Lessons for SEP holders

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Pravin Anand and Abhilasha Nautiyal on trends, and do’s and don’ts, for standard essential patents litigation

In recent times, India has become a battlefield for standard essential patents (SEP) litigation. Several SEP holders, including Philips, Ericsson, Dolby and Vringo, have chosen Indian courts, specifically Delhi High Court, as the forum to litigate their SEPs.

Pravin AnandManaging partnerAnand and Anand
Pravin Anand
Managing partner
Anand and Anand

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. 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 this legislation, India witnessed significant SEP action. One reason for this is the size of the Indian market, and also the localized operations of several large implementers. It helps that litigating in India is more economical than in several sophisticated jurisdictions.

Abhilasha NautiyalManaging associateAnand and Anand
Abhilasha Nautiyal
Managing associate
Anand and Anand

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.

Successes in initial cases have paved the way for further SEP litigation in India.

Trends in SEP litigation

Although 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 DVD patent litigation in India. This was carried forward by Ericsson’s telecom SEP litigation, in which all the big Indian handset manufacturers have been involved.

Interim arrangements have become almost the norm in all SEP litigation. As part of such an arrangement, the implementer is directed to deposit an interim royalty in court. There had come a time when such arrangements were entered with consent of both parties.

However, with the present status of the telecom market in India, where Chinese manufacturers have rapidly gained a large portion of the market, Indian telecom companies are reluctant to willingly enter into such arrangements. 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.

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

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

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 better tempo in negotiations.

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

Do’s and Don’ts

It is best to be prepared for all key requirements of 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 (fair, reasonable and non-discriminatory) 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.

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. It is also critical for a right holder to act sooner than later. As more and more players in the field of technology litigate in India, courts are bound to ask questions about royalty stacking.

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