KONINKLIJKE PHILIPS N.V VS MAJ (RETD.) SUKESH BEHL & ANR [CS (COMM) 423/2016], CS(COMM)  499/2018, CS(COMM) 519/2018.

The parties to the three suits and their inter-se relationships:

[CS (COMM) 423/2016]

KONINKLIJKE PHILIPS N.V

VS

MAJ (RETD.) SUKESH BEHL & ANR

CS(COMM) 499/2018

KONINKLIJKE PHILIPS N.V

Vs.

G.S KOHLI & ORS

CS (COMM) 519/2018

KONINKLIJKE PHILIPS N.V

Vs.

SURINDER WADHWA & ORS

IN THE HIGH COURT OF NEW DELHI: NARULA

HON’BLE JUSTICE MR. JUSTICE SANJEEV 

BENCH – SANJEEV NARULA

DATE OF JUDGEMENT: FEB 20, 2025. 

BASIC DETAILS:

The plaintiff’s Indian Patent No. 218255 is titled as “Method of Converting Information  Words to a Modulated Signal.” This suit is Patent Suit filed as a Divisional Conventional  Application under Section 16 of the Patent Act, 1970. The present suit arises from the  patent application No. 136/CAL/1995 dated 13th February, 1995, which was later  amended to application details 312/MAS/1999 date of filing 17^th March, 1999. The

Parent Application was later deemed to be abandoned under Section 21(1) of The  Defendants in CS(COMM) 519/2018. It shall be collectively referred as “Siddharth  Optical” in this judgment. The date of expiry is 12th February 2015.

CORRESPONDING:

EP PATENT 

EP745254B1  titled 

CORRESPONDING: 1. US PATENT  US 5920272, 

2. US 5696505C1

PARTIES:

“Method of converting a series of m bit information words to a modulated signal, method of producing a record carrier, coding device, decoding device, recording device, reading device, signal, as well as a record carrier“

filed on 25th July, 1997 and 08th February, 1995, respectively.

Method of converting a series of m-bit information words to a modulated signal, method of producing a record carrier, coding device, decoding device, recording device, reading device, signal, as well as a record carrier“

filed on 1st February, 1995

PLANTIFF: KONINKLIJKE PHILIPS:

INTRODUCTION OF THE PARTY TO DISPUTE:

Koninklijke Philips N.V. (previously Koninklijke Philips Electronics N.V.), a Netherlands based firm, is a global electronics leader. The firm, known by the name “PHILIPS,” has  transformed consumer electronics for decades. With operations in over 60 countries, its 

product line includes consumer electronics, home appliances, and healthcare products.  ∙ DEFENDANT’s:

In 423/2016, originally, (CS (OS) 2206/2012)

1. Maj. (Retd.) Sukesh Behl.ⁱ
2. M/s Pearl Engineering Company

In 499/2018 – (originally, CS (OS) 2700/2012

1. Mr. G.S. Kohli, Balaji ⁱⁱ, ⁱⁱⁱ
2. Optical Disc Private Limited, Defendant No. 2 is ex- parte
3. Powercube Infotech Private.
4. Mr. Jaspal Singh Chandok, Exparte^iv

In 519/2018 (originally, CS (OS) 1615/2012:

1. Mr. Surinder Wadhwa^v
2. M/s Siddharth Optical Disc Private Limited

References:

1. The Defendants in CS (COMM) 423/2016 shall be collectively referred as “Pearl Engineering” in this judgment.
2. Defendants No. 1 and 3 in CS(COMM) 499/2018 shall be collectively referred as “Powercube InfoTech”

FACTS: 

