Published: 12/12/13
In a preliminary opinion directing the opening of an investigation, the Competition Commission of India addressed allegations that Ericsson sought royalties for its FRAND-encumbered SEPs at levels that breached its FRAND commitments. The Commission addressed allegations that the royalties were discriminatory and that they were set on the basis of the price of end-user products rather than the price of the components that implemented the relevant standards. The Commission concluded that “[t]he royalty rates being charged by [Ericsson] had no linkage to patented product, contrary to what is expected from a patent owner holding licences on FRAND terms. The OP [Ericsson] seemed to be acting contrary to the FRAND terms by imposing royalties linked with cost of product of user for its patents.” The Commission found that the setting of the royalty based on the price of the end product violated the FRAND commitment because different end products would be charged different royalty levels “without any contribution to the product of the licensee” that would be charged the higher royalty level. The Commission said that a higher-cost smartphone that was subject to a higher royalty payment than a lower-priced counterpart cost more than its counterpart “due to various other softwares/technical facilities and applications provided by the manufacturer/licensee for which he had to pay royalties/charges to other patent holders/patent developers.” It further concluded that charging different royalties based on differences in the price of end products “is discriminatory and also reflects excessive pricing vis-a-vis high cost phones.”