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DHC IS NOW A HOTBED OF SEP LITIGATION - PHILIPS SUES VIVO & XIAOMI FOR INFRINGING LTE PATENTS

Some time back, I had posted that Philips had sued Vivo and others, on the blog here.  The Delhi High Court in two separate orders has issued orders against Vivo and Xiaomi to secure Philips interest during trial (see attached orders below).

This post focusses on the value on the basis of which Philips interest is secured. 

The operative part from the judgments first:

Philips v. Vivo

2. Counsel for the parties are agreed that in order to hasten the trial in the suit and final adjudication, the following directions can be issued: 

 (i) The defendant nos. 1 and 2 will not create any encumbrance or third party rights in the immovable property and the superstructure described as follows: “IT Park – Plot No. 8, Sector 24, Yamuna Expressway Area, Uttar Pradesh” 

(ii) The defendant nos. 1 and 2 will file an affidavit, to that effect, and, in particular, shall indicate that they have the title to the aforementioned property and that no encumbrance or third-party rights will be created during the adjudication of the instant case. The affidavit will be filed within 7 days from today; a copy of which will be furnished to the counsel for the plaintiff.

Philips v. Xiaomi
1. ....iv..
 In the alternative, pass an appropriate pro-tem order/interim arrangement during the pendency of the interim injunction application safeguarding the Plaintiff’s rights and interest and secure recovery of amounts for past infringing activities of the Defendant; v. Any further orders that this Hon’ble Court may deem fit in interest of justice and equity be passed in favor of Plaintiff and against the Defendant.” 
...
2. ... I take on record the submission made by [counsel] that till the next date of hearing the defendants shall maintain in their bank accounts operated in India an amount of Rs.1000 crores. The said statement is taken on record .It is made clear that the defendants are bound by the statement given by their counsel.

It is very interesting to see the Xiaomi order. 

The interim arrangement so agreed to between parties is, according to my analysis,  is directly related to Philips royalty demand.  The prayer in para 1.iv in Philips v. Xiaomi makes it clear that Philips is seeking to secure it current and past infringement of its patents.   Xiaomi started off in India in 2013 and so royalty is determined from then.  Sales during 2013 was much less (say about ~15% of current sales), and to make it as round figure, I take sales per year from 2013 - 2016 as ₹ 6000 crores.  Xiaomi's sales took off in 2016 and should be around ₹ 25000 Crores per year today.  So I take approximate average sales  per year as ~₹ 16000 Crores per year from 2016 till 2020.  As such the total average sales during this period is ₹ 80000 Crores, and total sales from Xiaomi is approximately ₹ 98000 Crores.

Once this figure is seen and compared with ₹1000 Crores (the amount to be retained by Xiaomi in its bank account), Philips is asking for a royalty of approximately 1% on net sales: 1% of 98000 Crores is 980 Crores. 

Of course, I may be off by some amount, but I am sure that the range that Philips has demanded is around this much only.   Same is the case with Vivo (they started in 2016-17: so they have to secure Philips for a lesser amount). 

Hence both parties are securing Philips for the same amount / range determined on their net sales. 

This is another reason why I do not like confidentiality clubs in SEP matters.  This information that is being hidden is for use by all potential cell phone providers / manufacturers.  What is information that is being hidden by the manufacturer? Their sales are public information.  So all this hush-hush benefits the patent owner only.

Philips_v__Vivo___383___Order_dt__17_11_2020.pdf 533 KB
Philips_v__Xiaomi___Order_dt__27_11_2020.pdf 140 KB

DHC IS NOW A HOTBED OF SEP LITIGATION - PHILIPS SUES VIVO FOR INFRINGING LTE PATENTS

This is in continuation of my previous post that the DHC has become a go to venue for SEP litigation.

The latest is that Philips has sued VIVO (18.09.2020) and others for infringing its 3G / 4G patents, some of which have already expired.   
The patents in issue are:

(i) IN 275419 (ii) IN 271469 (iii) IN 228133 (iv) IN 221703 (v) IN 211041

Out of these patents,  IN 221703 and IN 211041 have expired.

More precisely, the patents relate to Universal Mobile Telecommunication System / High Speed Packet Access / Evolved High Speed Packet Access and Long Term Evolution.


