The much-awaited National IPR Policy was announced in May this year. It has been applauded for recognising that “IPR promotes advancement in science and technology, arts and culture” and visualising “an India where knowledge is the main driver of development, and knowledge owned is transformed into knowledge shared”. It lays down seven objectives: to create IP awareness, stimulate generation of IPR, have strong and effective IP laws, modernise and strengthen IP administration and management, commercialise IP, strengthen enforcement, and reinforce adjudicatory mechanism.
Cell for IPR Promotion and Management (CIPAM)
The policy creates the Cell for IPR Promotion and Management (CIPAM) under the aegis of the department of industrial policy and promotion (DIPP) to, inter alia, facilitate the creation, promotion and commercialisation of IP assets. The policy, however, becomes overambitious when in paragraph 5.5, it assigns to CIPAM the task “to examine the availability of Standard Essential Patents (SEP) on fair, reasonable and non-discriminatory (FRAND) terms”. Such a task for CIPAM could affect the existing stability in the market, delay commercialisation and hinder creation of IP assets.
The Indian Patent Act of 1970 does not provide any definition of a Standard Essential Patent (SEP). The concept of SEP arose with the need to have standardised products/services in the era of globalisation. According to the European Commission, an SEP is a patent that claims an invention that is essential to comply with a standard. The standardisation has gained significant importance in the telecommunication sector which requires standardised world-wide inter-operability between networks, devices and network operators. Over 300 companies from 39 countries participated in standardisation process for 3G as compared to 200 companies from 13 countries in case of 2G technology! The implication of incorporating a patented technology as a standard is that, in general, all devices or equipment compliant with the standard and, in particular, the manufacturers producing them would require access to such patented standardised technology.
Various standards development organisations (SDO) like the ETSI in Europe and BIS, TEC, GISFI, TSDSI and DOSTI in India have been established to accept and lay down standards for various products or services. These have elaborated policies and provided model guidelines to determine licensing on FRAND terms. Nevertheless, it is often argued that an SEP-holder could be in a position to hold up the other market participants implementing the standard technology by using injunctive relief as leverage in negotiations. To mitigate or avoid the possibility of such conduct, an SEP-holder is required to commit to make its patents accessible on FRAND terms. Usually, in the standardisation process, companies spend years discussing how to solve certain technical problems (e.g. how to make sure consumers do not suffer disruptions in their calls). To solve such problems, companies share their best technology—often resulting from large R&D investments—with others in the SDO. There may be several such proposals, but the best technology, based on the technical merits, is chosen and this becomes essential for the standard. Patent-holders then give an undertaking that they will grant irrevocable licences on FRAND terms. For example, Ericsson is one of the main contributors to the wireless telecom standards and claims to hold the strongest radio communication patent portfolio covering 2G, 3G and 4G cellular standards, which are incorporated by many device makers such as Motorola, Micromax, Kingtech, Gionee, and Intex Technologies.
There is no doubt that the enforcement of SEPs has become a major area of dispute but at the same time there are studies to show , inter alia, that consumer prices in SEP intensive industries have shown a considerable decline compared to non-SEP intensive industries (Alexander, Stephen and Rose2015). The studies also show that FRAND commitment for SEPs have given a boost to the Indian business especially in the telecommunication sector. This is evident from the fact that India today stands second in the mobile telephony. India’s telephone subscriber base has expanded at a CAGR of 19.5% from 2007 to 2017. International Data (IDC) predicts that India will overtake US as the second-largest smartphone market globally by 2017.
Evidently, the present FRAND licensing model is leading to economic growth. Any interference in this growth model would unsettle the established industry equilibrium. Granting unbridled powers to CIPAM, making it the authority to examine the availability of SEP on FRAND terms could create unnecessary hurdle in the market framework and be counterproductive for the ‘ease of doing business’ in India. Moreover, it could also lead to the SEP-infringers indulging in delaying tactics instead of bona fide negotiations that would have led to a timely licensing agreement under the voluntary FRAND model. Finally, it is concerning that the policy does not elaborate on the powers of CIPAM regarding hold-out issues as well as on the imposition of penalties in such cases.
The National IPR Policy must be amended so that CIPAM no longer examines SEP with FRAND terms. This would confirm to the spirit of the policy and allow India to become an innovative country.
The author is a professor, Faculty of Law, University of Delhi