First final judgment on SEPs significant for future disputes

By Pravin Anand and Siddhant Chamola, Anand and Anand
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Standard Essential Patents (SEPs) have been creating quite a buzz across developed economies. What looked like a secondary aspect in the “phone wars” between giants in the field soon exploded into a realm of its own, dominating discussions in the legal and commercial world.

Pravin_Anand
Pravin Anand
Anand and Anand

So where was India in this inter-linked scheme of SEP wars? Well, it wasn’t far behind insofar as initiation of lawsuits is concerned. However, for a long time India had no decision establishing guidelines on how to litigate an SEP suit, recover royalties successfully, or defeat a claim for infringement.

12 July 2018 marked a milestone in the history of Indian patent law, as the Delhi High Court passed the first final judgment in two civil suits concerning infringement of Standard Essential Patent [Koninklije Philips NV v Rajesh Bansal, and Koninklije Philips v Bhagirathi Electronics & Ors].

PHILIPS’S PATENT

Philips claimed infringement of IN 184753. The patent covered a decoding device in a DVD Video Player that enabled the coded data on a DVD to be “undone” and read by the DVD player. It filed suits claiming infringement of the patent since Defendants were selling DVD players and had refused to take licences from it Philips had also registered corresponding patents in the US and EU.

THE COURT’S RULING

  • Philips’ patent was essential to the DVD standard

The court held the patent’s claims to be essential to the standard because:

(1) The claims for the US and EP patent corresponded to the Indian patent; and

(2) Essentiality reports filed by Philips categorically concluded that the US and EP claims were essential to the DVD standard.

These reports were not challenged by the defendants during trial. Therefore, any objection on mode of proof of these reports; the witnesses not conforming to the rules on “expert evidence”, etc., could not be raised during final arguments.

  • The defendants infringed Philips’ patent
  • The court ruled Philips’ patent was infringed by defendants on two accounts:

(1) The simple demonstration of the defendants’ use of SEP without seeking licences from Philips; and

(2) The witness testimony of Philips, which consisted of independent analysis comparing the patent with the specifications of the defendants’ product.

  • The defendants could not prove their defence of exhaustion

The court rejected the defendants’ defence under the “doctrine of exhaustion”. It held that the defendants ought to have led evidence that the DVD players and its components were procured from authorized entities pursuant to a licence.

  • Abuse of dominant position has to be decided by the Competition Commission of India (CCI)

There is hardly an SEP infringement dispute that does not see a defence claiming employment of abusive market practices. While the parties hit each other on this issue, the court ruled these issues could be considered only by the CCI , not a civil court.

  • Philips’ claim for royalty payment from the defendants was FRAND compliant

The following led the court to conclude that Philips’ licensing rates were fair, reasonable and non-discriminatory (FRAND):

(1) Philips claimed royalty only on the use of Philips’ patents, not for third party patents in the DVD patent-pool;

(2) Informal negotiations between parties and others showing a consistent rate of royalties claimed, is a strong indicator that rates are FRAND compliant; and

(3) No evidence was led by the defendants to rebut the Plaintiffs’ claim on the royalties being FRAND compliant.

The defendants were required to pay royalties of US$3.175 for the sale of each DVD player, from the date of institution of the lawsuits until May 07, 2010. They were also required to pay royalties of US$1.90 for each DVD player commercialized by the defendants between 8 May 2010 and 12 February 2015 (expiry date of the patent).

Finally, the court ordered the total fees payable by the defendants to be determined by a special inquiry.

These disputes were contested (interim injunction, royalty payment, trial) when India’s legal regime was only just becoming aware of complex issues of patent jurisprudence. In absence of precedent from elsewhere, Philips faced an uphill task convincing the judiciary to protect SEPs, establishing that licensing rates were FRAND.

However, by the time final arguments commenced in 2017, the concerned single judge had the benefit of several international decisions on these issues.

A first of its kind in India, this case will serve as a precedent on several issues, educating all litigants in a long line of pending SEP disputes that the strength of one’s claims alone isn’t enough. The decision takes one back to basics and emphasizes the importance of proving one’s case through strong, credible evidence.

PRAVIN ANAND is managing partner and SIDDHANT CHAMOLA is a senior associate at Anand and Anand

Anand-and-Anand

Anand and Anand

B-41, Nizamuddin East,

New Delhi 110013, India

www.anandandanand.com

Contact details:

Tel: +91 120 405 9300

Email: Pravin@anandandanand.com