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After in depth pleadings, professional testimonies and arguments in an SEP dispute between Ericsson and Lava Worldwide – the third largest Indian smartphone model, with 6% of the full market share when the dispute started in 2015 – the Delhi Excessive Court docket dominated in favour of Ericsson on 3 April 2024 and ordered Lava to pay 2.44 billion rupees in damages (US$29 million).
Case background
After protracted negotiations, Ericsson and Lava had did not agree on licensing phrases and charges. Lava filed a go well with in opposition to Ericsson to forestall it from implementing Lava’s SEPs. In 2015 Ericsson filed a go well with in opposition to Lava, alleging infringement of eight SEPs masking applied sciences such because the adaptive multi-rate speech codec, enhanced information charges for GSM evolution and 3G options. In its defence, Lava countered by difficult the patents’ validity.
Significance of the choice
Essentiality
Counting on pleadings and correspondence between the events, the court docket concluded that Lava had admitted that Ericsson’s patents had been important. Ericsson additionally efficiently established essentiality by means of its submission of declare charts.
Doctrine of exhaustion
Lava utilised the doctrine-of-exhaustion defence underneath Part 107A(b) of the Patents Act to argue that because it imported the cell phone handsets to India from licensed entities, it couldn’t be held chargeable for infringement. Ericsson countered by arguing that Lava had failed to indicate that it had imported the handsets from entities that held licences from Ericsson.
The court docket agreed. It said that, based mostly on precedent, a doctrine-of-exhaustion defence may solely achieve success if convincing proof may set up that the defendant had obtained the product with out derogation of a patentee’s rights underneath Part 48 of the Patents Act, which Lava was unable to do.
Two-step infringement check
The court docket relied on the Guidelines Governing Patent Fits 2022 and the division bench’s judgment in Intex v Ericsson to conclude that in SEP circumstances, infringement could be established if the go well with patents map onto an ordinary (step one) and the implementer’s gadget is compliant with the usual (the second step) (2023:DHC:2243-DB). On perusal of proof submitted by each events, the court docket discovered that Lava had infringed Ericsson’s patents.
Social gathering conduct throughout FRAND negotiations
The court docket analysed the correspondence between Lava and Ericsson, which happened previous to the initiation of the lawsuits. It concluded that Ericsson had engaged with Lava in good religion to barter licensing charges however decided that Lava had no intention of getting into right into a FRAND licensing settlement and was an unwilling licensee.
Foundation of damages
The court docket dominated in favour of utilizing all the SEP portfolio to calculate damages – not simply the asserted patents. This method is arguably stronger as SEPs are crucial to realize interoperability, and transaction prices and authorized complexities are minimised.
Ericsson was profitable in convincing the court docket that the disputed patented know-how was central to the first operate of the cellular gadgets and that damages needs to be calculated based mostly on the tip product utilizing the chipset – not the smallest saleable patent working towards unit (SSPPU), which was Lava’s place. The court docket reasoned that the SSPPU-based method would undervalue the patents’ contribution to the general worth of the gadget and could be inconsistent with telecom trade apply, during which royalties are calculated based mostly on the tip product.
Calculation of damages
Utilizing the comparable licences method, the court docket held that the charges beforehand supplied by Ericsson had been virtually similar to those who it had supplied different entities. The court docket thus discovered these charges to be FRAND. Extrapolating the validity of the go well with patents to Ericsson’s portfolio (seven out of the eight SEPs had been discovered to be legitimate) the court docket estimated that 87.5% of the patents within the portfolio had been more likely to be legitimate. The ultimate royalty fee was calculated at 1.05% of the promoting value of various gadgets that had infringed the patented applied sciences. The general damages had been roughly 2.4 billion rupees (US$29 million) – the most important ever in Indian patent litigation.
Litigation prices
The court docket dominated that Ericsson would even be entitled to the precise prices of the litigation.
The one-judge ruling clarified numerous points associated to SEP litigation and highlighted the significance of significant FRAND discussions.
Nonetheless, Lava appealed. Listed earlier than a two-judge appellate division bench on the identical court docket, this enchantment was heard for the primary time on 13 Might 2024. Lava did not receive a keep on the three April order. It has additionally been reported that whereas Lava could not must pay all the damages quantity earlier than the enchantment is adjudicated upon, it has agreed to make an interim deposit to safeguard Ericsson’s rights. To barter the deposit quantity, the court docket has arrange a confidentiality membership comprising choose attorneys from either side.
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