The suit patent pertains to a digital transmission system designed for efficient audio signal compression and transmission, utilised in MPEG-1 and MPEG-2 audio compression systems standardised under ISO/IEC 11172-3:1993 (E).

According to the plaintiff, the defendants were engaged in the manufacture and sale of VCDs employing the MPEG-1 audio compression and expansion system, thereby infringing the suit patent. During the period from June 2001 to February 2004, sixteen letters were exchanged, in which the plaintiff repeatedly urged the defendants to join its VCD licensing program, but the defendants neither executed the license nor furnished the required information.

Upon discovering that the defendants continued to manufacture and sell VCDs allegedly infringing the suit patent, the plaintiff filed the present suit seeking a permanent injunction and damages for the unauthorised use of its patented technology. As the patent expired during the proceedings, on 28^th May 2010, the only remaining issues pertained to infringement and damages.

Contentions of the Parties

The plaintiff contended that its patent on the digital transmission system was valid, subsisting and being infringed by the defendants’ VCDs. It argued that the defendants’ VCDs employed audio compression technology covered by the suit patent and that the defendants were aware of the patent and the need to obtain a license.

The plaintiff relied on prior correspondence exchanged between the parties from June 2001 to February 2004 and on a technical analysis of the audio frames in the VCDs, asserting that these demonstrated use of the patented system. The plaintiff further contended that the suit patent formed part of the ISO/IEC 11172-3 standard, rendering it a Standard Essential Patent (SEP), and sought compensatory and punitive damages for infringement and the defendants’ alleged non-cooperation.

The defendants, on the other hand, contended that they merely replicated VCDs from Master Discs supplied by third-party film producers and did not employ the patented system themselves. They argued that the replication machinery licensed from Singulus did not involve any transmission or compression of digital signals, and that the plaintiff’s technical analysis, based on copying data from the VCDs, was flawed and scientifically unreliable.

The defendants further submitted that the plaintiff failed to map the claims of the suit patent to their products and that the alleged SEP claim was unsupported. They also stated that prior correspondence could not be treated as evidence of infringement or essentiality and that the plaintiff could not claim damages since multiple patents exist in the VCD technology, not just the suit patent.

Philips v. Bathla: Court’s Findings

Claim Construction

In its analysis, the Court undertook a detailed construction of the claims of the suit patent, emphasising that interpretation must be guided by the complete specification and viewed from the perspective of a person skilled in the art. The Court emphasised that patent claims must be interpreted according to their ordinary and general meaning from the perspective of a person skilled in the art. The Court held that where any ambiguity arises regarding the scope or meaning of a claim, reference to the patent specification is essential to ascertain the true intent and language employed by the patentee.

In construing the claims, the Court noted that the suit patent relates to a digital transmission system comprising a transmitter and a receiver for transmitting a wide-band digital signal at a specific sample frequency “Fs”. The suit patent also relates to a transmitter and a receiver for use in the transmission system, as well as to the record carrier obtained from the system.

The Court held that the suit patent broadly covered a digital transmission system but was limited to a system with a transmitter, receiver and transmission medium. It stated that infringement must be assessed based on these system components.

System Claims and Infringement Analysis

In assessing infringement, the Court highlighted that in order to establish infringement of a product or system, the plaintiff must map the claims of the suit patent to the defendant’s product, and the determination of infringement must be based on this product-to-patent comparison, in light of the complete specification. Therefore, the comparison should be product-to-patent, and not product-to-product.

In this case, the plaintiff failed to construct the claims of the suit patent or perform the necessary claim mapping to the defendants’ product. Instead of showing that the defendants’ product incorporated the transmitter, receiver, and transmission medium integral to the patented digital transmission system, the plaintiff merely compared the end result, the audio frame length of the VCDs, with the output of the patented system. The Court noted that system claims are product claims covering the apparatus implementing the invention, not just the outcome and therefore infringement requires showing that each claimed component is present and functional in the defendant’s product.

The Court found that the plaintiff never examined or analysed the Singulus machines used by the defendants for VCD replication. The plaintiff’s expert only analysed audio data from the VCDs and did not map the patent’s claimed components to the defendants’ system. The defendants merely duplicated Master Discs from third-party producers and did not use the patented transmission system. The VCDs served only as storage media for compressed data and did not employ the claimed system. The plaintiff also admitted that replication did not involve compression or the patented system and failed to establish that the Master Discs used the patented technology. Accordingly, the Court concluded that the replication of VCDs did not constitute infringement.

Plaintiff’s Claim of Suit Patent Being an SEP

The plaintiff asserted that the suit patent constituted an SEP forming part of the ISO/IEC 11172-3 standard, which governs the compression and decompression of audio signals. The plaintiff contended that since this standard is mandatorily used in VCD replication, the suit patent was inherently essential to the process.

Although no specific issue on SEP was formally framed, the Court addressed the matter owing to the plaintiff’s strong reliance on it.

