CODE- R-41

Before

THE HON’BLE SUPREME COURT OF INDIA

CIVIL APPEAL UNDER ARTICLE 136 OF THE CONSTITUTION OF INDIA, 1950

Civil Appeal No. 19/2020

MR. JOYON

MR. SANMONTO …
APPELLANTS

SHUBHAM SINGH SOMVANSHI …RESPONDENT

 -Table of Contents-

TABLE OF CONTENTS

TABLE OF CONTENTS.........................................................................................................I

LIST OF ABBREVIATIONS...............................................................................................III

INDEX OF AUTHORITIES.................................................................................................IV

STATEMENT OF JURISDICTION.....................................................................................V

STATEMENT OF FACTS....................................................................................................VI

QUESTIONS PRESENTED...............................................................................................VII

SUMMARY OF ARGUMENTS.......................................................................................VIII

ARGUMENTS ADVANCED..................................................................................................1

1. THE DISPUTE CANNOT BE REFERRED TO ARBITRATION FOR RESOLUTION......................1

1.1. The issue in dispute is non-arbitrable and thus the case cannot be resolved via
arbitration..........................................................................................................................1
1.1.1. The dispute involves right in rem, rather than right in personam, making it fall
under the category of non-arbitrable disputes................................................................1
1.1.2. The arbitration clause contains a pathological arbitration clause, thus is
invalid.............................................................................................................................2
1.1.3. Unconscionable arbitration agreements are null and void.................................3
1.2. The arbitrator appointment clause in the agreement signed by the parties is
invalid................................................................................................................................4
1.2.1. The condition placed for deciding who would be selecting the third arbitrator
is biased and unfair.........................................................................................................4
1.2.2. Shubham agreed to such unreasonable terms due to unconscionable bargain...5
2. MR JOYON’S CLAIM FOR THE ENTITLEMENT OF CO-OWNERSHIP RIGHTS OF THE PATENT
IS ERRONEOUS AND CANNOT BE ACCEPTED............................................................................6

2.1. The agreement signed between Joyon and Shubham is an ‘agreement to assign’
rather than an actual agreement, hence is not eligible to transfer ownership rights........6
2.2. Registration of the assignment agreement forms an integral step in the transfer
of ownership rights, the absence of which renders the agreement inadmissible...............7
2.3. A separate deed outlining the intricacies of the assignment has to signed after
completion of the innovation even if there already exists a pre-invention assignment
agreement...........................................................................................................................8

MEMORIAL for THE RESPONDENT

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 -Table of Contents-

2.4. The agreements regarding the ownership title are unenforceable if they are
unconscionable, i.e. grossly unfair to either of the parties................................................9
3. THE DAMAGES CLAIMED BY MR SANMONTO CANNOT BE GRANTED...........................10
3.1. There is no fraudulent misrepresentation in the given case and thus there arises
no liability for Shubham to pay the damages..................................................................10
3.1.1. The statement made by Shubham had no fraudulent element; hence there was
no intention to deceive.................................................................................................10
3.1.2. It was not Shubham who was inducing Mr SanMonto’s to enter into a contract
but the vice versa..........................................................................................................11
3.1.3. Mr SanMonto did not exercise ordinary diligence required before entering into
the contract...................................................................................................................11
3.1.4. Loss caused to Joyon is indirect; thus, he cannot claim damages....................11
3.2. The claim of damages by Mr SanMonto on the basis of loss of reputation is
invalid..............................................................................................................................12
3.2.1. Damages are claimed where a loss is incurred due to the breach of contract,
while in the present case, Shubham did not breach the contract only..........................12
3.2.2. Even if a breach occurs, loss of reputation is an indirect loss, and thus no
damages can be granted for the same...........................................................................12

PRAYER.................................................................................................................................14

MEMORIAL for THE RESPONDENT

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 -Index of Authorities-

INDEX OF AUTHORITIES

STATUTES

1. The Arbitration and Reconciliation Act, 1996.---------------------------------------------------2

2. The Copyright Act, 1957----------------------------------------------------------------------------7
3. The Indian Contract Act, 1872----------------------------------------------------------------11, 12
4. The Patents Act, 1970--------------------------------------------------------------------------------7
CASES
1. [1965] 1 WLR 248 (PC).-------------------------------------------------------------------------------12
2. A.M. Rasool Const. & Engg Services Pvt. Ltd. v. National Bldgs. Const. Corpn. Ltd., 1997
SCC OnLine Del 782-------------------------------------------------------------------------------------4
3. Arvind Kumar Jain v. Union of India, ARB.P. 779/2019.------------------------------------------4
4. Basant Lal Wadhera v. Union of India, 1996 SCC OnLine Del 926-------------------------------5
5. Bharat Broadband Network Limited v. United Telecoms Limited, (2019) 5 SCC 755.---------4
6. Bhaurau Dagdu Paralkar v State of Maharashtra, Appeal (civil) 5162-5167 of 2005---------10
7. Booz Allen and Hamilton Inc v. SBI Home Finance, (2011) 5 SCC 532.------------------------1
8. Central Inland Water Transport Corporation Limited v. Brojo Nath Ganguli,  (1986) 3 SCC
156-------------------------------------------------------------------------------------------------------5, 7
9. Harilal Dalsukhram Sahiba v. Mulchand Asharam, (1928) 30 BOMLR 1149.-----------------11
10. Hoyt Props. v. Prod. Res. Grp., LLC, 736 N.W.2d 313, 321 (Minn. 2007).--------------------11
11. Lewis v. Citizens Agency of Madelia, Inc., 235 N.W.2d 831 (Minn. 1975).-------------------11
12. M/s. National Research Development Corp v. Ineos ABS Ltd., RFA(OS)No. 73 of 2009.----9
13. Pine Labs Pvt. Ltd v Gemalto Terminals India Pvt Limited, (2011) VIII AD (Delhi) 380-----6
14. Proddatur Cable TV Digi Services v. SITI Cable Network Limited, 2020 SCC OnLine Del
350.---------------------------------------------------------------------------------------------------------5
15. Raj Kumar Sharaf v. Visakha Chemicals Copyright Board, Case F. Nos. 3, 4, 5/2005---------6
16. RC Thakkar v. The Bombay Housing board, AIR 1973 Guj 34----------------------------------10
17. Sara International Limited v. Rizhao Steel Holding Group, 2013 SCC OnLine Del 223-------5
18. Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation, (2017) 4 SCC 665------------4
TREATISES
1. Dr. B.L. Wadehra, Law Relating to Intellectual Property, (4th ed., 2008).-----------------------8
2. Pullock and Mulla available at Lexis Nexis.---------------------------------------------------------11

