Standard Essential Patents - Critical Analysis Of Legal Framework
Author: LawSphereX
Category: Intellectual Property
Published:
Updated:
STANDARD ESSENTIAL PATENTS: CRITICAL
ANALYSIS
OF
LEGAL FRAMEWORK
Bhanu Pratap, LLM (Intellectual Property), Amity University, UP, Amity Law School Noida
ABSTRACT
Intellectual property rights must be protected in this era of rapid technological advancement. Innovations are crucial to development and inspire people to do additional innovation in regards to that IP protection will be rewarded. The goal of Patents and standards is to promote or assist technological advancements and their dissemination. Since a proper application of the patent system influences an accurate execution of the standard essential patents. An overview of Standard Essential Patents (SEPs) is provided in this abstract. A SEPs patent covers an innovation that is necessary for the application of standardized technology. SEPs are mostly used in the telecommunications and electronics manufacturing sectors to guarantee portability with each other and recognition by Standardization organizations (SOs).
This study also examines the licensing terms under which SEP holders license their patents to manufacturers in the market. Since it is impractical to manufacture products without first obtaining a license from SEP holders, licensing of these patents must be done on fair, reasonable, and non-discriminatory (FRAND) licensing terms. The development of SEPs, their significance, and methods for protection are all explores in this abstract. The international perspective on SEPs held by the US, EU, and WIPO will also be examine in this study. The case of Micromax vs. Ericsson case introduced SEP jurisprudence in India. SEPs litigation deals with significant problems included patent holdup, royalty stacking, and injunction relief.
Through this research the author will understand the challenges of SEPs licensing terms, its jurisprudence in India and its implementation in India and at global level through judicial interpretation. Keywords: SEPs, SOs, FRAND Licensing term, WIPO.
Introduction & Understanding of SEP
I Bhanu Pratap from Amity Law School Noida had made up the intellect efforts in writing the article on Standard Essential Patents. In the Intellectual Property domain Standard essential patents, or SEPs, are particularly important for the development and innovation of standardized technology, The term "standard essential patents" describes the awarding of patents to safeguard technology that are essential to adhere to a standard. Standardized technology requires every technical breakthrough or product manufacture must adhere to a common standard and design in order to preserve technology's functionality. It stipulates that inventions must meet standard uniform requirements and be accepted by sectors including the internet, automotive industry, commerce, and telecommunications sector.
Some well-known examples of standard essential patents include- Wi-Fi networks, Universal Serial Bus (USB), 4G (LTE) Networks, Bluetooth connecting devices and many more. The framework of standard essential patents governed by the Standard Setting Organization (SSOs). This organization is in charge for coordinating, setting up, determining, interpreting, and upholding standards. The SSO has established these standards in order establish the objective of standardization with input from technical and industrial experts. The national standard body of India, the Bureau of Indian Standards, has been established by the BIS Act of 2016 and is also referred to as the national SSO of India. 1 By contacting the appropriate Standard Setting Organization (SSO), the patent holder or inventor can get the patent rights as Standard Essential Patents (SEPs).
Once SEP get approved by the SSO, standard essential patents rights holder agrees to licensing of patents on Fair, reasonable, non-discriminatory (FRAND) terms. Maintaining the balance of interests between SEP holders and licensees is ensured by licensing under FRAND terms, which also obligate licensor and licensee to uphold fair trade practices and engage in good faith negotiations as required by competition law. 2 According to the FRAND terms and the judiciary's interpretation in numerous cases, these license requirements deny SEP holders the ability to exercise their monopolistic rights in the market and promote fair commercial activities.
1 Bureau of Indian Standard, (3rd Oct. 2024), https://www.bis.gov.in/,
Standard Essential Patents, World Intellectual Property Organization (3rd Oct. 2024), https://www.wipo.int/web/patents/topics/sep#:~:text=A%20Standard%20Essential%20Patent%20(SEP,made%2 0available%20by%20various%20companies.
What is SEPs, Standard and its Example. A standard is a set of accepted and validated technical terms and statements. Standards involve elements like working methods, concepts, products, and services, and also ensure that various technologies are compatible and functional with each other. 3 Standard essential patents are those patent rights to inventions that are essential to the application of technical standards. Since standard essential patents (SEPs) are present in every field of technology and have facilitated the shift to the digital economy, consumer awareness of SEPs has increased recently. Some Well-known Examples of SEPs are as follows- • Wi-Fi is wireless connecting device with smart phones, laptops, smart home devices and other technological devices. Commonly used technological standards related to Wi- Fi that guarantee connectivity and device compatibility.
