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  • Marta Beckwith

Jurisdiction No. 6 - India - Part 2

This post is the second to look at the emerging jurisdiction of India and its recent SEP related jurisprudence.  My first post (Jurisdiction No. 6 - India (sepessentials.com)) reviewed the Delhi High Court’s decision in the SEP patent lawsuit filed by Telefonaktiebolaget LM Ericsson (“Ericsson) against Intex Technologies.  To remind you, one of the bases for the lower court finding that Intex was, prima facie, an unwilling licensee was that Intex had “delayed” the proceedings by filing a complaint against Ericsson in the Competition Commission of India (“CCI”).  The lower court also used statements that Intex had made in those CCI filings as prima facie evidence that the patents were valid and standard essential (and the High Court endorsed this finding).[1]


This post takes a look at the companion case from the Delhi High Court in Ericsson’s appeal of CCI’s decision that Ericsson had violated the Indian Competition Act by imposing un-FRAND license terms on Intex.[2]  In the same decision, the High Court reviewed a conglomeration of other CCI decisions including one related to another Ericsson SEP assertion against Micromax Informatics Ltd. and a finding by CCI that Monsanto had violated the Competition Act by refusing to license, and charging excess royalties for, non-SEP patents.  The High Court set aside all of those CCI determinations, holding that the Competition Act does not confer authority on CCI to investigate or sanction parties that it determines have abused a dominant position, or harmed competition, through the exercise of patent rights.  Instead, the sole authority to make such determinations resides in the Controller and/or Civil Courts under the Patent Act. 


The Delhi High Court’s decision is, ostensibly, a simple one: whether the authority to investigate and sanction improper patent licensing behavior comes under the auspices of the Competition Act of 2002 or the Patents Act of 1970.  But, the inclusion of the Monsanto case in the decision makes clear that the High Court of Delhi sees no difference between the competition issues in SEP matters and those related to royalties for non-SEP patents. And, in making that determination, the High Court ignored many of the underpinnings of standard setting that, in other countries, provide authorization to competition authorities to review such behavior.  For example, the High Court reviewed only Ericsson’s SEP licensing behavior and ignored any issues related to how the relevant standard was set. 


There are complex antitrust and competition issues that stem from how standards are developed.  Picture this: a group of competitors representing a significant portion of the market, and a small number of their major customers, and a few of their key suppliers get together to develop new technology.  Wink, wink, nod, nod, they tacitly agree that, despite making a FRAND commitment, they will each obtain patents on the standard and then charge high licensing fees for those patents against anyone else who wants to practice the standard but not against each other.  Imagine further that the purpose of all of this is to make other competitors’ products more expensive, make it harder and more expensive for the non-participating customers to obtain products and keep the participating supplier’s manufacturing costs low while unduly burdening other suppliers with high licensing costs.  Most courts and competition authorities would take a hard look at such behavior and would understand that there are competition issues that arise from such collusion, whether tacit or explicit.  The High Court’s decision apparently would foreclose CCI’s review of this competitively harmful behavior because it relates to patents. 


That seemed odd to me so I thought it would be useful to better understand the framework under which the High Court’s decision was made.  I spoke with Patrick Heller, the Lyn Crost Professor of Social Sciences and professor of Sociology and International Studies at Brown University, whose research focuses on, among other things, democracy, governance and development in India.[3]  I wanted to get his expert viewpoint on what might be underpinning the High Court’s dual decisions. 


Professor Heller explained to me that India is a highly monopolistic country in which the current government plays favorites and those favorites, a few individuals and families, control an outsized portion of the Indian economy.[4]  Perhaps for that reason, CCI, the authority tasked with regulating monopolies and anti-competitive behavior, is not a significant agency and does not have much authority.  The Patent Office is more respected in Indian society and the decisions might just be a recognition of the difference in each agency's existing status. 


Professor Heller also explained that India is trying to de-couple from China and set up competing industries.  As an example, he mentioned Foxconn’s new factory to be built in India.[5] So, it could be that the High Court’s decisions in the Ericsson/Intex cases represent a rejection of China’s recent jurisprudence on these issues and an adherence to what the High Court perceives to be international, non-Chinese, norms.  This makes sense given the High Court’s reliance in the Ericsson/Intex patent case on European and U.S. case law.


In addition, Professor Heller said that the current government is trying to woo additional non-Chinese high technology to India both to open up manufacturing and technology development centers, and also to supply India’s technology needs.   The Prime Minister of India, Narendra Modi, has been on several visits to the U.S. to encourage technology development in India and has visited Silicon Valley and with Silicon Valley executives a number of times.[6] 


After my discussion with Professor Heller, I did some digging on Ericsson’s ties to India. Ericsson has a long history of investment in India and has connections with Prime Minister Modi’s government.  Ericsson is credited with helping India’s rollout of 5G and is a longstanding contributor to India’s economy.[7] That’s not to say that the High Court made its decisions because of these factors, but that is the context in which the decisions were made.

 

[4]          Professor Heller mentioned Gautam Adani and his recent problems as an example.  You can find some discussion of that here: Adani fallout could have political implications for India: Economist (cnbc.com)

[5]          Here’s some info on that investment: Foxconn to invest additional $1.7 bln in India's Karnataka state | Reuters

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