Summary
The Delhi High Court ordered Lava to deposit ₹20.08 crore or provide a bank guarantee in a patent infringement case filed by Dolby over SEPs related to AAC technology. The court found Lava to be an unwilling licensee and upheld Dolby’s claims for temporary security based on expired and valid patents.
The Delhi High Court in a recent case involving Standard Essential Patents (SEPs), FRAND obligations, and patent infringement in India, directed Lava International Limited to deposit approximately INR 20.08 crore or furnish an equivalent bank guarantee as pro tem security for alleged infringement of Dolby’s SEPs related to Advanced Audio Coding (AAC) technology.
Background & Facts
Dolby International AB filed the present suit seeking permanent injunction against Lava International for infringing eight of Dolby’s Indian patents asserted as SEPs for AAC technology. These included:
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- IN 315744 titled “MDCT-Based Complex Prediction Stereo Coding” valid till April 6, 2031;
- IN 331640 titled “Advanced Stereo Coding Based on a Combination of Adaptively Selectable Left-Right Or Mid/Side Stereo Coding And of Parametric Stereo Coding” valid till March 5, 2030;
- IN 350055 titled “Processing Of Audio Signals During High-Frequency Reconstruction” valid till July 14, 2031
- IN 230121 titled “An encoder, a decoder and method for encoding/decoding an audio signal” which expired on November 28, 2022;
- IN 247775 titled “An apparatus and method for spectral envelope adjustment of a signal” which expired on August 27, 2023;
- IN 264129 titled as “Method for reduction of aliasing introduced by spectral envelope adjustment in real-valued filter banks” which expired on August 27, 2023;
- IN 242206 titled “Apparatus for generating a decorrelation signal, multi-channel decoder and method for multichannel decoding” which expired on April 30, 2024; and
- IN 286020 titled “Efficient and scalable parametric stereo coding for low bitrate audio coding applications” July 10, 2022.
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Summons in the suit and notice in the application were issued on May 1, 2024. On the said date, Lava sought time to conclude licensing negotiations with Dolby and the court directed Lava to give a counter-offer. The court gave time to the parties to engage in a discussion towards arriving at a license agreement. The Court further directed Lava to furnish details of the devices sold by them which were subject matter of the present suit along with the sales reports and revenues earned from the sale of such devices.
On May 22, 2024 the Court recorded that the negotiations between the parties had failed and therefore listed the matter for adjudication.
Main Issue Before the Court
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- Was Dolby entitled to pro tem security deposit, including for expired patents?
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Other issues
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- Were Dolby’s patents valid SEPs essential to AAC standards?
- Were Lava’s devices infringing the suit patents?
- Was Lava’s conduct that of a willing licensee or an unwilling licensee under FRAND obligations?
- Quantum and starting date for any deposit.
- Prima facie essentiality, validity, and infringement without detailed merits exploration.
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Dolby’s Arguments
Dolby argued that the 8 suit patents represented its AAC portfolio, essential for audio coding in devices. In compliance with FRAND commitments Dolby had offered licenses to Lava and engaged in good-faith negotiations, providing claim charts mapping patents to standards. Lava delayed the negotiations and settlement for six years, making no counter-offer and exhibiting patent holdout behavior to let patents expire.
Dolby further submitted that Lava’s devices were AAC-compliant as noted from Lava’s own website and Android compatibility documents. This was further confirmed with test reports establishing clear infringement.
Dolby also argued that 940 licenses had been issued for the AAC portfolio, and prior Indian court orders had upheld its patents with pro tem deposits. Dolby therefore sought deposits from the 2018 assertion date, covering the entire portfolio including expired patents, on the ground that negotiations had started when all patents were valid. Lava’s insistence on third-party agreements was unjustified, and its financial investigations raised recovery risks. Dolby rejected Lava’s post-suit counter-offer of INR 5.13 per device as baseless.
Lava’s Arguments
Lava contended that five of the suit patents had expired before the suit thereby barring royalties or injunctions for them. The remaining three patents lacked independent protection sans the expired ones.
