STANDARD ESSENTIAL PATENTS – THE PATENTS WHICH YOU CAN NOT AVOID

INTRODUCTION

Standard Essential Patent (SEP) is a Patent granted for protecting an invention, necessary for the implementation and functionality of the technical standards. It plays a crucial role in industries where interoperability and uniformity are the main focus. A Patent is a legal right that protects a new invention, it is necessary to use a patented invention in order to follow a standard. A Standard is a commonly accepted rule that allows the product to work together smoothly. Examples of standards include Mobile communication networks such as 2G, 3G, 4G, and 5G; internet standards like Wi-Fi. These standards are set by Standard Setting Organizations (SSOs).

SSOs (STANDARD SETTING ORGANIZATIONS)

Also known as Standard Organizations (SOs) or Standard Developing Organizations (SDOs). SSOs involve various National and International Bodies, National Organizations such as the Bureau of Indian Standards (BIS), and the Telecommunication Standards Development Society (TSDS); International Organizations like European Telecommunications Standards Institute (ETSI), International Telecommunication Union (ITU), and International Organization for Standardization (ISO). 

FUNCTIONS OF SSOs:

1. SSOs are responsible for establishing technology standards.
2. SSOs foster interoperability and uniformity.
3. Ask the patent holders to sign a Contract, promising to license their SEP on Fair, Reasonable, and Non-Discriminatory terms (FRAND).
4. Prevent a Patent holder from demanding excessive royalties from the users.
5. These organizations enforce disclosure policies, which mandate the Patent holder to disclose any Patent they hold that is essential to a technical standard.

WHEN PATENT MONOPOLY MEETS STANDARDIZATION

1. Patent holders gain an exclusive monopoly over their technology, because of the rights conferred in Patent Law. Common standards aim to ensure interoperability and efficient functioning of goods and services. 
2. Relationship between Patents and Common standards arises when Patented technologies are involved in the standards, thus making the use of Patents unavoidable and necessary. These standards are known as Standard Essential Patents. Thus, this grants monopolistic powers to the Patent holders.
3. The conflict emerges when this leads to abuse of excessive powers by the Patent owners, which involves imposing excessive royalty demands, refusal to license, threat of injunctions, or deliberate Patent Ambush (intentionally hiding the patents relevant to the standard during Standard Setting Development and later claiming those Patents after the Standard is adopted and widely implemented).
4. To resolve these conflicts, SSOs ask the Patent owners to commit to Fair, Reasonable and Non-Discriminatory terms (FRAND).

FRAND LICENSES

FRAND stands for Fair, Reasonable, and Non-Discriminatory terms. These licenses exist to resolve the conflicts regarding SEPs. Without these licenses a Essential Patent holder can demand excessive royalty demands or refuse to grant licenses to competitors. Thus, FRAND Licenses ensure to balance the interests of Patent holders with other companies, which need access to those technologies.

DEFINITION-

1. FAIR– Equitable and unbiased negotiations, ensuring that the Patent holders do not use their powers to impose unfair conditions on the licenses.
2. REASONABLE– Fees and terms of license must be according to the value of the Patent and what would be reasonable in the industry.
3. NON-DISCRIMINATORY – All licenses must have access to Patents according to the same terms and conditions.

KEY LEGAL PRECEDENTS CONCERNING SEPs

• Micromax Informatics Ltd. v. Telefonaktiebolaget LM Ericsson, C.M. APPL.4963/2018

Micromax Informatics Ltd., a major mobile handset manufacturer in India, filed information under section 19(1)(a) of the Competition Act, 2002, against Telefonaktiebolaget LM Ericsson (Ericsson), a dominant global telecommunications company. Ericsson sued Micromax for infringing its SEPs related to 2G, 3G, and Edge technologies, and it demanded royalty payments on its Patents from Micromax, which ranged from 1.25% to 2% of the sale price of the products. Whereas Micromax alleged that Ericsson abused its dominant position by imposing excessive royalties. The Court held Ericsson’s patents valid and infringed prima facie and ordered Micromax to pay royalties (0.8-1.3% of device sales).

• Telefonaktiebolaget LM Ericsson v. Intex Technology (India) Limited, CS(OS) No.1045/ 2014

In this case, Ericsson alleged that Intex has infringed its SEPs by failing to secure necessary licenses. This established that SEPs are enforceable in India and the licensing must adhere to FRAND terms.

• Koninklijke Philips N.V. Vs. Maj (Retd) Sukesh Behl & Ors, CS(COMM) 423/2016

This judgment deals with the patent infringement (Unauthorized exploitation of patented inventions) of SEPs. Koninklijke Philips N.V, a globally recognised company, sued defendants for large-scale DVD replication, using the Philips patented technology, which also covers EFM+ (Eight-to-fourteen Modulation Plus), without obtaining a license. The most important issue of this case was whether Philips failed to disclose foreign patent applications as required by section 8 of the Patents Act. The Court held that revocation for section 8 is discretionary, not mandatory. It also confirmed that the EFM technology comes under SEP.

LEGAL POSITION OF SEP IN INDIA

There are no specific legal provisions related to SEP in Patent Law in India, and also no terms and policy for licensing of the Patent technology. SEP Holders and implementors should negotiate transparently and should provide clear royalty rates. Also, both parties should negotiate in good faith.

CONCLUSION

Standard Essential Patents play a crucial role in technological advancement and represent the intersection between Intellectual Property Rights and technological interoperability. Patents grant exclusive rights and legal protection to the inventors. Inherent tension between patent monopoly and standardization makes reflect the importance of SEP in the modern, technology-driven economy. During this, the role of Standard Setting Organisations (SSOs) becomes crucial as they mandate disclosure of essential patents and impose FRAND (Fair, Reasonable and Non-discriminatory) licensing terms. FRAND act as a safeguard against abuse of patent monopoly. 

Landmark Indian Cases like Micromax v. Ericsson and Ericsson v. Intex have established the SEPs enforceability and that the royalty rates must be based on the technical value of the patent. The SEP legal position in India is shaped by Judicial Precedents rather than legal provisions. It is essential for both Patent holders and Implementors to negotiate transparently and in good faith. 

Keywords – Standard Essential Patent (SEP), Standard Setting Organizations (SSOs), Patent, Standards, FRAND (Fair, Reasonable, Non-Discriminatory)

Link to similar articles: https://jpassociates.co.in/novo-nordisk-as-v-dr-reddys-laboratories/

REFERENCES 

1. Indian Kanoon-

• Micromax Informatics Ltd. v. Telefonaktiebolaget LM Ericsson, C.M. APPL.4963/2018: https://indiankanoon.org/doc/31507993
• Telefonaktiebolaget LM Ericsson v. Intex Technology (India) Limited, CS(OS) No.1045/ 2014: https://indiankanoon.org/doc/74163100
• Koninklijke Philips N.V. Vs. Maj (Retd) Sukesh Behl & Ors, CS(COMM) 423/2016: https://indiankanoon.org/doc/19040775

2.  Lawfull legal–  https://lawfullegal.in/sep-and-frand-licensing-in-india/

3. Bar and Bench– https://www.barandbench.com/view-point/standard-essential-patents-bridging-innovation-fair-practice