Standards are technical requirements or specifications that seek to provide a common design for a product or process. They enable improved compatibility, interoperability, reproducibility and quality of products in any sector. Standards are adopted by Standard Setting Organizations (SSOs), which can be governmental, quasi-governmental or private. These are responsible for setting, developing, coordinating, interpreting and maintaining standards. The Bureau of Indian Standards (BIS) is India’s national SSO. In the ICT(Information and Communications Technologies) sector the Telecom Engineering Centre (TEC) is the only formally recognized telecom standards/specification/type approval body in India. Global ICT Standardization Forum for India (GISFI) and Telecommunications Standards Development Society, India (TSDSI) and Development Organization of Standards for Telecommunications in India (DOSTI) are private SSOs in the Indian ICT sector. SSOs play a vital role in the interaction between standards and intellectual property rights. Many a times technology that is required to implement a standard is protected by patents. Those patents without which a standard cannot be implemented are termed as “Standard Essential Patents” (SEPs). In such cases, the patent holders, who already enjoy regular exclusionary rights over the patented technologies, have an added advantage by virtue of their technologies being essential to standards. This is because a large number of industry players want to sell standard compliant products and will therefore license SEPs giving the SEP holders a competitive advantage over others. Thus, SSOs are seen implementing IPR Policies that require members to disclose all their IPR and to license their SEPs under FRAND Terms (Fair, Reasonable and Non-discriminatory). However, the varied interpretation of “FRAND Terms” across jurisdictions has led to expensive litigation world over. India too has seen a recent rush of SEP litigations, with over ten lawsuits being filed over a span of two years.
In 2011 Ericsson – a Swedish multinational corporation – filed an application before the Commissioner of Customs, objecting to the import of goods by one Kingtech Electronics (India), claiming said goods infringed several of their SEPs in AMR Codec (Adaptive Multi-Rate) technology1. This was the starting point for SEP litigation in India. Consequently, when consignments belonging to Kingtech were detained by the Customs Authorities, Kingtech approached the Delhi High Court contending that the Commissioner had detained the goods without showing adequate reason to believe that the goods in question in fact infringed the patents as claimed by Ericsson. It was alleged that the Commissioner of Customs was not competent to make such determinations. In response, the Delhi High Court court ruled that while the Commissioner’s order did not show any application of mind with regard to the infringement claims, Ericsson had failed to follow due procedure, which is to approach a court of law to assert claim to its patents. Accordingly the Commissioner’s order was set aside and the court ordered the release of Kingtech’s goods.2 Thereafter Ericsson filed an appeal challenging this order before the High Court, which on July 13 2012 directed the Commissioner of Customers to pass fresh orders in the case, showing adequate reason to believe that Kingtech’s goods infringed Ericsson’s patents3. Subsequently Ericsson brought a patent infringement suit before the Delhi High Court seeking an injunction against Kingtech, preventing the use, sale of any mobile phone that incorporated their patented AMR Technology. Consequently, by an order dated August 22 2013 the High Court directed Kingtech to refrain from importing any devices incorporating Ericsson’s AMR technology patents4.
The second instance of SEP litigation in India involves a suit filed in March 2013 by Ericsson against Micromax Informatics Limited, one of India’s largest phone makers. Ericsson claimed that Micromax had infringed eight of it’s SEPs on AMR5, 3G6 and EDGE7 technologies, by selling mobile devices compliant with standards issued by the European Telecommunications Standards Institute (ETSI) and recognized by the Department of Telecommunications (DoT) in India. It was alleged that Micromax had avoided obtaining licenses for said technologies from Ericsson under FRAND terms. Ericsson sought permanent injunction, damages up to Rs. 100 crores and for Micromax to render its sales accounts of mobile devices(that incorporated Ericsson’s patented technology) for years 2008-20128. By its order dated March 19 20139, the Delhi High Court granted interim relief to Ericsson and directed Micromax to make interim royalty payments10. The Court further allowed Ericsson to inspect every consignment for Micromax that arrived at Customs. The parties were directed to negotiate FRAND licensing terms for the technologies in question on and an arbitrator was appointed for the purpose. Later on in November 2013, Micromax filed a complaint before the Competition Commission of India (CCI) claiming that Ericsson had abused its dominant position in the market by imposing exorbitant royalty rates for licensing its GSM technology under FRAND terms11. The CCI found Micromax’s claim to be valid and ordered an investigation on November 12 2013, which was subsequently challenged by Ericsson before the Delhi High Court. The jurisdiction of the CCI to investigate the actions of Ercisson was called to question. The court in its interim order dated January 21 2014 ruled that the CCI had entered into an adjudicatory and determinative role by recording a detailed and substantial reasoning at an initial stage, which was to order the Director General to conduct investigation. The court barred the Director General from contacting Ericsson officials stationed abroad (officials in India could still be contacted for the purpose of investigation) and restrained the CCI and Director General from passing any final orders till the completion of proceedings before the Court. The Court also directed that CCI’s order should not interfere with Ericsson’s negotiations with third parties12. Thereafter, the Delhi High Court in a judgment13 dated November 12 2014 fixed new royalty rates14 as interim arrangements pending trial of the suit. The court has also set December 31 2015 as the deadline for a decision in the suit.
