Standard Essential Patents

Context

India being a major economy is now more than ever required to investigate the potentially abusive licensing practices of technology companies that own  Standard Essential Patents (SEPs)

• The European Parliament has already enacted one such set of measures to regulate SEPs.
• The Delhi High Court has delivered a judgment recently on  one of the early lawsuits filed by Ericsson against Lava International.

About Standard Essential Patents

Standard Essential Patents are patents that protects technology that has been declared essential for the implementation of a technical standard adopted by a standard developing organisation (SDO). They are patents that cover technologies which are adopted by the industry as standards.

• Usage: 
  • Standard Essential Patents are widely used in the telecommunications sector given its highly standardized nature and driven by the requirement for interoperability between communication devices. 
    • Example: Such standards include technology standards such as 5G and WiFi, audio and video compression and decompression (e.g., MPEG, HEVC), technologies for data storage and exchange (e.g., CD and DVD), photo formats (JPEG), and home audio and video interoperability (HAVi)
  • Other industries: like consumer electronics, the automotive industry, and the electricity grid industry, such communication standards are also essential for the growth of the hyperconnected society.
• Who sets these standards?
  • The process of setting standards in the technology sector is handled by Standard Setting Organisations (SSOs).
    • Standard-setting organizations (SSOs) are either governmental, quasi governmental or a private body of independently governed industry associations. 
    • SSOs set, develop, coordinate, interpret, and maintain standards. Industry participants can collaborate on a single technical solution because of such standards.

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• Competition concerns and FRAND terms: Licensing of Standard Essential Patents (SEPs) on Fair, Reasonable, and Non-Discriminatory (FRAND) terms is a foundation of the standards development process
  • Objective: To promote the application of the standard and avoid any competition concerns so that the benefit of such a patent is reaped by the market at large and prevent the patent holder of such Standard Essential Patents from abusing their dominant position.Reduce risk of Patent Holdup: Adoption of the FRAND terms is an obligation put up by the SSOs before acknowledging particular technology as a SEP. 

Judicial Approach Regarding Standard Essential Patents in India 

• Micromax Informatics Ltd v Telefonaktiebolaget LM Ericsson 2013:

• • The Competition Commission of India started investigation on a complaint by Micromax against Ericsson on the ground of Ericson  abusing  its dominant position in the market by imposing exorbitant royalties for the use of its SEPs, thereby violating the Competition Act 2002. 
  • Ericsson challenged the order of CCI in High Court of Delhi against the power of the CCI to investigate the case stating that Patents Act vested the power to remedy an abuse of patents only with the Patent Office.
  • The issue is currently sub judice in The Supreme Court on an appeal by the CCI against a Delhi High Court judgment that was delivered against the CCI in July 2023. 
• The infringement test: The Indian judiciary through landmark cases has carved out a tripartite  test i.e., essentiality, infringement, FRAND nature of the offer to determine if a user of a SEP is an infringer or not. 
• Judicial Activism of Delhi High Court: 
  • The Delhi High Court is hearing a lawsuit filed by Ericsson and other SEPs owners against the infringement of SEP’s by the manufacturers of cellular phones. 
    • The infringement lawsuits are being heard while the competition law issues are unresolved and are sub judice.
    • Interim deposit orders: The court has granted an interim remedy to the SEP owners by requiring the  manufacturers, many of them Indian companies, to “deposit” money with the court in order to continue manufacturing during the pendency of the trial justified by invoking its “inherent powers to do justice”
• Effects of the Judicial Activism: 
  • Affecting Ease of doing business: Indian judiciary’s delayed response to investigating potentially abusive licensing practices of SEP owners is leading to prolonged litigation and absence of regulatory oversight.
  • Financial burdens: The deposit orders of Delhi High Court creates financial burdens on the manufacturers with their working capital stalled and undermines defendants’ rights.
  • Stalling Manufacturing Sector: It is negatively  affecting  government initiatives to attract investment in the manufacturing sector, hindering India’s progress towards becoming a manufacturing hub.

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