A standard essential patent (SEP) has no special rights over a regular patent. The rights are abridged because a declaration needs to be signed by standard contributors obliging them to offer licences to implementers, and by necessary implication, to not stop them with injunctions. The licence must be fair, reasonable and non-discriminatory (FRAND). It is the objective of any standard setting organisation to have the standard adopted and not stymied through hold-ups.
An implementer is, therefore, required to pay royalty when offered a license. If the implementer refuses, the undertaking falls away and an injunction becomes due. It can never be the intention that a contributor should not be recompensed for his contribution.
Simple as this may sound, it's on the implementation of these principles that disputes arise. The root is excessive royalty demand. When parties cannot agree, a contributor seeks an injunction against an 'unwilling licensee'. Conversely, an implementer may claim or counterclaim abuse of rights, over-leveraging or breach of FRAND commitments.
The challenges in FRAND licensing in India arise from the number and frequency of injunctions that have been granted. The general perception seems to be that Indian implementers are 'unwilling licensees' and that the contributors' demands and conduct leading up to a dispute is not unreasonable or abusive. Most findings in disputes have been summary when the issues are complex.
It has long been recognised that leveraging intellectual property rights (IPRs) can have competition law implications. IPRs may be abused, resulting in undue enrichment. So well established is this position that even the Trade-Related Aspects of Intellectual Property Rights, TRIPS, agreement provides for it. So sensitive is the issue of injunctions that in some jurisdictions, even moving a court for injunctive relief is considered abusive.
Some of the issues that require immediate resolution are: What is the value of a patent or portfolio; what is the overall money value of a standard and how to apportion; what are the obligations of an SEP contributor and when are they discharged; can injunctions be permitted to hold up a standard; and, is it only for the SEP holder to decide FRAND or whether it is obliged to make details available. Some of the basic concepts of FRAND and abuse of IPRs remain unaddressed. The approach taken is simplistic in that the Indian implementers are equated to counterfeiters who need to be restrained by injunctions.
National practice head (IPR), Shardul Amarchand Mangaldas & Co
'Indian courts consistent with global standards'
Contrary to wide-spread public opinion, patent litigation in India involving SEP was not inaugurated with Ericsson enforcing its six patents against a series of mobile phone manufacturers. Unfortunately, the Indian cases are in limelight for the issue that courts have granted interim injunction against mobile phone manufacturers. However, looking at international precedents, it has been clearly held courts have the right to grant injunction in case the licencee:
n has not made an unconditional offer to conclude a licensing agreement, and
n has not complied with obligations to account for acts of use and to pay the sums resulting therefrom.
It can be clearly observed orders from the Indian courts are consistent with global standards. In most SEP litigations, the tussle between the parties is predominantly with respect to royalty rate, so the terms "fair and reasonable" as contained in the acronym FRAND have constantly been a subject matter of adjudication by courts.
While the US and European courts have adjudicated on these terms many times in the past, the Indian courts do not appear to have any such past experience. So, it will be interesting to watch out how Indian courts calculate the royalty rates that ensure widespread adoption of technology, promotion of competition and incentivising companies to invest in research & development (by ensuring a reasonable return). Having said so, with iBall and Ericsson entering into a Global Patent Licence Agreement and settling their dispute, Indian courts might have some guiding factor as to what may constitute FRAND royalty rate with regard to the remaining disputes.
The author was assisted in this piece by G Deepak Sriniwas, partner, LexOrbis