Lava argued that the suit patents were not SEPs, and that alternative technologies existed and were being used by implementors including by Lava. None of the ETSI TS mapping, SEP declaration and technical effect evidence supported Dolby’s claim of essentiality.
Lava claimed it was a willing licensee, seeking information, but Dolby negotiated in bad faith without sharing third-party agreements.
On the issue of Pro tem deposits, Lava contended that a pro tem order is an extraordinary relief and should only be granted in exceptional circumstances upon prima facie finding of essentiality, validity, infringement and exceptional circumstances as described in Rule 5(k) of the Delhi High Court Rules Governing Patent Suits, 2022.
Lava further submitted that payments, if any, must be prospective only from the date of the order, excluding expired patents, and at Lava’s offered rate of INR 5.13 per device based on Dolby’s working statements.
Court’s Observations and Analysis
The court relied on several key precedents in order to determine the issue of pro tem deposits. The court refered to cases such as:
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- Xiaomi Technologies v. TLM Ericsson (CS(OS) 3775/2014)
- Huawei Technologies v. ZTE Corp (Case no.C-170/13 by the European Court of Justice.)
- Nokia Technologies v. Guangdong Oppo (2022/DHC/004935)
- Nokia Technologies v. Guangdong Oppo (2023:DHC:4368-DB)
- Philips v. Oplus Mobitech India (CS (COMM) 574/2019)
- Guangdong Oppo v. Interdigital Technology (2024:DHC:4547-DB)
- Atlas Global Technologies v. TP Link Technologies (CS(COMM) 575/2023)
- Strix v. Maharaja (CS(COMM) 403/2018)
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The court noted that SEP cases differ from standard patent suits under FRAND protocols, therefore validating pro tem deposits under CPC Section 151 without separate applications.
Based on the email communications between Dolby and Lava, the court noted that Dolby had initiated negotiations with Lava in 2018 with claim charts and clear explanations. Lava, however, dragged its feet on the same with delayed responses, no pre-suit counter-offers, excessive queries, and insistence on confidential data with no questions on the Patents’ validity. This was deemed a classic holdout move and therefore Lava’s behaviour was typically that of an unwilling licensee.
The court found a strong initial case for validity through Dolby’s 940 licenses, earlier pro tem wins in Dolby v. GDN (Oppo) and Dolby v. Das (Vivo), and unchallenged claims. Essentiality was shown through mapping to ISO/IEC standards and was held up with solid charts, including Lava’s own expert agreeing on standard mapping.
The court determined Infringement following the two-step test: patent-to-standard and device-to-standard mapping. The court noted that infringement was confirmed by Lava’s admissions, website, and test reports.
The court also noted that pro tem would apply to expired patents in the present case since the delays were caused by Lava. Furthermore, Lava’s counter-offer of INR 5.13 per device lacked basis and considering that Lava’s finances were already hit by an Ericsson ruling and an ED investigation, pro tem deposit/security was completely justified and was in fact a must.
Conclusion / Ruling
The court disposed of the application, directing Lava to deposit INR 20,08,06,293.92 or furnish an equivalent unconditional bank guarantee from an Indian bank within eight weeks, covering past sales from 2019 to 2024, to be held in interest-bearing fixed deposit. Adjustments allowed for prior deposits per May 22, 2024, order; future half-yearly deposits from January 2025 based on rates. Non-compliance entitled Dolby to seek injunction against sales.
The court also ordered an expeditious trial with liberty for case management. The ruling clarified that it provides no final findings on infringement, validity, essentiality, or FRAND rates, serving as temporary security, pending suit resolution, to ensure Dolby is not left unsecured while Lava contests issues.
Citation: Dolby International Ab & Anr. V. Lava International Limited, CS(COMM) 350/2024, Delhi HC, Judgment Reserved on: March 27, 2025; Judgment Pronounced on: July 10, 2025. Available on https://indiankanoon.org/doc/148335635/