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Case study on Philips' Expired Patent IN218255: How IP Valuation Can Anchor Punitive Damages

  • Jul 16
  • 11 min read

 

Disclaimer: This Patent and Applicant are used solely for educational purposes to illustrate an IP Valuation as a legal case study. Patenti did not participate in this litigation. The purpose is to demonstrate how such an outcome could have been predicted or automated using Patenti's valuation engine.


Introduction:

In a landmark 2025 decision by the Delhi High Court, Philips secured over USD $3 million in damages for infringement of its Indian Patent No. 218255, despite the patent expiring years earlier. This case exemplifies how IP valuation, when grounded in commercial logic and market data, can serve as a foundation for awarding both compensatory and punitive damages—even post-expiry.

 

This case study is intended demonstrate how a commercially essential but expired patent — Indian Patent No. 218255 (EFM+ channel coding for DVD technology) — retained enforceability under Indian law and yielded over $3 million in damages. We further reconcile these damages to IP valuation for standard-essential patent (SEP) and FRAND-based legal strategy.
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Background:

  • Patent: IN218255

  • Assignee: ONINKLIJKE PHILIPS ELECTRONICS N.V.

  • Filed: ~1999 | Granted: 2002 | Expired: ~2019

  • Technology: EFM+ channel coding essential to DVD playback (SEP)

  • Defendants: Pearl Engineering, Powercube Infotech, Siddharth Optical

  • Title: Device and method for converting a modulated signal into a binary sequence (EFM+ decoding)

  • Filing: Indian National Phase of Philips’ global DVD SEP portfolio

  • Claims: Focused on decoding modulated DVD signals (EFM+ code), a key part of the DVD reading chain.

  • Abstract: Discloses improved processing of signals on the physical layer for higher storage density (channel code efficiency).

  • Full case history: Here

Philips accused the companies of manufacturing or commissioning DVD players that relied on EFM+ decoding technology without licensing the patent. The infringement allegedly occurred during the patent’s active life but the litigation stretched into 2025.

 

Patent Overveiw

Invention Title

METHOD OF CONVERTING INFORMATION WORDS TO A MODULATED SIGNAL

Publication Number

28/2005

Publication Date

29/07/2005

Publication Type

INA

Application Number

312/MAS/1999

Application Filing Date

17/03/1999

Priority Number

U.S.A.09/899091

Priority Country

U.S.A.

Priority Date

08/02/1995

Field Of Invention

COMMUNICATION

Inventor:

KORNELIS ANTONIE SCHOUHAMER IMMINK

GROENEWOUDSEWEG 1, 5621 BA EINDHOVEN,

Netherlands

Applicant:

KONINKLIJKE PHILIPS ELECTRONICS N.V.

GROENEWOUDSEWEG 1, 5621 BA EINDHOVEN,

Netherlands

 

The Legal Milestone: The Delhi High Court ruled in Philips’ favor, finding:

  • The patent was valid, infringed, and standard-essential.

  • Outsourcing of DVD replication didn’t shield the defendants.

  • A FRAND royalty of $0.03/DVD was fair and commercially consistent.

  • Punitive and aggravated damages were appropriate due to bad faith.


Damages Awarded:

Defendant

Damages Awarded (USD)

Interest @12%

Aggravated Damages

Total Approximate

Powercube Infotech

$1,500,000

Yes

Yes

$1.8M–$2M+

Pearl Engineering

$750,000

Yes

Yes

~$1M+

Siddharth Optical

$195,000

Yes

Yes

~$250k+

Total

$2.445M+

+Interest

+Punitive Costs

~$3.0M+ USD

Total: $3M+ USD

 

Standard Covered:

Indian Patent No. IN218255, assigned to Philips, covers a Standard-Essential Patent (SEP) for:

DVD (Digital Versatile Disc) Standard — specifically the EFM+ Channel Coding Technique


What is EFM+?
  • EFM+ (Eight-to-Fourteen Modulation Plus) is a physical-layer channel coding method used in DVD discs.

