Category Archives: licensing

Compulsory licensing

Compulsory licenses are sovereign state authorizations which enable a third party to make, use, or sell a patented product without the consent of the patent holder. Provisions pertaining to compulsory licensing are provided for under both the Indian Patent Act, 1970, as well as the international legal agreement between all the member nations of WTO – the TRIPS. In India, Chapter XVI of the Indian Patent Act, 1970 deals with compulsory licensing while the conditions which need to be fulfilled for the grant of a compulsory license are laid down under Sections 84 and 92 of the Act.

In accordance with Section 84(1) of the Indian Patent Act, 1970, after three years from the grant of a patent, any interested person may make an application for a compulsory license on the grounds that the patented invention:

(a) Does not satisfy the reasonable requirements of the public;

(b) Is not available to the public at a reasonably affordable price; and

(c) Is not worked in the territory of India.

In addition to the aforementioned grounds, according to Section 92 of the Act, compulsory licenses can also be issued suo motu by the Controller of Patents pursuant to a notification issued by the Central Government if there is either a “national emergency” or “extreme urgency” or in cases of “public non-commercial use”. The said section enables the Government of India to notify to the public of such extreme circumstances, whereupon, any person interested can apply for a compulsory license and the Controller in such case may grant to the applicant a license over the patent on such terms and conditions as he thinks fit.

The patentee, however, has the right to be heard in the compulsory licensing application process.

India’s first ever compulsory license was granted by the Patent Office on March 9, 2012, to Hyderabad-based Natco Pharma for the production of generic version of Bayer’s Nexavar, an anti-cancer agent used in the treatment of liver and kidney cancer. It was established in the Bayer vs Natco case that only 2% of the cancer patient population had an easy access to the drug and that the drug was being sold by Bayer at an exorbitant price of 2.8 lakh INR for a month’s treatment[1]. Further, on the ground that Nexavar was being imported within the territory of India, the Indian Patent Office issued a compulsory license to Natco Pharma, which assured that the tablets would be sold for Rs. 8,880/- per month. It was settled that 6% of the net sales of the drug would be paid to Bayer by Natco Pharma as royalty.

In the second case of Compulsory licensing in India, the Controller rejected BDR Pharmaceuticals’ application for compulsory license (made on March 4, 2013) for BMS cancer drug, SPRYCEL[2]. The Controller rejected the compulsory license application made by BDR for stating that BDR has failed to make prima facie case for the making of an order under section 87 of the Act. Controller in the said case observed that BDR Pharmaceuticals had not made any credible attempt to procure a voluntary license from the Patent holder and the applicant has also not acquired the ability to work the invention to the public advantage.

In the most recent case of compulsory licensing in India, Lee Pharma, a Hyderabad based Indian pharma company, filed an application for compulsory license (dated 29.06.2015) for the patent covering AstraZeneca’s diabetes management drug Saxagliptin. In order to make a prima facie case, Lee Pharma strived to show that their negotiations for a voluntary license with the patent owner were not rewarding as they did not receive any response from the Patent owner within a reasonable period. The grounds alleged by Lee Pharma were that:

  • the patentee has failed to meet the reasonable requirements of the public,
  • the patented invention is not available to the public at a reasonably affordable price, and
  • the patented invention is not worked in India.

However, all the three grounds of Lee Pharma were rejected by the Controller General and the Compulsory license application was refused[3]. The application was rejected on the basis that Lee Pharma failed to demonstrate what the reasonable requirement of the public was with respect to Saxagliptin and further failed to demonstrate the comparative requirement of the drug Saxagliptin vis-a-vis other drugs which are also DPP-4 inhibitors. Further, Controller General held that all the DPP-4 inhibitors were in the same price bracket and the allegation that Saxagliptin alone was being sold at an unaffordable price was unjustified. The Controller General also stated that Lee Pharma failed to show the exact number of patients being prescribed the patented drug and how many of them were unable to obtain it due to its non-availability and consequently it was difficult to hold whether manufacturing in India was necessary or not.

Considering the last two compulsory license cases in India, it is clear that the provisions of compulsory license cannot be misemployed to diminish the rights of the patent holders and that the basic jurisprudence governing the subject of compulsory license lies in balancing the conflicting interest of the patentee’s exclusive rights and making the invention available at an affordable price to third parties in case of need.

About the author: Tanu Goyal, Patent Associate at IIPRD and can be reached at: tanu@khuranaandkhurana.com

[1] http://thefirm.moneycontrol.com/story_page.php?autono=1132015

[2]https://iiprd.wordpress.com/2013/11/13/indian-patent-office-rejects-compulsory-licensing-application-bdr-pharmaceuticals-pvt-ltd-vs-bristol-myers-squibb/

[3] http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/india-rejects-compulsory-license-application-of-lee-pharma-against-astrazenecas-saxagliptin/articleshow/50652935.cms

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Division Bench of Delhi HC stays restoration of Monsanto license agreements with Nuziveedu Seeds

In the light of the recent order by Division Bench of Delhi High Court, this is an update to author’s prior blog dated April 5 2017 pertaining to the legal dispute between Nuziveedu Seeds and Mosanto.

