India: Licensing Laws And Antitrust Concerns In India

Last Updated: 26 June 2017
Article by LexOrbis  

Conventus Law - What is the distinction between "licensing on the end value of device" and "licensing on the smallest component value"?

 LexOrbis - When a patent has claims that can be infringed at different levels of a device, the issue of "licensing on the end value of device" or "licensing on the smallest component value" come into picture. 

 In such cases, "Licensing on the end value of device" is a practice adopted by patentees to calculate royalty rate for their patent on basis of value of end product that infringes the patent. For example: the royalty rate for a patent for establishing communication is infringed by sale of a mobile phone will be calculated on the basis of the sale price of the particular mobile phone.  

 Whereas "licensing on the smallest component value" is a practice of calculating royalty rates on the basis of value of smallest saleable intermediate component that infringes the patent. For example: if a microprocessor / chipset (taken as the smallest sealable component) infringes the patent, and if sales price of the microprocessor / chipset is taken as the basis for calculation of the royalty rate, the practice may be referred to as licensing on the smallest component value.

Conventus Law -  Is this an unsettled issue of law in India, and what has the case law demonstrated thus far on the issue?

 LexOrbis - Yes, the issue of fixing the criteria for licensing a patent is unsettled. There are no specific guidelines for fixing the royalty rates, though the Courts have passed interim orders for fixing the royalties for standard essential patents (SEP) with the consent of the parties and in most of the cases adopted the approach of fixing the interim royalty rates for SEP on the basis of "Licensing on the end value of device".

For example: In case of Ericsson v. Micromax (2013) the Delhi High Court initially fixed the interim royalty rates ranging between 1.23- 2.50% of the net selling prices of the devices incorporating Ericsson's patented technology, which were later revised to 0.8-1.3% so that no party suffer during the pendency of the suit.

 Similar interim royalty rates were fixed by Delhi High Court in SEP litigation of Ericsson with Gionee, Intex in the year 2013 Xiaomi and iBall in the year 2014 and with Lava in the year 2015.

 Following the footsteps of Ericsson, the renowned audio company Dolby also got interim relief against two Chinese smart phone manufacturers Oppo and Vivo from Delhi High Court in term of fixing the royalty rate of 34 INR per unit till the terms for licensing are not finalised. Both the Chinese companies have agreed to discuss the terms of license on the basis of FRAND model with Dolby. 

     Conventus Law - What is royalty stacking, and what are its pros and cons?

 LexOrbis - In the simplest terminology 'royalty stacking' may be referred to the situation when manufacturer of a product which is practising claims of several patents of a particular patentee need to obtain licenses in respect of each patent from the patentee as opposed to obtaining a portfolio license. In terms of the both the licensee and the licensor, the pros for a portfolio license is that they does not have to negotiate repeatedly in relation to each patent. Actions such as accounting, monitoring, etc., become far easier for both parties. The disadvantage of portfolio license is that neither party will know for surety which patent(s) are of higher economic significance. Furthermore, the portfolio license ensures that a risk free business operation on part of the licensee in respect of future products.

 Conventus Law - For the PM Narendra Modi's 2014 Make in India initiative to be viable for the mobile phone industry, should royalty stacking be regulated or monitored so as to avoid excessive royalty burdens that result in manufacturing becoming economically unfeasible?   As a more general question, is it possible to achieve commercial viability with royalty stacking while respecting IPR at the same time in the mobile phone industry?

 LexOrbis - Mobile manufacturing industry has contributed a major share in Prime Minister's Make in India initiative. Last year 38 new mobile manufacturing units were setup in the country. Regulating or monitoring royalty stacking or capping the royalty rates will not be a good idea to deal with the issue of excessive royalty burden for the Government. It is highly recommended to let the private parties negotiate terms of royalty for their IPR freely because creating an environment conducive for the parties, to discuss and arrive among themselves, a suitable royalty rates will attract more manufacturer and organisation based on IP model to setup there units in India and it will help the innovative industry to maximise their profit and encourage them to expend more on the innovation and thus resulting in economic growth.

 If we specifically talk about mobile manufacturing industry which is a very complex industry where a single mobile device reflects numerous individual patents that are required to be licensed for manufacturing purpose. For example the '3G' wireless technology which actually includes 6000 patents and is essential to be implanted in a mobile device to match the market standard but it won't be feasible for the manufacturer to take the license for 6000 patents. In these cases portfolio licensing is very helpful to deal with stacking. A manufacturer can ask for a portfolio license from the Major market player covering the majority of '3G' technology patents But still manufacturer should allocate a part of their profit for those patentees from whom the prior license have been missed so that the royalty can be paid in case of dispute arising at later stage then only a commercial viable state can be reached with royalty stacking while respecting IPR at the same time.

 Regarding cellular phones, Qualcomm, a San Diego, California US based tech-based manufacturer, has been the target of many anti-trust allegations in multiple countries including the US, Europe, Taiwan and South Korea.  The company is a major player in India as well.  Qualcomm, like many of its competitors, prefers to license at the end value of the device and not at the component level, which is what has led to its many licensing and revenue sharing agreements. 

 Conventus Law - Without going into the specifics of each case in the various countries, what is the general basis for the anti-trust concerns (i.e. is it related to any specific type of anti-competitive behavior), and is this the type of behavior that Qualcomm and other similar businesses should be concerned with in India so as to avoid the scrutiny from the regulators in India?

 LexOrbis - There are no specific guidelines defining the anti-competitive behaviour in India. The patentees have freedom to negotiate the licensing terms as well as prising in respect of their patents. The practice of Portfolio licensing and licensing on the end value of device per se did not recognised as an anti-competitive practice in India. Additionally the Competition Act of India allows practicing restrictive monopoly over intellectual property by virtue of Section 3(5) of Competition Act, 2002. The Delhi High Court also held in the case of Ericsson vs CCI that in the event of any conflict between Patent Act and Competition Act, the Patent Act being a specialised statute, would override the general statute. Indian Anti-Competitive agency have recognised that an restrictive monopoly over Intellectual Property is allowed except the cases where the conduct of the licensor is unlawful on the grounds other than exercising IP rights which is negotiating royalty in the present case.

 Above all Indian Courts have also came up with the schemes of 'licensing on the end value of device' in almost every SEP related litigation in the past years.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions