SEP Infringement Requires Proof of Essentiality via Claim Charts and Evidence of Willing Licensor Offering FRAND Rates

The Respondent (Philips) sued the Appellants (the Bansals) for infringing Indian Patent IN 184753 (a decoding device for DVD technology).

Philips claimed the patent was a Standard Essential Patent (SEP) and sought damages at FRAND rates.

The Appellants contended they merely assembled DVD players using Printed Circuit Boards (PCBs) and chips purchased from authorized vendors like MediaTek, invoking the doctrine of international exhaustion.

The learned Single Judge decreed the suits, holding the patent was an SEP and calculating damages based on per-unit DVD player sales at rates offered during pre-suit negotiations.

1. Whether the suit patent (IN’753) qualifies as a Standard Essential Patent (SEP).

2. Whether the Appellants infringed the suit patent through direct or indirect evidence.

3. Whether Philips is barred from asserting patent rights due to the principle of international exhaustion under Section 107A(b) of the Patents Act.

4. Whether the royalty rates and damages determined by the Single Judge were legally sustainable.

Court primarily applied Section 48 of the Patents Act, 1970, which distinguishes between product and process patent rights.

Section 10(4)(c) of the Patents Act, which limits patent protection to the specific scope defined in the claims.

Regarding SEPs, the Court followed the "indirect test" (Law of Transitivity) and "FRAND protocol" established in Intex Technologies v. Ericsson and Huawei Technologies v. ZTE Corp.

Evidence of essentiality through expert reports was governed by Section 45 of the Indian Evidence Act, requiring the expert to be examined.

The doctrine of international exhaustion was applied via Section 107A(b) of the Patents Act (as amended in 2003), which protects imports from any person "duly authorised under the law" to sell the product, regardless of the patentee's direct consent.

Section 114 of the Evidence Act to draw adverse inferences regarding withheld documents.

The Division Bench found that Philips failed to prove the suit patent was an SEP because it did not produce "claim charts" mapping the patent to the standard, nor did it examine the authors of the Essentiality Certificates (ECs) as required by Section 45 of the Evidence Act.

Infringement was not proved because Philips' expert (PW-2) admitted the patent resided in a chip or PCB, yet the tests conducted were on the entire DVD player without producing the analytical logs or mapping the product to the claims.

The Court held that the "exhaustion" defense under Section 107A(b) was valid; since the Bansals purchased PCBs containing the patented device from MediaTek's authorized distributors, Philips' monopoly over those specific items was terminated upon the initial sale in the market.

The Court further determined that the Single Judge erred in calculating damages based on "informal negotiations" and the entire value of the DVD player, as a patentee is only entitled to royalty on the specific patented component (the decoding device) and must prove that the offered rate is FRAND by disclosing third-party licenses.

Infringement was not established as Philips failed to conduct a proper product-to-claim mapping or provide primary evidence of testing.

The doctrine of international exhaustion under Section 107A(b) protected the Appellants as they purchased the patented components from legally authorized sellers.

The royalty rates awarded were arbitrary and lacked an evidentiary basis for being "FRAND".

The Court allowed the appeals and set aside the Single Judge's judgment; the decree for damages and costs was quashed.