This article has been written by Debit Das, pursuing the Certificate Course in Intellectual Property Law and Prosecution from LawSikho.
Patent licensing is perhaps the main instrument accessible in the toolbox of proprietors to produce income from their innovations. Notwithstanding, what we need to comprehend is that the entire cycle of looking through an expected licensee, persuading them to purchase/permit our licenses is a long, dynamic and persistent cycle and in this manner, it ought to be done wisely. Patent licensing arrangements/agreements are contracts in which the patent proprietor (the licensor) consents to allow the licensee the option to make, use, sell, as well as import the guaranteed innovation, usually in return for a royalty or other compensation. A patent allowed under the Indian Patents Act 1970, presents restrictive rights to the patentee to keep outsiders from making, utilizing, offering available to be purchased, selling or bringing in the licensed creation to utilize, selling and offering available to be purchased in India without the assent of the patentee until the expiry of the said patent.
This keeps outsiders from financially misusing the licensed development till the time the said patent is in power. Any utilization of the protected creation without the proper assent of patentee will be considered as a demonstration of encroachment or infringement. The demonstration of encroachment or infringement can lead the infringer to inconvenience as the infringer can be sued by the patentee for encroachment with demands for financial remuneration or monetary compensation.
Benefits of patent licensing
- The patent license permits dividing expenses and danger among the parties, where an organization licenses the option to make and sell items; the licensor gets incomes from that authorizing but doesn’t face the challenge of assembling, advancing and selling those items.
- The patent license additionally assists with expanding market infiltration, where a proprietor of an IP right, for example, a patent right, may permit or license another business to sell in territories that the proprietor can’t cover.
What is the dispute about?
The lawful move is made by Ericsson against Samsung for alleged Patent Infringement of the principles for Standard-Essential Patents (SEPs) under Fair, Reasonable, and Non-Discriminatory terms and conditions. The case is tied in with situating for the 5 G standard – and with Samsung and Ericsson, the goliath associations in mobile telecommunications are additionally prepared to cross their swords. Ericsson (Sweden) sued Samsung (South Korea) for disregarding the guidelines for FRAND conditions and Standard-Essential Patents (SEP).
The background to this is the way that, even though there were wide-ranging license agreements for the first norms (2G, 3G and 4G), for the new standard 5G these licenses should be re-evaluated or they will terminate at any rate. In 2019, the proposition thus began dealings for new license contracts. According to Ericsson, the Swedes made a FRAND-consistent proposition, which incorporated a compensation payment. However, Samsung dismissed this proposition.
Samsung, thus, asked that Ericsson consent to a compensation payment in a global cross-license, which the Swedes said was significantly lower than Ericsson’s SEPs under the FRAND arrangements. In this manner, Ericsson against Samsung has just indicated readiness to negotiate. This isn’t inconsequential as to competition law rules. On the face of it, Art. 102 TFEU (with the right to claim for damages and injunctive relief) happens when the client searching for a license makes a proposition as per FRAND yet the patent holder doesn’t consent to it. In this specific situation, the patent holder is additionally foreseen to make a counter-offer.
Swedish technology organization Ericsson filed a claim in a lawsuit against Samsung Electronics Co. Ltd. and Samsung Electronics America Inc. over alleged patent encroachment. In the suit recorded with the U.S. District Court for the Eastern District of Texas, Ericsson is looking for royalty payments from the organizations (Samsung Electronics Co. Ltd. and Samsung Electronics America Inc.) for the utilization of its versatile innovations in Samsung gadgets. Ericsson additionally documented a claim against Samsung in December 2020 over the supposed infringe of legally binding contractual obligations. Ericsson documented a claim against Samsung in the U.S., charging the South Korean electronics giant penetrated authoritative responsibilities and breached contractual commitments. Moreover, it also neglected to haggle in accordance with some basic honesty over patent licensing and related instalments.
Ericsson states Samsung abused its commitments for essential patent licensing under FRAND (Fair, Reasonable and Non-Discriminatory) terms. Ericsson likewise needs an explanatory decision that the Swedish merchant itself conformed and complied to its own authorizing responsibilities and licensing agreements. Ericsson also stated that royalty payments for the intellectual property could be deferred if license renewal dealings don’t finish up before the current one expires.
Those unpaid IP royalties are required to be recovered once an agreement is restored. After considering all things, Ericsson cautioned of expected monetary impacts that it had to face and additionally referred to international conditions influencing handset deals as volumes moved from 4G to 5G. Ericsson estimated that, alongside postponed royalty payments and likely expenses of the case filed, could foresee Ericsson’s operating income endure a shot off between generally $118 million – $177 million a quarter beginning in the primary quarter of 2021.
