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22 September 2014PatentsShraddha Singh Chauhan and Archana Shanker

The patents and competition crossroads

Patent litigation in India has gradually moved beyond its traditional approach, which typically involved suits for infringement, counterclaims for patent invalidation or contractual disputes. The conduct of warring parties has brought patent litigation under the scanner of competition law. This article examines the convergence of Indian patent law and competition law and the emerging jurisprudence, more particularly, concerning the telecommunications industry.

In modern international trade, patents have become an essential element of global business operations, particularly driven by high-end technologies such as electronics, semiconductors, software, telecommunications, etc. All the major companies in the world rely heavily on patents, as patents are reflections of companies’ technological innovation.

Due to the increasingly important role played by patents in emerging economies, it is quite natural that there may exist some exchange between patent law and competition law. In fact, as Martin Khor, executive director of the South Centre, the intergovernmental organisation of developing countries, puts it, a trade-off may exist between achieving static efficiency (short-term efficiency) through competition and achieving dynamic efficiency (long-term efficiency) through growth and innovation.

The market dominance of the monopoly holder may seem to be anti-competitive, but it is a part of patent protection. There is no harm in dominance of market power as long as it is not abusive. It may be considered as an abusive action when a dominant company refuses or refrains from licensing its patent to competitors at a reasonable price. Thus, the application of competition law to patent cases is regarded as one of the most complicated and important fields of competition policy.

Understanding ‘abuse of dominance’ through the prism of competition law

India has emerged as a blistering market for various technologies. Telecommunications is one such industry, greatly driven by innovation and patents. Many big global telecom majors such as Ericsson, Qualcomm, Nokia, and Samsung have filed several patents in India. The proliferation of telecom technology and a stronger patent regime since 2005 have led to the aggressive enforcement of patents. It was when IP telecom jurisprudence started seeing the light of day that the recent orders of the Competition Commission of India (CCI) overshadowed its organic growth and posed a challenge for the IP telecom regime in India.

Parties’ contentions

Micromax, an Indian mobile handset maker, filed a complaint with the CCI under Section 19(1)(a) of the Competition Act 2002, alleging that Ericsson abused its dominant position by demanding unfair, discriminatory and exorbitant royalties for its patents by charging on the basis of the value of the phones in which Ericsson’s patents were being used, instead of on the basis of the cost of the product licensed.

This complaint was filed subsequent to Ericsson’s suing Micromax for patent infringement of its standard essential patents (SEPs) in the Delhi High Court and seeking an ad-interim injunction against Micromax for being an “unwilling licensee”. The court also issued an interim order asking Micromax to deposit a certain amount of money, apparently to protect Ericsson’s monetary interests while the negotiations were continuing. However, the negotiations were unsuccessful and, finally, Micromax approached the CCI.

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