Patents: FRAND Litigation in India

September 28, 2015

Introduction

 

Standard Essential Patents are patents, which are granted over an invention or technology establishing a standard. For example, mobile telecommunication technologies like 2G, 3G, GSM, EDGE, are based on a set of standards. These technologies establish standards on which various products (phones, tabs etc.) are based, thereby making it essential fo

 

r these products to acquire the technologies. The difference between SEPs and other patents is that SEPs are subjected to Fair, Reasonable, and Non Discriminatory (FRAND) terms set by standard setting organizations (SSO). As per FRAND terms, the patent holder is required to license the SEPs to market players on anti-competitive, reasonable rates, which are not discriminatory against the market players.

 

In spite of these efforts and provisions made by the Standard Setting organizations for licensing Standard Essential Patents (SEPs) on FRAND terms, litigation disputes with respect to these SEPs have taken a leap all around the globe.  FRAND litigation has not only given rise to contractual liabilities but has also attracted antitrust issues between companies. 

 

This article is an attempt to provide an overview of the recent trends of FRAND litigation in India and analyze the rulings of the court in some of these cases. 

 

 

FRAND proceedings in India

 

The Indian patent regime does not provide for any specific provisions regarding SEPs and its licensing. However, moving beyond its traditional approach, India has fairly dealt with a wide array of cases involving FRAND litigation in the recent past. However, the very idea of dealing with FRAND and SEPs litigation cases, is still a concept very naïve to the Indian Courts as compared to the US and European courts. 

 

FRAND litigation in India can be prominently seen in the Indian telecommunication industry, which has been seen to actively protect their IP rights by initiating infringement suits against other telecom companies for making use of their SEP’s without seeking a license as per the FRAND terms, and the threatened companies, instead approaching the CCI, alleging anticompetitive practice by demanding exorbitant royalty rates for licensing their SEP’s.

 

The first ever case on FRAND litigation in India was between the Swedish telecommunication giant, Ericsson and Micromax. Subsequently, Ericsson has initiated similar infringement suits against telecom companies such as Intex, iBall, Xiaomi etc.

 

Erricsson v Micromax:

 

It all started in 2008, when Ericsson had approached Micromax to discuss the licensing of its SEP on FRAND terms, so that Micromax could sell its products in India based on the disputed patents.  However, the parties failed to conclude an agreement. Midst the negotiations, in 2013, Micromax approached the Competition Commission of India (CCI), alleging that Ericsson had abused its dominant position by demanding exorbitant royalty rates and violating the FRAND terms.  The CCI after hearing both the parties, ordered an investigation in the matter, establishing that Micromax had made a prima facie case that Ericsson abused its dominant position. 

 

However, in March 2013, Ericsson sued Micromax before the Delhi High Court for infringement of eight of its essential patents.  The Delhi High Court demanded Micromax to give 1.25% to 2% of the sales of the devices in question in the suit.  Ericsson also challenged the order passed by the CCI contending that the licensing agreement was purely contractual in nature and that the Indian Patent Act itself provides for adequate measures to balance the patentee rights and that of the other stakeholders. The Delhi High Court restrained CCI from passing any final orders till the matter was pending before the court.

 

Ericsson v Intex

 

In a similar proceeding, Intex had filed a complaint against Ericsson before the CCI alleging that the royalty rates demanded by the later as per the “‘Term Sheet for Global Patent License Agreement” were unreasonably high and therefore, against the FRAND terms. It also argued that the signing of an NDA was restrictive and violative of FRAND commitment. The CCI passed an order similar to that passed in the Micromax case and ordered an investigation by the Director General under Section 26 of the Competition Act. 

 

Subsequently, in April 2014, Ericsson approached the Delhi High Court for infringement of its SEPs by the Defendant and alleged that the defendant was an “unwilling licensee”, thereby requesting an injunctive relief against the defendant. The defendant company, on the other hand challenged the plaintiff’s request for injunction on the ground that section 13(4) of the Patent Act has been interpreted by the Apex court to mean that ‘no patent which is granted in India enjoys presumptive validity owing to the mere factum of grant’, and that ‘the validity of a patent must be established before the issue of infringement is considered by the Court’. The defendant further argued that the plaintiff had not disclosed all information regarding its foreign patents when filing patent applications in India, thus violating section 8 of the Patent Act and that the plaintiff had violated FRAND terms by demanding different royalty rates from different companies. The Courts main finding can be summarized as follows

 

  1. Validity of Ericsson’s Patents:

 

The Court held that the that the essentiality and validity of the patents were a subject matter of the revocation proceedings before the IPAB, here these questions are to be addressed and that the matter cannot be so minutely examined at the interim stage in an infringement proceedings. It also held that Intex, in proceeding before the CCI had specifically admitted Ericsson’s patents to be SEP and therefore it cannot approbate and reprobate the same matter in a later proceeding. 

 

Intex had also challenged the validity of Ericsson’s patent under section 3(k) and 3(m) of the Patents Act. The court examined the meaning of the term “per se” and held that that by the insertion of the words per se in section 3 (k) , it appears prima facie that any technical invention which has a technical contribution or has a technical effect is not merely a computer programme per se.

 

2. Non disclosure under section 8 of the Act:

 

The Court held that said section should not be interpreted that every shred of paper filed in every foreign country has to be filed with the IPO. The obligation 8 cannot be so stressed in an action for infringement of patent is concerned, otherwise the injunction despite of infringement cannot be granted. 

 

 

iBall’s complaint against Ericsson before CCI.

 

 

Recently, in May 2015, Best IT World (India) Private Limited (known as iBall) has filed a complaint against Ericsson before the CCI. iBall has alleged that  Ericsson wanted iBall to execute a patent-licensing agreement and an NDA to license the use of Ericsson’s patents in GSM and WCDMA based products. iBall  argued that,  despite the fact that it was ‘willing to enter into a license agreement with Ericsson as per FRAND terms’, Ericsson had instead  put forth onerous terms through the NDA, including settling all disputes through arbitration in Stockholm, ten years’ confidentiality in the disclosure agreement, and covering past as well as future sales within the ambit of the license agreement.

 

iBall  also alleged that Ericsson’s conduct of initiating patent infringement suits against complainant companies and demanding ‘unreasonably high royalties’ violated section 4 of the Competition Act.

 

Similar to its orders in Micromax and Intex, the CCI observed that, because there is no alternate technology available for Ericsson’s patents in the 2G, 3G, and 4G standards, ‘Ericsson enjoys a complete dominance over its present and prospective licensees in the relevant market’. The CCI also said that Ericsson’s licensing practices appear to be ‘discriminatory as well as contrary to FRAND terms’. The CCI directed the DG to investigate further Ericsson’s licensing practices and highlighted that iBall’s allegations were similar to the allegations made in Micromax and Intex. The CCI also directed the DG that the CCI’s observations in the order not impede or affect the DG’s investigation.

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