Delhi HC directs Lava to deposit Rs 20.81 cr in Dolby Patent Case
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The Delhi High Court has asked Lava International to deposit Rs 20.81 crore as security covering all past sales from 2019 until 2024 with the court's registrar general. Alternatively, the court has permitted Lava to submit an unconditional bank guarantee of the same amount from a local bank in favour of its registrar general within eight weeks.Failure to deposit the amount would entitle Dolby International to seek a restraint order from the court preventing Lava from selling any more devices in India using the American company's patents, Justice Amit Bansal said, while directing an expeditious trial in the suit.The directions came on a petition by Swedish firm Dolby International alleging infringement of its Standard Essential Patents of its audio coding technology, enhancing the functionality of systems/devices such as mobile phones and tablets by Lava.The judge further said that based on the sales made by Lava for the subsequent period beginning January 1, 2025, Lava shall continue to deposit amounts in terms of the aforesaid rates or furnish a bank guarantee before the Registrar General of this court as directed on a half-yearly basis.However, the court clarified that this order does not confer any final finding on infringement or liability, nor does it mandate acceptance of the plaintiffs' licensing rate as binding. The scope of the pro tem order is limited to ensuring that during the pendency of the suit, the SEP holder is not left without any security, while the implementer retains full opportunity to contest all substantive issues, the order stated. The court noted that Dolby's patents had been within the knowledge of Lava at least since December 31, 2018, when they were first asserted by Dolby.During that period, Lava kept on implementing suit patents. Even after the filing of the present suit, a License Agreement could not be negotiated between the parties, it said, noting that Lava's conduct during negotiations had been that of an 'unwilling licensee'."The financial condition of Lava is such that it is necessary to direct Lava to make a pro tem deposit," Justice Bansal said.In December 2018, Dolby International had offered Lava the option of entering into a global fair, reasonable, non-discriminatory licensing agreement (FRAND) for the patents and negotiated continuously with the Indian company to obtain a bilateral license, or to obtain a pool license from its agent Via LA.However, Dolby claimed that Lava throughout the negotiations engaged in dilatory tactics and never even came up with a counter-offer.As Lava refused to enter into the required license, or even negotiate in good faith with Dolby, and continued selling infringing devices without paying any royalties, Lava obtained an unfair price advantage over the compliant licensees of Dolby who are market competitors of the Indian company, Dolby had argued. Consequently, Dolby International moved the high court seeking a permanent injunction against Lava International from using its patents.Lava on the other hand contended five of the eight patents held by Dolby International had expired prior to institution of the suit, thus the latter cannot charge royalty and claim injunction for their use. The claim charts presented by Dolby International lack clarity and fail to conclusively demonstrate essentiality, it further told the court. Thus, there was no reasonable basis to believe or presume that the patents held by Dolby International qualified as standard essential patents, Lava said.
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