Welcome to the website of the Geneva Internet Disputes Resolution Policies 1.0 (GIDRP 1.0).
GIDRP 1.0 is a project of the University of Geneva, which offers a set of policy proposals on selected legal topics relating to Internet disputes.
Welcome to the website of the Geneva Internet Disputes Resolution Policies 1.0 (GIDRP 1.0).
GIDRP 1.0 is a project of the University of Geneva, which offers a set of policy proposals on selected legal topics relating to Internet disputes.
The Geneva Internet Dispute Resolution Policies 1.0 (GIDRP 1.0) project has emerged as a result of an international conference that took place at the University of Geneva on 17 – 18 June 2015 at which leading experts presented and discussed selected facets of the numerous legal challenges surrounding Internet-related disputes (www.internet-disputes.ch).
In the months following the conference, a team of researchers from the University of Geneva has taken up the challenging mission to draft detailed policy proposals on pressing issues that can arise in the course of legal disputes relating to the Internet/IT industry. These policy proposals focus on the following four fundamental issues:
The GIDRP 1.0 obviously does not ambition to offer an ultimate and final solution to the legal issues that it addresses. Its objective is to contribute to the global debate and to facilitate the emergence of global standards that shall ensure efficient and equitable justice in the Internet era.
The GIDRP 1.0 is a digital policy project: it is not carved in stone and is not even materialized in any paper publication. The reason is that the GIDRP 1.0 is conceived as a work in progress (more precisely: a policy work in progress), that must be discussed, criticized and improved by a process of broad consultation and inclusive participation.
On this basis, institutions and people are strongly encouraged to share their comments on the GIDPR 1.0 and are also invited to participate with us for the next steps of the project which will hopefully materialize in the issuance of GIDRP 2.0.
Which national courts shall have jurisdiction in Internet-related disputes?
The emergence of the Internet, a borderless and international medium for communication and commerce, has enabled both physical and legal persons to regularly engage in a wide range of activities having a cross-border element. E-commerce has made it easy for companies and consumers alike to order goods and services from businesses located abroad; similarly, the global availability of websites has furthered the reach of torts, such as defamation, privacy offenses and copyright infringements, allowing them to cause harmful effects in multiple jurisdictions at the same time. This begs the question: when a given online contract or tort gives rise to litigation, which courts have jurisdiction to decide?
Questions of jurisdiction have been traditionally answered by the application of principles of international private law. For example, it is acknowledged that jurisdiction may be found, as regards contracts, before the courts located at the place of its performance, and, as regards torts, before those located at the place of the harm committed. The Internet, being a common global space in which acts cannot be attached with certainty to a geographical location, has majorly challenged the functioning of these territorially-bound rules. In that sense, some early writings about this issue have suggested that cyberspace, i.e. the “place” of the Internet, should be considered as a separate sovereign space which should be governed by its own judicial and legal system.
Today, it has come to be accepted that the Internet is subject to the jurisdiction of national courts regarding acts committed there. The current issues are thus more about how to adapt the existing rules of international private law to fit the borderless boundaries of the network; in particular, a common running theme in these discussions concern the required level of contacts that a website should entertain with a particular jurisdiction in order to be fully subject to the jurisdiction of the courts there without causing prejudice to, one the one hand, the principle of foreseeability of the forum, and, on the one hand, and the rights of access to justice.
The topic has very practical implications. From the point of view of owners of websites, jurisdictional rules should be clear enough in order to allow them to expect in which parts of the world they are liable to be sued; from the point of view of users, consumers and tort victims, it is important that they may be able to rely on the jurisdiction of courts that are close to their interests.
The principles listed below have been developed as a response to challenges raised by various areas of Internet law, however they do not apply equally to all of covered subjects. These are:
Internet-specific considerations should only apply if needed
Issue at stake:
Rejection of jurisdiction based on website access
Issue at stake:
Rejection of automatic jurisdiction at the place of the claimant’s domicile or habitual residence
Issue at stake:
Adoption of a targeting test
By “targeting test” it is meant an analysis of whether or not a website directs, or targets, its activity towards the forum.
