Intellectual Property Rights(IPR) a key to Globalization

Abstract: This article intends to explain how Standard Essential Patents are being litigated and how the
licensing of the SEP is done by the standard setting organization with the help of the business issues. The
business issues include Ericsson vs Xiaomi , Ericson vs Micrmax.
Introduction:
An essential patent or standard-essential patent is a patent that claims an invention that must be used to
comply with a technical standard.[1] Standards organizations, therefore, often require members disclose
and grant licenses to their patents and pending patent applications that cover a standard that the
organization is developing. Once an enterprise secures IPR protection over certain products/technology,
competition laws do not generally cast a duty to deal. For example, once an enterprise secures a patent,
competition authorities would not require the patent holder to license the patent to any other enterprise.
However, when it comes to essential patents1, the distant respect for IPR protected technology usually
accorded by competition authorities, gives way to rather active intervention.
If a standards organization fails to get licenses to all patents that are essential to complying with a
standard, owners of the unlicensed patents may demand or sue for royalties from companies that adopt the
standard. Xiaomi, a Chinese electronics company headquartered in Beijing has been slapped with an
injunction from a high court in India which bans the sales of the mobile phones that uses MediaTek-based
chipsets, in the country. It has been filed that Xiaomi has infringed 8 SEPs (Standard Essential Patents).
Xiaomi within its 6 months in the Indian smartphone market, was inundated with demand for its phones,
which were rich in features and performance and priced comparatively low. The Delhi High Court granted
an ex-parte injunction on the sale, manufacture, advertisement, and import of Xiaomi's devices. An exparte meaning, without even hearing the other side. Another
Legislations involved:
Licensing of Standards Essential Patents (SEPs) on reasonable and non-discriminatory (RAND) terms is a
foundation of the standards development process. The reason behind this is that it ensures the patent
holder of SEP cannot abuse the dominant market position it gains from the widespread adoption of
technical standard. Standards are norms that apply to a category of technology. Standards can be adopted
at a worldwide scale, or only at a regional scale. It is usually the interest of industrial players on the
market to create products that comply with standards. Patent rights granted over such standard
establishing technologies are called Standard Essential Patent. This right is different from the rest of the
patent right as in this case the owner is restricted to use the rights on the grounds of RAND (reasonable
and non-discriminatory). The owner is under the obligation of granting the license to use the technology
in return of the reasonable fee which should be justified otherwise the Competition law would intervene
to avoid enjoying the monopoly. Thus FRAND (fair, reasonable and non-discriminatory) are the base
requirements for SEPs to be useful and constructive. According to the principles of FRAND licensing, the

patent owner must allow to take a license, the license terms must not be illegal or anti-competitive, and
the cost of the license must not be too high.
Relevant Case Laws: The growing number of patent disputes especially in the field of information and
communication are always initiated by Non-Practicing Entities(NPEs)- companies that do not use patents
but merely acquires patents for the sake of licensing or asserting them through litigation. If the standardessential patents are not declared before a standard is established, it is difficult in practice for
manufacturers and service providers to switch and utilize technologies other than that are standard based.
Thu business enterprises that receive demands to terminate services or

manufacturing activities on the

grounds of standars essential patent infringement are put in serious disadvantageous position. The
problem is also that cross-licensing is also not possible as the NPEs do not engage in manufacturing
products and services.
Let us understand the trends of statndard essential patents in US , Europe.
US: It follows a four factor test for injunction Relief as the relief is not automatically granted upon an
infringement. The four factors include. This four factor test is applied by the district court in case of any
infringements and the discretion is given to them for granting the injunctions in the patent lawsuit
between market competitors.
Europe: In Germany which is considered as the largest market of patent lawsuits, the court establish a a
framework for restricting injunctive relief to standard essential patent holders. Since it is not possible to
avoid using essential patents when providing products or services that comply with standards , a holder is
regarded as having the dominant position in the market. Use the image to write the text.
European regulators are moving to implement restrictions on the granting of injunctions with respect to
standard-essential patents after the cases between Samsung and Apple in which Samsung has abused its
dominant position by seeking injunctive relief against Apple.
Generally accepted legal position on the issue:

According to the Indian Laws , n patent litigations, an IP owner typically requests the court to grant an
injunction against the Defendant on the ground that the said defendant is infringing their IP rights by
manufacturing or selling the patented invention.
Outside India, Injunctions are available to all patentees who have a registered patent in India. And they
can be granted against any Defendant who is making or selling the patented invention within the territory
of India ,even if that Defendant is headquartered outside.

