STANDARD ESSENTIAL PATENTS

AND ITS EMERGENCE IN INDIA

By Aman Siddiqui
L.L.M (NLSIU)
RESEARCH METHODOLOGY AND
HYPOTHESIS
 THE METHODOLOGY ADOPTED BY THE
RESEARCHER IS DISCRIPTIVE AND
ANALYTICAL.

 THE HYPOTHESIS OF THIS RESEARCH IS

THAT ‘INDIA CURRENTLY DOESN’T HAVE
AN EFFECTIVE LAW MECHANISM TO
DEAL WITH THE ISSUE OF STANDARD
ESSENTIAL PATENT.’
OBJECTIVES OF THIS PRESENTATION

 UNDERSTANDING THE TERM STANDARD.

 HOW ARE STANDARDS SET.

 WHAT ARE STANDARD ESSENTIAL PATENT.

 LICENSING OF THESE STANDARD

ESSENTIAL PATENTS.
 CONCEPT OF FRAND

 TO STUDY THE ADVENT OF STANDARD

ESSENTIAL PATENT LITIGATION IN INDIA.
 ISSUES FACED IN INDIA AND COMPARING
IT WITH OTHER JURISDICTIONS.
 DERIVE A CONCLUSION.
CHAPTERISATION
 CHAPTER 1 WILL DEAL WITH THE
CONCEPT OF STANDARD ESSENTIAL
PATENT, HOW ARE THEY ADOPTED AND
LICENSED.
 CHAPTER 2 WILL DEAL WITH HOW
STANDARD ESSENTIAL PATENT CREATES
AN OVERLAP BETWEEN COMPETITION
LAWAND INTELLECTUAL PROPERTY LAW.
 CHAPTER 3 WILL FOCUS ON THE
STANDARD SETTING ORGANISATION IN
INDIA AND THE ADVENT OF STANDARD
ESSENTIAL PATENT LITIGATION IN INDIA.
 CHAPTER 4 WILL DEAL WITH COMPARING
THE INDIAN SCENARIO WITH OTHER
JURISDICTION.
 CHAPTER 5 WILL TRY TO REACH A
CONCLUSION AND GIVE SUGESSION IF
ANY.
RESEARCH QUESTIONS
 WHAT SHOULD BE THE ROYALTY BASE TO
DETERMINE THE ROYALTIES?
 WHAT IS THE POSITION OF HIGH COURT
AND COMPETITION COMISSION OF INDIA
WITH REGARDS TO STANDARD ESSENTIAL
PATENT LITIGATION?
 IS GRANTING OR SEEKING INTERIM
INJUNCTION AN EFFECTIVE RELIEF IN
STANDARD ESSENTIAL PATENT
INFRINGEMENT ALLEGATION WHEN THE
PATENT OWNER HAS ALREADY GIVEN A
COMMITMENT TO LICENSE ITS PATENT
UNDER FRAND TERMS?
CHAPTER 1:
WHAT ARE STANDARDS?.
 IN ORDER TO UNDERSTAND WHAT A
STANDARD ESSENTIAL PATENT OR SEP IS,
WE MUST FIRST UNDERSTAND WHAT IS A
STANDARD.
 STANDARDS ARE WELL AGREED UPON WAY
OF DOING A CERTAIN THING WHICH
EVERYBODY WOULD COMPLY TO. IT IS
USUALLY A FORMAL DOCUMENT THAT
ESTABLISHES UNIFORM ENGINEERING OR
TECHNICAL CRITERIA, METHOD,
PROCESSES AND PRACTICES.
 EXAMPLES OF STANDARD INCLUDES 4G, 2G
ETC.
WHO SETS THE STANDARDS?
 THESE STANDARDS ARE SET BY S.S.O OR
STANDARD SETTING ORGANISATIONS, THESE
ORGANIZATIONS ARE RESPONSIBLE FOR
SETTING, DEVELOPING, COORDINATING AND
MAINTAINING STANDARDS. THEY MAYBE
PRIVATE, GOVERNMENT OR A MIXTURE OF
BOTH.
 S.S.O ARE COMPOSED OF MARKET PLAYERS,
MANUFACTURERS, STATES, ACADMECIANS
ETC. WHICH COMES TOGETHER TO DECIDE
UPON A STANDARD AND THEN IMPLEMENT IT.
IT INCLUDES TECHNOLOGY CONTRIBUTOR
AND IMPLEMENTER.
 EXAMPLES OF SSO ARE THE EUROPEAN
TELECOMMUNICATIONS STANDARDS
INSTITUTE (ETSI) OR THE INTERNATIONAL
TELECOMMUNICATION UNION (ITU)
HOW ARE THESE STANDARDS SET?
 THE METHOD OF SETTING STANDARDS DIFFER
FROM SSO TO SSO.
 GENERALLY THE MEMBERS MUTUALLY
DECIDE AND SET A STANDARD BY CONSENSUS,
HOWEVER THE SET STANDARD NEED NOT
BE MERITORIOUS.