MEMORIAL for THE RESPONDENT

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 -Index of Authorities-

ONLINE SOURCES
1. Kluwer Arbitration Blog, A false start uncertainty in the determination of arbitrability in
India, May 2018 available at http://arbitrationblog.kluwerarbitration.com/2016/06/16/a-
false-start-uncertainty-in-the-determination-of-arbitrability-in-india/?
print=print&doing_wp_cron=1596661699.8634231090545654296875 (Last visited on
August 5,2020).-------------------------------------------------------------------------------------------2
2. Kluwer Arbitration Blog, The legality of unequal arbitrator appointment powers in India- the
clarity the mist, March 3, 2020, available at
http://arbitrationblog.kluwerarbitration.com/2020/03/03/the-legality-of-unequal-arbitrator-
appointment-powers-in-india-the-clarity-the-mist/?doing_wp_cron (Last visited on August
6,2020).-----------------------------------------------------------------------------------------------------4
3. Nishith Desai Associates, Intellectual property law in India, January 2018 available at
https://nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/Intellectual_Property-
Law_in_India-Web.pdf (Last visited on August 6,2020).-------------------------------------------7
4. The Office of Controller general of Patents, designs and Trademarks, The Manual of Patent
Office Practice and Procedure, November 26, 2019 available at
http://www.ipindia.nic.in/writereaddata/Portal/Images/pdf/Manual_for_Patent_Office_Practic
e_and_Procedure_.pdf (Last visited on August 6,2020)---------------------------------------------8
5. Thomas Reuters: Practical Law arbitration Blog, Interpretation of pathological clauses: a
cautionary tale?, January 21, 2019 available at
http://arbitrationblog.practicallaw.com/interpretation-of-pathological-clauses-a-cautionary-
tale/#:~:text=The%20term%20%E2%80%9Cpathological%20clauses%E2%80%9D
%2C,smooth%20progress%20of%20the%20arbitration.&text=However%2C%20not%20all
%20%E2%80%9Cdefects%E2%80%9D,clause%20devoid%20of%20any%20effect. (Last
visited on August 6,2020).-------------------------------------------------------------------------------2
6. United Nations Commission on International Trade Law, 2012 Digest of Case Law on the
Model Law on International Commercial Arbitration, §20, ISBN 978-92-1-133793-8
available at https://www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf (Last visited
on August 6,2020).----------------------------------------------------------------------------------------3
7. Young ICCA Blog , Arbitrability of IPR disputes in India- 34(2)(b) or not to be, August 28,
2019 available at https://www.youngicca-blog.com/arbitrability-of-ipr-disputes-in-india-
342b-or-not-to-be/ (Last visited on August 5,2020).-------------------------------------------------2

MEMORIAL for THE RESPONDENT

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 -Index of Authorities-

8. Young ICCA Blog, Arbitrability of intellectual property disputes: setting the scene?, July 28,
2016 available at https://www.youngicca-blog.com/arbitrability-of-intellectual-property-
disputes-setting-the-scene/ (Last visited on August 5,2020)-------------------------------------1, 3

MEMORIAL for THE RESPONDENT

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 -Statement of Jurisdiction-

STATEMENT OF JURISDICTION

The jurisdiction of the Hon’ble Supreme Court has been invoked under Article 133 of the
Constitution of India in pursuance of the power of appellate jurisdiction of said august body.
An appeal lies to this Court from a judgement delivered by the High Court of Kolkata, on a
suit filed by one Mr. Joyon against one Shubham Singh Somvanshi, and a judgement
delivered by the High Court of Kolkata, on a suit filed by one Mr. SanMonto against one
Shubham Singh Somvanshi.

MEMORIAL for THE RESPONDENT

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 -Statement of Facts-

STATEMENT OF FACTS

I.

Shubham Singh Somvanshi, a final year student of computer science along with his friend
Monu Lahiri was passionate about developing a video game which would challenge the
intelligence of a player. Both of them were deeply inspired by their guest faculty Mr Joyon
Belgavikar who was also the CEO and MD of Seneca Gaming Industries. In January 2019,
both of them decided to develop such game and decided the graphics of the game as well.
The game was a combination of cunningness, deceit and trickery where the protagonist, his
friends and opponents had to secure hostel rooms for themselves. The toughness increased
with progressive levels adding new tasks at each subsequent level. It claimed that this game
would augment lateral thinking capability and regular players can even experience increment
in their intelligence quotient. The title of the game was decided to be “4D Room-Chess.”

II.

Shubham and Monu decided to drop out of the college and dedicate all their time to the
development of the game. Regarding the same, they contacted Mr Joyon for counsel and after
a hefty discussion, Mr Joyon permitted the same. He provided them with some tips and
pointers regarding programming and development as well which were very helpful for them.

Shubham and Monu decided to drop out of the college and dedicate all their time to the
development of the game. Regarding the same, they contacted Mr Joyon for counsel and after
a hefty discussion, Mr Joyon permitted the same. He provided them with some tips and
pointers regarding programming and development as well which were very helpful for them.

III.

Six months later, they were at crossroads as both of them lacked conceptual clarity regarding
the next step in game development. No prior experience and lack of resources forced them to
work in stringent conditions with fruitless outcomes. Soon Monu gave up the idea of
developing the game further and started searching for jobs. He finally got one at the
Simpurkar Bandhu Gaming Software that was founded by Mr SanMonto Yadava, the arch-
rival of Mr Joyon.

