Delhi High Court orders Chinese smartphone maker Transsion to furnish security in InterDigital patent case

The Delhi High Court has directed Shenzhen Transsion Holdings, the Chinese smartphone maker behind the Itel, Infinix, and Tecno brands, to furnish a pro tem security deposit with the Registrar General in patent infringement cases filed by InterDigital Patent Holdings over the alleged unauthorised use of standard essential patents (SEPs) related to 3G, 4G, 5G, and HEVC video coding technologies, reported Livelaw.

Justice Tushar Rao Gedela passed the order on 1 July while deciding InterDigital's applications seeking an interim pro tem security deposit pending the court's decision on its plea for an interim injunction.

InterDigital has filed two separate lawsuits against Shenzhen and its affiliated companies, asserting infringement of five patents. Four of these patents relate to cellular communication technologies incorporated in 3G, 4G and 5G standards, while the fifth covers HEVC video coding technology. The company alleged that Shenzhen has been using its SEPs without obtaining a licence since at least April 2016, despite licensing discussions that began in 2019.

According to InterDigital, it provided Shenzhen with more than 100 claim charts during negotiations and held at least 12 meetings with the company, including four full-day technical discussions in China. It also proposed resolving the licensing dispute through arbitration, but claimed Shenzhen rejected the proposal and continued to use the patented technologies without securing a licence.

Shenzhen opposed the request for a security deposit, arguing that InterDigital had failed to establish, even on a prima facie basis, the validity and essentiality of the patents in question. The company further contended that the court could not determine an appropriate security amount without examining comparable third-party licensing agreements.

The High Court rejected this argument, relying on previous Division Bench rulings that held the absence of comparable licensing agreements at this stage did not prevent the court from granting interim relief.

The court also reviewed decisions from foreign jurisdictions concerning corresponding patents. It observed that while Chinese authorities had invalidated counterparts of some of the asserted patents, courts in jurisdictions such as the United Kingdom and Brazil had upheld the validity or essentiality of corresponding patents. Considering these rulings collectively, the court said there was no reason at this preliminary stage to conclude that the patents asserted by InterDigital were either invalid or non-essential.

"It cannot be concluded with conviction that the suit patents are invalid or not essential to the standards," the court held, adding that InterDigital had prima facie established the validity and essentiality of the suit patents for deciding the present applications.

After examining the history of licensing negotiations between the parties, the court concluded that directing Shenzhen to furnish a pro tem security would appropriately balance the interests of both sides until the dispute is finally decided.

"A pro-tem security order does not confer any advantage upon the SEP holder but only balances the asymmetric advantage that an implementer has over a Standard Essential Patent holder," the court observed.

Since comparable third-party licensing agreements were not available on the record, the court treated Shenzhen's final counteroffer during licensing negotiations as the most appropriate benchmark for calculating the security amount.

Accordingly, the High Court directed Shenzhen to deposit one-fifth of the cumulative value of its last counteroffer, calculated over the licence period claimed by InterDigital, with the Registrar General within eight weeks.

As an alternative, the court allowed the company to submit an unconditional bank guarantee for an equivalent amount instead of making the cash deposit.

The court clarified that the observations in the order are limited to deciding the present applications for pro tem security and will not affect the pending proceedings concerning InterDigital's plea for an interim injunction.