1. That Koninklijke Philips N.V. (formerly, Koninklijke Philips Electronics N.V.), a company incorporated in Netherlands, is a globally recognized leader in electronics. Known by its trademark “PHILIPS,”. 
2. That Through substantial investment in research and development, the Plaintiff has pioneered several groundbreaking technologies. These include the compact cassette system, laser-based optical disc systems such as CD-Audio, CD-ROM, Video-CD, CD R/RW, SACD, and various other formats of DVDs and Blu-ray discs.
3. That The Plaintiff’s continuous efforts spanning decades culminated in the creation of the Compact Disc11 and DVD. At the time of filing of the suits, the Plaintiff held an extensive portfolio of intellectual property, including approximately 55,000 patent  rights, 33,000 trademark registrations, 49,000 design registrations, and 2,600  domain names.
4. That Among the Plaintiff’s patents is Indian Patent No. 175971, titled “Digital Transmission System,” which played a crucial role in VCD replication technology. This patent was valid until 27th May, 2010.
5. That In the present cases, the essential nature of the Suit Patent has been affirmed by an independent patent evaluator. The Suit Patent is indispensable to the technology underlying the replication of DVDs, as defined in the ‘DVD Specifications  for the Read-Only Disc-Part 1 – Physical Specifications ROM Standard. This standard  was established by the DVD Forum, an international consortium of hardware manufacturers, software developers, content creators, and other key players in DVD  technology.

6. That the scope of claims of the Suit Patent corresponds to the claims in its related US and European patents, which have undergone essentiality analysis in relation to the DVD ROM Standard.
7. That The Plaintiff enjoys statutory rights under the Patents Act in respect of the Suit Patent in India. This includes the exclusive right to make, use, sell, and license the Suit Patent, as well as the negative right to restrain others from engaging in such  activities without authorization, licensing regime vis-à-vis. The Plaintiff also engages  in the licensing of their patents to third parties. 
8. In this context, manufacturers and replicators of DVDs and VCDs across the world, including India, have obtained licenses from the Plaintiff to lawfully conduct mass replication of these products.
9. The replication, manufacture, sale, lease, and import of DVDs require licenses for the use of all essential patents involved in the process, including the Suit Patent, from within the relevant patent pools.
10. The Suit Patent is essential for adhering to the DVD Standard.
11. That The Plaintiff initiated a worldwide, non-discriminatory licensing program under which licenses for patents essential to the DVD Standard were offered. Under this program, the Plaintiff provided two types of patent licenses for DVD Video Disc  and DVD ROM Disc replication: 
12. “Philips Only” version, covering only the patents held by the Plaintiff, and b. Joint License, which included patents from Plaintiff, Sony, Pioneer, “DVD Standard.”
13. That through an agreement dated 28th January, 2005, Pearl Engineering obtained a license from the Plaintiff to use its patents relevant to VCD technology, including the VCD Patent, which was integral to the replication and manufacturing of VCDs. 
14. That Under the terms of the VCD License Agreement, Pearl Engineering was obligated to submit quarterly statements detailing the manufacture, replication, and sales of VCDs, pay royalties to the Plaintiff based on the reports, and submit audited  statements to the Plaintiff. However, Pearl Engineering only sporadically submitted

royalty reports, with the last report being for the April-June 2007 quarter. They also  made intermittent royalty payments, with no payments made since April 2009.  Thus, they were clearly in breach of the VCD License Agreement dated 28th January,  2005.

