Royalty issue: DoT drops licensing agreement clause

The Department of Telecom has dropped a controversial clause in the proposed intellectual rights policy that would have made it mandatory for companies such as Micromax and Karbonn to ink a royalty payment agreement with owners of essential patents, within a fixed time frame.

The proposed policy, in its initial draft, had stated that companies seeking patents would have to negotiate an agreement with innovator companies within 6-12 months, and if the discussions failed, the patent owner could take legal action.

The proposal was backed by the likes of Ericsson and Qualcomm as they own a significant number of patents in the telecom space. But other technology firms, including Microsoft, Intel and the Indian outfits, opposed the move on grounds that it was restrictive and against the objective of the ‘Make in India’ project.

Ericsson-Micromax issue 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 was finally settled in court this month with Micromax being asked to pay a royalty of 1 per cent of the selling price.

If the proposed policy had been implemented, Micromax would have had to negotiate with Ericsson or withdraw its product within a year.

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 a licence agreement to avoid royalty charges.

The Department of Telecom has, however, decided that since essential patents are already protected by the Patents Act, there was no need to make provisions specific to the telecom technology sector.