 FOR EXAMPLE:

A,B,C,D PUT FORWARD THEIR INVENTIONS TO

BE ADOPTED AS A STANDARD, THE SSO CAN
CHOOSE ANY ON OF THE INVENTION AND
ADOPT IT AS A STANDARD.
WHAT IS STANDARD ESSENTIAL
PATENT.
 THESE STANDARDS ADOPTED BY SSO ARE
OFTEN PROTECTED BY PATENTS, AND THE
PATENTS THAT PROTECT TECHNOLOGY
ESSENTIAL TO A STANDARD IS CALLED A
STANDARD-ESSENTIAL PATENT (SEP).
 ALMOST ALL SMART PHONES OR TABLETS
THAT WE USE TODAY ARE PROTECTED BY
ONE OR MORE SEPS
ADVANTAGES OF SETTING A
STANDARD
FOR THE TECHNOLOGY CONTRIBUTER :
 The reach of his patent increases which further
increases the profits.
FOR THE TECHNOLOGY IMPLEMENTER
 It creates equality in the market as the implementer
can get license of the standard
FOR THE CONSUMER
 They enable improved compatibility, interoperability,
reproducibility and quality of product.
 Better utility of products, and lower prices because of
competition.
 It encourages competition as it increases the number
of players and levels the field.
OBLIGATIONS OF THE MEMBERS OF SSO
 DISCLOSURE: THE MEMBER OF THE SSO
HAS TO COMPULSORILY DISCLOSE ITS
TECHNOLOGY TO THE ORGANISATION,
EVEN IF THE PATENT IS PENDING ON IT.
 LICENSING: THE MEMBERS OF THE SSO
ARE UNDER AN OBLIGATION TO LICENSE
ITS PATENT IF IT IS ADOPTED BY THE SSO
AS A STANDARD.
 FRAND: THE MEMBERS HAVE TO LICENSE
THESE PATENTS UNDER FRAND TERMS.
I.E. FAIR REASONABLE AND NON
DISCRIMINATORY.
WHY LICENSING OF THESE
PATENTS IS NECESSARY?
 The licensing of SEP’s is necessary because these
Patents contains technology essential to
implement a standard, in other words without
these Patents it is impossible to produce
standard compliant products.
 As standard plays an important role in improving
compatibility and quality of products, selling a
product which is not standard compliant means
selling a product which is incompatible with the
rest of the products, which will result in failure of
the product in the market.
 However Licensing of these Patents however may
lead to a situation where in the Patent holder
may charge exorbitant royalties from the
licensees and exploit its market power. The
Patent holder may also charge different royalties
from different licensees in a way which is
discriminatory. One way to avoid such situation
is to license these Patents under FRAND terms
or Fair Reasonable and Non Discriminatory
terms.
WHAT IS FRAND?
 It is a mutual beneficial solution wherein the
Patent holder is benefited royalties that are fair
reasonable and non discriminatory from its
Patent which widely used by the industry and
the interest of licensees is also protected as they
are prevented from paying exorbitant royalty
rates.
 However there are varied interpretations as
regards to what constitutes as FRAND terms
CHAPTER 2: INTERSECTION BETWEEN
COMPETITON LAW AND PATENT LAW IN
S.E.P.
 Competition law aims to prevent the misuse of
dominant position or stockpiling of market power
while Patent law grants monopoly rights with
certain exceptions to prevent abuse of such
rights. They appear to be distinct but they
intersect at a point.
 This intersection point is reached when a
patented technology becomes essential to achieve
a standard. Thus the basic idea behind the
Standard Essential Patents (SEPs) system is to
reconcile the interaction between Patents which
are primarily private and exclusive as against
standards which are meant to be public and non-
exclusive.
CHAPTER 3:
STANDARD ESSENTIAL PATENT IN
INDIA
STANDARD SETTING ORGANISATION IN INDIA-

