Appropriateness of injunctive relief in standard essential patent (SEP) litigation is highly controversial terrain and has been intensely debated in almost all the major jurisdictions around the world. While India, until a few years back, was completely oblivious to the hullabaloo surrounding the issue, thanks to a spate of ex parte injunctions in cases involving SEPs, the issue now is at the forefront of the intellectual property (IP) landscape in the country.
Xiaomi and Ericsson
Recently, the issue created a lot of stir when the Delhi High Court restrained Xiaomi, an electronics company based in China, from manufacturing, importing or selling all such products that incorporate any technology patented by Ericsson for mobile communications in an ex parte order.
The stringent order was, however, tempered by the division bench of Delhi High Court almost a week later, on 16 December 2014, on an appeal by Xiaomi. It allowed the Chinese company to sell some selected products in India, selected products being those that use chipsets purchased from Qualcomm, an American company that is Ericsson’s licensee and is authorised to use its technology. Although Xiaomi has been asked to pay a royalty of 100 rupees (US$1.60) on each such sale, it’s a small price to pay for the much needed relief.
While the case will now come before Delhi High Court on 5 February 2015, the hurried manner in which the court had rushed to grant interim relief to Ericsson without even hearing Xiaomi raised quite a few eyebrows in the patent fraternity and smartphone industry.
And critics of the order felt vindicated when it came to light during Xiaomi’s appeal that Ericsson had not divulged the fact that some of Xiaomi’s products used chipsets of Ericsson’s licensee, Qualcomm, and were non-infringing.
The case has also raised question marks over the validity and acceptability of injunctive relief in SEP litigation, especially when granted in ex parte proceedings. While it may be true that the injunctive relief is available under patent law, the remedy may, however, have negative repercussions on fair competition principles, a dictum usually not considered by the courts while granting an injunction.
Huawei and ZTE
While it may not be fair to argue that there should be a blanket ban on SEP holders from seeking injunctive relief, the privilege must be preceded by certain responsibilities aptly highlighted in an ongoing SEP litigation – Huawei Technologies v ZTE. The case between two of China’s largest telecoms hardware makers – Huawei and ZTE – is before the Court of Justice of the European Union (CJEU).
Referred to the CJEU by a German regional court, the case concerns a patent essential for the implementation of the LTE (long-term evolution) standard, developed by the European Telecommunications Standards Institute (ETSI) and owned by Huawei.
Taking measures before an action
While the preliminary ruling on the case has not yet been finalised by the CJEU, the advocate-general of CJEU has recommended that SEP holders, particularly those who have made a commitment to the standard setting organisation to grant licences to third parties on fair, reasonable and non-discriminatory (FRAND) terms must take certain specific measures before bringing an action for prohibitory injunction, so that it is not deemed as an abuse of dominant position.
This includes alerting the alleged infringer in writing and presenting to it a written offer for licence on FRAND terms, which contains the exact amount of royalty and the way in which that amount is calculated.
When to negotiate
The advocate-general goes on to opine that it’s not unreasonable to negotiate an SEP licensing agreement after the patented standard has already begun to be used, and even if negotiations are unsuccessful the conduct of the alleged infringer cannot be regarded as dilatory if it requests that FRAND terms be fixed either by a court or an arbitration tribunal.
The advocate-general has also cautioned against leaving the entire SEP licence negotiation process at the discretion of the parties – patentee and the alleged infringer – and mandated standardisation bodies such as the ETSI to establish minimum conditions or a framework of “rules of good conduct” for negotiation of FRAND licensing terms.
Solution of last resort
While the advocate-general has not examined the feasibility of ex parte injunctions in SEP litigation, he referred to injunctive relief as a “solution of last resort” in SEP licensing, and cautioned courts granting injunctive relief to SEP holders to ensure that the SEP owners have fulfilled their part of the obligations. The concerned court/judicial authority essentially needs to determine if the alleged infringer is “willing to negotiate”.
After all, if the alleged infringer is indeed “willing to negotiate”, crippling it with an injunction serves no purpose whatsoever and is also detrimental to public interest.
Quite clearly, this determination must involve the alleged infringer and not proceed unilaterally on the assertions made by the SEP holder in ex parte proceedings.
Word of caution
Considering that Indian courts have been granting ex parte interim relief in SEP infringement cases with rapid alacrity, the recommendations in the Huawei case provide a word of caution which, if adhered to, would mark the beginning of a new threshold for the granting of injunctive relief in SEP-related cases in India – and may it be added, rightly so.
Manisha Singh Nair is a partner and Priya Anuragini is an associate at LexOrbis
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