Late but worth the wait? Decoding Ericsson v Lava verdict

By Pravin Anand and Vaishali Mittal, Anand and Anand
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It took nine years, but the decision is a bellwether for future SEP protection

The recent FRAND (fair, reasonable and non-discriminatory) rate-setting decision from Delhi High Court (DHC) in the dispute between Ericsson and the Indian mobile maker Lava shines a light on India as a country of interest for standard essential patent (SEP) litigation. The dispute concerned Ericsson’s portfolio of SEPs for 2G and 3G technology.

The conflict began in 2011, when Ericsson initially sought to license its SEPs to Lava. Lava evaded for four years, and even filed a suit in a district court to set the royalties payable for a licence to Ericsson’s portfolio, forcing Ericsson’s hand in suing it for patent infringement and FRAND relief before Delhi High Court in 2015.

The decision builds on a great deal of jurisprudence that has developed in India over the years, and gives a lot of strategic guidance for SEP holders and implementers for negotiations and future litigation.

Invalidity of patents

Pravin Anand
Pravin Anand
Managing Partner
Anand and Anand
Tel: +91 120 4059 300
E: pravin@anandandanand.
com

The court introduced a systematic framework, the “Seven Stambhas Approach”, for evaluating the novelty of an invention. The seven pillars guiding the analysis are:

  1. Understanding the claims;
  2. Identifying relevant prior art;
  3. Analysing the prior art;
  4. Determining explicit and implicit disclosures;
  5. Assessing material differences while considering the entire scope of the claims;
  6. Verifying novelty in light of comprehensive scope and specific combination of claimed elements; and
  7. Documenting the analysis.

Indirect test of infringement

The court has acknowledged in previous decisions, Intex v Ericsson and Nokia v OPPO, which held that SEP infringement can be proved through mapping both the patent and the device to the standard. This two-step test is in line with the US decision of Fujitsu Ltd v Netgear Inc, and Ericsson’s evidence satisfied the test. Lava did not provide evidence to rebut this.

Patent exhaustion

Lack of direct agreements, or indemnification from chipset suppliers, made exhaustion a self-defeating argument. Ericsson’s patents claimed the handset, necessitating a licence with the device manufacturer.

FRAND rate setting

Vaishali Mittal, Anand and Anandv
Vaishali Mittal
Partner
Anand and Anand
Tel: +91 120 4059 300
E: vaishalimittal
@anandandanand.com

A crucial aspect of the judgment involved the calculation and ordering of a global FRAND rate post-trial. The court considered several key factors to determine this rate:

  • Comparable agreements. Identified as the most pertinent method for assessing FRAND rate, while a top-down is to be used as a cross-check;
  • Sales figures of Lava. The determined rate was benchmarked against Lava’s sales to assess damages;
  • Rejection of SSPPU. The court dismissed the smallest saleable patent practicing unit approach for royalty determination, opting instead for end-device rate setting; and
  • Damages on compliant devices and global portfolio. The court acknowledged that calculating damages based on the entire portfolio and compliant devices aligns with industry practices and is consistent with FRAND principles.

Using these factors, the court set a 1.05% royalty rate, based on Ericsson’s final offer to Lava, and its consistency with Ericsson’s agreements with third parties in India.

The court assessed party negotiations, and declared Lava as an unwilling licensee. It observed significant delays, lack of counteroffers in response to Ericsson’s offers, and its insistence on accessing Ericsson’s third-party agreements contributed to the declaration.

Final decree

Delhi High Court issued a decree favouring Ericsson, awarding it damages of INR2.4 billion (USD27 million) with an annual interest rate of 5% from the judgment date until the date of payment, along with legal costs.

Furthermore, Delhi High Court issued certificates of validity for the complete specifications of the seven patents that were upheld as valid, to be registered with the court’s registry.

Apportionment of the rate

Through a novel concept applied by the court, the final rate was apportioned based on the invalidity of one out of eight asserted patents. Consequently, this apportionment takes the total rate calculated and subtracted one-eighth from its entirety.

Key takeaways

Delhi High Court adhered to internationally recognised principles for assessing the essentiality of Ericsson’s patent portfolio. Rejecting the top-down approach for FRAND rate calculation due to a lack of requisite evidence from Lava, it favoured the use of comparable licensing to determine the FRAND rates.

Even as it comes after nine years of institution of the suit, the court’s extensive FRAND assessment has culminated in one of the most definitive and high FRAND rate determinations worldwide.

ANAND AND ANAND
B-41, Nizamuddin East,
New Delhi 110013, India

www.anandandanand.com

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