• ‘Standard essential patents’ (SEPs) are patents covering technologies adopted as industry standards (e.g., CDMA, GSM, LTE), crucial for ensuring interoperability among different cellular phone brands.
• The judiciary, tasked with regulating SEPs, has largely overlooked the issue, impacting India’s efforts to develop a domestic manufacturing industry for cell phones

THE PROCESS

• The process of setting standards in the tech sector is privatized, led by “standard setting organizations” (SSOs) mostly run by private tech firms, limiting countries like India in influencing standard setting and SEP licensing.
• Companies owning SEPs benefit significantly, as all cellular phone manufacturers must license these standards to stay competitive, leading to potential patent holdup issues.
• SSOs are expected to ensure fair licensing at a FRAND rate, but in reality, this model has failed due to opacity, resulting in substantial fines for anti-competitive practices, such as Qualcomm’s fines in various countries
• The largest of these SEP owners, Qualcomm, has been fined $975 million by China (2015), $873 million by South Korea (2017), $774 million by Taiwan (2017) and $1.2 billion (2018) and another $272 million (2019) by the Europe Commission

EFFECT OF JUDICIAL LETHARGY AND ACTIVISM

• The Indian judiciary’s response to SEP issues involves both lethargy and activism, particularly seen in the Delhi High Court.
• The Competition Commission of India (CCI) (in 2016) investigated Ericsson’s alleged abuse of dominant position regarding SEPs, leading to prolonged litigation.
• While competition law issues were unresolved, the Delhi High Court handled SEP infringement lawsuits, causing delays and complexities.
• The court’s interim remedies, like hefty deposit orders, have disrupted manufacturing activities, affecting defendants’ working capital and fairness.
• The court’s activism, justified under “inherent powers to do justice,” impacts investment and manufacturing incentives, favoring multinational corporations over domestic manufacturers.

WAY FORWARDTop of Form

• India should follow Europe’s lead and implement regulations to govern SEPs, given the judiciary’s impact on manufacturing.
• The European Parliament has enacted measures for SEP regulation, setting a precedent for effective governance.
• India’s lack of influence in SEP selection by SSOs and international agreements mandating patent enforcement justify the need for robust regulatory measures.
• Implementing similar or stronger regulations can safeguard India’s manufacturing interests and ensure fair treatment in SEP licensing and enforcement.