The Delhi High Court has clarified that to establish that a patent is a Standard Essential Patent (SEP), the plaintiff must prove the existence of a standard set by an SSO and also prove, by credible evidence such as proper claim mapping, that the claims of the suit patent map onto the technical features of that standard. Essentiality certificates or reports by private evaluators, being expert evidence, do not prove essentiality unless proved in accordance with Section 45 of the Evidence Act, including disclosure of the basis of the opinion and availability of the expert for cross-examination. In the absence of such proof and in the absence of claim charts, the suit patent cannot be treated as an SEP.
The Court further held that infringement of a product patent must be established through product-to-claim mapping. In an SEP matter, even the indirect method requires proof that the patent maps onto the standard and that the implementer’s product maps onto the same standard. Where no such mapping is undertaken, where the primary technical deponent does not enter the witness box, and where the alleged independent expert withholds logs and technical analysis, infringement is not proved either directly or indirectly.
Under Section 107A(b) of the Patents Act, the Court clarified that after the 2003 amendment, importation of patented products from a person duly authorised under law to produce and sell or distribute them does not amount to infringement, and it is not necessary that such person be authorised by the patentee. Therefore, once the patented chip/PCB embodying the invention had been lawfully placed in the market and purchased by the defendants from lawful sources, Philips’ patent rights stood exhausted and could not be enforced against the defendants.
Thus, the High Court asserted that a plaintiff claiming relief as an SEP holder must prove that the licence terms offered were FRAND. In the absence of disclosure of comparable third-party licence agreements or other objective material, a court cannot determine that the offered royalty is FRAND. Further, where the patent claim is only to a device embodied in a chip/PCB, royalty or damages cannot be assessed on the basis of the entire end product, i.e., per DVD player. Resultantly, the Division Bench quashed and set aside the judgment dated July 12, 2018 and allowed the appeals, holding that Philips failed to prove SEP status, infringement, enforceability in light of exhaustion, or FRAND royalty and damages.
The Division Bench comprising Justice C. Hari Shankar and Justice Om Prakash Shukla first examined the nature of the suit patent and held that the claims in the suit patent were only for a “decoding device” and not for any decoding technology or method. The Bench noted that although the complete specification used broader language referring to methods, coding device, recording device, reading device, signal and record carrier, protection under Section 10(4)(c) of the Patents Act could extend only to what was claimed. On the evidence of Philips’ own witness PW-2, the Bench found that the invention forming the subject matter of the suit patent resided in the chip or PCB contained in the DVD player, and not in the entire DVD player or in any general technology.
On the issue whether the suit patent was an SEP, the Bench accepted that the DVD Forum was the relevant SSO and also held that the Bansals could not deny this, having acknowledged the same in their written statement. The Bench also accepted that equivalence of the Indian suit patent with US’505 and EP’254 stood admitted by the Bansals. However, it found that Philips had failed to prove essentiality because the essentiality certificates issued by Proskauer Rose LLP and Cohausz & Florack were in the nature of expert evidence, but no person from those firms entered the witness box, no affidavit from them was filed, and the certificates did not disclose the manner in which the patents were mapped to the DVD standard. The Bench also emphasized that no claim charts mapping the claims of the suit patent, or even US’505/EP’254, to the technical features of the standard were produced, as required by para 95 of Intex.
On infringement, the Bench held that the indirect test necessarily required mapping of the patent to the standard and of the defendant’s product to the standard, and that such mapping had not been undertaken. As regards direct infringement, the Bench reiterated that the classical test was product-to-claim mapping, which had not been done.
On FRAND and damages, the Bench held that an SEP holder could claim injunction, royalty or damages only after establishing that it was a willing licensor offering FRAND terms and that the defendant was an unwilling licensee. It found that Philips had not produced even a single third-party licence agreement, though PW-2 admitted being in possession of such agreements. In the absence of such material, the Bench held there was no evidentiary basis to conclude that the rates offered by Philips were FRAND.
The Bench also held that interim negotiations or without-prejudice offers could not form the basis of final adjudication of FRAND royalty. Further, since the suit patent was only for a device residing in a chip/PCB, royalty could not lawfully be computed on a per DVD player basis. The award of punitive damages merely because Rajesh Bansal had been an employee of Philips was also held to be unsustainable.
Briefly, the appeals arose from a common judgment dated July 12, 2018 passed by the Single Judge in two suits filed by Koninklijke Philips Electronics NV against Rajesh Bansal/Mangalam Technology and K.K. Bansal/Bhagirathi Electronics alleging infringement of Indian Patent No. 184753, titled “Decoding device for converting a modulated signal to a series of M-bit information words.” Philips claimed that the suit patent was a Standard Essential Patent in relation to DVD player technology, corresponding to US Patent 5696505 and European Patent EP 745254B1, and alleged that the DVD players manufactured and sold by the Bansals infringed the suit patent without any licence from Philips. During pendency of the suits, the patent expired on February 12, 2015, as a result of which the controversy before the Single Judge survived only on damages and costs, though the issue of infringement remained material.
The Single Judge decreed the suits in favour of Philips, holding that the defendants had infringed the suit patent, that the patent was an essential standard patent in respect of DVD video player technology, and that Philips was entitled to recovery of royalty at FRAND rates, namely USD 3.175 up to May 7, 2010 and USD 1.90 thereafter till February 12, 2015, per video player manufactured/sold, along with interest at 10% per annum. Punitive damages of ₹5 lakhs were also awarded against Rajesh Bansal, and a Local Commissioner was appointed to ascertain the number of infringing DVD players manufactured or sold.
The Bansals challenged not only quantification of damages, but also the findings that the suit patent was an SEP, that it was infringed, and that Philips could maintain the suits despite the plea of international exhaustion under Section 107A(b) of the Patents Act. Their case was that the patented invention resided in a chip or PCB purchased from authorised sources such as MediaTek through Shuntak and Sheen Land, that they merely assembled DVD players using such components, and that Philips had failed to establish either essentiality, infringement, or FRAND rates. Philips, on the other hand, maintained that the suit patent corresponded to US and EP patents already treated as essential, that the DVD Forum was the relevant SSO, that the Bansals’ products infringed both by technical testing and by necessary implementation of the DVD standard, and that the royalty offered was FRAND.
Appearances:
Swathi Sukumar, Sr. Adv. with S. Santanam Swaminadhan, Naveen Nagarjuna, Ritik Raghuwanshi, Kartik Malhotra, Anindit Mandal and Shreya Mansi James, Advs., for the Appellants
Pravin Anand, Vaishali R Mittal, Siddhant Chamola and Gursimran Singh Narula, Advs., for the Respondents
