Tuesday, March 26, 2013

Standard-essential patent litigation arrives in India as Ericsson sues local player Micromax

Reports by the Times of India and the Economic Times (apparently sister publications) show that standard-essential patent (SEP) enforcement increasingly also takes place in Asia. According to the reports, Ericsson has sued local player Micromax.

The Delhi High Court ordered Micromax to make a deposit, apparently for the purpose of protecting Ericsson's financial interests while the parties are negotiating. The royalties to be deposited are category-specific and set forth in the order as follows:

  • "A. For phones/devices capable of GSM : 1.25% of sale price.

  • B. For phones/devices capable of GPRS + GSM : 1.75% of sale price.

  • C. For phones/devices capable of EDGE + GPRS + GSM : 2% of sale price.

  • D. WCDMA/HSPA [UMTS] phones/devices, calling tablets : 2% of the sale price.

  • E. Dongles, data cards : USD 2.50"

At first sight the royalty rates appear very, very high to me. This is not the result of any FRAND determination by the court but may merely be based on Ericsson's demands. A deposit (presumably to avoid injunctive relief) is not a final resolution of a case. The order mentions that products had been held up at customs over Ericsson's claims and will be released now, and the deposit has the purpose of allowing Micromax to keep importing and selling. The parties shall negotiate for a month. If they can't agree, the dispute over royalty rates will be referred to a mediator.

Intellectual property enforcement is critical to the growth prospects of emerging economies, including foreign companies' IP. India does not have the best reputation so far when it comes to patent protection. By comparison, China is widely considered to be far more advanced in that field than India. But for a jurisdiction in which IP enforcement is just developing, SEPs -- which are the intersection of IP and antitrust laws -- pose a particular challenge. The local players in those economies generally lack patents to countersue over (Indian companies also file far fewer patents abroad than, for example, their Chinese counterparts), and probably don't own any wireless SEPs.

Countersuing Ericsson is generally difficult unless someone holds patents that read on wireless network infrastructure. In a recent filing with a U.S. court, Samsung alleged that Ericsson, having "recently jettisoned its mobile phone business [...] now feels unhinged as a non-practicing entity in the mobile phone market to extort vastly unreasonable and discriminatory license fees".

Ericsson also accuses Samsung of FRAND violations, and it's too early to tell who's right (they could, in fact, both act abusively at the same time).

Samsung and Micromax are not the only companies Ericsson is presently suing over SEPs. Last months I watched an Ericsson v. Acer SEP trial in Mannheim, Germany.

In other Asian jurisdictions some decisions on SEP issues have already come down. Samsung won two SEP-based injunctions against Apple in Korea (which it can't currently enforce while on appeal), a fact that has given rise to an antitrust investigation of Samsung's conduct vis-à-vis Apple, and a Japanese court sided with Apple against Samsung.

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