Pro tem security in SEP litigation may be ordered based on defendant's counter-offer to balance equities.

The Plaintiffs, established global R&D leaders in wireless communications, hold over 31,500 patents worldwide, including a significant Standard Essential Patent (SEP) portfolio for 3G, 4G, 5G, and HEVC technologies.

They claim the Defendants (manufacturers of ITEL, INFINIX, and TECNO brands) have been infringing their SEPs in India since 2016.

Despite negotiations starting in 2019, including twelve meetings and the exchange of over 100 claim charts, the parties failed to conclude a Fair, Reasonable, and Non-Discriminatory (FRAND) license.

The Plaintiffs filed the present suits for infringement and moved applications under Section 151 of the CPC seeking a direction for the Defendants to make a "pro-tem" (temporary) security payment during the pendency of the interim injunction application.

The Defendants contested the essentiality/validity of the patents and argued that no deposit should be ordered without the disclosure of the Plaintiffs' Third-Party License Agreements (TPLAs).

1. Whether the court can order a pro-tem security deposit by an implementer without a detailed exploration of the merits or a final determination of FRAND rates.

2. Whether the non-disclosure of Third-Party License Agreements (TPLAs) by the SEP holder precludes the grant of pro-tem security.

3. Whether the conduct of the parties and foreign judicial decisions regarding counterparts of the suit patents are relevant factors for balancing equities at the pro-tem stage.

The court applied Section 151 of the Code of Civil Procedure (CPC), 1908, to exercise its inherent powers to balance equities between SEP holders and implementers.

It relied on the Division Bench principles from Intex v. Ericsson and Nokia v. Oppo, which established that the SEP regime imposes mutual reciprocal obligations on both parties and that an "unwilling licensee" should not gain an unfair competitive edge by using technology without payment during litigation.

The court followed the doctrine that pro-tem orders are ad-interim arrangements requiring a lower threshold of scrutiny than an interim injunction and do not require an "unequivocal admission" of infringement or FRAND status.

Section 48 of the Patents Act confers exclusive rights to patentees, which in the context of enmeshed mobile standards, justifies securing the interest of the SEP holder based on the entire portfolio discussed during negotiations.

The Court observed that the Plaintiffs established a prima facie case of validity and essentiality, noting that several suit patents (e.g., IN’036 and IN’910) had their foreign counterparts upheld by the UK Court of Appeals and Brazilian Courts.

It rejected the Defendants' "four-fold test" requirement, clarifying that a pro-tem deposit is not an injunction but a measure to balance the asymmetric advantage held by an implementer who continues to sell devices using the standards.

The Court found the Defendants to be potentially "unwilling" because they refused arbitration and failed to provide sales data or security despite years of negotiations.

The Court held that furnishing TPLAs is not a prerequisite for pro-tem security, as the court is not determining the final FRAND rate at this stage.

Even though some patents were invalidated in China, the global alignment of other courts favoring the Plaintiffs justified a protective order.

It held that such orders are fact-centric and intended to prevent implementers from benefitting from silence or inaction during the interregnum.

The Court directed the Defendants to either: (a) Deposit USD 13.44 million (approx. ₹112 Crores) or its equivalent in INR with the Registrar General within eight weeks, to be kept in an interest-bearing FDR; OR (b) Provide an unconditional bank guarantee for the same amount.

This quantum was derived by taking 1/5th of the Defendants' last counter-offer (approx. USD 67.2 million for the relevant period) as a reasonable security measure.