US-based agro major Monsanto Technology LLC and Hyderabad-based seed manufacturer Nuziveedu seeds had been locked in a long-term licensing agreement whereby Nuziveedu Seeds was entitled to use Monsanto’s patented seed technology – Bollgard II, for which Monsanto received a patent in 2009 (Patent Number- 232681, granted on 20th March 2009) in India, for its ability to modify cotton seeds to include a microbe- Bacillus thuringiensis (Bt), which fortifies cotton plants against bollworms. In lieu of making use of this technology, Nuziveedu Seeds was required to pay trait fees to Monsanto.

However in November 2015, MMBL (Mahyco Monsanto Biotech Ltd), a joint venture through which Monsanto sells cotton seeds in India and has sub-licensed Bt cotton seed technology since 2002 to various domestic seed companies, terminated the license agreements of Nuziveedu Seeds Ltd. and its subsidiaries – Prabhat Agri Biotech Ltd and Pravardhan Seeds Private Ltd on account of what it said continued refusal to pay contractually agreed trait fees amounting to more than $20 million.

Monsanto later sued Nuziveedu Seeds (and its subsidiaries) for continuing to sell cotton seeds using its patented Bt technology, even after the termination of the license agreements in 2015. Dismissing the claim, the single judge (Justice R.K. Gauba) on March 28 had held (order) that the license agreements allowing Nuziveedu Seeds to use Monsanto’s patented seed technology still continued to be in force and binding on both parties.

This decision allowed Nuziveedu to continue to use Monsanto’s genetically modified cotton seed technology and had directed the license agreements between the two companies to be modified as per the GM Technology Licensing Agreement found in the Licensing and Formats for GM Technology Agreement Guidelines, 2016.

The court had also held that all future royalty payments for the use of Monsanto’s patents were to be made as per the cotton seed price control order issued by the central government. The 2015 price control order reduces the cost of cotton seeds by 74 per cent, from Rs 163 to Rs 43 per packet (exclusive of taxes)[1].

Monsanto appealed against this single-judge order passed on March 28 which had held that the termination of its license agreements with Nuziveedu was illegal and arbitrary in nature.

Senior advocate Kapil Sibal, counsel for Monsanto, argued that the single judge could not pass a direction to restore inter-party contracts that had been terminated by one of the companies[2].

The Division bench of Hon’ble Delhi High Court granting interim relief to Monsanto, stayed its single judge’s order reinstating a sub-licence between US-based agro major Monsanto Technology and three Indian seed companies, which the foreign entity had terminated.

ABOUT THE AUTHOR:

Tanu Goyal, Patent Associate at IIPRD and can be reached at: tanu@khuranaandkhurana.com.

[1]http://www.business-standard.com/article/companies/high-court-stays-restoration-of-monsanto-agreements-with-nuziveedu-seeds-117041000803_1.html

[2]http://www.livemint.com/Companies/DvBDJEMcG9GXATm9JADOLL/Delhi-HC-stays-restoration-of-Monsantos-sublicence-pact-wi.html

Nuziveedu seeds wins legal battle against US Giant Monsanto!

It has been a long time since M. Prabhakara Rao, the chairman of Nuziveedu Seeds, was trying to knock down the world’s largest seed company “Monsanto Co”, in a high-profile conflict over licensing and royalty of patented seed technology–Bollgard II. Finally, in a decision taken on 29th of March, M. Prabhakara Rao won the long-fought legal battle and Monsanto was ordered to restore the licensing agreement with Nuziveedu Seeds and slash royalty charges by about 70%.

The battle between the two parties gathered pace, back in 2015 when MMBL (Mahyco Monsanto Biotech Ltd), a joint venture through which Monsanto sells cotton seeds in India and has sub-licensed Bt cotton seed technology since 2002 to various domestic seed companies, took Hyderabad-based Nuziveedu Seeds Ltd to court claiming patent infringements and accusing this Indian company of continuing to use Monsanto‘s technology even after MMBL had cancelled its licensing contract.

Monsanto and Nuziveedu seeds had been locked in a long-term licensing agreement whereby Nuziveedu Seeds was entitled to use Monsanto’s patented seed technology – Bollgard II, for which Monsanto received a patent in 2009 (Patent Number- 232681, granted on 20th March 2009) in India for its ability to modify cotton seeds to include a microbe- Bacillus thuringiensis, which fortifies cotton plants against Lepidopteran insect damage. In lieu of making use of this technology, Nuziveedu Seeds was required to pay royalty charges to Monsanto.

However, in June 2015, only about three months after renewing his contract, one of his executives was sent by Mr. Rao to Monsanto’s Mumbai office to demand  10% cut in royalties to which Monsanto bluntly refused. A month later, a similar issue was raised by a group of nine seed companies of which Nuziveedu seeds was a part, and wrote to MMBL to reduce the royalty charges paid by them on account of changes made by some state courts for amounts that can be charged for seeds. A similar argument was presented to MMBL by National Seed Association of India, a government body of which Mr. Rao was the President. However, Monsanto dismissed the demands and suggested the companies to keep the matter “bilateral”.

With the burgeoning strains, MMBL terminated the license agreements of Nuziveedu and its group companies on account of what it said continued refusal to pay contractually agreed trait fees amounting to more than $20 million despite having collected the full retail price from farmers.

Driven by the need to serve the interests of all Indian farmers, India’s agriculture ministry intervened and announced a cotton seed price regime to fix the price of genetically modified cotton seeds and the royalties Monsanto was allowed to collect. Later,ministry also launched an antitrust investigation to ascertain whether Monsanto abused its dominance in the marketplace. Monsanto’s monopoly was touted as not being good for India’s farming practices.

