Daniel Sokol Examines FRAND in India

Law professors D. Daniel Sokol, University of Florida, and Shubha Ghosh, University of Wisconsin, have a new paper out that examines FRAND cases in India, and Professors Sokol and Ghosh show that the current mix of Indian institutions may not yet be well suited to address complex issues of antitrust enforcement. [FRAND is an acronym that describes the terms for licensing essential patent rights: fair, reasonable, and non-discriminatory.]

In “FRAND in India,” Professors Sokol and Ghosh explain the nature of FRAND licensing:

FRAND licensing offers a contractual solution to aggregating technologies and coordinating decisions among firms in a particular industry. A product such as a smart phone or DVD player consists of myriad technologies many of whom will be subject to patents held by several distinct inventors and companies. Manufacturing a product for distribution and sale to consumers requires aggregation of these technologies through agreements among the several players. Although such coordination may in theory be possible, transaction costs grow geometrically with the number of patents associated with the product. FRAND licensing terms represents a commitment to license the requisite technologies on terms to all industry players that are fair, reasonable, and nondiscriminatory, in the sense of being equitable.

The authors go on to show the Indian Economic Context of FRAND:

FRAND related antitrust issues have to be put into context of a broader Indian high tech policy. The current Indian government has pushed innovation ahead with two policy initiatives – “Make in India” and “Digital India.” Prime Minister Modi launched Make in India in late 2014. Its purpose is to focus on job creation and improved skills for Indian companies and foreign companies doing business in India in twenty-five listed sectors. Similarly, the Indian government launched Digital India to improve India’s digital economy in 2015. Both initiatives have focused the Indian government on the importance of technology for Indian growth and innovation. The importance of technological innovation in India weighs upon the different institutional actors in India’s competition policy system.

From the paper’s abstract:

This paper examines FRAND issues in India. From an institutional perspective, India's FRAND cases do not effectively establish the appropriate role for antitrust in FRAND. On the one hand, there is the potential for hold-up and anti-competitive conduct in the FRAND setting. Such situations would be very fact specific but the CCI [Competition Commission of India] orders to date use sweeping language and analysis based on per se like rules of illegality. On the other hand, the creation of per se like rules of illegality create the possibility that CCI will act as a price regulator rather than antitrust enforcer. Over time and with greater use of economic analysis (and greater reliance on the economic staff at CCI), CCI may improve its institutional capabilities. However, the role of jurisdiction as between CCI and the judiciary remains unclear. How best to treat FRAND disputes will take time but the hope is that through greater experience and learning by doing, the Indian competition system will set out a set of economically informed principles for sound FRAND enforcement.

On the issue of institutional design and deference, one question that has not yet been reached (and may not for some time) is how the courts should handle deference when CCI has developed the necessary economic skills to undertake complex cases of antitrust and technology. Should the judiciary defer to agency as expert once expertise developed? This is potentially a chicken and egg problem on developing expertise and rules of deference in need of further study. Complicating matters further is that the economics on competition and patents is complex. Creating an administrable economic model that is coherent remains a work in progress.

Overall the Indian FRAND cases suggest that the current mix of Indian institutions may not yet be well suited to address complex issues of antitrust enforcement. Consequently, such cases should be approached cautiously with a mind on how to think through the economics of innovation, and the implications of enforcement on technology, IP and competition to yield optimal results and the right institutional structure for improved enforcement.

D. Daniel Sokol is a professor at the University of Florida's Levin College of Law, where he teaches courses on Antitrust, Commercial, Corporate, International and Comparative Business and Regulation. He focuses his teaching and scholarship on complex business issues from early stage start-ups to large multinational businesses and the issues that businesses face: corporate governance, compliance, pricing strategies, M&A, collusion, and disparate business regulation around the world. A highly prolific scholar, Professor Sokol has published his work in law reviews (e.g., Michigan Law Review, Northwestern Law Review), peer review journals (e.g., Journal of Law and Economics), books (e.g., Oxford University Press, Stanford University Press) and the popular press (e.g., Wall Street Journal).