KONINKLIJKE PHILIPS ELECTRONICS N.V. Vs. RAJESH BANSAL AND ORS.

CS (COMM) 24/2016

Submitted by Supervised by
Himanshi Garewal Mr. A. Nirmal Singh Heera
BA0160018 Assistant Professor of Law
5th Year, BA.,LLB(Hons.)

ADVANCE COURSE ON PATENT LAW

TAMIL NADU NATIONAL LAW UNIVERSITY,

INTRODUCTION

The judgement of the case stands to be the first judgement on a standard essential patent. The
Delhi High Court delves into the crucial issues relating to SEPs such as patent validity,
essentiality, into the overlapping jurisdiction matters of Civil Court and Competition
Commission of India (CCI) and lastly over the licensing fees.

BACKGROUND

List of Parties:

Petitioner: Koninklijke Philips Electronics N.V.

Respondent: Rajesh Bansal

Judges: Hon’ble Ms. Justice Mukta Gupta

Decided at: Delhi High Court

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SUMMARY OF FACTS

● Petitioner had registered patent No. 184753 a Channel decoding technology used on
DVD Video Playback function in a DVD Video Player. The patent in India is linked to
“Decoding device for converting a modulated signal to a series of M-Bit information
words”
● The Respondents are Indian based manufacturers who imported segments of DVD
players and organised them in India.
● The petitioner claimed that the Respondents DVD players use “decoders” that were
remarkably used for decoding contents that are accumulated in optical storage media in
consonance with the methods elucidated in IN-184753 hence it infringed the patent of the
plaintiff.
● It is pertinent to note that DVD Video Standard and the DVD ROM Standard were
recognized and adopted by ISO and ECMA.

ISSUES RAISED

● Whether the petitioner is the sole proprietor of the Indian Patent registered under No.
184753? and whether the petitioners' were owners of valid patents?
● Whether the suit patent is an essential patent in relation to DVD Player technology?
● Whether the respondents impinged the petitioner Indian patent IN-184753?
● Whether the Plaintiff and other several members of the DVD forum were abusing its
position in pursuance to create monopoly and earn exorbitant profits by forging patent
pools?
● Whether the respondent is liable to pay any license fee to the petitioner and if so then at
what rate?

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CRUX OF JUDGEMENT

The Delhi High Court analysed the case in the following ways detailed below:

1. Whether the petitioner is the sole proprietor of the Indian Patent registered under No.
184753? and whether the petitioners' were owners of valid patents?

On account of the said issue the Delhi High Court held in favour of the petitioners. The
respondent during the proceedings challenged the validity of suit patent, challenging that
the said device is an algorithm and not an invention that eventually cannot be provided a
patent. However, the said argument was not pleaded by the petitioner in their written
statement and was rejected by the Court.

2. Whether the suit patent is an essential patent in relation to DVD Player technology?

Considering the said issue, the petitioners claimed that the suit patent was an essential
patent that is mandatorily required to be compliant with the DVD Standard. The
petitioner relied on the “essentiality certificates” granted to its European and US Patents.
Here, the Court did not analyze and examine the validity of these essentiality certificates
meticulously and held that the petitioners have proved the burden of proof over
essentiality of patents. The Court considered the certificates as proper evidence. The
Court held that the suit patent is an essential patent for the satisfaction of the DVD player.

3. Whether the respondents impinged the petitioner Indian patent IN-184753?

The Court concluded that the respondent impinged upon the patent of the petitioner on
two accounts:

1. The suit patent were essential patents

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 2. The respondents were engaged in manufacturing a standard compliant device in
absence of a license for the Standard Essential Patent that is an implication of
infringement.

In order to come to this conclusion, the Court recognised that the proper evidence was
furnished by the petitioners' witnesses rendering that the petitioners was able to prove
through EFM (eight to fourteen modulation + demodulation technique) implying the suit
patent was infringed. It is pertinent to note that while analyzing the precedent on the
construction of a claim, there found to be no such construction and no comparison of the
patent claims with respect to the infringing product. It was ambiguous whether the EFM
technique was exposed to the suit patent. However, the analysis seemed appropriate in the
eyes of the court of law to hold the presence of factual infringement and impingement
based on compliance of standard in absence of taking the relevant licenses from the
SEPs.

4. Whether the Plaintiff and other several members of the DVD forum were abusing its position
in pursuance to create monopoly and earn exorbitant profits by forging patent pools?

With respect to the said issue, the respondent challenged the licensing of standard essential
patent as an issue of competition law and the said issue cannot be decided by the Civil Court as
in accordance with Competition Act, 2002. The Court viably rejected such issue and opined that
the said issue has already been dealt with in the case Telefonaktiebolaget LM Ericsson (PUBL)
vs. Competition Commission of India and Ors.1 wherein the Court held that the CCI and Civil
Court functions in distinct spheres and provide distinguished remedies and the civil court cannot
cross its limits of jurisdiction to assess the anticompetitive aspects.