11. That During the subsistence of the VCD License Agreement, the Plaintiff learnt that Pearl Engineering had purchased/ acquired a DVD disc replication line. The Plaintiff addressed a letter dated 31st August, 2006 to Pearl Engineering, informing them of  its patents pertaining to DVD Video and DVD-ROM Disc technology.
12. The Plaintiff requested a confirmation regarding the acquisition of the DVD replication line and advised Pearl Engineering to obtain the necessary patent license for DVD replication. A follow-up letter was sent on 27th September, 2006,  reiterating the Plaintiff’s earlier request.
13. That Pearl Engineering, via an e-mail dated 31st May, 2007 confirmed that they had procured a DVD replication line and requested “VCD License Agreement. 14. That subsequently, the Plaintiff received a partially filled Application Form from Pearl Engineering, albeit without a covering letter. In an e-mail dated 19th July,  2007, the Plaintiff acknowledged receipt of the form, but pointed out that it was  incomplete and incorrectly filled out. Plaintiff requested Pearl Engineering to  correct the errors and provide the missing information. As no response was  received, the Plaintiff sent a second e-mail on 30th July, 2007, reiterating the  request to rectify the application form. Despite these communications, Pearl  Engineering failed to provide the necessary information or obtain the requisite DVD  Disc Patent License Agreement.
14. That In the meantime, given the continued breach of the VCD License Agreement, the Plaintiff issued notices of default to Pearl Engineering on 29th April 2010, and again on 06th May, 2010. Since Pearl Engineering failed to respond to the default  notice, the Plaintiff terminated the VCD License Agreement on 14th July, 2010.
15. That Pearl Engineering continued to manufacture DVDs without obtaining the requisite license. Consequently, on 28th October, 2010, a representative of the Plaintiff purchased several DVDs manufactured by Pearl Engineering from a retail  store in New Delhi. Upon further investigation, the Plaintiff uncovered that Pearl Engineering is manufacturing and replicating DVD Video/ ROM discs using the  coding mechanism protected under the Suit Patent. 
16. That Upon examination of three DVDs produced by Pearl Engineering, namely, ‘Fairy Tales – Vol. 3,’ ‘Grade,’ and ‘Best of the Best Rhymes,’
17. That it became evident that they are utilizing the EFM+ Modulation technology disclosed in the Suit Patent. These findings are also supported by an affidavit of the Plaintiff’s technical expert, Mr. Johannes P.J.G. Van Liempd. 
18. That In 2007, the Plaintiff learnt that Defendants No. 1 and 2 were manufacturing and replicating DVDs. Consequently, they addressed a letter dated 25th April, 2007 to the Defendants, informing them of the Plaintiff’s patents pertaining to DVD Video  and DVD-ROM Disc technology.
19. The Plaintiff offered to execute a DVD Disc License Agreement with Defendants No. 1 and 2 and shared a copy of the application along with the necessary details. However, they never responded to the Plaintiff’s communication.
20. That defendant’s No. 1 and 2 continued to replicate and manufacture VCDs and DVDs without a license, the Plaintiff issued another communication dated 08th February, 2010, requiring them to obtain an appropriate license from the Plaintiff.  Similar communications were issued on 10th March, 2010 and 03rd November,  2010 to Defendants No. 1, 2 and 4, reiterating the Plaintiff’s position.
21. That Upon learning of Defendant No. 3’s involvement in the impugned activities, the Plaintiff addressed four letters dated 28th April, 2010, 19th May, 2010, 08th September, 2010, and 29th October, 2010 to Defendant No. 3. In these  communications, the Plaintiff informed Defendant No. 3 that they had procured  samples of DVDs titled ‘Bhavnao ko samjho’ and ‘3-in-1 movie’ replicated by  Defendant No. 3 for Eagle Home Entertainment Private Limited and Shemaroo  Entertainment Private Limited, respectively. However, no response was received  from the Defendants.

Significance under the proceedings:

Both parties filed applications under Order XII Rule 6 of the Code of Civil Procedure,  1908, 18 seeking a judgment on admissions in their favor, and against the other  party.19 The Defendants contended that the Plaintiff had admitted to its failure to disclose the relevant information to the Patent Office, as required by Section 8 of the  Patents Act. Consequently, they asserted that the Suit Patent was subject to revocation  under Section 64(1)(m) of the Patents Act and sought a judgment on this ground. Decision by divisional bench:

The Division Bench dismissed the appeal on 07th November, 2014, holding that non compliance with Section 8 may trigger Section 64(1)(m) for patent revocation, but such  revocation is not automatic. It observed that while compliance with Section 8(1) of the  Patents Act is mandatory. The use of the word “May” in Section 64(1) indicates that  revocation is discretionary. Thus, revocation under Section 64(1) would require proof of  deliberate omission. The Division Bench held that in absence of an unequivocal admission  by the Plaintiff, a judgment under Order XII Rule 6 of the Code could not be issued without  evaluating evidence from both parties. Pearl Engineering’s appeal [bearing SLP (C)  6615/2015] against the order of the Division Bench was dismissed by the Supreme Court  on 24th April, 2015.

