Standard Essential Patent Owners Can Pray For Interim And Final Injunctive Relief If Infringer Deemed To Be An ‘Unwilling Licensee’: Delhi High Court

Observing that the new technology has blurred national boundaries and given a boost to the international trade as well as infringement, the Delhi High Court has said that global doctrinal interdependence — referring to foreign Court decisions, is an effective and practical way of facilitating harmonization of basic principles of laws, especially when there is nothing contrary in the national laws. 

In its decision on the appeals against a single judge decision that held Telefonaktiebolaget LM Ericsson's eight suit patents prima facie valid and further ruled that Intex Technologies (India) Limited has prima facie infringed Ericsson's patent, the division bench of Justice Manmohan and Justice Saurabh Banerjee said rapid developments in the technology have posed unprecedented challenges to intellectual property laws.

"The case at hand illustrates the universally acknowledged truism that ‘law always lags behind technology’," said the court.

The court further said intellectual property laws have always been recognised and regarded as territorial, but in today’s world where borders of countries have ceased to have any relevance for trade purposes, enforcement of patent rights and court orders have become a challenge.

Intex's principal argument before the court was that the concept of Standard Essential Patents is unknown to India law and that since the Standard Setting Organizations do not check which patents are actually essential and the declarants do not provide any proof of essentiality, the patents in question cannot be presumed to be standard or essential. 

It was further argued that Single Judge could not have directed it to pay as well as deposit royalty at the interim stage since Standard Essential Patent owners’ only entitlement, even according to law laid down by foreign Courts, is royalties at the end of the trial.

"Even if the eight suit patents registered in India ... in Ericsson’s portfolio were truly essential, which was yet to be tested in a Court of law, there could be no presumption of essentiality of the entire portfolio of thirty three thousand (33,000) patents on the basis of review of only a handful of patents and there could also be no direction to make payment with regard to the other thirty three thousand (33,000) patents claimed by Ericsson especially when they are not even registered in India," Intex's counsel submitted.

Ericsson argued that Intex had acknowledged Ericsson’s patent to be Standard Essential Patent and a licence from Ericsson was required to be taken by Intex. It was duly offered by Ericsson in terms of licence of Standard Essential Patent to Intex, the company said.

Observing that one will have to adapt foreign jurisprudence with respect to Standard Essential Patent keeping in view the Indian realities, in particular that the judge-population ratio is extremely poor in this country and expeditious disposal of patent suits cannot be expected at the cost of other suits, the court said:

"One also cannot lose sight of the fact that legal regimes that do not preserve a reasonable expectation of injunctive relief against infringers in Standard Essential Patent litigations will have a counterproductive “domino effect” that shifts bargaining leverage to implementers in all Standard Essential Patent licensing negotiations, devaluing existing patent-protected technologies and disincentivising firms from developing new technologies".

The court said though the Standard Essential Patents are not spoken of in the Patents Act, 1970, but the decision of the high court have long recognised the concept and have adjudicated claims for infringement, security and damages. It referred to Telefonktiebolaget LM Ericsson (PUBL) v. Lava International Ltd and Koninklijke Philips N.V. v. Bhagirathi Electronics & Ors. 

"The Delhi High Court’s Rules Governing Patent Suits 2022 have formally recognized Standard Essential Patents and the different legal tests that are involved in their adjudication," said the court.

The bench rejected Intex's argument that the court should not grant an injunction or pass a direction to pay, since the Standard Essential Patent owner’s only interest is in obtaining reasonable royalties, an interest which can be fully recognised by an award of damages at the end of the trial.

"In contrast, either an injunction or a direction to pay royalty in the interim is likely to be a more effective remedy, as it does not merely result in a small increment to the cost of products which infringe the patents, but prohibits infringement altogether," said the court.

It also noted that the FRAND principle which precludes Standard Essential Patent owners from seeking injunctive relief has been rejected by the Court of Justice of the European Union (CJEU), the UK Supreme Court, and the US Court of Appeals for the Federal Circuit.

"In Huawei v. ZTE, the CJEU has held that a Standard Essential Patent owner may seek an injunction against ongoing infringement by an implementer unless the implementer responds to the Standard Essential Patent owner’s royalty offer by submitting a specified FRAND-compliant counter-offer and provides appropriate security pending resolution of the dispute," the court said.

The court also said that following the 2015 decision in Huawei v. ZTEI, the UK High Court of Justice and the UK Supreme Court reaffirmed the right of Standard Essential Patent owners to receive injunctions when faced with an “unwilling licensee” who engages in classic stalling tactics.

"Dutch and German national courts have also issued injunctions to Standard Essential Patent owners based on a finding that the infringer had engaged in “hold out” behavior," it added.

The court also said the near uniformity of judicial opinion in multiple jurisdictions, according to a paper dated 9th May, 2022 filed by legal academics, economists, and former United States governmental officials in response to European Commission call for evidence for an impact assessment, reflects common sense.

"According to the said paper, if Standard Essential Patent owners are flatly precluded from seeking injunctions, then infringers would have little reason ever to agree to, or negotiate in good faith, a licence with a Standard Essential Patent owner. A well-resourced infringer would rationally reject any licence offer and compel the Standard Essential Patent owner to enter into litigation that typically requires millions of dollars in legal expenses in multiple venues around the world. In the worst-case scenario, the infringer would be compelled to pay monetary damages that are typically calculated using a methodology designed to mimic the rate in a negotiated licensing transaction," the court said.

The court said absent any realistic prospect of an injunction within a reasonable period of time, the implementer enjoys access to the innovator’s technology, deriving revenues from the products and services that embody that technology, while, during the negotiations and litigation, the innovator earns nothing from the same technology that it developed at great cost and risk.

"This asymmetry is likely to lead to settlement amounts or, absent litigation, negotiated royalties that undervalue the innovator’s technology. This effectively transfers wealth from firms that specialize in developing technologies to firms (including some of the world’s most valuable companies) that specialize in using and integrating those technologies in branded devices/products sold to consumers," said the bench.

The court said there is no prohibition in Indian law against a Standard Essential Patentee from seeking an injunction and that Standard Essential Patent owners who file lawsuits can pray for interim and final injunctive relief if an infringer is deemed by a Court to be an “unwilling licensee".

The court also ruled that an injunction can be secured, even if the infringement of one patent is established either prima facie, or at the final stage. "This principle is also established in Standard Essential Patent jurisprudence emanating from the USA," said the court.

If the patentee shows that even if one of the patents in a product has been infringed, then the implementer’s product cannot be sold and all the thousands of patents therein will be of no use to the implementer, it said.

"Accordingly, if a case for infringement, even with regard to one patent, is made out, it is like a ‘silver bullet’.  Consequently, to restrain an infringing device, a Standard Essential Patent holder does not have to sue based on each of the thousands of patents that it claims to own in the product; it can do so by showing that one, or a handful of representative patents are infringed," said the bench.

Intex versus Ericsson 

The court said Ericsson’s claims of essentiality of its patents and infringement by Intex are admitted facts. 

"A perusal of the complaint filed by Intex before CCI shows that Intex therein admitted that Ericsson’s suit patents had been accepted as Industry Standard and declared as essential to ETSI. Intex also admitted in its CCI complaint that Department of Telecommunication, Government of India had formally accepted the Technology Standard formulated by ETSI and the only way for an Indian telecom player to comply with an ETSI/3GPP GSM standards in India was to obtain a licence from Ericsson. Intex admitted in its CCI complaint that every player in Indian GSM market has to obtain licence from Ericsson as there were no non-infringing alternatives available and that Ericsson owns a large number of Standard Essential Patents relevant to the standards," it added.

The court said invocation of the jurisdiction of CCI, which is premised on the presumption of essentiality, implementation and dominance of Ericsson’s patents, shows that Intex was very well aware that it was infringing the suit patents.

"Moreover, if Intex was of the view that it was not infringing Ericsson’s patents and the same were non-essential, Intex instead of approaching CCI alleging abuse of dominant position, should have sought a declaration of non- infringement or of groundless threat under Sections 105 and 106 of the Act," said the court.

The division bench also agreed with the Single Bench's conclusion that just because a revocation petition had been filed before IPAB, it cannot be presumed that a credible challenge had been raised by Intex qua the validity of the suit patents.

"This Court is further of the view that it is counter-intuitive for a party alleging abuse of dominance to claim that the patents are invalid as there cannot be dominance let alone abuse thereof qua patents which are invalid," it said.

Dismissing the appeal filed by Intex, the court directed it to pay the entire royalty amount to Ericsson within four weeks. 

Title: INTEX TECHNOLOGIES (INDIA) LTD versus TELEFONAKTIEBOLAGET L M ERICSSON (PUBL) 

Citation: 2023 LiveLaw (Del) 277

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