Cyngn, OnePlus, Micromax – The Legal Battle

Cyngn, OnePlus, Micromax – The Legal Battle

Recently, a battle has been waging in India over the rights to distribute the commercial version of the CyanogenMod operating system. The court order from the recent case (where Micromax wanted to enforce their exclusivity agreement against OnePlus) has been released. The order, written by Justice Manmohan Singh, weighs in at 29 pages, and the contents prove rather interesting. Let’s take a look through it. The documents are available for reference from this link. In a break with convention, I will give the summary first, then go through the judgement.

Summary (aka tl;dr)

OnePlus had a worldwide (excluding mainland China) non-exclusive right to use the Cyanogen trademarks and ship the software on their device. This agreement was in place for a time period, and said that Cyanogen wouldn’t work with other OEMs to develop or integrate the system during this time in the regions covered by the agreement. Cyanogen then went and made an agreement with Micromax that was exclusive (despite OnePlus already having non-exclusive rights to these countries), and told OnePlus they were terminating their agreement in an email simply saying they were terminating. Such a contract termination is most definitely unusual, and normally is not permitted without (significant) penalties. Given OnePlus and Cyanogen have agreed to settle disputes in this contract in California, we may well see further lawsuits in the new year over this matter, as the judgement highlighted that Cyanogen may well be liable to OnePlus for their breach of contract. Micromax succeeded in their injunction request against OnePlus, preventing the import and sale of OnePlus devices, on account of their exclusivity deal.

The Overview

The court judgement states what was already known, in that Micromax intended to launch its new phones in India on 20th December 2014. What is interesting, however, is that the first defendant on the lawsuit was Shenzhen-based OnePlus. However, there were further defendants, based in Delaware, USA. Defendants 2 and 3 are “Cyanogen”. Cyanogen and Micromax entered into an agreement, taking effect from 26th September 2014, which granted Micromax a license to integrate and distribute the Cyanogen operating system in India. This agreement was exclusive within India, and Cyanogen are reported here as having agreed to not “collaborate directly with another OEM for the purpose of integerating Core OS [the Cyanogen operating system] with devices distributed by such OEM in India”.

In August 2014, Micromax became aware that OnePlus intended to release their product in the Indian market, using the Cyanogen operating system, which Micromax would soon acquire exclusive rights to. When taken up with Cyanogen, they “confirmed that the exclusive rights would devolve upon Micromax post the effective date of the agreement”. In a word, Cyanogen agreed to honour that agreement with Micromax.

OnePlus on the Attack

The documents reveal that OnePlus filed suit against Micromax (case number 3688), to (in the view of Micromax) sabotage their launch of mobile products in India, which was scheduled for December 20th. Micromax alleged that OnePlus infringed upon their exclusive rights in India, by launching the OnePlus One on 2nd December with the CM 11S operating system. Micromax had previously been in email contact with OnePlus, where OnePlus said it “was aware of the agreement between Micromax and Cyanogen” and that “OnePlus wanted to discuss some arrangement” to allow them to use Cyanogen products in the Indian market.

In response, Micromax sent a legal cease and desist notice on 26th November, ordering OnePlus to not infringe upon their exclusive rights. At this time, Micromax stated to Cyanogen that they should take “necessary steps to prevent the breach of the term and conditions” of their exclusivity agreement. This was what prompted Cyanogen to produce a press release confirming the exclusive rights held by Micromax in India.

Micromax attested that the Trademark license agreement between Cyanogen and OnePlus was limited in scope, and did not affect the exclusivity agreement granted to Micromax. At this point, OnePlus appears to have pre-emptively filed for an injunction against Micromax and Cyanogen, based upon their license agreement, to prevent Micromax and Cyanogen from bringing proceedings against OnePlus in India.

OnePlus Agreement with Cyanogen

In a nutshell, OnePlus signed a collaboration agreement with Cyanogen on 28th February 2014, and a trademark license agreement on 1st February 2014, which is valid until 31st January 2016. OnePlus was granted a non-exclusive license to use the Cyanogen trademarks and software (CM 11S) worldwide, with the exception of mainland China. Now, I don’t know about you, but that seems a fairly reasonable agreement to have in place – any sensible reader would take from this that OnePlus is allowed to use the brand in India, albeit without exclusivity. But hey, exclusivity isn’t the be-all and end-all.

OnePlus was contacted by Cyanogen 2 weeks prior to their product launch regarding the termination of this agreement, requesting that OnePlus cease using the Cyanogen brand name for marketing in India. OnePlus found out via the press release that Cyanogen had entered an exclusive agreement with Micromax in India, and that Cyanogen would no longer “provide support to the OnePlus”. Cyanogen eventually agreed to provide OTA support to India-based OnePlus users for only December 2014, but on the same day, Cyanogen issued their press release to state “their operating system will exclusively support Micromax’s mobile devices in India”, and that they would “not support any other devices shipped in India with future updates.”

This is certainly interesting, as it points towards Cyanogen taking a leaf out of the “big corporation” handbook, and choosing to not issue updates to a device for political reasons. Community projects such as the ones you’ll find on XDA are formed to bring Android updates to users. For Cyanogen to engage in such witholding of updates clearly shows they are no longer valuing their users, or their community of fans.

