MICROMAX INFORMATICS LTD. (INFORMANT) VS. TELEFONAKTIEBOLAGET LM ERICSSON (DEFENDANT)

Applicable Act: The Competition Act, 2002 (The Act)

ALLEGATIONS

• The defendant had sued the informant for patent infringement and the informant in turn responded by filing a complaint to the Competition Commission of India (CCI) for contravention of the provisions of Section 3 and 4 of the Act which pertain to anti-competitive agreements and abuse of dominant position.
• The informant alleged the defendant of abusing its dominant position by imposing exorbitant royalty rates for Software Engineering Professionals (SEPs).
• The informant further argued that the royalty for the defendant's patents related to mobile phones should be based on the value of the technology used, not on the sale price of a phone. 
• The informant also submitted that the defendant had subjected all its present as well as prospective licensees to Non-Disclosure Agreements, refusing the disclosure of commercial terms between similarly placed licensees.

BRIEF OF FACTS

The defendant owned SEPs in respect of 2G, 3G and 4G patents used for smart phones, tablets, etc., which fall under "GSM" technology. The informant has contended the dominance of the defendant in the Indian markets and the relevant geographic market would be the territory of India. From the information and documents provided by the informant, it was prima facie evident that the defendant held a dominant position in the relevant market of GSM and CDMA in India and held a large number of patents. The defendant has 400 patents granted in India. There is no other alternate technology in the market and the defendant enjoys complete dominance over its present and prospective licensees in the relevant product market.

The defendant charged royalty on the basis of the cost of product of user for its patent and was alleged of acting contrary to the FRAND (Fair Reasonable And Non-Discriminatory) terms. Charging of two different license fees per unit phone for use of the same technology prima facie was held discriminatory and also reflected excessive pricing vis-a-vis high cost phones. The royalty charged for the use of same chipset in a smartphone was ten times the royalty for ordinary phone. 

CONCLUSION

The defendant had raised issues regarding infringement of Intellectual Property Rights in the High Court. Section 62 bestows the right to move to the CCI as it makes clear that the provisions of the Competition Act are in addition and not in derogation of the existing laws. Pendency of a civil suit in the High Court does not take away the jurisdiction of the Commission to proceed under the Act.

DECISION

The Commission was of the opinion that it was a fit case for investigation by the Director General into the allegations made by the Informant and violations, if any, of the Act.