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Date: July 10, 2025
Overview: The Hon’ble Delhi High Court has delivered its ruling in the case of DOLBY INTERNATIONAL AB & ANR. vs. LAVA INTERNATIONAL LIMITED, CS(COMM) 350/2024 with I.A. 9655/2024, I.A. 9658/2024, I.A. 9659/2024, I.A. 9660/2024, and I.A. 9666/2024. In this case, the plaintiffs (hereinafter ‘Dolby’) sought the grant of a pro tem order directing the defendant (hereinafter ‘Lava’) to deposit security during the pendency of a suit filed seeking, inter alia, a permanent injunction restraining Lava from infringing Dolby’s standard essential patent (SEP) portfolio.
Background
Dolby’s Advanced Audio Coding (AAC) portfolio includes Standard Essential Patents (SEPs) related to audio coding technology for digital devices. Dolby discovered that Lava was using these patented technologies in its devices without obtaining a license or paying royalties, thereby infringing its SEPs. Dolby first contacted Lava, asserting its AAC patent portfolio and calling upon Lava to obtain a global license under FRAND obligations. Dolby provided technical details and bilateral royalty rates in support of its claims.
According to Dolby, Lava denied Dolby’s claims and insisted on obtaining licenses only for patents that were proven to be valid, essential, and infringed by its products, which is contrary to established industry practice. Further, Lava did not make any counter-offer to Dolby’s proposed royalty rate and instead sought revised commercial offers, third-party confidential licensing agreements, and technical clarifications through several emails. In response, Dolby provided the requested clarifications regarding technical queries and reiterated the royalty rates, which were consistent with those offered to similarly situated entities.
Throughout these communications, Lava never questioned the validity of the SEPs nor did it contest Dolby’s claim charts on their merits. Consequently, Dolby initiated a patent infringement suit before the Hon’ble High Court seeking interim reliefs, including the grant of a pro tem order.
Dolby’s Arguments:
Dolby alleged that Lava had been utilizing this Advanced Audio Coding (AAC) portfolio having Standard Essential Patents (SEPs) in its consumer products without obtaining a valid license or paying the royalties. Dolby stated that it initially approached Lava, offering a global license on Fair, Reasonable, and Non-Discriminatory (FRAND) terms, providing both technical details and proposed royalty rates. Despite multiple follow-ups and clarifications of the licensing terms, Dolby asserted that Lava neither accepted the offer nor engaged in meaningful negotiations in good faith, and Lava continuously requested confidential licensing details and commercial revisions without making a counter-offer or advancing the discussions.
Dolby argued that in light of Lava's continued use of its patented technologies without licensing, and the absence of any meaningful engagement from Lava, it was entitled to interim relief, including a pro tem order directing the deposit of security to safeguard its potential claims.
Lava’s Arguments:
Lava denied Dolby’s allegations of patent infringement, asserting it was not obligated to license the entire AAC portfolio. Lava argued that five of Dolby’s asserted patents have expired, and the remaining three lack independent standing. It contended that the cited ISO/IEC 23003-3 standard is merely an update of an older version and not a new, patentable invention. Lava also claimed that prior pro tem orders cited by Dolby were based on expired patents and consent, and it challenged Dolby’s royalty demand as non-transparent.
It further argued that a pro tem order is an extraordinary remedy requiring prima facie findings of essentiality, validity, infringement, and exceptional circumstances under the Delhi High Court Patent Rules, 2022.
It further highlighted Dolby’s failure to provide SEP declarations or technical proof of essentiality, pointed to the availability of alternative technologies, invoked patent exhaustion due to chipset/software-level implementation, and insisted any royalty must be prospective only.
Court 's Findings:
The Delhi High Hon’ble High Court found that the main issue was whether Dolby was entitled to pro tem monetary relief under its FRAND (Fair, Reasonable, and Non-Discriminatory) obligations. In addressing this, the Hon’ble High Court further considered several related issues, including:
- whether an SEP holder can seek a pro tem deposit along with the infringement suit, without filing a separate application.
- whether a detailed examination of the merits is required for granting such relief;
- whether the four-fold test laid down in Nokia v. Oppo is applicable to pro tem orders;
- whether challenges to essentiality and validity raised by the implementer can defeat a pro tem deposit claim if they appear to be afterthoughts;
- whether the conduct of parties during FRAND negotiations is relevant in assessing their willingness to license or take a license; and
- whether there is any requirement to disclose third-party licensing agreements at the negotiation or pro tem stage.
To address this issue, the Hon’ble High Court analyzed several precedents and relied on the judgment of Intex v. Ericsson (2023), where it is clearly stated that as per the Hon’ble High Court Patent Rules, 2022, the Indian High Courts have the power to order a pro tem deposit even on the first date of hearing without filing a separate application, based on the facts of the case. Further, the Hon’ble High Court stated, based on Intex (supra) and Nokia v. Oppo (2022), that a pro tem deposit order is a temporary arrangement and does not require detailed exploration of merits. It means that no four-fold test, i.e., validity & essentiality, utilization, infringement, and the royalty rate, is required and such four-fold test is not good law. If the four-fold test is concluded, there will be no requirement of the interim order. Hence, the Hon’ble High Court concluded that the four-fold test is not applicable to pro tem deposit applications. The pro tem order should be issued based on the prima facie finding on essentiality and validity of patents, and said prima facie view can be formed based on surrounding factors, including facts and circumstances. The validity or essentiality challenges by the implementer, at a late stage, were prima facie insufficient for defense of the deposit claim.
Furthermore, relying on Intex (supra), the Hon’ble High Court found that conduct of the parties during negotiations is a key factor while determining willing licensors or willing licensees, respectively. An unwilling licensee cannot be permitted to freely sell its SEP-based technology in devices without making a pro tem security deposit. Moreover, the Hon’ble High Court held that there is no requirement to furnish such agreements to the implementer at the stage of negotiations or at the stage of determining pro tem deposit.
Applying the above analyses, the Hon’ble High Court found that Dolby had made a prima facie case by clearly providing technical data, history of licenses, and negotiation conduct under the FRAND protocol. In response to Dolby, Lava’s conduct—such as delay, no counter-offer, and failure to comply with the obligations of the FRAND protocol—indicated unwillingness.
Based on that, the Hon’ble High Court ordered Lava to deposit Rs. 20.08 crore as a pro tem security, either in an interest-bearing fixed deposit or via an unconditional bank guarantee, to cover the infringing sales from 2019 to 2024. Non-compliance within eight weeks entitles Dolby to seek an interim injunction to restrain further sales. For subsequent sales from January 1, 2025, Lava shall continue making half-yearly deposits or guarantees.
Conclusion:
In this case, the Hon’ble High Court clarified the principles regarding the matter of a pro tem order in the interregnum of a SEP infringement case. The Hon’ble High Court has shifted from a rigid test to a flexible, prima facie, conduct-intention approach to order the pro tem deposit. Such shifting empowers SEP holders’ interests and protects rights while ensuring due process and fairness.
Prepared by: Shubham K. Gadher
Designation: Patent Agent
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