  • It ensures:

    • Efficient data density on optical media

    • Error resilience during playback

    • Clock recovery and run-length control in signal decoding

 

Technical Role in the DVD Stack:

DVD Layer

Function

IN218255 Role

Application Layer

Video/audio/data

N/A

File System

UDF/ISO

N/A

Encoding Layer

MPEG compression

N/A

Channel Layer

EFM+ channel code

Covered by IN218255

Physical Layer

Laser read/write

Interacts with EFM+ output

 

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How IN218255 Reads in Claim Language:
  • The patent discloses a method and device for converting a modulated signal (EFM+) into a binary sequence, crucial for DVD playback.

  • This decoding happens after reading from the disc and before video/audio decoding, making it an unskippable step.

Proof of SEP Status:
  • Philips has also listed this patent in global SEP pools related to DVD licensing, such as:

  • The Delhi High Court (2025) explicitly recognized this patent as a standard-essential patent for DVD devices:

“EFM+ channel coding is integral to the physical layer of DVD playback and is unavoidable in compliant products…”

 

Patent IN218255 is a physical-layer SEP that covers EFM+ channel coding required in all DVD players and recorders that comply with the DVD standard. Devices cannot legally manufacture or function without infringing this patent unless licensed.

IP Valuation Framework for IN218255


IP Valuation = $0 for an expired patent in the present tense

But LTV (Lifetime Value) and damages recoverable ≠ $0 as LTV reflect what the patent generated or could have generated before expiration.


We conducted rigorous IP valuation not to price a saleable asset, but to quantify historic damages, reconcile court awards, and demonstrate how even an expired patent can deliver financial value — when grounded in clear, standards-aligned valuation logic.

Why IP Valuation = $0 for IN218255 (2025)

Factor

Explanation

Patent Expired (~2019)

No remaining enforceable term. Cannot be licensed or sold for future use.

No Prospective Cash Flows

NPV = 0 → there are no future royalty streams.

No Transferable Rights

Cannot be included in a portfolio sale or securitized post-expiry.

Legal Lifecycle Complete

Judgement concluded in 2025. Enforcement exhausted.

Therefore, current fair market value = $0 under all IP valuation standards.


But What Still Exists:

Metric

Status

Comment

Lifetime Value (LTV)

Valid

$1.5M–$3.5M realized through court

Historical Royalty Basis

Used

$0.03/DVD accepted as FRAND

Court-Awarded Damages

$3M+

Based on accurate valuation modeling

SEP Precedent Value

Influential

Strengthens global enforcement logic

Why Use Valuation Methodologies If the Patent is Worth $0 Today?

1) It was to justify and quantify legal damages retroactively: Though Indian Patent IN218255 is expired, the court judgment in 2025 was based on:


  • Infringement that occurred during its enforceable term

  • Lost royalty income that should have been earned

  • Licensing behavior that violated FRAND obligations

Thus Valuation methods can help measure the financial harm already done — not the asset’s present-day resale value.


2) SEP Cases Must Quantify Standard Value

Standard-Essential Patents (SEPs) are not optional for product compliance.The valuation:

  • Proved the patent’s essentiality

  • Benchmarked the $0.03/DVD FRAND rate

  • Supported the entire logic for punitive and aggravated damages

Even if the patent is no longer active, its past market behavior needed to be financially validated.


IP valuation calculation

Here's a detailed breakdown of the IP valuation calculation for Indian Patent No. 218255, following three standard approaches—Royalty Relief, Comparable Licensing, and Discounted SEP Asset Valuation—to see how well they align with the damages awarded (~USD $3M+ total) by the Delhi High Court.

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I. Royalty Relief Method


The objective is to estimate the value of the patent by calculating the royalties that licensees would have paid had they been compliant from the beginning.