Later:

On the Plaintiff approached this Court of applications under Order XII Rule 6 of the Code  filed by Siddharth Optical and Powercube InfoTech. Plaintiff-company underwent a change  of name from Koninklijke Philips Electronics N.V. to Koninklijke Philips N.V. on 15th May,  2013.

Accordingly, the Plaintiff preferred applications to bring on record this development.  Considering the above, the Plaintiff’s applications bearing I.A. 11788/2014, I.A.  11783/2014, and I.A. 11897/2014 in CS (COMM) 423/2016, CS (COMM) 499/2018 and CS  (COMM) 519/2018, respectively, were allowed on 18th July, 2014 and 07th January, 2015.

ORDERS:

Order dated 30th November, 2012 in CS (COMM) 423/206: The learned counsel for the  plaintiff states that the plaintiff presses only for damages and does not press for rendition  of accounts. Another Order was passed on dated 27th November, 2012 in CS (COMM)  519/2018: 

ISSUES:

1. Whether the plaintiff is the proprietor of Patent No. 218255, as alleged in the plaint? 2. Whether the plaintiff has obtained registration of Patent No. 218255 by committing fraud, as alleged in the written statement? OPD
2. Whether the Suit Patent is subject to revocation under Section 64(1)(m) of the Patents Act?

Issue- 1

1. Whether the plaintiff is the proprietor of Patent No. 218255, as alleged in the plaint?

The Plaintiff is a company incorporated in Netherlands. The suits have been  instituted by Mr. Farokh N. Bhiwandiwalla [PW-1] on their behalf. Mr.  Bhiwandiwalla, a director of the company named One-Red India Licensing Private  Limited,24 was earlier engaged with Philips Electronics India Limited. Mr.  Bhiwandiwalla has signed and verified the pleadings as a constituted attorney of the  Plaintiff authorized through Powers of Attorney dated 12th December, 2011 and  28th May, 2012 executed by Mr. E.P. Coutinho. To establish Mr. Coutinho’s authority  and competence, the Plaintiff relied upon extracts from the Trade Register of  Netherlands, exhibited as Ex. PW-1/2.

Arguments:-

Siddharth Optical and Pearl Engineering argued that CS (COMM) 519/2018 and CS  (COMM) 423/2016 have been filed by an unauthorized person.

Court’s finding: 

The Court has considered the objections raised by the defendants to the  maintainability for the said suits. The Plaintiff, a company, has the capacity to sue  and be sued in its own name.

Being a juristic entity, any company would necessarily act through individuals  authorized to represent their interests in legal proceedings.

Under Order XXIX Rule 1 of the Code, in cases involving corporations, the secretary,  director, or other principal officer’s familiar with the facts of the case, are  empowered to sign and verify pleadings on the company’s behalf. Order VI Rule 14,  pleadings must be signed by the party and their pleader.

The Court is satisfied that CS (COMM) 519/2018 and CS (COMM)  423/2016 have been instituted on behalf of the Plaintiff by a  competent person, and the technical objections raised do not warrant dismissal. The Plaintiff has sufficiently proved that Mr. Farokh N.  Bhiwandiwalla, who signed and verified the plaint, was duly authorized to  institute these suits. Accordingly, issue No. 7 in CS (COMM) 423/2016 and  issue No. 1 in CS (COMM) 519/2018 are answered in favor of the Plaintiff,  and against Siddharth Optical and Pearl Engineering.