Given that plants, parts of plants, seeds, plant varieties all stand excluded from patent protection by virtue of section 3(j) of the Indian Patent Act, 1970, it was further argued by Mr. Rao that Monsanto should never have been allowed to collect royalties after an initial payment to use its technology. Or, at the very least, prices should have been set by the government.

As an impact of the whole fiasco, Monsanto’s Sales of seeds and genetic traits for cotton dropped 16 per cent, or $83 million, in the fiscal year ending August 2016.

Finally, the Delhi High court ruled the infringement dispute by Monsanto in favor of Nuziveedu Seeds Ltd holding that the termination was invalid and illegal, and has also given a direction that the agreement of 2015 shall prevail. It has also said that the trait (technology) value as fixed by the central government from 2015-16 shall be applicable, and that the agreement should be modified accordingly.

About the author: TanuGoyal, Patent Associate at IIPRD and can be reached at: tanu@khuranaandkhurana.com

Samsung Patent Licensing Agreement with Personalized Media Communications

Texas-based Personalized Media communications, which is having a seminal intellectual property portfolio, has successfully signed a patent licensing agreement with Samsung Corporation and its affiliates.

PMC patent portfolio includes around 100 issued patents and pending applications that cover the use of control and information signals to control automated systems for generating and delivering electronic content to a display that is relevant to a user. Over the years, PMC is consistently pursuing a license-first approach to commercializing its intellectual property.

In November 2015 PMC filed suit against Samsung in the Eastern District of Texas, claiming the electronics maker had infringed patents related to signal processing. Specifically targeting Samsung digital televisions and its Android smartphones. In its complaint, PMC said it had months of discussions in the year 2014-15 about potential license but failed to reach a deal.

Samsung denied infringement and sought a judgment that the patents were invalid. Samsung said the patents arose from technology that dated back to the 1980’s and now PMC was “stretching its patents to cover modern-day smartphones and TVs, devices and technologies that were science fiction at the time of PMC’s purportedly inventive work.” But Samsung failed to prove the claims it had made.

Later, Samsung filed a series of petitions seeking Patent Trial and Appeal Board review of the patents. PTAB petition and district court case ended after the two sides reached an agreement.

With this licensing agreement, Samsung joins other like Sony, Panasonic, Cisco, DirecTV etc., who also have taken PMC patent license.

About the Author: Gaurav Giri, Sr. Executive Licensing at IIPRD and can be reached at: gaurav@iiprd.com

Meizu – Qualcomm License Agreement Deal

Qualcomm and the Chinese consumer electronics company Meizu recently announced that they had signed a licensing deal with each other. With this deal, they ended a yearlong infringement suit which was filed by Qualcomm against the Chinese company.

In the October of 2016, we came to know that Qualcomm (the largest chipmaker in the world) has filed patent infringement suits against the Chinese smartphone maker Meizu in the US International Trade Commission, the Mannheim regional Court in Germany and in France. The two went under a tiff when Qualcomm claimed that Meizu is refusing to negotiate the patent licensing deals for the chipmaker’s 3G and LTE technologies.

Qualcomm’s technology licensing (QTL) business owns a massive portfolio of wireless technologies and generates a lion’s share of its operating profits also. This portfolio allows it to generate a 3-5% profit over the wholesale price of every smartphone which is sold worldwide. This deal was widely accepted when the smartphone sales were booming but as the prices fell down, smartphone makers complained that the royalties were impacting the already small margins. In response to Qualcomm’s licensing fees, many companies in china started underreporting their shipments to pay the less licensing fee to Qualcomm. The Chinese government in return also slapped Qualcomm with a $975 million antitrust fine and forced it to lower its licensing rates.  Due to this, Qualcomm had to renegotiate new licensing agreements with the companies on its own. Most of the major Chinese companies negotiated new terms with the chipset maker but Meizu was not ready to do this as they said they are not using Qualcomm’s chips in its lower segment phones and mainly puts MediaTek chips in them and Samsung’s Exynos chips in higher end devices.

After all this tussle, the two recently signed a patent licensing deal with each other. Under this deal, Qualcomm is granting Meizu, a worldwide royalty-bearing patent license for developing, manufacturing and selling certain 3G and 4G smartphones following the terms that the royalties produced by Meizu in China should adhere to the terms and conditions of the rectification plan which Qualcomm has submitted to the country’s National Development and reform Commission.

About the Author: Gaurav Giri, Sr. Executive Licensing at IIPRD and can be reached at: gaurav@iiprd.com

BlackBerry and India’s Optiemus Infracom sign’s licensing agreement to capture Asian smartphone market

BlackBerry once a phone innovator, was considered a game changer in 1999 when its mobile phone allowed on-the-go business people to access email wirelessly. BlackBerry devices were popular for a long time almost a decade. But with the introduction of the iPhone in 2007 and Google’s android in 2008 BlackBerry lost its market as a consequence of errors in its strategy and vision.

Blackberry is striving to get back into the smartphone market for which it is strategically using third parties to manufacture and market the Blackberry smartphones. India being the fastest-growing smartphone market in the world, everybody is looking at India as a huge landing ground. Trying to capture Asian smartphone market BlackBerry has signed a long term licensing deal with Delhi based Optiemus Infracom to manufacture and market smartphones in the South Asian countries like India, Bangladesh, Sri Lanka and Nepal.

