Standard Essential Patents & FRAND in India: Balancing Innovation and Fair Competition

Posted on July 3, 2025 | By Sarangi Legal Team

Overview

In an era dominated by 5G, IoT, AI, and other inter-operable technologies, the ownership and licensing of Standard Essential Patents (SEPs) has become a central legal and economic issue worldwide. SEPs are patents that cover technology mandatory for compliance with industry standards. The ownership of such patents often confers significant market influence, creating the potential for monopolistic behavior if unchecked.

To counter this, SEP holders typically agree to license these patents on FRAND terms—that is, on conditions that are Fair, Reasonable, and Non-Discriminatory. However, the application and enforcement of FRAND commitments, especially in India, has become a complex legal battleground involving competition law, patent law, and evolving judicial trends.

What Makes SEPs Different?

Standard-setting bodies (SSOs), both global and domestic, require companies to disclose patents that may become essential to an adopted standard. Once recognized as a SEP, the patent holder is expected to license it under FRAND conditions.

But here's the catch: what is "fair" or "reasonable" is rarely clear-cut. It varies depending on:

• How royalties are calculated: Should it be based on the full device price or just the core component?
• What constitutes non-discrimination: Should all licensees pay the same, regardless of size or market?
• Whether injunctions should be allowed: Especially against companies willing to negotiate.

In India, the lack of statutory clarity on FRAND licensing has left these questions largely to the courts.

Legal Jurisdiction: Patent Enforcement vs. Market Regulation

Initially, India's Competition Commission (CCI) attempted to intervene in disputes involving SEPs by alleging anti-competitive behavior—especially in cases where patent holders demanded high royalties or offered discriminatory terms. This approach was tested in high-profile disputes like Ericsson v. Micromax and Lava v. Ericsson.

However, a turning point came with a 2023 ruling by the Delhi High Court, which clarified that such licensing disputes fall more squarely within the Patents Act, rather than the Competition Act. This shift narrowed the CCI’s role and reinforced the authority of patent courts to resolve these complex licensing issues.

Ericsson v. Lava (2024): A Landmark for India

In one of India’s most watched SEP disputes, the Delhi High Court delivered a crucial judgment in Ericsson v. Lava in 2024 after nearly a decade of litigation. The court ruled that Lava had not acted as a willing licensee and sided with Ericsson, awarding it substantial damages.

Key takeaways from the case include:

• Introduction of a "Seven Pillars" test for evaluating the novelty of patents.
• A clear two-step infringement analysis—mapping the patent to the standard, and then to the device.
• Rejection of the SSPPU (smallest saleable unit) method in favor of a device-level royalty.
• Adoption of comparable licensing agreements as the benchmark for determining reasonable royalty.
• Lava was ordered to pay INR 2.4 billion, reflecting a 1.05% royalty rate (adjusted slightly due to the invalidation of one patent).

This case marks a significant evolution in how Indian courts interpret and enforce FRAND obligations and is likely to influence future SEP litigation in the country.

Global Challenges: Royalty Games and Over-Declarations

Across jurisdictions, there's growing concern over SEP owners inflating their portfolios by declaring patents as "essential" even when they’re not. This practice leads to:

• Royalty stacking: Multiple SEP holders demand royalties, burdening manufacturers.
• Portfolio padding: Companies exaggerate their patent strength during negotiations.

For India’s fast-growing manufacturing and telecom sectors, such practices pose serious cost and compliance risks. The need for independent patent essentiality assessments and aggregate royalty caps is becoming increasingly urgent.

How Other Countries Handle FRAND

Different legal systems have taken varied approaches:

• The UK and China favor a top-down model—calculating a total royalty for a standard and distributing it among patent holders.
• The US leans toward a bottom-up model, valuing each patent individually.
• The EU discourages injunctions where the licensee is negotiating in good faith.
• China has sometimes used SEP enforcement to support its domestic industries.

These differences create uncertainty for multinational companies and lead to forum shopping, where parties choose jurisdictions likely to favor their case.

India’s Role in the Evolving SEP Landscape

As India continues to emerge as a significant player in global technology and manufacturing, it must adopt a structured and forward-looking approach to managing Standard Essential Patents (SEPs). To address the challenges posed by fragmented enforcement and opaque licensing practices, the country needs to establish independent mechanisms to assess the essentiality of declared patents. This would help prevent portfolio inflation and ensure that only truly essential patents benefit from SEP status. Additionally, creating transparent, publicly accessible databases for FRAND terms and licensing rates would enhance clarity and trust in licensing negotiations. The introduction of cross-border arbitration systems could further streamline dispute resolution and reduce the burden on national courts. To make this framework effective, coordinated action is needed among key regulatory bodies such as the Department for Promotion of Industry and Internal Trade (DPIIT), the Competition Commission of India (CCI), and the Indian Patent Office. Together, these institutions can formulate a coherent national strategy that aligns intellectual property protection with equitable access to innovation.

Conclusion

India is now poised to play a larger role in global patent governance. The courts have begun laying the groundwork with decisions like Ericsson v. Lava, but policy, legislation, and institutional clarity must follow.

Striking the right balance between protecting inventors and ensuring fair market access will determine how inclusive and sustainable India's innovation economy becomes in the years ahead.