Play it again: some companies were using patented tech and processes that were essential to the playback function in DVD players without paying a fee
Play it again: some companies were using patented tech and processes that were essential to the playback function in DVD players without paying a fee © AFP

Accusations of cross-border intellectual property theft feature prominently in modern trade wars. Yet beyond the headlines of international corporate espionage and cyber security breaches, a tiny widget used in DVD players is a more tangible example of the kind of IP theft western companies face from manufacturers in developing markets.

A landmark case in the Delhi High Court not only helped Dutch multinational Philips protect its own licensing agreements in India, but may also provide a framework for all technology manufacturers that want to protect their IP in emerging markets.

In 2009, Philips claimed a number of companies in India were unlawfully using its patented ideas to make and sell DVD players. By then, Philips had been in India for 90 years and had sunk significant research and development funds into the market.

The company viewed the threat as profound. “India is one of the company’s four innovation hubs for R&D,” says Jako Eleveld, who heads Philips’s intellectual property licensing out of the company’s headquarters in the Netherlands. Philips invests around €1.8bn a year in research and development globally, he says. Because R&D leads to new ideas, inventions and intellectual property, it is important to have “a robust legal system” so that patent owners can reap the rewards of their R&D spending.

Some patents are relatively superficial, such as the design of a casing or placement of a circuit board. In this case, however, which until last year had been going on for more than a decade, some Indian companies were using core Philips technology and processes that were essential to the playback function in its DVD players, but without paying royalties for the privilege.

Some technology is so fundamental to a product that it simply does not work without it. Think of global transmission systems in mobile phones. Such technologies need to be standardised across all products, no matter the manufacturer, and are protected by so-called standard-essential patents (SEPs). In DVDs, Philips owns the rights to certain standards for playback functions.

Philips’s law firm in India, Anand and Anand, found itself in a curious position. In 2009, when it first started defending Philips’s SEPs, there was little precedent for it to use. Western courts had not yet begun to understand how to deal with SEPs, so the Indian courts found themselves making judgments that would ultimately inform courts around the world.

At the time of taking on the Philips case, lawyers at Anand and Anand had already recognised the importance of dealing with SEP infringement not only in India but globally. “Even in 2009 we anticipated that there would be an explosion of SEP issues,” says managing partner Pravin Anand. “Most of the companies that own these patents are large multinationals [that] want to manufacture in India, so the Indian courts become even more important because the decision extends to other jurisdictions.”

Vaishali Mittal, another lawyer at the firm, says the Philips case was the first time a plaintiff had tried to prove indirect infringement of such patents in India.

One of the big difficulties of the case was to “explain complex DVD technology to a judge who may not necessarily have a science or a technical background”.

Anand and Anand’s response was to design and present a video animation that helped describe the entire patented invention in a “straightforward but engaging manner”. Even the defence lawyers, says Ms Mittal, could not argue with the plaintiff’s descriptions of the technology, because it was so accurate and easy to understand.

At the same time, even if Philips won the case, its lawyers worried that the defendants would not be able to pay the royalty they owed. “In India, a common defence is financial constraints and the threat of bankruptcy,” says Mr Anand. “When litigation is drawn out over many years, it’s possible that the defendants won’t even be around to pay damages when a decision is finally made.”

To combat this risk, the firm suggested to the court that the defendants should deposit quarterly royalties into an account while the case progressed. In 2009, it was a little-known strategy that Mr Anand says has now become almost universal in SEP disputes around the world. “It practically nullified the possibility that the defendants could claim they were unable to pay any eventual damages,” he says.

After a protracted initial trial, a final judgment was handed down in July 2018, although an appeal is pending. Anand and Anand was able to prove Philips’s patents were “standard-essential” and had indeed been infringed. The court imposed royalty payments on the defendants.

“The final judgment provides what Indian law has lacked until now,” says Mr Anand, “a precedent [that] lays down essential principles of adjudication of SEP infringement.”

The judgment is largely based on the law firm’s legal reasoning. Moreover, Mr Anand believes the legal framework has established India as a preferred jurisdiction for SEP enforcement in the developing world.

He admits that India — where the latest version of the Patents Act became law in 1970 and has hitherto been associated with difficult-to-resolve patent infringements — is an unexpected jurisdiction for intellectual property innovation to emerge. “Between the 1970s and early 2000s, there were only a handful of cases,” he says. “Most patent litigation started after a 2005 amendment to the Patents Act, when pharma and agricultural patenting was enshrined in law.”

