Delhi High Court Orders Lava To Pay ₹20 Crore Pro Tem Deposit In Patent Infringement Suit By Dolby Over Breach Of 'FRAND' Obligations

In a major setback for Indian mobile company Lava, the Delhi High Court has ordered a pro tem deposit of over ₹20 crore, in the patent infringement suit filed by Europe based audio/video processor Dolby International.In doing so, Justice Amit Bansal deprecated Lava's conduct during negotiations with Dolby— amounting to 'patent holdout'.“Throughout the negotiations that were carried out for six years, Lava kept on asking for details and information from Dolby, without providing any evidence to show that it is not using Dolby's technology. Lava's strategy was simply to delay the negotiations,” the bench said.It added that Lava failed to comply with the obligations of an implementor under the FRAND protocol, taking the position of an 'unwilling licensee'.FRAND (Fair, Reasonable And NonDiscriminatory) are a set of licensing terms associated with standard-essential patents (SEPs).Dolby had offered a FRAND license to Lava in respect of its eight SEPs but claimed that the latter did not cooperate and continued selling infringing devices without paying any royalties.It thus approached the high court seeking permanent injunction restraining Lava from infringing its patents and seeking grant of a pro tem order.Lava on the other hand argued that five out of the eight suit patents had already expired and thus, Dolby cannot charge royalty or claim injunction for their use. The remaining three patents, it argued, have no independent existence and are not entitled to any separate protection.Lava also argued that mere grant of a patent does not inherently establish its validity.The High Court observed that to grant a pro tem order, triple test of essentiality, validity and infringement has to be prima facie made out.In the case at hand it observed,“The suit patents have been licensed by Dolby to various third parties in India and across the world. A Prima facie case of validity of the suit patents has been made out in favour of Dolby. Dolby has placed on record claim-chart mapping in order to prima facie establish essentiality of the suit patents. Lava's devices implement the standards and this fact has been admitted by them on their website and is also evidenced by the test reports filed by Dolby. Hence…a prima facie case of infringement is made out.”The High Court also criticised Lava for making its first counter-offer to Dolby only after the initiation of the suit. The Court said it “clearly reflects an attempt to delay proceedings and is not reflective of good faith behaviour in FRAND licensing negotiations. Despite being in discussions with Dolby for over five years, Lava failed to propose any quantifiable licensing terms or provide its sales data until the present suit was instituted. Such conduct undermines the very spirit of good faith negotiations that is central to the FRAND framework.”As such, the Court directed Lava to deposit ₹20,08,06,293.92 covering all past sales from the year 2019 till 2024 with the Registrar General. The said amount shall be kept in an interest-bearing fixed deposit on an auto-renewal mode.In the alternative, Lava has been permitted to submit an unconditional Bank Guarantee from an Indian Bank for an equivalent sum.The Court has warned that Lava's failure to comply will entitle Dolby to seek an interim injunction against the company from selling any further devices in India which implement the suit patents.“Based on the sales made by Lava for the subsequent period beginning from 1st January, 2025, Lava shall continue to deposit amounts in terms of the aforesaid rates or furnish a bank guarantee before the Registrar General,” the Court added.Appearance: Mr. Chander M. Lall, Sr. Advocate with Mr. Ashutosh Kumar, Ms. Saya Kapur Choudhary, Mr. Devanshu Khanna, Mr. Swarnil Dey, Mr. Harsshita Pothiraj and Ms. Annanya Mehan, Advocates for Dolby; Mr. Jayant Bhushan, Sr. Advocate with Mr. Ashok V. Aggarwal, Mr. Mudit Sharma, Ms. Nandini Sharma, Mr. Parvez A. Khan and Mr. Abhishek Rathi, Advocates for LavaCase title: Dolby International AB & Anr. v. Lava International LimitedCase no.: CS(COMM) 350/2024Click here to read judgment

Delhi High Court Orders Lava To Pay ₹20 Crore Pro Tem Deposit In Patent Infringement Suit By Dolby Over Breach Of 'FRAND' Obligations

Kapil Dhyani

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