Local handset makers to close ranks in patent battle

While the court cases are pending, the local players have had to pay royalties to the patent holders on an interim basis.

Local handset makers to close ranks in patent battle
The idea behind the local handset makers coming together to fight the patent holders is not to pay any royalty. (Reuters)

The domestic handset manufacturers like Micromax, Lava, and Intex are contemplating to adopt a collaborative approach to fight the spate of patent litigation involving the likes of Swedish telecom equipment manufacturer Ericsson.

While the court cases are pending, the local players have had to pay royalties to the patent holders on an interim basis.

The association of the handset manufacturers, Indian Cellular Association (ICA) has taken the lead in this matter. It has reached out to the domestic manufacturers and advised them on the need “to have a calibrated approach which would mean that our responses to stakeholders raise similar issues in terms of patent invalidity, non-essentiality, non-infringement, and abuse of dominant position in the market etc. Once this approach is calibrated then it becomes a structured practice and response”.

“Having a strategy to respond to these demand letters (payment of royalty) from right holders may help your organisation navigate successfully around the current litigation,” the ICA advisory has said. It has suggested legal advice by a panel of its lawyers for its members in this regard. The idea behind the local handset makers coming together to fight the patent holders is not to pay any royalty.

The stepping in of the ICA in the matter and issuing an advisory of sorts to its members is quite significant as it comes at a time when companies like Micromax, iBall and Intex have had to pay interim royalty to Ericsson for using its patented technology under the directions of the Delhi High Court.

While the coming together of these players to fight against payment of royalty may be a good strategy, it remains to be seen whether it invites the charges of a buyers’ cartel in the context of anti-trust laws.

The fight between Ericsson and Micromax in the context of demand of payment of royalty had taken an ugly turn in December, 2015.

The Delhi High Court had issued bailable warrants against three Micromax promoters for violating its earlier orders that directed it to pay 1% royalty to Ericsson for use of its patented technologies in the mobile phones manufactured by Micromax.

This came after a series of orders by the court on the issue of patents where domestic handset makers were found to be using technology and equipments of foreign technology providers like Ericsson but desisted from paying any royalty.

What had happened was that in November, 2014 over a patent row between Ericsson and Micromax, the court had ordered the latter to pay royalty to the former that amounts up to 1% of the selling price of its devices for using its patents on technologies that are essential to manufacture the products.

Much later, Ericsson approached the court that Micromax was not paying by selling the handsets through a separate company floated by it and arguing that the order pertained to Micromax and not the entity through which the devices were being sold. This contention of Micromax was rejected by the court, when it had issued the bailable warrants.

Micromax was not only offender in the patent case filed by Ericsson. In September, 2015, upon the plea of the same company, the court had asked another domestic handset manufacturer, iBall to pay royalty. iBall later settled the matter with Ericsson by signing a global patent agreement.

In both the orders – Micromax and iBall – the court had basically accepted the contention of the Swedish major that the companies concerned never made any effort to negotiate with it the royalty rates which are fair, reasonable, and non-discriminatory (FRAND) in nature for using the concerned technologies. This despite efforts made by Ericsson to negotiate and enter into such an agreement. As such offenders were labelled by the court as unwilling licensees.

Legal experts told FE that in such patent related case the court’s approach so far has been on the premise that essential patents which are regulated by standard development body needs negotiation between patent holder and implementers for arriving at the royalty rates payable. The injunctions were granted in cases of Micromax and iBall because it was established that in these cases the respective companies did not bother to enter into negotiations with the patent holders on the royalty rates they need to pay for using their technologies.

Patently Together

What’s the issue about?

Companies like Ericsson hold technology patents

Handset makers like Micromax, Lava import/manufacture mobile phones, tablets with these technologies embedded

Until recently, they hadn’t been paying any royalty

The story so far

The Delhi High Court has asked companies like Micromax, iBall to pay royalty; lest they will have

to stop manufacturing/importing

iBall has settled the case with Ericsson by signing a patent agreement

Micromax needs to pay interim royalty of R10 crore every month

Role of ICA

The association has batted for domestic handset players

It has told them to jointly strategise and fight the cases

Plans to prove that such patents are non-essential & firms don’t infringe IPR

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First published on: 07-03-2016 at 02:23 IST