In a significant decision by the Delhi High Court in February 2025 reinforcing the enforcement of standard essential patents (SEPs) in India, Philips Koninklijke Philips N.V. (Philips) recently won a protracted legal battle against three Indian digital versatile disc (DVD) manufacturers – Pearl Engineering Company, Powercube Infotech, and Siddharth Optical Disc Private Ltd (Defendants).
The case, Koninklijke Philips Electronics N.V. v Maj (Retd) Sukesh Behl & Anr, revolved around Philips’ patented Eight-to-Fourteen Modulation Plus (EFM+) technology, which is critical for manufacturing DVDs with minimal errors and maximum storage, ensuring seamless functionality across different devices.
Initiated between May and September 2012, Philips accused the Defendants of utilizing the EFM+ technology in their DVD production processes without securing a license from them. Emphasising the global significance of this technology in standardising DVD production, Philips sought a permanent injunction against the Defendants to halt further infringement, besides compensatory damages for the losses incurred.
The Defendants refuted any claims of infringement, arguing that their DVD production methods did not incorporate the EFM+ technology protected by Philips’ patent. Additionally, they contested the patent’s validity on various grounds under Section 64 of the Indian Patents Act, 1970 (the Act), inter alia:
- Non-compliance with Section 8 by way of failure to disclose requirements and information on foreign filings;
- Obtaining the patent by means of false suggestions or representations;
- Subject matter not eligible for patent protection under the Act, specifically under Section 3(m), such as methods of performing mental acts, and under Section 3(k), which excludes computer programs per se;
- Lack of novelty and inventive step vis-à-vis an existing patent owned by Sony; an
- Lack of clear and sufficient description for replication by a skilled person in the art.
Philips countered all the above grounds in detail and argued that all the disclosures on foreign filings were made based on the available data within its records and hence any omissions in such disclosure were purely inadvertent. Philips also contested the ground of claimed invention being a mental act by arguing that the claimed process necessitated technical implementation involving circuits and buses and cannot be performed mentally or theoretically.
Arguing further on the non-applicability of section 3(k) on the suit patent, Philips argued that the invention did not involve mathematical or software-per se based processes, but incorporated hardware components contributing to the inventive step. It stressed that the claimed invention embodies a unique “EFL+” technology that optimizes encoding of the information thereby enhancing data storage capabilities on DVDs. This, Philips argued was a technical advancement and hence section 3(k) did not apply.
Agreeing with Philips, the Court affirmed the patent’s status as an SEP and concluded infringement by the Defendants, while meticulously addressing the implications of SEPs and obligations of parties under FRAND terms. Despite the patent’s expiration, which precluded an injunction, the Court decided to award significant damages to Philips to compensate for the impact of the SEP infringement.
Award of damages
The Court awarded damages based on several critical factors aligned with FRAND (Fair, Reasonable, and Non-Discriminatory) licensing terms.
- Philips had established a standard royalty rate of $0.03 per DVD, which the Court used as the baseline for calculating the financial compensation for infringement.
- Due to the Defendants' failure to disclose exact sales figures, the Court had to estimate the number of DVDs replicated using available evidence and reasonable extrapolation. Pearl Engineering was estimated to have produced approximately 250 million DVDs, Siddharth Optical around 65 million, and Powercube Infotech close to 499.3 million during the infringement period.
- The damages calculated in USD were converted to Indian Rupees at the current exchange rate of INR 83 per USD. This conversion was crucial to reflect the present-day value of the loss incurred by Philips due to the infringement.
- To compensate Philips for the time value of money over the prolonged litigation period, the court awarded an interest rate of 12% per annum from the date of filing the lawsuit until the actual payment date. Moreover, aggravated damages were imposed on each defendant due to wilful infringement, deliberate nondisclosure of sales records, and procedural misconduct, further increasing the financial burden on the infringers.
Breakdown of the Financial Awards
- Defendant Pearl Engineering was ordered to pay around INR 6.22 crores in royalty damages, plus INR 1 crore in aggravated damages (total of ~USD 8,70,000). Interest was calculated at 12% per annum from July 24, 2012, to February 25, 2025.
- Defendant Siddharth Optical was liable for approximately INR 1.61 crore in royalty damages and an additional INR 1 crore in aggravated damages (~USD 3,14,458), with interest accruing from May 28, 2012, to February 25, 2025.
- Defendant Powercube Infotech faced the steepest penalties with about INR 12.43 crore in royalty damages and INR 1 crore (~USD 1,61,807) in aggravated damages. Interest was added from September 4, 2012, to February 20, 2025.
The Court also mandated that the defendants cover the full costs of the litigation, emphasising the extensive legal resources expended due to the defendants’ delay tactics.
This judgment is crucial as it reinforces the enforcement mechanisms for SEPs, ensuring that patent holders can protect their innovations while adhering to FRAND commitments. The detailed examination of FRAND obligations and the defendants’ breach by not engaging in fair licensing negotiations also sets a precedent for how similar cases might be adjudicated in the future. It also signals to global markets that India respects and enforces international patent licensing standards.