Regarding contracts, the main use of targeting will arise when considering consumer contracts. In this context, the assessment of targeting is more precise, as it rests on whether the professional knowingly led its activity at the place of the consumer’s domicile.
When it comes to torts, the targeting test should play a role in determining jurisdiction at the place of damages, and would thus replace the accessibility approach seen in both Pinckney and eDate. Regarding personality torts, the test should be construed as striking a balance between, on one hand, the geography of the reputation of the victim and, on the other hand, the foreseeable impact of the offending Internet content. Regarding intellectual property infringements, the targeting analysis should take into account the geographical reach of the intellectual property right in question, and also in light of the remedy sought by the IP holder.
One issue commonly associated with the targeting approach is its vagueness. Indeed, in order for the test to provide certainty when it comes to determining whether or not a given forum is appropriate, it needs to be stated clearly and applied by courts in a cohesive manner.
In order to reach that goal, the following guidelines are submitted:
In order to give weight to this assessment, the following criteria may be used:
In line with the arguments brought forth in Proposal 3, the targeting test analysis should be contrasted against the forum’s general relationship with the dispute. For example, in the case of online defamation, the court situated at the “centre of interests” of the victim should only reject jurisdiction if there is a showing that no direct harm took place there. By contrast, a court situated in a place where the victim has less presence should require a stronger degree of targeting.
Magazine A, which is circulated in the United States, but is also available globally through a website, publishes a defamatory article about person B, an Australian businessman domiciled in the State of Victoria. Because Magazine A’s website rests on a paid subscription model which has deliberately been made available to readers in Victoria, and furthermore because that place is the victim’s centre of interests, the targeting element is fulfilled and jurisdiction of the local courts is appropriate.
Website A is a music streaming platform based in the United States; it is available globally and in particular in Spain. Streaming is free, yet supported by unskippable audio advertisements. Artist B, based in Madrid, recognizes that one of her songs is present on the platform without authorization. Given the global ad-supported business model of Website A, artist B may file a copyright suit before the courts of Madrid, but also before any court in any jurisdiction in which the song has been made available.
Restaurant A is located in France and operates a promotional website available globally, including in Germany. Restaurant B, operating under the same trademarked name which it has registered in its home country, wishes to sue Restaurant A for infringement. Depending on whether the website is available in German, owns a web address ending in .de and/or offers information and promotions targeted to a German audience, jurisdiction may be appropriate in Germany.
How to structure an alternative dispute resolution system for Internet-related disputes?
The rise of social networking platforms and the continued importance of search engines give rise to a high number of potential infringement cases which would involve parties from various jurisdictions around the world.
In addition to issues pertaining to territoriality (see Session 1), traditional dispute resolution mechanisms are unfit to deal with the large number of potential infringements on the Internet (whether related to IP, privacy, personality, or other rights) and may not be easily accessible to the general public.
Alternative dispute resolution mechanisms exist for specific Internet-related disputes, e.g. the UDRP (for domain name disputes), the DMCA’s notice and takedown system (for copyright infringement in the USA), and the EU Online Dispute Resolution for consumers and traders related to goods or services purchased online.
Some operators of the Internet have adopted dispute resolution mechanisms on their own initiative (e.g. Facebook and Twitter for trademark related disputes) or based on legal or judiciary requirements (e.g. Google as regards its “European privacy requests for search removals”). However, these dispute resolution mechanisms remain unclear/opaque – as regards the rules they are based on and the way they are examined by the operators – and may not best serve all the interests at stake.
This proposal for an alternative dispute resolution system for Internet-related disputes (“pADR”) aims at remedying the aforementioned shortcomings by providing a procedural framework and principles, which would be applicable to any kind of Internet-related dispute.
This procedural framework takes into account the two following scenarios:
Scenario 1: the potential infringement is the result of material that was published by a third party on an Internet platform/website that it does not operate (e.g. a content posted by a Facebook user on her Facebook page) or third party material that is directly or indirectly referenced on an Internet platform/website (e.g. the link to a third party website which is referred to on a Google search result page).