Ericsson’s grievance, documented in the U.S. District Court for the Eastern District of Texas, says exchanges or negotiations with Samsung slowed down as the seller attempted to arrive at a worldwide cross-license agreement (global cross-license agreement), covering Ericsson and Samsung’s essential patents before a current license expired.
Ericsson and Samsung both empty cash into innovative work for crucial advances that go into worldwide guidelines including 2G, 3G, 4G and now 5G. Those norms are utilized in things like smartphones, other cell phones and cellular framework.
Ericsson stated in its objection that without 4G and 5G technology and Ericsson’s creations consolidated in that, smartphones and other cell phones would not have the option to give the steady on-the-go access to video, real-time media (streaming media), and gaming that buyers anticipate today.
In the FRAND framework, represented by French law, driving innovation and technology organizations like Ericsson, just as Samsung, consent to license their purported “Essential Patents” to others on FRAND footing and gather royalty payments.
Samsung’s cell phones and cell network gear uses Essential Patents of Ericsson, while Ericsson sells equipment for infrastructure that uses Samsung’s, so they’ve had cross-license agreement previously. This happened in 2014 which was a multi-year agreement. That followed a two-year patent disagreement, wherein the two players sued each other before arriving at a settlement bringing about Samsung paying millions to Ericsson.
Ericsson says it started dealings for another license early this time around, in January of 2019. The proposition covered a worldwide cross-license for the two organizations’ essential IP, just as balancing payments from Samsung to Ericsson. The protest expressed that reflecting the parties’ general deals and the estimation of Ericsson’s Essential Patents when contrasted with Samsung’s.
As per the complaint, both parties comprehended that Samsung would owe Ericsson a considerable balancing payment. Ericsson says it has above 54,000 licenses around the world, numerous essentials, and reinvests a significant part of the authorizing royalty payments back into future innovation standards, spending between $4 billion and $5 billion every year on R&D. Samsung dismissed July 20, 2020, offer from Ericsson, as per the protest, reacting two months after the fact with a counter-offer Ericsson attests “was nonsensically low.”
The Swedish seller, Ericsson said at that point that it had sent a proposal for arbitration with a third-party to decide the proper FRAND rate for a global cross-license. Samsung dismissed the arbitration offer in a reply that came 44 days later. Since at that point, dealings have proceeded however without progress, Ericsson asserts. It has become clear that Samsung had no goal of haggling in accordance with some basic honesty towards finishing up a concurrence with Ericsson on FRAND footing and conditions,” rather demanding an underneath reasonable royalty payment. Furthermore, the protest says Samsung has denied Ericsson of its entitlement to an equivalent worldwide license for Samsung’s essential patents on reasonable and sensible terms. Ericsson said that it filed the suit to cure the breaches.
Ericsson sues Samsung for patent infringement in Europe
Ericsson has pressed Samsung in the worldwide licensing and patent dispute between the two organizations. Presently the Swedish cell phone organization is suing Samsung in Germany, Belgium and the Netherlands for the encroachment of cell phone patents. Simultaneously, a US court is negotiating the legitimacy of an anti-suit verdict by a Chinese court for the equal and parallel FRAND proceedings in the US.
Ericsson recorded four cases in Germany against Samsung. Moreover, the Swedish organization sued the Korean rival in Belgium and the Netherlands, each under two patents. In every single European lawsuit, Ericsson claims encroachment of alleged implementation patents. No SEPs are in disputes in Europe, unlike in parallel US proceedings.
In Germany, Ericsson filed four cases with the Regional Court of Düsseldorf (case IDs: 4a O 1/21; 4a O 2/21; 4b O 1/21; 4b O 2/21). These identify with EP 30 08 908, EP 28 19 131 and EP 17 21 324. Ericsson likewise filed one activity/action each in the Mannheim and Munich Regional Courts (case IDs not yet known). In Mannheim, the activity concerns EP 14 65 334, and in Munich EP 22 20 848. Ericsson is looking for injunctive relief, data and damages for each situation.
In the Netherlands, Ericsson hit Samsung with preliminary injunctions (case IDs: C/09/604745 KG ZA 20-1236; C/09/604749 KG ZA 20-1238). From the Regional Court The Hague, Ericsson is claiming cross-border injunctions for the encroachment of licenses EP 28 19 131 and EP 14 65 334. Cross-border injunctions are a forte of the Dutch patent court. It might give a directive for the encroachment of European patents for all nations in which the patent is legitimate.
