One of the main challenges faced in litigation in India is delay caused on account of backlog of cases. While many measures have been employed to ensure "speedy disposal" and "early resolution" under the Commercial Courts Act, 2015, one significant tool that forces both parties to put all their cards on the table, is the tool of discoveries as provided under Order XI of Code of Civil Procedure, 1908.
When an application seeking production of documents under Order XI Rule 5 of the CPC, 1908 (amendment by Commercial Courts Act, 2015) is filed before the Hon'ble Court, the same is not allowed automatically. Instead, the said application may only be allowed once the Court is satisfied that the documents sought (i) relate to "matters in question in the suit", (ii) are necessary for disposing the suit expeditiously, and (iii) are not in the nature of fishing and roving exercise.
In a suit pertaining to Standard Essential Patents (SEPs), one of the most important documents for the adjudication of the dispute is plaintiff's third-party license agreements as they play crucial and central role in adjudication of FRAND issues, which is a legal obligation that requires an SEP holder to evidence that it has sought royalties on Fair, Reasonable and Non- Discriminatory (FRAND) terms, which, in simple words means that SEP holder can only ask for the same royalties that it has received from all its other similarly situated licensees. Accordingly, High Court of Delhi Rules Governing Patent Suits, 2022 specifically mandate, under Rule 4 A (viii), for the plaintiff to file its third-party license agreements along with the plaint. However, invariably, it is seen that plaintiffs seek to pick and choose the third-party license agreements that they wish to rely upon, rather than being upfront and absolutely transparent about it. Often enough a counter request for production of defendant's third party license agreements is also made by the plaintiff, many-a-times as a pressure tactic to compel production of confidential documents, even if the said party is not relying upon them. The intent is clear, plaintiff is seeking to justify its non-disclosure by seeking production of defendant's confidential documents, regardless of their irrelevancy to the issues in a case
While plaintiff's licenses are crucial on the aspect of FRAND analysis, since it is they who have to justify the FRAND nature of the royalties sought by them, the production of these documents necessarily qualify the above-mentioned test for production of documents under Order XI Rule 5, CPC. However, defendant's licenses, admittedly, have no bearing on the issue of FRAND royalties of the plaintiff's patents since they pertain to patents of third parties which are entirely different, the plaintiff then must seek to somehow legally justify its request for production.
Some SEP cases which have ruled or made observations on the aspect of production of defendant's licenses are Koninklijke Philips N.V. v. Vivo Mobile Communication Co. Ltd & Ors. CS(Comm)383/2020 (hereinafter referred to as "Philips v Vivo"), Interdigital Technology Corporation & Ors v. Xiaomi Corporation & Ors. CS(Comm) 295/2020 & Interdigital VC Holdings INC & Ors v. Xiaomi Corporation & Ors. CS(Comm) 296/2020 (hereinafter referred to as "InterDigital v Xiaomi") and Interdigital Technology Corp & Ors. v. Guangdong Oppo Mobile Telecommunications Corp. Ltd. and Ors. CS (Comm) 692/2021 & Interdigital VC Holdings Inc & Ors. V. Guangdong Oppo Mobile Telecommunications Corp. Ltd. & Ors. CS (Comm) 707/2021 (hereinafter referred to as "Interdigital v Oppo").
In the Philips v Vivo case, Philips' application seeking production of Vivo's licenses was allowed, however, the disclosure was allowed by the Court for the limited purpose of adjudication upon the issue of exhaustion of patent rights. Thus, the Court allowed Vivo to redact its payment terms and figures while it produced its licenses, since these terms and figures are not relevant for the purpose for which production of these licenses was directed by the Court i.e., for the issue of exhaustion of patent rights. Similar redaction was permitted by the Court for OPPO's licenses in the Philips v OPPO matter.