MEMORIAL for THE RESPONDENT

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 -Statement of Facts-

IV.

Meanwhile, Shubham met Mr Joyon at a restaurant, and when it came to Mr Joyon

knowledge that owing to lack of resources, Shubham is not able to develop the game any
further he suggested Shubham work with him and use the resources of his company instead.
Shubham was not willing to miss this opportunity accepted the offer and next day agreement
regarding employment and assignment agreements were signed by the parties. Shubham
worked very hard to develop and complete the innovation and Mr Joyon allowed him to work
without any interference from his side. He guided Shubham using his knowledge in the field
to help him overcome the roadblocks.

V.

With the completion of the game, Joyon asked Shubham to apply for the patent at the earliest.
Same was done by Shubham, and through this patent, he got exclusive ownership over the
game for 20 years. Joyon, who had already thought of various ways in which he was going to
exploit the game to make crore of rupees, was waiting for Shubham to get the patent before
deploying his plans. Joyon called for a meeting with his advisors to discuss the modalities,
where his legal advisor suggested him to enter into a different agreement exclusively
regarding co-ownership assignment as an extra measure to avoid any dispute in future.

VI.

Following the advice, Joyon called Shubham and told him about the requirement of another
document that needs to be signed and also informed him that Shubham would be getting 10%
of the total profit share made by the game. While Shubham was on his way to meet Joyon,
Mr SanMonto, who was informed about the deal between Shubham and Joyon by Mr Ispy
called Shubham and offered him to enter into a contract with him instead, under which he
would be giving him 50 lakhs as upfront payment and 20% cut in the profit share. Shubham
enticed by the consideration accepted the offered and signed a deal with Mr SanMonto.

VII.

Infuriated by this desertion by Shubham, Joyon appointed lawyers and ordered them to obtain
patent rights from Shubham at any cost. Meanwhile, SanMonto, quite happy with the deal,
decided to unveil the game in grand ceremony inviting Bollywood stars and other imminent
people. On February 1, Joyon through a press conference accused Shubham and SanMonto of
stealing intellectual property and announced the commencement of proceedings against both

MEMORIAL for THE RESPONDENT

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 -Statement of Facts-

of them.This explosive conference forced Mr SanMonto to cancel the ceremony organised

which led to a huge monetary loss and he was also forced to apologise in public for his role in
the fiasco.

VIII.

On February 3rd, Joyon sent Shubham a legal notice invoking clause 5 of the Employment
agreement according to which the dispute between the parties would be heard by an
arbitration panel. Joyon sought to initiate an arbitral proceeding in order to obtain co-
ownership rights in the patent. Shubham was invited to select the second arbitrator and
participate in the procedure laid to decide the appointment of the third arbitrator.

IX.

Since Shubham refused to reply to the arbitration notice, Joyon filed a suit in the High Court
where Shubham contended that the issue of the dispute was non-arbitrable in nature and also
the procedure for the appointment of the third arbitrator is invalid. The court rejected Joyon’s
plea and gave a verdict supporting the contentions of Shubham. A suit was also filed by
SanMonto against Shubham claiming damages for fraudulent misrepresentation and loss of
reputation which was also rejected by the High court. Shubham, in response to this suit,
stated that he is still willing to fulfil his contractual obligations.

X.

Both Joyon and SanMonto decided to appeal in the Supreme Court against these
unfavourable decisions by the High court. As the respondent in both the cases is same, the
Chief Justice clubbed the two cases and referred the case to a three-judge bench comprising
him and two other judges.

MEMORIAL for THE RESPONDENT

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 -Questions Presented-

QUESTIONS PRESENTED

The following questions are presented before the Hon’ble Bench for its consideration:

1. Whether the issues in dispute between Mr Joyon and Shubham are amenable to
resolution by arbitration and whether the arbitrator appointment clause is valid?

2. Whether Mr Joyon is entitled to be included as a co-owner of the patent for the “4D
Room-Chess”?

3. Whether Shubham is liable to pay damages to Mr SanMonto on account of

fraudulent misrepresentation and loss to reputation?

MEMORIAL for THE RESPONDENT

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 -Summary of Arguments-

SUMMARY OF ARGUMENTS

1. The issue in dispute is not amenable to resolution through arbitration as the object in
disputes is non-arbitrable in natures, and the arbitrator appointment clause is invalid
as it is unfair and unconscionable.
It is submitted that the issue in the dispute is non-arbitrable as the inherent right involved here
is ‘right in rem’ rather than ‘right in personam’ and also the arbitration agreement contains a
pathological arbitration clause which renders the agreement invalid. The terms of the
agreement depict that the arbitration clause is unconscionable and according to UNCITRAL
rules, such arbitration agreements are inoperable. The arbitrator appointment clause of the
agreement is invalid as the procedure laid down to decide the appointment of the third
arbitrator is biased and unfair to the Respondent circumventing the universal principles of
equality and impartiality.
2. Mr Joyon is not entitled to be included as co-owner of the patent for the “4D Room-
Chess”.
Mr Joyon’s claim to be included as co-owner of the patent cannot be accepted as the
agreements signed between the parties are ‘agreements to assign’ rather than actual
assignments thus granting no statutory rights. Other factors such as the absence of deed
assigning ownership rights after the completion of innovations and registration of the
agreement to assign the co-ownership also make Mr Joyon’s claim unsustainable. The terms
of the agreement to assign are highly unfair to Shubham, which point towards the
unconscionability of the agreement.
3. Shubham is not liable to pay damages to Mr SanMonto on the grounds of fraudulent
misrepresentation and loss of reputation.
Fraudulent misrepresentation involves the elements of deceit where one person induces the
other to enter into the contract on the basis of a statement which is known is not true. In the
present case, it is seen that Shubham nowhere made any such claim that he knows is not true
and it was Mr SanMonto who persuaded him to enter into a contract with him. Damages for
loss of reputation cannot be provided as this loss was indirect and unforeseeable for which
Shubham cannot be blamed.