Mr Eleveld says Philips considers the win an “important milestone”. The decision creates more clarity for Philips and other innovators, and “provides confidence that the country recognises and allows for a legal environment that protects our investments in R&D”.

At the moment, says Mr Anand, more than 20 SEP infringement cases are still pending in Indian courts. In the meantime, he adds, intellectual property law students around the world are studying the Philips case as a benchmark for how to protect infringements.

Dechert: pioneer of third-party-funded arbitration

People walk past commercial buildings in the central business district of Singapore, on Wednesday, June 13, 2018. Tourism as well as the consumer sector will likely see a lift thanks to the influx of international media at the recent DPRK-USA Summit, according to RHB Research Institute Singapore Pte. Photographer: SeongJoon Cho/Bloomberg
Singapore: central business district © SeongJoon Cho/Bloomberg

As asset classes go, it is hard to find one less correlated to markets than litigation financing. The windfall that investors receive from backing a successful plaintiff in a civil suit is dependent on the successful litigation of the case and typically not the swings of the equity or fixed income markets. Yet few law firms have so far been able to build a scalable model for attracting third-party funding.

Enter global firm Dechert. In 2017, hoping to become more of a centre for commercial arbitration, Singapore began allowing third parties to fund international arbitrations, reversing a centuries-old prohibition under the common law against such practices.

Singapore-based Dechert partner Mark Mangan had an innovative approach to funding, which he wanted to test. Rather than pitch to just one investor, he developed his case theory and then presented it to four prospects. He also rejected their requests for exclusivity, effectively creating a competitive market.

The case was against a well-funded Asian state-owned entity. Although it involved a high-value claim, it had been languishing for years because the eastern European claimant lacked sufficient resources to pursue it.

Mr Mangan ultimately picked Australia-based litigation funding company IMF Bentham as the funder. The choice, he says, depended only partly on the financial terms being offered. There was also the “intellectual capital the funder could bring to the case through its perspective on case theory and strategy”, which counsel could use to present the best case possible.

The development in Singapore “has encouraged other lawyers to pursue claims that would otherwise lie dormant, helped strengthen Singapore as a place for arbitration, and ultimately facilitated better access to justice”, he says.

The tables below rank law firms and in-house legal teams for the FT Innovative Lawyers Apac awards.

Litigation and Disputes:

