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Summary of CIS Comments to DIPP’s Discussion Paper on SEPs and their availability on FRAND terms

Posted by Anubha Sinha at Apr 26, 2016 12:10 PM |
This blog post summarises CIS’ responses to DIPP’s Discussion Paper on SEPs and their availability on FRAND terms. The response made specific recommendations regarding adequacy of Indian law to determine SEP litigation, remedies for FRAND assured SEPs, FRAND royalty rates, SSO’s policies, parties’ non-disclosure agreements and transparency, and essentiality of SEPs and their declassification.

On April 22nd, 2016, CIS filed a comment with the Department for Industrial Policy and Promotion (DIPP), regarding Standard Essential Patents(SEPs) in India and their availability on FRAND terms. A TL;DR version of the comment follows.   

Whether IPR and antitrust legislations should be amended 

CIS submitted that no amendments to either the Patents Act, 1970 or the Competition Act, 2005 may be preferred. The changes that need to be brought forth are the adoption of a balanced National IPR Policy, and a National Competition Policy - both of which have been in the works for a while. Further, we urge the government to not enter into FTAs like the Regional Comprehensive Economic Partnership.

IPR Policies of SSOs, and prescribing Guidelines for their functioning

CIS recommended that, first, Indian SSOs adopt an IPR Policy factoring in “India specific requirements”; second, on TSDSI’s IPR Policy (and DOSTI, GIFSI), certain changes be made to the policy to a) require the members to refrain from seeking injunctive relief b) delete the condition where FRAND negotiations may be subject to a condition of reciprocity; (c) to identify in detail the procedure to be followed in case of patent ‘hold­ups’ and patent ‘hold­outs’; (d) to identify in detail the procedure to be followed in case of refusal to license by TSDSI members, and, non­members, both; and, (e) to include a detailed process on the declassification of a standard or technical specification. Further, SSOs may consider recommending the use of royalty-free licenses, in tune with the W3C and Open Mobile Alliance.

The government should prescribe Model Guidelines that may be adopted by Indian SSOs (incorporating the suggestions above), in view of increasing complexity of SEP litigation, and potential abuse of FRAND process. The Model Guidelines may additionally cover (a) the composition of the SSO; (b) the process of admitting members; (c) the process of the determination of a standard or technical specification; (d) the process of declassification of a standard or technical specification; (e) the IPR Policy; (f) resolution of disputes; (g) applicable law.

Royalty Rates 

The government should also intervene in the setting of royalties and FRAND terms, in light of severe inadequacies in the SSOs’ IPR policies. CIS suggested that the government should initiate the formation of a patent pool of critical mobile technologies and apply a compulsory license with a five per cent royalty. Also, payment of royalties on SEPs should be capped by fixing a limit by the DIPP. 

Further, royalty rates for SEPs should be based on the smallest saleable patent practising component. 

Non-Disclosure Agreements and Transparency 

On the use of Non-Disclosure Agreements in SEP/FRAND litigation, CIS submitted that . pending a final determination by the CCI (and subsequent appeals) it would be premature to  make an absolute claim on whether the use of NDAs results in an abuse of dominant position in all instances.

On making the practices of cross-licensing and patent pooling transparent, CIS strongly urged the DIPP to strictly enforce the compliance of Form 27s by patentees. Availability of Form 27s will critically enable willing licensees to access patent working information in a timely manner. The Form 27 template may be modified to include more details, including patent pool licenses, with an explicit declaration of the names of the licensees and not just the number.

Further, guidelines may be drawn up on whether it was discriminatory to charge no royalties (whether on the SSPPU or on the whole device) for a patent holder in a cross ­licensing arrangement with another, when it charges royalty on the selling price of the device from a non­ cross­-licensor.

Remedies for FRAND- assured SEPs 

CIS recommended that courts adopt a more cautious stance towards granting injunctions in the field of SEP litigation, because a) injunctions may deter willing licensees from agreeing to the FRAND commitment, and also harm them b) accurately proving irreparable damage is difficult to establish in the Indian context for smartphone manufacturers c) there exists ambiguity in Indian jurisprudence to determine the conduct of an unwilling licensee, inter alia.

In CIS’ opinion, there is no need for an independent expert body to determine FRAND terms for SEPs and devising the methodology for such a purpose. The existing legal and regulatory framework is reasonably equipped to determine FRAND terms. Analytical frameworks may be studied in American jurisprudence to determine reasonable royalty rates, and patent damages.

Essentiality of SEPs and their declassification 

To determine whether a patent declared as SEP is actually an Essential Patent, CIS submits that various methodologies have been used by studies to analyse the same. Goodman and Myers led a study on the subject in 2005; and additionally, laboratory tests and expert opinions can be taken into account to determine the essentiality. 

Lastly, CIS suggested that Indian SSOs maintain a publicly accessible database of SEPs found to be invalid or non-essential in India. Such a record will assist the process of declassifying SEPs timely.

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