2. Whether the plaintiff has obtained registration of Patent No. 218255 by committing fraud, as alleged in the written statement? OPD

The Plaintiff had filed a petition on 12th November, 2004 in respect of the belated  submission of details stipulated under Section 8 of the Patents Act. In this petition,  the Plaintiff alleged that the requisite information was not available to them on 17th  March, 1999, and therefore could not be entered in Form-4. Further, This  submission is false and controverted by the record. In contrast, the Plaintiff argued  that on 16th July, 2004, they had furnished complete information in respect of filing  and prosecution of patent applications across jurisdictions, spanning three pages, to  their patent agent. The Court has considered the submissions and evidence  advanced by the parties. The Plaintiff provided the information to its legal  representative, Mr. Solomon, who was responsible for prosecuting the Suit Patent  before the Patent Office. The affidavit of Mr. Solomon stated that he had submitted  the required details to the Patent Office on three separate occasions: 17th March,  1999, 13th March, 2002, and 31st August, 2004. 

Findings: 

The incongruencies between the annexures dated 13th March, 2002 and 31st  August, 2004 and omissions by the Plaintiff have been adequately addressed  through the testimony. 

3. Whether the Suit Patent is subject to revocation under Section 64(1)(m) of the Patents Act?

Under Section 64(1)(m) of the Patents Act, Suit is liable for revocation if the  applicant fails to disclose the information required Section 8, or furnishes information which, in to their knowledge. The Court must nozw determine whether  the Suit Patent is liable for revocation under Section 64(1)(m) of the Patents Act.  This requires an examination of whether the Plaintiff’s omission to furnish complete  information was deliberate or wilful, or indicative of intent to mislead the Patent  Office. The Defendants argued that the letter dated 16th July, 2004 was also issued  to the patent agent through e-mail. They contended that the information  transmitted via e-mail would not involve physical page- turning, and thus, the  missing data was inexcusable.

Findings:

The Plaintiff has placed evidence on record showing that, at the time of filing, the  disclosures made under Section 8 were based on the best available data within its  internal records. Therefore, The Court finds that the objections under Section  64(1)(m) are without merit and do not justify invalidating the Suit Patent. The  jurisprudence on anticipation under Section 64(1)(e) of the Patents Act supports  the Court’s analysis. For a patent to be invalidated on this ground, the prior art must  disclose every element of the claimed invention in the same arrangement and  functionality. A mere resemblance in certain aspects is insufficient unless the prior  disclosure is complete and enabling. The Plaintiff has demonstrated that the Suit  Patent complies with the statutory requirements for divisional applications under  Section 16 of the Patents Act. The fact that the Parent Application was abandoned  does not invalidate the Divisional Application so long as the latter met the statutory  conditions before the Parent Application’s grant or termination. The Courts have  consistently emphasized that a patent is not a mere idea – it must provide sufficient information to be carried into effect. The standard applied is that of a person skilled  in the relevant art. If such a person is unable to work the invention based on the  disclosure, the patent may be revoked.

Held:

The Division Bench of this Court, in Merck Sharp and Dohme Corporation (Supra),  held that claims must be fairly based on the specification and that any speculative  extension beyond the disclosed invention would be impermissible. The complete specification of the Suit Patent clearly lays out the invention, including the method  of encoding and the structure of the record carrier.

Claims:

The claims essentially describe a process that could be executed by software, and as  such, fall within the exclusion under Section 3(k) of the Patents Act. 129.7. If  software is integrated with hardware elements, but the inventive contribution lies  primarily in the software – or if the software is combined with generic hardware  such as components of a general-purpose computer or an information storage  medium – then the claim should not be deemed patentable. The threshold for  patentability would only be met if the hardware itself represents an inventive  contribution that meets the statutory criteria of novelty, non-obviousness, and  industrial applicability. 129.8 The claims in the Suit Patent fail to meet this standard  as they do not disclose any novel hardware elements or suggest that the claimed  process yields a technical effect through a specific hardware configuration.

