Delhi High Court orders Oppo to deposit security in patent infringement case filed by Nokia

The Delhi High Court recently passed an interim order in favour of mobile manufacturer Nokia in its patent infringement dispute against Chinese smartphone manufacturer Oppo and directed the latter to furnish security payment within four weeks [Nokia Technologies Oy v Guangdong Oppo Mobile Telecommunications Corp Ltd & Ors]. .While the exact amount is confidential, the High Court said that it will be 23% of the ‘last paid amount’ under the 2018 license agreement between the two companies. This is because India accounts for nearly 23% of Oppo’s worldwide sales.A division bench of Justices Manmohan and Saurabh Banerjee passed the order on an appeal filed by Nokia and set aside the judgement of the single-judge who had ruled against Nokia with respect to the interim relief sought. “Keeping in view the status of Oppo as an ex-licensee, its admission that its phones use Nokia’s patents, its willingness to renew the 2018 Agreement and make interim payments as late as June 2021, the fact that it has approached a Court in China for determining a FRAND [Fair, Reasonable and Non-Discriminatory] rate as well as the consistent practice of this Court and the financial condition of Oppo, this Court is of the view that the impugned judgment is contrary to the facts as well as settled principles of law. Accordingly, the present appeal is allowed and the impugned order is set aside,” the Court said.It added,“This Court also directs the respondent to deposit the ‘last paid amount’, attributable to India i.e. Twenty Three per cent (23%) of XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (the last paid amount) under the 2018 Agreement within four weeks. This Court clarifies that the observations made in the present order are only for deciding the present appeal and shall not prejudice either of the parties in any other proceedings or at the final hearing of the suit.”.Nokia’s arguments.It was Nokia’s case that Oppo secured a license for use of Nokia’s Standard Essential Patents in 2018 for a period of three years. The agreement was a cross-licence agreement for patents belonging to both the parties.Nokia contended that the 2018 Agreement did not include patents relating to the 5G standards and considering that 52 per cent of Oppo’s sales in India and 64 per cent of its global sales consist of 5G devices, any new license fee would be substantially higher.It was their case that after the expiry of the 2018 Agreement, Oppo witnessed an unprecedented increase in the sale of its devices and during the period between July 2021 and December 2022, it sold around 77 million devices in India without paying a single rupee in royalty to Nokia.Nokia further said that despite making efforts including making itself available for discussions on the technical and economic fronts, Oppo refused to execute a fresh/second licence agreement..Oppo’s case.However, Oppo asserted that in Standard Essential Patent matters, a patent holder cannot seek an interim or even a permanent injunction as a matter of right.Oppo further stated that virtue of Oppo’s bank guarantees, Nokia stands secured in excess of the 2018 Agreement. It emphasised that the bank guarantees cover global sales and as such necessarily cover Indian sales and therefore, Nokia cannot indulge in double dipping in multiple jurisdictions for the sole purpose of causing financial duress to Oppo..Court’s conclusion.After considering the case, the Court held that a prima facie case of infringement was made out against Oppo and that the 2018 agreement was not a license for non-standard essential patents.The Court recorded that out of the 13 proceedings filed globally between the parties with regard to the same portfolio of Standard Essential Patents (SEPs), 11 courts had found infringement to be established and five courts had found Oppo to be an unwilling licensee.The Court also observed that the German bank guarantee is a ‘smoke screen’ as it will only come into fruition once a licence agreement has been signed.“It is also interesting to note that pursuant to the order of the German Court, Oppo has chosen to suspend its operations in the German market, rather than take a licence for Nokia’s Standard Essential Patents. Consequently this Court is of the prima facie view that Oppo is an unwilling licensee.”.Court’s observations on ‘pro-tem security’.In a detailed judgement, the Court also held that Indian courts have the powers to pass a pro-tem order if the facts warrant the same. “Consequently, to balance the equities between the parties, this Court has the power, if the facts so warrant, to pass a pro-tem order being a temporary arrangement without a detailed exploration of merits. This view, according to the Court, promotes a modernized and fair patent system, encourages ingenuity, creativity and intellectual activity as well as provides for a conducive environment for knowledge transfer. Needless to state that the nature of pro-tem security/deposit order as well as interim order will necessarily depend on the factual matrix of each case,” the division bench said. It further stared that a pro-tem security order cannot be likened to an injunction order because unlike an injunction order, it does not stop or prevent the manufacture and sale of the infringing devices.“The intent of a pro-tem security order is to either ensure maintenance of status-quo or to retain the Courts’ power and ability to pass appropriate relief at the time of disposal of the injunction application under Order XXXIX Rules 1 and 2 or at the final stage. In the facts of the present case, the pro-tem security order does not confer any advantage upon Nokia as it only balances the asymmetric advantage that an implementer has over a Standard Essential Patent holder,” the Court ruled. .Senior Advocate Gourab Banerjee with advocates Pravin Anand, Vaishali Mittal Siddhant Chamola, Pallavi Bhatnagar, Rohin Koolwal, Rakesh Talukdar and Subro Prakash Mukherjee appeared for Nokia.Advocates Saikrishna Rajagopal, Julien George, Sneha Jain, Sidharth Chopra, Anu Paarcha, Arjun Gadhoke, Vivek Ayyagari, Avijit Kumar, Aniruddh Bhatia and N Parvati represented Oppo..[Read Judgment]