INDIA: High Court denies pro tem relief to Nokia in SEP suit

Introduction

In a recent judgement passed in the matter of Nokia Technologies OY vs. Guangdong Oppo Mobile Telecommunications Corp Ltd & Ors., the Hon’ble High Court of Delhi dismissed Nokia ‘s application under Order XXXIX Rule 10 of the CPC seeking an interim deposit amount from Oppo, on payment of which Oppo could be granted a license to use the suit patents which are Standard Essential Patents (SEPs).

The Court delved upon the concept of SEP criteria and emphasized on the issues for consideration in SEP litigation cases.

Background

The present suit was instituted by NOKIA TECHNOLOGIES OY (hereinafter the “Plaintiff”) against GUANGDONG OPPO MOBILE TELECOMMUNICATIONS CORP LTD & ORS (hereinafter the “Defendant”) alleging infringement of the three suit patents which are Standard Essential Patents (SEPs), which are necessary to work the technology for making cellular systems which are 2G, 3G, 4G and 5G compliant. The three suit patents are

(i) Indian Patent No. 286352 (IN ‘352) titled- System and Method for Providing AMR-WB DTX Synchronization,

(ii) Indian Patent No. 269929 (IN ‘929) titled- Method Providing Multiplexing for Data Non-Associated Control Channel and

(iii) Indian Patent No. 300066 (IN ‘066) titled- Additional Modulation Information Signaling for High-Speed Downlink Packet Access.

The Defendant had initially obtained a cross-license to use the Plaintiff’s SEPs by paying royalty at FRAND rates, but the license expired in 2021. The Plaintiff contended that the Defendant is using their SEPs without renewing the license Agreement or without taking any fresh license and thus, is infringing their patents.

While the infringement suit had been filed along with application for grant of ad interim injunction, the present application was filed in order to have an alternate interlocutory arrangement in place, during the pendency of the application for interim injunction given that considerable time was likely to elapse before any substantive order would be passed on the application for preliminary injunction.

Facts and Submissions

The Plaintiff averred that the suit patents protect technology necessary for 2G, 3G, 4G and 5G wireless telecom which was developed within the framework of the European Telecommunications Standard Institute (ETSI) and the cellular handsets of Defendant are admittedly in compliance with the technical standards to which the suit patents conform and thus, are infringing the plaintiff ‘s SEP. The Plaintiff alleged that the Plaintiff had also offered a license to the defendant to use the suit patents at royalty rates which were FRAND, which the defendant refused to accept.

The Plaintiff sought a direction to the Defendant to pay the monies directly to the Plaintiff in the present application and for measuring the damages, relied on an affidavit dated 1st July 2021 which suggests the methodology for working out the sum to which Plaintiff would be entitled as security.

The Defendant, on the contrary, contested the maintainability, as well as the merits, of the plaintiff ‘s application under Order XXXIX Rule 10, CPC[1]. The Defendant also contested the validity and essentiality of the suit patents and the royalty rate claimed as not being FRAND compliant.

The Defendant contested the methodology adopted by the Plaintiff to assess the royalty/damages assessment. The Defendant also questioned the Plaintiff’s claim regarding the Plaintiff’s assertion with respect to the Defendant’s obligation to pay royalty. The Defendant asserted that an in-depth examination was required to ascertain whether the suit patents are SEPs and whether the Defendant has at all infringed the suit patents and whether the rates at which Plaintiff has offered licenses are FRAND compliant. The Defendant asserted that the calculations in the affidavit of the Plaintiff were based on assumptions and presumptions and not on actual data.

The Defendant also opposed the reliance of the Plaintiff on the first FRAND license agreement. It was submitted that the said agreement cannot operate as an estoppel against the right of Defendant to question the essentiality and validity of the suit patents by virtue of Section 140(1)(iii)(d)[2] of the Patents Act. The Defendant submits that it has always been willing to take a FRAND license from Plaintiff representing the true value of its patent portfolio, but the proper value has never authoritatively been determined at any stage.

Further, any second license agreement could not fructify as the plaintiff was unable to satisfy the technical queries raised by them. The Defendant made three specific counter offers for a second agreement in good faith and agreed to make interim deposits for the period for which they were unlicensed without requiring the Plaintiff to disclose any third-party license agreement. To support the Defendant’s submissions, an affidavit was also submitted.