MEMORIAL for THE RESPONDENT

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 -Summary of Arguments-

MEMORIAL for THE RESPONDENT

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 -Arguments Advanced-

ARGUMENTS ADVANCED

1. THE DISPUTE CANNOT BE REFERRED TO ARBITRATION FOR RESOLUTION.

1. It is submitted that the dispute between the parties cannot be referred for arbitration
because the issue in the dispute is non-arbitrable in nature (1.1) and the arbitrator
appointment clause in the agreement is invalid (1.2).
1.1. The issue in dispute is non-arbitrable and thus the case cannot be resolved via
arbitration.
2. It is humbly submitted that the dispute that has arisen between Joyon and Shubham is not
amenable to resolution by arbitration. Thus, the contention by Joyon that an arbitration
tribunal should try the dispute stands invalid. Whether a dispute can be referred for an
arbitration process or not depends on the arbitrability of the matter. In Indian
Jurisprudence, there exists no clear distinction between the arbitrable and non-arbitrable
matter. The courts are developing this demarcation through various judgements in which
they have laid tests, to determine whether the dispute in hand is amenable to arbitration
resolution or not. In the given circumstances, as the dispute involves right in rem (1.1.1) it
contains a pathological arbitration clause (1.1.2) arbitration agreement is invalid because
it is unconscionable (1.1.3), the dispute is NON-ARBITRABLE.

1.1.1. The dispute involves right in rem, rather than right in personam, making it
fall under the category of non-arbitrable disputes.
3. The SCI for the first time dealt with the concept of ‘arbitrability of the issue’ in the case,
Booz Allen and Hamilton Inc V SBI Home Finance 1. In this case, it laid down the ‘rights
test’ to determine whether a specific issue belongs to the category of arbitrable or non-
arbitrable issue. It asked to examine the nature of the right being involved. In case of right
in personam (i.e. rights exercisable against specific persons) the disputes are deemed to
be eligible for the arbitration process whereas in cases involving right in rem (i.e. disputes
concerning rights exercisable against the world at large), the dispute is considered to be
non-arbitrable and should be referred to courts for further trial.2 This test focusses on the
question of whether the dispute in question is “inherently” arbitrable or not depending on

1
Booz Allen and Hamilton Inc v. SBI Home Finance, (2011) 5 SCC 532.
2
Young ICCA Blog, Arbitrability of intellectual property disputes: setting the scene?, July 28, 2016 available at
https://www.youngicca-blog.com/arbitrability-of-intellectual-property-disputes-setting-the-scene/ (Last visited
on August 5,2020).

MEMORIAL for THE RESPONDENT

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 -Arguments Advanced-

the rights relied upon in the dispute.3 Ownership and title to patents, belong to the
category of right in rem as the actions regarding the determination of their title are not
confined to the parties themselves but also to against the general public having an interest
in the property. Also in the subsequent judgement in, A. Ayyasamy vs A. Paramasivam &
Ors4, the court clearly stated that disputes relating to “patent, trademarks and copyright”
are generally non-arbitrable. Though the Arbitration and Reconciliation Act, 19965
nowhere mentions the list of the arbitrable or non-arbitrable issues, section Sections 34(2)
(b) of the act, states that an arbitral award for a dispute involving a non-arbitrable matter
is not binding.
4. In the present case, the dispute between Joyon and Shubham is regarding patent
ownership which involves right in rem rather than right in personam. Thus, abiding by the
‘rights test’ laid down by the SCI and further judgments, it can be concluded that the
dispute involves non-arbitrable matter and is not amenable to resolution by arbitration.
1.1.2. The arbitration clause contains a pathological arbitration clause, thus is
invalid.
5. Pathological arbitration clauses usually refer to arbitration clauses with “apparent
defect(s) liable to disrupt the smooth progress of the arbitration.”6 The English Court
in Kruppa v Benedetti stated that interpretation of such ambiguous clauses might not
always help in ascertaining a definite course of resolution and thus, a structured
agreement for arbitration is desirable. 7 Indian courts have also recognised instances of
Pathological arbitration clauses. In Jagdish Chander v Ramesh Chander, the SCI upheld
that the clause which read “disputes shall be referred for arbitration if the parties so
determine” would not form a binding arbitration agreement owing to the absence of
“consensus ad idem” to refer the dispute to arbitration. 8 Instances of pathology also

3
Kluwer Arbitration Blog, A false start uncertainty in the determination of arbitrability in India, May 2018
available at http://arbitrationblog.kluwerarbitration.com/2016/06/16/a-false-start-uncertainty-in-the-
determination-of-arbitrability-in-india/?print=print&doing_wp_cron=1596661699.8634231090545654296875
(Last visited on August 5,2020).
4
Young ICCA Blog , Arbitrability of IPR disputes in India- 34(2)(b) or not to be, August 28, 2019 available at
https://www.youngicca-blog.com/arbitrability-of-ipr-disputes-in-india-342b-or-not-to-be/ (Last visited on
August 5,2020).
5
The Arbitration and Reconciliation Act, 1996.
6
Thomas Reuters: Practical Law arbitration Blog, Interpretation of pathological clauses: a cautionary tale?,
January 21, 2019 available at http://arbitrationblog.practicallaw.com/interpretation-of-pathological-clauses-a-
cautionary-tale/#:~:text=The%20term%20%E2%80%9Cpathological%20clauses%E2%80%9D%2C,smooth
%20progress%20of%20the%20arbitration.&text=However%2C%20not%20all%20%E2%80%9Cdefects
%E2%80%9D,clause%20devoid%20of%20any%20effect. (Last visited on August 6,2020).
7
Id.
8
Id.

