“Delhi High Court Rules in Favor of Ericsson in SEP Dispute Against Lava International, Orders Payment of $29 Million in Damages”

In a landmark decision, the Delhi High Court has ruled in favour of Ericsson in a long-standing Standard Essential Patent (SEP) dispute with Lava International, the third largest Indian smartphone brand. The court ordered Lava to pay 2.44 billion rupees (US$29 million) in damages, marking the largest ever damages award in Indian patent litigation.

The dispute began in 2015 when Ericsson filed a suit against Lava, alleging infringement of eight SEPs covering technologies such as the adaptive multi-rate speech codec, enhanced data rates for GSM evolution and 3G features. Lava had previously filed a suit against Ericsson to prevent it from enforcing its SEPs after the two companies failed to agree on licensing terms and rates. In its defence, Lava challenged the validity of Ericsson’s patents.

The court’s decision hinged on several key factors. Firstly, it concluded that Lava had admitted that Ericsson’s patents were essential, based on pleadings and correspondence between the parties. Ericsson also successfully established essentiality through its submission of claim charts.

Lava had attempted to utilise the doctrine-of-exhaustion defence under Section 107A(b) of the Patents Act, arguing that it could not be held liable for infringement as it imported the mobile phone handsets to India from licensed entities. However, the court agreed with Ericsson’s counter-argument that Lava had failed to show that it had imported the handsets from entities that held licences from Ericsson.

The court also relied on the Rules Governing Patent Suits 2022 and the division bench’s judgment in Intex v Ericsson to establish that in SEP cases, infringement can be established if the suit patents map onto a standard and the implementer’s device is compliant with the standard. On perusal of evidence submitted by both parties, the court found that Lava had infringed Ericsson’s patents.

The court analysed the correspondence between Lava and Ericsson prior to the initiation of the lawsuits and concluded that Ericsson had engaged with Lava in good faith to negotiate licensing rates. However, it determined that Lava had no intention of entering into a FRAND licensing agreement and was an unwilling licensee.

The court ruled in favour of using the entire SEP portfolio to calculate damages – not just the asserted patents. Ericsson was successful in convincing the court that the disputed patented technology was central to the primary function of the mobile devices and that damages should be calculated based on the end product using the chipset – not the smallest saleable patent practicing unit (SSPPU), which was Lava’s position.

Using the comparable licences approach, the court held that the rates previously offered by Ericsson were almost identical to those that it had offered other entities. The court thus found these rates to be FRAND. The final royalty rate was calculated at 1.05% of the selling price of different devices that had infringed the patented technologies.

The court also ruled that Ericsson would be entitled to the actual costs of the litigation. The single-judge ruling clarified various issues related to SEP litigation and highlighted the importance of meaningful FRAND discussions.

Lava has since appealed the decision. The appeal was heard for the first time on 13 May 2024, but Lava failed to obtain a stay on the 3 April order. It has been reported that while Lava may not need to pay the entire damages amount before the appeal is adjudicated upon, it has agreed to make an interim deposit to safeguard Ericsson’s rights. The court has set up a confidentiality club comprising select lawyers from both sides to negotiate the deposit amount.