Optiemus will focus on BlackBerry handsets priced between Rs 12,000 to Rs 20,000, which is the fastest growing segment in India. Under this aggrement Optiemus Infracom will perform all the services for Blackberry starting from manufacturing to selling the Blackberry smartphones in South Asia. Optiemus will provide all the customer support needed for the users. The Delhi-based firm is expecting to sell two million handsets in one year.

BlackBerry will also license its security software and service suite to Optiemus whereby it will launch BlackBerry smartphones running on Google Android operating system and position them as “secured” handsets. The handsets will also receive security updates directly from BlackBerry.

The agreement between BlackBerry and Optiemus also supports the Indian Government’s “Make in India” initiative, which aims to create local manufacturing and job opportunities. As per the agreement, Optiemus will follow BlackBerry’s recent global licensing agreement with TCL Communication and PT BlackBerry.

With this, BlackBerry now have licensees all over the world, in all markets to manufacture BlackBerry branded devices, proving the firm is delivering on its licensing strategy and accelerating its transition to be a ‘future-proof’ security software and services company.

About the Author: Gaurav Giri, Sr. Executive Licensing at IIPRD and can be reached at: gaurav@iiprd.com

Khurana & Khurana expands footprint in South East Asia

With business models over the world turning more idea-driven, Intellectual Property Rights (IPRs) are now one of the most valuable assets for any economy. With a significant increase in IPR related activities, South East Asia is developing as a key market for IP Protection and initiating Enforcement actions. Khurana & Khurana, Advocates and IP Attorneys (K&K) one of the leading IP and Commercial law firms in India is committed to provide high quality consistent End-to-End Legal Services in IP and Corporate Legal Matters, and with a belief that success comes only when one has a long-term perspective and high level of client orientation, we are expanding our footprints in South Asian countries (Bangladesh, Vietnam, Myanmar, Nepal) with our strong associations with an objective of being a single-point of contact for IP Prosecution Matters in South-East Asia.

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About K&K

Khurana & Khurana, Advocates and IP Attorneys (K&K) is more than a full-service Intellectual Property and Commercial Law firm.  K&K was formed with a very firm focus on providing end-to-end IP Prosecution/ Litigation and Commercial Law services in a manner that is Corporate Centric and follows stringent delivery practices that are consistent and are above-defined quality standards. K&K works closely with its sister concern IIPRD, both of which supplement each other in order to provide end-to-end IP Legal, Offshored IP Support, and Commercialization/Licensing services to over 3000 Corporates.

Our team of over 95 professionals spread across 6 Offices in India having high level of technical and legal competence, gives us the right competitive edge and positioning, as a law firm focused on creating immense IP value for our clients. K&K, through its experienced and qualified team of Attorneys/Practitioners, across Technology and Legal Domains, gives a rare synergy of legal opinion, out-of-box thinking for the protection of ideas/IP’s and entrepreneurial spirits to its client base. K&K is strongly ranked and recommended by Chambers and Partners, IAM, MIP, Legal 500, Asia IP, among other like agencies, and is an active member of INTA, APAA, AIPLA, LES, and AIPPI.

Export under section 107A of Indian Patent Act, 1970

In the case of Bayer Corporation versus Union of India & ors (W.P.(C) 1971/2014) and Bayer Intellectual Property Gmbh & Anr versus Alembic Pharmaceuticals ltd (CS(COMM) No.1592/2016), High Court of Delhi in the consolidated decision dated March 08, 2017, adjudicated on the issue whether Section 107A of the Patents Act, 1970 permits export from India of a patented invention, even if solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product.

Though it’s been almost five years after first compulsory license (in India) was granted to Natco in 2012 against Bayer’s Patent IN215758 covering Nexavar (Sorafenib ), Bayer and Natco are fighting it hard in 2017 as well. One of the terms of Compuslory License was “solely for the purposes of making, using, offering to sell and selling the drug covered by the patent for the purpose of treating HCC and RCC in humans within the territory of India”.

Subsequently, Natco was permitted to export the drug SORAFENIB TOSYLATE not exceeding 15 gm for development / clinical studies and trials. Natco again applied for permission to export 1 Kg. of Active Pharmaceutical Ingredient (API) SORAFENIB to China for the purposes of conducting development / clinical studies and trials, to which Bayer objected.

To better understand the issue at the heart of this decision, it’s important to understand section 48 of the Indian Patent Act, 1970 which gives rights of Patentee and section 107A of the Indian Patent Act, 1970 which lists out activities which shall not be considered to be infringement of Patent.
Both the sections have been reproduced below for convenience.

Section 48:

Subject to the other provisions contained in this Act and the conditions specified in section 47, a patent granted under this Act shall confer upon the patentee—

(a) where the subject matter of the patent is a product, the exclusive right to prevent third parties, who do not have his consent, from the act of making, using, offering for sale, selling or importing for those purposes that product in India;

(b) where the subject matter of the patent is a process, the exclusive right to prevent third parties, who do not have his consent, from the act of using that process, and from the act of using, offering for sale, selling or importing for those purposes the product obtained directly by that process in India.

Section 107A:

For the purposes of this Act,— any act of making, constructing, using, selling or importing a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product; (b) importation of patented products by any person from a person who is duly authorised under the law to produce and sell or distribute the product, shall not be considered as a infringement of patent rights.