MEMORIAL for THE RESPONDENT

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 -Arguments Advanced-

include ‘OR’ clauses. Such clauses provide various possible outcomes, thus, making a
process not a definitive one and rendering the clause nugatory.9
6. In the given circumstances, the procedure mentioned for the appointment of arbitrators
contains the ‘OR’ clause, where the decision of appointing the third arbitrator (that
depends upon flipping of five coins) would be taken either by Joyon OR by Shubham.
This presence of ‘OR’ clause depicts the uncertainty in the procedure, rendering this
agreement for arbitration invalid.
1.1.3. Unconscionable arbitration agreements are null and void.
7. According to the UNCITRAL principles, arbitration agreements which are unfair or one-
sided, are deemed to be “null and void, inoperative or incapable of being performed”. 10
Such unconscionable or abusive agreements are against public policy and hence are
invalid.11 Even, the SCI has followed the UNCITRAL principles and applied them to
cases to render the arbitration agreement invalid to ensure and enhance the
expeditiousness and effectiveness of the procedure. 12 Thus, in cases where the terms of
the agreement sow the idea of unconscionability, the agreement is so be considered
inoperative or invalid.
8. The terms that form the agreement that was signed between Joyon and Shubham are one-
sided, benefitting Joyon to a greater extent. Clauses stating that all the potential
discoveries by Shubham in due course of time would belong to Joyon implies how one-
sided the whole agreement was. As for the arbitration agreement, the arbitrator
appointment clause which lays down the procedure for the appointment of the third
arbitrator is unfair and biased as the chances of Shubham winning the flipping coin task
are bleak, and Joyon’s chances of winning are quite high. These arrangements show that
as Shubham was in dire need of resources to sustain himself and his project, Joyon agreed
to provide him with the same but placed some unreasonable conditions to which
Shubham as to agree because of the absence of any reasonable alternative. Thus,
according to the UNCITRAL principles, due to unconscionability the arbitration
agreement stands invalid, making the dispute not amenable to resolution by arbitration.
1.2. The arbitrator appointment clause in the agreement signed by the parties is
invalid.
9
Supra note 2.
10
United Nations Commission on International Trade Law, 2012 Digest of Case Law on the Model Law on
International Commercial Arbitration, §20, ISBN 978-92-1-133793-8 available at
https://www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf (Last visited on August 6,2020).
11
See id., §21
12
Id., 58.

MEMORIAL for THE RESPONDENT

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 -Arguments Advanced-

9. It is submitted that the arbitrator appointment clause as formulated by Mr Joyon is invalid

and thus cannot be undertaken for appointing the third arbitrator in case the parties refer
to arbitration process for resolution in case of a dispute. In the case of appointment of
arbitrators, the universal principle of equality acts as a limit to the freedom of the
parties.13 In the given circumstances, the procedure laid down for the selection of the third
arbitrator, that is via flipping of five coins is invalid as it is unfair because it makes
Shubham’s chances of winning a rare scenario, giving Joyon an overriding power (1.2.1)
Shubham agreeing to such conditions depict that this is a case of an unconscionable
bargain (1.2.2), thus making the appointment clause INVALID.
1.2.1. The condition placed for deciding who would be selecting the third
arbitrator is biased and unfair.
10. It is a well-established fact that independence and impartiality are the hallmarks of the
arbitration proceedings.14 In Bharat Broadband Network Limited v. United Telecoms
Limited15, the Supreme Court of India held that procedural fairness is essential to the
formation of any segment of a contract which includes arbitration clauses as well. It
stated that the universal principles of impartiality and independence have to be
maintained throughout the arbitral procedures, especially during the stage of the
formation of the arbitral panel and circumventing these would be “incongruous” even if
the same has already been agreed upon by the parties before the dispute has arisen. 16
Thus, regardless of any apparent agreement between the parties, there exists a minimum
standard requirement of independence and impartiality, which has to be maintained while
appointing the arbitrators. Similarly, the Delhi High Court has also pronounced that
appointment of arbitrators “is a matter of agreement between the parties” and thus, no
party in the arbitration agreement can unilaterally appoint a person to become the
arbitrator for the dispute.17 The appointment, without considering the other party, is
unfair.18
11. The intention behind professing these ideas is to create an impartial, fair and conducive
environment for arbitration in India, where parties have equal opportunities to select the

13
Kluwer Arbitration Blog, The legality of unequal arbitrator appointment powers in India- the clarity the mist,
March 3, 2020, available at http://arbitrationblog.kluwerarbitration.com/2020/03/03/the-legality-of-unequal-
arbitrator-appointment-powers-in-india-the-clarity-the-mist/?doing_wp_cron (Last visited on August 6,2020).
14
Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation, (2017) 4 SCC 665.
15
Bharat Broadband Network Limited v. United Telecoms Limited, (2019) 5 SCC 755.
16
Id., ¶57.
17
A.M. Rasool Const. & Engg Services Pvt. Ltd. v. National Bldgs. Const. Corpn. Ltd., 1997 SCC OnLine Del
782.
18
Arvind Kumar Jain v. Union of India, ARB.P. 779/2019.

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panel of arbitrators and the decision should not be based on the choice of one party alone,
eliminating bias of any kind throughout the proceedings. Existence of clauses that
override these principles of equality and impartiality cannot be accepted or validated. 19
Thus, the procedure laid regarding the appointment of arbitrators of the panel should be
such that no aforementioned principles are violated. Parties are provided on equal terms
in deciding the panel so that the whole arbitration proceeding is fair and unbiased.
12. In casu, on reading the third clause of the appointment procedure, it is evident that the
chances of Shubham winning the toss is rare and way less than that of Joyon. The
threshold for winning for Joyon is the bare minimum and easily achievable. Thus, the
clause in no way provides both the parties an equal chance to appointing the third
arbitrator for the panel as finally Joyon winning and deciding the same is pre-destined.
This clause is not only violating the principles of equality stated above but also provides
Joyon with an overriding power to unilaterally decide the third arbitrator that is an
essential factor in determining the course of the dispute resolution process. Thus, this
procedure is invalid as it is unfair to Shubham as he is not being provided with an equal
opportunity in the appointment process as the procedure is biased towards Joyon.
1.2.2. Shubham agreed to such unreasonable terms due to unconscionable
bargain.
13. An unconscionable bargain is irreconcilable with right or reasonable 20. The principle of
unconscionable bargain applies when the parties to the contract have unequal bargaining
power which is a consequence of vast economic disparity between them. the SCI held that
this principle would be employed when “the weaker party is in a position in which he can
obtain goods or services or means of livelihood only upon the terms imposed by the
stronger party or go without them.”21 The party on the lower side of the bargain has no
reasonable alternative to choose and thus agrees to the terms laid by the opposite party no
matter how unreasonable, unfair or unconscionable the rule or set of rules is. In Sara
International Limited vs Rizhao Steel Holding Group 22, the court listed certain situations
such as the absence of any reasonable alternative, adverse effects on the victim, etc., that
help to decide the presence of such bargain in subsequent judgements. Thus, the presence
of unconscionable bargain renders an agreement invalid.