• A standard interface called USB makes it possible to connect a variety of peripherals to computers and other devices. USB technology depends on established protocols covered by SEPs to enable consistent and dependable data transfer for a variety of uses, including charging cell-phones and connecting external hard drives and printers. • Bluetooth connection devices also have standard connection technology protocols which ensures its connectivity with other compatible technological devices. • The cellular networking technology known as 4G (LTE) Long-Term Evolution, that shall power cell-phones, enables data processing, internet browsing, and video conferencing are all possible. SEPs for 4G networks guarantee processing and connectivity.
Standard Setting Organizations (SSO) & FRAND licensing terms The development and ongoing administration of standard technology patents is the responsibility of the standard setting organization. This organization analyses and works with 3Intellectual Property Office. UK, Guidance on Standard Essential Patents, Govt. UK, (21st Mar. , 2023, 1:01pm), https://www. gov. uk/guidance/standard-essential-patents-seps-explained a variety of stakeholders, including researchers, elected officials, industry representatives, and analysts, to execute and examine the technical standards solutions.
SSOs are working at level of both international and national stance, International Organization for Standardization (ISO), International Telecommunications Union (ITU), and European Telecommunication Standards Institute (ETSI) are working on the international stance for the development of technological standards. • International Organization for Standardization (ISO)- it is one of the oldest nongovernmental international Organization working since 1946, which brings global experts together and managing the process for cooperation between the people and companies to establish international standards technology to make people’s life consistent with technology.
• International Telecommunication Union (ITU): this United Nation's agency focuses on developing technical standards to assure technological and usability standards for other digital devices, as well as working on information and communication technologies including radio spectrum. It increases everyone's access to technology and provides digital connectivity to everybody in the globe. • European Telecommunication Standards Institute (ETSI)- A separate, nonprofit SSO that creates standardized technology for mobile communications in 3G, 4G, and 5G, and also in aeronautical, Artificial Intelligence, and broadband cable access. • Telecommunications Standards Development Society India (TSDSI) is the first SSO in India which proctored all the technological standards, and specifications related to telecom sector.
Both the International Telecommunication Union and the Institute of Electrical and Electronic Engineers are well-known SSOs in the cellular and Wi-Fi domains. In 2013, the first SSO in India was founded, the TSDSI, with the objective of creating and advancing telecom sector in India. • Bureau of Indian Standards (BIS)- It is the official standard-setting body for India, offering tangibility and traceability benefits to the country's economy in a number of ways by standardizing, certifying, and testing goods to improve their quality for consumers.
One of the anti-trust Authority that is Competition Commission of India (CCI) which also made to overseeing the implementation, checks and balance regards to the standard essential patents in the automobile sector in India. FRAND Licensing terms is a very significant legal negotiable agreement between the SEPs holder i. e. , the licensor and product manufacturers i. e. , the Licensee in order to maintain the conflict of interest of both parties to the agreement. Once the SEPs rights is granted to the inventor by the SSO then it becomes no longer feasible for the manufacturers to manufacture the products without obtaining the license from the SEP holder. In the view of anti-trust law here SEPs holders exercised their monopolistic rights in the market as because of lack of alternative technology standard.
These practices include charging of high prices in licensing with deceptive intention and refusal from licensing of SEPs. At some point court grant injunction in order to preserve the interest and rights of manufacturers as well as public interest. 4 FRAND licensing terms is to safeguards the interest of the manufacturers and to tackle the majority bargaining power of the patent holders. SEP holders are required to license their patent rights under appropriate FRAND licensing conditions, which stand for fair, reasonable, and non-discriminatory terms. Since the patent holder granted the license on the basis of these terms, it is important to remember that these are contractual responsibilities rather than legislative provisions. SEP holders frequently attempt to exploit their monopolistic rights when licensing the patent through dishonest means, such as obtaining high royalties.
Charging of high royalties by patent holders can impact the consumer interests and they will get to pay high price for the concerned product. These actions are prohibited by the Competition Commission of India, which oversees the market competition between manufacturers and licensors and defends the interests of consumers. Determining of FRAND licensing rates by the national court is a challenging issue arises that whether a national court can fix the licensing rates for multi-jurisdictional courts. Determination of FRAND rates by the national courts can led to increase the conflicts of judgment on other jurisdictional courts and on global level. In the case of Nokia v. Oppo5, the 4 Aryan Puri & Sanya Rawlani,” Standard essential Patents & Injunction Relief”, 01 (E-JAIRIPA) 113, 113-120, (2020).
