Customer Care No.

91-1145562222

Competition Law and

Cellphone Patents

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Introduction
The Competition Act 2002("Act") was enacted for the
establishment of a Commission to prevent practices having
adverse effect on competition, to promote and sustain
competition in markets, to protect the interests of
consumers and to ensure freedom of trade carried on by
other participants in markets, in India, and for matters
connected therewith or incidental thereto.
The provisions of section4of the Competition Act, 2002
mandate the Competition Commission of India ("CCI") to
inquire into the cases where dominant players may restrict
competition in the market by way of denial of market
access and by imposing unfair and discriminatory
conditions.
The present case as determined by CCI in its orderBest IT
World (India) (P.) Ltd. (iBallv.Telefonaktiebolaget L M
Ericsson
(Publ)
[2015] 59Care
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Customer
No. 91-11-55/131 SCL 392 (CCI)enunciates

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Meaning of certain terms
2.Standard Essential Patents ("SEP"): An Essential Patent or Standard Essential Patent is a patent
that claims an invention that must be used to comply with a standard. Standards frequently make
reference to technologies that are protected by patents. A patent that protects technology that is
essential to comply with a standard is called a Standard Essential Patent.
The (supra) of judgementadjudicated by United States Court of Appeals for the Federal Circuit
defines standard essential patent as "Creating some standards, like IEEE's 802.11 standard,
is a complicated process that involves the collaboration and can involve cooperation of a number
of interested parties. Due to the collaborative nature of this process, the chosen standard may
include technology developed by a number of different parties. Sometimes that technology is
covered by patents. Because the standard requires that devices utilize specific technology,
compliant devices necessarily infringe certain claims in patents that cover technology
incorporated into the standard. These patents are called "standard essential patents" ("SEP").
European Telecommunications Standards Institute ("ETSI") :-ETSI, the European
Telecommunications Standards Institute, produces globally-applicable standards for Information
and Communications Technologies (ICT), including fixed, mobile, radio, converged, broadcast and
Internet technologies. ETSI are officially recognized by the European Union as a European
StandardsCare
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FRAND: It is a legal term which stands for Fair, reasonable and Non-discriminatory. FRAND
terms puts obligation on owner of SEP to license its patents under FRAND terms.
3. Facts of the Case
M/s Best IT World (India) Private Limited ("Informant") was engaged in Business of import
and distribution of computer peripherals, mobile handsets, tablets etc. under brand name
'iBall'. Telefonaktiebolaget L M Ericsson ("TLME") incorporated under laws of Sweden. Ericsson
India Private Limited ("EIPL") is 100% subsidiary of TLME and was engaged in the business of
manufacturing and sale of telecom equipment, network equipment, software and other
services in India.[TLME & EIPL hereinafter termed as Ericsson]
Informant stated that Ericsson is one of the world's largest telecommunication companies
with a global market share of 38% and also one of the largest holders of Standard Essential
Patents ("SEPs) in the mobile phone and wireless industries with approximately 33,000
granted patents as of 2012, out of which 400 were granted in India.
Ericsson issued letter to Informant stating that, informants products have infringed GSM
(Global System for Mobile Communications) and/ or WCDMA (Wideband Code Division Multiple
Access) and requested meeting to discuss the Issue.
Ericsson specified that Informant should enter into a Global Patent Licensing Agreement
Customer
Care
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("GPLA")
for No.
all 91-11the patents of Ericsson. The Informant showed its willingness
to enter into

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Ericsson notified the Informant to enter into a non-disclosure agreement ("NDA") before
proceeding the matter .The informant alleged that, Ericsson reluctant to share information of
infringement of patents unless the informant executed NDA. The informant further stated that
they were willing to enter into a license agreement under FRAND terms and within jurisdiction of
Indian courts as the current NDA terms were very strict ,onerous and one sided. The informant
was of view that Ericsson was tying and bundling of patents irrelevant to the Informant's
products and demanding unreasonably high royalties by way of certain percentage of handset,
such an act of Ericsson is in violation of Section 4 of the Act.
Can owner of standard essential patent be obliged to issue patents to third party?
4. A patent holder is granted a statutory right to prevent third parties from making, using,
offering for sale, selling or importing the patented products and if the patent is a process then
the patent holder would have the right to prevent the third parties from using or in any manner
dealing with the said patent. The only manner in which a patent holder can exercise his rights is
by refusing a licence permitting a third party to exploit its patent and it would be quite
legitimate for a patentee to seek injunctive relief to enforce such rights. However, on the other
hand, a refusal by a patentee to grant a licence may result in adverse effect on competition.

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Considering the present case, Ericsson being a member of ETSI is bound to offer its SEPs on
FRAND terms. As per clause 6.1 of the - ETSI Intellectual Property Rights Policy expressly
provides that:
"When an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is
brought to the attention of ETSI, the Director-General of ETSI shall immediately request the
owner to give within three months an irrevocable undertaking in writing that it is prepared to
grant irrevocable licences on fair, reasonable and non-discriminatory ("FRAND") terms and
conditions under such IPR to at least the following extent:
MANUFACTURE, including the right to make or have made customized components and subsystems to the licensee's own design for use in MANUFACTURE;
Sell, lease, or otherwise dispose of EQUIPMENT so MANUFACTURED;
Repair, use, or operate EQUIPMENT; and
Use METHODS.
The above undertaking may be made subject to the condition that those who seek licences
agree to reciprocate."
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