Standard Essential Patents

Indian mobile handset companies were facing the might of tech patent holders recently. It was looked upon as a non-issue by Indian Cellular Association (ICA).

Important Facts

• Technologies which are required to establish the standards are more important. Such technologies are core technologies without any alternatives hence every product which is based on a standard requires a mandatory access over these technologies. Patent rights granted over such standard establishing technologies are called Standard Essential Patent (SEP).
• The base requirement for SEPs to be constructive is licensing under FRAND conditions. Without FRAND, SEPs can cause costly conflicts. FRAND is the acronym for fair, reasonable, and non-discriminatory. It’s also known as RAND—reasonable and non-discriminatory. According to the principles of FRAND licensing, the patent owner must allow to take a license, the license terms must not be illegal or anti-competitive, and the cost of the license must not be too high.
• Indian Cellular Association (ICA) is the apex body of the mobile industry comprising manufacturers, brand owners, application & solution providers, distributors, retailers and eminent consumers of mobile handsets.
• The Association has been constituted to provide value and service to the mobile cellular industry in India by fuelling its growth, improving competitiveness, helping create a legal and ethical market and regulatory environment, thereby providing long-term benefits of mobile connectivity to the Indian masses.
• The Indian Patent does not contain any special provisions with respect to SEP’s.
• There is an inherent tussle regarding the royalty rates between the company who spent its resources in R&D to develop the Standard and the company that seeks to license it.

Questions for Analysis

Why is there a tug of war between Competition Law and Patents Law with respect to SEPs?

The basic idea behind the patent system is to reconcile the interaction between patents which are primarily ‘private’ and ‘exclusive’ as against standards which are meant to be ‘public’ and ‘nonexclusive’.

There is seen the crossing point between the competition law and Patent law. The competition law aim to prevent the stockpiling of market power while patent law grants monopoly rights. The Competition Commission of India, was formed with the objective to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers. The Competition Act 2002 is based on the principle that competition is desirable for the progress of technology with the parallel aim of dealing with issues like “abuse of dominant position” and “anti-competitive agreement”. The recent SEP litigation cases are the result of overlapping ambit between patent law and the competition law.

Indian Patent act does not have any reference for the standard essential patent(s). Thus, in the present scenario, the SEP license holder tends to approach court for filing infringement suit against licensee who are found not obeying the terms of license while on the other hand the licensee in turn approach the Competition commission of India for filing complaints for the “abuse of dominant position” and “anti-competitive agreement” against SEP holder.