Background

  • The dispute pertains to SEPs (Standard Essential Patents) related to 2G and 3G devices owned by Ericsson, which are subject to FRAND commitment, i.e. a commitment to offer the license on fair, reasonable and non-discriminatory terms.
  • Infringement suits initiated by Ericsson against Micromax and Intex in India, since Micromax and Intex applied these standards without a license to the SEPs
  • During the pendency of the suits both Intex and Micromax filed complaints with the Competition Commission of India (CCI) alleging abuse of dominant position.
  • CCI issued a prima facie directing the Director-General (DG) to initiate investigations,
  • Ericsson filed writ petitions challenging the jurisdiction of the CCI to investigate and the applicability of Competition Law.

Subject-matter of investigation

  • Ericsson demanding an unfair and excessive royalty for its SEPs
  • Issuing threats of interim injunction and custom seizures
  • Insisting to execute an NDA which contained several onerous clauses including one that compelled Intex to accept the jurisdiction and governing laws of Singapore
  • Offering different royalty rates and commercial terms to potential licensees from the same category & opaque and non-transparent negotiations
  • ‘bundling and tying’- Only offering its entire pool of patents as a bouquet and refusing to offer specific royalty rates in respect of each of the SEPs endeavoring to compel Intex to acquire licence for all its patents relating to 2G and 3G technologies without giving any choice to Intex

Prima facie orders of CCI in 2013-2014

  • Ericsson holds a complete dominance over its present and prospective licensees in the relevant product market.
  • Practices adopted by Ericsson are prima facie discriminatory and contrary to FRAND.
  • Royalty rates charged by Ericsson related to the end product rather than the patented product, which is prima facie unreasonable.

Delhi High Court Ruling

  • Court states that at this stage, it only has limited jurisdiction, i.e. examine the validity of the CCI orders issued so far to examine: (a) whether allegations made by Intex and Micromax could form the subject matter of proceedings under the Competition Act; and (b) whether the impugned orders are perverse?
  • Ericsson would fall within the definition of an ‘enterprise’ under Section 2(h) of the Competition Act in as much as patents were akin to ‘goods’ under the Sale of Goods Act.
  • There is no irreconcilable repugnancy or conflict between the Competition Act and the Patents Act –
    • Compulsory license system under Patents Act offers different remedies than what is contemplated under Competition law and they are not mutually destructive
    • Compulsory license remedies are in personam, where as CCI remedies are in rem.
    • Competition Act contains provisions that enable the CCI to confer with Patent Office, if required
  • While the Patents Act was found to be a special act vis-à-vis the Competition Act, since there is no irreconcilable conflict between the provisions, the jurisdiction of CCI to entertain complaints for abuse of dominance in respect of Patent rights cannot be ousted.

Other important observations from the Delhi High Court

  • Seeking injunctive reliefs by an SEP holder in certain circumstances may amount to abuse of its dominant position –
    • But this is a question within the scope of the Competition Act on which the CCI has exclusive jurisdiction;
    • No civil court can decide whether an enterprise has abused its dominant position and pass orders.
  • The CCI proceedings cannot be stayed merely because Mircromax and Intex have challenged the validity of the patents in another proceeding.