Delhi High Court hands Philips landmark win in triple DVD SEP infringement case

Context: Between May and September 2012, Philips sued three Indian DVD manufacturers, Pearl Engineering Company, Powercube Infotech, and Siddharth Optical Disc Private Ltd., for each infringing a standard-essential patent (SEP) covering Eight-to-Fourteen Modulation Plus (EFM+) coding, which forms an essential and integral industry standard in the manufacturing, storage, and replication of data in digital formats (such as in DVDs). The SEP owner also sought a permanent injunction, alleging at the time that the defendants had engaged in large-scale DVD replication using the patented technology without a license and this innovation had been “crucial” to the global standardization of DVD production, ensuring “universal compatibility” with DVD players regardless of the manufacturer.

What’s new: In a landmark ruling handed down on Thursday, the Delhi High Court sided with Philips, declaring that all three DVD manufacturers “knowingly” used Philips’ patented EFM+ technology without a license. The court ruled that the defendants were unwilling licensees, refusing to negotiate in good faith, and held them liable for aggravated damages. However, no injunction could have been granted at this stage (because the patent term expired in February 2015).

Direct impact and wider ramifications: This judgment is of course a long-awaited win for Philips, but it is also another big win for SEP owners looking to enforce in India. It once again reinforces India (more specifically the Delhi High Court) as a venue for SEP enforcement, with the court reminding licensees that patents must be respected or infringers will face serious consequences. Vivek Ranjan at Kommit Techno-Legal LLP in Delhi told ip fray that the Phillips decision “reaffirms” Indian courts’ alignment with the global jurisprudence in FRAND matters – and, by extending common law doctrines like joint tortfeasance to SEP infringement and awarding comprehensive reliefs, the courts have “ensured complete justice beyond the letter of the law”.

The patent-in-suit was:

Indian Patent No. 218255 (“Method of converting information words to a modulated signal”)

According to Philips, the patent, which expired on February 12, 2015, concerned a “transformative development” in DVD production – the encoding of data into binary format using EFM+ technology, which facilitates higher data storage capacity on DVDs compared to earlier methods (like video compact discs).

In its infringement actions in 2012, Philips claimed that this SEP had been crucial to the global standardization of DVD production, ensuring universal compatibility with DVD players regardless of the manufacturer. The company emphasized that the replication process adopted by the defendants directly involved its patented EFM+ encoding, and constituted a willful and deliberate infringement of the patent.

However, while the defendants admitted to replicating DVDs in significant volumes, they argued that they employed a “mechanical process” to facilitate this, denying any infringement of the patent. The patent entails a process for data compression applied in the manufacturing of an original DVD, which is different to the mechanical process that they had used, the manufacturers said. At the time, they also claimed that they had obtained the necessary documentation, such as copyright permissions from content owners to reproduce the copies, and that the EFM+ encoding process they had undertaken was outsourced to third parties – so their actions could not amount to infringement.

Siddharth Optical, Pearl Engineering, and Powercube Infotech also sought to revoke the SEP, challenging its validity, and claimed that Philips had known about their manufacturing activities since 2005, 2006, and 2007, respectively, but delayed the filing of its suits by nearly six years. “This inaction amounts to acquiescence, rendering the suits unsustainable, and liable to be dismissed,” they argued.

But Philips fought back, arguing among other things that as an SEP, the infringement of the patent could be demonstrated indirectly by showing that the defendants’ products comply with the standardized DVD specifications (which inherently include EFM+ encoding).

Three separate trials were conducted in the three suits, but the core issues in each case were substantially the same. Therefore, the court handed down its decisions in one common judgment.