RankLaw firmDescriptionOriginalityLeadershipImpactTotal
STANDOUTMayer BrownInvoked new rules introduced by the Singapore International Arbitration Centre to achieve early payment of debts owed to the firm's client. The early-dismissal rules had been introduced to try to make the arbitration process more efficient. The firm convinced the tribunal it could render an early award without prejudging the rest of the case. The outcome represents a shift in the funding and conduct of arbitrations, including preventing parties from avoiding paying up until the conclusion of an arbitration. Commended: Yu-Jin Tay88824
STANDOUTAnand and AnandRepresented electronics company Philips in India's first judgment concerning standard essential patents (SEPs), pertaining to infringement of DVD player technology. The firm secured interim royalty payments and established important precedents relating to SEP infringement claims in a time of little global SEP jurisprudence. 88723
STANDOUTShin & Kim Defended South Korea in a World Trade Organization tribunal on the imposition of antidumping duties on pneumatic valves imported from Japan. The firm successfully constructed the first legal test on which the WTO Panel may rely when establishing jurisdiction. Commended: Doo-Sik Kim88723
HIGHLY COMMENDEDYoon & Yang Defended cryptocurrency exchange Bithumb in the South Korean tax authorities’ first investigation into a domestic digital currency exchange. This case establishes standards and guidelines for digital currency taxation in South Korea, as well as a procedural framework for taxpayers to respond to tax evasion investigations. 87722
HIGHLY COMMENDEDDechertFollowing legislative changes permitting third-party funding litigation for international arbitration in Singapore, the firm revived a dormant claim on behalf of a client, with financing provided by third-party litigation funder IMF Bentham. The success of the claim influenced the Singapore legislature's decision to permit third-party funding for domestic and class-action suits.77721
HIGHLY COMMENDEDSingularity LegalRepresented Mercator International and its subsidiary, MCS Holdings, in bringing multiple civil and criminal claims alleging fraud against the managing director of the two companies and local partner in Indonesia. Lawyers enabled the clients to regain control of operations and also turned disputes with two other Indonesian companies arising from the alleged fraud into a beneficial joint venture.68721
HIGHLY COMMENDEDYulchonRepresented South Korean biopharmaceutical company Celltrion in parallel patent invalidation and patent infringement proceedings relating to its new drug Herzuma, a "biosimiliar" — or copycat version of a biologic medicine — of Swiss pharma group Roche's breast cancer drug Herceptin. The firm persuaded the civil court deciding the issue of infringement to overturn the South Korean patent court's decision validating Roche's patent for Herceptin. 59721
COMMENDEDLNT & PartnersRepresented PVTEX, owner of one of the largest polyester manufacturing plants in Vietnam, in a Singapore International Commercial Court arbitration around the interpretation of an engineering, procurement and construction contract. This is the first case in which a Vietnamese firm has led as counsel for an ICC dispute, saving PVTEX $50m and allowing it to resume operation of its plant.58720
COMMENDEDNishith Desai AssociatesCreated mutually agreed mechanisms and guidelines for Indian and United Arab Emirates parties on the execution and enforcement of civil and commercial Dubai International Financial Centre court judgments in India and vice versa. Commended: Moazzam Khan77620
COMMENDEDShin & KimRepresented several minority shareholder private equity firms in a suit against majority shareholder Doosan Infracore, for breaching the terms of a shareholders' agreement by failing to co-operate with investment exit mechanisms. The court determined that minority shareholders were entitled to the entire amount of investment returns projected when the shareholders’ agreement was executed.67720
COMMENDEDWongPartnershipIn a break from tradition, the firm persuaded a Singaporean court to permit a non-QC foreign lawyer to present arguments relating to Indian foreign law in a Singapore arbitration proceeding.77620
COMMENDEDAnand and AnandRepresented agrochemical company Monsanto in its suit for patent and trademark infringement against Indian seed company Nuziveedu Seeds, which had continued to use Monsanto's patented Bollgard II gene technology after licence agreements ended in 2015. The firm successfully appealed to India's Supreme Court to overturn a Delhi High Court declaration that the Bollgard II gene was non-patentable.67619
COMMENDEDHerbert Smith FreehillsOverturned an ex parte injunction brought by US venture capital firm Sequoia Capital. The injunction had restrained digital currency exchange Binance founder Changpeng Zhao from negotiating with third parties as a condition of securing $10m in financing from Sequoia.57719
COMMENDEDHogan LovellsRepresented Lego, the Danish construction-toymaker, in 20 copyright infringement, trademark infringement and unfair competition lawsuits against three manufacturers and one distributor of Lepin, a Lego copycat, before two Chinese courts. The firm secured copyright protection for Lego by reframing the argument to focus on Lego sets rather than Lego bricks.67619
COMMENDEDJ. Sagar AssociatesRepresented Indian power companies Adani Power and Coastal Gujarat Power in a clarification proceeding before the Supreme Court of India concerning amendments to their power-purchase agreements. The firm persuaded the court to reconsider its previous judgment that unexpected price hikes for coal should not result in compensation to the power producers.67619
COMMENDEDBae, Kim & LeeRepresented South Korean national rail operator Korea Railroad in a Supreme Court challenge to a large sum of additional valued added tax imposed by tax authorities on government subsidies. The Supreme Court declaration clarifies that in this instance the subsidy cannot be seen as a reward for provision of services, but as a form of recompense for operating a lossmaking service in the public interest.56718
COMMENDEDNishith Desai AssociatesSuccessfully challenged the enforceability of non-complete clauses in an arbitration brought against two entrepreneurs who had sold their business to a global advertising company. The tribunal said the non-complete clauses unreasonably prevented the ex-founders from engaging in any new business. 66618
COMMENDEDNorton Rose FulbrightActed on Singapore’s first third-party funded arbitration, enabled by the passing of the Civil Law (Third Party Funding) Regulations 2017 in Singapore. This proceeded at a time when third-party funding was still viewed with suspicion in many key common law jurisdictions.75618
COMMENDEDYulchonAssisted technology company Seoul Semiconductor in initiating criminal charges against former employees suspected of leaking intellectual property to a Taiwanese competitor. The firm managed to prevent the case becoming a larger dispute between South Korea and Taiwan by helping its client safeguard its IP swiftly after attempts at theft were identified.56718
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