COLOSSAL DAMAGES AMOUNTING TO USD 26 MILLION AWARDED IN A PATENT INFRINGEMENT SUIT: DELHI HIGH COURT

INTRODUCTION

With the outset of securing the rights of a patentee, the Hon’ble Delhi High Court in a recent judgment in the case of Communication Components Antenna Inc. v. Mobi Antenna Technologies (Shenzhen) Co. Ltd & Ors. (CS(COMM) 977/2016) has set a significant precedent in the field of patent infringement. Centered around the infringement of the Indian Patent Number 240893 (hereinafter “IN’893”), the landmark judgement imposed damages on the Defendant amounting to INR 217 crores, equivalent to USD 26 million.

BACKGROUND

In September 2010, TenXc Wireless Inc. and TenXc Wireless India Private Limited sued Mobi Antenna Technologies and others for infringement of their patent IN’893, which relates to a method which allows a greater number of subscribers to connect using the same spectrum while maintaining the call quality. TenXc later sold their assets to Communication Components Antenna Inc., now the Plaintiff.

Amidst this legal battle, the Defendant challenged the patent on grounds of novelty, inventive step, and non-patentability u/S 3(d) and 3(f) of the Indian Patents Act (hereinafter “the Act”). The arguments were dismissed, upholding the patent, but the Court later reconsidered revocation u/S 64(1)(h) and (k). Due to insufficient evidence from the Defendant, the ruling favoured the Plaintiff but left the issue of granting of certificate of validity to be heard in the infringement matter.

Thereafter, the Court dealt with the issues given below:

ISSUES BEFORE THE COURT

The Hon’ble Court identified the following main issues:

Whether patent IN’893 is a valid patent?
Whether the Defendant was infringing the suit patent?
Whether the Plaintiff is entitled to any relief and for what period?
What relief?

THE COURT’S ANALYSIS

ISSUE 1

Initially, a Single Bench had held the suit patent valid, with the exception of Sections 64(h) and (k) of the Act. The Division Bench set aside the judgement due to a lack of pleadings with respect to these sections and remanded the case. Upon reconsideration, the Single Bench ruled in favour of the Plaintiff, noting a lack of evidence. It left the grant of validity certificate to the Court in the current case. However, the Court refused the grant, citing the Defendant's abandonment of revocation proceedings and another ongoing challenge to the suit patent, and chose not to act further in this regard.

ISSUE 2

The Court, while adjudging upon the infringement of the subject patent, undertook a detailed analysis of the testimonies of both the Plaintiff’s witnesses (PW1, PW2) and the Defendant’s expert witness (D1W1). Based upon their testimonies, the Hon’ble Court reached the conclusion that the Defendant’s products read onto the Claims (1&10) of IN’893 and hence, the Plaintiff prevailed against the Defendant.

ISSUES 3 AND 4

After ascertaining infringement, the Court took upon the issue of calculation of damages in the matter and analyzed the Plaintiff’s approach. Instead of pursuing an account rendition, the Plaintiff opted for compensatory and punitive damages, supported by testimonies from PW1 and PW2 (Plaintiff’s second witness).

In 2011, PW1 had submitted a Total Addressable Market analysis (TAM Analysis) to potential investors to estimate the potential market size for the patented product. The Plaintiff while presenting an evaluation of damages, used this analysis and took several factors into account, including:

1) the Plaintiff's "market size lost" in India;

2) the retail prices of patented products in India from 2007 to 2011, and

3) the patented product’s retail prices in Canada and the United States in 2011, since the Plaintiff was selling the product in those respective markets at the time.

Based on this, the Plaintiff determined a total of 94,710 potential unit sales in India and presented a figure of USD 96 million as lost profits by multiplying the number of units with profit per unit.

THE COURT’S DECISION

The Court relied on Strix Ltd v. Maharaja Appliances Ltd, (2023 SCC OnLine Del 7128) and emphasized that punitive damages are only awarded if compensatory amounts are deemed insufficient. Strix referred to the Delhi High Court IPD Division Rules, mandating a reasonable estimate of the claimed amounts along with supporting evidence. Furthermore, various factors were considered while calculating damages in the Strix case, including the Defendant’s sales, market share, and potential royalties (had the product been licensed). Notably, the absence of sales or profit disclosure from the Defendant led the Court to dismiss any advantage for their non-participation, emphasizing that damages may be notional in the absence of evidence.

In this case, the Court decided to decline punitive damages but affirmed the Plaintiff's demonstration of infringement by the Defendant and its entitlement to monetary compensation. It opined that where the patentee is a manufacturer of the patented product, the reasonable profit that the patentee would have earned if the infringing product was actually sold by the patentee would be a reasonable measure. Echoing the strictness seen in Strix with an inactive defendant, the Court likewise denied any benefit of the doubt to the Defendant in the present matter.

The Court questioned the assumption of revenue from 94,710 units going entirely to the Plaintiff, settling instead on an estimate of half that figure: 47,355 units. Multiplying this by the average retail price of USD 1,350 and the profit per unit of USD 550 (for 2011), damages were awarded totaling INR 217 crore (approx.) equivalent to USD 26 million, covering the period from 2011 to 2014, along with 5% annual interest from the judgment date until payment. Additionally, a permanent injunction was also granted.

CONCLUSION

The developing jurisprudence on calculation of damages in India is further bolstered by this landmark judgment. It is pertinent for the stakeholders to note that the Court has recognized that the reasonable profit that the patentee would have earned if the infringing product was actually sold by the patentee would be a reasonable measure for final calculation of damages. The Court also highlighted the inert attitude of the Defendant during the course of events, ultimately choosing to take the same stance as Strix that an inactive Defendant cannot be given any advantage.