A New FRAND Framework: India Embraces Interim Security to Deter SEP Hold-Out

The Delhi High Court’s ruling in Dolby International AB & ANR v. Lava International Limited appears to mark a pivotal shift in India’s approach to the enforcement of standard essential patents (SEPs) wherein the High Court ordered Lava to deposit approximately INR ₹ 20.81 crore (roughly USD $2.3 million) as security to cover past sales, while simultaneously allowing Lava to continue product sales through the litigation.

Dolby filed suit requesting relief of a pro tem order directing a deposit of security by Lava, claiming that Lava, a major Indian handset manufacturer, incorporated Dolby’s Advanced Audio Coding (AAC) technology, which is protected by a portfolio of SEPs, into Android phones without obtaining a license on fair, reasonable, and non-discriminatory (FRAND) terms. Dolby alleged that despite entering licensing discussions in December 2018, Lava failed to meaningfully engage, instead using dilatory tactics without making any concrete counteroffers.

Following prolonged negotiations with Lava, Dolby initiated proceedings before the Delhi High Court, asserting infringement of eight Indian patents from its AAC codec portfolio. In response, Lava contested the validity and essentiality of the asserted patents. Lava further argued that several of the asserted patents had expired during the pendency of the dispute, mooting Dolby’s claims for monetary or injunctive relief.

Dolby maintained that Lava’s conduct constituted patent hold-out — the practice of continuing to commercially benefit from SEP-covered technology while strategically stalling FRAND negotiations. The High Court was asked to evaluate whether Dolby established a prima facie case of infringement, essentiality, and validity, and whether Lava’s continued use of the relevant technology warranted interim relief in the form of a pro tem security deposit.

In a detailed interim order, the Delhi High Court held that Dolby established a prima facie showing of essentiality, validity, and infringement of its AAC codec SEPs. Because Dolby’s claim charts and evidence of compliance with the Android Compatibility Definition Document remained unrebutted by Lava despite years of negotiation, the High Court concluded that Lava did not merely fail to meaningfully engage in substantive licensing negotiations, but, rather, engaged in patent hold-out behavior in continuing to commercially exploit the technology for years without executing a license.

Instead of imposing injunctive relief, the High Court ordered Lava to provide a pro tem security deposit covering retrospective use of the patented technology from 2019 through 2024 in the form of cash or a bank guarantee. The Delhi High Court’s approach indicates the adoption of a security-centric framework as a means of protecting a patentee’s interests and rights without forcing a defendant to cease its business operations mid-litigation.

Takeaways

The ruling appears to represent a significant development in India’s evolving SEP jurisprudence, as it seems to reveal a new willingness to deter strategic delays in FRAND negotiations by requiring upfront financial security after a patentee establishes a case for patent infringement and hold-out. The decision signals that India is prepared to enforce SEP rights, even without a final determination of liability, through meaningful interim relief, thereby increasing pressure on implementers to negotiate in good faith and comply with licensing norms in a timely manner. The decision further strikes a delicate balance between supporting India’s economic growth through continued manufacturing and sales with the need to deter strategic, intentionally harmful delays. Moreover, the court’s decision mirrors established global best practices and further aligns India with SEP enforcement trends, including rejection of attempts to discount expired patents, acceptance of portfolio-based licensing, and reliance on claim charts and public standard documentation as proof of essentiality. After Dolby-Lava, delay is no longer a cost-free tactic in India.