India jurisdiction report: SEPs at the crossroads
The local mobile device manufacturers hold a substantial share of this market, giving rise to litigation between the holders of standard-essential patents (SEPs) and the manufacturers who implemented those standards in their devices.
The litigations were claimed to be an inevitable consequence of drawn-out negotiations on licensing terms and fair, reasonable and non-discriminatory (FRAND) rates that failed to come to settlement between the SEP holders and the local implementers.
The patent holders—Ericsson, Vringo and Dolby Laboratories—filed suits against infringement of their SEPs by local manufacturers Micromax Informatics, Intex and iBall. They also filed suits against Chinese manufacturers such as Xiaomi and Oppo. All these suits were filed in the Delhi High Court, the preferred forum in India for patent matters, which immediately restrained the local implementers from manufacturing and selling their products that were alleged to be infringing the SEPs.
The implementers were, however, some months later allowed to sell their products during the pendency of the suits on the condition of payment of royalties to the SEP holders based on an interim arrangement determined by the court.
Guidelines
Previously there had been no clarity on licensing of SEPs and determination of FRAND rates in India and that could have been the reason the earlier negotiations failed. Even the suits filed by the SEPs to date could not give an opportunity to the court to give definitive guidelines on FRAND rates and licensing of SEPs as these suits got settled before the trial could take place.
However, the factors that the Delhi High Court considered in determining the royalty to be paid to SEP holders while allowing the local implementers to continue sale of their products in the interim stage, gives us a direction on how the jurisprudence could develop on SEPs and FRAND rates in India.
The Delhi High Court relied upon comparable licences in all these cases to derive FRAND rates during the interim arrangement that brought the royalty rates closer to the real-world market valuations of asserted SEPs. The court also used the price of the entire licensed device rather than of components within the device as the base for determining the royalty rates.