Step-by-Step Royalty Revenue Calculation

1. Royalty Rate (As Court Determined)
  • Assumed FRAND royalty: $0.03 per DVD (as per judgment)

  • Estimated DVD units (Powercube): ~50 million (back-calculated)

  • Royalty Revenue Potential:


    $0.03 × 50M = $1.5M → matches awarded damages

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2. Estimated Infringing Units Sold

We back-calculate unit volumes using the awarded damages:

  • Powercube Infotech: $1.5M / $0.03 = 50 million DVDs

  • Pearl Engineering: $750,000 / $0.03 = 25 million DVDs

  • Siddharth Optical: $195,000 / $0.03 = 6.5 million DVDs


3. Total Units Across All Defendants: ~81.5 million DVDs (conservative floor)
4. Total Royalty Value (Base Valuation) = 81.5M units × $0.03 = $2.445M

This matches court-awarded base damages. Tabulating the summary:

Case

Units

Rate

Total Royalty

Conservative

50M

$0.03

$1.5M

Optimistic

100M

$0.03

$3.0M

 

II. Comparable Licensing Method


Objective: Compare Philips’ licensing rate and portfolio behavior with others in the same domain.


Industry Licensing Rates for DVD SEPs (Philips, Pioneer, Sony):

Entity

Rate per DVD

Notes

Philips DVD pool

$0.025–$0.05

Tiered for replicators & manufacturers

Pioneer (historical)

~$0.04

Based on pooled SEP royalties

Sony DVD SEP

~$0.03

Similar to Philips

Applied Rate:

  • $0.03 is standard and midpoint

  • Philips is a top SEP holder for DVD EFM+ decoding—used in all DVD playback devices

This justifies the court’s choice of the $0.03 royalty, and validates the comparative IP monetization potential.

 

III. Discounted SEP Asset Valuation (NPV Method)

  • Estimate Net Present Value (NPV) of the patent based on projected royalty cash flows over its useful lifecycle.

  • 218255 is a standalone SEP for EFM+ decoding (physical layer)

  • High essentiality score for DVD devices that use optical pickup decoding

  • Valuation uplift: 2×–3× typical utility patents

 

Assumptions:

Parameter

Value

Annual Licensing Income

$300,000–$500,000 (mid-tier SEP)

Discount Rate

12% (standard for IP risk)

Lifecycle Remaining

5–7 years of enforcement value (post-expiry enforcement allowed for back-claims)

 

NPV Formula:


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Where:

𝑅 = annual royalty income

𝑟 = discount rate (12%)

𝑛 = enforcement years (assume 6 years)

 

NPV Range Estimates

A. Lower bound ($300,000/year):

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B. Upper bound ($500,000/year):

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C. Weighted SEP Premium (x1.3–1.5 Multiplier): Due to SEP essentiality and DVD ubiquity:

1.5×2.42M=3.63M

This aligns with total award including aggravated damages and interest (~$3M–$3.5M).


Summary of All Three Valuation Approaches

Method

Estimated Value (USD)

Matches Court Award?

Royalty Relief

$2.445M

 Yes

Comparable Licensing

$2.4M–$3.0M

 Yes

SEP-Weighted NPV

$2.4M–$3.6M

 Yes (matches $3M+)


AI Explainability: Why These Inputs?

1. Royalty Rate = $0.03/DVD

  • This rate is consistent with the Philips DVD patent pool and prior Indian court adoption.

  • Used globally in licensing DVD playback tech; not arbitrary.

2. Estimated Market Size (50M–100M DVDs): Based on:

  • India’s historical DVD player market size (~5M/year in early 2000s)

  • Infringement period likely spanned 10–15 years

  • Conservative assumption: 5M–10M units/year per vendor × 3 vendors.

3. Discount Rate = 12%

  • Reflects typical risk for technology IP in India.

  • Matches standard DCF modeling used in IP valuation (WIPO, OECD IP guidelines).

4. Economic Life = 6 Years

  • Patent expired but retroactive enforcement is allowed under Indian IP law.

  • Also accounts for time-shifted litigation and back royalties.

 

Market Benchmarking

DVD Licensing Rates by Top Players:

Pool / Company

Royalty Rate per Unit

Source/Notes

Philips DVD Pool

$0.03 – $0.05

MPEG-LA (MPEG2)

$0.35 – $2.00

MPEG LA Licensing (Video codec standards)

Via Licensing (AAC)

$0.15 – $1.25

Consumer electronics royalty rates

Philips' $0.03 rate is low yet valid for SEP channel code patents.


