Introduction:
Standard Essential Patents (SEPs) form the heart of technological developments, particularly in the telecommunication sector. Courts across the globe have faced challenges in enforcing SEPs. The Indian Courts, too, have been involved in resolving many such issues and challenges, and in that process, India has emerged as an important forum for asserting SEPs, particularly with respect to telecommunication. In any case, stakes in India are also quite high in that sector in terms of volumes:
- The total telephone subscriber base in India stood at 1,199.28 million in March 2024.
- The total volume of wireless data usage increased by more than 10 fold, from 4,206 petabytes in Q1 of FY2018 to 47,629 petabytes in Q2 of FY2024.
- The total volume of wireless data usage increased by more than 10 fold, from 4,206 petabytes in Q1 of FY2018 to 47,629 petabytes in Q2 of FY2024.
- India’s 5G subscriptions are expected to reach 350 million by 2026, accounting for 27% of all mobile subscriptions.
- The value of export of mobile phones in FY2024 increased by 42%, reaching US$ 15.6 billion.
Some of the important players involved in SEP litigations in India are:
- Ericsson
- Inter-Digital
- Nokia
- Phillips
- Dolby
- Xiaomi
- Vivo
- Oppo
- Many other Indian implementers
The Early Trends:
The first litigation enforcing SEPs related to DVD players was filed by Phillips against local DVD manufacturers in 2008 before the Delhi High Court. The suit was tried, and a final decision was made by the Court in 2018. As the suit patent had expired on February 12 2015, a permanent injunction could not be awarded after the post-trial. However, the defendants were directed to pay a royalty to the plaintiff @ USD 3.175 from the date of institution of the suits till mid-2010 and, after that, @USD 1.90 till patent expiry in 2015 with interest @10% annually per video player manufactured/sold. The actual damages were not set out because of the lack of sales data provided by the defendants, and the Court appointed a local commissioner to ascertain the exact quantum of damages.
The second round of SEP litigations started in 2012 when Ericsson, a major European telecom technology developer and manufacturer, sued many Indian brands selling mobile devices. Some of the leading defendants in the suits filed by Ericsson before the Delhi High Court were Mercury Electronics, Micromax, Intex, Carbonn, Lava, etc., claiming infringement of its eight SEPs used in 2G, 3G and 4G devices.
In suits filed by Ericsson against Mercury Electronics and Micromax, the single-judge bench of the Delhi High Court granted an ex parte injunction in favour of Ericsson. Micromax filed an appeal against the said order, and a two-judge bench (Division Bench) of the Delhi High Court dismissed the appeal. In the meantime, the defendants– pursuant to the Court’s directions– entered into an interim agreement whereby Micromax agreed to pay royalties at the rate demanded by Ericsson. The royalties under the interim arrangement were based on the sale price of the phone and not on the value of the technology/chipset used in the phone.
Aggrieved by that position, Micromax started a parallel proceeding under Competition law before the Competition Commission of India (CCI), alleging abuse of dominant position by Ericsson. In that case, the CCI ordered an investigation into the matter based on the findings that Ericsson held a dominant position in the market for the devices in which its SEPs were essential for implementing the standard. The CCI also held that the royalty rates charged by Ericsson were contrary to what was expected from a SEP owner committed to FRAND terms.
Ericsson appealed the decision of CCI before the Delhi High Court, and the Court vide order dated March 30, 2016, recognised the CCI’s jurisdiction in investigating the complaint of Micromax.
During this period, Ericsson filed suits against several other Indian brands, and the courts in those suits followed the Micromax case trend and ordered the defendants to enter into interim arrangements to pay royalties to Ericsson based on the sale price of the phones. However, the litigation between Ericsson and Micromax, as well as some other Indian brands of mobile devices, ended in out-of-court settlements, resulting in the defendants entering into a patent licence agreement.
However, between 2018 and 2022, we witnessed a reversal of the aforesaid trend, and it appeared that interim relief was no longer available in SEP disputes. Most interim decisions during that phase tilted in favour of implementers.
The Recent Trends:
Intex v. Ericsson: 2023
In the suit filed by Ericsson in 2015 against Intex, an Indian brand of mobile phones, a single-judge bench of the Delhi High Court issued interim orders directing Intex to pay 50% of the royalty demanded by Ericsson during the pendency of the suit. Intex appealed that order, and the Division Bench of the High Court affirmed the interim order of the single-judge bench. In that case, the Court ruled that Ericsson had made a prima facie case and ordered that Intex must pay 100% of the royalty during the pendency of the suit.
