Interim relief in commercial litigation, especially in the Indian Context, plays a very vital role in ensuring that justice delayed, does not in fact result in justice denied. Such relief is designed to prevent irreparable harm and balance the equities. However, recently, there has been an emerging trend of Pro Tem deposits in Standard Essential Patent ("SEP") litigation, which essentially means a relief intended "for the time being", as it is intended to operate as a stop gap arrangement, even prior to an assessment of the merits of a claim under Order 39 of the Code of Civil Procedure, 1908 ("CPC").
The SEP holders are, of course, arguing that there is a need for pro tem reliefs, since the standard for satisfying the requirements for the grant of interim reliefs is too high for SEP matters. This is because SEP litigations involve assessment of technical claims of many patents and even an enquiry into the issue of FRAND compliance, which is bound to be time consuming, while leaving the SEP holders remediless. On the other hand, the accused implementers argue that SEP litigation do not deserve any special treatment over other commercial suits. The implementers further argue that the so-called pro tem relief is nothing but an ad interim relief, which can only be granted if the Plaintiff succeeds in establishing a prima facie case, and if there is a real threat of irreparable harm that requires a balancing of the equities. Accused implementers are also insisting that the SEP holders are only crying wolf, since ultimately an SEP suit, if justified on merits, is nothing but a money claim, and that equities, in fact, favour the implementers, since there is no threat of capturing in the market share of an SEP holder, which is the threat sought to be avoided in ordinary patent suits.
While there have been a few instances when the Court has felt that a case for pro tem deposits have been made out due to the specific facts of the said case, the recent seminal judgement dated 31.05.2024 of the Division Bench of the Hon'ble Delhi High Court in Guangdong OPPO Mobile Telecommunications Corp. Ltd. & Ors. v. Interdigital Technologies Corp & Ors., FAO(OS) (COMM)-47/2024 1 has clarified that pro tem deposits have to comply with the requirements of an ad interim relief, thereby underscoring the need to ensure that the well-settled required standards for grant of interim relief are not given a go-by. This judgment has significant implications for SEP holders and implementers in India. In this article, we explore the brief facts of the dispute, the salient findings, and their potential impact on SEP jurisprudence.
Brief Facts of the Dispute
The multi-jurisdictional dispute between IDG and OPPO revolves around enforcement of SEPs for 3G, 4G and 5G as well as HEVC technologies. In the Indian suit, IDG sought the relief of pro tem deposits to be awarded till the determination of the application for interim reliefs, arguing that such measures were necessary to secure its interests while the case was ongoing. OPPO contested these demands, raising defences related to the essentiality and validity of the SEPs in question as also the issue of FRAND compliance.
However, prior to an adjudication of any of these applications, the parties had agreed vide a consent order to dispose of the interim injunction and pro tem applications in view of the international bank guarantees ("Global BGs") provided by OPPO already submitted to IDG, which secured IDG to the extent of the global counteroffer made by OPPO. While both parties had agreed to specific terms for the acceptance of the Bank Guarentees ("BGs"), the Single Bench of the Delhi High Court, also directed bank officials of the BG issuing Bank, i.e., HSBC Paris, to appear before the Delhi High Court and verify the BGs. Thereafter, due to multiple reasons of effective notice, the bank officials of HSBC Paris could not appear before the Court, due to which reason, OPPO ultimately offered to provide an Indian Bank Guarantee ("Indian BG") for the Indian apportionment of its counteroffer. IDG however, rejected this and instead sought the deposits of the entire quantum of the counter offer.
The primary questions that arose before the Court were (i) whether a consent order could be modified without the consent of the parties; (ii) whether OPPO was at fault for not being able to ensure the appearance of the bank officials of HSBC Paris; and (iii) whether the Indian BG offered by OPPO to secure IDG for the Indian suit could be an acceptable substitute to the previous consent order between the parties. The Single Bench vide Order dated 21.02.2024 while affirming that a consent order could not be modified without consent, held that OPPO was at fault for not being able to produce representatives of HSBC Paris before the Court and therefore, in light of concerns about its financial position, and due to the delay caused in the matter, OPPO should be directed to render deposits for the quantum of Indian apportionment of the Global BGs, instead of accepting the Indian BG offered by it. Resultantly, OPPO filed an appeal against the said order, essentially questioning why an Indian BG provided by OPPO wasn't an appropriate security, especially when IDG was agreeable for a BG in the first place. On 31.05.2024, the Division Bench allowed OPPO's appeal and directed OPPO to provide an Indian BG while rendering a number of key findings integral to SEP jurisprudence in India.
Key Findings of the Division Bench Judgment in IDG v. OPPO
- Pro Tem relief is in the
nature of Ad-Interim Relief and is not a Punitive Measure. Thus, it
necessarily requires consideration of the defences raised by the
Defendants.
The Court held that pro tem relief is another name for ad-interim relief, and as such falls within the broad scope of Order 39 of the CPC. The Division Bench further observed that pro tem orders are protective in nature and are not meant to be punitive. Therefore, a consideration of the defences of the Defendant is essential, i.e., such orders cannot be made without prima facie finding of the essentiality and validity of the SEP. The rationale being that interim measures should not unjustly burden the implementer without first establishing a foundational case for the SEP's validity and essentiality.