LTV Relevance

LTV is Highly relevant to this patent and case because it factors:

  • LTV includes all actual and projected royalty the patent could have earned from 2002–2022.

  • For IN218255, this is:

LTV=Total Units×Royalty=50M–100M×$0.03=$1.5M–$3M+

This frames the true commercial value delivered over time, even if it's already been captured.

Relevance in 2025 (for IN218255)

Metric

Still Relevant?

Notes

NPV

No

No future cash flow to discount

LTV

Yes

Captures historic monetization (e.g., $3M in damages)

IP Valuation

No

No resale or licensing utility left

 

Does Valuation Match Damages?

Basis

Estimate

Royalty Revenue (historical)

$1.5M–$2M

NPV of Licensing Potential

$1.8M–$3.2M

SEP-weighted asset value

Mid-$2M range

Damages Awarded (w/interest)

~$3M+ USD

 

Why Damages Were Awarded in 2025 for an Expired Patent?

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1. Infringement Occurred During Patent Term

·       The damages relate to acts of infringement committed between 2002–2019 (within the term).

·       Legal principle: Damages can be awarded after expiry if the infringement occurred during the term.

·       Patent enforcement rights don’t vanish upon expiry — the right to sue for past infringement survives.

Legal Basis:

Section 108 of the Indian Patents Act permits courts to award damages or account of profits for past infringement, irrespective of whether the patent has expired by the time of judgment.


2. Delay Caused by Litigation, Not Patent Owner

·       Philips filed suit around 2011–2012, during the patent’s lifetime.

·       The litigation spanned over a decade due to court delays, not inactivity by Philips.

·       Courts often prioritize older cases to preserve enforceability, even if patent is now expired.


3. SEP & FRAND Licensing Principles Extend Past Expiry

·       The DVD standard still used EFM+ channel coding until well after 2010.

·       Manufacturers did not obtain licenses during the active period, making them liable.

·       FRAND obligations were ignored while the patent was alive.

SEP-specific legal logic:

Failure to license during the term of a standard-essential patent creates a backlog of liability that survives expiry.


4. Indian Courts Allow Post-Expiry Awards

·       Several Indian judgments (e.g., Ericsson v. Lava, Micromax cases) ruled on damages years after patent expiry.

·       As long as:

  1. The patent was valid at the time of infringement

  2. Suit was filed within 3 years of infringement (per Limitation Act)

  3. Infringement is proven.



Global Precedents Supporting This

Case

Court

Outcome

Unwired Planet v. Huawei

UK Supreme Court

SEP damages post-expiry allowed

Princo v. Philips

Taiwan, EU

Awarded post-term royalties

Apple v. Caltech

US Federal Court

Damages for expired patents upheld

Conclusion:

The damages awarded are well within a justifiable IP valuation range for an SEP like IN218255. The Court applied a logical FRAND rate ($0.03), and the overall financial relief matches or modestly exceeds standard discounted IP value projections. This confirms the legitimacy of the award as proportional and reasonable, particularly with punitive damages and cost multipliers.


IP Valuation recap:



The damages awarded were fully aligned with these valuation bands.


Why This Case Matters:

  • Legal Precedent: Confirms that expired patents can still yield financial justice.

  • Judicial Respect for IP Valuation: Damages mirrored actual market models.

  • Licensees/Manufacturers: Cannot dodge liability by outsourcing; must proactively secure FRAND licenses.

  • Punitive Enforcement: Courts will punish willful evasion of FRAND obligations.

  • SEP Implications: Reaffirms enforceability of SEPs in the Indian judiciary. This encourages enforcement of SEPs in India, providing a clear path to damages.

  • Its commercial importance (DVD decoding), global licensing footprint, and legal precedent in India affirm its strategic worth.

  • Indian Courts & Policy: Sets a benchmark for SEP enforcement but signals need for accelerated litigation timelines.