Natco pleaded that export of the Patented invention for the use reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product is squarely covered under section 107A. It also submitted that its intentions were not for commercial purpose. Natco also submitted that grant of Compulsory License does not take away the rights to export the Patented invention for the purposes of section 107A.

Bayer alleged that 107A of Indian Patent Act does not allow exporting of drug even for the purposes of reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product. Bayer tried to draw attention to the fact that language of section 107A does not use the word ‘export’ but uses the word ‘import’. Bayer alleged that absence of the word ‘export’ clearly indicates the purpose of the law was not to allow the export of the patented invention and the words ‘in a country other than India’ should be interpreted only to allow export of the information generated by experiments in India. Patented invention as such cannot be exported from India to generate information to be submitted in other countries. The word selling should be interpreted to mean selling in India and not outside. Bayer alleged that if law intended to allow export, language would have expressly included that as it has included import. In summary, Bayer requested the court to interpret the word sell to mean selling without exporting, i.e. selling in India. Bayer importantly also alleged that exporting under 107A of Patented invention for which compulsory license was granted would result in the abuse of law.

On 5th November, 2014, Natco was permitted export of SORAFENIB for carrying on activities for obtaining regulatory approvals within the meaning of Section 107A of the Act. Bayer preferred appeal against the said order and which was disposed of by expediting the hearing of the writ petition and by prohibiting export till the decision of the writ petition. The hearing of the writ petition commenced on 7th September, 2015 and concluded on 8th July, 2016, when orders were reserved.

Natco had also brought attention to the fact that China requires clinical trials to be conducted in China and do not recognize clinical trials conducted in India. This makes it mandatory for Natco to seek export under section 107A so that it can launch the product in China immediately after term of patent is over.

CS(COMM) No.1592/2016 was filed by Bayer to injunct Alembic from making, selling, distributing, advertising, exporting, offering for sale and in any manner directly or indirectly dealing in Rivaroxaban‘ and any product that infringes Bayer‘s patent IN 211300. Alembic was manufacturing and exporting RIVAROXABAN to the European Union and had made multiple Drug Master File submissions to the United States Food and Drug Administration in the United States of America for the drug RIVAROXABAN. Alembic alleged that exports being effected by Alembic were within the meaning of Section 107A only.

For both cases, court held after referring different dictionaries that selling cannot be interpreted to mean to exclude exporting. Also court found that Patent Act does not require court to do so. Court also brought attention to the fact that even absence of the word ‘export’ in section 48 does not prevent Patentee from restricting third parties from exporting patented invention. Court explained that it’s not the exporting of information is allowed but it’s the Patented invention. The words ‘in a country other than India’ are for the law in force (of country where information is required).
Court also went on to hold that even when compulsory license is granted, Natco as a non-patentee cannot be deprived of making, constructing and selling by way of export a patented invention for purposes specified in Section 107A.

Court gave the liberty Bayer to, if makes out a case of the exports effected or to be effected being for purposes other than specified in Section 107A, take appropriate proceedings therefor.

About the Author: Swapnil Patil, Patent Associate at Khurana & Khurana, Advocates and IP Attorneys and can be reached at: swapnil@khuranaandkhurana.com.

FRAND-ING PATENT LICENSES AND ITS IMPLICATION IN LANDMARK CASES IN INDIA

Everyday, a number of products are being invented all over the world, some cascading over the improvement of existing inventions, and the others, portraying a unique set of methods and products unknown to man at large. Simultaneously, there is an eruption of infringements that remain unnoticed or noticed following an incredulous load of proceedings and exorbitant costs. It is essential to protect the rightful rights of these owners against such infringements and unlawful interference to avoid any possible losses or damages in their peaceful functioning of their entities. In the field of protection of inventions, the adoption of Agreement of Trade Related aspects of Intellectual Property Rights (TRIPS) and the Patent Act, 1970 and related amendments aim to let these owners benefit from their inventions without any unnecessary disturbance.

1. DEFINING STANDARDS

In our day-to-day activities, we try to sculpt our needs as per certain benchmarks to achieve our desired results. Similarly in the field of patents, every invention requires certain targets to abide by in order to facilitate an irreplaceable position in the market. To put it technically, standards are technical specifications that seek to provide a common design for a product or process[1]. Ensuring that the products conform to standards facilities almost definite reliability, quality, stability when purchasing the products and subsequently, an increase in their demand. To lay it down simply, a standard is a document that exhibits certain requisites for a particular product, element, system or service or elaborately describes a specific method. Formal standards are declared by Standard Setting Organizations (SSOs) and include establishments such as the European Telecommunications Standards Institute (ETSI), Institute for Electrical and Electronics Engineers (IEEE) and various other ad hoc informal organizations[2].   Standards can also be of two different kinds- those with are mandatory or those that are up to one’s discretion[3].

2. STANDARD ESSENTIAL PATENTS

The concept of Standard Essential Patents (SEPs) cropped up when controversies between smartphone giants came about. Standard Essential Patents are basically, patents that inform the users or anyone else that the particular invention conforms to a particular standard denoted by that patent. SEP was also defined by the Washington District Court in Microsoft Corp. v Motorola Mobility, Inc.[4], as “A given patent is essential to a standard if use of the standard required infringement of the patent, even if acceptable alternatives of that patent could have been written into the standard”. It is a universal truth that consumers prefer standard compliant products as they deliver an incorrigible quality. Thus, in order to save a spot in the demand market, the inventors are forced to adopt technologies conferred by Standard Essential Patents. In turn, these SEP holders gain a huge competitive edge in the market and do not face any competition until they expire and move into the public domain.