Scenario 2: the potential infringement is the result of material that was published on a website by the operator of such website or by any person under such operator’s responsibility (e.g. an article authored by an employee of a journal which is published on the journal’s website).
An overview of the proposed procedural framework is reproduced below.
Comments on the procedural framework proposal:
(1) In case of infringement, a claimant may file a request to the operator of a platform (in scenario 1) or to the Independent Body (in scenario 2), which will be the first entity to decide on an infringement case.
(2) In scenario 1, the claimant, the respondent and, in case of public interest, the Independent Body shall have the right to appeal the decision of the operator of the platform to the Independent Appellate Body.
In scenario 2, the claimant and the respondent shall have the right to appeal to the Independent Appellate Body.
The Independent Appellate Body could be an entity already existing (e.g. the WIPO Mediation & Arbitration Center) or a new entity to be set-up for the purpose of the pADR.
(3) The pADR shall be exclusive of other dispute resolution mechanisms. This means that at the moment when a claimant files a request under the pADR and until the process under the pADR is concluded, such claimant opts in to such exclusive alternative dispute resolution and is thus prevented from bringing the same case before national or regional courts until the pADR procedure is over.
The pADR shall not be mandatory, but rather be an alternative option – for the claimant as well as the respondent and the involved operator, if any – that would be incentivized by the following:
Procedural principles for the pADR
1.1 The pADR shall be accessible financially and procedurally. (Accessibility)
The costs of submitting a request using the pADR shall be low (e.g. USD 5) in order for anyone in the general public to be able to use it.
The pADR shall not be unnecessarily burdensome procedurally to remain accessible to anyone without the help of a legal counsel. In order to simplify the submitting of a request, a model complaint for each kind of claims shall be made available for use by potential claimants. 
1.2 In principle, each party related to a specific case shall have the right to be heard. (Right to be heard)
The parties related to a specific case are (i) the claimant and (ii) the respondent.
As a matter of efficiency, a relatively short deadline shall be set for the respondent to submit a response (e.g. 5 business days).
No further submission exchange shall be possible at the first stage (before the operator of a platform or the Independent Body). At the appeal stage, a second round of submissions shall be requested by the appellant. A relatively short deadline shall be set to both parties in such case (e.g. 5 business days).
In case of failure to meet a submission deadline, the decision-making entity shall be allowed to decide without hearing the respondent or the claimant (in case of further submissions).
During the first stage of the pADR (i.e. until a decision granting the request of the claimant is taken by the operator or the Independent Body), the disputed material or content shall remain available online. During the appeal stage of the pADR, the content shall remain online if the request has been denied or shall remain offline if the request has been granted.
1.3 Each decision-making entity shall decide impartially on the basis of the facts and in accordance with the substantive principles without any restrictions, improper influences, inducements, pressures, threats, or interferences. (Independence)
The operators shall appoint specific personnel for such task which shall be relatively independent (similar to the role and status of a data protection officer as provided under EU law).
The independent body and independent appellate body shall be independent from the operators. However, their funding may partially be based upon contributions by the operators.
1.4 Both the procedural principles and the substantive principles shall be published and made available to the public; in addition, the Independent Body shall have access to all cases’ data and shall regularly and publicly report on such cases. (Transparency)
The decisions would not all be published. At the first level, the decisions of the operators would be published only upon decision of the independent body. The decisions of the independent appellate body would all be published. This distinction allows filtering the decisions not to flood the public with too much information (which would hinder the clarity and transparency of the process).
The Independent Body shall regularly publish a “transparency report” containing statistical/anonym information related to cases decided under the pADR.
Notwithstanding the preceding: (i) decisions pertaining to the “right to be forgotten” or other privacy matters shall in principle be redacted to the extent required to anonymize the claimant before they are made public and (ii) other decisions shall be redacted upon request of the concerned party in order to accommodate its rights/interests.
Substantive rules applicable in the context of the pADR
2.1 A set of substantive rules shall be drafted by “dumbing down” internationally recognized principles (i.e. finding the common denominator).
2.2 The substantive rules shall be different and adapted to each subject matter (e.g. copyright, trademark, personality rights, “right to be forgotten”).