1
W.P.(C) 464/2014.

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5. Whether the respondent is liable to pay any license fee to the petitioner and if so then at what
rate?

Considering such a crucial issue, the petitioners challenged, the value of royalty must be in
compliance with the entirety of the patent pool, generally on which licensing takes place. In
response to this, the defendants argued this shall be the infringement of FRAND terms that is
abided in the cases of SEPs. However, the judgement remained silent on this issue. The Court
opined by relying on the judgement rendered by the U.S Federal Courts in the case,
CommonWealth Scientific and Industrial Research Organization vs. CISCO Systems,Inc.2 in
pursuance to conclude that the royalty rates to be based on informal negotiations and in non
appearance of countervalleling methodology by the respondents, the Court permitted the royalty
rate to be fixed at USD 3.175 from the date of institution of the suits till 27th May, 2010 and
from 28th May, 2010 at USD 1.90 till 12th February, 2015.

DETAILED COMMENTARY

Whether the petitioner is the sole proprietor of the Indian Patent registered under No.
184753? and whether the petitioners' were owners of valid patents?

The Court with respect to the above mentioned issue have erred in rendering a precise
judgement. The respondent challenged the suit patent on grounds of Section3(k) of the Patents
Act claiming the device to be an algorithm based and not an invention consequently that cannot
be patented. But the Court dismissed this issue due to non appearance of the issue in the written
statement. The Court should have heeded every argument of respondents irrespective absensence
in a written statement. This viably amounts to violation of natural justice. The respondents were
not heard precisely by the Court. Their claims and arguments were rejected on grounds of non
appearance in the written statement. The validity of a patent is a vital aspect that should have

2
Fed. Cir. 2015

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been provided attention. It should have examined whether the patent is valid in order to proceed
further. The Court had not assessed and examined appropriately. It is pertinent to note, the Court

should have asked the respondents to amend their written statement for which they were raising
claims. In contrast, the Court had rejected their claim and rendered the judgement. This
straightforward stand by the Court ensued violation of natural justice since the parties were not
heard appropriately. Thus, the question that centers around whether the petitioner was sole
proprietor of Indian Patent and whether the petitioner was the owner of the Indian Patent
remained silent and ambiguous.

Whether the suit patent is an essential patent in relation to DVD Player technology?

The above-mentioned issue was decided by the Court based on the “essentiality certificates”
granted to its European and US patents furnished by the petitioners as evidence. It is crucial to
point, the creditworthiness of such certificates were not examined by the Court. It could have
been a case where the certificates might have forged or tampered and in order to examine any of
the fallacies the Court must have taken a step forward to analyze the creditworthiness of the
“essentiality certificates” rather Court without any substantial reasoning at hand moved to held
the certificates to be adequate and precise evidence. This lax move of Court was implausible and
esuse miscarriage of justice. Thus, the Court again in the issue whether the evidence provided
with respect to imply that patent is essential in relation to DVD Player Technology stands to be
ambiguous and implausible. The Court had not analyzed the basic and vital components of case
such as validity of patent as earlier discussed and the crucial issue of whether suit patent is an
essential patent, these aspects are the prominent components of the case and under the Patents
Act itself but the judgement malfunctioned in these areas.

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Whether the respondents impinged the petitioner Indian patent IN-184753?

In relation to this issue, the Court held that respondents impinged upon the petitioner Indian
Patent IN-184753 on two accounts:

1. It was held by the Court that suit patent were essential patent
2. The respondents were manufacturing devices in absence of licenses for Standard
Essential Patent.

It is pertinent to state here that the petitioner was unable to prove the infringement. The
ubiquitous technical practices and the state of the art in usage, making, selling, and leasing of the
DVD Player, these vital components were not proved by the petitioner in order to claim
infringement of the patent. Despite this, the Court remained silent on these factors. The Court
considered the evidence furnished by witnesses of petitioners and concluded the plaintiff proved
patent infringement. It is pertinent to note that while analyzing the precedent on the construction
of a claim, there found to be no such construction and no comparison of the patent claims with
respect to the infringing product. It was ambiguous whether the EFM technique was exposed to
the suit patent. Thus, initially the Court was imprecise in examining whether the patent is valid
and secondly whether the suit patent was an essential patent or not. These two crucial points
remained ambiguous and without any substantial backing. The question where the respondent
had impinged upon the Indian Patent is a conundrum. It is due to the fact that it is unknown
whether the patent is valid and the patent suit is an essential patent in the first place. On to the
other point of consideration, the Court had been laxed in examining the evidence furnished by
the petitioner's witnesses in relation to prove the infringement occurred overt.