In the first order of 18.09.2020, I see that Philips (allegedly) had demanded $1  from Vivo.  Whether or not that is FRAND, only will be seen in the course of litigation.  Philips makes the argument that for two years they have been in discussions with Vivo but they have not taken a license.
18092020.pdf 439 KB


The only comment that I would make at this stage is that this matter too is going the same way the other SEP matters have been going.  Same confidentiality club arrangements etc. 

The matter is now listed for tomorrow 12.11.2020, subject to availability of court.

20102020.pdf 490 KB





DELHI HC BECOMES THE GO TO VENUE FOR ADJUDICATING SEP DISPUTES IN INDIA

Banner image from here.

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A couple of days ago, InterDigital filed two patent infringement law suits against Xiaomi at the Delhi High Court (DHC) for infringement of its standard essential patents (SEPs).

The matters are CS(Comm) 295/2020 and 296/2020 for infringement of its patents related to cellular and H.265/HEVC – (video compression) technologies. These are IN262910; IN295912 ; IN298719;  IN313036; & IN320182  for the cellular patents and IN242248 / IN299448 & IN308108 for the video compression patents.

InterDigital is seeking injunctive relief apart from compensatory / punitive damages for infringement of its asserted patents, unless Xiaomi elects to take a license on terms determined to be FRAND by the court.

The current InterDigital suit is one of the latest ones to be filed before the DHC – last year, Nokia had filed law suits against Lenovo and a company called Fractus had filed law suits against Vivo Mobile and Xiaomi for infringement of their SEPs.

In my view, a lot of patent owners would start to use DHC as the go to forum to litigate their SEPs given Ericsson’s success in the Micromax, Lava, Intex, iBall, Gionee matters. This is especially true when companies cannot litigate in China. Or for that matter bring any action. InterDigital had at one point (in 2013) refused to meet Chinese competition authorities fearing that its officials would be arrested. See the Reuters coverage on this issue here.

Given this kind of reception to patent claims in China, it is anybody’s guess why companies prefer to bring actions against Chinese companies outside China.  As one can see, all the Defendants are Chinese entities, and are being sued here in the DHC. The current political environment also is a changed circumstance from earlier times.  For example, in an earlier case, the argument that royalty for China could be seen in China (obtained legally in China) would be okay, but now Indian courts will be asked about global rates / setting a FRAND portfolio rates.

One thing that is different from the earlier SEP litigation that we have covered on this blog, presumably because defendants were Indian entities, is that now patent law-suits are filed in multiple jurisdictions against the same defendants using jurisdiction specific patents.  For example, Fractus had filed a law suit against Xiaomi in the Netherlands early this year but failed to get any kind of expected traction it had hoped (see Juve Patent coverage here).  Similarly, Sisvel (an entity to whom Nokia had sold some of its patents) had also filed a law suit against Xiaomi mid-last year (see Juve Patent coverage here).

Readers know my view against both portfolio licenses and global licenses: a portfolio license / global FRAND rate license hides the inefficiencies inherent. For example, why the assumption that all patents are equal in scope, etc. Then there is the issue about license on the end product or only the component.

For H.264/HEVC patents, what is the relationship with say Bluetooth, or RAM or marketing costs, of the mobile phone? Similarly, for 2G/3G/4G – what is the relationship with RAM / screen / marketing costs etc. It is these questions that will have to be answered by the Court while deciding the issues and license rate demanded.

It is worth repeating the fact that any SEP litigation is necessarily an exercise in the determination of public rights.  It is public interest that suffers when one has to pay extortionary costs to a SEP owner. These costs are not just higher royalties, but payment for expired patents that are bundled into a patent license, irrelevant patents, and non-essential patents.  This is because in SEP litigation, it is not general competition in the market. Rather, it is competition for the market. The more entrenched a standard is, the more power a SEP owner has. Those that give examples of multiple businesses operating in the same market (where SEPs are implicated) mistake the presence of multiple players as a healthy sign. However, they are not comparing the right market and make multiple logical fallacies: mistake cause for effect, confuse between apples and oranges, etc. Just because there are 10 handset brands does not mean it is a healthy market. If one looks closely, all 10 brands are based on the same standard and all 10 have to approach the SEP owner for a license. There is no competition here as the market is already locked in into a particular standard. Just think, what other cellular standard are any of your phonebook contacts using today? Hint: They all use some form of LTE (Long Term Evolution)/ 4G technology as it is popularly known. You don’t even buy a phone because it is LTE compliant: you buy it because of other reasons, such as price etc.

