SEP Holder Must Prove Infringement to Claim Royalty

Source: Delhi High Court

Why in News?

A Division Bench of the Delhi High Court, comprising Justice Hari Shankar and Justice Om Prakash Shukla, in KK Bansal v. Koninklijke Philips Electronics NV (2026), held that a holder of a Standard Essential Patent (SEP) cannot claim royalty or damages from a defendant merely by asserting that its patent is essential to a product standard. The Court held that the patent owner must first establish that the patent qualifies as an SEP and must thereafter prove, with evidence, that the defendant's specific product actually infringes that patent. 

• Setting aside a 2018 single-judge ruling that had directed KK Bansal and Rajesh Bansal to pay royalty and punitive damages to Philips, the Division Bench further held that Philips had failed to prove that its claimed royalty rates were fair, reasonable, and non-discriminatory (FRAND), and that the doctrine of patent exhaustion under Section 107A(b) of the Patents Act, 1970 extinguished Philips' exclusivity rights over the subject patent.

What was the Background of KK Bansal v. Koninklijke Philips Electronics NV (2026) Case? 

• Koninklijke Philips Electronics NV held Indian Patent IN 184753, which related to a decoding device used inside a DVD player to read information stored on a DVD disc and convert it into playable audio and video — not to the DVD player as a whole. 
• Philips claimed that this was a Standard Essential Patent (SEP), meaning that any DVD player following the relevant DVD standard would necessarily use its patented decoding technology. 
• The Bansals — running Mangalam Technology and Bhagirathi Electronics — sold DVD players and were sued by Philips for allegedly using its patented technology without a licence. 
• A single-judge of the Delhi High Court accepted Philips' case in 2018. Since the patent had expired, no injunction was granted; however, the Bansals were directed to pay royalty at USD 3.175 per DVD player up to May 7, 2010, and USD 1.90 per unit thereafter until February 12, 2015, along with 10% interest, and ₹5 lakh in punitive damages against Rajesh Bansal. 
• The Bansals challenged this ruling before the Division Bench, contending that they had purchased printed circuit boards from Shuntak and Sheen Land — authorised dealers of MediaTek, which was itself an authorised dealer of the boards containing the patented invention — and that Philips had failed to prove infringement or establish FRAND royalty rates.

What were the Court's Observations? 

• On the Burden of Proof for SEP Infringement: The Court held that a plaintiff claiming to be the holder of an SEP must first establish that its patent qualifies as an SEP, and must thereafter separately prove that the defendant's product infringes that specific patent. A bare assertion that the technology is essential to a standard, combined with proof that the defendant sold products conforming to that standard, is insufficient to establish infringement. 
• On Methods of Proving Infringement: The Court held that infringement could be proved either by directly comparing the claims of the patent with the defendant's product, or by demonstrating that the patent maps onto the relevant DVD standard and that the defendant's product conforms to that standard. Philips had failed to establish infringement by either route. 
• On the Doctrine of Patent Exhaustion: The Court held that the Bansals had purchased printed circuit boards from authorised dealers of MediaTek, which was itself an authorised dealer of boards containing the subject matter of Philips' patent. Accordingly, Philips' right to exclusivity stood extinguished by operation of the doctrine of patent exhaustion under Section 107A(b) of the Patents Act, 1970. 
• On FRAND Royalty Rates: The Court held that Philips had failed to place any evidence on record to demonstrate that its claimed royalty rates were fair, reasonable, and non-discriminatory. Despite its own witness deposing that licence agreements with third parties were available, not a single such agreement was produced before the Court. 
• On the Royalty Base: The Court rejected Philips' attempt to calculate royalty on the basis of the entire DVD player. Since the patent covered only a decoding device forming one component of a printed circuit board — itself only one part of a DVD player — Philips was not entitled to royalty on any item beyond that decoding device. Calculating royalty per DVD player would amount to claiming royalty for items over which Philips held no patent.

What is Section 107A of the Patents Act, 1970? 

Section 107A — Certain Acts Not to be Considered as Infringement: 

Section 107A specifies two acts that shall not constitute infringement of patent rights: 

• Section 107A(a) — Regulatory Use Exception: Any act of making, constructing, using, selling, or importing a patented invention — solely for uses reasonably related to the development and submission of information required under any law in force in India or any other country that regulates the manufacture, construction, use, sale, or import of any product — shall not amount to infringement. 
• Section 107A(b) — Exhaustion/Parallel Import Exception: Importation of patented products by any person from a person who is duly authorised under the law to produce, sell, or distribute the product shall not amount to infringement. This provision gives statutory recognition to the doctrine of international patent exhaustion — once a patented product is sold by or with the authorisation of the patent holder, the holder's exclusive rights over that product stand exhausted, and its importation through authorised channels cannot be treated as infringement. 

What is a Standard Essential Patent (SEP)? 

A Standard Essential Patent (SEP) is a patent that covers technology which is indispensable to implementing a particular industry standard. Key aspects include: 

• A product cannot comply with the standard without using the technology protected by the SEP. 
• SEPs commonly arise in sectors such as telecommunications, electronics, and multimedia technology, where uniform technical standards govern product design. 
• Holders of SEPs are typically required to license their patents on FRAND (Fair, Reasonable, and Non-Discriminatory) terms, to prevent abuse of the monopoly position that a standard-essential patent confers. 
• FRAND obligations ensure that patent holders do not charge excessive royalties or discriminate between similarly situated licensees. 
• Merely holding an SEP does not entitle the patent holder to automatic royalty from all manufacturers of standard-compliant products; infringement must be specifically established against each defendant.