Against that backdrop, patentees looking to do business in India have good reason to celebrate. Two decisions handed down by the High Court of Delhi (a senior court in the capital city of New Delhi and a specialist intellectual property court) (“Delhi High Court”) recently clarified the law with respect to an Indian stance on standard-essential patents. These decisions make clear how the courts balance the rights of standard-essential patent holders (“SEP holders”) and implementers looking to obtain licenses from these SEP holders, similar to the EU’s Court of Justice’s 2015 decision in Huawei v. ZTE and the Supreme Court of the United Kingdom’s decision in Unwired Planet International Ltd v. Huawei Technologies (UK) Co Ltd & Anr. (“Unwired Planet”). Along with certain other interim orders passed by the High Court in the recent past, these decisions form a body of law which reinforce patentees’ rights in India.
This article provides a brief introduction to the Indian legal system, an overview of the Ericson dispute that set out principles governing infringement trials for SEPs in India, and a summary of Nokia v. Oppo, which clarified that Indian courts can grant pro-tem orders pending final decisions.
Overview of Indian IP legal system
Patent law is governed by the Patents Act, 1970 (“Patents Act”). Infringement is triable by any district-level civil court. Where a defendant intends to seek revocation of the patent in their counterclaim, the trial must take place before the state’s High Court. While all twenty-five High Courts may try patent suits in theory, in practice, patentees usually prefer one of the High Courts at Delhi, Kolkata, Mumbai, and Chennai. Unlike the other High Courts, these have original (trial) jurisdiction, specialist judges and special procedures governing intellectual property trials. It is usually possible to demonstrate a cause of action in the territory covered by these High Courts by evidence of the sale or usage of the patent in question. Trials are held before a judge sitting singly, (“Trial Judge”), and a Trial Judge’s decision is appealed to a panel of two judges (“Division Bench”). Apart from the High Court, a regulatory authority known as the Controller-General of Patents, Designs and Trademarks (“Patent Controller”), is tasked with various roles under the Patents Act, including but not limited to the grant of compulsory licenses. Decisions of the Patent Controller are appealed to the state High Courts.
Indian antitrust law is governed by the Competition Act, 2002 (“Competition Act”). The statutory regulator, the Competition Commission of India (“CCI”), has exclusive jurisdiction to investigate and rule on competition law infringements. Proceedings before the CCI are referred to as “quasi-judicial”, i.e. a mixture of administrative proceedings and adversarial proceedings; the CCI ultimately returns findings, imposes behavioural remedies, and levies penalties. Civil courts cannot apply the Competition Act. This often creates regulatory conflict between the CCI and specialist regulators, something which was also resolved recently by the High Court in another decision (with respect to patent licensing issues).
The Ericsson dispute
In March 2023, the Delhi High Court handed down judgement in a nearly ten-year long proceeding between Swedish telecommunications manufacturer Ericsson and the Indian mobile phone company Intex Technologies (“Intex”), (the decision is the “Ericsson DB Judgement”). In doing so, the High Court set out principles governing infringement trials for SEPs in India. The Ericsson DB Judgement follows best practices set out by courts in the United States, the United Kingdom and the European Union, and incorporates them into the Indian framework.
Ericsson owned multiple patents used by mobile phone manufacturers across the world, including certain Indian patents essential to their 2G and 3G phones. At the time, Ericsson had already made fair, reasonable and non-discriminatory (“FRAND”) commitments to several standard setting organizations. Intex, an Indian mobile phone manufacturer, was alleged to have been infringing the Ericsson patents. The parties entered several rounds of negotiations between 2008 and 2013, but were unsuccessful in reaching agreement.
In late 2013, Intex approached the CCI alleging that Ericsson had been abusing its dominant position in the relevant market for these technology patents. The CCI found a prima-facie infringement, and initiated an investigation. At the same time, Intex also approached the IPAB seeking revocation of Ericsson’s patents (“Revocation Petition”).