 IN INDIA BIS OR BUREAU OF INDIAN

STANDARDS IS THE NATIONAL STANDARDS
BODY OF INDIA WORKING UNDER THE
MINISTRY OF CONSUMER AFFAIRS, FOOD &
PUBLIC DISTRIBUTION, GOVERNMENT OF
INDIA. HOWEVER BIS IS THE SSO OF ALL
EXCEPT TELECOM INDUSTRY.
 AS INDIA IS THE SECOND LARGEST
TELECOMMUNICATIONS MARKET HAVING A
BASE OF 1.2 BILLION, IT HAS A HUGE ROLE TO
PLAY IN PROVIDING INPUT IN STANDARD
SETTING ORGANISATION.
STANDARD ESSENTIAL PATENT IN
INDIA
 DUE TO THIS AN SSO WAS ESTABLISHED NAMED
DEVELOPMENT ORGANIZATION OF. STANDARDS
FOR TELECOMMUNICATIONS IN INDIA (DOSTI),
HOWEVER THIS SSO WAS NOT SUCCESSFUL, IT FAILED
NOT BECAUSE OF TECHNICAL MERIT BUT BECAUSE IT
WAS DOMINATED BY TELECOM OPERATORS.
 A NEW SSO WAS ESTABLISHED KNOWN AS TELECOM
STANDARD DEVELOPMENT SOCIETY OF
INDIA(TSDSI) . IT HAS A CONSENSUS BASED
APPROACH IN DEVELOPMENT OF STANDARDS BY
INVOLVING ALL STAKE HOLDERS. IT FOLLOWS THE
PRINCIPLES OF OPENNESS, TRANSPARENCY,
FAIRNESS, CONSENSUS AND DUE PROCESS IN
CONDUCTING ITS ACTIVITIES, MAINTAINS
TECHNOLOGY NEUTRALITY AND PROVIDES A
UNIFORM PLAYING FIELD FOR ALL ITS MEMBERS. ITS
MEMBER INCLUDES GOVERNMENT, SERVICE
PROVIDERS, EQUIPMENT VENDORS, EQUIPMENT
MANUFACTURERS, ACADEMIC INSTITUTES AND
RESEARCH LABS.
STANDARD ESSENTIAL PATENT IN
INDIA
 ERICSSON V. MICROMAX –
 BRIEF FACTS:
 MICROMAX WAS USING STANDARD ESSENTIAL
PATENT WHICH BELONGED TO ERICSSON,
HOWEVER IT REFUSED TO ACCEPT THE TERMS
OF LICENSING OFFERED BY ERICSSON. AS A
RESULT OF WHICH ERICSSON APPROACHED
THE DELHI HIGH COURT ALLEGING MICROMAX
FOR INFRINGEMENTOF ITS PATENTS.
 THE DELHI HIGH COURT GRANTED AN
EXPARTE INTERIM INJUNCTION AGAINST
MICROMAX. DURING THE PENDANCY OF SUIT
THE PARTIES ENTERED INTO AN AGREEMENT
WHEREIN MICROMAX STARTED PAYING
ROYALTIES TO ERICSON AT THE DEMANDED
RATES WHICH WERE NOT DISCLOSED BEING A
PART OF NDA.
STANDARD ESSENTIAL PATENT IN
INDIA
 MICROMAX LATER FILED A COMPLAINT
AGAINST ERICSSON WITH THE COMPETITION
COMISSION OF INDIA ALLEGING THE ABUSE
OF DOMINANT POSITON BY CHARGING
EXHORBITANT RATES ON A TECHNOLOGY
WHICH IS AN SEP.
 CCI HELD THAT THE REQUESTED ROYALTIES
HAD NO LINKAGE TO THE PATENTED PRODUCT
AND WERE THUS DISCRIMINATORY AS WELL
AS CONTRARY TO FRAND TERMS AND
ORDERED INVESTIGATION IN THE MATTER BY
THE DIRECTOR GENERAL.
 ERICSSON THEN CHALLENGED THIS
DECISION OF CCI IN THE HIGH COURT, THE
COURT HELD THAT CCI SHOULD REFRAIN
ITSELF FROM PERFORMING
ADJUDICATORY FUNCTIONS AND
RESTRAINED IT FROM PASSING ANY FINAL
ORDER IN THIS MATTER.
 THE COURT GAVE AN INTERIM ORDER
DIRECTING MICROMAX TO DEPOSIT 1.25%
OF THE SALE OF THE DOWNSTREAM
PRODUCT TO THE COURT
ISSUES FACED IN INDIA
 Determination of Royalty base: whether the price
of smallest saleable unit or the price of the
downstream or the end product to be taken as a
base for calculation of royalty?
 Conflict of opinion between high court and
competition commission of India: Should the
competition commission of India be restricted
from performing adjudicatory functions.?
 Is the practice of granting and seeking interim
injunction effective relief, where the patent
