The Department of Industrial Policy and Promotion (DIPP) recently published a discussion paper on standard essential patents (SEPs) and their availability on fair, reasonable and non-discriminatory (FRAND) terms. The paper published on 01-March-2016 invites views from the concerned stakeholders regarding Standard Essential Patents and the issues surrounding them.
This post is the first part in the series of posts to come that will discuss on the concept of SEPs. This post therefore will provide an introduction to Standrad Essential Patents and will briefly discuss the contents of the paper published by DIPP. SEPs have always been the subject of debate, discussion and deliberation. Therefore it is only imperative that we discuss on this issue.
An essential patent or standard-essential patent is a patent that claims an invention that must be used to comply with a technical standard. In other words a Standard Essential Patent (SEP) is a patent that must be used to implement a technical standard, i.e. it is essential to the implementation of the standard.
Once we understand the definition of SEPs, we can now move over to understanding what ‘FRAND’ means in the context of SEPs. FRAND terms or fair, reasonable and non-discriminatory terms is where the owners commit to licence the SEPs on Fair, Reasonable and Non-discriminatory terms. To better understand this an example is the instance that, in many of the mobile standards, e.g. 3G, 4G, LTE, the majority of SEPs are owned by a handful of companies. This creates issues on a number of levels. First, the problem of calculating a single royalty for all SEPs owned by a company and Secondly, the cumulative effect of aggregating FRAND royalties across multiple licensors. The so-called “royalty-stacking” problem.
While the following posts will discuss in detail on these issues, it is best that this post be limited to present a brief overview on the discussion paper by DIPP. The paper discusses in detail all topics that may pertain to SEPs and concludes with Section XI entitled “Issues for Resolution”. The issues for which views and suggestions have been invited are provided below for the reference of our readers.
- Whether the existing provisions in the various IPR related legislations, especially the Patents Act, 1970 and Anti-Trust legislations, are adequate to address the issues related to SEPs and their availability on FRAND terms? If not, then can these issues be addressed through appropriate amendments to such IPR related legislations? If so, what changes should be affected.
- What should be the IPR policy of Indian Standard Setting Organizations in developing Standards for Telecommunication sector and other sectors in India where Standard Essential Patents are used?
- Whether there is a need for prescribing guidelines on working and operation of Standard Setting Organizations by Government of India? If so, what all areas of working of SSOs should they cover?
- Whether there is a need for prescribing guidelines on setting or fixing the royalties in respect of Standard Essential Patents and defining FRAND terms by Government of India? If not, which would be appropriate authority to issue the guidelines and what could be the possible FRAND terms?
- On what basis should the royalty rates in SEPs be decided? Should it be based on Smallest Saleable Patent Practicing Component (SSPPC), or on the net price of the Downstream Product, or some other criterion?
- Whether total payment of royalty in case of various SEPs used in one product should be capped? If so, then should this limit be fixed by Government of India or some other statutory body or left to be decided among the parties?
- Whether the practice of Non-Disclosure Agreements (NDA) leads to misuse of dominant position and is against the FRAND terms?
- What should be the appropriate mode and remedy for settlement of disputes in matters related to SEPs, especially while deciding FRAND terms? Whether Injunctions are a suitable remedy in cases pertaining to SEPs and their availability on FRAND terms?
- What steps can be taken to make the practice of Cross-Licensing transparent so that royalty rates are fair & reasonable?
- What steps can be taken to make the practice of Patent Pooling transparent so that royalty rates are fair & reasonable?
- How should it be determined whether a patent declared as SEP is actually an Essential Patent, particularly when bouquets of patents are used in one device?
- Whether there is a need of setting up of an independent expert body to determine FRAND terms for SEPs and devising methodology for such purpose?
- If certain Standards can be met without infringing any particular SEP, for instance by use of some alternative technology or because the patent is no longer in force, what should be the process to declassify such a SEP?
The full paper is available here and readers, stakeholders and any interested persons, can submit their views, suggestions along with any facts, figures and empirical evidence to firstname.lastname@example.org by 31st March, 2016.
Authored by Gaurav Mishra.