19
Proddatur Cable TV Digi Services v. SITI Cable Network Limited, 2020 SCC OnLine Del 350.
20
Basant Lal Wadhera v. Union of India, 1996 SCC OnLine Del 926.
21
Central Inland Water Transport Corporation Limited v. Brojo Nath Ganguli,  (1986) 3 SCC 156.
22
Sara International Limited v. Rizhao Steel Holding Group, 2013 SCC OnLine Del 223.

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14. Shubham was a college dropout, had no job and no resources to complete his game. He
was facing a harsh situation when Joyon promised him to provide all the required sources
to complete his game. Joyon being resourceful, took advantage of Shubham’s situation
and influenced him to accept the agreement formulated by him knowing well that in the
given circumstances, Shubham had no other reasonable alternative to choose and would
agree to the unreasonable appointment clause inserted by him without any negotiation.
Shubham accepted the terms and conditions under this influence because of the existing
disparity. Thus this clause of appointment stands invalid because of being hit by the
principle of the unconscionable bargain.
Thus the issue in dispute in non-arbitrable and the procedure for the appointment of
arbitrators is invalid.
2. MR JOYON’S CLAIM FOR THE ENTITLEMENT OF CO-OWNERSHIP RIGHTS OF THE PATENT IS ERRONEOUS
AND CANNOT BE ACCEPTED.

15. It is humbly submitted that the contention raised by Mr Joyon regarding his inclusion in
the co-ownership of the patent for “4D-Chess Room” is invalid as he possesses no such
rights. Transfer of ownership rights cannot be done by signing a single document stating
the same but has various procedures and conditions involved that are needed to be
complied with. The terms and the nature of the agreement signed between the parties in
the present case such as the agreement signed was ‘agreement to assign’ rather than
actual agreement (2.1) absence of any separate deed assigning the rights of co-ownership
after completion of the project (2.2) there was no registration of the assignment
agreement (2.3) pre-assignment, in this case, is unfair and unconscionable (2.4), make
this agreement incapable of transferring the ownership right to Mr Joyon, thus rendering
his claim for ownership UNSUSTAINABLE.
2.1. The agreement signed between Joyon and Shubham is an ‘agreement to assign’
rather than an actual agreement, hence is not eligible to transfer ownership rights
16. In the case, Pine Labs Pvt. Ltd v Gemalto Terminals India Pvt Limited 23, the Delhi High
court held that Section 18 of the Copyright Act, there can be agreements involving
‘assignment of an existing work’ as well as ‘assignment of future works’. 24 However, the
prior form qualifies as an actual assignment, while the latter shall be treated as an
‘agreement to assign’ not creating any statutory power. Formation of an actual agreement
passing the interests and right of the assignor to the assignee can be only done when the

23
Pine Labs Pvt. Ltd v Gemalto Terminals India Pvt Limited, (2011) VIII AD (Delhi) 380.
24
Raj Kumar Sharaf v. Visakha Chemicals Copyright Board, Case F. Nos. 3, 4, 5/2005.

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agreement stands in conformity with the provision of section 19 of the Copyrights Act 25.
The Court opined that though there exist provisions relating to assignment of future work,
“such assignments are merely an agreement to assign and therefore, they only create
rights in equity”.26 These observations have been made regarding the copyrights law, yet
the same can be extended to the patents law since, section 19(1) of the Copyright Act and
Section 68 of the Patents Act27, which provides basic requirements of an assignment deed,
is apparently analogous provisions. Owing to this similarity in between provisions of the
patents and copyrights act, it can be concluded that even in the patent law, the
assignments relating to future inventions would be regarded as ‘agreements to assign’ not
as actual agreements, thus creating rights in equity rather than any actual statutory
assignment. Furthermore, the mere expression of assignment in the agreement is not
sufficient to create a valid clause for the transfer of rights, additional requirement of the
work being assigned should be properly identified and designated before entering into any
relevant assignment agreement.
17. In casu, the agreement signed by Shubham regarding the co-ownership rights is regarding
the assignment of a future invention, thus making the agreement an ‘agreement to assign’
rather than an actual agreement transferring the rights. The work being assigned is also
not fully identified and designated as it is still in the process of completion, negating the
basic requirement for transfer needed. This agreement, as mentioned above, only creates
right in equity but lack the power to form any actual statutory binding agreement. Thus,
Mr Joyon, according to the terms of the agreement entered into cannot claim co-
ownership rights in the patent as the agreement entered into is not an actual agreement.
2.2. Registration of the assignment agreement forms an integral step in the transfer of
ownership rights, the absence of which renders the agreement inadmissible.
18. Any assignment of patent or share in same or any other interest in the patent is only valid
if there exists a written agreement that embodies “all the terms and conditions governing
rights and obligations of the parties” 28and the same is registered under the Patent Rules,
2003 by filling the Form 16, with the patent office, granting the patent. Though this
registration can be done any time after the assignment, failure to do so would render the
agreement under which the rights are transferred inadmissible as evidence in Indian
25
The Copyright Act, 1957, §19(1).
26
Supra note 21.
27
The Patents Act, 1970, §68.
28
Nishith Desai Associates, Intellectual property law in India, January 2018 available at
https://nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/Intellectual_Property-Law_in_India-
Web.pdf (Last visited on August 6,2020).

