Technology & Law

The law follows the technology...



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