Recently, in a high-stakes patent litigation concerning the enforcement of SEPs linked to AAC technology in mobile devices, the Delhi High Court examined whether a pro tem security deposit can be ordered against an alleged unwilling licensee. The central issue was whether a party that delayed FRAND negotiations for years could escape liability by invoking expired patent rights and procedural defences. Read on to understand how the Court addressed this evolving intersection of SEP enforcement, licensing conduct, and interim relief in India’s growing tech-litigation landscape.
Brief facts:
The case arose from a patent infringement dispute between Dolby International AB and Dolby Laboratories Inc. (“Dolby”) and Lava International Limited (“Lava”), relating to the alleged unauthorised use of Dolby’s SEPs covering AAC technology in mobile devices. Dolby, known for its research in audio technologies, owns a global portfolio of approximately 19,300 patents, including eight Indian patents relevant to the dispute. Five of these patents had expired before the institution of the suit, while three remain valid and enforceable.
Dolby alleged that Lava failed to constructively engage in licensing negotiations despite being offered a global FRAND licence, and that Lava’s AAC-compliant devices infringed its SEPs, enabling Lava to sell products without paying royalties. The suit was filed before the Delhi High Court seeking a permanent injunction, interim security, and other reliefs, on the ground that Lava had not negotiated in good faith.
Contentions of the Plaintiff:
The Plaintiff argued that a pro tem security order is part of the FRAND protocol and does not require a detailed merits review, unlike an interim injunction. It submitted that the suit patents correspond to ISO/IEC 23003-3 and 14496-3 standards, as demonstrated by claim charts, which Lava did not dispute during negotiations. The plaintiff alleged infringement on the basis that Lava’s Android devices are AAC-compliant, as stated on Lava’s website, thereby implementing Dolby’s SEPs. Lava’s prolonged inaction, lack of counter-offers, and continued sale of devices were cited as evidence of patent holdout and unwillingness to license. It asserted that its SEPs have been upheld in prior Indian litigation, with courts granting pro tem relief in similar suits, and that its AAC portfolio is licensed to over 940 entities globally. Lastly, the plaintiff referred to Lava’s financial exposure, including a ₹300 crore award in Ericsson v. Lava and an ongoing ED investigation, to justify the need for immediate security.
Contentions of the Defendant:
The Defendant submitted that a pro tem security order is an exceptional remedy requiring a prima facie case of validity, infringement, and exceptional circumstances, under Rule 5(k) of the Delhi High Court Patent Rules, 2022. It argued that no royalty or deposit could be imposed for the five expired 2-Series patents, and that the 3-Series patents lacked independent enforceability. On essentiality, it contended that Dolby failed to identify applicable ETSI standards and that alternative technologies were available, as supported by expert analysis. It further asserted that Dolby’s royalty demands were not FRAND-compliant, and its negotiation conduct contradicted its own declarations before the Patent Office. Invoking the doctrine of exhaustion, Lava claimed that its use of licensed chipsets and Android software precluded infringement. It also maintained that any pro tem deposit, if granted, should apply only prospectively from the date of suit.
Observations of the Court:
The Court addressed the question of Dolby’s entitlement to a pro tem security deposit in the context of Standard Essential Patents (SEPs), drawing a distinction between SEP litigation and conventional patent infringement suits. While referring to Intex v. Ericsson and Nokia v. Oppo, the Court reaffirmed that “SEP cases are different from normal patent infringement cases to the extent that an SEP holder does not have the right to claim an injunction against an implementor without holding negotiations with the implementor, as per the FRAND protocol.”
Further, the Court clarified that an Indian court is empowered to grant pro tem security under Section 151 Code of Civil Procedure, 1908, even in the absence of a formal application, and that such an order is ad-interim in nature and does not require a detailed inquiry into the merits. It rejected the stringent four-fold test proposed in Nokia v. Oppo, requiring unambiguous admissions of essentiality, validity, infringement, and royalty, as inappropriate at the interim stage.
On the issue of FRAND compliance, the Court found that Dolby had met its obligations by initiating negotiations, providing claim charts, and offering royalty rates consistent with those extended to other licensees. By contrast, Lava’s prolonged delay, lack of counter-offers, and insistence on disclosure of confidential third-party agreements were considered indicators of bad faith.
Concerning essentiality, the Court accepted Dolby’s unrebutted claim charts mapping the suit patents to ISO/IEC standards, noting that even Lava’s expert admitted the alignment of three patents. On validity, it observed that Dolby’s licensing to over 940 entities, including competitors, supported a prima facie finding in its favour, stating, “No one pays good money for bad patents.”
The Court applied the two-step standard laid down in Intex v. Ericsson to assess infringement. It observed, “(i) Mapping patentee's patent to the standard to show that the patent is a Standard Essential Patent. (ii) Showing that the implementer's device also maps to the standard.” Applying this test, the Court found that Dolby had sufficiently mapped its patents to the relevant standards and that Lava’s AAC compliance, confirmed through its website and supporting test reports, satisfied the required threshold.
The Court rejected the exhaustion defence advanced by Lava, observing, “In order to claim the benefits of defence of exhaustion, a party has to prove that the product in question was obtained in a manner that respects a patent holder’s rights,” which Lava had failed to establish. On the issue of expired patents, the Court held that since the asserted patents were valid when negotiations commenced, Lava could not derive benefit from delay, stating “Lava cannot take advantage of its own wrong.”
Finally, noting the company’s financial vulnerability, including a ₹300 crore award in Ericsson v. Lava and an ongoing Enforcement Directorate investigation, the Court found it appropriate to secure Dolby’s claim through a pro tem deposit. The date for calculating the royalty was fixed from the date Dolby first asserted its patents.
The decision of the Court:
In light of the foregoing discussion, the Court disposed of Dolby’s application with specific directions. Lava was ordered to deposit a sum of ₹20,08,06,293.92, representing alleged infringing sales from 2019 to 2024, with the Registrar General within eight weeks, to be maintained in an interest-bearing fixed deposit. Alternatively, Lava was permitted to furnish an unconditional bank guarantee for the same amount. Amounts already deposited pursuant to the order were allowed to be adjusted.
The Court further directed that failure to comply with the deposit condition would entitle Dolby to seek interim injunctive relief. For future sales from January 1, 2025, onwards, Lava was directed to continue making deposits or furnishing guarantees on a half-yearly basis.
An expeditious trial was ordered, with liberty to apply for case management directions. The Court clarified that the present order does not constitute a final determination on infringement or liability.
Case Title: Dolby International AB & Anr. Vs. Lava International Limited
Case No.: CS(COMM) 350/2024 with I.A. 9655/2024, I.A. 9658/2024, I.A. 9659/2024, I.A. 9660/2024 and I.A. 9666/2024
Coram: Justice Amit Bansal
Advocate for Plaintiff: Sr. Advocate Chander M. Lall, Advocates Ashutosh Kumar, Saya Kapur Choudhary, Devanshu Khanna, Swarnil Dey, Harsshita Pothiraj and Annanya Mehan
Advocate for Defendant: Sr. Advocate Jayant Bhushan, Advocates Ashok V. Aggarwal, Mudit Sharma, Nandini Sharma, Parvez A. Khan and Abhishek Rathi
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