 06 agreements are subject matter of dispute in CS (OS) No. 973/2010.

Vide interim order dated 25th October, 2010, this Court directed that the Plaintiff shall be entitled to sell or distribute the books which it had already published and printed under its agreement with the Defendant company, subject to the condition that it shall maintain an independent account in respect of the books which are distributed and/or sold or on after 25th October, 2010. As far as Cooperation Agreement is concerned, as noted by this Court vide order dated 20th January, 2011 passed in CS(OS) No. 2512/2010, its term having expired on 31st December, 2008, it does not subsist anymore and Plaintiff has No. legal right to seek its continuance thereafter.

While dismissing IA No. 14182/2010 filed by the Plaintiff for grant of interim injunction in CS (OS) No. 2512/2010 and allowing IA No. 16463/2010 filed by the Defendant, under Order 39 Rule 4 CPC for vacating the interim order passed by the Court in that Suit on 25th October, 2010, this Court inter alia observed as under:

The e-mail dated 25th September 2008 was replied by Mr. Sudesh on the same day. Mr. Sudesh informed Mr. Malik that he was trying to find out his resources to give response to him. He also noted that the Plaintiff was being given only six months'' time to pay and wind up operations with Thieme and wanted to know what would be the arrangement, thereafter.

It is thus quite clear that the offer made by the Defendant vide e-mail dated 25th September 2008 to the Plaintiff company was not accepted by the Plaintiff company. Hence, the Plaintiff can take No. advantage from the terms contained in this e-mail, including the offer to restrict the previous debt to Euro 12000. Assuming that offer made vide e-mail dated 25th September 2008 sent by Mr. Malik to Mr. Sudesh is still open for acceptance by the Plaintiff, this would require not only payment of Euro 12000 by the Plaintiff to the Defendant, it would also mean that the reprint agreement between the parties would have come to an end on 31st March 2009 and consequently the Plaintiff would have No. right to publish any of the titles, which were subject matters of reprint agreements, w.e.f. 1st April 2009.

The contention of the learned Counsel for the Plaintiff is that the reprint agreements between the parties were open ended, without any time limit having been fixed for publication of the titles subject matters of the agreements. Assuming this to be correct, the Plaintiff can publish those titles only subject to payment of the licence fee fixed under each agreement. Admittedly, the Plaintiff has not paid the agreed licence fee within 90 days from the date of the invoice, as was stipulated in the reprint agreements. In fact, even today the Plaintiff is not ready to pay the licence fee stipulated in the reprint agreements executed between the parties. What the Plaintiff wants is to take the advantage of the reprint agreements in order to continue publishing the titles subject matters of the reprint agreements forever, while at the same time take advantage of a part of the offer made by Mr. Malik of the Defendant company to Mr. Sudesh of the Plaintiff company by offering to pay only Euro 12000. This, to my mind is not permissible in law and available to the Plaintiff company. Firstly, the offer made vide e-mail dated 25th September 2009 was never accepted by the Plaintiff company. More importantly, under that offer, the Plaintiff has No. right to publish any title, subject matter of the reprint agreement after 31st March 2009. In any case, the Plaintiff could not have accepted and offer in part. It had/has to be either accepted or rejected as a whole.

Vide IA No. 10286/2011, the Plaintiff has sought to file additional documents comprising exchange of communication through e-mail, whereas vide IA No. 10287/2011, it has sought permission to reprint, distribute and/or sell the 21 titles, subject matter of the Reprint Agreements, which are covered by the notice of the Defendant dated 22nd September, 2010. IA No. 11430/2010 and IA No. 11431/2010 have been filed by Defendants No. 1 & 2 in CS(OS) No. 973/2010 seeking vacation/modification of interim order dated 17th May, 2010 and seeking injunction against the Plaintiff restraining it from printing/selling the subject works. IA No. 6590/2010 has been filed by the Plaintiff for grant of injunction restraining the Defendants from reproducing the Plaintiff''s "Subject Works" in any manner. IA No. 11930/2010 and IA No. 14337/2010 has been filed by Defendant No. 1 & 2 seeking vacation/modification of the interim order passed by this Court on 17th May, 2010 and 6th September, 2010 in CS(OS) No. 973/2010.

As noted earlier, it is an admitted position that the Plaintiff before this Court has not paid the agreed licence fees in respect of 21 out of the 27 Reprint Agreements between the parties. The case of the Plaintiff during the course of arguments before this Court was that the Defendant had agreed to accept a sum of Euro 12000 from the Plaintiff towards a composite licence fees in respect of 27 agreements; the Plaintiff made payment of Euro 1987 to the Defendant on 19th January, 2009 and the rest of the payment was agreed to be made in installments. It was also informed during arguments that the balance payment has also been deposited by the Plaintiff during pendency of the suit.

I have carefully perused the exchange of e-mails between the parties. I have also taken into consideration the copies of e-mails which the Plaintiff did not file initially but has filed along with IA No. 10286/2011. Vide e-mail dated 16th August, 2008 Mr. Malik of the Defendant company, informed Mr. Sudesh of the Plaintiff company that as per their calculations, they were to receive approximately Euro 51000 from the Plaintiff and that he would try to get the Defendant to accept a onetime payment of Euro 15000 and close the books. He sought confirmation of the Plaintiff in this regard. Vide e-mail 18th August, 2000 Mr. Sudesh informed Mr. Malik that Plaintiff would be more comfortable paying Euro 10000 but asked him to negotiate this further. Vide e-mail 24th September, 2008, Mr. Malik informed Mr. Sudesh that he would go for payment of Euro 12000 in installments and that around Euro 3, 5 or 4 could be paid by the Plaintiff to start with. There was No. response from the Plaintiff company to the offer made by Mr. Malik to the Plaintiff company vide e-mail dated 24th September, 2008. As already discussed by me in order dated 20th January, 2011 vide e-mail dated 25th September 2008 sent by Mr. Malik of the Defendant company to Mr. Sudesh of the Plaintiff company, the Defendant informed the Plaintiff that he had obtained official agreement from the Directorate at Thieme to reduce the old business debt to Euro and had also obtained the agreement that they would continue their relationship between the parties until 31st March, 2009 after which they would stop the business relationship. The Plaintiff was requested to give suggestion as to how balance payment could be made by 31st March, 2009. A written agreement was also suggested so that the amount of Euro 35000 could be written off. In reply, Mr. Sudesh informed that he was trying to find his resources to give response to him. He also noted that the Plaintiff was being given only 06 months time to wind up operations with the Plaintiff and sought to know what arrangement would thereafter be.

Vide e-mail dated 3rd December, 2008 Mr. Malik informed Mr. Sudesh that the official take was that they were going to cooperate until 31st March, 2009 and until then, the Plaintiff would pay Euro 12000 to the Defendant. He also informed that until that time, the Defendant would give full support to the Plaintiff with samples and timely delivery of orders etc. Again, there was No. acceptance of the offer made by Mr. Malik to the Plaintiff company. No. reply was sent by the Plaintiff to the Defendant, agreeing to pay Euro 12000 to the Defendant and further agreeing to stop cooperation between the parties after 31st March, 2009. Vide e-mail dated 12th January, 2009 Mr. Sudesh informed Mr. Malik about transfer of Euro 1987 to the Defendant on 9th January, 2009 and stated that rest they could talk when they meet. He further made it clear that the Plaintiff was in No. position to pay what he had said, by March. Thus, the Plaintiff company clearly refused the offer of the Defendant to make payment of Euro 12000 and stop cooperation between the parties by 31st March, 2009. Mr. Malik writing to the Plaintiff company that they were going to cooperate only until 31st March, 2009 clearly implied that payment of Euro 12000 was to be made by that date. Exactly same was the understanding of the Plaintiff with respect to the offer made by Mr. Malik on behalf of the Defendant company as is evident from Mr. Sudesh saying "Vitasta is in No. position to pay what you said by March". In view of this e-mail which is a document relied upon by the Plaintiff itself, it cannot be disputed that the offer of the Defendant to accept Euro 12000 in full and final settlement of the liability of the Plaintiff under the Licence Agreements by 31st March, 2009 was expressly rejected by the Plaintiff company. There is absolutely No. material on record to indicate that the Defendant company had agreed to accept any part of the payment beyond March, 2009. This is evident from the e-mail dated 13th January, 2009 sent by Mr. Malik to Mr. Sudesh whereby he stated "if the full payment cannot be made by March, I will have a serious problem". He also sought to know whether partial payment could be made if so, to what amount. There was No. response from the Plaintiff company to this e-mail from Mr. Malik meaning thereby that the Plaintiff company was not ready even to commit a partial payment in reply to the e-mail dated 13th January, 2009.

From the above referred exchange of e-mail between the parties, it appears to me that the offer made by the Defendant company to accept a sum of Euro 12000 from the Plaintiff company by 31st March, 2009 was never accepted by the Plaintiff company and therefore it did not result into a concluded contract between the parties for payment of Euro 12000 in full and final settlement of all the dues of the Defendant company.

A perusal of the agreement for reprint rights would show that the rights and licences granted by the Defendant to the Plaintiff were subject to the terms stipulated therein including payment of the same specified in the agreement as licence fees and the due date for payment was 90 days from the date of the invoice. Since the licence granted to the Plaintiff company was conditional on payment of the licence fees within 90 days from the date of invoice and admittedly payment in terms of the agreement was not made, the Defendant was very much entitled in law to give a notice to the Plaintiff company requiring it to pay the amount of the licence fees within 30 days of the receipt of the notice and was also right in stating that in case of failing of the Plaintiff to make payment of the licence fees, the rights granted to it under the agreements were to revert back to the Defendant automatically without further notice. Since the Plaintiff had not only committed breach of the terms of the licence by not making payment of the licence fees within 90 days from the date of the invoices, but had also failed to make the aforesaid payment within the time stipulated in the notice dated 22nd November, 2010, it is not entitled to exercise any right under the 21 reprint agreements, licence fees for which have not been paid to the Defendant company. IA 10287/2011 is, therefore, liable to be dismissed.

As regards 06 licences, licence fees for which is stated to have been paid to the Defendant company, the Plaintiff can continue to exercise the rights which were granted to it under the licences subject matter of those 06 agreements.

A perusal of the documents filed by the parties would show that the books reprinted by the Plaintiff carried the inscriptions "ISBN 3-13-139781-0(GTV) Indian Reprint ISBN 81-8976612-0. This edition is licenced for distribution in India only as pharmaceutical premium and its sale is prohibited in the trade. Printed in India: Pocket Atlas of Endodontics Published by Vitasta Publishing Private Limited (Representing Thieme International for the South Asia Region)". The Plaintiff company while reprinting 06 titles subject matter of licences fees for which stands paid to the Defendant would continue to carry the above referred inscription and will sell the books only as pharmaceuticals premium. The Plaintiff company will not be entitled to sell those books in the trade meaning thereby that the book can be sold only to pharmaceuticals companies and nobody else. The Plaintiff company would keep true and faithful accounts of the printing and distribution of these 06 titles including the profits made by it from sale of the aforesaid 06 titles.

The interim orders stand modified and the applications stand disposed of in terms of this order.

CS (OS) No. 2152/2010 & CS (OS) No. 973/2010

List for framing of issues on 1st February, 2012.