This is an important decision which addresses many highly debated topics related to the licensing of SEPs, and it sets the standards for the current and future SEP litigations:
- FRAND commitment is not a one-way street but imposes obligations on both the SEP owner and implementers of SEP.
- An implementer must pay royalty to SEP owners during the pendency of the suit and while negotiating to license an SEP.
- Injunctive relief, including interim injunctions, should be granted against defendants who delay licensing negotiations on one pretext or another. The reason for issuing such Interim relief is to incentivise implementers/defendants to negotiate a license.
- SEP owners might need to provide information to a prospective licensee (under a confidentiality agreement). This condition is not mandatory for licenses who have prior experience with patent licenses and from which they can draw insights.
- SEP owners can include an entire SEP portfolio for licensing negotiation.
Nokia v Oppo: 2023
A Division Bench of the Delhi High Court passed an interim order directing Oppo to deposit interim security concerning the claimed infringement of Nokia’s three (3) Standard Essential Patent (SEP) related 2G. 3G, 4G and 5G. While passing the order, the Division Bench stated that the Courts have the power to direct the defendants to deposit security in cases where the Defendant continues to drive benefit from the SEPs without making payments to the patentee. Oppo challenged the said interim Order of the Division Bench of the High Court before the Supreme Court of India. The Supreme Court of India dismissed Oppo’s appeal, not finding merit in interfering with the decision of the Division Bench.
In that case, the Division Bench held that normally, a pro-tem deposit should be directed only after making prima facie findings on the essentiality and validity of the suit patents. However, in this case, Oppo took a license from Nokia in the 2018 agreement and admitted its obligation in law to secure a new license agreement on the expiry of the 2018 license. Therefore, the Court found that there arises a prima facie presumption that the challenge to the essentiality and validity of Nokia’s patents is merely an afterthought.
The Division Bench also directed Oppo to deposit the ‘last paid amount’ attributable to India, i.e., twenty-three per cent (23%) of the last paid amount under the 2018 Agreement.
Further Development:
After the above judgment of the Division Bench, the present suit, along with all connected suits such as NOKIA TECHNOLOGIES OY v. VIVO MOBILE COMMUNICATION CO., LTD & ORS CS(COMM) 162/2022, were listed for determination interim injunction application. When the judgment was reserved in the interim injunction applications, there was another development in the suit, which resulted in a piquant situation. Vide judgement dated November 28 2023 the Chongqing No. 1 Intermediate People’s Court, China delivered a judgement in a parallel proceeding and determined a Global FRAND rate.
In light of the above development, the parties entered into a settlement agreement, and the suit was withdrawn. A final judgment in this matter and all the connected matters was passed on February 13, 2024.
On Damages
Lava International Ltd. v. Ericsson: 2024
In the first final ruling (post-trial) in telecommunication SEP infringement, the Delhi High Court awarded Rs 244 crore (~30M USD) damages to Ericsson along with a 5% interest (till the realisation of the amount) to Ericsson against Lava. The FRAND royalty rate, which was decided by the Court applicable to Lava, has been determined to be 1.05% of the net selling price of the devices sold by Lava. The Court discarded the calculation of the royalty rate on a Chipset basis. The Court held that in mobile devices, where telecommunication network connectivity is the core functionality, the calculation of royalties at the end-product level is the most appropriate approach, aligning with industry practices, economic efficiency, and legal precedents. The Court held that Ericsson is entitled to receive damages calculated based on the loss of royalty/license fees it would have received had Lava executed a FRAND license agreement at the commencement of its business operations.
The Court held that “granting damages only for the asserted patents, rather than for the entire portfolio, would not only deviate from industry practices and FRAND principles but also potentially disrupt the balance and fairness in the licensing ecosystem.” The Court further said that since compliance with the standard implies implementation of all SEPs, it is necessary to take a license for all SEPs, and accordingly, the damages would also have to be assessed based on the entire portfolio.
On the aspect of infringement of SEP patent, the Court recognised the application of the two-step test for establishing infringement of SEPs, which involves mapping the suit patent(s) to the standards and showing that the implementer’s device also maps to the standard. Consequently, on account of compliance of Lava’s devices with the standards, infringement of the suit patents has been held to be an inevitable outcome.
Concluding remarks
With the aforesaid decisions, the courts in India are evolving well-established international principles related to SEP litigation and customising them to local laws and needs. There has been an extensive debate in the past about Indian courts not being patent friendly or not equipped to calculate actual damages in patent SEP related litigations. The courts in India have broken that myth. The myth related to delay in disposing of IP litigations has also been broken by the strict adherence to Commercial Court Rules and recently implemented IP Division Rules.
Authors: Abhai Pandey and Joginder Singh