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.
FRAND violation disputes and other aspects pertaining to SEP litigation including non disclosure of patents to SSO, seeking interim injunctions as a litigation strategy, NDAs and using injunctions to then negotiate FRAND would ALL fall under the jurisdiction of the CCI. While the CCI isn’t going to be giving out a final order on this anytime soon, other regulators, including the EC and the FTC have been issuing orders on all of these issues since 1996, if not earlier – on all of the issues that I’ve mentioned above – finding them to be well within their jurisdiction and finding such conduct to be abusive of a dominant position and an anti-trust law violation. So, I don’t think it’s entirely correct to say that this is the CCI overstepping its jurisdiction by asking for an enquiry.
You should also look at Section 60 of the Competition Act, 2002 which is the overriding effect of the Competition Act, 2002 over other laws; and read it with the above.
Also, I’m unaware of any ongoing litigation between Iball and Ericsson. Your post only speaks of a letter and subsequent negotiations. In the absence of any litigation, it might not be fully accurate to say that that the jurisdiction of the CCI will be challenged. The CCI has jurisdiction on a case to case basis – so, even if the investigation based on Micromax’s complaint is suspended, this might still continue. Ericsson was able to get a stay from the Delhi High Court on the CCI’s investigation in the complaint filed by Micromax because the matter in issue was essentially the same (before the Delhi High Court and the CCI), which is not the case with Iball’s complaint, since there is no litigation between Ericsson and Iball. Again, the court has only restrained the Commission from issuing a final order and issued guidelines for how the rest of the investigation is to continue, which could also be read as a recognition by the court that the jurisdiction of the CCI can’t be ousted.
Appeal was filed before the Ld. Single Judge HMJ Shakdhar today, where orders has been reserved where Mr. Amit Sibbal Appeared for Iball and Mr. P Chidambram for Ericsson, reference was also made to the Google Decision of the Division Bench of the High Court and its now reserved for orders.
Kindly see the order dated 27.05.2015 in W.P. (C) No. 5604/2015 – Ericsson vs. CCI & Anr. (Writ filed against the above discussed 12.05.2015 order of CCI)
The Judge has rightly taken into account that irrespective of the fact that there were no pending proceedings between Ericsson and iBall, the Court is seized of the issue of Jurisdiction in the Micromax and Intex writs and therefore, there cannot be a digressing order.
Also as far as I have followed the matters, the argument of Ericsson in Micromax and Intex writ is quite strong with regard to jurisdiction and the Judge is in any case hearing the matter only on Jurisdiction, i.e. not on facts per se, but on law and the interplay between the Competition Act and Patents Act (specifically) is going to be decided in the said Writs.
Also, just because FTC and EC have been issuing such orders on above issues (which is also quite incorrect reading, see the EC Memos in Samsung and Motorola Cases), I think the case to case basis principle is applicable to CCI also since all the laws are territorial and the Acts have to be read in order to determine the exact authority who has the powers and the extent to which such authority has to pass orders in this unique interface of competition and patents law in India.
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bPk
(simply an avid follower of the case)