Other jurisdictions

A few other major cases involving SEPs that either have been settled or decision is pending are as follows:

In April this year – Unwired Planet (a company owned by PanOptis – that also purchased patents from Ericsson) settled its patent litigation with Huawei in Germany and the United States. The UK action before the UK Supreme Court is still pending (see UK Supreme Court site). The impact the judgement has remains to be seen as even after Brexit, the UK remains subject to EU law and remains part of the EU customs union during the transition, but is no longer part of the EU’s political bodies or institutions.

It is now apparent that the CJEU case of Huawei v. ZTE, C-170/13, did not give much clarity to SEP disputes and as a result there are differing opinions among member states even within the EU.  The example is the differing opinions by UK, EU and Dutch courts. Very briefly, the Huawei v. ZTE had ruled that parties must negotiate in good faith, the use of an injunction against a willing licensee was an abuse of dominant position under Article 102 of the TFEU. There are strict obligations that a licensor that has to adhere to including offering a FRAND rate – to the would be licensee, before it can ask for an injunction.

The Hauwei v. ZTE decision leaves out the determination of what is FRAND etc. and which is why the divergence of opinions in almost polar opposites by different courts.

First posted on spicyip.com on 05.08.2020

QUALCOMM UNDER FIRE: KOREA FTC, US FTC, CLASS ACTION SUITS, AND APPLE


This (long) post is about Qualcomm.  Qualcomm has a business model that is based on IP, whether it is IP creation (SEP or manufacturing related) or IP licensing.  It has been the historical practice in the technology industry that licensing was, and per Qualcomm and related parties, still is, done on end value of device.

Qualcomm, Ericsson, and Nokia are three top players in the SEP licensing domain and unsurprisingly hold similar views as their business model is SEP licensing.  For example, all three gave similar statements to the effect that they will not contribute to the IPR, under the new IEEE policy post February 2015, when smallest component value was inserted into the IEEE rules.

This issue of where to license in the value chain, as our readers know is a hot button.  In India, Ericsson is conducting multiple litigations on this very issue.  Additionally, Qualcomm and Ericsson have a licensing / revenue sharing arrangement in place where Qualcomm gets money from manufacturers in China for IPR and Qualcomm pays Ericsson (and several others) as per their share. See my post on this arrangement here.  In short, Qualcomm is deeply involved in the Indian market.   It sponsors several events in India and even some competition law programs at some law schools.

Recent events in the past weeks are set to unravel Qualcomm’s (and related parties) positioning in the industry.  First the Korean anti-trust authority issued a huge fine against Qualcomm, then the US FTC filed an action against Qualcomm, quickly followed by a class action law suit on grounds similar to the US FTC action.  This was followed by a complaint by Apple against Qualcomm.  All are covered in reverse chronological order of occurrence in this post.

Qualcomm has consistently maintained that “intellectual-property-rights policies of the cellular standards organizations do not require licensing at the component level.” To this end, it has engaged in several opinion building efforts across the globe at various institutions.  In India, it has sponsored programs in intellectual property and competition law at the National Law University, Delhi and the Jindal Global Law School.

Given these matters, it is highly unlikely that these public opinion building efforts will yield the desired fruit. Rather, the Competition Commission of India and even Europe and Taiwan may take suo moto notice of complaints against Qualcomm.  This is because of the explicit provisions under respective competition acts – acts that arise outside the jurisdiction but have an appreciable adverse impact on the relevant market in the jurisdiction.

To summarize the post, several actions by the anti-trust authorities indicate that Qualcomm has charged royalty on end product values, which includes duties, taxes, etc. – i.e. things that have no relationship with the invention.  It has continued to charge for patents that have expired, etc.  For example, the CDMA technology is of 1995 vintage.  All patents related to CDMA have expired in 2015. However, Qualcomm continues to charge for them.

I must mention here that the similar position is in GSM area- GSM V2.0 standards came out in 1995 – i.e. all patents relevant to GSM expired in 2015, the technology having passed on to the public domain.  Patents for GPRS and EDGE (GPRS is an improvement to GSM, and EDGE is an improvement to GPRS) expire in 2017 and 2018 respectively.  But Ericsson and others continue to demand royalty for GSM patents. In all the matters in Delhi High Court related to Ericsson, royalty has been charged and paid / deposited in court, for GSM.

