As we had reported earlier on this blog, the Controller General has made available the ‘Statements of Working’ or Form 27s filed by all patentees, under S. 146 of the Patent Act, disclosing the extent to which their patents have been worked within the territory of India. The disclosures contained in these statements are useful not only for the purposes of judging the effectiveness of the patent system but also aids in the valuation of patents.
Thanks to the manner in which the information has been put up on the website, it is possible to do a company wise search for the statements filed with the patent office. I did a search for Ericsson’s patents, hoping to come up with the Form 27s for the patents involved in the lawsuit filed by Ericsson against Micromax on March 6, 2013 before the Delhi High Court. (We’ve blogged about it over here and here) Unfortunately, I don’t have access to the patent numbers involved in the litigation, since the Delhi High Court nowadays issues ex-parte interim injunctions in patent infringement cases without even mentioning the patent numbers involved. But here is a random list of Form 27s filed by Ericsson for a few of its Indian patents. I’m presuming that at least some of these patents are involved in the litigation before the Delhi High Court.
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Two observations about these Form 27s filed by Ericsson for some of its 3G patents:
(i) Ericsson does not disclose any of the information required under S. 146, namely the extent to which the patent has been commercially worked – the standard submission by Ericsson in all these Form 27s is as follows: “The said patent is one among the plurality of patents associated with a single product or plurality of products sold and to some extent manufactured by Ericsson in India. It will be really hard to evaluate the financial value of the said patent in isolation because of the said situation. We will try and provide further information on the sales, as specific as we can at any time, if requested by the Controller”.
Well isn’t a request for information under S. 146, specific enough for Ericsson to disclose information? What does Ericsson mean that it will provide the information only on a specific request by the Controller? What kind of company can’t value its own patents?
(ii) Ericsson’s commitment to FRAND licensing – the relevant portion of the Form 27 is as follows – “This patent is essential for a 3rd Generation Partnership Project (3GPP) standard and Ericsson is also, subject to reciprocity, committed to make its standard essential patents available through licensing on fair, reasonable and non-discriminatory (FRAND) terms.” How does Ericsson intend to FRAND licence its patents if it is really hard to evaluate the financial value of the said patent in isolation of the overall product?
The Ericsson-Micromax litigation: As we had reported earlier, the Delhi High Court fixed an interim royalty rate at 2.5% for those Ericsson’s patents used by Micromax. Given the disclosure, or rather lack of disclosure, in the Form 27s filed by Ericsson, it is necessary to ask the Delhi High Court how it gave its stamp of approval to the 2.5% royalty rate proposed by Ericsson on the 19th of March, 2013. Also, please note that there is only a few days of difference in the filing of Form 27 and the lawsuit before the Delhi High Court. The Form 27s, without any information, were filed between the 22nd of March and the 29th of March, 2013 i.e. merely a week after Ericsson suggested the 2.5% royalty rate before the High Court. If Ericsson had enough information to suggest an interim royalty rate to the Delhi High Court, why did it not file the same information before the Patent Office?
An interim injunction is an equitable remedy and in order to seek such a remedy it is of utmost importance that the plaintiff approaches the court with clean hands. Ericsson cannot make one statement to the Delhi High Court and another statement of the Patent Office. It is entirely possible that such conduct would be viewed as inequitable conduct, justifying the setting aside of an interim injunction.
At the same time, the Patent Office must make it a point to fine entities like Ericsson for not filing the relevant information. Foreign companies do not have a right to enter Indian markets, sue Indian companies when they are violating Indian laws. The law provides for a Rs. 10 lakh fine for not filing complete Form 27s with the Patent Office and the Controller General must make it a point to fine Ericsson, for at least the 8 patents involved in the Micromax litigation.
I would be surprised if Micromax has not already raised this issue before both the Delhi High Court and the Patent Office.
I see no reason for the blogger to be so hypersensitive on the Form 27s filed by ericsson. When the blogger postulates "How does Ericsson intend to FRAND licence its patents if it is really hard to evaluate the financial value of the said patent in isolation of the overall product?"
ReplyDeleteForm 27 does not ask to valuate one's patent. It merely asks the revenue and they have given clubbed revenue since to provide revenue from each patent under FRAND will simply be, to put it decently, stupid.
The blogger will do good by not approaching such issues in a biased attitude as is reflected consistently on this blog. I understand that the position of the blog overall is anti-patent but pro-Indian companies when at all patent laws are to be allowed.
I think SpicyIP should review the posts before publishing them. Some of the posts have no logic and are just crap. The present post says that Ericsson should provide the value of the patent in form 27. The patent office is not asking for the value of a patent but the amount of sales involving the patent. In circumstances where multiple patents are used in a product/service, determining the amount of sales corresponding to any one patent is not possible. This is a basic logic. The blogger has not rights to say what rights a foreign company has. It is an humble appeal to all IP practitioners to stop reading this blog as the posts are not genuine and sensible.
ReplyDeleteKrishna
I find it interesting as to how these posts are bringing out such vicious reactions.
ReplyDeleteEven more baffling is the revelation that Form 27 does not require patentees to reveal valuation of their patents. Form 27 requires patentees to reveal the total revenues and total quantity of the product sold - if you can't value a patent with that information there is no way you can calculate a FRAND licensing rate.
As for the personal attacks and jibe, we have a strict editorial policy against allowing such comments and if you're future comments are on these lines, we will not publish them. You can go take out your frustrations on your own blog.
Prashant
There is nothing personal here. Value of a patent is computed on assumptions, I think you should be aware of this. SpicyIP has to grow with the patent fraternity.
ReplyDeleteTrash talking and calling my post "crap" is a sign of growing with the patent fraternity? Who are your clients?
ReplyDeleteAnd why would you calculate the value of a patent on an assumption when you have hard data at hand?
Prashant
I got the following email, with a lot of useful information, from somebody with inside experience in the telecom industry. He wishes to remain anonymous:
ReplyDeleteJust mentioning that Ericsson will give a FRAND license does not explain the entire construct. For example, the total revenue that comes to Ericsson (from FORM 27) is about Rs. 100 Billion. This amount is further divided into three categories - In 2011, networks was 43 Billion, managed services was 22 billion, and multimedia was 38 billion. In 2012, networks was 32 Billion, global services was 22 billion, and support solutions was 41 billion.
There is no mention of handsets into this category. (As a technical fact, both handset and operator need to conform to the same technology - patents for the system to work).
What is not mentioned is that Ericsson acts as a managed services operator (backend, towers, and control systems) for Reliance and Airtel. Both these contracts are worth billions of dollars. Also not mentioned, is that most of Ericsson's patents are actually directed towards a basestation - and Ericsson gets major money from operators.
Second, when Ericsson is ready to give a license on FRAND terms to prospective licensees, what is not mentioned is the rate - why is there secrecy on the rates? As an example of a good licensing practice - see mpegla.com for licensing of any of their portfolios. Everything including the rates, current licensees, mapping of patent to the technology is provided.
Also, as you have mentioned - this FRAND paragraph came in only after Ericsson had launched suit against Micromax.
It would be useful if the editorial policy also extended to ensuring that posts are also free of 'personal attacks and jibe' against certain firms and personal endorsements of certain firms. Balanced analysis without pointless rhetoric is a fundamental signpost of academic maturity. The only thing missing in the post above is the question 'What was Ericsson thinking?"
ReplyDelete