A couple of firsts

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The common factors in two uncommon Indian cases are investigated by Raju Elangovan

Patents have no geographical borders. A decision in a patent litigation in one country will influence other countries, as patents are global subject matter. Patent litigations in India have gained global attention in recent times. There are two important cases. Enough has been written on these cases. However, it is interesting to learn that there are common factors in these uncommon cases.

The first high claim infringement case

On March 19, 2013 the High court of Delhi issued an interim order in the case between Ericsson and an Indian mobile phone company, Micromax. In this case, Ericsson claimed damages of around US $19 million. This is the first infringement case with such a high claim.

It was alleged by Ericsson that Micromax had infringed the Ericssion patents which are Standard Essential Patents for technologies such as GSM and EDGE used in the handsets of Micromax. And that Micromax had not obtained the license from Ericsson, in spite of that company’s efforts in the last couple of years. As an interim relief, the court fixed an interim licensing fee ranging from 1.25% to 2.5% of the sale price of the products, depending on the different categories based on the type of technology allegedly used. The money has to be deposited to the Court. Ericsson was granted permission to verify the consignments along with the customs officials. The order says that both parties should strive to agree a licensing arrangement, at the earliest, on the principle of FRAND and if the negotiation fails, both the parties shall enter mediation before the Court appoints an advocate.

 Micromax has emerged as a leading handset manufacture in India. Next to Samsung, Micromax is the second largest handset company in India with a market share of 15%. It is 12th largest in the global handset market in terms of the number of cell phones it produces.

The first compulsory license case

Another case which got global attention in 2012 was Bayer v Natco Pharma. The complaint was made by Natco Pharma to the Controller of Patents, seeking a direction to Bayer to grant license to Natco to manufacture a cancer treating drug. The issue here was that Natco had been approaching Bayer for license to manufacture the drug and Bayer had not granted the license, but continued to import and sell the drug at an exorbitant cost. Further, Natco complained that though the drug was brought in by Bayer to India three years ago, Bayer failed to manufacture the drug in India. Natco offered the drug at a fraction of the cost of Bayer’s price.

The Controller of patents in India granted a compulsory license in favor of Natco Pharma, invoking a special provision under the Indian Patents Act. Recently, the Indian Patent Appellate Board upheld the controller’s decision on hearing the appeal filed by Bayer. The news is that Bayer was not happy about the decision and decided to appeal to the High Court.

The Indian generic drug manufacturers are aggressively pursuing global business strategies and at the same time the health care business opportunities in India are very big. Hence, the patent holders are vigilantly monitoring infringed of their patents.

The commons and the uncommons

 Both these cases are first of their kind. Ericssion v Micromax is the first high claim damages case in the Indian patent litigation context, while Natco v Bayer is the first compulsory license case.

There are many more common factors. The mobile phone market and the health care market are huge and have great opportunity for businesses. There is an unprecedented growth among the local players both in the pharma and the mobile phone sectors. The local companies are also reaching out to global markets aggressively. The pricing strategy of these local companies is really a great threat to the multinational companies. Both these cases are about infringement of patents.

Another common thing in these cases is licensing. In both these cases, the complainant asked the authority that the other party be required to reach a licensing arrangement with the complainant and the judgment, so far, has been in favor of the complainant. The patent holders were granted remedy by the authorities by the fixing of licensing fees on the FRAND basis.

The one significant uncommon factor in these cases is that in the Bayer case the non-patent holder sought the licensing arrangement from the patent holder, whereas in the Ericsson case, the patent holder sought the licensing arrangement from the non-patent holder. The route taken by Natco pharma was through the special compulsory license clause in the Indian Patent Act on the reason that the interest of the public at large will be served by granting a compulsory license against Bayer (the patent holder). In the Ericsson case, the route taken was through the Standard Essential Patents. Ericsson complained that by using some technology, Micromax had infringed the patents of Ericsson, because these patents are essential to these technologies.

Patent litigation is becoming complex, global and subjected to the rights and the power of many stakeholders such as the public, other players in the industry and governments. The rights granted by the patent to the patent holder will no longer be an absolute right. By this right, a patent holder cannot deny granting a license or cannot decide the license fee just to their liking. We are heading for a situation where in, courts will deliver compelling judgments that the patent holder has to put the patent into use for the common good and for the benefit of the society at large and if a non patent holder can give better benefits like availability, Quality and the Cost of products and services, then the patent holder may not have a choice but to grant a license on FRAND basis.

It will be a tight rope walk for the courts to balance the interest of the patent holder and the interest of the public. There is a responsibility on the part of the non patent holder to monitor the technologies used or likely to be used in their products and a possible complaint of infringement from a patent holder, to avoid litigation. So that the non patent holder can take the initiative to go for licensing arrangements with the patent holder on voluntary basis, which the court may view favorably even in the case of litigation by the patent holder.

Résumé

Raju Elangovan, CEO, E-Merge tech Global Services

Raju is the founder and CEO of E-Merge tech, a premier Patent, Technology and Competitive Intelligent services company. E-Merge tech provides a range of services within these three areas, to global customers. He has more than 25 years of experience in various functions including legal from different industries and held “C” level positions in knowledge services companies.