It is the CCI’s first substantive investigation of the intersection between competition and intellectual property law, in particular the commitment by standard-essential patent (SEP) holders to license their patents on fair, reasonable and non-discriminatory (FRAND) terms.
Ericsson is the largest holder of SEPs for mobile communication in the world with some 33,000 patents, 400 of which have been granted in India.
The investigation is based on a complaint filed by mobile phone manufacturer Micromax Informatics.
Micromax alleges that Ericsson was “demanding unfair, discriminatory and exorbitant” royalties for its GSM wireless communication patents, in breach of its FRAND obligations. Micromax claims that as Ericsson is aware there is no alternative technology available, it has abused its dominant position through its hiked licensing rates.
In response to Micromax’s complaint Ericsson said the dispute was a commercial one that does not come under the jurisdiction of the competition enforcer. But the CCI says given the allegations made by Micromax the matter is “a fit case for thorough investigation” under competition law.
“[Micromax] has every right to raise issues before the commission. […] The act makes it clear that [the] provisions of [the] Competition Act are in addition to and not in derogation of other existing laws,” reads the CCI’s order.
Samir Gandhi at AZB & Partners in New Delhi, says: “It seems that the CCI is keen to prevent the problems associated with patent hold-up and royalty stacking, which have come under scrutiny by competition authorities worldwide.”
The complaint comes after a previous dispute between the two companies regarding patent licensing. In March Ericsson filed a lawsuit at Delhi’s High Court against Micromax for allegedly infringing eight of its patents used in 2G, 3G and 4G-capable mobile devices. It says before filing the lawsuit Ericsson made several attempts to sign a FRAND licensing agreement with Micromax.
The court has issued an interim order directing Ericsson and Micromax to come to a licensing agreement under FRAND terms and that, in the interim, Micromax pay Ericsson a fixed royalty for the SEPs.
At the recent BRICS conference in New Delhi, Gandhi adds, a CCI member clearly outlined that they expected the interplay between IP and competition law in the high-tech sector to be the next significant area for competition enforcement.
“The initiation of this investigation demonstrates that intent,” he says.
In a statement, Ericsson says it “will fully cooperate with the authority in this investigation to reach a fair and reasonable conclusion”.