owner has already given commitment to license
its patent under FRAND terms?
CHAPTER 4:
COMPARISION WITH OTHER
JURISDICTIONS
 POSITION IN UNITED STATES: IT IS ONE OF THE
MAJOR AND MOST POPULAR FIELD OF S.E.P
LITIGATION.
 DETERMINATION OF ROYALTY BASE: CSRIO v
CISCO, the US District Court for the Eastern District of
Texas had ‘rejected that royalty should be based on chipset
price’ and stated that it should be based on the downstream
product.
 AS REGARDS GRANTING INTERIM INJUNCTION
MOTOROLA V. MICROSOFT IS OF USE.
 Brief facts: Motorola was a member of an SSO and had
committed to license its patent under FRAND terms.
Microsoft was a third party which used the patent by Motorola
in its device ( X-BOX) however the royalty charged by
Motorola was 2.25% of the end product. Microsoft went to
court stating that such royalties were exorbitant. Court held
in favour of Microsoft stating that Motorola had an obligation
to license the patents on FRAND terms.
 POSITION IN GERMANY:
 The statutory law allows the patentee to apply for an
injunction. German courts will grant injunctive relief
in patent matters if there is a risk of infringing use of
the patent. German courts have, as a general rule, no
discretion on whether to grant an injunction in
patent infringement litigation. German patent law
does not provide a basis for an infringer to avoid an
injunction based on a FRAND defense.
 However now German courts have applied German
competition law to develop the so-called Orange Book
Standard for assertion of a FRAND defense. In
Orange Book Standard of May 6, 2009, the German
Federal Supreme Court allowed, for the first time, a
patent user to defend itself against an injunction
claim by arguing that it is entitled to a FRAND
license according to antitrust law.
 POSITION IN JAPAN:
 In Japan, as in Germany, if patent infringement is
established and an injunction is sought, courts issue
an injunction as a matter of law. A Japanese court
may refuse to grant injunctive relief, however, if it
determines that the patent holder has abused its
patent right.
 Recently, however, a Japanese court considered a
FRAND defense for the first time in Samsung
Electronics vs. Apple where Samsung filed a
request for a preliminary injunction against Apple in
Tokyo District Court. The Tokyo District Court
refused Samsung‘s request for a preliminary
injunction on the ground that the asserted patents
are SEPs encumbered with a FRAND commitment.
CHAPTER 5:
CONCLUSION

 The legal system in India is efficient to deal with

the issue of standard essential patent litigation
but the pendency of suits poses a big challenge.
 The following are the suggestions:
 The downstream product should be taken as a royalty
base.
 Interim injunctions should not be granted where the
patent holder has committed to license its patent
under FRAND terms.
 The adjudication regarding Standard essential patent
has to be left with the high courts and the
competition commission of India should perform only
investigative functions.