intex vs. ericsson
TRANSCRIPT
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
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Intex Vs. ERICSSON
SHILPA SUBRAMANIAN
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
INTRODUCTION
An Indian mobile handset maker, Intex Technologies (India) Limited
(“Intex”) filed a complaint (“Complaint”) with the Competition
Commission of India (“CCI”) against the Swedish company,
Telefonaktiebolaget LM Ericsson (“Ericsson”) in 2013 alleging abuse
of dominance by Ericsson while negotiating a licensing agreement
with Intex. CCI, in its order dated 16.01.2014 (“CCI Order”), made
a prima facie determination of abuse of dominant position and
ordered an investigation under section 26 of the Competition Act,
2002 (“Act”). However, before the investigation was completed,
Ericsson filed a writ petition (WP No. 464/2014) at the Delhi High
Court (“DHC”) challenging this order of CCI.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
FACTS
Ericsson holds 33,000 granted patents and is the
largest holder of Standard Essential Patents (SEPs) for
mobile communication and its unrivalled patent
portfolio covered 2G, 3G and 4G technologies, with
more then 100 patent licensing agreements. Ericsson
also got patented many of its technologies in India. It
is pertinent to note that a Standard Essential
Patent (“SEP”) is one for which there are no
non-infringing alternatives.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
STANDARDISATION AND SEP
Standardisation is a voluntary process wherein a number of
market players reach a consensus for setting “common
technology standards‟ under the support of a Standard Setting
organisation, which in the present case is European
Telecommunications Standard Institute (ETSI). In simple terms,
standardisation is the process of developing and implementing
technical standards. Once a patent is declared as Standard
Essential Patent, it faces no competition from other patents
until that patent becomes obsolete due to new
technology/inventions.
A SEP holder is therefore under an obligation to license the SEPs
to every party under Fair, Reasonable and Non-Discriminatory
(FRAND) terms, in terms of the irrevocable commitment made to
standard setting organization, such as ETSI.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
royalty stacking and patent hold up issues
According to the Complaint filed by Intex before the CCI, Ericsson was liable for royalty stacking and patent hold up issues in the following :
Demanding exorbitant royalty fees from Intex, by way of Term Sheet to a Global Patent Licensing Agreement (“GPLA”)
Despite its purported commitment to the FRAND terms under the ETSI IPR Policy, Ericsson failed to share with Intex, the commercial terms and royalty payment arrangements with other such similar Licensees, on the grounds of Non-Disclosure Agreements (“NDAs”) executed between Ericsson and such licensees.
Requiring Intex to enter into an NDA as a necessary pre-condition for letting the Intex know about the details of the alleged infringement and that Intex was compelled to sign the NDA before Ericsson provided details of infringement to Intex.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
Issues for consideration
In adjudicating the Complaint, the following issues demand consideration: Standardisation of the Patents owned by Ericsson Role of Standard Setting Organisation (SSO), in this
case ETSI and the effect of its IPR policy Test to see if the terms negotiated with Intex are in
line with the requirements of FRAND terms in Global Patent Licensing Agreements
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
Standardisation
The World Intellectual Property Organisation (WIPO), in the thirteenth session of the Standing Committee of the Law of Patents (“SCP”) held in 2009, discusses inter alia, the standards of patents.
In doing so, the SCP categorizes the standards into two, viz., de facto standards and de jure standards.
De jure standards are set by standard setting organizations (SSOs), which coordinate and facilitate a standard setting process with the involvement of various stakeholders. The SCP further contemplates that the SSOs may be international, regional or national, and that in certain cases, companies of their own accord form a consortium to establish technical standards in a particular field or industry.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
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According to WIPO, the possible areas for improvement in SSOs patent policies, relate to the transparency, clarity and certainty of patent policies, including the following: clarification of terms used in the patent policies; ex-ante disclosure of licensing terms, which go beyond the unspecific
RAND or FRAND terms, by the patentees of essential patents, on a voluntary basis, before the adoption of the standard under discussion;
effective identification of potentially essential patents at an early stage of the standard-setting process;
effective enforcement of SSOs’ patent policies; areas of interaction between an SSO’s patent policy, in particular,
RAND or FRAND licensing terms, and open source software licenses.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
ETSI IPR Policy
ETSI produces globally applicable standards for information and communication technologies i.e. fixed, mobile, radio, converged, broadcast and internet technologies, some of which are covered by patents held by ETSI or ETSI members like Ericsson. ETSI has in place, a comprehensive IPR policy (“ETSI IPR Policy”), as part of its Rules of Procedure.