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courts and “therefore not enforceable in legal proceedings.” The patent office maintains a
record of all the information relating to a patent including names and address of the
grantees, extension and revocation of patents, etc. This helps the assignee to be able to
sue for infringement; otherwise, the assignee has to prove his title first and only then he
would be able to sue for same.29 The Delhi HC upheld that according to the Section 68 of
the Patent Acts, 1970, assignment of a patent should not only be in writing, embodying all
the terms and conditions but also should be filed with the Controller of Patents for
registration with him.30 (Section 68, 69. Rule 90, 91, 92. Form-16.)
19. In the present case in hand, though an agreement of assignment of co-ownership was
signed between the parties, Joyon did not get the same registered with the Patent Office.
This absence of registration makes the agreement entered into inadmissible and
unenforceable as evidence in Indian courts of law. Thus, Joyon’s claim of co-ownership
rights based on this agreement cannot be accepted and is invalid.
2.3. A separate deed outlining the intricacies of the assignment has to signed after
completion of the innovation even if there already exists a pre-invention
assignment agreement.
20. Unlike other jurisdictions which have codified laws relating to employee inventions,
Indian patent laws offer minimal guidance on same. But courts have usually refused to
enforce the clauses which are “broad or unreasonable in scope and duration” such as
contracts which possess clauses forcing the employee to assign all the future inventions
subsequent to the employment term. To avoid any hassle, it has been stated that after the
completion of the invention a separate agreement regarding the assignment of the IP
rights has to be entered into by the parties, even though a pre-invention assignment
agreement embodying all the terms and conditions has already been executed. The US
Supreme Court has also observed the same stating that a future IP that is in the course of
development cannot be adequately assigned. Hence, every invention that comes into
existence requires a separate deed acknowledging the same has to be signed. Section 7 (2)
(b) of the UK Act under the Patents Act, allows pre-invention assignment to be duly valid
and recognises no need of any further deed. Indian law has no provision analogous to this
section, and following the maxim of expressio unius est exclusio alterius (the inclusion of
one is the exclusion of Other), it can be deduced that in Indian law there exists a need for
29
Dr. B.L. Wadehra, Law Relating to Intellectual Property, (4th ed., 2008).
30
The Office of Controller general of Patents, designs and Trademarks, The Manual of Patent Office Practice
and Procedure, November 26, 2019 available at
http://www.ipindia.nic.in/writereaddata/Portal/Images/pdf/Manual_for_Patent_Office_Practice_and_Procedure_
.pdf (Last visited on August 6,2020).

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actual assignment, after the agreement to assign has been signed. The same has been
upheld by the courts31 as well with reference to section 19(1) of the Copyright Act, 1947.
21. In casu, The parties have entered into a pre-invention agreement during the initiation of
employment term itself. The agreement contained a clause regarding assigning rights of
all the subsequent inventions which makes the clause unreasonable and beyond the scope
comprehension. Even after the completion of the game, the parties did not enter into a
separate agreement regarding the intricacies of the game in dispute and Joyon relied on
the pre-invention agreement solely, to claim his co-ownership right. Thus, the nature of
the agreement and absence of entering into a post invention deed (embodying terms and
other aspects of the game) vitiates the claim of co-ownership by Joyon.
2.4. The agreements regarding the ownership title are unenforceable if they are
unconscionable, i.e. grossly unfair to either of the parties.
22. Pre-invention assignment agreements address potential innovations by the employees.
They typically require the employee to assign rights regarding all the innovations he
develops/conceives/created in his course of employment to his employer. This clause of
the contract is referred to as ‘pre-invention’ assignments as they are executed at the start
of the employment tenure before any invention is conceived. Courts generally render such
assignments inoperable in cases where the terms and conditions of such assignments are
grossly unfair to one party or where such assignments are entered into by concealing
relevant facts relating the innovation. In such cases, the court treats these assignments as
well as the transfer of ownership through them invalid.
23. In casu, Joyon being well aware of the fact that the game being developed by Shubham is
a path-breaking innovation that shall be attracting huge profits to Seneca Games did not
reveal this to Shubham and made him accept the agreement according to which Shubham
would be getting a mere 10% of the total profit earned by 4D-Chess Room. He also
agreed wherein any innovation conceived by Shubham would be assigned to Joyon, in the
course of his employment, which is unreasonable having no limitations. Joyon was
cognizant that Shubham was in dire need of resources to sustain his living and develop
his games, and was sure that though unreasonable and unfair Shubham would agree to the
conditions laid by him. Thus, it can be deduced that because of being on the higher side
of the bargain, Joyon’s conditions in the assignment are unconscionable and unfair to the

31
M/s. National Research Development Corp v. Ineos ABS Ltd., RFA(OS)No. 73 of 2009.

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interest and rights of Shubham and thus, the agreement on the co-ownership of the
innovation is invalid.
Thus, Mr Joyon’s claims for co ownership rights is invalid
3. THE DAMAGES CLAIMED BY MR SANMONTO CANNOT BE GRANTED.
24. It is submitted that the damaged being claimed by Mr SanMonto on the grounds of
fraudulent misrepresentation (3.1) and loss of reputation (3.2) cannot be granted.
3.1. There is no fraudulent misrepresentation in the given case and thus there arises
no liability for Shubham to pay the damages.
25. It is submitted that the agreement entered between Mr SanMonto and Shubham is free
from the element of fraudulent misrepresentation as claimed by Mr SanMonto and thus
Shubham is not liable to pay the damages claimed by him. The claim stands invalid
because of absence of the element of fraud in Shubham’s statement (3.1.1) statement
made by Shubham was not responsible for inducing Mr SanMonto to enter into a contract
(3.1.2) he did not exercise ordinary diligence before entering into the contract(3.1.3) the
damage caused to him was because of his impulsive actions (3.1.4) giving rise to no
liability for Shubham.
3.1.1. The statement made by Shubham had no fraudulent element; hence there
was no intention to deceive.
26. Fraudulent statements are suggestions made by a person knowing well that they are false,
which he makes to deceive and induce the opposite party to enter into a contract with
him.32 The innocent party might act according to the statement made and suffer damages
as a consequence because it was unaware of the falsehood of the statement.33
27. In casu, Shubham honestly and correctly believed that the patents over the innovation
were registered under his name and he possesses sole right over the ownership of the
same. This right grants him a right further to sign an agreement of co-ownership with Mr
SanMonto. He nowhere made a statement knowing it to be false to induce Mr SanMonto
to enter into a contract with him. Thus, statements and agreement undertaken by
Shubham are free from this element of deceit and cannot be labelled as fraudulent.
3.1.2. It was not Shubham who was inducing Mr SanMonto’s to enter into a
contract but the vice versa.
28. A statement qualifies as fraudulent misrepresentation if it induces the opposite party to
enter into the contract, where the innocent party is unaware of the falsehood attached.

