Independent auditor’s variance in sales figures justifies enhanced pro-tem security deposit in SEP infringement suit.

The Plaintiff, owner of Standard Essential Patents (SEPs) related to Wi-Fi 6 technology, alleged infringement by the Defendants through the unlicensed manufacture and sale of compliant networking devices

By an order dated 28.08.2023, the Court initially directed a pro-tem security deposit of USD 1 million based on the Defendants’ counter-offer

This was later reduced to Rs. 50 lakhs on 13.10.2023, following the Defendants’ submission of CA Certificates showing lower sales

Alleging inconsistencies between these figures and market data (IDC), the Plaintiff secured the appointment of an independent Auditor

The Auditor’s report found a variance in sales figures and noted limitations in data regarding freight and discounts

The Plaintiff filed I.A. 31839/2025 seeking enhanced security of approximately Rs. 9.29 crores, costs for false information, and summoning of the Defendants' representative

Whether the Defendants’ alleged misrepresentation of sales figures warrants an enhancement of the pro-tem security deposit to Rs. 9.29 crores.

Whether the Defendants should be penalized for furnishing false information or fraud based on the Auditor’s findings.

The Court applied the principles of pro-tem security in patent infringement suits, which serve as a temporary arrangement to protect the patentee's interests pending final adjudication

It referenced Section 35, 35A, and 35B of the Code of Civil Procedure (CPC), 1908, and Rule 1 of Chapter XXIII of the Delhi High Court (Original Side) Rules, 2018, regarding the imposition of costs and consequences for the conduct of parties during litigation

The Court observed that while the Auditor's report identified variances in sales data, it did not explicitly confirm "willful misrepresentation" or fraud

The Auditor noted that the Defendants failed to provide a split between Wi-Fi 6 and non-WiFi 6 devices regarding freight and discounts, but the Court accepted the Defendants' explanation that such specific apportionment is often logistically impossible at the point of sale

The Court declined to rely on third-party IDC data at this stage, noting that the Auditor relied solely on the Defendants’ books of accounts

However, the Court recognized that the Defendants admitted to selling approximately 2 lakh additional devices between 29.08.2023 and 31.12.2024

Balancing equity, the Court determined that the previous security ratio (Rs. 50 lakhs for approx. 2 lakh devices) remained a reasonable benchmark for continued sales

The Court held that this order attaches finality to the issue of pro-tem security

It declined to summon the Defendants' representative or impose heavy costs at this stage, leaving the examination of alleged misrepresentation and the IDC report to be adjudicated during the trial