Part I: Apple complaint against Qualcomm

On 19th January, Apple sued Qualcomm in federal district in Southern California, claiming that Qualcomm uses its dominant position to collect “tributes” on every iPhone improvement and that it withheld nearly $1 Billion owed to Apple because it cooperated with antitrust investigators in South Korea.

Apple fired the salvo quickly after the FTC filed its own action claiming Apple has been overcharged by billions due to Qualcomm’s refusal to follow its commitments of licensing SEPs on FRAND terms.

Apple states “For years, Qualcomm has abused its business relationship with Apple and blocked competitors from selling chipsets.” …..“Qualcomm’s recent effort to cover its tracks – by punishing Apple for providing truthful testimony at the request of government regulators – underscores the lengths to which Qualcomm will go to protect its extortion scheme.”

Apple has 35 claims against Qualcomm, including breach of contract, bad faith, patent non-infringement, recovery of patent royalties, monopolization and unfair business.  Apple seeks damages for missed payments and an injunction compelling Qualcomm to license its patents on fair terms and to stop engaging in anticompetitive conduct.

Apple complaint can be downloaded from here.

Qualcomm issued its views (click here), and states “While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple’s claims are baseless. Apple has intentionally mischaracterized our agreements and negotiations, as well as the enormity and value of the technology we have invented, contributed and shared with all mobile device makers through our licensing program. Apple has been actively encouraging regulatory attacks on Qualcomm’s business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information. We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits…”

Part II: United States Fair Trade Commission complaint

The US Federal Trade Commission (US FTC) on 17th January, 2017 filed a complaint (download here) in a federal district court in California charging Qualcomm with abusing it position to maintain its monopoly in the supply of chipsets used used in cell phones.  The FTC complaint alleges that Qualcomm: ”

  • Maintains a “no license, no chips” policy under which it will supply its baseband processors only on the condition that cell phone manufacturers agree to Qualcomm’s preferred license terms. The FTC alleges that this tactic forces cell phone manufacturers to pay elevated royalties to Qualcomm on products that use a competitor’s baseband processors. According to the Commission’s complaint, this is an anticompetitive tax on the use of rivals’ processors. “No license, no chips” is a condition that other suppliers of semiconductor devices do not impose. The risk of losing access to Qualcomm baseband processors is too great for a cell phone manufacturer to bear because it would preclude the manufacturer from selling phones for use on important cellular networks.
  • Refuses to license standard-essential patents to competitors. Despite its commitment to license standard-essential patents on FRAND terms, Qualcomm has consistently refused to license those patents to competing suppliers of baseband processors.
  • Extracted exclusivity from Apple in exchange for reduced patent royalties. Qualcomm precluded Apple from sourcing baseband processors from Qualcomm’s competitors from 2011 to 2016. Qualcomm recognized that any competitor that won Apple’s business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm’s competitors.
The FTC states that it was seeking a court order to undo and prevent Qualcomm’s unfair methods of competition in violation of the FTC Act. The FTC asked the court to order Qualcomm to cease its anticompetitive conduct and take actions to restore competitive conditions.

Interestingly,the US FTC voted 2-1 to file the complaint.  Republican Commissioner Maureen Ohlhausen dissented and issued a statement.  She is likely to become the next head of the FTC after the current chairman ( Democrat Edith Ramirez) departs in February, 2017.  Unsurprisingly, Qualcomm in its statement uses the dissent as its defense.  See statement here.

The coming FTC administration may or may not be swayed to change course.  But for reasons given below including parts III and IV of this post, even if FTC filing is withdrawn, Qualcomm will continue to fight the same issues elsewhere.