The third SEP litigation also involves a suit filed by Ericsson (claiming infringement of the same SEPs over which Micromax15 was sued) against Gionee,a leading Chinese smart phone maker. In October 2013 the Delhi High Court ordered Gionee to make interim royalty payments for its sales in India (approx. USD 24 million)16. The royalty rates were set on the basis of the interim royalty rates awarded to Ericsson in March 2013 in the patent infringement suit against Micromax.
The fourth in the series of litigations involving Ericsson began with a complaint filed against Ericsson before the CCI in September 2014. An Indian phone maker -Intex Technologies- alleged that Ericsson had been demanding exorbitant royalty rates (linked with cost of product to the user17) and using unfair terms to license its SEPs(GSM technologies) to Intex. On January 16 2014, the CCI ordered a clubbed investigation into Ericsson’s actions, based on allegations made by Intex as well as Micromax18. Like in Micromax’s case, this order was also challenged by Ericsson before the Delhi High Court who on February 17 2014 ruled that the CCI had entered into a determinative process at the initial stage of investigation and imposed restrictions on the CCI and Director General similar to those imposed in the Micromax case19. Thereafter Ericsson filed a patent infringement suit against Intex, for infringement of the same AMR, 3G and EDGE SEPs. During the course of proceedings, Intex informed the court about a similar case before the Court of Rome, where all of Ericsson’s claims against mobile manufacturer ZTE had been rejected by the court who challenged the very presumption of essentiality of Ericsson’s patents. The Court of Rome observed that in order to assess the claim of essentiality, it would be necessary to examine the patents, which was too complex an analysis for the purpose of interim proceedings. Further the Roman Court held that even if it were to be assumed that the patents asserted were indeed “essential”, Ericsson would not suffer irreparable harm since the primary issue between the parties was pecuniary in nature. Ultimately Ericsson had to drop all the suits instituted against ZTE and settle the matter. However, the Delhi High Court refused to accept Intex’s challenge to the validity of the SEPs as a ground for rejecting Ericsson’s request for injunction. The court said that Intex in spite of being notified of the SEPs way back in December 2008, never questioned their validity over the years and this was enough evidence of validity of the SEPs20.Further based on contradicting statements made by Intex before the CCI and Court, as regards validity of the SEPs, the court concluded that the SEPs were prima facie valid. The court took the view that Intex had initiated proceedings before the CCI solely to prolong litigation by avoiding paying the royalty. While granting royalty rates in line with those granted in the infringement suit against Micromax on November 12 2014, the Court directed Intex to pay 50% of the royalty, due from the date of the lawsuit till March 1 2015, directly to Ericsson. The remaining amount was to be paid by Intex with a bank guarantee within four weeks. These terms were to apply every six months till the disposal of the suit. Intex was further restrained from importing goods that were infringing Ericsson’s SEPs.21 The matter is to be notified on August 21 201522.
In December 2014, Ericsson filed yet another suit against Xiaomi – a fledgling Chinese mobile device manufacturer – before the Delhi High Court alleging infringement of the same 8 SEPs that Micromax and Gionee were sued over. Ericsson submitted before the Court that despite being specifically requested to license the SEPs, Xiaomi launched their infringing devices in India in July 2014. Ericsson was granted an ex-parte injunction in December 2014 preventing the sale, manufacture, import and advertisement of Xiaomi’s devices23. This injunction was subsequently challenged by Xiaomi before a Division Bench of the Delhi High Court, claiming that its latest devices sold in the Indian market used Qualcomm chips, which were in fact licensed by Ericsson. Accordingly, in a pro tem order dated December 16 201424, the Court permitted Xiaomi to import and sell devices carrying Qualcomm chips, on the added condition that Xiaomi would deposit Rs. 100 as royalty for every device it imported to India from the date of the launch of the device in India to January 5 2015. The matter is currently pending before the Delhi High Court, with the next round of hearings set for August 2015.
The most recent litigation involves a case against Lava International Limited, where Ericsson once again asserts its SEPs relating to AMR, GSM and EDGE technologies. At the first couple of hearings, Lava International claimed that Ericsson refused to divulge information about its agreements with other parties25. While the suit is still at its initial stage, the parties have been directed to make efforts towards resolving their dispute but have failed to do so and thus the matter is now scheduled to be taken up on merits26 27.