OnePlus argued in their suit that Micromax or Cyanogen might try to prevent them from using the software or trademark, which would have disrupted their product launch on 2nd December, and that it had a “valid and subsisting license granted by Cyanogen in favour of OnePlus”, and that termination of this agreement “without any cause, reason and justification would be illegal”. That does seem a pretty valid claim – OnePlus were first, and had a valid license deal.

Later on in the court documents, we read that OnePlus “shall only distribute, sell and market the OnePlus phone using online stores (or applications) and no distribution or sale shall occur in or through physical storefronts, kiosks or other permanent or temporary physical locations in the permitted territory.”, and that OnePlus won’t allow any third party (that they engage) to sell the device (or ship it) to someone outwith the permitted territory. There was also a grant of limited exclusivity given to OnePlus, stating that as long as OnePlus didn’t breach the agreement, Cyanogen “shall not engage in the integration of CyanogenMod with any other mobile device manufacturer for the purpose of distributing such device in the permitted territory” for the first 30 days. The agreement goes on to state that Cyanogen would not “develop or integrate features and services similar to the CMOD [we presume this refers to CyanogenMod] enhancements for any other mobile device manufacturer … in the permitted territory.” during this time. Interestingly, however, Cyanogen is not prevented from releasing source code of these enhancements to the community after the launch date of the product. OnePlus was likewise required to not “offer or otherwise distribute” their handset with an operating system other than CyanogenMod in the permitted territory.

UPDATE: This section has been rectified given a better reading of the judgement from Entropy512. The previous revision interpreted the judgement as giving OnePlus a longer period of exclusivity.

The Micromax and Cyanogen Agreement

As the judgement includes a copy of the contract between Cyanogen and Micromax, we can take a look at the wording of this agreement. The license agreement is a standard enough agreement, even stating that Cyanogen grants a “non-exclusive, nontransferable” agreement to distribute the services and applications, and distribute the operating system. Interestingly, the agreement places a number of limitations on the OEMs, such as requiring them to fully distribute the entire operating system including all applications (i.e. the company cannot exclude any applications without written consent). This includes a “third party apps” list. So just a heads-up here folks – this agreement clause could end up being used to force out unwanted software on these devices, if it was to benefit Cyanogen. Micromax would also have to get the approval (in writing) of Cyanogen, with “such approval not to be unreasonably withheld”.

Also interestingly, the agreement states “If Cyanogen specifies a specific version of Core OS […] or an application to be distributed in a certain territory, company [Micromax] will distribute only such version within such territory.” While this could well be used to ensure an OEM does not ship an outdated operating system on devices, it could (potentially) also be used to prevent an OEM from updating an older device, if Cyanogen decided to play dirty with a company. These terms are fairly restrictive for an OEM entering into an agreement like this.

Finally, a special set of terms appear, in an appendix to the agreement, stating that Micromax has exclusivity over India, Bangladesh, Sri Lanka, Nepal, Pakistan and Myanmar. This agreement grants limited exclusivity “for Core OS such that Cyanogen will not collaborate directly with another OEM (or agent acting on behalf of such OEM) for the purpose of integrating” the Core OS with devices from another OEM.

From the judge’s reading, he states it is clear this license was non-exclusive, but had exclusivity on the Core OS in the listed countries. The judge noted, “On the other hand OnePlus was granted non-exclusive rights for distribution, sale and marketing to end users in the permitted countries without any exception.”

The Court Case

The judge found that, due to the standard legal terms of the agreement, OnePlus and Cyanogen had agreed to resolve any disputes in their agreement in the courts of Northern California, and that they had agreed to not commence any suits otherwise. For that reason, the suit against Cyanogen in India was found to be invalid, as it is in breach of the agreement. The judge noted that OnePlus was not in the position to take action against Micromax, due to their agreement being non-exclusive, and that “the only complaint of OnePlus could be that Cyanogen has breached the agreement between OnePlus and Cyanogen by inducting another licensee in India in the form of Micromax”. That would certainly seem to be the case, and this would be a case which would need to be brought to court in California, per the agreement.

The judge notes that “it is evident that Cyanogen has changed its stand from time to time”, given the emails exchanged between OnePlus and Cyanogen. The blog post from Cyanogen on 8th December 2014 stated that OnePlus One global users would continue to receive OTA updates, but that this did not include the OnePlus One device in India (the original Cyanogen branded one), where they reaffirmed their commitment to working with Micromax. It’s certainly confusing what Cyanogen’s position is, to say the least.

The Emails

One of the few advantages in court cases (for they are a real drain on everyone, and only end up lining the pockets of lawyers) is that often, internal communications are made public as part of the evidence. And these emails won’t disappoint you! The first email is from Carl Pei of OnePlus, to Kirt McMaster, CEO of Cyanogen. In the email, dated 17th November, which appears to be a reply to an existing one using a thread title of “Cyanogen end”, Carl wrote,

I’m guessing there’s some misunderstanding. Shall we talk about it during your visit in December?

