India: Tech Patents In Smartphones

Last Updated: 28 October 2015
Article by Anupam Sanghi

OLD WINE IN NEW BOTTLE

Joining the smartphones wars ensuing in India, the recent entrant in the ring happens to be M/s Best IT World (India) Private Limited ( iBall ) – who Informed the Competition Commission of India ( CCI ) how Ericsson is abusing its dominant position, contravening Competition law in the Indian market.

ALLEGATIONS

In November 2011, Ericsson issued a letter to them, stating that they have reviewed the Informant‟s product portfolio and it believes that certain standard essential patents ( SEPs) of Ericsson have been infringed, which were directly relevant to the Informant‟s past, present and future GSM (Global System for Mobile Communications) and/ or WCDMA (Wideband Code Division Multiple Access) compliant products and requested for a meeting to discuss the issue. However, Ericsson had failed to mention the patents that were being infringed, hence, the informant / iBall called upon Ericsson to identify the same.

Ericsson demanded the iBall enter into a global patent licensing arrangement (GPLA) for all the patents of Ericsson. The iBall expressed its willingness to enter into GPLA if Ericsson could identify the patents which were alleged to have been infringed, such patents were valid and enforceable in India and the terms of such arrangement were reasonable and not onerous.
Ericsson informed the iBall that a non-disclosure agreement (NDA) would have to be entered into before proceeding further in the matter. The NDA imposed very strict terms such as ten years confidentiality in relation to disclosure of any information by either party, confidential information is to be shared only with an affiliated company and all disputes are to be settled by way of arbitration in Stockholm, Sweden.

HOW IS ERICSSON'S DOMINANCE ESTABLISHED

Ericsson is a member of the Standard Setting Organisation named ETSI and the clause 6 of ETSI policy states that an IPR owner is required to give irrevocable written undertaking that it is prepared to grant irrevocable licenses on FRAND terms to be applied fairly and uniformly to similarly placed players. FRAND licenses help in avoiding royalty stacking or patent hold up. Being an owner of 33,000 patents to its credit, with 400 of these patents granted in India, Ericsson is also the largest holder of SEPs used in mobile communications like 2G, 3G and 4G patents used for smart phones, tablets etc. The lack of alternative technology by virtue of them being SEPs make Ericsson a dominant player in this market of "Standard Essential Patents for 2G, 3G and 4G technologies in GSM standard compliant mobile communication devices in India"

Thus, CCI reached the conclusion that Ericsson is dominant in the market.

HOW IS ERICSSON ABUSING ITS DOMINANT POSITION

iBall highlights some abusive conduct like –

  • Refusal by Ericsson to identify the standard essential patents so infringed by iBall;
  • threat of patent infringement proceedings;
  • coaxing the Informant to enter into one sided and onerous NDA;
  • tying and bundling of patents irrelevant to the iBall's products by way of GPLA;
  • demanding unreasonably high royalties by way of a certain percentage value of handset as opposed to the cost of actual patent technology used etc.
  • Charging of two different license fees per phone for use of the same technology, prima facie, appears to be discriminatory. Further, the terms of the NDA is contrary to the spirit of applying FRAND terms fairly and uniformly to similarly placed players.

On this basis, iBall has sought the Commission to conduct, inter alia, necessary investigation on the abuse of dominant position by Ericsson.

ADVERSE IMPACT ON MARKET

Hold-up can undermine the competitive process of choosing among technologies and undermine the integrity of standard-setting activities Similarly, royalty-stacking occurs when a single product uses many patents of same or different licensors.
As such, from the perspective of a firm manufacturing the product, all the different claims for royalties need to be added or 'stacked' together to determine the total burden of royalty to be borne by the manufacturer.
Ultimately, the high costs of such patents get transferred to the final consumers.

Basically, all the allegations brought forth are quite similar to previous cases i.e., Case No. 50 of 2013 Micromax Informatics Limited V. Telefonaktiebolaget LM Ericsson (Publ)] and Case No. 76 of 2013 [Intex Technologies (India) Limited V. Telefonaktiebolaget LM Ericsson (Publ)] wherein the Commission was of the prima facie view that the conduct of Ericsson amounts to violation of the provisions of section 4 of the Act and had directed the Director General (DG) to conduct an investigation.

Although the Commission held a similar view, it has advised the DG to conduct investigations devoid of prior influence.

Concerns relating to Standard Essential Patents and warring Smartphone makers

The smartphone market is no stranger to legal struggles – Apple and Samsung have had legendary battles over patent disputes but this has largely been the case in US & Europe. However, the ripple effect is beginning to show in the Indian and also around Asian market with growing competitiveness between brands. In the last few years Patent holders like Ericsson, Google have been locked in litigation, around the world, particularly over Licenses relating to their Standard Essential Patents ( SEPs) given to Smartphone manufacturers.

Brands like Micromax and Karbonn have created a niche in low cost phones using the standardized technology patented by established brands like Samsung, Ericsson or Google. These Brands license the use of their SEPs (Standard Essential Patents) relating to various mobile telecommunications standards and have committed to license these SEPs on FRAND (Fair Reasonable And Non-Discriminatory) terms.

Originally posted on Anupam Sanghi And Associates:

Concerns relating to Standard Essential Patents and warring Smartphone makers

The smartphone market is no stranger to legal struggles – Apple and Samsung have had legendary battles over US & Europe. However, the ripple effect is beginning to show in the Indian and also around Asian  market with growing competitiveness between brands. In the last few years Patent holders like Ericsson, Google have been locked in litigation, around the world, particularly over Licenses relating to their Standard Essential Patents ( SEPs) given to Smartphone manufacturers.

Brands like Micromax and Karbonn have created a niche in low cost phones using the standardized technology patented by established brands like Samsung, Ericsson or Google. These Brands license the use of their SEPs (Standard Essential Patents) relating to various mobile telecommunications standards and have committed to license these SEPs on FRAND (Fair Reasonable And Non-Discriminatory) terms.

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