Introduction: The Structural Tension in Standardised Technology Markets

Technology innovation in the modern digital economy is deeply dependent on the process of “Standardisation.” Industries such as Telecommunications, Consumer electronics and information technology rely on common technical standards to ensure technical compatibility between products manufactured by different firms. In absence of these standards, it is not possible for devices to interact within a unified technological ecosystem. Standard Essential Patents are commonly found in technologies such as Wi-Fi (IEEE 802.11), USB interfaces, advanced video coding standards (MPEG-4/H.264), 4G LTE Etc.

However, the standardisation process often incorporates patented technologies. If a patented invention becomes indispensible for the implementation of a technical standard, it attains the status of a Standard Essential Patent (SEP). Manufacturers seeking to produce standard compliant products are required to obtain licenses from the holders of such patents, as it is not technically feasible to implement the standard without infringing the patented technology.

This creates a unique legal economic dilemma, while patent law grants exclusive rights upon investors, the essential nature of SEP’s can confer substantial market power upon their holders. This market power may distort licensing negotiations, particularly where implementers have already invested heavily in technologies complaint with the adopted standard. Recognising the risks associated with such market power, standard-setting organisations typically require patent holders participating in standardisation process to commit to licensing their patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms. These commitments are intended to ensure that essential technologies remain accessible to the market participants, while at the same time preserving the incentives for innovation.

Against this backdrop, disputes involving SEPs have increasingly required courts and competition authorities to address complex issues such as FRAND royalty determination, the availability of injunctive relief and the possibility that SEP enforcement may amount to abuse of dominance under competition law.

This article examines the evolving legal framework governing SEP’s and FRAND licensing, with particular emphasis on the Indian experience.

Institutional Architecture of SEP Licensing

The legal and economic challenges associated with standard essential Patents cannot be understood without examining the institutional framework through which technological standards are developed and implemented. This framework operated through the interaction of four core elements: “Technical Standards”, “Standard Setting Organisations (SSO’s)”, “Standard essential Patents (SEP’s)” and “FRAND Licensing commitments”

A. Technical standards ~ A standard refers to 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. In industries characterised by complex technological systems particularly telecommunications and information technology these standards play a crucial coordination function by allowing devices produced my multiple manufacturers to operate within a shared technological framework.

B. Standard Setting Organisations (SSO’s) ~ A Standard Setting Organization (SSO) is primarily engaged in activities such as developing, coordinating, promulgating, revising, amending, reissuing, interpreting, or otherwise maintaining hundreds of thousands of standards applicable to a wide base of users outside the standards developing organization. It aims to generate the acceptance or proliferation of such new standards-based technologies, products or services. Prominent examples of such standard-setting organisations include the European Telecommunications Standard Institute, Institute of Electronics Engineers and the International Telecommunications Union, which plays a significant role in developing globally adapted technological standards.

C. Standard Essential Patent ~ A Standard Essential Patent refers to a patent that protects technology which must necessarily be used in order to implement a particular technical standard. The Washington District Court in Microsoft Corp. v. Motorola Mobility, defined SEP, as a “given patent is 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. A patent is also essential if the patent only reads onto an optional portion of the standard. Thus, it is impossible to manufacture standard-compliant products without using technologies covered by one or more SEPs.”

D. FRAND Licensing Commitments ~ In order to mitigate the risks associated with the market power conferred by SEP’s, standard-setting organisations require patent holders participating in the standardisation process to undertake FRAUD licensing commitments. FRAND refers to the obligations of SEP holders to license their patents on FRAND Terms. These commitments aim to ensure that essential technologies remain assessable to all market participants’ while still allowing patent holders to obtain appropriate remuneration for their innovations.

Competition Law concerns in SEP Licensing

Once a standard becomes widely adopted, manufacturers seeking to produce standard-compliant products become dependent on access to SEP technologies. The structural dependence may create opportunities for the exercise of market power by Patent holders. Three interrelated issues have emerged as central to Competition Law analysis in SEP disputes: “Patent Hold-Up”, “Royalty Stacking” and the “Strategic use of Injunctions”

One of the most widely discussed concerns in the SEP is the risk of Patent hold up. This phenomenon occurs when the owner of the standard essential patent exploits the industry’s reliance on a standard by demanding excessive royalties or imposing onerous licensing conditions after the standard has already been adopted. SEP holder secures a higher position in the market and has the capacity to bargain as there are not many alternatives of the same technology available to the licensee. Instead of incurring the cost of switching and delaying the manufacturing process of the product the implementer agrees to pay the unreasonable amount of royalty demanded by the patentee. The adoption of FRAND licensing commitments by standard setting organisations is therefore intended to mitigate the risk of post-standardisation opportunism by ensuring that essential technologies remain accessible to meet participants.

