Discover How Nokia v. Oppo Redefined FRAND Licensing in India
Introduction
The case of Nokia v Oppo, adjudicated in the Delhi High Court, stands as a significant milestone in the realm of Standard Essential Patents (SEPs) and Fair, Reasonable, and Non-Discriminatory (FRAND) licensing. This comprehensive case study delves into the intricacies of the dispute, analysing the arguments presented by both parties, the court’s ruling, and the far-reaching implications for SEP licensing in India.
Standard Essential Patents (SEPs)
SEPs are patents that protect key technologies needed to put industry standards into practice. These patents are essential for ensuring the compatibility and efficient operation of equipment within a particular technological field. The SEPs in the Nokia v. Oppo case covered innovations essential to 2G, 3G, 4G, and 5G communication standards.
Nokia’s Allegations against Oppo
Nokia, a well-known technology company with SEPs, filed a lawsuit against Oppo, claiming that Oppo was using SEPs without authorization to implement 2G, 3G, 4G, and 5G standards-compliant technologies. Oppo admitted to utilising Nokia’s patented technologies, and Nokia claimed Oppo had a licence in the past, but it had since expired. Nokia further charged Oppo with purposefully avoiding the renewal of the licensing agreement.
Licence negotiations and Oppo’s rebuttals
Oppo presented several counter arguments to refute Nokia’s allegations in response to their claims. Oppo argued that the prior licence agreement covered more expansive patent rights than just the patents at issue in the current dispute. Oppo added that new discussions for a renewed licence agreement were required due to modifications to Nokia’s patent portfolio. Oppo also questioned the legality of the asserted patents and emphasised that SEPs should be subject to FRAND terms. Oppo made it clear that during the negotiations, it had made no explicit admissions regarding any particular royalty value.
The Court’s Ruling on Deposit of Royalty
Nokia’s request for a deposit of royalties from Oppo for using Nokia’s SEPs under Order XXXIX Rule 10 of the CPC was the main point of contention. However, the court denied Nokia’s request for two important reasons:
- Lack of Clear, Categorical, and Unequivocal Admission: The court observed that Oppo had failed to make a straightforward, categorical, and unequivocal admission of liability with respect to the use of SEPs. The application for a royalty deposit became inapplicable due to this lack of a firm admission.
- Lack of FRAND Terms Consensus: The court emphasised that the initial FRAND licence agreement between Nokia and Oppo had expired. The court concluded that it was not necessary to order Oppo to pay any interim royalties because there was no agreement on the terms of a renewed agreement.
Examining SEP Licencing Requirements
The court’s decision shed important light on the distinctive features of SEPs and the responsibilities placed on SEP holders. Notably, SEP owners like Nokia must be willing to grant licences to interested parties on FRAND terms and are not permitted to monopolise their patents. Equally important, prospective licensees must show that they are sincere in their desire to accept licences at FRAND prices.
Important Elements Governing SEPs- The four fold test
The court emphasised important elements to further clarify SEPs:
- Indispensable Technologies: SEPs include patents that protect innovations that are essential to the operation of particular industry standards. These patents are essential for using and implementing the pertinent technology.
- Licencing Requirements: Owners of SEPs are required to be prepared and willing to issue licences to third parties who need the patented technology for their goods or services.
- The FRAND Terms Fair, Reasonable, and Non-Discriminatory licence terms must be provided to ensure that all people have access to the necessary technologies.
- Unwilling Licensees and Infringement: A party that refuses to accept FRAND terms for a licence is referred to as an “unwilling licensee.” It is illegal to use the SEP without a licence, which is considered patent infringement.
The Appeal
Nokia, dissatisfied with the initial court ruling, decided to pursue an appeal against the order. The division bench of the Delhi High Court carefully reviewed the appeal and scrutinized the arguments presented by both Nokia and Oppo, ultimately rejecting the decision of the court of first instance.
Nokia accused Oppo of employing a “holdout” tactic, wherein the licensee avoids negotiations or fails to pay fair royalties for the use of Standard-Essential Patents (SEPs). The division bench thoroughly assessed Nokia’s evidence to ascertain if Oppo’s conduct indeed aligned with a holdout strategy. In response to Oppo’s claim that they had provided adequate security for both SEPs and Non-SEPs, Nokia asserted that the bank guarantees could only be utilized after a Fair, Reasonable, and Non-Discriminatory (FRAND) agreement had been executed.
Nokia Prevails in Appeal Against Oppo’s Holdout Strategy
After considering all aspects, the Delhi High Court issued a pro-tem decision, compelling Oppo to submit an undisclosed sum as a security deposit within four weeks. Though the exact amount remains undisclosed, it corresponds to 23% of the patent license agreement Nokia had with Oppo in 2018.
Furthermore, the court rejected the four-fold test established by the court of first instance. The earlier test had been deemed “unfeasible” as it relied on information that could only be ascertained at the conclusion of adjudications, defeating the purpose of interim reliefs.
The judgment marks a significant victory for Nokia, as the court recognizes the seriousness of Oppo’s alleged holdout strategy and ensures that adequate measures are taken to protect Nokia’s intellectual property rights.