2.3 The same substantive rules shall be applied by all decision-making entities.
How shall disputes about the licensing of Standard Essential Patents (SEP) under Fair, Reasonable and Non-Discriminatory (FRAND) terms be solved?
Standards and standard setting organizations (“SSO”) have always played a key role in the ICT sector. Quite obviously, the selection of a technology as part of a standard generally provides a competitive advantage to its owner, as the technology becomes technically essential in order to implement the standard. In case there is no true alternative standard available on the market, the incorporated technology is not only technically but also commercially essential, providing in substance a dominant position to its owner.
Over the last decade, disputes in the ICT industries have increasingly been centered around requests made by IPR owners whose technology has been incorporated in a standard preventing the use of their rights by third party users (so-called implementers) or claiming allegedly excessive compensation for the use of this technology. Even if such disputes are of civil nature in the first place, competition authorities have increasingly jumped in (often upon request of potential licensees) on the ground that IPR owners are trying to corner the market or getting overly high return in consideration for the use of the technology and, as a consequence, that said IP owners are slowing down the diffusion of technology and preventing effective competition from taking place. Hence, both private and public interests are at stake in modern disputes in the ICT industries.
In order to address these concerns, SSOs have typically adopted IPR policies whose main purpose is to request from IPR owners that they commit ex ante to license their technologies on fair, reasonable and non-discriminatory terms (usually referred to as FRAND or RAND terms in practice) in the event these technologies are incorporated in a standard. From a theoretical perspective, the concept of FRAND terms is relatively easy to grasp. By contrast, the practical determination of what would constitute, for instance, a fair or reasonable royalty for the use of the technology incorporated in a standard is a much more delicate issue.
We believe that disputes in the ICT industries relating to FRAND terms would be more efficiently solved with the ADR mechanism proposed below. This mechanism should not be made mandatory. We rather aim at creating incentives within the mechanism to increase chances of players in the industry adopting it. In addition, the ADR mechanism proposed below aims at taking properly into account competition law issues and, thus, at being approved by competition authorities. As a result, such authorities should have no ground to intervene in disputes relating to FRAND terms. These incentives would be as follows:
For the avoidance of doubt, the purpose of the system would be the efficient resolution of cases and not necessarily the harmonization of laws at a global level.
Links with other sessions:
ADR mechanism for solving disputes relating to FRAND terms
Proposal 1.1: Participation by companies in the standardization process should be conditional upon accepting an ADR procedure in case of future disputes relating to FRAND terms.
Proposal 1.2: The ADR procedure in case of future disputes relating to FRAND terms should be a fast track ADR procedure.
Proposal 1.3: Decisions issued at the end of the ADR procedure should be partially published.
Proposal 1.4: The ADR procedure should be the unique way to solve the legal issues pertaining to these rights and the parties should not be allowed to interfere with this procedure in any manner. In particular, owners of technically essential IPR should not be allowed to seek an injunction from an ordinary court aiming at blocking the use of the technology while the ADR procedure is pending (including in case of an appeal). In addition, the ADR procedure should not offer owners of technically essential IPR the opportunity to seek an injunction aiming at blocking the use of the technology.
Substantive rules applicable in the context of ADR procedures within the meaning of Proposal 1 above
Proposal 2.1: Infringement as well as validity and enforceability of IPRs should be assessed based on the choice of law made by the parties and, absent such choice, on the law with which the case has the strongest connection.
Proposal 2.2: Owners of IPR should be shielded from competition law liability when seeking compensation for the use of their technology, provided however:
Coordination with competition authorities
Proposal 3.1: The fast track ADR procedure described under Proposals 1 and 2 above should be considered as compliant with legitimate requirements of competition law and, therefore, competition authorities should not intervene unless the IPR owner has not complied with one of the alternatives set out in Proposal 2.2.
Proposal 3.2: In the course of the ADR procedure, the arbitration tribunal/the appellate court could seek an opinion – on a no-name basis – from one or several major competition authorities if a question of principle arises.
How shall immunities apply on the Internet?
