Delhi High Court Dismisses Nokia's Plea Seeking Deposit Of 'Royalty' By Oppo For Alleged Infringement Of Cellular Technology Patents

The Delhi High Court recently dismissed Nokia's application seeking a direction to Chinese smartphone manufacturer Oppo for deposit of an amount with the court as "royalty" for alleged infringement of its patents in cellular technology.

Nokia owns three Standard Essential Patents (SEPs) which are stated to be necessary to make cellular systems 2G, 3G, 4G or 5G compliant. The Finnish multinational company last year filed a suit before the High Court accusing Oppo of infringing its patents. 

Oppo in 2018 had obtained a license from Nokia for utilising its SEPs on payment of royalty at FRAND rates. The license expired in 2021 but, according to Nokia, Oppo continued to use its SEPs  without renewal of the agreement or taking of any fresh license.

In the application, Nokia sought a direction to Oppo to deposit, with the Court, an amount which would represent the royalty, at FRAND rates, "on payment of which Oppo could be granted a license to use the suit patents and to which Nokia, consequently, claims to be entitled."

Justice C Hari Shankar in the order passed on November 17 said that the court cannot rely on the first FRAND license agreement as a basis to direct deposit by Oppo of any amount in terms of Order XXXIX Rule 10 of the CPC. The provision requires a clear, categorical and unequivocal admission that the defendant is holding monies of the plaintiff or that certain monies are due from the defendant to the plaintiff, the bench said.

"The first FRAND license agreement has, admittedly, expired. There has been no consensus, ad idem, between Nokia and Oppo on the terms at which, the agreement is to be extended or continued further. Oppo has, in its communications, clearly stated that it had reservations regarding the reasonability of the terms at which Nokia was seeking to grant a license to Oppo to exploit its patent portfolio and as to whether they were actually FRAND. Oppo has, at all times, reserved its right to question the essentiality of the suit patents, as also the liability of Oppo to pay royalty to Nokia for the exploitation thereof, at any rate," said the court.

The court also said that Oppo has disputed Nokia's contention that the suit patents are SEPs, as also that it was exploiting the said suit patents and that the royalty rate at which Nokia was willing to permit such exploitation were FRAND.

"These are all matters which require trial and on which, in the absence of a trial, it would be hazardous to venture even a prima facie opinion, as the present application would require this Court to return. I am unable to glean, from the material on which Nokia has sought to place reliance, any admission of liability of Oppo's part, as would be sufficient to justify an order under Order XXXIX Rule 10 of the CPC," said the bench.

According to the suit, Nokia had offered a license to Oppo to use the suit patent at royalty rates but the Chinese company failed to accept the offer. Nokia also told the court that the pre-suit communications with Oppo clearly contained admissions by Oppo, that they were liable to pay at least some amount to Nokia. Nokia told the court that Oppo voluntarily made three counter offers.

Oppo in response said that the first FRAND licensing agreement dealt only with patents relevant to 2G, 3G and 4G standards and did not cover patents applicable to 5G standards. Oppo also argued that Nokia has to establish that patents are indeed SEPs. It also said that counter offers could not be regarded as admission of any patent claims by Nokia as they were always made without prejudice to Oppo's right to challenge the essentiality and validity of Nokia's SEPs.

It added that the Finnish company also has to establish that the defendant was using the patents in its devices and the royalty rates at which license was being offered by the plaintiff was FRAND and defendant was unwilling to take a license at such rates.

Justice Shankar said the e-mails exchanged between the companies do not disclose any unequivocal admission on Oppo's part of any specific liability, for being permitted to exploit Nokia's SEP portfolio.

"An agreement, at the end of the day, is an agreement, and no more. Unless the agreement spells out, in express terms, admission of liability, no such inference can flow from the mere fact that the agreement was executed," the court said.

The court further noted that even in communications with Nokia, Oppo was contesting the very essentiality and validity of 2G, 3G and 4G patent portfolio of the Finnish company.

"These communications, therefore, clearly indicate that (a) the figures, which were being exchanged between Nokia and Oppo, were in the nature of offers and counter offers, (b) Oppo was not willing to agree to any interim payments, or even any royalty payments to Nokia, except on cross-licensing basis there was disagreement between Nokia and Oppo even regarding the scope of the first FRAND license agreement and (d) any interim payment payable by Oppo to Nokia, even if a figure in that regard were ultimately to be arrived at, would be without prejudice to the royalty rate, if any, which would ultimately be found to be payable and subject to adjustment from such royalty, positively or negatively," it added.

The court said neither Nokia nor Oppo disputes the fact that the question of whether the royalty rate proposed by an SEP holder is or is not FRAND, would require examination of license agreements between the SEP holder and third party. It added that said same is an intricate and evolved exercise which cannot be done by the court while exercising jurisdiction under Order XXXIX Rule 10 of the CPC.

"The issue of whether there exists, or does not exist, any 'admission' of monies due to the plaintiff, by the defendant, so as to justify directing deposit of such amounts under Order XXXIX Rule 10, cannot be decided by isolated references to one document or the other. This is, in fact, a classic case to understand the working of the provision where there are protracted and high-level confabulations between the parties regarding the possibility at arriving at mutually acceptable terms," said the court.

The court said offers and counter-offers, during negotiations aimed at arriving at a possible agreement or settlement, cannot in the absence of any unequivocal evidence of consensus ad idem, constitute the basis for a direction for deposit under Order XXXIX Rule 10 of the CPC.

"Barring offers and counter-offers – in fact, counter-offers by Oppo to offers by Nokia – there is, really, no peg on which Nokia can seek to hang its case in the present application, as would bear its weight. The contention of Nokia that Oppo should "least" be directed to deposit US$ *****, is alien to Order XXXIX Rule 10. The Court cannot, under the said provision, direct a party to at least deposit a particular amount. If there is an admission, by either party, of its liability to the other, that amount can be directed to be deposited. In the absence of any such admission, the application must inexorably fail," said Justice Shankar.

Both sides had relied upon affidavits of "experts" to substantiate their claims. The court refused to rely on them at this stage. However, it clarified that even at a prima facie stage, they can be relied "against" the party who chooses to place it on record as that party cannot dispute its own evidence.

"I do not see how any order can be passed on the basis of such affidavits, which are not admitted by the opposite party. Expert evidence, though given a slightly exalted status under Section 45 of the Evidence Act, is otherwise relevant, only if it is tested in the manner envisaged by the CPC and the Evidence Act. At a pre-trial stage, therefore, I confess my hesitance in relying upon expert evidence, which is not admitted by either party," said the court. 

Pertinent to mention, Nokia has challenged Justice Shankar's order. The division bench of Justice Manmohan and Justice Saurabh Banerjee on December 12 issued notice to Oppo in the appeal

Title: NOKIA TECHNOLOGIES OY vs GUANGDONG OPPO MOBILE TELECOMMUNICATIONS CORP LTD & ORS

Citation: 2022 LiveLaw (Del) 1167

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