In yet another Order where the CCI continues to be insistent on exercising jurisdiction in SEP matters, the Commission, proceeding from a complaint by iBall, directed the DG to complete an investigation against Ericsson. This adds to jurisprudence that shows the CCI as being adamant to exercise jurisdiction in matters where there is genuine confusion as to its reach.
In 2011, Ericsson issued a letter to iBall making clear its belief that its patents, which were directly relevant to iBall’s past, present and future GSM and WCDMA compliant products, were being infringed. When Ericssion refused to identify the SEPS that were infringed, threatened iBall with patent infringement proceedings, attempted to coax iBall into entering into one-sidee and onerous Non-Disclosure Agreements, tied and bundled patents irrelevant to iBall’s products by way of GPLAs, demanded unreasonably high royalties by way of percentage value of handsets instead of cost to patent technology, iBall alleged violation of Section 4 of the Competition Act, 2002 and prayed for an investigation into abuse of dominant position by Ericsson.
The Commission found ‘Standard Essential Patents for 2G, 3G and 4G technologies in GSM standard compliant mobile communication devices in India’ to be the relevant market for the matter. The Commission then found a prima facie dominance of Ericsson in the market as there was no alternate technology available in the market in India. Thereafter, the Commission found that the royalty rate being charged by Ericsson had no linkage to the functionality of the patented product. The Commission found that Ericsson ‘seemed’ to be acting contrary to the FRAND terms by imposing royalties linked to the cost of the manufacturing product. It called the charging of two different license fees per phone for use of the same technology to be prima facie discriminatory. The Commission also labeled the terms of the NDA as being contrary to the spirit of applying FRAND terms fairly and uniformly to similarly placed players. The Commission also stated that forcing a party to execute Non Disclosure Agreements and imposing excessive and unfair royalty rates amounted to an abuse of dominance in violation of Section 4 of the Competition Act, 2002. Additionally, the Commission also stated that imposing a jurisdiction clause debarring iBall from getting disputes adjudicated in the country where both the parties are engaged in doing business and vesting the jurisdiction in a foreign land, prima facie, appeared to be unfair. Therefore, the Commission ordered the Director General to complete an investigation.
The facts in this case are strikingly similar to the Orders of the CCI in the cases of Intex and Micromax. [Find our posts on this here, here, and here]. Ericsson challenged the jurisdiction of the CCI before the Delhi High Court. [Find the Order of the Delhi High Court here.] The Delhi High Court in Intex noted that the CCI was entering into an adjucdicatory and determinative process by recording a substantial reasoning at Section 26(1) stage and directed the DG to refrain from passing final orders pending adjudication of the matter. What is extremely interesting is that the Commission cites its own Orders in Micromax and Intex without following up on the HC Orders that followed. While it is true that the CCI in this Order has not made extensive determination as to royalty rates, etc., therefore differentiating it from its Order in Intex, it does not mean that the dictum of the Delhi High Court becomes absolutely irrelevant.
One must note that the present Order may be as it is be due to the fact that the jurisdiction of the Commission was not challenged by Ericsson (the Order is not clear on that). That said, it is true that it does seem that the Commission is toeing the line that limits its jurisdiction. In fact, one might argue, that in stating that this was a violation of FRAND terms automatically puts the case outside the jurisdiction of the CCI and into the hands of the IPAB and the High Court.
It seems intuitive to expect an appeal from this decision, or a writ petition before a High Court, challenging the jurisdiction of the Commission. It is imperative that there be a more concrete determination of the bounds of the Commission’s jurisdiction, in clearer terms than in the Order of the Delhi High Court. That would bring about greater clarity and direction to FRAND litigation in India.