The emergence of new social facts does not as such render obsolete the existing applicable rules of international law. However, new social facts may give rise to new practices, which becomes rules of international law either through implicit or express consent. For instance, the creation of nuclear weapons after the Geneva Conventions and customary international law did not render obsolete the rules of international humanitarian law. The same goes with the Internet. Neither the development of the Internet nor its increasing pervasiveness in contemporary daily life changes the general regime of international law, including the rules governing the immunities applicable to states and international organizations. As a practical consequence, existing rules of international law, both customary and conventional, applicable to state immunities continue to govern legal relations falling within their scope of application.
A state can therefore invoke its sovereign immunity as a bar to legal proceedings for activities it conducts in it acts in its sovereign capacity. Par in parem non habet imperium. However, when a state acts in its private capacity, engaging in acta iure gestionis, that is to say as a private person, it cannot avail itself of immunities.
State immunity also protects high-ranking state officials under customary international law for their time in office.
Other state officials may enjoy immunities when in mission in foreign states.
Other state agents may enjoy ratione materiae state immunities for acts that they perform in their official capacity.
– State immunities also cover state property ‘affected to a non-commercial purposes’, including their Internet-related components. As such, state properties not affected ‘affected to a non-commercial purposes’, included their Internet-related components, are immune of measures of constraints, such as attachment.
Although new social facts, such as the Internet, do not as such affect the existence of pre-existing normative regimes. However, they engender new issues, especially as to the applicability and the application to them of pre-existing normative regimes, calling therefore for clarifications.
Fostering the respect of foundational principles of international law
Proposal 1.1: State agents do not enjoy immunity for internet-related crimes committed on third states’ territory, except acts committed by military forces in period of armed conflict.
State agents enjoy ratione materiae immunity for state acts, that is to say, acts they perform in their official capacity. As ratione materiae immunity relates to the state act itself, and not to the state agent, a state official can avail himself of such immunity even after their time in office. Exceptionally, however, a state agent may not enjoy immunity for acts committed in her official capacity when such acts are committed in foreign territory. Article 12 of the United Nations Convention on Jurisdictional Immunities of States and their Property, codifying in some respect, what is known as the ‘territorial tort exception’, stipulates:
a State cannot invoke immunity from jurisdiction before a court of another State which is otherwise competent in a proceeding which relates to pecuniary compensation for death or injury to the person, or damage to or loss of tangible property, caused by an act or omission which is alleged to be attributable to the State, if the act or omission occurred in whole or in part in the territory of that other State and if the author of the act or omission was present in that territory at the time of the act or omission. (Emphasis added)
State practice does not unanimously recognize the territorial tort exception.
The difficulties surrounding the ‘territorial tort exception’ to state rationae materiae immunity increase with respect to the Internet for at least one main reason. As much as the Internet reduces time and space, in some cases, it disconnects the place of an action from that of its effects. Concretely, Internet allows infringing another state’s territorial sovereignty and rights without the actor being physically on its territory. Spying, cyber-attacks, and other Internet-related offences do not require a physical presence on a foreign state territory. The separation between the place of an action and the place of its effects raises question on the applicability of the territorial tort exceptions in such circumstances.
We propose that ‘State agents do not enjoy state immunity for Internet-related crimes committed on third states’ territory, except acts committed by military forces in period of armed conflict’.
The controversies surrounding the application of the territorial tort exception to the acts of armed forces abroad in period of armed conflicts justifies the caveat in the proposal in this respect. As mentioned above, the International Court of Justice’s review of state practice considers that, under customary international law, armed forces enjoy immunities in these circumstances.
Proposal 1.2. Protecting the properties of states through immunities under international law
The property under review at this stage is of two types:
Proposal 1.2.1: States domain names are per nature properties used for non-commercial purposes, and as such should enjoy immunities under international law
Under international law, states enjoy immunity for their property used for a ‘non-commercial purposes’. Thus, article 10 of the United Nations Convention on Jurisdictional Immunities of States and Their Property stipulates that:
‘No post-judgment measures of constraint, such as attachment, arrest or execution, against property of a State may be taken in connection with a proceeding before a court of another State unless and except to the extent that: […]
c) it has been established that the property is specifically in use or intended for use by the State for other than government non-commercial purposes and is in the territory of the State of the forum, provided that post-judgment measures of constraint may only be taken against property that has a connection with the entity against which the proceeding was directed.’