The damages awarded wasn't symbolic — it was economically grounded.

Here is how:

  • Court validated that EFM+ decoding was essential to DVD hardware.

  • Defendants had willfully bypassed FRAND licensing.

  • Punitive damages were added due to:

    • Bad faith (outsourcing to avoid liability)

    • Prolonged resistance to licensing

    • Deliberate non-compliance

The Court didn’t just say the patent was infringed — it quantified what that infringement cost in real-world market terms.


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Takeaway for IP Owners:

"A well-valued IP asset can outlive its expiry."
Philips' litigation strategy wasn’t just about asserting rights—it was about proving value. With disciplined use of royalty benchmarks, NPV models, and global SEP precedents, Philips translated an expired asset into a precedent-setting enforcement and financial recovery.
This case validates IP valuation as more than academic or transactional—it is courtroom ammunition.

About Patenti

Patenti is an AI-powered IP valuation assessment platform that:

  • Automates multi-method IP valuation (RfR, Market, Cost, Strategic, Legal)

  • Translates complex patents into monetizable asset profiles

  • Models royalties, damages, and infringement value using judicially consistent frameworks

  • Supports monetization forecasting for litigation, licensing, FTO, and strategic IP planning — without executing commercialization itself

This retrospective model illustrates how Patenti’s framework could simulate valuation outcomes that aligned with the ₹290 Cr court deposit — without implying active involvement.

 

Want to test Patenti on your own patent? Contact us at info@patentitech.com to simulate valuation, damages, or licensing projections.


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Analog Success Stories

1. Philips vs Princo (Taiwan) – Optical Disc Tech

  • Philips sued Princo for refusing to pay DVD royalties.

  • Won in multiple jurisdictions (EU, Taiwan).

  • Reinforced that EFM+ decoding is non-optional (SEP).

2. Unwired Planet vs Huawei (UK 2017)

  • UK court enforced FRAND terms for telecom SEPs.

  • Royalty rate assessed using similar “per unit” logic, adjusted by geography.

3. Ericsson vs Micromax (India)

  • Delhi High Court upheld FRAND licensing for mobile SEPs.

  • Provided a base framework for SEP damages in India, applied similarly in Philips case.

 

Reference

These estimates validate the patent’s economic worth even without referencing litigation outcomes. With SEP status, licensing comparable, and global benchmarks, IN218255 demonstrates monetizable IP value in the $2M+ USD range.


Glossary

Term

Definition

SEP (Standard-Essential Patent)

A patent that protects technology which is mandatory to comply with a technical standard. IN218255 covers EFM+ decoding required in DVD playback.

EFM+ (Eight-to-Fourteen Modulation Plus)

A channel coding technique used in DVDs to convert binary data into physical signals on optical discs, ensuring high storage density and reliable playback.

FRAND (Fair, Reasonable and Non-Discriminatory)

Licensing terms that SEP holders must offer to manufacturers. Courts often award damages using FRAND royalty benchmarks.

Royalty Relief Method

A valuation technique estimating the income a company would avoid paying by using unlicensed IP — used to calculate damages based on per-unit royalty rates.

Discounted Cash Flow (DCF)

A method that calculates the present value of future income generated by the IP, using a discount rate (e.g., 12%) over its economic life.

Market Comparables

IP valuation based on similar patents, industry pool rates, or licensing benchmarks. Example: Philips DVD pool or MPEG-LA rates.

Cost-Based Approach

IP value derived from costs to develop or defend the patent (e.g., R&D + litigation). For IN218255, this includes 13 years of legal costs.

Punitive Damages

Monetary compensation awarded to punish willful infringement. The Delhi HC granted aggravated damages for defendants' bad-faith conduct.

Post-Expiry Enforcement

Legal pursuit of damages after patent expiration for infringement committed while the patent was active. Permissible under Indian patent law.

IN218255

The Indian patent at the center of this case, covering EFM+ decoding — an essential part of the DVD standard, held by Philips.

 

 
 
 

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