On March 1, 2016, the department of industrial policy & promotion (DIPP) of the ministry of commerce, launched a path-breaking initiative—that of having a detailed discussion on the complex techno-legal aspects of Standard Essential Patents (SEPs). In particular, the DIPP has sought views on SEPs and their availability on FRAND (Fair, Reasonable and Non-Discriminatory) terms. This move by the commerce ministry is in a complicated domain that directly involves the administrative ministry of communications and IT. The DIPP exercise has created quite a flutter in the telecom sector, where many are intrigued as to why this new exercise has been initiated when the officially-recognised standards setting organisation (SSO)—the Telecom Standards Development Society of India (TSDSI)—had only recently formulated relevant IPR policies based on an in-depth industry-wide consultation.
Founded in November 2013, the TSDSI (created in the PPP mode) is dedicated to the development of standards, including the policies relating to IPR, which are an integral part of the safeguarding of standards. The recently-formulated IPR policy was developed after deep consultation and was passed by a voice vote at the general body meeting on October 14, 2014. The GBM was attended by 69 representatives from local manufacturers, DoT,
DeitY, IITs, IIM, C-DoT, C-DAC, ICA, COAI, foreign manufacturers, etc. The policy was approved by DoT.
The process followed was democratic with all possible inputs being put on the table for discussion. These inputs included all issues which have been now put up by the DIPP for views from stakeholders, such as fixing of royalty rates, Smallest Saleable Patent Practising Component (SSPPC), possibilities of injunctions, etc. TSDSI had even discussed and deliberated some more issues which DIPP has inadvertently forgotten to list along with its set of 13 questions. Some of these were captured as para 5.7 and 5.8 in the original final draft IPR policy document of TSDSI and read as under.
5.7 To promote the licensing of …. ESSENTIAL IPRs, the owners and potential licensees of ESSENTIAL IPRs ….. shall negotiate FRAND terms and conditions in good faith so as to reach an agreement on a license for such ESSENTIAL IPRs at the earliest in a reasonable period of 6 to 12 months. The parties to the negotiation may,… agree for extended time period.
5.8 During…negotiation, the parties will avoid resorting to any legal recourse including injunctions for such ESSENTIAL IPRs. In case the parties fail to reach an agreement …within said period, all legal remedies are available to the parties…. including injunctions pertaining to alleged infringements.
DoT, vide a response dated October 13, 2014, dropped para 5.7 & 5.8 from the final draft, citing the following reasons (page 10 of the MoM of GBM dated October 14, 2014).
“Considering the fact that standard essential patents have the protection provided by the Patents Act, there is no need to have a specific provision. Therefore, para 5.7 and para 5.8 may be deleted.”
Hence, it is clear and apparent that the DoT never questioned the validity of these provisions, but acknowledged that these are already covered by the Patents Act and, therefore, are redundant.
The above highlights a key issue with respect to SEPs, which was at the core of the Ericsson dispute with some local OEMs. On the one hand, Ericsson, which holds the patents, claims that it tried its best to negotiate and license them to the local OEMs on the proper FRAND terms but that the OEMs were uncooperative and unwilling to engage and negotiate in good faith. Hence, it had no option but to seek suitable injunction from the court, which it successfully obtained. On the other hand, the OEMs allege that Ericsson is misusing its dominant power to charge royalties for SEPs held by it which are essential for manufacturing of handsets as alternatives are not available for these. Since the court did award injunctions, it is clear that the court found merit in Ericsson’s arguments. This position is also indirectly validated by DoT’s view that the proposed clauses 5.7 & 5.8 (above) are unnecessary and to be dropped.
Ericsson’s dispute with the local OEMs has been going on since 2013, well before the TSDSI consultation and subsequent policy formulation. Therefore, it was fully taken into account in the deliberations and final decision. Hence, it is surprising that DIPP should now launch into its current ‘discussion’, particularly when all these same issues are before the CCI and the courts. Many stakeholders are, unsurprisingly, quite concerned.
The current TSDSI SEP policy is in sync with that of the European standards bodies ETSI, 3GPP, Japan’s ARIB and such leading SSOs/SDOs. This is extremely important for India and we need to maintain to be able to march with the progress of new, advanced technologies like 5G, etc. In 2014, only the IEEE of USA adopted an IEE-SA SEP Policy (which has been strongly opposed by 15 major technology companies as being undemocratic and contrary to IEEE’s own governance provisions, core value and principles of standardisation) that is inconsistent and incompatible with the policies of all major SDOs/SSOs of the world. Among other negative effects of this policy, experts believe that it has not only adversely affected the dynamics of collaboration on new technology development but has also reduced the momentum for 802.11 ah (a new standard for extended range WiFi and for supporting Internet-of-Things). It would be positively harmful for India to consider IEEE-SA type of SEP policy and to fall out of line with the other global majors.
Experts are seriously worried that the current consultation could seek to dilute IPR value disproportionately and thus seriously jeopardise the investment on R&D in India by even local OEMs.
We need to remember that the Global Intellectual Property Index presents a dismal picture of India in respect of safeguarding IPR, with it being ranked 37th out of 38 countries. It scored 7.05 out of 30, lower than last year’s 7.23 and is rated inferior to its peers of the BRIC group and even below countries such as Indonesia, Nigeria, Ukraine and Vietnam.
In such a grim situation, we should be seeking to strengthen our IPR policies and patent laws rather than take up unwarranted consultations of settled aspects and consider a dilution of the existing policies.
Strong progress for the Make-in-India initiative demands good IPR safeguards. Further weakening of the existing policies, as indicated by the current DIPP discussion, could well lead to an unmaking of the Make-in-India initiative. We are proud that local manufacture of handsets is making good progress, but we need to also note that many of these are just an assembly of SKD sets (even the PCBs, i.e., printed circuit boards are populated ones!) and cannot be deemed to be genuine manufacture. The government is not only losing 10% excise duty and withholding tax for these but, importantly the overflow of foreign exchange continues unabated (due to no investment in R&D and Design in India) and the potential royalty value addition is also possibly lost to China or Taiwan or some other country.
There is an urgent need to strengthen, and not weaken, IPR policies for realising Make-in-India goals. In fact, we need to concurrently encourage and support Design-in-India, without which we would not have high quality manufacturing on a sustainable basis.
The author is fellow , the Institution of Engg & Technology, London, and president of Broadband India Forum. Views are personal