International instruments do not as such define what a ‘property’ is for the purposes of state immunities. As a plea of state immunity has to be made before domestic courts and tribunals, any definition of what constitutes a ‘property’ for the purposes of state immunity is to be found in the relevant domestic law on state immunity.
‘The ccTLDs exist only as they are made operational by the ccTLD managers that administer the registries of second level domain names within them and by the parties that cause the ccTLDs to be listed on the root zone file. A ccTLD, like a domain name, cannot be conceptualized apart from the services provided by these parties. The Court cannot order the plaintiffs’ insertion into his arrangement.” 
A better view on this issue would consider that state domain names are ‘properties’ available for attachment under the international law of state immunity, and therefore to be immune of any measure of constraints.
The contracts with the registration authority gave the applicant company, in exchange for paying the domain fees, an open-ended right to use or transfer the domains registered in its name. As a consequence, the applicant could offer to all Internet users entering the domain name in question, for example, advertisements, information or services, possibly in exchange for money, or could sell the right to use the domain to a third party. The exclusive right to use the domains in question thus had an economic value. Having regard to the above criteria, this right therefore constituted a ‘possession’, which the court decisions prohibiting the use of the domains interfered with.
As state ‘property’ under the law of state immunities, domain names are immune against measures of constraints.
Safeguarding the provision of public international services
Proposal 2.1: The domain names of international organizations are ‘properties’ to be protected through immunities
The same reasons justifying the proposal that state domain names are ‘property’ that can be protected through immunities apply mutatis mutandi to the domain names of international organizations.
However, the immunities of international organizations have some singularities:
Proposal 2.2: Entities administering domain names as providers of ‘public international services’ enjoy immunities ratione materiae with respect to these activities
As alluded to above, the domain name system in general serve the function of an ‘address book’ of sorts when considering the infrastructure of the Internet.
The Ben Haim and al. v. Islamic Republic of Iran and al. raised a problem regarding the status of ICANN, as a non-profit association under California law, exercising functions that are critical to the good functioning of the current Internet system.
In the Ben Haim case, claiming that states’ top level domain names are not attachable property avoided that ICANN could be judicially forced to make the ccTLDs at stake available for attachment.
Granting immunities ratione materiae to entities administering TLDs has the advantage of protecting these entities from any judicial intrusion as far as their DNS functions are concerned.
Dear Prof. de Werra and all project members,
My congratulation to the team for sharing the GIDRP 1.0 website and giving us an opportunity to read and comment on your proposal. I am a faculty member in Jindal Global Law School (New Delhi, India) and I have been working in the area of SEP licensing in ICT industry, FRAND terms, and role of competition agencies in these disputes. I wish to comment on topic 3. My response is divided in three parts. Section I presents an overview of the Indian scenario regarding telecom industry and SEP disputes. Section II discusses the substantive issues of seeking injunctions in SEP matters and the role of ADR. Section III concludes my response.
(I) Indian Scenario
The issues in FRAND/SEP litigation came to the forefront in India only in the past few years. Ten years ago, only 12 out of 100 people in India had phone connections. Since then the Indian telecom market has leapfrogged achieving a tele-density of 80% now, and active smartphone subscribers crossing 220 million. One of the main factors for Indian telecom revolution can be mapped to the availability of technologies to indigenous low cost smartphone manufacturers. The dichotomy in the Indian telecom industry is that despite the huge revenue potential due to the growing number of subscribers and penetration of mobile technologies in rural area, the propensity to innovate in mobile communication technologies is abysmally low. In the domestic market, top three Indian manufacturers (Micromax, Intex and Lava) hold over 30% of market share (IDC 2015). However, they do not hold any patents in India on chipsets, processors, communication networks and other core mobile technologies (Contreras and Lakshanay 2016); and they hold only a handful of patents and that too on software related to audio and keyboards. Although Indian firms have design studios, their focus is on hardware development (such as casing, batteries and chargers) and further localisation of components imported from elsewhere. Therefore, the dependence is understandably on more innovative and R&D-intensive firms that have patent portfolios for technological standards such as 3G, 4G and LTE.
