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The approach of courts for granting of damages has been a welcome trend in patent law

This article discusses two recent Delhi High Court decisions where the court granted damages in the millions of dollars. Of the two cases, one was a contested SEP (standard essential patent) matter where the court delineated the methodology used to arrive at damages of USD29 million. In the other, the court awarded damages of USD26.04 million based on the lost profits of the patentee, even though the defendants had earlier abandoned the proceedings.

Damages under Indian patent law:

• Section 108 of the Indian Patent Act, 1970, provides reliefs that a plaintiff can claim in patent infringement suits, including damages and account of profits.
• Rule 20 of Delhi High Court’s Intellectual Property Rights Division Rules, 2022, provides that a party seeking damages or account of profits must give a reasonable estimate of the amount claimed and provide evidence or account statements to support the claim.

Lost profits in SEP cases

The SEP landscape in India has piqued the interest of SEP holders worldwide in light of Delhi High Court’s recent decision in Lava International Limited v Telefonaktiebolaget LM Ericsson, where the court granted USD29 million in damages to Ericsson.

In Xiaomi v Ericsson (2014), it was held that the measure of damages for infringement of a patent would be the revenue loss to the patentee, which it would have received by royalty while granting the licence. A similar position was later followed in Ericsson v Lava (2024), where it was held that, in SEP cases, the patentee’s lost profits would be the amount of money that the patentee would have earned by granting a licence on fair, reasonable and non-discriminatory (FRAND) rates for its SEPs. There are certain factors that are kept in mind while calculating the royalty to be awarded as damages, which are:

Royalty calculated on market value of “end product”. Delhi High Court, in Philips & Anr v Bhagirathi (2017) – which is also the first SEP case in India where a judgment was passed post-trial – dealt with the argument that the suit patent was embodied in a chip and not the entire DVD player, i.e., the end device. The court held that reasonable royalties for SEP are not only in terms of FRAND but also the incremental benefit derived from the invention.

This same approach has been followed in Ericsson v Lava, where the court also examined the witnesses, and the agreements placed on record by Ericsson. The court found the royalty rates agreed on between parties in the agreements filed by Ericsson were based on the net selling price of the end device, and in none of the agreements the royalty was calculated on the value of the chipset.

Further, the patented technology in the Ericsson case was found to be central to the primary function of the end device, which furthered the reliance on royalty calculation on a market value of end-device basis.

Calculation of FRAND rate for determining royalty. For determining whether the rate offered is on FRAND terms, certain methodologies are followed, such as:

Top-down approach. A top-down approach in SEP licensing requires the determination of the aggregate royalty burden for all patents essential to a particular standard and then apportioning a share to the total SEPs in the portfolio in question.

Comparable licensing approach. Under this approach, licences that are comparable in nature assist in determination of royalty rates at FRAND terms. Comparable licences in essence provide FRAND rates that have been negotiated between parties in similar circumstances for the same portfolio.

Damages are based on the entire portfolio of patents and not just asserted suit patents. It is industry practice to offer a global portfolio licence for the entire portfolio. It is also a settled position of law that damages are assessed on the entire portfolio of patents and not just the asserted suit patents. The reasoning for this is that a licence needs to be taken for all SEPs and not just a representative set of SEPs, which have been asserted in a suit.

Lost profits of patentee = damages suffered. In Communication Components Antenna Inc v Mobi Antenna Technologies (Shenzhen) Co Ltd & Ors (2016), where the defendant had abandoned the proceedings, the court arrived at damages of USD26.04 million. The court noted that the defendant had not given any record of its sales or profits and chose to stay away from the proceedings. The court then made a reasonable estimate of the lost market share of the plaintiff and arrived at a figure of USD26.04 million.

Conclusion

Indian courts are assessing quantum of damages in patent infringement suits meaningfully. They are also considering grants of punitive damages in addition to compensatory damages. Unlike general patent infringement suits, there are several additional factors, mentioned above, that weigh in on the calculation of damages in SEP matters.

Therefore, an understanding of important factors during the assessment of damages in SEP matters is crucial for SEP holders to better develop their negotiation and litigation strategies.