The Court further clarified that the Division Bench's decision in Nokia Technologies OY v. Guangdong OPPO Mobile Telecommunications Corp. Ltd. & Ors., is not an authority for the proposition "that pro tem deposits/payments can be ordered without even considering the defenses raised by the defendants and taking a prima facie view." The relevant extract is reproduced hereunder:
"99. The contention that there is no necessity to form a prima facie view before issuing pro tem orders is erroneous. Pro tem measures are also in the nature of an interim / ad-interim measures. It is thus necessary that in a contested case the court form a prima facie before granting any interim relief. The reliance on the decision of the Coordinate Bench of this Court in Nokia Technologies OY v. Guangdong OPPO Mobile Telecommunications Corp. Ltd. & Ors.(supra) is misplaced. In the said case, the Division Bench of this Court had observed that "normally speaking a pro tem deposit should be directed only after a prima facie finding of essentiality and validity of the suit patents have been recorded... The decision in Nokia Technologies OY v. Guangdong OPPO Mobile Telecommunications Corp. Ltd. & Ors. (supra) is not an authority for the proposition that pro tem deposits/payments can be ordered without even considering the defenses raised by the defendants and taking a prima facie view." - Modification of Consent Orders requires Consent of both
Parties, sans which a Rehearing is the only Option.
In addressing the issue of the modification of consent orders, the Division Bench made it clear that consent orders cannot be altered without mutual agreement between the parties involved. The Single Judge's direction to impose a deposit as a pro tem measure was found to materially alter the terms agreed upon by IDG and OPPO. The Court stressed that if the consent order could not be implemented, the appropriate course would have been to recall the consent order and reconsider the applications for interim reliefs based on their merits. In the facts of this case, it meant that the Court would have to hear IDG's application for pro tem and interim relief afresh. Relevant portion of the decision is reproduced hereunder:
"96. It is also relevant to note that directions to make a deposit equal to an amount that would be payable in terms of the counter offer made by the defendants could be passed only for the purpose of securing the plaintiffs and not as a punitive measure against the defendants. The reasoning of the learned Single Judge that the defendants must not be placed in a better position than as placed under the consent order, is erroneous. Once the learned Single Judge concluded that the consent terms were not implemented and that the applications for pro tem measures required a relook, the said applications were required to be considered a fresh on their own merits." - Acceptability of Bank Guarantees as Pro Tem Security
instead of a Deposit.
The Division Bench has also ruled that a Bank Guarantee is an acceptable form of pro tem security, dismissing the argument, that in the given facts only a deposit would be appropriate. The relevant portion of the decision is reproduced hereunder:
"106. As observed hereinbefore, pro tem orders are not required to be imposed as punitive measures. It was also erroneous to proceed on the basis that the defendants were required to be placed in the same or a worse position than as agreed by them. We are also unable to accept that permitting the defendants to furnish the bank guarantees from an Indian bank would place them in a better position than as agreed by them.
107. However, none of these issues are material as the principal objective of the pro tem order was to secure the plaintiffs at least to the extent of the counter offer made by the defendants. The only relevant reason indicated in the impugned judgment for directing deposit instead of furnishing of a bank guarantee is that a bank guarantee would not sufficiently secure the plaintiffs. However, there is no reason to entertain any such doubt. The learned Single Judge had held that the financial condition of the defendant was not good and the state authorities were investigating the defendants. However, the financial conditions of the defendants are not relevant as a bank guarantee is an independent obligation of the concerned bank and the same would be honoured irrespective of the financial state of the person at the instance of whom the bank guarantees are furnished. There is no reason to doubt that the Indian bank (IDBI Bank) was not solvent to honour its guarantee.
108. We find that there are no grounds for rejecting the defendants offer for securing the plaintiffs by an unconditional bank guarantee of an Indian bank and insisting on a deposit with the Registry of this Court."
The Court further observed that IDG failed to show a single instance where a bank has defaulted in honouring an unconditional Bank Guarantee furnished to the Court. Accordingly, the Court allowed OPPO to provide a BG of an Indian Bank in favour of the Registrar General of the High Court.
Implications for SEP Jurisprudence
The judgment, therefore, marks a significant development in the landscape of SEP litigation in India. By clarifying the standards for granting pro tem deposits and emphasizing the necessity of a prima facie assessment of essentiality and validity, the Court has clarified that interim reliefs are not merely granted for the asking. This is extremely crucial in an SEP scenario, where many of the patents are often invalid and non-essential.
The judgment is also a substantial step forward in commercial litigation and SEP jurisprudence as it clearly enunciates that BGs are valid security for ad-interim and interim reliefs. Besides being less onerous than deposits, this upholds the commonly accepted global practice also enunciated in judgments like Huawei v ZTE. While it is a welcome step in SEP jurisprudence, it is likely to have a significant impact on all commercial litigation, allowing parties to provide BGs instead of deposits, and enabling cash-intensive businesses to operate free from financial duress.
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Footnotes
1. The authors of the article are counsels of the Defendants in the case, i.e. IDG vs OPPO, which is discussed in the article and thus it is clarified that the opinions expressed in the article are solely those of the authors and intended for informational purposes only. The article therefore does not constitute legal advice, since the information provided is based on the facts and circumstances of the discussed case and may not be applicable to other situations
2. 2024:DHC:4547-DB
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