By Aman Siddiqui L.L.M (NLSIU) RESEARCH METHODOLOGY AND HYPOTHESIS THE METHODOLOGY ADOPTED BY THE RESEARCHER IS DISCRIPTIVE AND ANALYTICAL.
THE HYPOTHESIS OF THIS RESEARCH IS
THAT ‘INDIA CURRENTLY DOESN’T HAVE AN EFFECTIVE LAW MECHANISM TO DEAL WITH THE ISSUE OF STANDARD ESSENTIAL PATENT.’ OBJECTIVES OF THIS PRESENTATION
UNDERSTANDING THE TERM STANDARD.
HOW ARE STANDARDS SET.
WHAT ARE STANDARD ESSENTIAL PATENT.
LICENSING OF THESE STANDARD
ESSENTIAL PATENTS. CONCEPT OF FRAND
TO STUDY THE ADVENT OF STANDARD
ESSENTIAL PATENT LITIGATION IN INDIA. ISSUES FACED IN INDIA AND COMPARING IT WITH OTHER JURISDICTIONS. DERIVE A CONCLUSION. CHAPTERISATION CHAPTER 1 WILL DEAL WITH THE CONCEPT OF STANDARD ESSENTIAL PATENT, HOW ARE THEY ADOPTED AND LICENSED. CHAPTER 2 WILL DEAL WITH HOW STANDARD ESSENTIAL PATENT CREATES AN OVERLAP BETWEEN COMPETITION LAWAND INTELLECTUAL PROPERTY LAW. CHAPTER 3 WILL FOCUS ON THE STANDARD SETTING ORGANISATION IN INDIA AND THE ADVENT OF STANDARD ESSENTIAL PATENT LITIGATION IN INDIA. CHAPTER 4 WILL DEAL WITH COMPARING THE INDIAN SCENARIO WITH OTHER JURISDICTION. CHAPTER 5 WILL TRY TO REACH A CONCLUSION AND GIVE SUGESSION IF ANY. RESEARCH QUESTIONS WHAT SHOULD BE THE ROYALTY BASE TO DETERMINE THE ROYALTIES? WHAT IS THE POSITION OF HIGH COURT AND COMPETITION COMISSION OF INDIA WITH REGARDS TO STANDARD ESSENTIAL PATENT LITIGATION? IS GRANTING OR SEEKING INTERIM INJUNCTION AN EFFECTIVE RELIEF IN STANDARD ESSENTIAL PATENT INFRINGEMENT ALLEGATION WHEN THE PATENT OWNER HAS ALREADY GIVEN A COMMITMENT TO LICENSE ITS PATENT UNDER FRAND TERMS? CHAPTER 1: WHAT ARE STANDARDS?. IN ORDER TO UNDERSTAND WHAT A STANDARD ESSENTIAL PATENT OR SEP IS, WE MUST FIRST UNDERSTAND WHAT IS A STANDARD. STANDARDS ARE WELL AGREED UPON WAY OF DOING A CERTAIN THING WHICH EVERYBODY WOULD COMPLY TO. IT IS USUALLY A FORMAL DOCUMENT THAT ESTABLISHES UNIFORM ENGINEERING OR TECHNICAL CRITERIA, METHOD, PROCESSES AND PRACTICES. EXAMPLES OF STANDARD INCLUDES 4G, 2G ETC. WHO SETS THE STANDARDS? THESE STANDARDS ARE SET BY S.S.O OR STANDARD SETTING ORGANISATIONS, THESE ORGANIZATIONS ARE RESPONSIBLE FOR SETTING, DEVELOPING, COORDINATING AND MAINTAINING STANDARDS. THEY MAYBE PRIVATE, GOVERNMENT OR A MIXTURE OF BOTH. S.S.O ARE COMPOSED OF MARKET PLAYERS, MANUFACTURERS, STATES, ACADMECIANS ETC. WHICH COMES TOGETHER TO DECIDE UPON A STANDARD AND THEN IMPLEMENT IT. IT INCLUDES TECHNOLOGY CONTRIBUTOR AND IMPLEMENTER. EXAMPLES OF SSO ARE THE EUROPEAN TELECOMMUNICATIONS STANDARDS INSTITUTE (ETSI) OR THE INTERNATIONAL TELECOMMUNICATION UNION (ITU) HOW ARE THESE STANDARDS SET? THE METHOD OF SETTING STANDARDS DIFFER FROM SSO TO SSO. GENERALLY THE MEMBERS MUTUALLY DECIDE AND SET A STANDARD BY CONSENSUS, HOWEVER THE SET STANDARD NEED NOT BE MERITORIOUS.