Court findings

The Court noted that in SEP litigation cases, three primary issues arise for consideration, i.e., whether

(i) the suit patents are SEPs, (ii) the defendants are using the plaintiff‘s suit patents and (iii) the rate at which the plaintiff is willing to license the patents to willing licensees is FRAND.

The Court discussed various cases to understand the scope of Order XXXIX Rule 10 of the CPC. On the issue of maintainability of the application, the Court noted that “Order XXXIX Rule 10 of the CPC applies to a situation in which ―the subject matter of a suit is money or some other thing capable of delivery‖. Where the subject matter of the suit conforms to this requirement, Order XXXIX Rule 10 further requires, for the provision to apply, admission, by one or the other party to the suit. The admission must be either that (i) such party holds the money or other thing as a trustee for the other party, or (ii) such money or other thing belongs to the other party or (iii) such money or other thing is due to the other party”

The Court observed that for applying Order XXXIX Rule 10, the communications and exchanges between the parties must be seen as a whole and there must exist ​​an admission of liability. It was elaborated that for such admission to exist, ordinarily, in a case of SEP Frand infringement litigation, there must be unequivocal admission of (i) the essentiality and validity of the suit patents, i.e. that they are, in fact, SEPs (which would include, by its very nature, admission that, without utilizing the plaintiff‘s SEPs, the defendants‘ devices would not function as they should, i.e. the aspect of ―essentiality), (ii) the fact of utilization, of the said SEPs by the defendant, (iii) the fact that such utilization, absent any payment of royalty, would amount to infringement and (iv) that the royalty rate proposed by the plaintiff was FRAND.

The Court opined that Offers and counteroffers, during negotiations aimed at arriving at a possible agreement or settlement, cannot, therefore, in the absence of any unequivocal evidence of consensus ad idem, constitute the basis for a direction for deposit under Order XXXIX Rule 10 of the CPC.

The Court did not consider the affidavits submitted against the opposite party but opined that the affidavit can, nonetheless, be relied upon, even at a prima facie stage, against the party who chooses to place it on record, as a party cannot dispute its own evidence.

The Court noted that the first FRAND license agreement was on cross- licensing basis and there was no unequivocal admission of liability in the present case.

Upon referring to the pre-suit communications between the parties, discussed in the affidavits submitted and the pleading of both the parties, the Court was of the opinion that the Plaintiff has not been able to make out a case of any direction to the Defendant to make a deposit in terms of Order XXXIX Rule 10 of the CPC and thus, dismissed the application under Order XXXIX Rule 10 of the CPC.

The focus will now shift to the application for interim injunction and the trial of the infringement lawsuit.

[1] Order 39 Rule 10 of CPC: 10. Deposit of money, etc., in Court. – Where the subject-matter of a suit is money or some other thing capable of delivery and any party thereto admits that he holds such money or other thing as a trustee for another party, or that it belongs or is due to another party, the Court may order the same to be deposited in Court or delivered to such last-named party, with or without security, subject to the further direction of the Court. [2] 140 Avoidance of certain restrictive conditions. - (1) It shall not be lawful to insert- (i) in any contract for or in relation to the sale or lease of a patented article or an article made by a patented process; or (ii) in licence to manufacture or use a patented article; or (iii) in a licence to work any process protected by a patent, a condition the effect of which may be- (a) to require the purchaser, lessee, or licensee to acquire from the vendor, lessor, or licensor or his nominees, or to prohibit him from acquiring or to restrict in any manner or to any extent his right to acquire from any person or to prohibit him from acquiring except from the vendor, lessor, or licensor or his nominees any article other than the patented article or an article other than that made by the patented process; or (b) to prohibit the purchaser, lessee or licensee from using or to restrict in any manner or to any extent the right of the purchaser, lessee or licensee, to use an article other than the patented article or an article other than that made by the patented process, which is not supplied by the vendor, lessor or licensor or his nominee; or (c) to prohibit the purchaser, lessee or licensee from using or to restrict in any manner or to any extent the right of the purchaser, lessee or licensee to use any process other than the patented process, (d) to provide exclusive grant back, prevention to challenges to validity of Patent & Coercive package licensing,] and any such condition shall be void.