There is no separate category of patents called SEPs under Indian law. Rather Indian law simply provides
that any patent that is registered in India can be enforced. But in tech-literature, the term SEP is used to
refer to patents covering technology standards.
One of the major reasons why Xiaomi halted its expansion into western markets this year, despite its huge
sales, is because of the fact that certain internal members within the companys management itself, are
aware of the fact that they will face patent battles, if they try to sell their phones, in numbers similar to
what they sold in China or India.
Micromax alleged that Ericsson was being opaque about its other licensing arrangements where it
demanded a lower license fee. The court then ordered Ericsson to produce these licenses and upon finding
lower rates in them, ordered Micromax to pay a much lower percentage of sales as royalty (.8-1.25%).
But even this is high, if one considers the fact that royalties are being paid on the entire phone sales and
not just the chip component and hopefully this will be reduced after trial. Also since Micromax has
mounted a serious challenge to some of the patents of Ericsson, it is also likely that they may be
invalidated.
Ericssons claim that it has been trying to engage Xiaomi for the past three years means this conflict
began long before Xiaomi ever entered India, or any country outside of China for that matter. Xiaomis
first-ever phone was launched just over three years ago, in August 2011.
Chinese smartphones typically operate on one of two types of networks: the local standard used by the
countrys biggest carrier, China Mobile (TD-SCDMA and TD-LTE) or the international standards used by
China Unicom and China Telecom (WCDMA, CDMA2000, and FDD-LTE). Ericssons beef is with
Xiaomi phones use of the latter, which most Indian carriers also use.
But China has been notoriously protective of its domestic tech companies, which have gotten away with
failure to pay royalties in the form of licensing fees in the past. Notably, chipset maker Qualcomm
suffered a serious hit to its earnings after several phone makers using its chips refused to shell out.
Chinese authorities then accused Qualcomm of price gouging, and the firm is now under investigation for
breaking anti-monopoly and antitrust regulations.

The impact on the company:

Xiaomi has enjoyed great success in its home market of China, becoming the largest
vendor in the country in Q2 2014, beating Samsung for the title. The company also
was the third-largest smartphone maker worldwide in Q3 2014. And things appear
to only be looking up for Xiaomi, with shipments expected to grow at a still rapid pace.
The company hasn't really been challenged locally by any of the big non-Chinese
players, as quite likely any suits filed against it for patent infringement would be lost by
the plaintiffs. Western companies have been dealing with this problem for (too) many
years. However, as Xiaomi expands into India, it has to deal with a different legal
system, one which just sided with Ericsson in a case of patent infringement.

The Delhi High Court has banned imports and sales of Xiaomi mobile devices in India
until February 5, 2015, after the company's devices sold in the country were found to
infringe upon a number of telecommunications-related patents (regarding 3G, EDGE and
AMR) that Ericsson currently holds. The Delhi High Court imposes said ban onto Xiaomi
and its local partner, e-commerce firm Flipkart.

A report by the Internet and Mobile Association of India (IAMAI) stated that the number of
mobile internet users was to increase from 173 million users in December 2014, to 213 million
users by June 2015. r. Another report by the Boston Consulting Group and IAMAI states that by
2018, there will be 550 million mobile internet users in India, and while 60-70% of users
accessed internet on mobile in 2013, that number could rise to 80% by 2018.2 More than 50% of
the Indian population uses the mobile phone as a sole access point to the Internet,3 which
uniquely positions the mobile phone as the access point to knowledge. The ubiquitous mobile
phone, in turn, plays a crucial role bringing about social and economic change, from aiding the
development of the agriculture sector,4 to help ping education in rural areas,5 and in the
dissemination of financial services. The realization of the promise of the low-cost mobile phone6
as a facilitator of access to knowledge7 more so in India where it forms the only mode of
access for over 50% of the population.

References:

India's Overview On Standard Essential Patent (SEPs) (http://www.mondaq.com/article.asp?

article_id=349008&signup=true)
Latest Trends in restrictions on the Exercise of Standard Essential Patent
Rights(https://www.nttdocomo.co.jp/english/binary/pdf/corporate/technology/rd/technical_j
ournal/bn/vol15_2/vol15_2_062en.pdf)
https://www.wto.org/english/tratop_e/trips_e/intel1_e.htm.
In India , Ericson has a high ground.(https://www.techinasia.com/ericsson-banned-xiaomiselling-phones-india)