A faceoff

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Pravin Anand and Abhilasha Nautiyal provide pointers on how to handle buse of dominance in IP matters

Does a standard-essential patent (SEP) holder abuse its dominant position by bringing an infringement action seeking an injunction prohibiting the infringement of its patent or seeking the recall of products manufactured with its patent? Ruling on 16 July in Huawei Technologies Co Ltd v ZTE Corp, the European Court of Justice (ECJ) recently answered this question with a qualified no.

What is an Indian court likely to decide when confronted with the same question? This comment compares the Huawei opinion with a 2 September order of Delhi High Court, passed by Justice Manmohan Singh in Ericsson v iBall, to draw parallels for criteria an Indian court is likely to consider.

 Pravin Anand
Pravin Anand

Players in some industries, usually where compatibility of products is critical, agree to standardize the technical aspects of their products. The owners of patents included in the standardized technical aspects, the standard-essential patents (SEPs), commit to license these patents to entities who use it on fair, reasonable and non-discriminatory (FRAND) terms.

Problems arise when an SEP holder and a standard implementer cannot reach a deal on a licence. The question then is should the SEP owner be able to seek an injunction prohibiting the infringement of its patent against the implementer, or would this amount to abuse of dominance?

While the ruling in Huawei was in response to a request for a preliminary ruling from the Landgericht Düsseldorf, a court of general jurisdiction of a state in Germany, in iBall Delhi High Court passed an interim injunction restraining the defendant from infringing the plaintiff’s SEPs till the next date of hearing.

As regards alerting the alleged infringer, the ECJ held that an injunction may follow if prior to bringing the action, the proprietor has alerted the alleged infringer of the infringement complained about by designating that patent, and; specifying the way in which it has been infringed.

The defendant (iBall) in Delhi High Court had relied on Huawei to argue that the plaintiff’s suit is premature, unless requisite details about its claim were provided. As such, the defendant argued that it cannot be blamed for being unwilling to enter into a FRAND licence. However, the court rejected the defendant’s argument of insufficient information about the plaintiff’s claim. It held that the plaintiff had provided the defendant with information to conclude the execution of a non-disclosure agreement (NDA). The information included: a list of illustrative products of the defendant that were using the plaintiff’s SEPs; a list of the plaintiff’s SEPs; eight claim charts; a presentation about standards and licensing; and 2G/3G example patent lists. The court was of the prima facie view that the plaintiff was willing to provide such information and give clarifications.

Abhilasha Nautiyal
Abhilasha Nautiyal

Delhi High Court also held that even if it was presumed that insufficient details were provided to the defendant before the suit was filed, the defendant is now prima facie aware of the plaintiff’s claim as the plaintiff had filed infringement reports, etc. in the suit. The court also said an interim injunction would not harm the defendant if it is not infringing the SEPs in question.

Considering the alleged infringer’s conduct the ECJ in Huawei added the proprietor of an SEP does not abuse its dominant position, where the alleged infringer continues to use the patent in question after expressing its willingness to conclude a licensing agreement on FRAND terms, and the proprietor has presented the infringer a specific, written offer for a licence. In this situation the alleged infringer is seen to have not diligently responded to the SEP owner’s offer, in accordance with recognized commercial practices in the field and in good faith, as this is a matter which must be established on the basis of objective factors and where there are no delaying tactics.

However, the ECJ observed that an alleged infringer cannot be criticized for challenging, in parallel to the negotiations relating to the grant of licences, the validity of those patents and/or the essential nature of those patents to the standard in which they are included and/or their actual use, or for reserving the right to do so in the future.

In the iBall case, Delhi High Court felt that the defendant had not taken any steps or shown any interest in executing a licence on FRAND terms, as it alleged that it is not infringing the patents in question, even as it filed a complaint before the Competition Commission of India (CCI), claiming abuse of dominance by the plaintiff.

It is to be noted, that the 2 September order in iBall was appealed. Based on what transpired in court during the appeal hearing on 8 September (as a copy of this order is not available yet) it appears that the parties were ordered to try and reach a settlement, for which they have been given about two weeks. In addition, the interim injunction, which was earlier to be operative from 9 September, has been postponed till the next date of hearing. The appeal was re-notified to 21 September.

Pravin Anand is the managing partner of Anand and Anand, where bhilasha Nautiyal is a senior associate.

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Email: Pravin@anandandanand.com

Email: Abhilasha@anandandanand.com

Tel: +91 120 4059300