FOR EXAMPLE:
A,B,C,D PUT FORWARD THEIR INVENTIONS TO
BE ADOPTED AS A STANDARD, THE SSO CAN CHOOSE ANY ON OF THE INVENTION AND ADOPT IT AS A STANDARD. WHAT IS STANDARD ESSENTIAL PATENT. THESE STANDARDS ADOPTED BY SSO ARE OFTEN PROTECTED BY PATENTS, AND THE PATENTS THAT PROTECT TECHNOLOGY ESSENTIAL TO A STANDARD IS CALLED A STANDARD-ESSENTIAL PATENT (SEP). ALMOST ALL SMART PHONES OR TABLETS THAT WE USE TODAY ARE PROTECTED BY ONE OR MORE SEPS ADVANTAGES OF SETTING A STANDARD FOR THE TECHNOLOGY CONTRIBUTER : The reach of his patent increases which further increases the profits. FOR THE TECHNOLOGY IMPLEMENTER It creates equality in the market as the implementer can get license of the standard FOR THE CONSUMER They enable improved compatibility, interoperability, reproducibility and quality of product. Better utility of products, and lower prices because of competition. It encourages competition as it increases the number of players and levels the field. OBLIGATIONS OF THE MEMBERS OF SSO DISCLOSURE: THE MEMBER OF THE SSO HAS TO COMPULSORILY DISCLOSE ITS TECHNOLOGY TO THE ORGANISATION, EVEN IF THE PATENT IS PENDING ON IT. LICENSING: THE MEMBERS OF THE SSO ARE UNDER AN OBLIGATION TO LICENSE ITS PATENT IF IT IS ADOPTED BY THE SSO AS A STANDARD. FRAND: THE MEMBERS HAVE TO LICENSE THESE PATENTS UNDER FRAND TERMS. I.E. FAIR REASONABLE AND NON DISCRIMINATORY. WHY LICENSING OF THESE PATENTS IS NECESSARY? The licensing of SEP’s is necessary because these Patents contains technology essential to implement a standard, in other words without these Patents it is impossible to produce standard compliant products. As standard plays an important role in improving compatibility and quality of products, selling a product which is not standard compliant means selling a product which is incompatible with the rest of the products, which will result in failure of the product in the market. However Licensing of these Patents however may lead to a situation where in the Patent holder may charge exorbitant royalties from the licensees and exploit its market power. The Patent holder may also charge different royalties from different licensees in a way which is discriminatory. One way to avoid such situation is to license these Patents under FRAND terms or Fair Reasonable and Non Discriminatory terms. WHAT IS FRAND? It is a mutual beneficial solution wherein the Patent holder is benefited royalties that are fair reasonable and non discriminatory from its Patent which widely used by the industry and the interest of licensees is also protected as they are prevented from paying exorbitant royalty rates. However there are varied interpretations as regards to what constitutes as FRAND terms CHAPTER 2: INTERSECTION BETWEEN COMPETITON LAW AND PATENT LAW IN S.E.P. Competition law aims to prevent the misuse of dominant position or stockpiling of market power while Patent law grants monopoly rights with certain exceptions to prevent abuse of such rights. They appear to be distinct but they intersect at a point. This intersection point is reached when a patented technology becomes essential to achieve a standard. Thus the basic idea behind the Standard Essential Patents (SEPs) system is to reconcile the interaction between Patents which are primarily private and exclusive as against standards which are meant to be public and non- exclusive. CHAPTER 3: STANDARD ESSENTIAL PATENT IN INDIA STANDARD SETTING ORGANISATION IN INDIA-
IN INDIA BIS OR BUREAU OF INDIAN
STANDARDS IS THE NATIONAL STANDARDS BODY OF INDIA WORKING UNDER THE MINISTRY OF CONSUMER AFFAIRS, FOOD & PUBLIC DISTRIBUTION, GOVERNMENT OF INDIA. HOWEVER BIS IS THE SSO OF ALL EXCEPT TELECOM INDUSTRY. AS INDIA IS THE SECOND LARGEST TELECOMMUNICATIONS MARKET HAVING A BASE OF 1.2 BILLION, IT HAS A HUGE ROLE TO PLAY IN PROVIDING INPUT IN STANDARD SETTING ORGANISATION. STANDARD ESSENTIAL PATENT IN INDIA DUE TO THIS AN SSO WAS ESTABLISHED NAMED DEVELOPMENT ORGANIZATION OF. STANDARDS FOR TELECOMMUNICATIONS IN INDIA (DOSTI), HOWEVER THIS SSO WAS NOT SUCCESSFUL, IT FAILED NOT BECAUSE OF TECHNICAL MERIT BUT BECAUSE IT WAS DOMINATED BY TELECOM OPERATORS. A NEW SSO WAS ESTABLISHED KNOWN AS TELECOM STANDARD DEVELOPMENT SOCIETY OF INDIA(TSDSI) . IT HAS A CONSENSUS BASED APPROACH IN DEVELOPMENT OF STANDARDS BY INVOLVING ALL STAKE HOLDERS. IT FOLLOWS THE PRINCIPLES OF OPENNESS, TRANSPARENCY, FAIRNESS, CONSENSUS AND DUE PROCESS IN CONDUCTING ITS ACTIVITIES, MAINTAINS TECHNOLOGY NEUTRALITY AND PROVIDES A UNIFORM PLAYING FIELD FOR ALL ITS MEMBERS. ITS MEMBER INCLUDES GOVERNMENT, SERVICE PROVIDERS, EQUIPMENT VENDORS, EQUIPMENT MANUFACTURERS, ACADEMIC INSTITUTES AND RESEARCH LABS. STANDARD ESSENTIAL PATENT IN INDIA ERICSSON V. MICROMAX – BRIEF FACTS: MICROMAX