Context: Between May and September 2012, Philips sued three Indian DVD manufacturers, Pearl Engineering Company, Powercube Infotech, and Siddharth Optical Disc Private Ltd., for each infringing a standard-essential patent (SEP) covering Eight-to-Fourteen Modulation Plus (EFM+) coding, which forms an essential and integral industry standard in the manufacturing, storage, and replication of data in digital formats (such as in DVDs). The SEP owner also sought a permanent injunction, alleging at the time that the defendants had engaged in large-scale DVD replication using the patented technology without a license and this innovation had been “crucial” to the global standardization of DVD production, ensuring “universal compatibility” with DVD players regardless of the manufacturer.
What’s new: In a landmark ruling handed down on Thursday, the Delhi High Court sided with Philips, declaring that all three DVD manufacturers “knowingly” used Philips’ patented EFM+ technology without a license. The court ruled that the defendants were unwilling licensees, refusing to negotiate in good faith, and held them liable for aggravated damages. However, no injunction could have been granted at this stage (because the patent term expired in February 2015).
Direct impact and wider ramifications: This judgment is of course a long-awaited win for Philips, but it is also another big win for SEP owners looking to enforce in India. It once again reinforces India (more specifically the Delhi High Court) as a venue for SEP enforcement, with the court reminding licensees that patents must be respected or infringers will face serious consequences. Vivek Ranjan at Kommit Techno-Legal LLP in Delhi told ip fray that the Phillips decision “reaffirms” Indian courts’ alignment with the global jurisprudence in FRAND matters – and, by extending common law doctrines like joint tortfeasance to SEP infringement and awarding comprehensive reliefs, the courts have “ensured complete justice beyond the letter of the law”.
This is the judgment:
The patent-in-suit was:
- Indian Patent No. 218255 (“Method of converting information words to a modulated signal”)
According to Philips, the patent, which expired on February 12, 2015, concerned a “transformative development” in DVD production – the encoding of data into binary format using EFM+ technology, which facilitates higher data storage capacity on DVDs compared to earlier methods (like video compact discs).
In its infringement actions in 2012, Philips claimed that this SEP had been crucial to the global standardization of DVD production, ensuring universal compatibility with DVD players regardless of the manufacturer. The company emphasized that the replication process adopted by the defendants directly involved its patented EFM+ encoding, and constituted a willful and deliberate infringement of the patent.
However, while the defendants admitted to replicating DVDs in significant volumes, they argued that they employed a “mechanical process” to facilitate this, denying any infringement of the patent. The patent entails a process for data compression applied in the manufacturing of an original DVD, which is different to the mechanical process that they had used, the manufacturers said. At the time, they also claimed that they had obtained the necessary documentation, such as copyright permissions from content owners to reproduce the copies, and that the EFM+ encoding process they had undertaken was outsourced to third parties – so their actions could not amount to infringement.
Siddharth Optical, Pearl Engineering, and Powercube Infotech also sought to revoke the SEP, challenging its validity, and claimed that Philips had known about their manufacturing activities since 2005, 2006, and 2007, respectively, but delayed the filing of its suits by nearly six years. “This inaction amounts to acquiescence, rendering the suits unsustainable, and liable to be dismissed,” they argued.
But Philips fought back, arguing among other things that as an SEP, the infringement of the patent could be demonstrated indirectly by showing that the defendants’ products comply with the standardized DVD specifications (which inherently include EFM+ encoding).
Three separate trials were conducted in the three suits, but the core issues in each case were substantially the same. Therefore, the court handed down its decisions in one common judgment.
SEP enforcement in India a ‘favourite for many’
The ruling on Thursday confirmed that the patent-in-suit was indeed an SEP for DVD manufacturing and the three defendants knowingly used Philips’ patented EFM+ technology, despite repeated notices. The court also rebuked the defendants’ outsourcing argument, reaffirming that they were fully responsible for the infringement. It also rejected the argument that Philips purposefully delayed its enforcement actions and stated that no matter the time lapse, the patent remained enforceable.
Vivek Ranjan, a partner at Kommit Techno-Legal LLP in Delhi, says the Phillips decision “reaffirms” Indian courts’ alignment with the global jurisprudence in FRAND matters.
“In addition, by extending common law doctrines like joint tortfeasance to SEP infringement and awarding comprehensive reliefs; including compensatory damages, aggravated damages (the highest is approximately 60% of compensatory damages) high-interest rates, and litigation costs, the courts have ensured complete justice beyond the letter of the law,” he says.
Given the absence of the Commercial Courts Act and Rules Governing the Patent Suits at the time when the suit was filed, there was a delay in adjudication. But the final judgment reflects a “well-balanced and just” approach, doing complete justice to the delay that has occurred in the adjudication of the matter, Mr. Ranjan says.
While he is not a huge fan of some of the court’s findings, such as calculating damages from three years prior to the filing of the suit, Mr. Ranjan concludes that “as an SEP litigator” he is happy with the Delhi High Court approach in doing “complete justice” in the matter.
“It seems this aspect was not argued upon and therefore judge ruled under general law; in India, it is settled that damages of patent infringement can be calculated from much earlier than a three-year limitation period prescribed in general law,” he comments.
Mr. Ranjan adds:
“I am sure, given the market India has and the jurisprudence prevailing to do complete justice beyond the letter of the law, SEP enforcement in India is going to be a favourite for many.”
Counsel
Philips was represented by Anand and Anand’s Pravin Anand, Vaishali Mittal, Siddhant Chamola, Shraddha Singh Chauhan, and Pallavi Bhatnagar.
Meanwhile, Pearl Engineering Company, Powercube Infotech, and Siddharth Optical Disc Private Ltd. were represented by J. Sai Deepak, Avinash K. Sharma, Bhardwaj Law Associates’s N. K. Bhardwaj, and Kashima Chadha and Bikash Ghorai at R K Dewan & Co.