Industry divided on proposed patent policy for tech sector

A proposed policy that aims to protect essential patents in the technology space has divided industry. Called the Intellectual Rights Policy, it proposes to set a framework for the licensing of essential patents in India.

However, a clause that sets a fixed timeframe for negotiations between the patent owner and potential licensees has upset major technology players, including Microsoft and Intel. On the other hand, patent owners such as Ericsson, Nokia and Qualcomm, have backed the proposed policy.

The key point of difference is a rule which states that the patent owner and the company that wants to build a product using the specific patent will have to reach an agreement on royalty payments in 6-12 months.

The negotiations will have to be conducted under Fair, Reasonable, and Non-Discriminatory (FRAND) terms, which essentially means that the patent owner will broadly offer similar terms to a potential licensee as to any other existing licensee.

Neither party can take legal recourse during the period of the negotiations. If the negotiations fail, then all options will be open to both sides, including seeking injunctions pertaining to alleged infringement.

Companies such as Microsoft want this clause to be dropped on the grounds that it tilts the balance of power in favour of the patent owners. In a letter to the Department of Telecom, Microsoft has said that essential patent owners will be able to file for an injunction even when the terms of the licensing are unreasonable. Such an injunction (given by a court) would mean that the company that is seeking the licence will have to stop selling its products. This could facilitate anti-competitive practices, Microsoft said.

Those backing the policy say that such concerns are unfounded because the negotiations will be under the FRAND terms and, therefore, there is no scope of offering unreasonable terms.

They believe that the policy will, in fact, engender more licensing, leading to more products.

“The big difference this policy will make is that it will bring the licence seeker and the patent owners to the negotiating table with a fixed timeline.

Currently, there are companies that continue to infringe patents for years, which increases litigation,” said an executive backing the policy.

For example, in 2013 Ericsson sued Indian handset firm Micromax for alleged patent infringement — after three years of negotiations. During the negotiations Micromax continued to roll out products using the patents, for which Ericsson claimed infringement. The issue is still in court.

If the proposed policy had already been in place, the negotiations would have been completed in 12 months. Those who oppose the policy say that if it had been in place earlier, Micromax would have had to either reach an agreement with Ericsson or face the possibility of having to pull out its products from the market.

But those who back the policy say that without it there will be an unfair increase in the negotiating power of the patent seeker, who will continue to sell products and delay signing the licence agreement in order to avoid royalty charges.

Senior Department of Telecom officials said that all the companies had agreed to the draft policy’s wording at a July 17 meeting, so the concerns raised by Microsoft in the letter dated August 1 have to be looked into.

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