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Lessons from India on SEP litigation

In recent times, India has become a battle field for standard essential patents (SEP) litigation. Several SEP holders (Philips, Ericsson, Dolby and Vringo) have chosen Indian courts, specifically the Delhi High Court, as the forum to litigate their SEPs. Pravin Anand and Abhilasha Nautiyal of Anand and Anand explain why

We will look at the reasons why India is witnessing a high volume of SEP litigation, analyses the trends in SEP litigation so far in India, and considers the do's and don'ts.

Why India?

Philips was the first to land on Indian shores to litigate its SEPs and it was almost poetic justice when judgment was reserved in a Philips SEP lawsuit in July 2017 becoming the first SEP case in which post-trial judgment was reserved. This was particularly interesting since Ericsson, another big SEP litigant in India, has tried to expedite trial in its cases and in fact one such case, Ericsson v Lava, has been pending at the final hearing stage for a while now.

India introduced the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act in 2016. This legislation identifies certain cases, including patent litigation, as "commercial cases" and provides for, among other things, expedited procedures for such lawsuits.

However, even prior to the enactment of this legislation, India witnessed significant SEP action. One reason for this is of course the size of the Indian market and the localised operations of several large implementers. It also helps that litigating in India is more economical than in many sophisticated jurisdictions.

Another reason could be that Indian courts are viewed as injunction friendly. In fact, at least in the non-pharmaceutical patents space, Indian courts have consistently upheld and enforced patents. However, one must clarify that the characterisation of Indian courts as pharma patent unfriendly is rather outdated with the recent decisions of the Delhi High Court in the Roche v Cipla and Merck v Glenmark disputes.

Given that the SEP landscape in India is still developing, SEP holders may have viewed this clean slate as an advantage and tried to seize the opportunity to mould the law favourably.

Further, successes in the initial cases paved the way for further SEP litigation in India.

Trends in SEP litigation in India

The first SEP lawsuit was filed before an Indian court around 2002 to 2003. Though the first few cases were quickly settled after the court granted ex parte interim injunctions in favour of the patentee, the real contest started with the DVD patents litigation in India. This was carried forward by Ericsson's telecom SEP litigation in which all the big Indian handset manufacturers have been involved.

At least the following noteworthy trends have emerged in SEP litigation in India. This list is not exhaustive but gives a flavour of how Indian courts have viewed this species of litigation.

Interim arrangements

Interim arrangements have become almost the norm in all SEP litigation. As a part of such arrangements, the implementer is directed to deposit an interim royalty in court. There had come a time when such arrangements were entered with the consent of both parties. However, Chinese manufacturers have rapidly gained a large portion of the telecom market in India, and Indian telecom companies are reluctant to willingly enter into such arrangements. In at least one case, an Indian company is trying, unsuccessfully so far, to get out of such a commitment.

However, a court doesn't need the consent of parties to direct that the parties should follow an interim arrangement during the pendency of the litigation.

We have seen several versions of such interim arrangements including where:

  • the implementer deposits the royalty in court and the right holder withdraws the money so deposited after furnishing a bank guarantee to secure the interest of the implementer;
  • the implementer makes a royalty payment directly to the right holder after the right holder furnishes a bank guarantee to secure the interest of the implementer;
  • the implementer deposits the royalty in court and the right holder may be permitted to withdraw such deposits based on the final outcome of the lawsuit;
  • the implementer furnishes a bank guarantee to secure the royalty based on an interim arrangement. In this case, the implementer does not make any actual payments to the court.

Indian courts have devised these methods to balance the interests of the parties during pendency of the lawsuits. Most interim arrangement orders passed by courts are being challenged before the appeal courts and only time will tell the fate of such arrangements.

Competition Commission of India's role

The interaction of courts and the Competition Commission of India (CCI) in intellectual property disputes is complicated to say the least. The two have contradicted each other on issues such as calculating the royalty base; whether non-disclosure agreements are anti-competitive; and whether the filing of a CCI complaint shows unwillingness of a prospective licensee.

We have seen the court's initial reactions to CCI's orders where the CCI ordered investigations against SEP holders. In all cases where the CCI ordered investigations against SEP holders, the High Court granted orders protecting SEP holders by directing the CCI to continue its investigation but not pass any orders.

