The Delhi High Court has rejected Koninklijke Philips Electronics NV’s royalty claim in a DVD patent dispute, holding that a patent owner cannot claim money merely by saying that its technology is essential to a product standard [KK Bansal Vs Philips].

A Bench of Justices Hari Shankar and Om Prakash Shukla said that the patent owner must prove, with evidence, that the other side actually used the patented technology.

In simple terms, the Court said Philips could not argue that because its patent was necessary for DVD technology, and because some others had sold DVD players, they must have infringed Philips' patent.

“For a plaintiff, who claims to be the holder of an SEP, to establish infringement and claim damages from a defendant, he has to first establish that his patent is an SEP; thereafter, that the defendant’s product infringes his patent,” the Court said.

The Court passed the ruling while setting aside a 2018 judgment that had directed KK Bansal and Rajesh Bansal to pay royalty and damages to Philips.

The dispute concerned Indian Patent IN 184753, owned by Philips. The patent was not for an entire DVD player. It related to a decoding device inside a DVD player. This device helped the DVD player read information stored on a DVD disc and convert it into playable audio and video.

Philips claimed that this was a standard essential patent, or SEP. In ordinary terms, Philips argued that any DVD player following the relevant DVD standard would necessarily use its patented decoding technology.

Philips sued the Bansals, who ran Mangalam Technology and Bhagirathi Electronics, alleging that DVD players sold by them used this technology without a licence.

A single-judge of the High Court had accepted Philips’ case in 2018. Since the patent had already expired, the single-judge did not grant an injunction.

However, the Court directed the Bansals to pay royalty at USD 3.175 per DVD player up to May 7, 2010, and USD 1.90 thereafter till February 12, 2015, with 10 percent interest. The Court also awarded ₹5 lakh as punitive damages against Rajesh Bansal.

The Division Bench has now reversed that finding.

The Bench said Philips had to prove infringement in one of two ways.

It could either directly compare the claims in its patent with the Bansals’ DVD players, or it could show that its patent mapped onto the DVD standard and that the Bansals’ DVD players also followed that same standard.

The Court found that Philips had failed to do this.

The Court also accepted the Bansals’ argument that they had bought printed circuit boards from Shuntak and Sheen Land and used them in their DVD players. These boards contained MediaTek chips.

The Bench noted that Shuntak and Sheen Land were authorised dealers of MediaTek, and that MediaTek was an authorised dealer of the printed circuit boards containing the invention forming the subject matter of Philips’ patent.

“Philips’ right to exclusivity, in the suit patent, also stands extinguished by application of the doctrine of patent right exhaustion (once a patentee makes the first sale of a patented item, their exclusive rights over that specific item are exhausted), in terms of Section 107A(b) of the Patents Act,” the Court held

On royalty, the Bench found that Philips had not proved that the rates claimed by it were fair, reasonable and non-discriminatory (FRAND).

“The finding of the learned Single Judge, that the royalty rate offered by Philips was FRAND, is not supported by any evidence whatsoever,” the Court said.

The Bench added that Philips had not placed even one agreement with any third party on record, though its witness had said that such licence agreements were available.

“Not a single agreement, with any third party, has been placed on record, even though PW-2 (Philps) deposed that he was in possession of such licences/agreements,” the Court noted.

The Court also rejected Philips’ attempt to calculate royalty on the basis of the entire DVD player. It said the patent was only for a device inside a chip or printed circuit board, which was only one of several parts of a DVD player.

“There is no question of Philips having been entitled to any royalty, for any item, other than, or in excess of, the decoding device,” the Bench held.

The Court added that if royalty was calculated on a per-DVD-player basis, it would amount to Philips obtaining royalty for items in respect of which it holds no patent.

The Division Bench, therefore, allowed the Bansals’ appeals and set aside the July 12, 2018 single-judge ruling.

“Resultantly, the impugned judgment dated 12 July 2018 is quashed and set aside,” the Court said.

Senior Advocate Swathi Sukumar appeared for the Bansals with advocates S Santanam Swaminadhan, Naveen Nagarjuna, Ritik Raghuwanshi, Kartik Malhotra, Anindit Mandal and Shreya Mansi James.

Advocates Pravin Anand, Vaishali R Mittal, Siddhant Chamola and Gursimran Singh Narula fron Anand & Anand appeared for Philips.

[Read Judgment]