3. FAIR, REASONABLE AND NON-DISCRIMINATORY TERMS (FRAND)

Due to the ubiquitous yearning for snowballing sale of one’s products, the market players are in a constant struggle to find the most desirable, the most profitable, and the most economically efficient techniques to garner demand for their brands. For this reason, SEPs play an unparalleled role to fulfill such wishes of the inventors. However, this also means that they have unbridled power in the market. Creating a monopoly of such SEP holders would be detrimental to the inventors, as they will have no say in the unfair and discriminatory terms brought before them. They will be forced to succumb to such terms for meeting the primary objective of every company in the market. There are a number of issues that rise during the event of licensing SEPs to other companies that inevitably cause a disruption in the unadulterated functioning of licenses in the country. A commonly occurring issue is patent holdup when an SEP holder realizes his irreplaceability in the market and consequently, causes a rise in the royalty rates to order to unjustly profit from his dominance, thereby burdening the licensee companies. Another frequent issue is royalty stacking where the companies are forced to pay for all the patents held by the SEP holder, patents that are not even incorporated by them in their products, purely under the coercion by the SEP holders of revoking the license

Hence, in order to evade such prejudiced demands of the SEP holders, the concept of FRAND was incorporated. The SSOs stress the requisite for such holders to enter into a promise to not cultivate any unwanted competitive strategies and misuse of the power granted to them. This promise is to coincide with the FRAND terms. Following the licensing strategies stated under the FRAND terms forms the basis of the standard development process. Conformance to FRAND terms guarantee that the SEP holders do not abuse their dominant position in the market and they license SEPs to desiring companies in a ‘fair, reasonable and non-discriminatory’ manner.

4. THE ERICSSON AND MICROMAX CASE

On the 4th of March, 2013, Ericsson filed a case of patent infringement against Micromax for eight of its SEPs which related to its 2G, 3G and EDGE devices, in the Delhi High Court. In response, on the 19th of March 2013, the Court passed an order stating that both the companies would enter into a contract under FRAND terms for the next month purely under an ad-interim arrangement, with prescribed royalties given in the table below.

A mediator was appointed to resolve the disputes between the two companies, but it was in vain. As a result, on the 24th of June 2013, Micromax filed information under Section 19(1)(a) of the Competition Act, 2002, alleging Ericsson to have inculcated an abusive and unfair mode of setting royalties. On the 12th of November 2014, the Court agreed to a new set of interim arrangement for the parties wherein Micromax was asked to pay the royalty on different terms given in the table below.

 

Phones/devices Capable of GSM Capable of GPRS + GSM Capable of EDGE+ GRPS+GSM WCDMA/HSPA, calling tablets
From 19/03/2013(earlier interim order) 1.25% of sale price 1.75% of sale price 2% of sale price 2% of sale price Dongles or data cards- USD 2.50
From date of filing till 12/11/2015 (later interim order) 0.8% of net selling price 0.8% of net selling price 1% of net selling price 1% of net selling price
From 13/11/2015 to 12/11/2016 0.8% of net selling price 0.8% of net selling price 1.1% of net selling price 1.1% of net selling price
From 13/11/2016 to 12/11/2020 0.8% of net selling price 1% of net selling price 1.3% of net selling price 1.3% of net selling price

 

With regard to the complaint filed by Micromax, it was stated that Ericsson was allegedly demanding an unfair royalty for its SEPs relating to the GSM Technology. It contended that the royalty should be based on the patents relating to the chipset technology and not arbitrarily calculate the royalty as a percentage of the sales price of the licensed downstream product[7]. It also stated that Ericsson was confident that there was no alternate technology for its patents in the market and hence, Ericsson believed that it had the right to charge such royalty for its patents. Moreover, Ericsson also wanted Micromax to sign a Non-Disclosure Agreement, which was restrictive and was not in conformance with the FRAND terms. On the 12th of November 2013, under Section 26(1) of the Competition Act, 2002, in pursuance to the complaint filed by Micromax, the CCI laid down the following:

  1. Ericsson was the largest holder of SEPs in the country with regard to 2G, 3G and 4G patents used for smart phones, tablets, etc. Due to this, it undoubtedly held a dominant position in the market for devices that use the GSM and CDMA standards.
  2. While FRAND licenses were primarily meant to prevent patent hold-up and royalty stacking, the competitive endurance showcased by such SEP holders might prove detrimental to their integrity.
  3. Ericsson’s royalty rates were excessive and absurd, and these royalties had not linkage to the patented products. Thus, it was clear that there were discriminatory and contrary to the FRAND terms.

Due to these inferences, CCI ordered for an investigation on the same matter by the Director General, which was challenged by Ericsson in the court. What happened to the case from this point shall be discussed in detail in combination with two other cases with Ericsson.

 5. ERICSSON AND INTEX CASE

In 2013, Intex had filed a suit against Ericsson on the same terms as in the case of Micromax, about setting discriminatory and unreasonable royalties for the SEPs. The CCI, on its account, ordered for an investigation along with the complaint filed in the previous case. Ericsson filed a writ petition against this move for an investigation. Alongside, it filed a suit against Intex for the alleged patent infringement of the same eight patents and demanded damages of Rs. 56 crores.