At the patent court in Brussels, Ericsson filed normal preliminary injunctions dependent on similar patents. Here and in the Netherlands, Ericsson demanded that Samsung should stop the encroachment of the two patents. Between the two companies, the background to the lawsuits is failed license negotiations. A durable cross-licensing between the two organizations has lapsed, with Ericsson and Samsung neglecting to accord another agreement. Most importantly, the amount of payment from Samsung to Ericsson is supposed to be in the contest.
Ericsson and Samsung followed the failed permit negotiations with an outing to court. Ericsson sued Samsung in the District Court for the Eastern District of Texas for disregarding contractual obligations to haggle in compliance with common decency and to license the patent on FRAND standing.
What is FRAND?
FRAND is the abbreviation for fair, reasonable and non-discriminatory. It by and large emerges in antitrust situations where a proprietor of intellectual property rights (IPR) will not allow a license or won’t give a license on FRAND standing.
This framework FRAND, ETSI and SEP was created with the development of mobile communication in the last part of the 80s at the initiation of the European Commission. Since the time 1998, ETSI has gotten benefits together with five other standardization bodies to shape the worldwide third Generation Partnership Project (3GPP), chiefly for the standardization of UMTS. The political activity is that contenders’ innovation should be made accessible to other network companies or cell phone organizations.
Thus, especially in the mobile communication area, standard essential patents (SEPs) are accounted for by the patent owner as indispensable to the standardization association “European Telecommunications Standards Institute” (ETSI). Thus, they set out to license these patents to rivals on fair, reasonable and non-discriminatory (FRAND) terms in concord with ETSI’s Intellectual Property Right (IPR) Directive. This has prompted many licensing contracts in the mobile sector area for the 2G, 3G and 4G standards, just as among Samsung and Ericsson; who have both enrolled several patents identified with mobile telecommunication as SEP with ETSI.
Fizzling or declining to license IPR on FRAND footing can be an encroachment of the EU’s antitrust principles. For instance, the EU Commission as of late sent a statement of objections to Motorola Mobility over its endeavour to authorize a patent injunction against Apple in Germany (that is the Commission has reached the primer resolution that Motorola has to intrude the antitrust guidelines).
The patents being referred to identify with GPRS, a piece of the GSM standard, which is utilized to make cell phone calls. Motorola acknowledged that the patents were standard essential patents and had, along these lines, concurred that they would be authorized to Apple on FRAND footings. Notwithstanding, in 2011 Motorola attempted to take out and authorize an injunction against Apple in Germany dependent on those patents, even in spite of the fact that Apple had said that it was happy to pay royalties, as determined by a German court, to utilize the patented innovation.
Samsung has likewise been the beneficiary of an assertion of complaints from the EU Commission. It looked for injunctions to forestall Apple encroaching patents regardless of Apple evidently being eager to pay a license fee and arrange a license on FRAND terms.
Notwithstanding, what is fair, reasonable and non-discriminatory to one individual, or in one setting, might be unjustifiable, irrational and unfair to other people, or in an alternate setting. This implies that the specific conditions under which a permit or a license will be FRAND agreeable are not a generally acknowledged standard.
Fair: It is for the most part moderately simple to recognize license arrangements that are plainly unjustifiable or unfair. For instance, it is out of line to request from licensee concessions that are autonomous of the license deal (for example purchase agreements, subcontracted production), or to attach the grant of the license to irrelevant commitments. What is fair is abstract and more difficult to characterize.
Reasonable: This is additionally an emotional idea and a subjective concept yet a decent beginning stage for surveying sensibility would be to benchmark against far and wide industry practice.
Non-discriminatory: The main point of contention here is whether all licensees that are in identical conditions are treated similarly. Where licensees are dealt with in an unexpected way, there ought to be target support for doing as such.
Impact of the dispute
The FRAND framework is a basic structure or a building block of a rich environment that has permitted worldwide cellular availability and connectivity to scale to more than 8 billion interoperable connections. It permits admittance to intellectual property, protected innovation, created by contributors like Ericsson, under worldwide mobile standards, on FRAND terms and conditions.
Ericsson reported that long-standing negotiations on the agreement renewals from Samsung and different organizations would make a huge deficiency in the form of loss. As per Ericsson, the current international conditions are affecting handset sales volumes just like the move from 4G to 5G handsets. The organization noticed that this, in mix with deferred royalty payments from unlicensed periods and likely expenses of litigation, may affect Ericsson’s operating income by 1 – 1.5 billion Swedish kronor a quarter starting in the principal quarter 2021.The quarterly loss is without a doubt a huge deal for Ericsson, which is the reason it pushed the claim in a lawsuit against Samsung.
