Fair trade watchdog CCI will probe telecom gear firm Ericsson for alleged abuse of its dominant position in charging higher royalty on GSM technology patents, following a complaint by handset maker Micromax .
Competition Commission of India (CCI) has ordered investigation into the matter after finding prima-facie evidence of Telefonaktiebolaget LM Ericsson indulging in unfair trade practices.
Meanwhile, Ericsson has said it would fully co-operate with CCI, which has ordered a probe into the company's alleged unfair trade practices.
"The CCI has now decided to refer the case to the Director General for an in-depth investigation. Ericsson will fully cooperate with the authority in this investigation to reach a fair and reasonable conclusion," Ericsson said in a statement.
"In March 2013, Ericsson sued the Indian company Micromax for patent infringement in Delhi High Court, India. Ericsson had before that made numerous attempts to sign a license agreement with the company on Fair, Reasonable and Non- discriminatory (FRAND) terms. As part of its general defense, Micromax has filed a complaint to the CCI," it noted.
Micromax had complained that Sweden-based Ericsson was demanding unfair, discriminatory and exorbitant royalty for its GSM technology-related patents.
In its order, CCI has said that it is a "fit case for through investigation by the Director General into the allegations made by the informant (Micromax), and violations, if any, of the provisions of the Competition Act".
It is prima facie apparent that Ericsson is dominant in the market of GSM and CDMA (telecom technology standards) in India and holds large number of such patents, said the CCI order dated November 12, but released on Wednesday.
As per the order, Ericsson has 33,000 patents to its credit, with 400 of these granted in India. The company was the largest holder of SEPs (Standard Essential Patents) for mobile communications technologies like 2G as well as 3G and 4G, used mainly used for smartphones and tablets.
The Commission noted that since Ericsson held these SEPs and there was no other alternate technology in the market, the telecom equipment firm "enjoys complete dominance over its present and prospective licensees in the relevant product market".
Micromax said it had received a notice from Ericsson on November 3, 2009 for infringing essential GSM patents of the company.
The Commission observed that allegations regarding royalty rates make it clear that the practices adopted by the Ericsson were discriminatory as well as contrary to FRAND (Fair, Reasonable and Non-Discriminatory) terms.
"The royalty rates being charged by the Opposite Party (Ericsson) had no linkage to patented product, contrary to what is expected from a patent owner holding licences on FRAND terms.
"The Opposite Party seemed to be acting contrary to the FRAND terms by imposing royalties linked with cost of product of user for its patents," the order said.
Meanwhile, Ericsson had filed a civil suit against Micromax for alleged violation of patent rights.
The Commission said that issues raised by Ericsson before the Delhi High Court were in respect of infringement of Intellectual Property Rights (IPR).
"...this Commission has obligation and jurisdiction to visit the issues of competition law. Pendency of a civil suit in High Court does not take away the jurisdiction of the Commission to proceed under the Competition Act," the order said.