FIRST JUDGEMENT ON SEP AND FRAND IN INDIA

The Delhi High Court delivered India’s first ever judgement on standard essential patents.

Plaintiff, Koninklije Philips N.V.,  filed two suits being CS(OS) No. 1034/2009 and CS (OS) No.1082/2009 alleging infringement of its essential DVD Video Player patent, seeking the reliefs of permanent injunction, directions to the defendants to provide complete details, delivery, rendition of accounts, damages, etc.

The invention of Indian Patent No. 184753 relates to Channel (De) coding technology used for DVD Video Playback function in a DVD Video Player. It concerns ‘channel modulation’ which involves a coding step that is performed directly before the storage of the data. This coding ensures that the data to be stored on the disk has a particularly suitable structure for storage. The decoding of 16-bit code words to 8-bit information words is performed by “looking ahead” to the next code words.

Philips claimed that IN-184753 is an essential patent corresponding to US 5696505 and EP 745254B1 registered in USA and Europe respectively.

CS (COMM) 24/2016 was filed against the defendant Mr. Rajesh Bansal who is the sole proprietor of Manglam Technology (in short ‘Manglam’) which is an entity engaged in manufacture, assembly and sale of DVD Video players under various brands. Philips argued that the defendant’s DVD Video Players employ Decoders especially meant for decoding contents stored on optical storage media in accordance with the methods described in IN-184753, thus infringing the suit patent.

In the second suit, CS(COMM) 436/2017, Philips impleaded Bhagirathi Electronics (in short ‘Bhagirathi’) whose sole proprietor is K.K. Bansal, father of Rajesh Bansal. In the same suit, the third Defendant is the owner of the second defendant, Big Bazar which is an outlet which offers for sale inter-alia DVD Video players manufactured/ assembled by Bhagirathi.

In the written statement the Defendants argued primarily that the major components of the DVD players in question were procured by the defendants from authorized licensees like Sony, MediaTek, Sanyo, ST Micro etc. from China after due payment of all the taxes and custom duties. Hence the defendants were not indulging in infringement of the plaintiff’s suit patent having purchased the products from the duly authorized licensees of the plaintiff.

Both the suits were consolidated and common evidence was led. Plaintiff in support of its case examined two witnesses i.e. Farokh Bhiwandiwala as PW-1 and Ben Liempd as PW-2. Defendants also examined two witnesses i.e. S. Chandra Sekaran as DW-1 and Rajesh Bansal as DW-2.

On the basis of the pleadings of the parties 6 issues were settled. The issue and Courts finding in respect of them are as follows:-

(i) Whether the plaintiff No.1 is the proprietor of Indian Patent registered under No. 184753?

 (ii) Whether the suit patent of the plaintiff is invalid

  •  To prove that the plaintiff is the proprietor of the suit patent, plaintiff’s witnesses 2 exhibited the certified copy of the certificate of registration.
  • Patent validity was challenged by the Defendants on grounds of the claims being software and algorithm related. Therefore, a section 3 (k) argument was taken up during trial and final arguments.
  • However, as there was neither any pleadings nor any evidence led on this count by the defendants, challenge to the validity of the suit patent under Section 3(k) of the Patents Act based on no pleadings in the written statement was not considered.
  • Issue Nos. (i) and (ii) have therefore been decided in favour of the plaintiff and against the defendants.

 Next Court decided the issue of Essentiality (Issue (vi)) before other issues

(vi) Whether the suit patent is an essential patent in respect of DVD player technology?