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 Whether the Plaintiff and other several members of the DVD forum were abusing its
position in pursuance to create monopoly and earn exorbitant profits by forging patent
pools?

With regard to the above mentioned issue, the Court had appropriately entangled the grapple
over jurisdiction between the Civil Court and the Competition Commission of India (CCI). In the
remarkable case, Telefonaktiebolaget LM Ericsson (PUBL) vs. Competition Commission of India
and Ors. stated the Court had already settled the dispute with respect to overlapping jurisdiction
contours. It was appropriately opined by the Court that the Civil Court has no jurisdiction to
assess the issues relating to anti competitive aspects and that it purely vests in the hands of the
CCI. This facet of judgement was appropriately delivered by the Court. In examining the issues
of anticompetitive, an expert body should grasp the jurisdiction and deliver a justifiable
judgement. In accordance with the Competition Act, 2002 the CCI is the regulator that solely
scrutinizes the prevalence of anti competitive acts by each player essentially by the dominant
players. The Civil Court is not the competent authority to decide in the domain of competition
law matters as it precisely lacks the expertise and information. The Judgement of the Court sets
as a remarkable precedent as it plausibly deter the conundrum linked to overlapping jurisdiction
matters with respect to Patents Act and the Competition Act. Thus, this issue of judgement was
delivered expediently.

Whether the respondent is liable to pay any license fee to the petitioner and if so then at
what rate?

Court proclaimed that the respondents had infringed the suit patent of the petitioner. In that
corollary, the respondent is liable to pay license fee to the petitioner. Although, the rate at which
the Court permitted the license fee was not plausible. The judgment had malfunctioned in
keeping the license fee at the terms of FRAND i.e., Fair, Reasonable And Non-Discriminatory.
Rather, the Court decided to keep the license fee based on informal negotiations. This facet of
judgement was untenable. The Delhi High Court had no jurisdiction to decide the royalty fees

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on respondents as the issue purely revolves around competition law aspects. In a landmark case
of Micromax v. Ericsson3, the said case deals with important issues of competition law
implication in case of licensing of intellectual property. In this case, it was analyzed by the CCI
that Ericsson is dominant in the relevant market of GSM and CDMA in India. Ericsson was
charging royalty in contravention of FRAND Terms by imposing royalties linked with the cost of
product for its patents. It was averred in the case that, a dominant player with Patent must keep
royalty fees in consonance with the FRAND Terms. It is pertinent to state that royalty fees in
contravention to FRAND Terms can result in abuse of dominance that can have appreciable
adverse effect on competition. For instance, the licensor can incorporate an agreement with the
licensee that may provide that royalty should continue to be paid even after the patent has
expired. Licensor may fix the prices at which licensee should sell. These are the crucial and
formidable concerns that could come in a way while keeping the royalty fees in contravention of
FRAND Terms. Thus, the above mentioned issue should be analyzed first that whether the
petitioner is a dominant player in the relevant market and if the dominance test turns out to be
affirmative then royalty fees must be kept in consonance with the FRAND Terms. It is the CCI
that vests with regulatory power over competition law matters. In that corollary to determine the
royalty fees must be assessed by the CCI. Thus, the Court had no jurisdiction to determine the
royalty fees to be paid by the respondents and it is the CCI who is vested with the power.

SUGGESTIONS

The judgment delivered was the first on the issues relating to Standard Essential Patents.
However, the judgement partially could not be remarkable because the certain crucial aspects
were not determined, examined and analyzed by the Court justifiable and in some issues the
Court exceeded exercising its jurisdiction powers. The following points should be mindful while
determining the cases relating to Standard Essential Patent that the Court seemingly malfunction
to observe, these are are detailed below:

3
Case No. 50/2013.

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 1. To determine with substantial backing whether the suit patent is a valid patent or not.
2. To determine whether the suit Patent is an Essential Patent. The Court must have
analyzed the evidence provided and should have substantial evidence in concluding the
suit Patent to be an Essential Patent.
3. In interface between Patents Act and Competition Act, the jurisdiction should vests with
Competition Commission of India as it is the expertise regulatory body that regulates
competition matters emanating from patents.
4. Determination of royalty fees by the Standard Essential Patent Player in a relevant market
is a sphere of the Competition Commission of India to regulate and no other Courts
should have the jurisdiction. The Royalty fees should be levied by the Standard Essential
Patent Player in consonance with the FRAND Terms i.e., Fair, Reasonable And
Non-Discriminatory in pursuance to prevent the anticompetitive conduct to take place.

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