Ericsson is a Swedish multinational company and is the registered owner of eight patents pertaining to AMR technology, 3G technology and Edge technology in India. It is amongst the largest patent holders in the mobile ph

CS Professional · Intellectual Property Rights - Law and Practice · PYQS · December 2015
Ericsson is a Swedish multinational company and is the registered owner of eight patents pertaining to AMR technology, 3G technology and Edge technology in India. It is amongst the largest patent holders in the mobile phone industry along with Qualcomm, Nokia and Samsung. The patents owned by Ericsson are considered to be standard essential patents. Standard essential patents are those patents which form a part of a technical standard that must exist in a product as a part of the common design of such products. In the past two years, Ericsson has been suing various mobile handset companies on the ground of patent infringement in India, such as Xiaomi Technology (Xiaomi), Micromax Informatics Ltd. (Micromax) and Intex Technologies (India) Ltd. (Intex), which are major handset and smartphone provider companies in India. Contentions of Ericsson Ericsson moved to the Delhi High Court against companies named above contending that licences on the standard essential patents were offered to be granted to these companies on fair, reasonable and non-discriminatory (FRAND) terms. However, these companies had refused to undertake such licences and were using these patents without licence and accordingly were infringing Ericsson's patents. Decision of the High Court The High Court held that prima facie Micromax and Xiaomi were dealing with a patent infringing product and therefore, granted ex-parte injunction orders against them. Furthermore, the court also directed the Customs Authorities to take note of any consignment of the products undertaken by these companies. In the case of Xiaomi, Flipkart was also impleaded in the order and was directed to get rid of all the products of Xiaomi that may be patent infringing. Although, Xiaomi managed to acquire an order allowing the company to import and sell the devices that use the chipsets imported from Qualcomm Inc., a licensee of Ericsson, it was asked to deposit an amount of ₹100 for the sale of every device. Furthermore, the court also directed Micromax to pay certain royalty rates per set to Ericsson pending the final outcome of the patent infringement suit, if Micromax wanted to continue selling the devices. The aforesaid ex-parte injunction orders by the High Court were with respect to selling, advertising, importing and/or manufacturing devices that infringed the patents owned by Ericsson. CCI Investigation Orders Some of the aggrieved parties like Micromax decided to file a complaint under section 19(1)(a) of the Competition Act, 2002 before the Competition Commission of India (CCI) against Ericsson. These parties claimed that Ericsson did not negotiate the terms of the licence for the standard essential patents as per FRAND terms. The main contention raised by the parties was that the royalty rates prescribed by Ericsson were excessive and discriminatory and that Ericsson, being a dominant player in the relevant market with respect to the essential patents, had taken advantage of its position and charged exorbitant rates for royalty from the companies for use of its patents. The CCI considered this contention and after examining the evidence presented, agreed with the companies and passed an investigation order. However, this order suffered a blow as the Delhi High Court passed an order restraining the CCI from passing final orders with respect to the contention of the companies. The Delhi High Court held that the CCI's order resulted in raising a question of conflict of jurisdiction with the orders of the Delhi High Court. The High Court held that the order of CCI was adjudicatory and determinative due to the nature of the order being detailed and as a result of which the remedy available to Ericsson had been discarded. Under what provisions of the Patents Act, 1970, can the court grant injunction orders? Is the injunction order justified in this case?

Answer & Explanation:

Provisions for Granting Injunction Orders Under the Patents Act, 1970, the court can grant injunction orders primarily under Section 108 , which deals with reliefs in suits for infringement. Section 108(1) states that the reliefs which a court may grant in any suit for infringement include an injunction (subject to such terms, if any, as the court thinks fit) and, at the option of the plaintiff, either damages or an account of profits. In cases of patent infringement, an interlocutory order in the form of a temporary injunction can be granted if the facts indicate: A prima facie case of infringement. The balance of convenience is in favour of the plaintiff. The plaintiff would suffer insufferable damage if the injunction is not granted. The Indian Patents Act, 1970, seeks to protect the rights of patent holders, and courts have often granted ex-parte injunction orders without hearing arguments on merits from the alleged infringers, especially when a strong prima facie case is established. Justification of the Injunction Order in this Case In this specific case, the High Court granted ex-parte injunction orders against Micromax and Xiaomi, holding that prima facie they were dealing with patent-infringing products. The justification for such an order typically rests on the three conditions mentioned above. However, the justification of the injunction order in this case is debatable for the following reasons: Standard Essential Patents (SEPs): The patents owned by Ericsson are considered Standard Essential Patents (SEPs). SEPs are those patents that form a part of a technical standard and must exist in a product as part of its common design. Holders of SEPs typically commit to licensing them on Fair, Reasonable, and Non-Discriminatory (FRAND) terms. The court, in granting an ex-parte injunction, failed to adequately consider the implications of these being SEPs. Obligation of Alleged Infringers: While the alleged infringers (Micromax and Xiaomi) were under an obligation to ensure that SEPs existed in their products as part of the common design, the nature of SEPs implies that access to these patents should be available on FRAND terms. Lack of Hearing: The High Court granted the ex-parte injunction orders without hearing any arguments on the merits from the alleged infringers. Given the nature of SEPs and the commitment to FRAND licensing, it would have been more appropriate to provide the defendants an opportunity to be heard before issuing such a sweeping injunction. Impact on Competition and Consumers: Such ex-parte orders, especially for SEPs, can have significant implications for the development of technology and protection of consumers. By immediately restricting the sale and import of devices, consumers are deprived of choice, and competition in the market is stifled, potentially leading to higher prices. The case mentions that consumers would implicitly have to pay more for the products as Micromax would pass on royalty payments. Therefore, while the court has the power to grant injunctions under the Patents Act, the justification for an ex-parte injunction in this specific case, particularly concerning SEPs and without a prior hearing, is questionable due to its potential adverse effects on competition and consumer welfare, and the unique nature of SEPs which are meant to be licensed on FRAND terms.

Topics: Patents Act, 1970

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