32
Bhaurau Dagdu Paralkar v State of Maharashtra, Appeal (civil) 5162-5167 of 2005.
33
RC Thakkar v. The Bombay Housing board, AIR 1973 Guj 34.

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29. In the present case, the statement made by Shubham was not an inducement but rather an
assurance to Mr SanMonto that there would be troubles after the formation of contract as
he has sole rights over the innovation and it’s his discretion to decide how to practise
them. Also, this assurance given was irrelevant as Mr SanMonto had already decided to
form a contract with Shubham, and he was the one to come up with the offer. Thus, it can
be deduced from the facts that Shubham did not induce Mr SanMonto to enter into a
contractual agreement and thus is not liable for fraudulent misrepresentation.
3.1.3. Mr SanMonto did not exercise ordinary diligence required before entering
into the contract.
30. The contract entered into because of fraudulent misrepresentation is not voidable if the
party could have discovered the truth by practising due diligence and reasonable care. 34 If
the party still abstains from exercising these and believe that statement, it cannot claim
discrepancy later.35 In commercial contracts, this reliance on statements of the parties
should be reasonable.36
31. In casu, it could be inferred that Mr SanMonto abstained from inspecting the modalities
of the issue which he could have done because of the presence of Mr Ispy in Joyon’s
office. He could have tested Shubham’s statement veracity before relying on it and
entering into a contract. He desisted doing the same earlier and cannot claim damages
based on it now.

3.1.4. Loss caused to Joyon is indirect; thus, he cannot claim damages.

32. Damages are provided in the cases where the loss caused is reasonable, foreseeable, and a
direct consequence of the breach. Indirect losses are not eligible for claiming damages. 37
In cases of fraud, the party claiming the damages needs to show that it undertook measure
to mitigate the loss suffered.38
33. The loss suffered by Mr SanMonto is because of his impulsive decision of cancelling the
whole event of game launch before discussing the dispute briefly with Shubham.
Shubham throughout the agreement maintained a firm stance of helping him with the
promotion of the event and thus made no gesture or breaching of contract or causing any
loss howsoever. As this act of Mr SanMonto cannot be foreseen by Shubham and also, he
34
The Indian Contract Act, 1872, §19.
35
Harilal Dalsukhram Sahiba v. Mulchand Asharam, (1928) 30 BOMLR 1149.
36
Hoyt Props. v. Prod. Res. Grp., LLC, 736 N.W.2d 313, 321 (Minn. 2007).
37
Lewis v. Citizens Agency of Madelia, Inc., 235 N.W.2d 831 (Minn. 1975).
38
Pullock and Mulla available at Lexis Nexis.

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did not inform Shubham before cancelling the event, Shubham cannot be made liable to
pay the damages for the loss incurred to Mr SanMonto because of his own impetuous
decision.
3.2. The claim of damages by Mr SanMonto on the basis of loss of reputation is invalid.
34. It is submitted that Mr SanMonto cannot claim damages from Shubham based on loss of
reputation because there is no breach of contract (3.2.1) even if there is a breach, nature
of loss is indirect(3.2.2), and thus Shubham cannot be made liable to pay the damages.
3.2.1. Damages are claimed where a loss is incurred due to the breach of contract,
while in the present case, Shubham did not breach the contract only.
35. A contract is said to be breached when the promises made in the contract are broken or
the activities of the parties are in contravention with the terms agreed upon by them.39
36. In casu, even after Mr SanMonto filed a case against Shubham, he still agreed to fulfil is
part of the contractual obligations as agreed by the terms of the contract. Shubham’s
actions nowhere vitiated the contract as his assertion regarding his ownership was true,
and he never backed out from performing his part of the bargain. Thus, there is a breach
of contract by Shubham, and hence, Mr SanMonto cannot claim damages based on it.
3.2.2. Even if a breach occurs, loss of reputation is an indirect loss, and thus no
damages can be granted for the same.
37. General damages cannot be granted for loss of reputation. 40 A person is liable to pay
damages that are only foreseeable by the party breaching the contract and not beyond it.
In a commercial contract, damaged based on anguish, humiliation or loss of reputation
cannot be are not addressed. Chitty on Contracts has also mentioned that damages based
on loss of reputation are not generally awarded as the same is under check by the law of
defamation in torts.
38. In the present case, Mr SanMonto suffered the loss of reputation because of his impulsive
act of cancelling the game launch event, without discussing the matter with Shubham. It
was nowhere Shubham’s fault as he was honest throughout and was not aware of the
dispute that arose. Also, as the loss incurred is not a direct but indirect or remote loss,
damages for the same cannot be granted, and thus Shubham is not liable to pay the
damages.
The damages demanded by Mr SanMonto on the grounds of fraudulent
misrepresentation and loss of reputation cannot be granted.

39
The Indian Contract Act, 1872, §73.
40
[1965] 1 WLR 248 (PC).

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PRAYER

In the light of the issue raised, arguments advanced, and authorities cited, the Counsel for the
Respondent humbly prays before this bench to kindly adjudge, hold and declare:

A. The issue in dispute between Mr Joyon and Shubham are not amenable to
resolution by arbitration, and the arbitrator appointment clause is invalid.
B. Mr Joyon is not entitled to be included as a co-owner of the patent for “4D Room-
Chess”.
C. Respondent is not liable to pay damages to Mr SanMonto on account of fraudulent
misrepresentation and loss of reputation as the prior cannot be established, and the
latter is an indirect loss.
And for this kindness, the Respondent as in duty bound shall forever pray.

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