Competition Law and Cellphone Patents

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Customer Care No. 91-11-45562222
Competition Law and Cellphone Patents
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• Introduction
• The Competition Act 2002("Act") was enacted for
  the establishment of a Commission to prevent
  practices having adverse effect on competition,
  to promote and sustain competition in markets, to
  protect the interests of consumers and to ensure
  freedom of trade carried on by other participants
  in markets, in India, and for matters connected
  therewith or incidental thereto.
• The provisions of section 4 of the Competition
  Act, 2002 mandate the Competition Commission of
  India ("CCI") to inquire into the cases where
  dominant players may restrict competition in the
  market by way of denial of market access and by
  imposing unfair and discriminatory conditions.
• The present case as determined by CCI in its
  order Best IT World (India) (P.) Ltd.
  (iBall v.Telefonaktiebolaget L M Ericsson
  (Publ) 2015 59 taxmann.com 55/131 SCL 392
  (CCI)enunciates abuse of dominant position in
  market of Standard Essential Patents for 2G, 3G
  and 4G technologies in GSM standard compliant
  mobile communication devices in India.

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• Meaning of certain terms
• 2. Standard Essential Patents ("SEP") An
  Essential Patent or Standard Essential Patent is
  a patent that claims an invention that must be
  used to comply with a standard. Standards
  frequently make reference to technologies that
  are protected by patents. A patent that protects
  technology that is essential to comply with a
  standard is called a Standard Essential Patent.
• The (supra) of judgement adjudicated by United
  States Court of Appeals for the Federal Circuit
  defines standard essential patent as "Creating
  some standards, like IEEE's 802.11 standard, is a
  complicated process that involves the
  collaboration and can involve cooperation of a
  number of interested parties. Due to the
  collaborative nature of this process, the chosen
  standard may include technology developed by a
  number of different parties. Sometimes that
  technology is covered by patents. Because the
  standard requires that devices utilize specific
  technology, compliant devices necessarily
  infringe certain claims in patents that cover
  technology incorporated into the standard. These
  patents are called "standard essential patents"
  ("SEP").
• European Telecommunications Standards Institute
  ("ETSI") -ETSI, the European Telecommunications
  Standards Institute, produces globally-applicable
  standards for Information and Communications
  Technologies (ICT), including fixed, mobile,
  radio, converged, broadcast and Internet
  technologies. ETSI are officially recognized by
  the European Union as a European Standards
  Organization

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• FRAND It is a legal term which stands for Fair,
  reasonable and Non-discriminatory. FRAND terms
  puts obligation on owner of SEP to license its
  patents under FRAND terms.
• 3. Facts of the Case
• ? M/s Best IT World (India) Private Limited
  ("Informant") was engaged in Business of import
  and distribution of computer peripherals, mobile
  handsets, tablets etc. under brand name 'iBall'.
  Telefonaktiebolaget L M Ericsson ("TLME")
  incorporated under laws of Sweden. Ericsson India
  Private Limited ("EIPL") is 100 subsidiary of
  TLME and was engaged in the business of
  manufacturing and sale of telecom equipment,
  network equipment, software and other services in
  India.TLME EIPL hereinafter termed as
  Ericsson
• ? Informant stated that Ericsson is one of the
  world's largest telecommunication companies with
  a global market share of 38 and also one of the
  largest holders of Standard Essential Patents
  ("SEPs?) in the mobile phone and wireless
  industries with approximately 33,000 granted
  patents as of 2012, out of which 400 were granted
  in India.
• ? Ericsson issued letter to Informant stating
  that, informants products have infringed GSM
  (Global System for Mobile Communications) and/ or
  WCDMA (Wideband Code Division Multiple Access)
  and requested meeting to discuss the Issue.
• ? Ericsson specified that Informant should enter
  into a Global Patent Licensing Agreement ("GPLA")
  for all the patents of Ericsson. The Informant
  showed its willingness to enter into GPLA , if
  Ericsson specified which patent have been
  infringed , such patents were valid and
  enforceable in India and the terms of such
  arrangement were reasonable and not onerous.

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• ? Ericsson notified the Informant to enter into a
  non-disclosure agreement ("NDA") before
  proceeding the matter .The informant alleged
  that, Ericsson reluctant to share information of
  infringement of patents unless the informant
  executed NDA. The informant further stated that
  they were willing to enter into a license
  agreement under FRAND terms and within
  jurisdiction of Indian courts as the current NDA
  terms were very strict ,onerous and one sided.
  The informant was of view that Ericsson was tying
  and bundling of patents irrelevant to the
  Informant's products and demanding unreasonably
  high royalties by way of certain percentage of
  handset, such an act of Ericsson is in violation
  of Section 4 of the Act.
• Can owner of standard essential patent be obliged
  to issue patents to third party?
• 4. A patent holder is granted a statutory right
  to prevent third parties from making, using,
  offering for sale, selling or importing the
  patented products and if the patent is a process
  then the patent holder would have the right to
  prevent the third parties from using or in any
  manner dealing with the said patent. The only
  manner in which a patent holder can exercise his
  rights is by refusing a licence permitting a
  third party to exploit its patent and it would be
  quite legitimate for a patentee to seek
  injunctive relief to enforce such rights.
  However, on the other hand, a refusal by a
  patentee to grant a licence may result in adverse
  effect on competition.

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• Considering the present case, Ericsson being a
  member of ETSI is bound to offer its SEPs on
  FRAND terms. As per clause 6.1 of the - ETSI
  Intellectual Property Rights Policy expressly
  provides that
• "When an ESSENTIAL IPR relating to a particular
  STANDARD or TECHNICAL SPECIFICATION is brought to
  the attention of ETSI, the Director-General of
  ETSI shall immediately request the owner to give
  within three months an irrevocable undertaking in
  writing that it is prepared to grant irrevocable
  licences on fair, reasonable and
  non-discriminatory ("FRAND") terms and conditions
  under such IPR to at least the following extent
• ? MANUFACTURE, including the right to make or
  have made customized components and sub-systems
  to the licensee's own design for use in
  MANUFACTURE
• ? Sell, lease, or otherwise dispose of EQUIPMENT
  so MANUFACTURED
• ? Repair, use, or operate EQUIPMENT and
• ? Use METHODS.
• The above undertaking may be made subject to the
  condition that those who seek licences agree to
  reciprocate."

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