In the InterDigital v Xiaomi case, the Delhi High Court passed a landmark judgment dated 16.12.2020 on the issue of inclusion of Defendants' representatives in confidentiality club under the aegis of which the Plaintiff was to file its third-party licenses. In the same judgment, the Hon'ble Court observed that on the issue of FRAND analysis, Defendants' licenses are not relevant, and it is only the Plaintiff's licenses which are relevant. The relevant observation is as follows:
"56. In this context, I also agree with the submission, of Mr. Rajagopal, that acceptance of the arrangement proposed by Mr. Pravin Anand would result in an unequal balance, as the officials and personnel of InterDigital would have full access to the third-party license agreements, and would be aware of the contents thereof, whereas none of the officials and personnel of Xiaomi would be privileged to gain such access. It is no answer, in my opinion, to contend – as Mr. Pravin Anand would seek to urge – that Xiaomi is also entitled to the same privilege. The plaint has been brought by InterDigital. InterDigital is the SEP holder. InterDigital is required, by law, to allow exploitation of SEPs by Xiaomi, by granting a license to Xiaomi at FRAND rates. The rate offered by Xiaomi is unacceptable to InterDigital. InterDigital, instead, is requiring Xiaomi to agree to take a license, from InterDigital, at the rate at which it offers the SEPs to other licensees. Third-party license agreements would, therefore, obviously be produced by InterDigital, rather than by Xiaomi, in support of its case. As such, the occasion for Xiaomi to request for any such "two-tier" Confidentiality Club, ex hypothesi, does not arise. Even if it did, it would be for InterDigital to arrive at an agreement, with Xiaomi, for the establishment of a "two-tier" Confidentiality Club, excluding officers and personnel of the parties from access to the "inner tier" confidential documents. This Court cannot trust such an arrangement upon Xiaomi, without its consent, in the absence of any clear right having been established, by InterDigital, for the imposition, on Xiaomi, of such an arrangement."
This ruling has been fortified by the Delhi High Court vide its recent order dated 31.05.2024 passed in InterDigital v OPPO cases. Brief facts of the cases are that 2 suits were filed by InterDigital Technology Corporation against inter alia OPPO before the Hon'ble Delhi High Court in respect of its claimed Standard Essential Patents pertaining to cellular technology and HEVC technology. InterDigital had sought production of OPPO's third-party license agreements with Qualcomm, Ericsson and Orange SA. The basis for seeking production of the Qualcomm agreement was that it would "throw light" on OPPO's defence of exhaustion. Further, the agreement with Orange SA and Ericsson was sought in order to "throw light" on the issue of FRAND i.e. whether OPPO is an unwilling licensee.
Further, OPPO had sought production of InterDigital's licenses and InterDigital had agreed to provide to OPPO the 7 agreements which were also provided in the UK proceeding. However, InterDigital objected to production of its agreement with Qualcomm. The basis for seeking the production of InterDigital -Qualcomm agreement was for the purpose of adjudication of issues of exhaustion and FRAND determination.
By way of its order dated 31.05.2024, the Hon'ble Delhi High Court adjudicated upon the request of both parties for the production of license agreements of the other and directed production of both parties' agreement with Qualcomm for the purpose of adjudication on the issue of exhaustion. However, the Court rejected InterDigital's request for production of OPPO's agreements for verification of FRAND rates. Pertinently, the Court specifically held that "...defendants' agreement with other third parties cannot have a bearing, at this stage, to the rates offered by the plaintiffs to their licensees". This decision by the Court is aligned with the ruling of the UK High Court which denied InterDigital's similar request for production of OPPO's licenses, made in InterDigital's suit filed before the UK Court.
Further, the Court also held that in an SEP suit, the positive evidence has to be provided by the Plaintiff. Most pertinently, the Court has laid down a sequencing to be followed in SEP cases where the Plaintiff must first evidence essentiality of its patents and then establishes infringement by the Defendants.
This is a welcome decision which provides further clarity in respect of SEP litigation and the scope of discovery that ought to be permitted in such matter. It provides the necessary guidance in streamlining the progression of SEP litigations and expediting them.
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