Claims 1 to 11 of the Suit Patent pertain solely to a computer program per se  or a mathematical act, and therefore, fall under the exclusions of Section 3(k)  of the Patents Act, rendering them non- patentable. Claim 12 merely refers to  a storage medium containing a signal derived from this method, which itself is  generated by a computer program or mathematical process outlined in the  earlier claims. The claimed invention does not fall under the embargo of  Section 3(m) of the Patents Act

Relief:

The Court has determined that the Suit Patent is essential to the standard for DVD  manufacturing and production, as recognized by the DVD Forum. As a result, all  entities engaged in DVD manufacturing, known as implementers, are required to  obtain a license from the Plaintiff – the patent owner. In such a scenario, the Plaintiff  is obligated to provide a license on FRAND terms. This includes granting licenses at  reasonable royalty rates that reflect both the value of the patented technology and  the competitive balance within the industry. n the present cases, the Defendants  have neither meaningfully contested the essentiality of the Suit Patent nor provided evidence disputing the fairness of the royalty rates quoted by the Plaintiff. The  Plaintiff submitted that the standard royalty rate for manufacturing or production of  DVD using the Suit Patent is USD 0.03 per unit.

The Court, therefore, deems it appropriate and necessary to award interest at the  rate of 12% per annum on the total damages awarded, calculated from the date of  filing of the suits, until the date of actual payment. This interest rate is justified in  light of the Defendants’ wilful and continued refusal to compensate the Plaintiff,  despite having been notified of the Suit Patent’s essentiality and their obligation to  obtain a license. The award of both pendente lite and future interest serves the  purpose of compensating the Plaintiff for the deprivation of the rightful use of  money and ensures that the damages 1983 SCC OnLine SC

Court’s Judgement in these cases

1. Accordingly, the suit is decreed in favour of the Plaintiff, and a decree is passed jointly and severally against both Defendants for a sum of INR 6,22,50,000/- (six crore twenty two lakh fifty thousand only), along with interest at 12% per  annum from the date of filing of the suit until the date of full payment. Further,  the aggravated conduct of the Defendants, including wilful infringement,  deliberate non-disclosure of sales records, and procedural misconduct, warrants  award of additional damages of INR 1,00,00,000/- (one crore only), for which  both Defendants shall be jointly and severally liable.
2. The suit is decreed in favour of the Plaintiff, and a decree is passed jointly and severally against both Defendants for a sum of INR 1,61,85,000/- (one crore sixty one lakh eighty five thousand only), along with interest at 12% per annum  from date of filing of the suit, until full realisation of the amount. Additionally, in  light of the Defendants’ wilful infringement, deliberate suppression of sales  records, and procedural misconduct, this Court deems it appropriate to award  aggravated damages of INR 1,00,00,000/- (one crore only), for which both  Defendants shall be jointly and severally liable.
3. Accordingly, the suit is decreed in favour of the Plaintiff, and a decree is passed jointly and severally against both Defendants No. 1 and 3 for a sum of INR 12,43,25,700/- (twelve crore forty three lakh twenty five thousand seven hundred only), along with interest at 12% per annum from the date of filing of  the suit, till the date of final payment. Further, the egregious conduct of the  Defendants, including wilful infringement, deliberate non-disclosure of sales  records, and procedural misconduct, warrants award of additional damages of  INR 1,00,00,000/- (one crore only), which shall be recoverable jointly and  severally by Defendants No. 1 and 3.

ⁱDefendant No. 1 is the proprietor of Defendant No. 2.

ⁱⁱ Defendant No. 1 is the director of Defendant No.

ⁱⁱⁱ Defendant No. 1 is an erstwhile director of Defendant No. 2, He resigned from this position prior to the  institution of the suit.

^iv Defendant No. 4 is stated to be the director of Defendants 2 and 3. And Defendant No. 4 is stated to be the  director of Defendants 2 and 3.

^vDefendant No. 1 is the director of Defendant No. 2.