Micromax-Ericsson patent row: Bailable warrants against founders

By: | Updated: December 3, 2015 9:40 AM

Micromax was not only offender in the patent case filed by Ericsson. In September this year, upon the plea of the same company, the court had asked another domestic handset manufacturer, iBall, to pay royalty.

Micromax, Micromax case, micromax ericsson, Sumeet Kumar, Rahul Sharma, Vikas Jain, Ericsson, YU TeleventuresLast November, in a patent row between Ericsson and Micromax, the court had ordered the latter to pay royalty to the former that amounted to 1% of the selling price of its devices for using its patents on technologies that are essential to manufacture the products.

In a major setback for the promoters of home-grown handset maker Micromax, the Delhi High Court on Wednesday issued bailable warrants against three of them — Sumeet Kumar, Rahul Sharma and Vikas Jain — in a matter of contempt on its earlier order of November 2014 relating to payment of royalty to Swedish technology major Ericsson on the sale of its handsets. It also restrained Micromax’s subsidiary firm YU Televentures from importing and selling mobile handsets and other devices that infringe Ericsson’s registered patents without paying royalty. Justice Najmi Waziri, while issuing the bailable warrants, observed that YU Televentures was liable to pay Ericsson the same royalties as Micromax and posted the matter for further hearing on December 15, when the three promoters need to be present.

The development assumes significance as it comes after a series of orders by the court on the issue of patents where domestic handset makers have been found to be using technology and equipment of foreign technology providers like Ericsson but desisting from paying any royalty. When contacted for comments, a Micromax spokesperson said, “We have not received any order, hence cannot comment on it. In case there is anything, we will take necessary legal recourse.”

Last November, in a patent row between Ericsson and Micromax, the court had ordered the latter to pay royalty to the former that amounted to 1% of the selling price of its devices for using its patents on technologies that are essential to manufacture the products. The interim order holds until December 31, 2015, the deadline set by the court to conclude the trial.

However, Ericsson had recently approached the court saying Micromax was not paying the royalty 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 while issuing the bailable warrants.

Lawyers for Ericsson stated that Micromax was trying to defeat the court orders through the new venture and the new firm is just a tool to violate patents.

Micromax opposed the allegations, saying YU Televentures is a separate legal entity and was not bound to pay royalty. Lawyers appearing in the matter said that they are representing Micromax and not the directors and its subsidiary.

In December 2014, Micromax had launched the Yureka series of mobile phones under the YU brand that sells only through online channels. When it was launched, it was exclusively available on Amazon. YU, which was headed by Micromax’s co-founder Rahul Sharma at the time of the launch, said the brand was created to cater to the internet ecosystem and would have a slew of connected devices in its portfolio. YU sells its mobile phones through flash sales like Chinese mobile maker Xiaomi does. However, YU continues to be a 100% subsidiary of Micromax — 99.98% owned by Micromax Informatics and 0.01% each owned by two other co-founders, Vikas Jain and Sumeet Kumar.

As per the court’s order by which Micromax was to pay up to 1% of the selling price of the handsets, the company would have had to shell out something in the range of Rs 10 crore every month.

Micromax was not only offender in the patent case filed by Ericsson. In September this year, upon the plea of the same company, the court had asked another domestic handset manufacturer, iBall, to pay royalty.

Legal observers welcomed the development, saying that it strengthens the intellectual property system of the country by protecting innovation.

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 that are fair, reasonable, and non-discriminatory (FRAND) in nature for using the technologies concerned. 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 cases, the court has basically gone on the premise that essential patents that are regulated by a standards development body need negotiation between the patent holder and implementers for arriving at the royalty rates payable and injunctions need to be granted wherein it is established that the implementers have not bothered to enter into negotiations with the patent holders on the royalty rates they need to pay for using their technologies.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition