Ericsson v. Micromax – A Case of Abuse of Dominance and Unambiguous Laws of India

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Introduction

Standards have infinite forms and objects. Standard means doing something familiar recognized or in an established manner. In this world, the standard is set everywhere and for everything. Standard is very important for a manufacturer while installing different technologies in their phones which may not be a big concern for a consumer. One of the biggest concerns of the consumer is the price of a commodity, whether it is within their budget or not. Many companies try to sell affordable good quality products to their customers. As per the market strategies and requirements, the price of a product is fixed. But what happens if in between the process of manufacturing some highly dominating organizations try to influence the price indirectly through their unreasonable terms and conditions. The problem starts when the legal remedy is itself unambiguous because of a lack of precedents and lucid laws.

The tussle between Ericsson and Micromax started in the year of March 2013 when Ericsson sued Micromax for its patent infringement SEPs (Standard Essential Patent) which is used in mobile phone manufacturing. Eg 2G, 3G, Edge, etc.

 

Who are Ericsson and Micromax?

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Micromax or Micromax Informatics is an Indian multinational company that was initially an IT software company then, later on, it entered into the market of making mobile handset. In the year 2010, it became one of the biggest competition in Indian markets and the world’s top 10 global handset vendors. The biggest reason for its popularity was that it provided fancy and compatible smartphones at affordable prices which became dream come true for Indian consumers. On the other hand, Ericsson is a telephone stock company known as Telefonaktiebolaget LM Ericsson. It is a Sweden based multinational telecommunication company. It has a market share of 27% in 2G, 3G technology. Ericsson has registered around 49,000 patents in its names in mobile network infrastructure.

 

Main Issues of the Case

  • Micromax alleged that the demand for royalties by Ericsson for its GSM technology was not according to FRAND terms. It was more unfair, unreasonable as compared to other patentees for alike patents.
  • Ericsson sued Micromax for infringement of its eight patents used in 2G, 3G & 4G devices before Delhi High Court.
  • Micromax further contended that Ericsson has abused its dominance by filing an injunction against it and threatening to report to SEBI against Micromax’s non-payment of royalty before its listing.

The judgment of the Competition Commission of India

The Commission made it very clear that Ericsson has a dominant position in the market of GSM as it holds around 33,000 patents in GSM and CDMA in its name. It is also the largest holder of SEP in 2G, 3G, and Edge technology. It enjoys dominance in the market as there is no alternative present for such technology. The commission further pointed out that it is prima facie discriminatory to charge royalties on the criteria of the cost of the smartphone for the same GSM technology used in every smartphone irrespective of its cost. It is against the FRAND terms. Ericsson has abused its dominance by charging excessive and unreasonable royalties for its GSM technology

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The commission further cleared its jurisdiction which was challenged by Ericsson in the High Court of Delhi. The commission specified that as per Sec 3(5) of the Competition Act, protection of IPR rights of a person is mentioned, Sec 4(1) specifies the abuse of dominance by an enterprise and Sec 4(2) provides the imposition of unfair and discriminatory conditions on sale & purchase of goods leads to abuse of dominance. Hence the commission has jurisdiction in the present case.

The judgment of the High Court

Ericsson challenged the judgment of CCI in Delhi High Court by filing a writ petition. Claiming that the infringement of patent licensing is provided in the Patent Act of 2002, hence the Competition Act has nothing to do with the case. The High Court dealt with the question of whether any of the Acts is clashing with the other.

  • Both the Acts IPR & Competition Law is inconsistent as the former monopolies and latter seek prevention of monopoly under anti-competition practices. The remedy provided under both the Acts is different.
  • The relief provided under Patents Act is a remedy in personam while under Competition Act the remedy is of different types which are imposing penalties, cease & desist order i.e. remedy in rem.
  • Based on its observations the court decided that there is as such no incompatibility between the two Acts. Hence, CCI has the jurisdiction in this case.
  • The High Court further held that there is no prima facie abuse of dominance by Ericsson as it was only exercising its rights as a patent holder.

Based on its above analysis the High Court scrapped off the jurisdictional challenge by Ericsson and held that CCI has the jurisdiction to investigate the abuse of dominance by the patent holder, Ericsson.

Conclusion 

Section 18 of the Competition Act, 2002 puts a mandate on the Competition Commission of India to eliminate practices having an appreciable adverse effect on the Competition in India. Interestingly, not only the CCI but also other authorities like the Telecom Regulatory Authority of India, Petroleum & Natural Gas Board, etc. have been given the same powers of regulating competition in their respective domain. Clashes between competition law and other legislations is a matter of concern that is still left unsolved and hence the judgment of the court depends upon the facts and circumstances of the case. The provision of reference given in Section 22 & 22A of the competition act, which tries to solve the sectorial conflict by harmony has neither any binding effect nor it place any compulsion on CCI or any other sector to send an issue for reference to other statutory authority. Hence, a single word ‘may’ in the act makes a big difference. Not only the domain conflict is left unnoticed but also the perplexing cases regarding SEP-FRAND jurisprudence also need urgent attention. CCI needs to formulate a strategic policy to deal with cases like this. As the competition Act is infant legislation, it requires more interpretations when it comes to the protection of competition in the market. The lack of CCI’s experience in dealing with cases of different domains makes it more difficult to interpret the law in its true sense. Competition Act, 2002 has always been considered as a more sophisticated and well-arranged version of the MRTP Act, 1969. One among the many differences between the two Acts is that the Act of 2002 has not only the power of imposing cease & desist order but also imposes penalties for offenses. Hence it has a more punitive approach. But in many cases, it has been seen that the CCI is not able to recover its fine money from the parties. The reason is the judicial appeals due to which either the fine money gets delayed or it prevents CCI to recover. Indian Anti-trust laws have experienced many ups & downs starting from Licensing Raj (1950) to Competition Act, 2002. Current issues signify that the journey is long & complex. In this era where it is next to impossible to find material evidence against anti-competitive practices, CCI needs a broader view of the new challenges coming against the competition. In the end, what needs to be managed is competition.

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