6. ERICSSON AND BEST IT WORLD (INDIA)

In November 2011, Ericsson had sent a letter to Best IT World that it had infringed the same eight patents as in the previous cases due to its GSM and WCDMA related products. Ericsson suggested both the companies get into a Global Patent Licensing Agreement (GPLA) for all the infringed patents. Best IT stated that it was interested in entering the said agreement only under the condition that Ericsson discloses the alleged infringed patents in order to find out whether the allegations were valid and enforceable in the country. Ericsson intentionally refused to respond to that request and went ahead to impose the need to draft an NDA with ten years confidentiality agreement wherein all the confidential information would be shared only with the company affiliated to it, and any disputes arising out of the same would be settled in Stockholm, Ericsson’s location of its headquarters, which was evidently onerous and one-sided.  It further stated that the license agreement to be entered into would have to apply to the previous and future sale of the company. In September 2015, Best IT filed a suit under Section 4 of the Competition Act, 2002 against Ericsson for an abuse of dominant position.

Thus, as occurred in the cases above, the CCI ordered for an investigation to take place. Ericsson challenged the order of CCI and claimed that the order was ‘arbitrary in nature and without jurisdiction’. It was noticed by the Delhi High Court that the plea by Best IT ought to be disregarded as it had not entered into the licensing agreement with Ericsson and that it was evident that it used Ericsson’s SEPs.

ANALYSIS OF THE ABOVE ERICSSON CASES

Extracting the detail from the Micromax v Ericsson case, Intex v Ericsson case and Best IT World (India) v Ericsson case about Ericsson filing writ petition against the order of CCI for investigations, as per the judgment laid down by the Delhi High Court on the 30th of March 2016, the CCI had the authority to direct the investigations as in the event of an abuse of dominance, jurisdiction lies within the scope of Competition Act. The court agreed to use the net sales prices of the downstream product as the royalty base, and ordered that the royalty for licenses based on FRAND must be derived from sound economic reasoning.

In the Micromax case, the court ordered Micromax to pay the royalties as per the rates stated in the later interim order, rates mentioned in the table.

By the judgment delivered on the 13th of March, 2015, the Delhi High Court ordered that the royalties which were stated in the case of Ericsson v Micromax shall be applicable in this case too. The only difference that lies is that the court ordered Intex to pay 50% of the royalty as per total selling price per device and not chipset, from the date of filing of the suit till 1st of March, 2015, shall be paid directly to Ericsson by way of a bank draft within four weeks from the date of the judgement. The balance shall be secured with a bank guarantee within the said four weeks with the Registrar General, who would invest the same in an FDR for twelve months.

As per the order passed on the 2nd of September, 2015, the court declared that Best IT World must restrict importing mobiles, handsets, devices, tablets, etc. all articles that infringe the patents of Ericsson, which would be operative from the 9th of September, 2015.

7. ERICSSON AND XIAOMI TECHNOLOGY

Ericsson had filed a patent infringement suit for eight of its patents essential to 2G and 3G standards registered in India, against Xiaomi in December 2014. Ericsson had requested to obtain license from it before it sold the infringing products in India, but Xiaomi had entered into an agreement with Flipkart Internet Private Limited to sell the products under Xiaomi’s name. It had begun launching such products from the month of July 2014. Subsequently, the court had issued an injunction order against Xiaomi to restrain the import or sale of its infringing device. Xiaomi appealed to the injunction stating that it had entered into a ‘Multi Product License Agreement’ with Qualcomm Incorporated and used the chipset, which in turn was licensed to Qualcomm by Ericsson. Thus, it argued that it had not infringed any of Ericsson’s patents. As an interim measure, on the 16th of December 2014, the court allowed Xiaomi to sell only those devices that contained the chipsets, which were licensed by Qualcomm and had to deposit Rs.100 per device with the Registrar General of the Delhi High Court.

On the 22nd of April, 2016, the Court revoked the interim injunction on Xiaomi on account of concealment of significant information regarding the alleged infringing patents, by Ericsson. It laid down that Xiaomi was using the 3G patents licensed by Qualcomm, which in turn was licensed to it by Ericsson. The amount of royalty paid by Xiaomi to Qualcomm was provided to Ericsson as royalty and hence, there lay no requirement of paying royalty directly to Ericsson.

8. ERICSSON AND LAVA INTERNATIONAL PRIVATE LIMITED

Ericsson challenged Lava in a suit for patent infringement related to its AMR, GSM and EDGE technologies. On an order passed by the Delhi High Court in March 2015, both the companies tried to negotiate an agreement on FRAND terms but it was in vain. An interim order was passed by the Delhi High Court, operative from the 21st of June, 2016, ordering an injunction to prevent the import, export, manufacture and sale of mobile phones that use the concerned patents of Ericsson. The final order on the case is still pending before the Court.

With the judiciary at the brim of delivering justice to the deserving, the SSOs and various organization striving to protect the rights and inventions of the lawful owners, the Intellectual Property Appellate Board to discuss matters of concern of the distressed, and the laws on various aspects merging to bridge the gap between the people and justice, it is almost impossible to fathom a situation wherein the aggrieved parties could not be redressed. The only aspect which have to be looked into by these mechanisms is its clear and untainted practice. The salvo of the dominance and power of multi-national companies being fired at domestic companies who strive to maintain a position in the market have to be adjudicated in a fair manner, without any involvement of duress and coercion. The elixir of righteousness lies in the hands of these deciding authorities. The real question here is ‘Would the adjudicators choose impartiality and morality, or would they surrender to dominance?’

