Demystifying the Indian FRAND Regime
National Law Institute University
Today’s liberalized economy survives on the merits of innovation. Naturally, inventors are entitled to protect their creations and enjoy the rewards of their labor. These privileges and rights are recognized through the grant of patents.
Patents are monopoly rights bestowed upon human inventors by governments for a limited period of time. Upon the expiration of this period, this creation can be freely manufactured and sold. The owners are free to license or sell off their patents to third parties. Likewise, non-owners can enter into legally enforced negotiations with the patent-holders to earn access to the patented product.
As the world welcomes newer inventions, it becomes imperative for technical standards to be set in order to ensure consistency in the quality of products. A standard can be defined as a document which provides requirements, specifications, guidelines or characteristics that can be used consistently to ensure that materials, products, processes and services are fit for their purpose. A practice popularized during the industrialization of the West, standardization ensures compatibility and interoperability in the international marketplace.It would be impossible for mobile phone operators, computer manufacturers and even television receivers to function without such interoperability.
Standard Essential Patents are “patents essential to implement a specific industry standard. This means that it is impossible to manufacture standard-compliant products such as smartphones or tablets without using technologies that are covered by one or more standard essential patents (SEPs).” In the case of Microsoft v. Motorola, the Court defined a given patent to be essential to a standard if use of the standard requires infringement of the patent, even if acceptable alternatives of that patent could have been written into the standard.
Standard Setting Organizations (“SSO”) are entrusted with the responsibility of monitoring the interactions between competing companies in arriving at the appropriate technical standards, ensuring transparency and inclusive decision making at every stage. The Institute of Electrical and Electronic Engineers (“IEEE”) and International Telecommunication Union (“ITU”) are prominent SSOs in the cellular and Wi-Fi space.
During the development of standards, SSOs are typically presented with a range of competing technology solutions that can potentially achieve the same result. However, once an SSO chooses a particular technology, the SEP-holder’s “bargaining power surges because a prospective licensee has no alternative to licensing the patent; he is at the patentee’s mercy.” The prima facie anti-competitive connotation of SEP’s cannot be ignored. In order to prevent discriminatory behavior by patent-holders, SEP-holders are permitted to license their patents only on fair, reasonable and non-discriminatory terms (“FRAND”), with the added incentive of immunity from punitive action. It needs to be noted that the SSO is only responsible to ensure that the licensing agreement is negotiated on FRAND terms and not for the ascertainment of the validity of the SEP itself.
The introduction of FRAND licensing has created a whirlwind in patent regimes all over the globe. The ambivalence created by FRAND-encumbered SEP licenses has assumed a geo-economic color as Standard Setting Organizations, patent-holders and the users of the inventions have all become equal stakeholders.
 G. Sidak, Meaning of Royalties, J. of Competition Law & Econ., 931, 1055, (2013).
 Understanding patents, competition and standardization in an interconnected world, ITU Telecommunication Standardization Bureau, (2014), http://www.itu.int/en/ITU-T/ipr/Pages/Understanding-patents,-competition-and-standardization-in-an-interconnected-world.aspx.
 Antitrust decisions on standard essential patents (SEPs) – Motorola Mobility and Samsung Electronics – Frequently asked questions, European Commission, Memo 14-322 (April 29, 2014), http://europa.eu/rapid/press-release_MEMO14-322_en.htm/.
 Microsoft Corp. v. Motorola Inc., 696 F.3d 872 (9th Cir. 2012).
 Apple, Inc. v. Motorola Inc., 869F, Supp.2d, 901, 913 (N.D Ill.2012).