Monday, January 20, 2014

Competition Commission of India launches second FRAND antitrust investigation against Ericsson

On Thursday (January 16, 2014), the Competition Commission of India decided to launch a second antitrust investigation of Ericsson's assertions of FRAND-pledged standard-essential patents (SEPs). This time around, the complainant is Intex Technologies, a local hardware company. The first investigation of Ericsson's SEP-related conduct started in November further to a complaint by another local device maker, Micromax.

I liked about the CCI's announcement of the first investigation the fact that an antitrust enforcement agency finally took someone to task over the proper royalty base. Other competition regulators should do the same at some point. Last week's announcement of the second investigation mentions that issue again, and I'd also highlight the following passages that relate to preconditions Ericsson allegedly imposed in order to enter into any specific discussion of the alleged infringement of its SEPs:

"Ericsson also required [Intex] to enter into an NDA [non-disclosure agreement] as a necessary pre-condition for letting [Intex] know about the details of the alleged infringement. [Intex] also stated that despite several objections and reservations, it was compelled to sign the NDA before Ericsson provided details of infringement to [Intex]."

"The NDA prevents [Intex] from disclosing any proprietary confidential information of Ericsson to the Informant's vendors. As a result, the Informant cannot even discuss with its vendors, regarding the alleged infringements, of Ericsson's patents for the products supplied by them despite the fact that the Informant had specific agreements in place with such vendors wherein the vendors have represented that the products of the vendor do not infringe any of the intellectual property rights of third parties. Further, the NDA provides for jurisdiction of Singapore and cripples [Intex's rights] to address or seek redress of its grievances in a local court of law."

At this stage, the CCI merely stated what Intex had told it in its complaint. If any of the above is true (which I don't doubt, though I haven't seen any proof of it either), it does raise issues in and of itself. SEP holders should have to provide infringement claim charts without an NDA. If anyone's confidential business information is at stake in this context, it's the alleged infringer, if (and only if) confidential technical aspects of its products are addressed by a claim chart. But if a patent is public and a SEP holder believes it's infringed merely by implementing the standard, then there's no reason why an infringement theory (particularly if based on the specifications of the standard, which is typically public, too) should be withheld unless an NDA is signed.

The second paragraph quoted above may explain why Ericsson primarily imposed such restrictions on Intex: it wanted to complicate the alleged infringer's discussion and coordination with chipset makers affected by Ericsson's assertions. Should this be the case, I would also regard it as anticompetitive.

If Ericsson insisted on a foreign jurisdiction (Singapore), that would be another problem -- not because it's Singapore, but because it's not India, where Intex is based and presumably sells the bulk of its allegedly-infringing products. SEP-related issues should be sorted out in a jurisdiction with respect to which a patent holder seeks royalties. If companies reach an agreement without undue pressure or threats, there's no problem with a worldwide NDA or even a worldwide license agreement under one particular country's jurisdiction. But if any FRAND licensing issues come up, they must be resolved locally. Otherwise there's a risk of companies availing themselves of foreign jurisdictions (and the leverage they have in foreign markets with patents) with the effect of distorting competition (through hold-up) in the local market. This, too, is something I believe other antitrust enforcers should keep an eye on (for example, in connection with InterDigital).

I expect further developments in the FRAND antitrust arena in the weeks and months ahead. For example, the European Commission indicated last month that Samsung's proposed settlement offer may need improvement. It will be interesting to see whether the EU's top competition authority will expect Samsung to address the very fundamental shortcomings of its proposal or content itself with cosmetic, face-saving changes.

In other FRAND news, U.S. cable network operator Charter Communications filed a lawsuit in the District of Delaware this month against the Rockstar Consortium (owner of thousands of ex-Nortel patents acquired in a 2011 auction), one of its subsidiaries, and Spherix, a patent monetizer to which Rockstar recently sold 100 patents. Charter raises a variety of issues and wants the court to require the defendants to make a FRAND offer (a "specific performance" remedy). Its allegations include, among other things, the claim that Rockstar assigned FRAND-pledged patents to other entities without ensuring that those would honor Nortel's original FRAND licensing commitments. It's too early to tell whether Google and Samsung (two companies whose SEP assertions have given rise to antitrust investigations in different jurisdictions) will discuss similar issues in connection with their dispute(s) with Rockstar. Google has answered to the Rockstar/Netstar search engine patents complaint, emphasizing an inequitable-conduct defense, and is now also a co-defendant in a lawsuit against Samsung. While Google generally favors aggressive SEP enforcement, it did semi-surprisingly raise a low-key FRAND defense against Intellectual Ventures (over former Nokia patents) last year.

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