In addition to the Ericsson lawsuits, other SEP infringement lawsuits include those filed during 2013 and 2014 by Vringo Infrastructure, a wholly owned subsidiary of the Vringo Corporation in USA. These are summarized as follows:
Vringo filed a suit against ZTE, its CEO Xu Dejun and its Indian subsidiary ZTE Telecom India in November 2013 over the alleged infringement of its patent (No. 243980 titled as ‘Mobile Station Operable with Radio Access Network and a Packet Data Serving Node and a Method for Operating Such Mobile Station’), which was claimed to be an essential ingredient of the technologies used in CDMA2000 and CDMA2000 Revision A and Revision B. Vringo, Inc., headquartered in the US, is engaged in the development and monetisation of intellectual property and mobile technologies. ZTE is a multinational company headquartered in Shenzhen, China, which manufactures products and provides services in the telecom infrastructure, equipment, systems; mobile phone; and telecom software sphere.The Delhi High Court granted an ad-interim ex-parte injunction on the manufacture, import, sale, use, or advertisement of ZTE’s infringing products. ZTE challenged the injunction, which was lifted by the court on December 12 2013. ZTE was directed to pay a bank guarantee of Rs. 5 crores (50 million) along with affidavit containing details of devices sold in India. The Delhi High Court agreed for appointment of a Scientific Advisor from the list drawn by the parties. The patents claimed by Vringo belong to a portfolio of Nokia acquired by Vringo.
Vringo and Vringo Infrastructure filed another patent infringement suit in the Delhi High Court in January 2014, against ZTE, ZTE’s Indian subsidiary and Indiamart, a distributor of ZTE’s products. Vringo claimed that its patent ( No. 200572, titled “A method and device for making a handover decision in a mobile communication system”) that pertains to 3G and 2G technologies. In February 2014, the court granted an ad-interim ex-parte injunction restraining ZTE from importing, selling, advertising, installing or operating devices that comprise the infringing components. It also appointed local commissioners to inspect ZTE’s premises and instructed customs authorities to detain ZTE’s shipments that may contain such devices and to notify Vringo about them. In March 2014, ZTE appealed against the injunction, which was lifted on August 5, 2015 with ZTE being ordered to deposit Rs. 17.85 crore (178.5 million) to the court. The affidavit of Expert submitted by Vringo was rejected by the Delhi High Court and a Committee of three Professors was appointed by the Court.
In April 2014, Vringo filed a third patent infringement suit against AsusTek Computer Inc., one of its distributors in New Delhi, Nuage Techsol Pvt. Ltd. in the High Court of Delhi. In this suit Vringo claims infringement of a Non-SEP (Patent No. 223183 titled “Method and system for providing wireless communication using a context for message compression”) by AsusTek. No interim Order has been passed in the matter till date.
UPDATE: On August 5, 2015, SFLC.in along with five other civil society organizations wrote to the CCI, urging it to withdraw its participation in the upcoming 3rd International Conference on IPR and Competition. The letter states that the CCI’s participation in an event, the themes of which clearly fall under on-going investigations by the CCI against some of the event’s private organizers and sponsors, would lead to serious concerns of conflict of interest. A copy of the letter is available here.
1 AMR Patents: IN203034 (Linear Predictive Analysis by synthesis encoding method and encoder); IN 203036 (Apparatus for producing from an original speech signal a plurality of parameters) ; IN234157 (A method of encoding/ decoding multi-codebook fixed bitrate CELP signal block) ; IN203686 (Method and system for alternating transmission of codec mode information) ; IN213723 (Method and apparatus for generating comfort in noise in a speech decoder)
8 Paragraph 2 of the judgment available at http://indiankanoon.org/doc/90888012/
10 For phones/devices capable of GSM – 1.25% of sale price; For phones/Devices capable of GPRS + GSM- 1.75% of sale price; For phones/ devices capable of EDGE+GPRS+GSM- 2% of sale price; WCDMA/HSPA phone/devices, calling tablets- 2% of the sale price; Dongle/Data cards- USD 2.50
- For phones/ devices capable of GSM -0.8% of net selling price;
- For phones/ devices capable of GPRS + GSM -0.8% of net selling price;
- For phones/devices capable of EDGE + GPRS + GSM -1% of net selling price;
- WCDMA/ HSPA phones/devices, calling tablets -1% of the net selling price.
From 13.11.2015 to 12. 11.2016
- For phones/ devices capable of GSM- 0.8% of net selling price;
- For phones/ devices capable of GPRS + GSM – 0.8% of net selling price;
- For phones/ devices capable of EDGE + GPRS + GSM – 1.1% of net selling price;
- WCDMA/ HSPA phones/ devices, calling tablets – 1.1% of the net selling price
From 13.11.2016 to 12.11.2020
- For phones/ devices capable of GSM – 0.8% of net selling price;
- For phones/ devices capable of GPRS + GSM – 1% of net selling price;
- For phones/ devices capable of EDGE + GPRS + GSM – 1.3% of net selling price;
- WCDMA/ HSPA phones/ devices, calling tablets – 1.3% of the net selling prices.
17 E.g. for the use of GSM chip in a phone costing Rs. 100, royalty would be Rs. 1.25 but if this GSM chip is used in a phone of Rs. 1000, royalty would be Rs. 12.5. However, the higher cost of the smart-phone could be due to various other technical features, yet the licensee is compelled to pay higher royalty charges to patent holders.
20 Para 106 of order available at http://indiankanoon.org/doc/74163100/
22 Copy of order available at http://delhihighcourt.nic.in/dhcqrydisp_o.asp?pn=94545&yr=2015