5 Nokia v. Oppo, [2023] EWHC 1912 (Pat).
issue raised regards to the determining of licensing rates of SEPs even where some of the parties to the case did not agree to the terms of FRAND rates and jurisdiction, and also initiated the proceedings for determination of FRAND rates in China court. Even though Oppo had committed to abide by the FRAND rate set by the Chongqing Court in China, Justice Meade took a somewhat stern approach in the Nokia judgment and directed the Oppo to agree to a rate set by a UK court or face an injunction. The lack of statutory provisions regards to the standard essential patents led to misnomer effects on the court to decide the licensing rates. 6 Importance of SEPs for Technological Development Standard Essential Patents are mostly used in the telecommunication sector as it involves highly standardized technology.
The interoperability of seamless devices with 4G, 5G, and Wi- Fi networks was made possible by these standardized technologies and the corresponding SEPs. SEP input accelerated the market's growth in technological innovation and made products more user-friendly for consumers. The automotive, electric grid, and consumer electronics industries are likewise associated with Standard Essential Patents. These connecting standards help in the development of the hyperconnected society. 7 The possibility of licensing SEPs has a significant impact on a company's incentive to invest in standardization activities, in addition to other rewards like concentrating standard development on technology solutions in which the appropriate company is well-positioned and able to supply certain services or infrastructure.
Companies which implement the standardization in their innovated technology will have to pay the royalties to obtain the licence for the SEPs from the SEP holder, in general, licensing patents is becoming more difficult, and in particular negotiating royalties for standard-essential patents is becoming more difficult due to the growing integration of information and communication technology. SEPs can protected in India by registration of patent, both the patent and standards have common objective to boost up the state’s economy towards technological sector. 6 Dr. Victor Vaibhav Tandon and Dr. Ashwini Siwal, SEPs & FRAND: Misnomers & Maladies, Spicy IP, (7th Oct. , 2023),https://spicyip. com/2023/10/seps-frand-misnomersmaladies. html#:~:text=A%20Different%20Jurisprudence,core%20of%20disputes%20involving%20SEPs.
7 European Innovation Council and SMEs Executive Agency, SEP landscape in India, European Commission,( 4th Jan. , 2024) https://intellectual-property-helpdesk. ec. europa. eu/news-events/news/standard-essential-patentlandscape-india-part-1-2024-01-04_en Breach in the SEP granting process: In standard essential patents the technologies covered under IPR i. e. , Patent shall essential to implement the standard. This clearly means that there is no alternative technology to a true SEP. Addressing the application of standard essentials patents, there are no organization tests or certifications required to examine the standard essential associated with technology.
For example, standard-setting organizations such as ETSI only need self-declaration from SEP holders regarding the implementation of standardized technology, A portion of these applications may be later found to be invalid or never receive approval from the national patent office. The court in the Unwired Planet International Ltd. v. Huawei case ruled that the SEP was invalid, noting that the stated SEPs in the portfolio are frequently deemed invalid or nonessential. Para 20. Of the judgement of the Huawei Technologies Co. Ltd. v. ZTE Corp8 describes that ETSI does not check whether there is process of standardized essentiality to the innovation. As SSOs is not again clear on the policy and guidance on FRAND licensing terms which also led to misnomer effects in the market and untested SEP provides false indication regards to the essential implementation of standards.
International Position of SEPs a. United States is one of the first countries which identifies the challenging effects of granting injunction relief to SEP holders and on FRAND licensing terms. Antitrust laws, such as "The Sherman Antitrust Act of 1890," aim to preserve the producers' and patent holders' relative interests. Anti-trust legislation i. e. , “The Sherman Antitrust Act of 1890”, work on maintaining the balance of interest between the patent holders and manufacturers. A monopoly would be established by laws that make it simple for patent holders to ask for injunctions. However, it's also critical to strike a balance by allowing patent holders to pursue injunctions without being prevented from doing so, as doing so would only deprive them of their rights to their innovation protected as intellectual property rights. U. S.
court have made a stern approach for tacking these challenges, in the case of Motorola vs. Google. 9 The court determined that an injunctive relief from injunctions unless the licensees do not comply with FRAND Terms. The US Federal Trade Commissions have also taken action against the anti-competitive practices of the SEP holders and in some cases have made them comply with the FRAND terms. 10 b. European Union is having the same set of view like US have, regards to the granting of injunctions in SEPs FRAND licensing disputes. According to European Court decisions, licensees who comply with FRAND Terms should have the advantage against patent holders seeking injunctions. Huawei v. ZTE is the landmark precedent established in EU regarding the SEPs litigation and FRAND licensing disputes, which was settled by the Court of Justice by European Union (CJEU).