Furthermore, Samsung isn’t the solitary organization that would have its contract ending with the Swedish telecoms organization, implying that Ericsson would have less fallback as it had before from agreements. Additionally, the organization has launched the negotiations since the time of February 2019, in which Samsung has not yet consented to Ericsson’s counter-offer up to this point.
Shares in Swedish telecoms maker Ericsson tumbled after it reported it was suing South Korea’s Samsung, cautioning the debate could see deals endure a shot off over a large portion of a billion dollars in 2021. In the primary hour of trading on the Stockholm stock exchange, Ericsson’s share price was down around seven per cent. The monetary effect of the litigation, combined with postponements to renewals of license agreements and economic situations, could contrarily affect Ericsson’s operating income by somewhere in the range of one and 1.5 billion Swedish kronor ($118-177 million, 98-146 million Euros) each quarter beginning in the main quarter of 2021, the organization said. Ericsson, which is one of the main providers of mobile network gears and equipment close to Finland’s Nokia and China’s Huawei, booked net deals of 227.2 billion kronor in 2019.
Ericsson Wins Temporary Restraining Order over Samsung in ED TX FRAND Litigation
Judge Rodney Gilstrap of the United States Federal District Court for the Eastern District of Texas gave a temporary restraining order against Samsung in a FRAND (fair, reasonable and non-discriminatory licensing rates) case initiated by Ericsson on December 11, 2020. The Order gives Samsung until January 1, 2021, to document any resistance to the continuation of the temporary restraining order, and gives Ericsson until January 5, 2021, to respond if, or more probable when, Samsung, records an objection.
From the beginning to the trained eye this appears to be stunning, yet with no guarantees so regularly the case in the realm of Standard Essential Patents (SEPs) and FRAND, there is considerably more than meets the eye.
For what reason would Judge Gilstrap give Samsung just until January 1 to react or respond? That appears superfluously Grinch-commendable except if he simply needs to demolish whatever New Year festivity COVID-19 will permit Samsung’s lawyers to in any case be appreciating. However, in the event that one sees what incited the issuance of this temporary restraining order one will see that after Ericsson sued Samsung in the Eastern District of Texas, Samsung initiated a secret lawsuit in Wuhan trying to charge the procedures in Judge Gilstrap’s court. Ericsson was given no early notification of the Wuhan case, or the expansive anti-suit injunction mentioned until it was given promptly toward the beginning of the day on Christmas day, December 25, 2020. In this way, Ericsson’s Christmas present from Samsung was an injunction from Wuhan for a procedure they weren’t educated about. Cheerful Christmas!
Samsung’s endeavour to divest Judge Gilstrap of jurisdiction over this case managing worldwide telecommunication innovator that is in a real sense headquartered in Plano, Texas is beyond shocking in any event, for the quarrelsome universe of patent encroachment prosecution. Far and away more terrible, the determination of Wuhan as a setting by Samsung is misleading and deceptive.
Chinese courts can’t deliver reasonable justice in FRAND cases; however, they are desirable over Judge Gilstrap. That is the self intrigued rationale of Samsung.
We should simply recognize what’s going on—anti-lawsuit injunction and anti-injunction lawsuits go crazy in the SEP world. While these are not new procedural instruments, they have become undeniably better known in recent years, especially inside the SEP space, and more especially concerning FRAND licensing disputes in the telecommunications industry. China is the home to a considerable number of these anti-injunction lawsuits, a reality that should astound nobody. China is attempting to intervene with justice around the world.
China has been on a walk toward turning into a worldwide hegemony. Organizations and political pioneers around the globe, blinded by the size of the Chinese economy, have looked the alternate route as they have re-appropriated fabricating, parted with intellectual property to contending Chinese organizations in return for admittance to Chinese business sectors, cut great economic alliance that make inequitable tariffs, choose not to see money control and decline to consider China responsible for dirtying the planet dependent on some misinformed conviction that China is a developing nation like Nigeria, the Philippines, Qatar, or Turkey, when China has a bigger GDP than the United States when adapted to buying influence and will by 2028 have a bigger economy than the United States.
Unfortunately, we clearly can’t look to political pioneers and by far most of the business pioneers to go up against the developing Chinese hegemony. Except if federal district court judges want to become nothing more than overvalued filing clerks and magistrates for the People’s Republic of China, something should be done to address the developing disease of these sorts of an anti-lawsuit injunction. This is maybe the ideal case for Judge Gilstrap to express the self-evident: an innovator headquartered in Texas has a privilege to contest in Texas where they work together and where the respondent likewise works together. There is no authentic, legitimate or even conceivable motivation to permit Wuhan or elsewhere in China, or some other court around the globe, to strip the Eastern District of Texas of its jurisdiction or to displace appropriate venue.
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