Ericsson proceeded to file an infringement suit before the Delhi High Court, along with an application for a temporary injunction. In March 2015, the trial judge issued an interim injunction, with the finding that Intex had taken contradictory stands in its submissions before the CCI and the IPAB. Before the CCI, Intex submitted that the patents were valid and standard-essential, but before the IPAB, Intex claimed that Ericsson had not fulfilled the requisite conditions under the Patents Act, including subject-matter patentability and prior art. The Trial Judge assessed both cases separately and found that the Revocation Petition lacked merit. Intex also argued that the validity of these patents would amount to the patenting of software, which could not be allowed under Indian law. this argument was also dismissed by the Trial Judge. Intex was directed to pay 50% of the royalty amount (calculated basis the price of the phone, as opposed to the chipset), in line with the U.S. District Court’s decision in CSIRO v. CISCO.
The DB Judgement
Both Ericsson and Intex appealed. Ericsson sought full payment of the royalty rate, while Intex sought to vacate the Trial Judge’s order.
Intex argued before the Division Bench that it had not admitted the essentiality of Ericsson’s patents before the CCI. Moreover, because there is no legislative presumption of a patent’s validity under Indian law, standard-essential patents could not be presumed valid as a separate class of patents. Ericsson, on the other hand, argued that the negotiations between itself and Intex, and itself and third parties, showed that the patents were valid, and that Intex continued to be a willing infringer.
Through the Ericsson DB Judgement, the Division Bench confirmed the Trial Judge’s injunction handed down in 2015 and dismissed Intex’s appeal. While the decision relies extensively upon foreign precedent from the United States, the European Union, and the United Kingdom, it attempts to set out the Indian position on dealing with the rights of SEP holders vis-à-vis implementers. Most importantly, the Ericsson DB Judgement specifically sets out the policy that SEP holders are entitled to an injunction where an implementer does not negotiate FRAND terms. The Ericsson DB Judgement proceeds to set out the following principles:
The legal regime cannot promote holdout: The Ericsson court relied on the EU Court of Justice’s decision in Huawei v. ZTE to hold that the negotiation between SEP holder and implementer places obligations on both parties. While there are obvious limitations on SEP holders as to what they may or may not offer as licensing terms, implementers must either offer reasonable counter-offers or, pending negotiations, offer security. Implementers may not continue to sell products in the absence of either.
FRAND imposes mutual obligations: A FRAND obligation is not an obligation upon the SEP holder alone. While the SEP holder may be required to offer necessary information to the implementer to allow them to arrive at a fair and equitable license rate, the implementor may also review its own licenses with other parties to find whether the terms offered by the SEP holder are FRAND or not.
SEP holders can seek injunctive relief before Indian courts: Intex argued that Indian courts should not, as a rule, permit injunctive relief where royalty would be adequate compensation. It also argued that the trial judge must ascertain that the patent in question is standard-essential, and that the terms of its licensing were FRAND. To that end, Intex relied on Huawei’s arguments before the UK Supreme Court in Unwired Planet. Although Huawei’s arguments as to foreclosure of injunctive relief were rejected by the UK Supreme Court, the same found some favor with the Trial Judge in Nokia v. Oppo in November 2022, (ultimately set aside in appeal by the Division Bench in 2023). The Ericsson court disagreed. It relied on the Unwired Planet ruling to show that even the UK Supreme Court accepted that injunctive relief in SEP cases differed on a country-by-country basis. While the UK rarely grants injunctions unless it conclusively determines that a patent was indeed valid and infringed through two separate trials in the UK, India does not hold separate patent infringement and validity trials. Indian courts have the discretion to issue injunctions prior to the start of trial, for interim protection. The Court recognizes that where SEP holders are precluded from seeking injunctions as a rule, infringers would not negotiate licenses with SEP holders in good faith.