The Court, after referring to judicial precedents, legal commentaries, and institutional authorities, enumerated the factors relevant for determining the essentiality of a patent, as follows:

• Filing of claim mapping charts on record by the patentee, and mapping the claims of the suit patent to the international standard. Additionally, it must be shown that the suit patent corresponds to the mandatory portions/implementations of the said standard.
• Expert analysis/affidavit (technical reports) mapping the contents of a specification of the suit patent to the international standard, accompanied by a reasoned opinion affirming the essentiality thereof.
• Large-scale licensing arrangements which the patentee would have entered into with various implementers for the patented technology.
• Prior correspondence between the parties, indicating acknowledgement or admission by the implementer regarding the essentiality of the suit patent vis-à-vis the relevant international standard.
• Acceptance of the role/contribution of the patentee of the technology by the relevant trade and industry, including SSO documentation at the time of preparation of the international standard and the contemporaneous technical publications acknowledging the patentee’s contribution to the international standard.
• Existence of corresponding international patents which have been formally recognised as “essential” or have been issued with an essentiality certificate by the competent authority.

Applying these factors, the Court held that the plaintiff failed to establish the essentiality of its patent. The claim mapping filed by the plaintiff between the suit patent and the ISO/IEC 11172-3 standard did not demonstrate that all essential elements, particularly the transmitter, receiver, and transmission medium, were covered by the standard. The mapping lacked evidence that these structural and functional features formed part of the mandatory standard components.

The Court also noted the absence of any independent expert essentiality report, FRAND declarations, or executed license agreements confirming SEP status. The documents relied upon were self-authored by the plaintiff and did not reference the suit patent or the claimed system architecture.

The Court reiterated that the burden of proof lies on the plaintiff to establish both essentiality and infringement, and the absence of evidence from the defendants does not shift this burden. The plaintiff also failed to establish infringement under either the direct (literal comparison) or indirect method, as no proper claim construction or mapping to the defendants’ product was demonstrated.

Ultimately, the Court concluded that although the plaintiff demonstrated that the data packed on the VCD, i.e., the end result, is “substantially similar”, however, it failed to establish that such data was packed in a substantially similar way, i.e., as per the system claimed in the suit patent.

Prior Correspondence Between the Parties and Its Evidentiary Value

The Court dismissed the plaintiff’s reliance on prior correspondence to prove that the defendants had admitted the essentiality of the suit patent. It held that the correspondence was inadmissible to establish any such admission. The Court noted that although the suit was based on a single patent, the plaintiff’s letters referred broadly to “Philips Patents,” suggesting that the discussions concerned a pool of patents rather than the suit patent.

The Court observed that the plaintiff’s letters did not identify any specific patent, and without a clear reference to the suit patent, no admission could be presumed. It held that the defendants’ general reference to “essential” Philips patents did not amount to an acknowledgement of the suit patent as an SEP.

The Court rejected the plaintiff’s claim that the absence of the phrase “without prejudice” in the defendants’ letters implied an admission. It clarified that even if the word “without prejudice” is not written, the intention of negotiation correspondence is always “without prejudice”, relying on the case of Sonia Magu v. Commissioner of Income Tax.

Relying on Peacock Plywood (P) Ltd. v. Oriental Insurance Co. Ltd., the Court held that correspondence written for the purpose of settling a dispute is protected by the “without prejudice” privilege. Referring to UTO Nederland B.V. and Another v. Tilaknagar Industries Ltd., the Court further observed that a mere suggestion made to arrive at a settlement cannot be treated as an admission.

Likewise, in Sri Bauribandhu Mohanty and Another v. Sri Suresh Chandra Mohanty and Others, the Court observed that parties often make admissions in the course of settlement negotiations, and it would be unfair to hold them to such statements if the compromise ultimately fails

The Court found that the defendants had not sought a licence and that the plaintiff initiated discussions without specifying the patent to the defendants. It held that the correspondence could not be treated as an admission of essentiality or infringement of the suit patent.

Court’s Decision

The Court held that the “Digital Transmission System” claimed in the suit patent was not part of the VCD replication process used by the defendants. The plaintiff failed to establish infringement and to provide proper claim mapping to the ISO/IEC 11172-3 standard, as the analysis did not identify any mandatory elements requiring the use of the suit patent. With no credible evidence of infringement, the suit was dismissed.

Key Takeaways

• To prove infringement of a system or product patent, the plaintiff must perform a product-to-patent comparison based on the complete specification; mere product-to-product similarity is insufficient.
• SEP status must be substantiated. The patentee must provide evidence to demonstrate that a patent is essential to a standard; self-authored documents alone are not adequate to establish essentiality.
• Burden of proof remains with the plaintiff. Even if defendants do not contest, the plaintiff must establish infringement with concrete evidence.
• Negotiation letters or settlement discussions, even without the phrase “without prejudice,” cannot be treated as admissions of infringement or essentiality.