WAS USING STANDARD ESSENTIAL PATENT WHICH BELONGED TO ERICSSON, HOWEVER IT REFUSED TO ACCEPT THE TERMS OF LICENSING OFFERED BY ERICSSON. AS A RESULT OF WHICH ERICSSON APPROACHED THE DELHI HIGH COURT ALLEGING MICROMAX FOR INFRINGEMENTOF ITS PATENTS. THE DELHI HIGH COURT GRANTED AN EXPARTE INTERIM INJUNCTION AGAINST MICROMAX. DURING THE PENDANCY OF SUIT THE PARTIES ENTERED INTO AN AGREEMENT WHEREIN MICROMAX STARTED PAYING ROYALTIES TO ERICSON AT THE DEMANDED RATES WHICH WERE NOT DISCLOSED BEING A PART OF NDA. STANDARD ESSENTIAL PATENT IN INDIA MICROMAX LATER FILED A COMPLAINT AGAINST ERICSSON WITH THE COMPETITION COMISSION OF INDIA ALLEGING THE ABUSE OF DOMINANT POSITON BY CHARGING EXHORBITANT RATES ON A TECHNOLOGY WHICH IS AN SEP. CCI HELD THAT THE REQUESTED ROYALTIES HAD NO LINKAGE TO THE PATENTED PRODUCT AND WERE THUS DISCRIMINATORY AS WELL AS CONTRARY TO FRAND TERMS AND ORDERED INVESTIGATION IN THE MATTER BY THE DIRECTOR GENERAL. ERICSSON THEN CHALLENGED THIS DECISION OF CCI IN THE HIGH COURT, THE COURT HELD THAT CCI SHOULD REFRAIN ITSELF FROM PERFORMING ADJUDICATORY FUNCTIONS AND RESTRAINED IT FROM PASSING ANY FINAL ORDER IN THIS MATTER. THE COURT GAVE AN INTERIM ORDER DIRECTING MICROMAX TO DEPOSIT 1.25% OF THE SALE OF THE DOWNSTREAM PRODUCT TO THE COURT ISSUES FACED IN INDIA Determination of Royalty base: whether the price of smallest saleable unit or the price of the downstream or the end product to be taken as a base for calculation of royalty? Conflict of opinion between high court and competition commission of India: Should the competition commission of India be restricted from performing adjudicatory functions.? Is the practice of granting and seeking interim injunction effective relief, where the patent owner has already given commitment to license its patent under FRAND terms? CHAPTER 4: COMPARISION WITH OTHER JURISDICTIONS POSITION IN UNITED STATES: IT IS ONE OF THE MAJOR AND MOST POPULAR FIELD OF S.E.P LITIGATION. DETERMINATION OF ROYALTY BASE: CSRIO v CISCO, the US District Court for the Eastern District of Texas had ‘rejected that royalty should be based on chipset price’ and stated that it should be based on the downstream product. AS REGARDS GRANTING INTERIM INJUNCTION MOTOROLA V. MICROSOFT IS OF USE. Brief facts: Motorola was a member of an SSO and had committed to license its patent under FRAND terms. Microsoft was a third party which used the patent by Motorola in its device ( X-BOX) however the royalty charged by Motorola was 2.25% of the end product. Microsoft went to court stating that such royalties were exorbitant. Court held in favour of Microsoft stating that Motorola had an obligation to license the patents on FRAND terms. POSITION IN GERMANY: The statutory law allows the patentee to apply for an injunction. German courts will grant injunctive relief in patent matters if there is a risk of infringing use of the patent. German courts have, as a general rule, no discretion on whether to grant an injunction in patent infringement litigation. German patent law does not provide a basis for an infringer to avoid an injunction based on a FRAND defense. However now German courts have applied German competition law to develop the so-called Orange Book Standard for assertion of a FRAND defense. In Orange Book Standard of May 6, 2009, the German Federal Supreme Court allowed, for the first time, a patent user to defend itself against an injunction claim by arguing that it is entitled to a FRAND license according to antitrust law. POSITION IN JAPAN: In Japan, as in Germany, if patent infringement is established and an injunction is sought, courts issue an injunction as a matter of law. A Japanese court may refuse to grant injunctive relief, however, if it determines that the patent holder has abused its patent right. Recently, however, a Japanese court considered a FRAND defense for the first time in Samsung Electronics vs. Apple where Samsung filed a request for a preliminary injunction against Apple in Tokyo District Court. The Tokyo District Court refused Samsung‘s request for a preliminary injunction on the ground that the asserted patents are SEPs encumbered with a FRAND commitment. CHAPTER 5: CONCLUSION
The legal system in India is efficient to deal with
the issue of standard essential patent litigation but the pendency of suits poses a big challenge. The following are the suggestions: The downstream product should be taken as a royalty base. Interim injunctions should not be granted where the patent holder has committed to license its patent under FRAND terms. The adjudication regarding Standard essential patent has to be left with the high courts and the competition commission of India should perform only investigative functions.