In response, Kirt replied to say,

Carl. We will be terminating our relationship with one plus. I will get back to you with more details shortly.

Now, I’m no expert, but that certainly seems to be the corporate equivalent of dumping your long-term partner by email or SMS. Kirt then sent a second reply around half an hour later, saying

No misunderstanding. We have no reason to meet in sz [Shenzhen]. We are terminating.

OK, that’s pretty harsh. Given these 2 companies have legal agreements in place, this would certainly seem to be a fairly significant issue that would normally be handled professionally by lawyers. Not on emails sent from an iPad, such as this one the following day, sent to Carl from Kirt, copied to Vikram Natrajan (Vice President of Global Partnerships and Distribution) and Frank Montes (General legal counsel) of Cyanogen:

Carl….Any and all communication in regard to oneplus and cyanogen must go through vik and myself.

We will halt support for oneplus devices immediately…..I am also requesting that oneplus stop using the cyanogen brand in any marketing collateral or communication in India.

Frank also cc’d is our general council. If you have any specific questions send them to all of us.

K

Sent from my iPad

A very interesting request here, concerning stopping the use of the brand name, considering OnePlus already had an agreement in place worldwide, excluding mainland China, to license the name (see earlier). Also interesting to note that the CEO of an Android development company sends his company emails from an iPad… Surely to goodness you should believe in your own product?

There were some further emails, mostly attempting to arrange phone calls or Skype discussions, which offered no real further insight. The only other one of interest was on November 24th, when Carl said “We have removed mentions of Cyanogen in PR, marketing and upcoming product pages already.” The judge stated from these email exchanges, it was clear that Cyanogen was “determined to terminate the license with OnePlus in India”, and that it certainly seemed that OnePlus and Cyanogen “have good business relation of similar kind in many other countries”.

The Final Judgement

The judgement comments on how OnePlus proceeded to launch its phone on December 2nd, despite the concerns regarding the above exchanges, and said that this cannot be easily understood. Likewise, Cyanogen took a U-turn on its blog, on 4th December, then cleared its stance in a subsequent blog post. All very confusing, over what devices would be supported, and what devices wouldn’t.

The end result of the judgement (the part that matters) is that given the lack of an agreement between Micromax and OnePlus, Micromax does indeed have exclusive rights in India as the result of a subsequent agreement. The judgement does note, however, that “the damages, compensation and loss, if any, suffered by OnePlus would be a subject matter of litigation between OnePlus in California.” Somewhat amusingly, the judge has to go by the “last word emanating from Cyanogen”, given the U-turns and confusion caused by their blog posts. The judgement granted an interim injunction against OnePlus (and all the usual associates) from “marketing, selling and shipping its OnePlus mobiles in India”, and that stock “lying in the market… is allowed to be disposed of.”

Wow.

That was a long read. It’s also pretty in-depth, and not the normal kind of thing we cover here on XDA. I make no apologies for going into great detail on this, but we can certainly draw some conclusions from this. First off, it would certainly appear OnePlus have been “wronged”, and had their agreement with Cyanogen breached. While nothing is a certainty in life, it isn’t at all improbable that we’ll see a case being filed in California shortly. Either way, this highlights the risks of doing business with international companies. It also highlights that an agreement held between 2 parties can, at very least, be modified (effectively) by a third party who enters into a future agreement (in this case, Micromax). The judgment though is correct, in that OnePlus has no relationship with Micromax, and for that reason, there was no grounds for their initial lawsuit. On the other hand, OnePlus and Cyanogen had already entered into an agreement to only take legal action within California, which prevented their initial claim from going anywhere.

Either way, the losers of this situation would certainly appear to be customers. This is one of the reasons why XDA remains 100% focused on the community. History has shown us that the mobile market is fraught with disputes such as these, and that the end users are always the end users, left without updates or support. The actions of Cyanogen in this case certainly appear to be unethical–to grant an exclusive license without negotiating this with someone already previously granted a near-worldwide license is hardly a good-faith way of doing business. For that reason, I suspect we’ll be seeing more about this in the coming months in the courts of California.

It is a sad day to see what was once a community project go in this direction, and betray the goals and ideals of the community from which it was built. This opens up a large number of questions for debate. I’ve seen discussions already from others about this judgment and whether or not parts of it are applicable to Apache licensed software and similar. There is also the question of how a company should behave, both ethically and legally. There’s a number of occasions where it certainly seems that Cyanogen have acted incredibly unprofessionally (as noted by the judge’s comments on U-turns and twists), or perhaps could have even broken their contract with OnePlus. Given the purpose of a contract like this, for one partner to seemingly unilaterally terminate a contractual relationship in a 2-line email seems a concerning move from a company seeking to establish itself and build up a customer base. Given the likelihood that people will want to share opinions and discuss this further, we have created a forum thread in addition to the usual comments area below.

[Thanks to kahtahs for highlighting the court documents to me.]

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OEMs or other companies reading this and interested in ways to partner with XDA, or in need of consulting to avoid pitfalls such as these in the Android community, can get in touch with our team here.

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