ARTICLE
20 January 2025

Standard Essential Patents: Bridging Innovation And Fair Practice

Saga Legal

Contributor

Saga Legal, founded in 2016, is a multi-service law firm providing a wide gamut of legal services in diverse areas of practice, ranging from dispute resolution to corporate advisory, the firm provides manifold legal solutions to its valued clients under one roof.
In the fast-paced world of technology, innovation and standardization, many new products and services are emerging daily, thereby making it important to ensure that these technologies can work seamlessly together.
India Intellectual Property

OVERVIEW

In the fast-paced world of technology, innovation and standardization, many new products and services are emerging daily, thereby making it important to ensure that these technologies can work seamlessly together. This is where Standard Essential Patents ("SEP(s)") and the framework of Fair, Reasonable, and Non-Discriminatory ("FRAND") terms come into play. But what exactly are SEP, how do they impact industries, and why do we need FRAND terms to regulate them?

This Article delves into the concept of SEP, explores their critical role in fostering technological interoperability, and examines the significance of FRAND terms in balancing the interests of patent holders and technology implementers.

UNDERSTANDING SEP AND THE ROLE OF FRAND TERMS

SEP is a patent granted for an invention that is vital to the implementation and functionality of a technical standard.1 But what does that really mean? Simply put, a standard is a set of established technical requirements or specifications that allow products, services, and systems to work together effectively, ensuring compatibility across the industry. These standards are typically set by Standard-Setting Organizations that create and maintain these technical guidelines. One of the well-known organizations is the Bureau of Indian Standards which sets the standards for the goods and services in India.

When a company contributes technology to a standard, the underlying innovation may be patented. If the patent is essential for implementing the standard, it becomes a SEP. This means manufacturers seeking to incorporate the technology into their products must obtain a license from the SEP holder. Without this license, they cannot legally use the patented technology, restricting their ability to produce compliant products.

Take, for example, electric vehicles ("EVs"). For EVs to function with public charging stations, they must adhere to standards like the Combined Charging System ("CCS"), which specifies charging protocols and connector designs. The technology underlying CCS is protected by SEPs. Manufacturers aiming to produce EVs compatible with public charging infrastructure must secure licenses for these SEPs. Without such licenses, they are effectively excluded from the market.

However, the existence of SEPs can create potential monopolistic behaviour, as patent holders may demand exorbitant royalties or refuse licenses, stifling competition. This interplay between competition law and patent rights is addressed through FRAND terms, introduced in the late 1990s to mitigate these challenges.

THE FRAND FRAMEWORK

FRAND terms require SEP holders to license their patents in a manner that is:

  1. Fair – Ensuring equitable access to technology for all market participants.
  2. Reasonable – Avoiding excessive royalty demands that could exclude smaller players.
  3. Non-Discriminatory – Providing equal licensing terms to all, regardless of size or market position.

The primary objective of these terms is to ensure that patent holders make their patented technologies available in line with the agreed-upon guidelines. It is important to note that FRAND terms are not governed by statutory provisions but depend on the good faith of contractual obligations between the parties. Any breach or failure by patent holders to comply with these terms may result in a claim or serve as a defence for an accused infringer.

LICENSING SEPS IN INDIA

In India, licensing SEPs under FRAND terms requires negotiation between the patent holder and the licensee. The objective is to strike a balance: Ensuring that the patent owner gets a fair reward for their invention, while also ensuring that no one is excluded from using important technologies because of high costs.

JUDICIAL INTERPRETATION BETWEEN SEP AND COMPETITION LAW

Lately, the interplay of SEPs and Competition Law has gained prominence in India, with several landmark cases shaping the legal landscape. These cases not only address patent infringement but also delve into the complexities of FRAND terms to prevent the dominant entities from exploiting their position in relation to essential technologies. Below are key precedents that highlight how Indian courts have navigated the complexities of SEPs and Competition Law.

  1. LAVA International Limited v. Telefonktiebolaget LM Ericsson2,
    In this landmark case, the Delhi High Court resolved a patent infringement dispute concerning SEPs related to technologies such as AMR, EDGE, and 3G. Ericsson accused Lava of infringing its SEPs, while Lava contested the validity of the patents, citing a lack of novelty and non-patentable subject matter. The court upheld the validity of most of Ericsson's patents but invalidated one for failing to meet patentability criteria. A critical aspect of the ruling was the designation of Lava as an 'unwilling licensee' due to its failure to engage meaningfully in FRAND negotiations. The court ordered Lava to pay damages of INR 244 crore along with interest, underscoring the importance of adhering to FRAND obligations. The judgment also introduced the 'Seven Stambhas Approach' for assessing the novelty of an invention and established a methodology for calculating a global FRAND rate.
  2. Telefonaktiebolaget LM Ericsson v. Intex Technology (India) Limited3
    In this case, Ericsson alleged that Intex had infringed eight of its SEPs by failing to secure necessary licenses. Intex argued that the patents lacked presumptive validity under Section 13(4) of the Patents Act, 1970 which states that patent validity must be established before infringement is considered. Intex also accused Ericsson of failing to disclose complete information under Section 8 of the Act. Despite these defences, the Court found Intex had deliberately avoided executing a FRAND agreement. It ruled that Ericsson's rights as a patent holder could not be invalidated as long as the patents remained valid. The court granted Ericsson an injunction, reasoning that failure to enforce royalties or sign FRAND agreements would result in irreparable harm to Ericsson's global royalty structure and contractual relationships with other licensors.

CLOSING REMARKS

India's legal framework for patents lacks specific rules for SEPs, however, judicial decisions, policies and bodies like the Bureau of Indian Standards and Telecom Engineering Centre, along with private groups, contribute to setting and implementing technology standards.

The judicial precedents highlight the need to balance patent rights with fair competition. Clear regulatory guidelines and adherence to FRAND principles are crucial to foster innovation and fair access to essential technologies. A transparent SEP system can drive technological growth and strengthen India's position in the global market.

Footnotes

1. https://www.wipo.int/en/web/patents/topics/sep

2. Lava International Limited vs. Telefonaktiebolaget LM Ericsson, [CS(COMM) 65/2016]

3. I.A. No. 6735/2014 in CS(OS) No.1045/ 2014

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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