In the Ericsson disputes, at least three implementers approached the CCI with complaints against Ericsson. In all cases, the CCI ordered investigations.

Much water has flown since the Ericsson investigations were initiated. There is greater awareness in the relevant circles about SEPs and the threat of investigations before the CCI as counterblast to SEP litigation is past its peak.

Interestingly, the High Court in a recent judgment remarked that it is difficult to form an opinion that the conduct of Ericsson (in its licensing business with the Indian implementers) indicates any abuse of dominance. What remains to be seen is the outcome of the CCI's investigations against Ericsson and the interplay of the CCI and courts in SEP disputes.

Royalty based on comparable licenses

At least at the interim stage, most royalty arrangements set by courts are based on comparable licences, though in some cases the royalty figures appear to be the result of haggling among the judge, the right holder, and the implementer.

However, these interim orders are challenged in appeal and it is yet to be seen how courts finally treat this in comparison with the "smallest saleable patent practising unit" argument advanced vehemently by implementers.

In fact, the government invited comments on about 12 questions relating to SEP litigation in 2016. One question was specifically on "the basis of royalty rates for SEPs". There has not been any further update from the government on what it proposes to do after it received comments on these questions.

Alternate dispute resolution

Pre-litigation conciliation and mediation are also being used by right holders in SEP disputes. Such methods also signal the right holder's seriousness in discussions and can help achieve a better tempo in negotiations.

Long discovery proceedings

Unless checked, litigation can become a long-drawn affair in India. There are of course ways to expedite litigation. At the same time, litigation can be slowed. Parties trying to delay proceedings usually try to embark on extensive discovery proceedings.

The Commercial Courts Act mentioned above is an effective tool to expedite SEP litigation. However, this may require more work at the pre-litigation stage. It may be good idea to play out the entire litigation, including details such as collecting relevant documents, documents that may be reasonably required to meet any reasonable request for discovery, and identifying witnesses, before filing a lawsuit.

Advice for litigants

As explained above, it is best to be prepared for all key requirements of the litigation to the extent possible before the lawsuit is filed.

In the SEP context, it is especially important to be aware of information shared with the patent office. For instance, in one SEP case, the implementer argued that the SEP owner's royalty offer was non-FRAND since in its Form 27 filed with the Indian patent office (this is the working statement requirement under Indian law), the right holder disclosed lower rates.

Similarly, statements made by or on behalf of the SEP owner in other jurisdictions should be consistent with those made before the Indian court. This is especially important with respect to the description of the invention. For instance, under Indian law a mathematical or business method or a computer program per se or algorithms are unpatentable.

Indian courts take the issue of suppression of material facts very seriously. In fact, a party may lose the chance of any interim relief if it suppresses a material fact.

Further, it is critical for a right holder to act sooner than later – as more and more players in the same field of technology litigate in India, courts are bound to ask the question of royalty stacking.

Pravin Anand
Pravin Anand, managing partner of Anand and Anand, completed his law studies in New Delhi in 1979 and has practised as an IP lawyer since then.

He has been counsel in several landmark IP cases, including those involving the first Anton Piller order (HMV); first Mareva injunction order (Philips); first Norwich Pharmacal order (Hollywood Cigarettes); moral rights of artists (Amarnath Sehgal); first order under the Hague Convention (AstraZeneca); and several significant cases for pharmaceutical clients such as Merck, Novartis, Pfizer and Roche. He received the National Innovation Foundation Award from the Indian government in recognition of pro bono work for rural innovators at the grassroots.

He is coauthor of the two volumes of Halsbury’s Laws of India on intellectual property and author of the India chapter in Copyright Throughout the World. He also serves on the editorial board of several international IP journals – including many leading journals on IP jurisprudence – and international legal magazines such as CTLR, PLC – Life Sciences, Asia IP, The Patent Lawyer, Who’s Who Legal – Patents and Lexis Nexis Asia IP Guide.

He has spoken extensively at various forums, including the World Intellectual Property Organisation, International Association for the Protection of Intellectual Property (AIPPI), International Trademark Association, Licensing Executives Society, International Bar Association, LAW ASIA and the UN Conference on Least Developed Countries in the Digital World.

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