In the FTC complaint, paragraph 77, it is stated:

  • a. Qualcomm’s royalties are disproportionately high relative to the value contributed by its patented inventions, and often are several times higher than the royalties of other SEP licensors that have made similar technical contributions;
  • b. Qualcomm has continued to calculate royalties as a percentage of a handset’s price, even though handsets today offer a number of features—including cameras, high-resolution touch-screen displays, powerful applications and graphics processors—other than cellular connectivity;
  • c. Qualcomm’s standard royalty rate has not fallen, even though many of Qualcomm’s patents related to CDMA technology have expired; and
  • d. Qualcomm has required OEMs to grant Qualcomm cross-licenses (in some cases, to both SEPs and non-SEPs), often with pass-through rights to other OEMs.
These issues exist independent of the FTC complaint (see parts III and IV below) – in my view the new FTC administration, even if taking the most conservative view, would work on principles of harm to competition / fair competition rules.  Conservative principles and harm to competition principles can co-exist.

Part III: Consumer Class Action:

On 18th January, a consumer class action law suit was filed in California on the grounds that consumers had to pay extra / inflated prices for cellphones as Qualcomm’s licensing practices increased costs for phone manufacturers.  As is typical of US legal system, more such complaints are likely, whether or not they succeed.  The case is Jordie Bornstein et al v. Qualcomm Incorporated, case number 5:17-cv-00234, filed in the U.S. District Court for the District of Northern California.  Both the FTC’s case and these class action cases, raise the same issue.  I will upload the complaint on the site when the complaint is available.

Part IV: Korean FTC Fine and Guideline

In the last week of 2016, the Korean Fair Trade Commission (“Korean FTC”) fined Qualcomm, about $850 Million for antitrust violations regarding Qualcomm’s failure to license its Standard Essential Patents (“SEP”) on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms.  This is the largest fine ever to be imposed by the Korean FTC.

The decision makes it clear that the Korean FTC views SEPs / FRAND commitments made outside Korea (but having an impact in Korea) under its jurisdiction.  Apart from the fine, the Korean FTC issued a remedial action report.  Qualcomm must enter into negotiations with interested chipset makers; there is a prohibition against linking chipset sales with patent license contracts; if requested by mobile phone companies, to renegotiate some previously signed licensing contracts.

It is clear that the decision is based on Qualcomm’s global business model, rather than limited to Korea.  I had in a previous post highlighted the problem with portfolio licensing as having an extraterritorial reach, on this blog, here.

The Korean FTC’s decision is very different from the one issued in 2014 by the Chinese Antitrust Authority.  The Chinaese National Development and Reform Commission had imposed a fine of ~ $ 975 Million on Qualcomm for alleged violation of the country’s Anti-Monopoly Law but was limited to the impact on Chinese companies and Chinese consumers.  In China, Qualcomm had agreed to a lower royalty base for sales limited to China.

An (unofficial) English translation of the decision can be downloaded from here.

The ramifications of the decision of the Korean FTC alone could be huge for Qualcomm as other competition agencies, including our CCI and the Taiwanese AntiTrust authority may also take similar views as the Korean FTC.

Qualcomm has publicly states that it plans to fight any attempt by the KFTC “….[T]o regulate intellectual property rights granted by other countries, or activities outside of Korea.”  Per Qualcomm the Korean action is in direct conflict with international law priniciples.  See Qualcomm press release here.

In my view, such an attempt will backfire – the test is not whether the activities arose outside Korea: it is whether the test has “appreciable adverse effects on competition” in Korea.  A similar clause is Section 32, The Competition Act, 2002.

There is the story of a “lie” becoming the truth if the lie is spoken a 100 times.  If interested parties speak in collective voice that any discussion on the base makes a party an unwilling licensee, then it is the case that willingness cannot be unilateral – it takes two parties to disagree. The licensor must be willing to discuss terms that are fair and not impose unilateral terms.  Sadly, in India, the reverse is true and courts have so far looked at licensees as being unwilling.  Most of the issues that have been raised in the SEP wars have been temporarily adjudicated against the licensees.

To conclude, another is the story of the truth just wearing its boots, and the lie reaching half way around the world. The actions by the Korean and US anti-trust authorities may have been delayed. But better late than never!!

Disclaimer: I. as a lawyer, advise several clients in the technology domain and particularly in SEP licensing and FRAND issues.

