India court sets FRAND rates

Micromax is one of the most popular handset manufacturers in India. Pictured: the Canvas 2

Justice GS Sistani of the Delhi High Court issued an order last week setting out royalty rates to be paid by Micromax, pending trial, for sales of devices in India that may be covered by Ericsson’s standards essential patents (SEP).

Ericsson is represented by Singh & Singh while Micromax is represented by Saikrishna & Associates.

According to the order, Ericsson had produced to the court 26 licence agreements that it had with other companies. The set rates vary according to the technology and the date of the sale. The rates, all based on net selling price, are as follows:

Sales from the filing date of suit (March 2013) to November 12, 2015:

• Phones/ devices capable of GSM - 0.8%;

• Phones/ devices capable of GPRS + GSM - 0.8%;

• Phones/devices capable of EDGE + GPRS + GSM - 1%;

• WCDMA/ HSPA phones/devices, calling tablets - 1%.

Sales from November 12, 2015 to November 12, 2016:

• Phones/ devices capable of GSM - 0.8%;

• Phones/ devices capable of GPRS + GSM - 0.8%;

• Phones/devices capable of EDGE + GPRS + GSM – 1.1%;

• WCDMA/ HSPA phones/devices, calling tablets – 1.1%.

Sales from November 13, 2016 to November 12, 2020:

• Phones/ devices capable of GSM - 0.8%;

• Phones/ devices capable of GPRS + GSM - 1%;

• Phones/devices capable of EDGE + GPRS + GSM – 1.3%;

• WCDMA/ HSPA phones/devices, calling tablets – 1.3%.

The court also ordered that the trial shall be completed no later than December 31 2015.

Ericsson sued in March 2013 alleging that Micromax violated its SEPs, following several years of negotiations. Even before Micromax was served, Ericsson secured an injunction calling for Customs seizures of imports of infringing products as well as a raid on Micromax’s offices.

A couple of weeks later, the parties came to an interim agreement, which brought the two parties back to the negotiation table. In exchange for Customs allowing Micromax's products into the market, the handset maker agreed to deposit interim payments pending final determination of the rates. Like the order from last week, the rates varied according to technology, though the rates from the previous agreement were higher:

• For phones/devices capable of GSM - 1.25% of sale price;

• Phones/devices capable of GPRS + GSM - 1.75% of sale price;

• Devices using EDGE + GPRS +GSM technology - 2% of sale price;

• WCDMA/HSPA phones/devices, calling tablets - 2% of the sale price;

• $2.50 per device rate for data cards and dongles.

These rates were very close to what Ericsson had been demanding in discussions.

Countries around the region are increasing addressing the intersection between competition law and intellectual property. Last year, China’s Guangdong High Court found that American NPE InterDigital had violated its FRAND obligations in its dispute with telecommunications company Huawei. In that case, the court also set a royalty rate, though the Chinese court ordered a much lower rate of no higher than 0.019% of the sales price of each device.

Both judges and juries in the US have also set rates in disputes involving SEPs:

• • In Microsoft v Motorola, Judge James Robart of the Western District of Washington set a FRAND rate of 3.471 cents per wifi unit and 0.555 cents per h.264 unit;

• • In Ericsson v D-Link a jury in the Eastern District of Texas set a rate of 0.15 cents per wifi chip;

• • In In re Innovatio, Judge James Holderman of the Northern District of Illinois determined a rate of 9.56 cents per wifi chip;

• • In Realtek Semiconductor v LSI, the jury determined a 0.12% royalty for the '958 patent and 0.07% royalty for the '867 patent, or 0.19% combined - the lowest US-litigated RAND rate so far.

Several of the US decisions discuss issues that may later confront the Delhi High Court. For example, in Innovatio, Holderman examined concerns of “royalty stacking”, where multiple patent holders’ claim for royalties add up to more than 100%. He also looked into a dispute as to the proper royalty base - Innovatio claimed that the licensing rate should be based on the total price of the product and the contribution made by its wifi-related patents, while the defendants argued that because the features of the standard were embodied in the wifi chip used in the product, the chip itself should be the base. The court sided with the manufacturers. Finding that the price of each wifi chip was $14.85, the royalty rate of 9.56 cents per chip was effectively 0.6% of the chip price.

See here for our previous coverage of the Ericsson v Micromax dispute.