The surge in cases filed with the Competition Commission of India (CCI) involving Standard Essential Patents (SEPs) and the commitment to Fair, Reasonable, and Non-Discriminatory (FRAND) terms raises a pressing question: Can companies advocating innovation wield monopoly power? While standards have brought remarkable benefits to today’s economy, the emergence of SEPs, which protect patented technologies integral to industry standards, has raised concerns about fostering an environment conducive to anticompetitive behavior. This environment, if left unchecked, has the potential to erode competition and consumer welfare.

ANTICOMPETITIVE EFFECTS OF STANDARDIZATION

SEPs, by definition, are patents that must be enforced to adhere to a standard. In other words, compliance with a standard necessitates licensing the patented technology. This grants patent holders considerable influence over market access, raising concerns that SEP owners might abuse their bargaining power, leading to opportunistic actions and detrimental consequences. These consequences could manifest when patent owners either deny licenses at fair rates or impose onerous licensing conditions, stifling innovation.

AMBIGUITIES SURROUNDING INTERNATIONAL OBLIGATIONS

SEP owners hold contractual rights that allow them to prevent any use of their patents, effectively rendering the standard inaccessible. They are, however, obligated to grant licenses to third parties under FRAND terms. The term “FRAND” lacks a precise definition, introducing ambiguity into SEP negotiations. The Commission notes that “fairness” and “reasonability” are “flexible” and context-dependent. The goal is to encourage transparent negotiations and propose rules to resolve disputes.

ABUSE OF DOMINANCE IN COMPETITION LAW

While competition laws generally avoid intervention in exclusionary intellectual property rights (IPR), competition law intervention in SEP litigation involving mobile phones revolves around the prevention of abuse of dominance. Patent owners can potentially abuse market dominance through practices like withholding licenses, demanding unreasonable fees, imposing unfair or discriminatory licenses, and using SEPs in anticompetitive ways. SEPs provide significant monopoly control to their owners, who may exploit this by leveraging standards to exclude competitors or extract excessive royalty payments.

INJUNCTIONS AS REMEDIES IN OTHER COUNTRIES

In the United States, the policy on injunctions by SEP owners shifted after the Supreme Court’s eBay decision, allowing district courts flexibility in issuing injunctions based on the circumstances. This approach adheres to fairness and reasonableness.

In Europe, patent laws vary by member state, and the term “standard essential patent” is yet to be legally defined. Several lawsuits worldwide concern the issuance of injunctions for FRAND-encumbered SEPs.

THE PATH FORWARD

India lacks specific laws or regulations addressing SEPs or defining FRAND commitments. Adopting jurisprudence from other countries is one approach to address this void, but it requires legal action. A uniform policy for determining FRAND terms could guide courts and provide patent holders with confidence.

Injunctions should be granted with caution, considering the negotiation process and the parties’ behavior. Courts must ensure that injunctions do not contravene antitrust laws, and they can delve into negotiation histories to facilitate consensus. A balanced approach that safeguards innovation and competition is paramount.