The plaintiff need not demonstrate that all infringed patents are standard-essential: The Ericsson DB Judgement also discusses what the Court might take into consideration while considering injunctive relief. Given that it may not be possible to prove whether all the infringed patents are standard-essential at the beginning of the trial, the Court held that the “direct” rule (where the claims in the defendant’s patent are mapped against the patentee’s patent) need not be applied. Instead, an “indirect” approach (where an injunction might be granted if the defendant’s patent maps to the standard) is acceptable; this presumes that the infringed patent is indeed standard-essential. In doing so, the Ericsson court relies on the US Federal Circuit decision in Fujitsu v. Netgear Inc.
Injunction may be granted even if only one patent is infringed: SEP holders can file infringement suits for the entire portfolio of SEPs if it can be demonstrated that only one is infringed. This principle is taken from Microsoft v. Motorola.
Pro-tem security must be paid by an infringing implementer: Owing to delays caused by overburdening of the judicial system, SEP holders are and must be granted interim relief without undue delay, which includes pro-tem security in lieu of royalty payment. This is an important link between this judgement and the Nokia DB Judgement (details below). Intex relied on the Trial Judge’s judgement in Nokia v. Oppo, which set out a four-element test determining whether the SEP holder was due royalty from the implementer. Under this test, the court considers whether: (i) the asserted suit patent is in fact a SEP, (ii) the technology used by the defendant infringes the SEP, (iii) the royalty rate at which the plaintiff is willing to license its SEP is FRAND, and (iv) the defendant is unwilling to take the license at the said FRAND rate.
While not explicitly setting the trial judge’s decision in Nokia aside (given that another Division Bench was hearing the appeal in Nokia at the time the Ericsson DB judgement was being authored), the Ericsson DB Judgement held that the four-element test was incorrect, as it places an impossibly high burden on the SEP holder at the time of filing the suit and seeking interim relief. To that end, the judgement recognizes that delays are inherent in the Indian judicial system, but that does not mean that the SEP holder must await final judgement to be compensated adequately.
While it had been customary to grant injunctive relief in patent infringement cases pending trial in India, the Ericsson DB Judgement’s clear statement of the above points provides a great deal of clarity. Its incorporation of international best practices into Indian law, along with the Nokia DB judgement, means that SEP holders need no longer await the outcome of lengthy trials for the adjudication of their rights.
Nokia v. Oppo: Indian courts can grant pro-tem orders pending final disposal
A second judgement from the Delhi High Court, passed July 2023 (i.e., the Nokia DB Judgement) also makes clear that courts can enter pro tem orders for payment of security to the SEP holder. While this custom was already practiced by the Delhi High Court in prior decisions, its formal recognition in the law is important because it means that patentees are not remediless until the end of trial. This is particularly important because trials in India often take considerable time, owing to overburdened court dockets.
The case started when Nokia filed a patent infringement suit before the Delhi High Court in 2021, along with an application seeking interim relief (an injunction). Owing to Covid-19 and the complexity of the facts, the application seeking interim relief was not decided until 2022. Nokia filed another application seeking deposit of security into court, stating that Oppo had paid royalties to Nokia under a FRAND agreement (for Nokia’s 2G, 3G and 4G SEPs) that expired in 2021. Oppo stopped paying Nokia royalty upon expiry of the agreement, although it sold over 77 million devices in India. Given this background, Nokia contended that Oppo should be required to pay security pending judgement in this trial. The Trial Judge denied Nokia relief and set out the four-fold test explained above.
On appeal, the Division Bench set aside the findings of the Trial Judge. Relying on the EU Court of Justice’s decision in Huawei v. ZTE, the Division Bench now recognizes that pro-tem security payments are a necessary facet of license negotiations in SEP license negotiations. Moreover, the Division Bench relied on the findings of courts in other jurisdictions (the UK, the Netherlands and Germany) in proceedings between these same parties to hold that Oppo was an unwilling licensee.
Good news for patentees in India
These judgements from the High Court provide more certainty regarding the rights of SEP holders, which is helpful for patentees looking to invest in technology in India. While High Court decisions only have probative effect (and are not binding precedent) on decisions passed by other High Courts, the general principles that have been set out by the Delhi High Court are consistent with decisions from around the world and are likely to be followed closely by other courts in India as well.