VRINGO V. ZTE: DHC VACATES INJUNCTION AGAINST ZTE

First published on spicyip.com on 10.08.2014

Our readers would remember that some time back we had carried a post on the dispute between Vringo & ZTE.  As a background, Vringo had filed two different law suits against ZTE.  One law suit was filed by Vringo / Vringo Infrastructure Inc.  against ZTE India, and Xu Dejun in November 2013 (“Nov. law suit”), and we had covered this law suit in our post in great detail.  The Nov. law suit alleged that ZTE had infringed Vringo’s Indian patent 243980 (‘980 patent).  The ‘980 patent relates to provisioning for a mobile station operable with a network and a packet data serving node.  An injunction was granted on Nov. 8, which injunction was later removed, and we had covered it in our post.   When the injunction was vacated, ZTE was asked to pay bond of approximately $800,000 and provide accounting by way of affidavit.  This post deals with another law suit filed by Vringo against ZTE for infringing Indian patent 200572 patent.  Justice V.K. Shali in an eloquent decision that covered the factors involved in a patent litigation for an injunction, patented technology and the non-infringement position, expert affidavit filed by Vringo, vacated the injunction against ZTE.  Very long post follows.

Background: In January 2014, Vringo filed another law suit against ZTE, and Indiamart Intermesh Ltd., a distributor of ZTE products (“Jan. 2014 law suit”).  The Jan. 2014 law suit alleged infringement of Indian patent 200,572, (‘572 patent). The ‘572 patent related to making a handover decision in a mobile communication system.”  In February, the Court granted an ex-parte preliminary injunction, restraining ZTE and its officers, directors, agents, distributors and customers from importing, selling, offering for sale, advertising, installing, or operating any infringing devices.  On March 15, 2014, ZTE appealed.

Factual Matrix: The ‘572 patent is the Indian counter part of US patent 6285884, and deals with a method and arrangement for making a handover decision in a mobile communication system of multi-layer radio coverage, which comprises measuring at a mobile station (MS) a radio signal transmitted by a base station (BTS) of a microcell, and reporting the measurement results at substantially regular intervals.  A relative speed for the mobile station is determined on the basis of the number and classification of the measurement results received at substantially regular intervals. Mobile stations moving at a speed slower than the relative speed are defined as slow moving and commanded to register in the base station of a suitable microcell (A, B, C) – see figure below.

Vringo alleged that ZTE’s basestations infringed not only the ‘572 patent, but Vringo’s other patents as well.  Vringo also stated that it had obtained injunctions against ZTE in multiple countries including UK, Germany, France, Australia, Romania,  Netherlands, USA etc. qua the same / similar patent portfolio.  Vringo also included an affidavit of an “expert” who had compared the technologies in ZTE’s base-stations and that as disclosed in Vringo’s patents.  Apart from these, Vringo alleged that it had a prima facie good case, that the balance of convenience was also in its favour, and that it was suffering irreparable loss on account of unhindered infringing material being brought, installed, sold, by ZTE in India and hence ex parte ad interim injunction be granted.

ZTE put in appearance, and stated that it had filed its written statement and reply to Vringo’s application.  ZTE specifically stated that the technology used in it’s base stations was very much different than as disclosed in Vringo’s patents.  More specifically, ZTE asserted that unlike Vringo’s patent where they try to find the user of a cell phone in a particular micro cell, ZTE’s technology measured the average use of the cell phone at a given place for a specified period.  Based on the average use, the position is recorded and a user is allowed to shift from a macro to a micro cell.

Grounds: 1.  ZTE also contended that Vringo had claimed that the cause of action accrued to them in December 2012 (when Vringo – purchased from Nokia a bunch of of CDMA patents), but that Nokia was aware that ZTE was using their technology at least since 2002, but still despite being fully aware of such use did not take any action against ZTE.  Hence Vringo’s case was barred under limitation and as Vringo / Nokia were aware of the usage no irreparable harm could occur.

2.  ZTE also raised the issue of sham assignment as the valuation of the entire bouquet of patents was at 10 US Dollars, and hence there was also gross under valuation.  Vringo countered this by stating that it was prepared to give a full copy only for the perusal of the court. As regards the under valuation – Vringo stated that at best the under valuation was an irregularity but the document of assignment could be admissible.

3.  ZTE contended that the expert affidavit filed could not be relied upon by the court as the expert had a degree of management whereas the conclusion and content was entirely based on science.  ZTE also asserted that it had already filed a counter claim for revocation of the ‘572 patent under Section 64 of the Patents Act.  ZTE averred that Vringo had claimed that ZTE was selling goods in India but nowhere had they claimed that they too were commercially exploiting the patent – And that Vringo had not filed the statement of working under section 146 of the Patents Act.

