The protection of intellectual property is vital to economic growth and global competitiveness. It has major consequences on a country's ability to promote security and stability. Some countries such as China, Russia, Brazil and India are realizing that they cannot sustain an advanced and growing economy without protecting IPR.
Introduction
A Standard Essential Patent (SEP) is a patent that claims an invention that must be used to comply with a standard. Standards frequently make reference to technologies that are protected by patents.
The protection of intellectual property is vital to economic growth and global competitiveness. It has major consequences on a country's ability to promote security and stability. Some countries such as China, Russia, Brazil and India are realizing that they cannot sustain an advanced and growing economy without protecting IPR.
Introduction
A Standard Essential Patent (SEP) is a patent that claims an invention that must be used to comply with a standard. Standards frequently make reference to technologies that are protected by patents.
A standard provides a set of rules, guidelines or characteristics for material, products, processes and services to interoperate. The standard creates a language so that two devices can connect via a common language. Further, a patent that protects technology that is essential to comply with a standard is called a Standard Essential Patent.
There are several Standard Development Organizations in India. It requires years of research and significant financial expenditure to develop technology that may become part of a standard because it is difficult for a technology to be accepted as a part of standard. There is no guarantee that it would be accepted as the process of standardization is a highly competitive process. Studies showed that to create 3G and 4G, companies submitted over 262,773 technical contributions, out of which only 43,917 were approved.
Standardization is a continuous process. Technology companies not only work towards the development of new standards but for improvement of existing standards as well. As a result of such efforts, the numbers of implementers of standards as well as standard compliant products has increased over a period of time.
What is FRAND?
FRAND stands for fair, reasonable, and non-discriminatory. FRAND is about creating the right balance between the interests of users of the technology and that of the technology providers. Thus, at the time of negotiations, interest of both parties (i.e. the patent licensor and licensee) should be considered. The FRAND value should not be so high such that it makes the business of the implementer unsustainable, making it difficult or impossible for the technology provider to invest back in the R&D activities to come up with new technological developments.
FRAND rates are determined by multiple factors. For example, the apportion the patent holder deserves of a reasonable cumulative royalty rate, the conduct of parties and the value of the standardization technology to the end product. The latter is key for IoT.
Role of standard development organization and standard essential patents
International Organization for Standardization defines a formal standard as "a document established by a consensus of subject matter experts and approved by a recognized body that provides guidance on the design, use of performance of materials, products, processes, service systems or persons".
A standard provides a set of rules, guidelines or characteristics for material, products, processes and services to interoperate. The standard creates a language so that two devices can connect via a common language. Further, a patent that protects technology that is essential to comply with a standard is called a Standard Essential Patent.
There are several Standard Development Organizations in India. It requires years of research and significant financial expenditure to develop technology that may become part of a standard because it is difficult for a technology to be accepted as a part of standard. There is no guarantee that it would be accepted as the process of standardization is a highly competitive process. Studies showed that to create 3G and 4G, companies submitted over 262,773 technical contributions, out of which only 43,917 were approved.
Standardization is a continuous process. Technology companies not only work towards the development of new standards but for improvement of existing standards as well. As a result of such efforts, the numbers of implementers of standards as well as standard compliant products has increased over a period of time.
What is FRAND?
FRAND stands for fair, reasonable, and non-discriminatory. FRAND is about creating the right balance between the interests of users of the technology and that of the technology providers. Thus, at the time of negotiations, interest of both parties (i.e. the patent licensor and licensee) should be considered. The FRAND value should not be so high such that it makes the business of the implementer unsustainable, making it difficult or impossible for the technology provider to invest back in the R&D activities to come up with new technological developments.
FRAND rates are determined by multiple factors. For example, the apportion the patent holder deserves of a reasonable cumulative royalty rate, the conduct of parties and the value of the standardization technology to the end product. The latter is key for IoT.
Role of standard development organization and standard essential patents
International Organization for Standardization defines a formal standard as "a document established by a consensus of subject matter experts and approved by a recognized body that provides guidance on the design, use of performance of materials, products, processes, service systems or persons".
The enormous growth of the telecom sector with ever-increasing consumer base for cell phones is a testimony to the fact that technologies are made available largely at resorbable licensing fees. Without FRAND and thus, no return on investment, there would be free riding, where the holders of essential patents would be compelled to stop contributing the result of large R&D efforts to open standardization.
Moreover, there would be a shift towards proprietary technologies that preclude interoperability, efficiency and consumer welfare.
Thus, standard essential patents resulting from extensive R&D efforts form the backbone for technology companies that ensure return on investments and hence a continuous cycle of innovation. As mentioned above, SEPs are patents that claim technologies required to perform given standards. Thus, a standard cannot be implemented by an implementer e.g. device manufacture, etc. without infringing the essential patent.
Further, SDOs require their members to declare those patents and patent applications that are or may become essential and to agree to make those essential patents available on FRAND terms & conditions.
Standardization led to the telecom revolution in India besides spurring competition
Standardization has led to enhanced performance and interoperability and also reduced prices of mobile devices as well as data charges by more than 90% in last 2 decades, leading to immense consumer benefit.
Without any doubt, standardization has enhanced competition among the implementers, i.e. mobile handset manufacturers in all markets, including the Indian market. Back in 1980s, 5 handset players enjoyed 85% of the market. However, due to the adoption of FRAND licensing and a standardization process following the WIPO criteria, the market has opened, removing entry barriers. Today there are 100+ mobile brands selling handsets through both online and offline sales. Increased consumer demand for standard handset, coupled with the availability of standards-essential patents on FRAND terms and conditions, has led to an exponential growth of handset players operating in India, as is evident from the net sales figures and turnover.
Challenges faced in India
For continuous progression of technological growth and effective commercialization of intellectual property (IP), it is important that IP rights are granted in a timely manner without undue delay. Since the shelf life of inventions in the ICT field is low in a fast pace technological advancement environment, the commercial window available for owners of patents is far too low whereas the costs incurred in innovation are far too high. Any undue delay in timely grant of intellectual property rights can be a deterrent and a big discouragement for innovation-oriented companies. The current efforts of government of India in increasing manpower at patent offices by hiring a large pool of examiners is commendable and we are hopeful that the challenges faced at the patent offices would soon be ironed out. Effective enforcement of IP rights in India, which increases the ease of doing business, will play a significant role in attracting more foreign direct investment. Today, enforcement of standard essential patent is, thus, one of the biggest challenges facing the telecom revolution in the country.
In a nutshell, diluting IP regime, by taking away rights of the SEP owner would deter India's objective of being self-reliant rather than being import-reliant with respect to manufacturing business. A balanced eco-system recognizing the need for a timely and fair return on investment through a strong and efficient IP system would, on the other hand, lead to a continued cash outflow in India.
Conclusion
Currently, policies and jurisprudence in India on issues related to SSO IPR policies and FRAND licensing disputes are in formation, and the issues involved at the core of all these matters are currently being debated on a global scale. How India chooses to shape its policies related to IP enforcement and FRAND licensing issues, will be interesting for international dialogue, but more importantly, it would be instrumental in determining India's future in the global wireless value chain.
With the government's initiatives on "Make in India" and "Design in India," it is imperative that the adopted IPR policies are attractive both to implementers and inventors of new technologies, so that local investment in R&D and manufacturing is lucrative, as well as for activities in India to climb further in the value chain towards long-term innovation.
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