Another competition concern frequently associated with SEP licensing is the problem of Royalty stacking. Modern technological standards particularly in sectors such as telecommunications often incorporate numerous patented technologies owned by multiple firms. Implementers seeking to manufacture standard-compliant products must therefore obtain licences from several SEP holders. While individual licensing fees may appear reasonable in isolation, the cumulative effect of multiple royalty demands can significantly increase the overall cost of manufacturing standard compliant products. Investigations in cases such as Ericsson vs. Micromax and Intex vs. Ericsson revealed regulatory concerns regarding excessive pricing and cumulative royalty burdens in SEP licensing.

Competition concerns have also arisen in relation to the strategic use of Injunctions preventing the manufacture and sale of infringing products. However, the use of injunctions in the context of SEP’s has raised concerns that such remedies may be employed as a bargaining tool during licensing negotiations.

Because implementers cannot realistically avoid using essential technologies once a standard has been adopted, the threat of an injunction may place significant pressure on licensees to accept licensing terms that may not reflect FRAND obligations. Competition authorities have therefore increasingly examined whether the pursuit of injunctive relief by SEP holders against willing licensees constitute anti-competitive conduct.

Competition Law and SEP Enforcement

Unlike several jurisdictions where SEP disputed have primarily been addressed within the contours of Patent law, India has witnessed a distinctive dual track approach, marked by significant intervention from competition authorities alongside patent courts. This has resulted in a uniquely layered jurisprudence, where issues of patent enforcement, licensing conduct and market power are examined through overlapping legal frameworks.

The entry point of SEP-Competition Law interface in India can be traced to Micromax Informatics Limited vs. Telefonaktiebolaget LM Ericsson, where the informant contended that Ericsson, a dominant holder of GSM-related SEPs, imposed excessive and discriminatory royalty rates, calculated as a percentage of the entire handset value rather than the value attributable to the patented technology. The CCI, prima facie, found merit in these allegations and directed an investigation under Section 26(1) read with Section 4 of the Competition Act, 2002.

This decision marked the first major instance in which SEP Licensing practices which were traditionally confined to private patent enforcement were subjected to antitrust scrutiny.

Subsequent litigation in Intex Technologies (India) Ltd v Telefonaktiebolaget LM Ericsson, where similar allegations of excessive royalty demands and refusal to licence on FRAND terms were examined. Once again, the CCI found prima facei evidence suggesting that Ericsson’s conduct may constitute an abuse of dominant position. However, the proceedings soon gave rise to jurisdictional conflict between CCI and Delhi HC. Ericsson challenged the CCI’s investigation before the Delhi, arguing that disputes relating to patent licensing should fall exclusively within the domain of civil courts exercising jurisdiction under patent law. The Delhi HC subsequently stayed the CCI’s investigation, thereby resulting in parallel proceedings and creating doctrinal ambiguity regarding the respective roles of competition authorities and patent courts.

Further, in the other orders that have been passed by the commission, reliance was placed on the decision of the single judge of Delhi High Court in Telefonaktiebolaget LM Ericsson (Publ) v. Competition Commission of India, which held that there was no conflict between the Competition Act, 2002 and the patents Act, 1970 and that the jurisdiction of the Competition Commission to entertain complaints alleging abuse of dominance in respect of patent rights could not be excluded. However the position was subsequently overturned by the Division Bench in Telefonaktiebolaget LM Ericsson (Publ) v. Competition Commission of India, stating that Patents Act, 1970 constitutes a special and self-contained code governing patent licensing and therefore in matters relating to the same, it will prevail over the Competition Law, thereby limiting the role of Competition authorities in SEP disputes.

This jurisdictional overlap has since become a defining feature of SEP litigation in India, reflecting an unresolved tension between ex post competition enforcement and ex patent rights adjudication. Simultaneously, Indian courts began developing independent patent side jurisprudence on SEP’s. In Telefonaktiebolaget LM Ericsson v Xiaomi Technology & Ors , the Delhi HC granted interim injunction restraining the sale and import of allegedly infringing devices, subject to limited crave-outs. The case highlighted the increasing willingness of Indian courts to grant injunctive relief in SEP disputes, while also exposing complexities arising from multi layered licensing chains, particularly where component suppliers such as Qulcomm were already licensed.

