India: Ericsson Under Probe By Competition Commission Of India Over It’s SEP

Last Updated: 27 March 2014
Article by Nalanda Singh

In the present article we are discussing about enforcement of the Ericsson's standard-essential patents (SEP) relating to wireless technology standards such as GSM, EDGE and 3G in India.

Ericsson, the Swedish company, a big player in mobile network infrastructure manufacturing, had filed a patent infringement suit against Micromax in March 2013, Micromax i.e one of India's largest domestic mobile handset manufacturers. The suit, filed at the Delhi High Court, involves a huge claim of Rs. 100 crores made by Ericsson by way of damages which is one of the highest in terms of damages sought in a patent suit in the Indian IT and Telecommunications industry.

Ericsson, had come up with the legal action against Micromax due to the failure of three years' negotiation with Micromax for a license agreement on certain standard-essential patents (SEP) relating to wireless technology standards such as GSM, EDGE and 3G. Justice Manmohan of Delhi High Court issued an order on March 19, 2013. While the order allowed Micromax to sell the alleged infringing products in India, an interim arrangement on payment of royalties by Micromax to Ericsson was put in place.

As per the Order, the parties were to negotiate the terms of a license in presence of a mediator and the interim payments were to be deposited in the court as per the arrangement till the dispute is finally settled. The Order embodies FRAND (fair, reasonable, and non-discriminatory) terms, as per which Micromax will be required to pay anywhere between 1.25% - 2% of sale price as royalty per phone and tablet.

As the negotiations in presence of the mediator were not successful, Micromax filed a complaint before Competition Commission of India (hereinafter CCI) alleging Ericsson of abusing a dominant position and engaging in practices contradicting to its previous global commitments on providing its SEP to handset makers under fair, reasonable and non- discriminatory (FRAND) terms. Particularly, it has been alleged hat Ericsson had abused its dominant position by imposing exorbitant royalty rates for standard essential patents as it was aware that there was no alternative technology available and it was the sole licensor globally.

The Competition Commission of India (CCI) has ordered investigation into the matter after finding prima-facie evidence of Ericsson indulging in unfair trade practices. The prima facie findings were summarized in an order dated November 12, 2013. The Director General, CCI is now destined to conduct through investigation and make a report of his findings (i.e. whether there are any violations of the provisions of the Competition Act) to CCI.

Ericsson, vide a separate writ petition before the Delhi High Court had challenged CCI's jurisdiction to investigate the Ericsson's actions as the Patent Act itself provides adequate mechanism to balance the rights of patentee and other shareholders The Court here expressed its unhappiness at CCI entering into an 'adjudicatory and determinative' process by recording detailed and substantial reasoning at Section 26(1) stage itself.

The Single judge directed the Director General of CCI to refrain from passing any final order/report pending the adjudication of this matter in the Court and restricted him from summoning any person working abroad without the leave of the Court.

The CCI appealed against this order, and a Division Bench of the Delhi HC recently modified the single judge order to the extent that the Director General may call foreign officers for purposes of the investigation. However, Ericsson can approach the court if it feels that the call is unnecessary.

Thus, it can be observed that while the battle started in the form of patent infringement suits, we have already noticed the defendant taking cover other enactments. It can also be said that till now, the Courts have done a fair and reasonable job of balancing between the rights of patentee and other shareholders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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