About the Author : Ms. Anjana Mohan, Symbiosis Law School, Pune, intern at Khurana and Khurana, Advocates and IP Attorneys. Views expressed in this article are solely of the intern and do not reflect the views of either of any of the employees or employers. Queries regarding this may be directed to swapnil@khuranaandkhurana.com or swapnils@khuranaandkhurana.com.

9. REFERENCES

1. ONLINE NEWSPAPER/ MAGAZINE/BLOG ARTICLES

a. Narula, Ranjan. “Standard Essential Patents.” Rouse The Magazine, 2015. Available On Http://Www.Rouse.Com/Magazine/News/Standard-Essential-Patents/?Tag=India

b. Rao D And Shabana N, Standard Essential Patents, Singhania & Partners, Available On Http://Www.Singhania.In/Wp-Content/Uploads/2016/04/Standard-Essential-Patents.Pdf

c. Lakshane R, “Compilation of Mobile Phone Patent Litigation Cases in India”, The Centre for Internet & Society, Available on http://cis-india.org/a2k/blogs/compilation-of-mobile-phone-patent-litigation-cases-in-india

d. Chawla K, “Ericsson v. Intex, Part 1- SEPs, Injunctions, and gathering clouds for Software Patenting?”, SpicyIP, available on http://spicyip.com/2015/03/ericsson-v-intex-part-1-seps-and-injunctions-and-a-new-era-of-software-patenting.html

2. ONLINE JOURNALS AND OTHER GUIDELINES

a. Sidak G, Frand In India: The Delhi High Court’s Emerging Jurisprudence On Royalties For Standard-Essential Patents, Journel Of Intellectual Property Law & Practise, 2015, Vol. 100, No.8, Available On Https://Www.Criterioneconomics.Com/Docs/Frand-In-India-Royalties-For-Standard-Essential-Patents.Pdf

b. Meniere Y, ‘Fair, Reasonable And Non-Discriminatory (Frand) Licensing Terms’, Jrc Science And Policy Report, 2015, Available On Http://Is.Jrc.Ec.Europa.Eu/Pages/Isg/Euripidis/Documents/05.Frandreport.Pdf

c. Department Of Industrial Policy And Promotion, Ministry Of Commerce & Industry, Government Of India, Discussion Paper On Standard Essential Patents And Their Availability On Frand Terms, Available On Http://Www.Ipindia.Nic.In/Whats_New/Standardessentialpaper_01march2016.Pdf

d. Agreement On Technical Barriers To Trade, Annexure I, Available At Https://Www.Wto.Org/English/Docs_E/Legal_E/17-Tbt.Pdf

e. Delhi High Court Cases, available on http://delhihighcourt.nic.in/

f. Indiankanoon, available on http://indiankanoon.com/

Inside Secure states, France Brevets licenses NFC Patents to HTC

Access to robust data and effective analytics are the must for today’s business world. But sometimes it can be difficult to acquire good data. That’s where near-field communication (hereinafter referred as “NFC”) technology comes in. NFC is a short-range high-frequency wireless communication technology which enables the exchange of data between devices when they’re touched together or brought within a few centimetres of each other by using magnetic field induction.

Reportedly, on November 14, 2016, Inside Secure (INSD.PA) has announced that France Brevets have granted to HTC (mobile phone Company) a worldwide patent license under their NFC Patent Licensing Program for use in HTC’s products. [1]

INSIDE Secure, is a leader in security solutions for mobile and connected devices, provides software, silicon IP, tools and know-how required to protect customers’ transactions, content, applications, and communications. With deep security expertise and experience, the company delivers products with advanced and distinguished technical capabilities to serve the gruelling markets of network security, IoT security, content & application protection, mobile payment & banking.

France Brevets leads the efforts under the NFC Licensing Program in Asia, Europe, South America and Africa. NFC Technology LLC, France Brevets’ affiliate, leads the NFC Licensing Program in the US. The Program provides NFC-enabled device manufacturers the right to use the patents of INSIDE Secure, the NFC patents of Orange and also other patents acquired by France Brevets and NFC Technology, LLC. The licensing program caters multiple categories of NFC device manufacturers, for example, those manufacturing smartphones, feature phones, tablets, laptops, desktop computers, TVs, and smart meters offering a wide range of services such as mobile payment, transit, access control, customer retention programs and also ticketing.

France Brevets, created in March 2011, jointly owned by the French government and the Caisse des Dépôts ET Consignations, is the number one patent monetisation and investment fund in Europe. France Brevets aims to create a coherent patent cluster by acquiring public and private patents, then executing licensing strategies that best serve the interests of the patent holders and partners of France Brevets. More simplified it is tasked with helping private and public research to best monetise its patent portfolios from an international perspective. The key focus areas of France Brevets is Information Technology and Communication at large, Aeronautics and Space, Alternative Energy, Chemistry, Materials, Life Sciences and the environment.

Enormous usage of artificial intelligence has made the internet of things (IoT) more ubiquitous giving ways for NFC to become a staple of networks everywhere. Though NFC has only been deployed recently but is grow rapidly in importance and with NFC Patent Licensing Program soon will become a part of everyone’s daily life might be through social interactions, commerce, and identification etc.

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