  • The suit patent relates to “Decoding Device for converting a Modulated Signal to a series of M-Bit Information Words”. A perusal of the claim in the suit patent reveals that the same is equivalent to the claims 33 to 37 of the US No.5696505 and EP 0745254B1.
  • Defendant’s witness DW-1 in fact in his evidence by way of affidavit admitted that out of the claims in EP-0745254B1 claims 32 to 38 have been included in the Indian patent application,
  • Philips also filed reports which proved that the US and EP patents were found to be essential to the given DVD standards.
  • In view of essentiality reports and corresponding claims of patents, the Court held that Philips proved that the patent in India is also an essential patent

 (iii) Whether the defendants have infringed the plaintiffs’ Indian Patent No. 184753? OPP

  •  Plaintiff’s proved that the suit patent is a standard essential patent and the mere fact that the defendant uses a standard proves infringement.
  • However the plaintiff also proved infringement independently by the evidence of witness and the cross-examination of defendants’ witnesses.
  • Plaintiff witness deposed that he independently examined the defendants’ products using tests devised specifically for the purpose of determining the presence of EFM (eight to fourteen modulation) + demodulation technique and confirms that defendants’ DVD Video players were using the EFM+ demodulation technique, thus infringing the suit patent.
  • The defendants argued on the basis of doctrine of exhaustion that they were purchasing the chip from Shuntak (HK) trading Company and Sheenland Corporation who were the authorized venders.The Court however rejected the argument and stated that the defendants failed to discharge the onus to prove that both Shuntak and Sheenland were the licensees of the plaintiff and thus the plea that there is no infringement by virtue of doctrine of exhaustion was rejected.
  • The Court held that the Plaintiff’s has been able to prove that it is the owner of a standard essential patent, and thus the defendant’s products if manufactured, sold without license necessarily infringes the suit patent. The Court further noted the evidence of plaintiff’s witness who has explained the claim in the suit patent and compared the same with the products of the defendants to come to the conclusion that the defendants are infringing the suit patent by using the plaintiff’s patent IN 184753 in the DVD player sold by them.
  • The issue was therefore also decided in favour of the plaintiff and against the defendants

(iv) Whether the defendants had knowledge of the plaintiffs’ patents in respect of DVDs and the plaintiffs’ licensing programs?

 The court held that because it has been held that the plaintiff is the holder of a standard essential programme and also that the defendants have infringed the suit patent even if the defendants had no knowledge of the licensing programme they were in law bound to take the license from the plaintiff.

 (v) Whether the plaintiffs along with various other members of the DVD forum are misusing its position with a view to create a monopoly and earn exorbitant profits by creating patent pools? 

  • The Court after an extensive discussion of the various provisions of the Patents Act and the Competition Act held that the remedies as provided under Section 27 of the Competition Act for abuse of dominant position are materially different from the remedy as available under Section 84 of the Patents Act, thus the remedies under the two enactments are not mutually exclusive, in other words grant of one is not destructive to the other.
  • The Court held that there was no irreconcilable repugnancy or conflict between the Competition Act and the Patents Act, and, in absence of any irreconcilable conflict between the two legislations, jurisdiction of CCI to entertain complaints for abuse of dominance in respect of Patent rights could not be ousted
  • Thus whether creating of a patent pool by the bigwigs of the industry getting together amounts to an anti-competitive practice being misuse of the dominant position cannot be decided in the present suit. Hence this issue was held to be beyond the scope of the decision in the present suit.

 (viii) Whether the plaintiffs are entitled to a decree of damages or any other relief? OPP”

  • The Court held that the plaintiff is seeking royalty at FRAND terms and no evidence has been led by the defendants to rebut that these are rate were not FRAND terms.
  • The Court ordered the Defendants to pay royalty to the plaintiff @USD 3.175 from the date of institution of the suits till 27th May, 2010 and from 28th May, 2010 @USD 1.90 till 12th February, 2015. Royalty rates are further subject to interest of 10% per annum.
  • Considering the conduct of the Defendant and he being an ex-employee of the plaintiff knowing fully well with impunity infringed the suit patent was held also to be liable to pay punitive damages of ₹5 lakhs.

In view of the above, the Court decreed the suits in favour of the plaintiff and against the defendants holding that the said defendants have been infringing the suit patent IN-184753 which is an essential standard patent in respect of DVD video player, however, no injunction was granted to the plaintiff for the reason the plaintiff’s suit patent expired on 12th February, 2015.

A decree of actual cost incurred by the plaintiff including lawyer’s fee, the amount spent on court fee and the Local Commissioner’s fee is also passed in favour of the plaintiff and against the Defendants.

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