Oppo and Vivo sued for Patent Infringement by Dolby in India
On 28th October 2016, the Delhi High Court directed Oppo and Vivo to deposit Rs. 34 (3.4 CNY) per smartphone imported/manufactured/sold in India. Both Chinese companies have been dragged along with another reseller BBK Electronics in to Patent infringement lawsuit filed by Dolby International AB (an American/Dutch Company) for using technology related to audio noise reduction, encoding and compression techniques. The filing of the case comes at a time when both Oppo and Vivo have announced to set up manufacturing/assembling units in India by making an investment of $300 million each.
With a Population of 1.25 billion people India is biggest under-penetrated market for Smart Phones in the world. While local Chinese market has seen a saturation more than 100 million Smartphones were imported in India in 2015 and this number is on the rise. A study by Counterpoint Research says shipments to India by Vivo, Lenovo and Oppo have grown 759%, 344%, 183% in Q1 of 2016.
Delhi High Court, which is hearing the case, has ordered the two companies to deposit the Royalty amount with the court as per the standard royalty chart of the Plaintiff’s SEP:
|Volume (per unit*/annual reset)||Per Unit Fee|
|For the first 1 to 500,000 units||$0.98|
|For units 500,001 to 1,000,000||$0.78|
|For units 1,000,001 to 2,000,000||$0.68|
|For units 2,000,001 to 5,000,000||$0.45|
|For units 5,000,001 to 10,000,000||$0.42|
|For units 10,000,001 to 20,000,000||$0.22|
|For units 20,000,001 to 50,000,000||$0.20|
|For units 50,000,001 to 75,000,000||$0.15|
|For units 75,000,001 and more||$0.10|
AAC License fee being charged by Via Licensing Corp. under FRAND Agreement
The court however at this ad-interim stage refrained from asking defendants to deposit the royalties for the sales made in the past. The two companies are discussing licensing terms with Dolby under the Fair, Reasonable and Non-Discriminatory (FRAND) licensing terms. In the meanwhile Vivo and Oppo will be allowed to sell their smartphones upon depositing the Royalty with court. The matter will be heard next on 25th November 2016.
Earlier cases involving Chinese mobile companies in India
Ericcson vs. Xiaomi
In December 2014, Ericsson had filed a suit against Xiaomi in India for the alleged infringement of the 8 Standard-Essential Patents. The Delhi High Court granted an injunction against Xiaomi on the sale, manufacture, advertisement, and import of Xiaomi’s devices. Xiaomi claimed that its latest devices in the Indian market (as of December 2014) the Mi3, Redmi1S and Redmi Note 4G, contained Qualcomm chipsets, which implemented technologies licensed by Ericsson. The Redmi Note 3G and previous models of the Mi and Redmi ranges, however, contained chipsets from Mediatek, which does not have a licensing agreement with Ericsson. Then Xiaomi could resume the sale, import, manufacture and advertise only those devices having Qualcomm chips. Xiaomi subsequently challenged the injunction before a Division Bench of the Delhi High Court, which issued temporary orders to allow Xiaomi to resume the sell, import, manufacture, and advertisement of its mobile devices subject to the following conditions:
• Xiaomi would only sell devices having Qualcomm chips.
• Xiaomi would deposit Rs.100 (CNY 10) per device towards royalty for every device it imported to India from the date of the launch of the device in India to January 5, 2015. This amount was to be kept in a fixed deposit for three months during the proceeding of the case. In April 2016, on the ground of concealment of information by Ericcson as urged by Xiaomi was accepted to the extent of the two patents relating to CDMA applications. Accordingly, the interim order dated December 8, 2014 in so far as it relates to two patents IN229632, IN240471 (3G patents) was vacated but still remains in force for other 6 Patents.
Ericsson vs Gionee
Ericsson sued Indian budget smartphone manufacturer Gionee in late 2013 over the alleged infringement of the same 8 SEPs. In October 2013, the Delhi High Court fixed an interim royalty to be paid by Gionee to Ericsson for one month, which was calculated based on the sales of Gionee’s devices worth approximately US $24 million in India. These rates were established based on the interim royalties awarded to Ericsson in March 2013 in the patent infringement suit against Micromax.
○ For phones or devices implementing GSM, Gionee would pay 1.25% of the sale price of every unit to Ericsson.
○ For phones or devices implementing GPRS and GSM, Gionee would pay 1.75% of the sale price of every unit.
○ For phones or devices implementing EDGE, GPRS, and GSM, Gionee would pay 2% of the sale price of every unit.
○ For devices implementing WCDMA/ HSPA, which includes mobile phones and tablets that support voice calling, Gionee would pay 2% of the sale price of every unit.
○ For dongles and data cards, Gionee would pay US $2.50 for every unit sold.
Safeguarding their own IP managing risks involved has become important not only for Chinese mobile phone manufacturers, but any Chinese business that is looking at India as a potential market. We recommend Freedom to operate opinions before product launches in India and executing license deals. Dolby becomes second player after Ericcson to choose India as a battle ground for Patent infringements as the Indian courts grant high royalties and quick injunctions in Patent cases. It is expected that more lawsuits will follow relating to Cellular Baseband Chip, Memory and multimedia cards, DRAM, Wi-Fi, Bluetooth, GPS, NFC, Battery, Audio, MP3, Camera, JPEG and OS related Standards which may lead to Royalty stacking and make the business less profitable or IP centric.