In this case court interpreted the article 102 of the Treaty on the Functioning of European Union, which states that the SEP holders shall not monopolised their rights and dominant position while licensing their patents, they must fulfil the terms and policies of the FRAND licensing. If any party to the licensing agreement violates the FRAND terms, then the injunctive relief will be granted against that party. Court also states that party shall negotiate the rates as per the FRAND policy regards to the SEP licensing, if negotiation fails then impugned party shall approach to the court for the rate fixation on FRAND terms. 11 c. World Intellectual Property Organization (WIPO) is one of the special agencies of the United Nation (UN), which ensures the protection IP at global level.
WIPO also came up with the strategy on SEP, these strategies mainly ensure the WIPO approach towards dealing with the issues and challenges regards to the SEPs granting rights and FRAND terms. The WIPO’s vision for this protective strategy is mainly aim towards the establishment of IP ecosystem to protect the IP rights of innovations and creativity, and SEPs are very crucial in this aspect as it implements the standardization in technology and need for proper licensing policies and enforcement laws. The plan aims towards the establishment of FRAND license terms to preserve the conflict of interests between the SEP holder and manufacturers. Globalization, cross-border disputes regarding the SEP litigation is the biggest challenge before WIPO, it shall require proper assessment. In this legal strategy the fundamental principles of WIPO's approach are
10 Supra Note.4 at 125-127
11 Supra Note. 4, at 127
complementarity, neutrality, and voluntary involvement. WIPO already started engaged in the SEP related activities like global awareness on SEPs, promoted SEP related information, enhanced transparency, promote services to improve patent quality and its essentiality, ADR sessions before WIPO mediation centre, and support legislatures, adjudicating authority, and industry stakeholders. 12 Standard Essential Patents in India The determination of royalties is the primary matter of contention in the SEP dispute. In SEP there shall be mutual duties and restrictions on the parties to the licensing agreement to enforce fair commercial practice. Standard Essential patents emerge in India when Ericson had initiated an infringement proceeding against the King-tech electronics (India) for using the handset infringing the SEP in Adaptive Multi rate Code of the SEP holder i. e. , Ericson.
There are no specific legal provisions regards to the SEP in patent law in India nor any policies and terms regarding the licensing of the patent technology. But there shall be the legal obligation on the patentee while licensing the patents to the manufacturers to establish the fair market governance. Indian judiciary is very crucial in framing laws through interpretation power in respect of SEP. Many Standard Setting Organization in India working for the promotion and application of SEP to implement technological products which have standardized features. National Telecom Policy (2012), Bureau of Indian Standards, Telecom Engineering Centre is working to implementation of SEP.
The Development Organization of Standards for Telecommunications in India and the Telecommunications Standards Development Society, India (TSDSI), the International Telecommunication Union and the Institute of Electrical and Electronic Engineers are two well-known SSOs in the cellular and Wi-Fi industries. Judicial Interpretation on SEP in India & role of CCI in SEP cases. Judiciary is making up crucial efforts in the promotion of Standard essential patents, as in the case of Koninklijke Philips Electronics N. V. vs. Rajesh Bansal and Ors. 13 (2018), the court determined that without utilizing the aforementioned standard, of which the patent was an 12 WIPO International Publication, WIPO Strategy on Standard Essential Patents, World Intellectual Property Organization, (Apr. , 2024), https://www. wipo. int/publications/en/details. jsp?
id=4719&plang=EN 13 Koninklijke Philips Electronics N. V. vs. Rajesh Bansal and Ors. , CS (COMM) 24/2016, CS(COMM) 436/2017 (Delhi High Court). essential aspect, the product could not be manufactured, and here the respondent had modified the specific technological effects for DVD players of the plaintiff and that cannot be achieved without infringing the SEP. It is the first case regards to the SEP litigation India where final judgment was delivered. In the following cases CCI also interpreted for the protection of SEPs rights and implementation of FRAND licensing terms. Micromax v Ericsson14 & Intex Techs. (India) Ltd v Ericsson. Competition commission of India deals with the complaint filed by the complainant i. e.
