Committing to FRAND Terms: Observing Indian Position

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The basic analogy behind the measurement of consumer harm relies especially on three factors i.e. price, quality, and innovation. Indian Courts, in various cases, have dealt with all three factors. A clear analysis of three factors inherently gives us two more subjects to deal with. Those two subjects famous in the Competition law area are Abuse of Dominance and the Refusal to license. To our observation, Indian law is successful in dealing with both areas. Abuse of dominance, are anti-competitive practices dealing with the economic strength of the enterprise. Why it is important for us, is because it is the IP that potentially creates market dominance and it is that dominance that can distort the fair competition in the market. On the other side refuses to license can be anti-competitive, based on the rule of reason. Observing Indian Law can give us the inference that IP law creates monopolies but Competition law battles the monopoly which is the basic general perception of how these two operate. frand licensing

Section 3(3) of the Competition Act deals with the horizontal agreements which are presumed to be in the ambit of per se prohibition, while 3(4) requires the rule of reason prohibition to be analyzed. Section 3(5)(i) of the Act talks about the exemption if the agreements fall under Section 3(3) and 3(4), to impose a reasonable restriction. But this exemption does not entail in itself an exemption from Section 4 that talks about the Abuse of Dominant Position. The exemption needs to pass Section 4 following the test of reasonability.

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FRAND and Injunction

Six SEP suits (Micromax- CS(OS) 442/2013; Intex- CS(OS) 1045/2014; I ball- CS(OS) 2501/2015; Mi- CS(OS) 434/2016; Gionee- CS(OS) 2010/2013; Lava- CS(OS) 65/2016) dealing with the FRAND terms were filed, where Ericsson was the common plaintiff. The first thing determined by the courts was that the SEPs being referred to were prima facie valid. Ericsson was able to obtain a consent order in which the court has determined interim royalties until the conclusion of the trial and injunction could be invoked in case of non-compliance of such an order. It was further noted that it is of the essence to maintain a certain amount of restraint while granting the injunction since validity can be an issue. However, while granting the ex parte injunction (eg. against Micromax, Intex, Xiaomi (LM Ericsson(PUBL) vs. Xiaomi Technology and Anr, (2016) DHC, FAO(OS)522/2014) and LAVA (LM Ericsson(PUBL vs. Lava International Ltd., I.A. Nos. 5768/2015 &16011/2015 in CS(OS) No. 764/2015)); the court also noted that an exclusion order will be appropriate under certain conditions, redefining the relation of implementer-licensee. The court observed that the refusal to accept FRAND Licence or even demanding in excess to the limit of FRAND term or not engaging in negotiation can result in an exclusion order.

This observation is the most probable operative thought. However, the injunction was ready to be lifted if the implementer would deposit the royalties with the court during the pendency of the suit. The readiness of the court to determine the interim royalty rates turned out to be a progressive part of these cases and is presently set as the current standard in telecoms SEP fights. It is along these lines, for Ericsson and likewise placed SEP owners, contesting in India implies that the implementer has the option of avoiding an injunction by depositing the interim royalty as may be decided by the judiciary and as found in the recent cases, this turning into the de facto practice.

The CCI was approached by Micromax  and Intex  contending that Ericsson’s conduct amounted to an abuse of dominance, by discriminating manufacturers concerning differential royalties, given that these rates were based on the final price of the finished product and not on actual. Even though CCI has initiated an investigation after finding a prima-facie case against Ericsson, however, the subject of seeking an injunction and its relationship with abuse of dominance has not been put to test.

As of late, India’s very first judgment on SEP was Koninklijke Philips Electronics N.V. (Plaintiff) v Rajesh Bansal and Ors (Defendants) (251(2018) DLT602.), whereby Philips claimed for permanent injunction and even the rendition of account and damages. The parties interested in the production of DVD will have to use the patent, essential for DVD-Rom standard. It was further asserted that the DVD video players fabricated, gathered, and sold by the defendants utilized the innovation as per the claims of the said Patent, thereby infringing the same. The Delhi High Court while rendering the judgment in favor of the plaintiff, observed that:

  • The patent in question was a valid one and was essential to the given DVD standards, thereby qualifying as a SEP;
  • The defendants had used a SEP without authorization or license and thus infringed the petitioner’s rights;
  • There was no case of abuse of dominance; and
  • The defendants failed to prove that the license terms offered by the petitioner did not comply with FRAND terms.

The court needs to give much impetus on the term of the license, offered by the SEP holder, to be valid. The concentration on the licensing term will eventually be much advantageous for the court since this is the subject matter of actual dispute in almost all cases. The whole impetus must be put on the parties to resolve the issues at hand. This will help the court to know the earlier efforts by the parties to reach a consensus. If there seems no previous effort, then further reliance must be placed on allowing negotiations for having consent towards FRAND terms, assuming that both parties will negotiate in good faith. Probably, the whole process if not successful will invite the court to decide over the FRAND terms, disobeying can imply issuance of an injunction against the SEP user.

Author: Saransh Chaturvedi (an advocate) currently pursuing LLM from Rajiv Gandhi School of Intellectual Property Law (IIT Kharagpur).  In case of any queries please contact/write back to us at support@ipandlegalfilings.com.

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