FRANDLY WARS

ImageIndia’s mobile handset maker Micromax has filed a complaint against the Swedish telecommunications company Ericsson to the Competition Commission of India  for abusing its dominant position by  charging unfair, discriminatory and exorbitant royalty rates for  use of its standard essential patents for GSM technology.  This complaint has been filed subsequent to Ericsson filing for an injunction against Micromax in the Delhi High Court. The Competition Commission of India after hearing both the parties has directed the Director General to investigate into the allegations made by Micromax and violations of the Competition Act, if any. The order can be accessed here.

Standard Essential Patents (SEP’s) are patents protecting a technology which is essential for the implementation of an industry standard developed by a standard-setting organization. All undertakings desirous of manufacturing products based upon the standards set require access to and use of such standard essential patents. The undertakings that own these standard essential patents are required to license the same on FRAND terms. The term FRAND stands for Fair, Reasonable and Non Discriminatory. Currently, there is quite a bit of uncertainty/disagreement regarding the precise meaning of FRAND. The same shall be discussed in a separate blog entry. In the subject matter, Ericsson was required to license its SEP’s pertaining to GSM technology to Micromax on FRAND terms. However, it has been argued by Micromax that the royalty rates that are being asked for are unfair and exorbitant and that Ericsson is thereby abusing its dominant position.

 Another aspect of the said dispute which gets only a passing reference in the Commission’s order is whether the seeking of injunction by the owner of SEP’s amounts to an abuse of dominance. Injunctions or the threat of it may be used to distort the licensing negotiations and impose unfair licensing terms on the licensees. The question of whether seeking injunctions for a standard essential patent is an abuse of dominance is currently being discussed and deliberated upon by the European Commission in the complaints filed against Samsung and Motorola by Apple. I am  sure that the Competition Commission of India would in the said matter also deliberate upon the same along with the issue of unfair and exorbitant royalty rates. The European Commission published a Q&A memo on its website pertaining to the Samsung matter.  To the question of whether the Commission takes a position on what a reasonable royalty rate is, the Commission’s answer is in the negative and further states that the national courts and arbitrators are generally well equipped to do this.  The  EU Commission’s issue of concern is whether the seeking of injunctions may unjustifiably distort FRAND licensing negotiations where a commitment to license the SEPs in question on FRAND terms has been given.

 Also, as per the order under Section 26(1), the Director General is required to submit the investigation report to the Commission within a period of 60 days. Such stringent time frames imposed on the DG may prove to be inadequate in order to carry out thorough and satisfactory investigations. Considering the limited resources of the Director General, more time should be given for carrying out investigations in order to avoid haphazard and incomplete investigations.

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