Prima Facie case: The prima facie comparison between the patent and the allegedly infringing base station cannot be done by the court at this stage as it essentially involves scientific evidence which needs great deal of specialized knowledge in telecommunications and experience as to how the cell phone technology functions. “This can be opined by an expert, who has experience in the field of telecommunication and help the court in understanding the patent, its technology viz-a-viz the technology which has been adopted by the defendants.” 

The Court considered that unlike Section 31 of the Trademarks Act, there is no presumption of validity of a patent. Hence it is upon the plaintiff in a patent infringement suit to prima facie prove that the infringer is using the same technology which is patented by them.  This onus is very heavy on the plaintiff to be discharged in the first instance. The plaintiffs must establish such acts as will prima facie satisfy the court that there are strong and prima facie reasons for acting on the supposition that the patent is valid….It cannot be said that the plaintiffs are having a prima facie good case on the basis of the registration of the patent alone. It is required to do something more. This something more is being sought to be shown by an affidavit by the plaintiffs which claims to be an affidavit of an expert.

The Court agreed with ZTE that Vringo’s so called expert was not an expert for the purpose of showing infringement and validity of the ‘572 patent.  The court went into great detail re the affidavit filed by the expert.  The Court held that the expert affidavit could not be the basis of terming him to be an expert in telecommunications which is form of a science so as to make his affidavit admissible under Section 45 of the Indian Evidence Act, 1872.  The expert ought to have some basic degree in science or telecommunication or B.Tech engineering dealing in telecommunication and electronics and thereafter some research work having been conducted by him which would have qualified him to be an expert within the definition of Section 45.  To the contrary, he only had a degree in business administration and his holding of different assignments and posts only shows that though he was employed by various telecommunications or computer companies, but the nature of work was essentially of a ‘generalist’, as a management consultant so as to boost the sales of a particular technology or a product rather than that of an expert in telecommunication. The expert has also not shown any special technical knowledge about the telecommunication or the technology in question and by simply stating that he has written books or research papers would not be good enough to term him an expert in the light of the fact that the opinion of an expert under Section 45 of the Evidence Act, 1872, is relevant.

The Court also looked at the Patents Act re the requirements of an expert and stated that the legislature in its wisdom was cognizant of the fact that the patent law may deal with very intricate inventions in science, technology, communication, pharmaceutical apart from various other fields which the courts may not be very familiar with where a suit for infringement is brought about, that is why a provision for appointment of a scientific advisor has been made under Section 115 of the Patents Act, 1970 to seek their expert assistance.  Under Rule 103 of the Patents Rules, 2003 for a person to be qualified as a scientific advisor, he must fall in all three categories: a) He holds a degree in science, engineering or technology or equivalent; b) He has at least fifteen years practical or research experience; and c) He holds or has held a responsible post in a scientific or technical department of the Central or State Government or in any organization.

Hence the court concluded that the expert affidavit could not be treated as expert affidavit and accordingly, Vringo was not able to make out a prima facie case, which is the first requirement for an injunction.

Balance of Convenience:  Under this factor, the Court considered that the ‘572 patent had been assigned to Vringo by Nokia Telecommunication in 2006, but curiously enough Nokia, despite having known the fact that their patent was being allegedly infringed by ZTE, did not chose to seek any damages from them as no suit or proceeding was ever filed by them before the assignment of this patent in favour of the plaintiffs.  The Court referred to the decision of Franz Xaver Huemer vs. New Yash Engineers; AIR 1997 Delhi 79 stating that a foreigner, who has registered patents in India and who has not kept them in use in India, thereby seriously affecting market and economy in India, cannot, in equity, seek temporary injunction against others from registering the use of patented device.  Vringo tried to rebut this arguing that a patent may be commercially exploited either by the patentee or by its licensee as held under N.R.D. Corporation of India vs. D.C. & G. Mills Co.; AIR 1980 DEL 132.

The Court took a strong view to the fact that the averments regarding use and commercial exploitation was made in the rejoinder rather than in the pleadings itself.  “A party cannot be permitted to raise an argument which is not even pleaded. Rejoinder is an opportunity given to the plaintiffs for explanation, refutation, implication and not to set up a new case. In any case, even if these averments of the plaintiffs are taken on their face value, it becomes a debatable issue which needs to be adjudicated by the court but prima facie the balance of convenience does not turn out to be in favour of the plaintiffs or rather it turns out to be in favour of the defendants as any restraint on the defendants from manufacturing, selling or distributing the product which they are doing and which according to the plaintiffs is infringement of their patent, would cause harm to them.”

The Court looked at Section 109, 110 of the Patents Act and found that since Vringo averred that Nokia Samsung, Alcatel etc. were licensees of the patents, how come that these licensees did not object to the non-licensed sales by ZTE as their sales would have been negatively impacted by the sales from ZTE.  “While as the fact of the matter is that there is no complaint from the licensee to the original patentee regarding infringement. If there is no complaint made by the licensee to the original patentee and similarly, no action was brought by the original patentee before assignment to the plaintiffs, it becomes an important fact which cannot be ignored. This becomes a triable issue as to whether the technology of the plaintiffs is being infringed or not by defendant Nos.3 and 4 and at this point of time, the court cannot assume that the technology of the plaintiffs is being infringed. Therefore, this also tilts the balance of convenience in favour of the defendants rather than the plaintiffs. On this score also, I must go in favour of the defendants and not in favour of the plaintiffs.”

Irreparable Loss: This is the third condition which the Court also found against Vringo.  Under this heading, the Court must be satisfied that non-grant of ad interim injunction to the plaintiffs would result in irreparable loss to the plaintiffs. An irreparable loss is a loss which cannot be compensated in terms of money. A loss which can be calculable in terms of money or for which money can be adequately compensated, can never be said to be an irreparable loss.  The Court looked at Section 48 of the Patents Act (Rights of a patentee) and various judgments cited by Vringo but held that prima facie Vringo was no able to make out a case.   The judgments referred to were: Micromax Informatics Limited vs. Telefonaktiebolaget LM Ericsson (PUBL); 2013 (56) PTC 592 (Del), Strix Limited vs. Maharaja Appliances Limited; MIPR 2010 (1) 0181, Hindustan Lever Limited vs. Eureka Forbes; ILR (2008) Supp. 6 Delhi 1, Bayer Corporation & Ors. vs. Union of India & Ors.; 2009 (41) PTC 634 (Del.), etc.

The Court also referred to the directions given by the Division Bench in respect of the case filed qua infringement of the ‘980 patent that had held that the Customs authorities intimate Vringo of ZTEs consignments, and that Vringo inspect the goods. After inspection, the products could be released to ZTE or the concerned importer. ZTE would then deposit a bank guarantee of 5 crores or bank guarantee of 2.5 crores and remaining as security before the Registrar. ZTE would also by way of affidavit disclose all sales of CDMA products for any future imports, accompanied by quarterly statement of accounts etc.

Accordingly, the injunction granted to Vringo was vacated as there was no prima facie case. the balance of convenience was in ZTE’s favour and as Vringo could be compensated, there was no irreparable harm.  However, the conditions of bank guarantee etc.were imposed on ZTE’s future sales.

Finally, the Court also appointed three experts from the domain – one each from IIT Delhi, Delhi College of Engineering, and Netaji Subhas Institute of Technology to submit a report to the court for its consideration.  The experts would consider submissions and presentations etc. from both the parties.

Analysis: This is undoubtedly a major judicial pronouncement on the issue of injunction and patents.  However, it does not stop just there – it provides the standard for a person to be an expert in the field at issue.  It also provides the framework for adequately determining balance of convenience in patent cases.  Procedurally, it provides the relevant guidelines for what could be included in a rejoinder.  Finally, it underscores the importance of an expert and appropriate usage thereof in patent matters.

Vringo or ZTE could very well appeal to the Supreme Court against this order. Vringo against the fact that regardless of the fact that the expert affidavit, the plaint substantially disclosed that the patent was being infringed.  This is because a comparison would show that Nokia/Vringo’s patent disclosed location of a user to a micro cell includes a simple determination first of where (i.e in which micro cell under a macro cell) a user was, versus ZTE’s admission that a user is allowed to reach a micro cell.  However, this is a matter of trial.  ZTE could appeal that since no factor was adjudged in Vringo’s favour, yet they were asked to render bank guarantee, accounts etc. for both ‘572 patent infringement case as well as under the ‘980 case.