, Micromax and Intex in the above-mentioned case regards to the exercised of dominant position in granting licensing of SEP and excessive charge of royalties for the use of SEPs, refuse to share the commercial terms under FRAND which violates the commercial practice and led towards the discriminatory market practices, and charging different charges as royalties to different licensee which violates FRAND terms. CCI restrained the monopoly right of the respondent i. e. , Ericson for excessing the dominant position in granting license regards to the SEP and held that these unfair practices are threat to consumers and Standard Setting Organization as well, and thus ordered for investigation in this case by the Director general.
The Delhi High Court declares on the two aforementioned cases in the appeal that Ericson filed, stating that the CCI's ruling on the downstream product's sales price as a royalty basis is exorbitant and has no connection with the valuation of SEP. And the high court had stayed the order of CCI and investigation report of Director General. 15 Interdigital vs. Xiaomi16, it is the first case where high court of Delhi granted an anti-anti-suit injunction. In this case the interdigital filed an infringing suit against the Xiaomi for violating the FRAND terms, and use of SEPs without consent of the plaintiff, and here the plaintiff sought for an injunction if the respondent did not agree for FRAND licensing rates. The defendant here before the high court filed an infringement suit and sought for the injunction for setting the royalty rates on the FRAND terms before the Wuhan court, China.
Chinese court grant anti-suit injunction against the Interdigital to not to initiates any proceedings before the
14 MICROMAX INFORMATICS LTD V TELEFONAKTIEBOLAGET LM ERICSSON, CASE NO. 50 OF
2013, COMPETITION COMM’N OF INDIA (12 NOVEMBER 2013).
15 DPIIT, GOI, Discussion Paper on Standard Essential Patents & their Availability on FRAND terms, IPO, 1, 23-
24 (1st Mar., 2016).
16 Interdigital vs. Xiaomi, 2021 SCC Online Del 2424
high court of Delhi. This anti suit injunction also prevents the plaintiff i. e. , interdigital from availing the remedies. But the high court of Delhi granted the anti-anti suit injunction in this case, and observed that cause of action arises in India and suit for infringement filed under section 104 of the Indian Patents Act, that clearly comes under Indian statutory act and jurisdiction. High court also finds that there is no reason to restrain the plaintiff from availing the remedies in India, and to interfere with the jurisdictional and statutory aspects of Indian Patent law. Court further concluded that the high court of Delhi is having the jurisdiction to entertain the matter on the present claim, a foreign jurisdictional court cannot restrain the party to initiate the proceeding in India.
Conclusion & Suggestive measures Standard Essential Patents are very crucial in the rapid technological growth, India is a developing country in the sector of technology which evolves time to time as per the advancement required. These technological sectors are totally dependent on the manufacturers, producers, investors, and consumers, standardization of technology improves the life for the consumers in using standard products related to telecom, Wi-Fi network services, automotive industry, and other technology industry. SEP framework arises the licensing of the SEP that required to regulate the marketing force towards the new invention and its industrial applicability, SEP holders and manufacturers are entering into a licensing agreement of patents which comply FRAND terms.
FRAND licensing terms is the negotiating policy for the parties who are entering into the licensing agreement, it creates mutual obligation to the party for the fair commercial practices and ensures the defence for any conflict of interest between the licensor and licensee and the consumers. There are no specific legislative provisions for SEP in India. The Indian judiciary has adopted a stern approach toward SEP litigation, patent infringement proceedings, and injunctions for violating the terms of the FRAND license agreement, Regarding SEP and FRAND policy, the judiciary keeps an eye on the situation and offers direction. A catena of cases brings an end to the legal disputes between parties over the establishment of rates under FRAND terms for SEP licensing. Court also derives four factor tests in the case of Intex vs Ericson are as follows:
1. Patents to the suit shall have standardized essentials.
2. Using of the technology by the implementor shall led to SEP infringement.
3. Agreeing rate SEP holder for royalty on the basis of FRAND terms.
4. Injunctive relief if SEP holder unable to comply with FRAND terms.
Many strategies and policy development related to SEP arise in India. DPIIT work on the standard essential patents awareness and came up with discussion paper on the SEP and FRAND policy, which is access to the public to read and aware about the SEP framework and its approach towards technology. Other organization such as Centre for Intellectual Property Rights Promotion and Management (CIPAM), Telecom Authority of India, and competition commission of India works for the promotion of SEP in India and to establish the legal framework for the protection of innovations and creativity.