As per sub-clause 6 to Clause 15, "ESSENTIAL" as applied to IPR means that it is not possible on technical (but not commercial) grounds, taking into account normal technical practice and the state of the art generally available at the time of standardization, to make, sell, lease, otherwise dispose of, repair, use or operate EQUIPMENT or METHODS which comply with a STANDARD without infringing that IPR. For the avoidance of doubt in exceptional cases where a STANDARD can only be implemented by technical solutions, all of which are infringements of IPRs, all such IPRs shall be considered ESSENTIAL.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
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Further, sub-clause 11 to Clause 15 of the ETSI IPR Policy defines ‘STANDARD’ as any standard adopted by ETSI including options therein or amended versions, including European Standards (ENs), ETSI Standards (ESs), Common Technical Regulations (CTRs) which are taken from ENs and further including drafts of any of the foregoing, and documents made under the previous nomenclature, including ETSs, I-ETSs, parts of NETs and TBRs, the technical specifications of which are available to all MEMBERS, but not including any standards, or parts thereof, not made by ETSI.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
According to Clause 6.1 of the ETSI IPR Policy, 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.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
CCI’s findings
Upon a conjoint consideration of the ETSI IPR Policy and
the fact situation that Ericsson’s SEPs being adopted in
India and was being used by a large number of telecom
service providers who have entered into Unified Access
Service License agreement with the Department of
Telecommunications, the CCI made the following findings:
Ericsson was dominant in the relevant market of GSM and CDMA
technologies in India as it held a large number of GSM and CDMA
patents.
since Ericsson holds SEPs and there was no other alternate
technology in the market in India, it enjoyed complete dominance
over its present and prospective licensees in the relevant product
market
Contd..
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
Refusal of Ericsson to share commercial terms of FRAND licences with licensees similarly placed to the informant, strengthens the case regarding alleged discriminatory commercial terms imposed by Ericsson.
Charging of two different license fees per unit phone for use of the same technology prima facie is discriminatory and also reflects excessive pricing vis-à-vis high cost phones.
Both forcing a party to execute NDA and imposing excessive and unfair royalty rates prima facie was abuse of dominance and violation of section 4 of the Act.
It is a matter of record that the practice of Ericsson of imposing discriminatory royalty rates contrary to FRAND terms, was previously considered by the Commission in Case no. 50/2013, In Re: Micromax Informatics Limited vs. Telefonaktiebolaget LM Ericsson (Publ), wherein the Commission had already formed a prima facie opinion under section 26(1) of the Act and directed the Director General to conduct an investigation
In finding the above, the CCI had ordered for investigation by the Director General, in the above allegations made by Intex.
As mentioned supra, the CCI Order is now under challenge before the Hon’ble Delhi High Court in W.P No. 464/2014. However, no stay has been granted on the CCI Order by the Delhi High Court.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
Conclusion
Whilst Ericsson seeks to maintain technical arguments on jurisdiction, drawing support under Section 3(5)(i) of the Act (dealing with the coextensive remedies available for IPR), in its challenge to the CCI Order, the fact that the High Court has refused to grant a stay on the investigation but further study the subject, opens up avenues for the growth in the discussion on ensuring FRAND terms in patent license agreements and protection of licensee interest therein.
CHENNAI3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,Mylapore,
Chennai - 600 004.Tel: +91 - 44 - 2498 4821
BANGALORE Suite 920, Level 9,
Raheja Towers,26-27, M G Road,
Bangalore - 560 001.Tel: +91 - 80 - 6546 2400
COIMBATOREBB1, Park Avenue,
# 48, Race Course Road,Coimbatore - 641018.
Tel: +91 - 422 – 6552921
WEBSITE
www.altacit.com
Thank you