FRAND in India

Competition Policy and Antitrust, Standards, Interoperability, Patents and Intellectual Property

Article Snapshot

Author(s)

Shubha Ghosh and Daniel Sokol

Source

Competition Policy and Regulation in India: An Economic Approach, Oxford University Press (India), 2016 (forthcoming)

Summary

Some patents must be licensed on fair, reasonable, and non-discriminatory (FRAND) terms. In India, both the Competition Commission of India (CCI) and the courts have decided FRAND disputes. The CCI’s decisions lack detail and adopt different rules than the courts.

Policy Relevance

Indian courts and regulatory agencies should make greater use of economic analysis.

Main Points

  • Standard-setting organizations require patent owners to license patented technologies essential to conform to the standard on fair, reasonable, and non-discriminatory (FRAND) terms; disputes may arise as to whether the terms of a license are reasonable.
     
  • The CCI ruled that Ericsson’s licensing practices violated FRAND principles in three cases decided between 2013 and 2015.
     
    • CCI’s decisions were short and lacked careful economic analysis.
       
    • CCI’s analysis was simplistic, for example, ruling that Ericsson violated FRAND simply by basing the royalty on the sale price of the final product.
       
  • The High Court of Delhi’s FRAND cases make little reference to CCI’s cases, raising the possibility that the Court is developing rules for FRAND independent of CCI.
     
    • The Court’s rulings base the royalty on the price of the final product, following the practice of firms in private negotiations.
       
    • CCI’s rulings base the royalty on the price of the smallest marketable unit incorporating the patented technology, following the practice of many courts in the United States.
       
  • Under the Indian Competition Act of 2002, CCI has the authority to review the reasonableness of FRAND license terms; the High Court should take CCI’s findings into account, but should overturn unreasonable findings.
     
  • Because CCI’s FRAND orders were short and lacked reasoned analysis, the question of how much deference the High Court should give to CCI is unresolved.
     
  • CCI’s brief FRAND decisions suggest that some ordinary business behavior is illegal, regardless of the context; especially in fast-moving technology markets, this overly simplistic analysis will chill innovation and harm consumers.
     
  • The CCI’s simplistic analysis creates the possibility that CCI will function more as a price regulator than an antitrust enforcer; CCI should improve its decision-making by making greater use of economists and lawyers trained in economic analysis.
     

 

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