Ericsson and Nokia v Oppo signal that non-discriminatory terms are key concern for Indian courts
This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight
|Case name||Nokia v Oppo|
|Court||Delhi High Court|
|Cause of action||Liability for royalties|
The SEP/FRAND landscape in India is constantly evolving. The most recent developments – Ericsson and Nokia v Oppo – are revealing certain trends, most notably, a marked preference for settlements. This revelation in turn enables predictions to be made about the future of the SEP landscape in India, particularly as legal bodies are still shaping guidelines to outline what ‘FRAND’ actually means.
Ericsson’s SEP litigations
It appears that the initial flood of Ericsson’s SEP litigations in India has settled into more of a gentle brook. Ericsson and defendants, also mobile manufacturers, reached out-of-court settlements one by one and then entered into licence agreements. While the exact settlement terms are not publicly available, it is likely that the parties would have agreed to an amount close to what was initially imposed by the court as an interim royalty based on Ericsson’s comparable licences with other parties.
Initially, the court asked the opposing parties to pay some fees to Ericsson as an interim arrangement or else face an injunction. The amount of the fee was determined based on comparable licences that Ericsson had entered into with other parties. It is likely that when the matters were settled with Ericsson, the defendants would not have agreed to a fee higher than the amount imposed by the court. This trend indicates that for a licence term to be acceptable – at least in the eyes of the court – non-discriminatory terms are seen to be more crucial in India than fair and reasonable terms. In other words, as long as a patent holder charges a similar licence fee as it has to other licensees, the licence will be acceptable.
Nokia v Oppo
In a subsequent development, Nokia initiated an infringement suit against mobile phone manufacturer Oppo at the Delhi High Court. At the start, Nokia requested that the court pass an interim order directing Oppo to deposit money with the court, claiming that Oppo already admitted its liability for royalties to Nokia, as it was using Nokia’s SEPs. However, the court (in its order dated 17 November 2022) relied upon the parties’ communications to hold that there was no unequivocal admission by Oppo that the subject patents were SEPs or that the royalties sought by Nokia were based on FRAND terms. While refusing to direct Oppo to deposit any amount towards royalty payments, the court gave two reasons:
- Order XXXIX Rule 10 of the Code of Civil Procedure (CPC) requires a “clear, categorical and unequivocal admission” that the defendant is holding monies of the plaintiff, or that certain monies are due from the defendant to the plaintiff; and
- Oppo “contested the case at all levels”.
With regard to the first reason, the court stated:
no such unequivocal admission of liability can be said to exist in the present case … even if the present plaint were to be considered as encompassing the entire SEP portfolio of Nokia, no case for directing interim payment under Order XXXIX Rule 10 of the CPC can be said to exist. The first FRAND license agreement has, admittedly, expired. There has been no consensus, ad idem, between Nokia and Oppo on the terms at which, the agreement is to be extended or continued further. Oppo has, in its communications, clearly stated that it had reservations regarding the reasonability of the terms at which Nokia was seeking to grant a license to Oppo to exploit its patent portfolio and as to whether they were actually FRAND. Oppo has, at all times, reserved its right to question the essentiality of the suit patents, as also the liability of Oppo to pay royalty to Nokia for the exploitation thereof, at any rate.
And, with regard to the second reason, it held that:
in the written statement, filed by way of response to the plaint instituted by Nokia, Oppo has contested Nokia’s case at all levels. It has disputed Nokia’s contention that the suit patents are SEPs, as also that it was exploiting the said suit patents and that the royalty rate at which Nokia was willing to permit such exploitation were FRAND.
The court ultimately opined that these matters would require a trial. In the absence of such a trial, even a prima facie opinion would be “hazardous”, as the present application would require the court to reconvene. The application, under Order XXXIX Rule 10 of the CPC, was dismissed.
The court also made the following observations concerning FRAND terms and the use of SEPs:
- an SEP is a patent without which it would be impossible to work a particular technology – the SEP must therefore adhere to the standard set by standards-setting organisations and adopted by the European Telecommunications Standards Institute;
- an SEP holder is not entitled to an “absolute monopoly” on the SEP, as is the case with other patent holders – it must be willing to allow use of the SEP on a licence basis; and
- the SEP holder must make said licence available on FRAND terms.
Going even further, the court asserted that:
No person who is unwilling to take a license from the holder of a SEP on FRAND terms is entitled to use the SEP. Such a person would be an unwilling licensee, and any such use of the technology contained in the SEP would amount to infringement within the meaning of Section 108 of the Patents Act, 1970. Such a licensee could be injuncted from the use of such patent.
Nokia has filed an appeal against this order, which is pending before a division bench of the Delhi High Court. However, it appears to be the trend in India that most SEP-related cases get are settled out of court, instead of going through a long trial process. This appeal is likely to face the same fate; both Nokia and Oppo are exploring settlement options before the appellate court.
The future of the SEP FRAND landscape in India
As of now, the trend of settling licence terms between SEP holders and mobile manufacturers in India points towards the dominance of non-discriminatory terms. So far both courts and manufacturers have sought comparable licence agreements from SEP holders to eventually settle the licence fees and other terms. The legal landscape in India is still evolving and various bodies are working on guidelines for what fair and reasonable terms actually are, which becomes crucial in scenarios where there are no comparable licences or where SEP holders refuse to reveal them.