A significant doctrinal milestone was reached in Koninklijke Philips Electronics NV v Rajesh Bansal, which constituted one of the first post-trial judgements on SEP’s in India. The Delhi HC recognised the essentiality of Philip’s DVD related patents and held that the manufacture of standard-compliant devices without license amounted to infringement. The court first affirmed that royalty determination must align not only with FRAND principles but also with the incremental value of patented technology, thereby implicitly rejecting arbitrary or inflated royalty benchmarks.

More recently the jurisdictional conflict between Patent Law and Competition Law in India has been most prominently examined in Lava International Ltd. v. Telefonaktiebolaget LM Ericsson, where the Delhi HC held that lava had infringed Ericsson’s SEP’s relating to 2G and 3G telecommunications standards and awarded damages exceeding ₹ 244 crore, making one of the most significant SEP rulings in India. The Court clarified the hierarchy between the two legal regimes, observing that the Patents Act, 1970 constitutes a special statute governing the enforcement of Patent rights. It was held that issues relating to Patent Licensing and infringement fall primarily within the domain of Patent Law. Thereby limiting the role of CCI in examining SEP-related disputes. This reasoning reflects a judicial preference for addressing FRAND and licensing issues within the patent framework rather than antitrust intervention.

This decision was subsequently challenged before the Supreme Court of India by CCI; however, the Court declined to interfere while expressly leaving the broader question of jurisdiction open. The result is a state of doctrinal uncertainty, where patent law presently enjoys practical primacy, yet the possibility of competition law scrutiny remains unresolved.

Taken together, these cases demonstrate the gradual evolution of SEP jurisprudence in India. While competition authorities have sought to scrutinise licensing practices through antitrust law, patent courts have simultaneously addressed issues relating to patent validity, infringement and licensing obligations, resulting in Fragmented dispute resolution and inconsistent regulatory approaches.

Reconciling Patent Rights and Competition Law in India : Towards a Coherent SEP

Framework

The intersection between intellectual property rights and competition law presents a complex regulatory challenge, as patent exclusivity may conflict with competition law and distorts market competition. In the context of Standard Essential Patents (SEPs), this tension becomes particularly pronounced because patented technologies become indispensable for the implementation of industry standards.

One of the most contested issues in SEP disputes concerns the determination of FRAND royalty rates. Indian litigation has revealed disagreements regarding the appropriate basis for calculating royalties. In several disputes involving telecommunications technologies, SEP holders calculated royalties as a percentage of the entire value of the end product, such as a smartphone, rather than the value attributable to the patented component. Critics argue that such approaches may artificially inflate licensing fees and distort competition in downstream markets.

International scholarship has suggested alternative approaches to FRAND royalty determination. These include the Smallest Saleable Patent Practising Unit (SSPPU) methodology and the top-down royalty allocation approach, both of which attempt to ensure that royalties reflect the actual contribution of the patented technology to the final product. However, the absence of clear regulatory guidance in India continues to generate uncertainty for both SEP holders and technology implementers.

Another unresolved issue concerns the role of the Competition Commission of India (CCI) in regulating SEP licensing practices. While competition law oversight may be necessary to prevent abuse of dominance, excessive regulatory intervention may risk undermining incentives for innovation. Scholars have therefore emphasised the need for a coordinated regulatory framework involving patent courts, competition authorities and sectoral regulators, supported by clearer FRAND licensing guidelines and specialised dispute-resolution mechanisms.

The Way Forward

Ultimately, the regulation of SEPs in India requires a careful balancing of competing policy considerations. Excessive restrictions on SEP enforcement may weaken incentives for technological innovation and reduce the willingness of firms to contribute patented technologies to standard-setting processes. Conversely, insufficient regulatory oversight may allow SEP holders to exploit the market power created by technological standards.

A balanced approach should therefore seek to promote transparent licensing negotiations, consistent FRAND interpretations, and institutional coordination between courts and competition authorities. By clarifying the legal principles governing SEP licensing, Indian regulators and courts can ensure that the standardisation process continues to foster both innovation and competitive market outcomes.

Author :- Akanksha, in case of any query, contact us at Global Patent Filing or write back us via email at support@globalpatentfiling.com.