There has been a slew of litigations between Indian companies and a dominant SEP holder involving infringement of essential communication patents, injunctive relief and alleged abuse of dominant position. Nine prominent SEP related disputes pertaining to mobile technology patents filed in India. The key interested parties in bringing these cases to court is Swedish multinational corporation Telefonaktiebolaget LM Ericsson (Ericsson) which claims to hold a third of 2G standard essential patents (SEPs) and a quarter of 3G SEPs. The other is US based Vringo Infrastructure Inc.
• (2011) — Ericsson v. Kingtech;
• (2013) — Ericsson v. Micromax; Ericsson v. Gionee; Ericsson v. Intex ;
• (2013 and 2014) — Vringo v. ZTE I & II * (which were later clubbed);
• (2014) – Vringo v. Asus; Vringo v. Nusol (Asus’s distributor in New Delhi)
• (2014) — Ericsson v. Xiaomi;
• (2015) – Ericsson v. iBall*; Ericsson v. Lava.
*Settled out of court. The rest of the suits are sub judice in the Delhi High Court at the time of writing. The primary targets of the abovementioned companies are manufacturers of low-cost mobile phones: Kingtech, Gionee, Xiaomi (Chinese) and, Micromax, Intex, iBall, Lava (Indian).
Homegrown Indian mobile phone sellers, Micromax and Intex, ‘informed’ the Competition Commission of India (CCI) in mid 2013 of anticompetitive practices by Ericsson, which was prima facie found by the commission. This was after the parties individually failed to sign a patent licensing agreement with negotiations spanning 34 years not yielding any result. The most important arguments CCI relied upon were (1) thrusting manufacturers with a NonDisclosure Agreement (NDA), (2) seeking royalties that were not uniform across ‘similarly situated’ players, and (3) contention over place of arbitration in case of dispute. The antitrust watchdog seems to have erred on both counts. It acted in haste by not taking into account the interim arrangement ordered by the Delhi High Court, which held that NDAs are legitimate and sine qua non in every licensing deal, particularly in patent licensing. NDAs become necessary safeguards for any party that is reliant on high-tech inventions and, by extension, on holding, managing or using intellectual property rights embedded in those inventions. NDAs are antecedent to any negotiation process, and are a versatile and valuable tool for both licensor and licensee. During the negotiation, Intex had revealed that it was rather unaware of the infringement and of the underlying patents essential to the functioning of technologies in their devices, such as those that conserve use of bandwidth and enhance speech quality in 2G and 3G enabled smartphones. It sought confidential details of infringing patents, without signing a NDA, to discuss with its vendors in China from whom it was importing the device.
(II) Substantive issues of seeking injunctions in SEP matters and the role of ADR
In cases when a patent owner has a large worldwide portfolio of SEPs, international arbitration on a portfolio basis is likely the most efficient and realistic means of resolving FRAND disputes. Otherwise, the patent owner would be required to file lawsuits around the world to adjudicate royalties on a patent-by-patent basis.Monetary damages are the typical remedy in disputes concerning SEPs. The availability of injunctive relief is an essential remedy. First, FRAND-assured SEP holders need the credible threat of an injunction if they are to recoup the value added by their patents and maintain their incentives to innovate. Second, when an injunction is unavailable, an unscrupulous or judgment-proof infringer can force the SEP holder to accept a below-FRAND rate. Specifically, if the worst penalty an SEP infringer faces is not an injunction but merely paying, after an adjudication, the FRAND royalty it should have agreed to pay when first asked, then reverse holdup and holdout give implementers a profitable way to defer payment—or if they are judgment proof, to avoid payment altogether—and puts SEP holders at a disadvantage that reduces the rewards to, and therefore can only discourage, both innovation and participation in standard setting. Without injunctive relief, holdouts may actually reduce the gains from innovation and standardisation.
FRAND and SEP related cases involve various disciplines and fields of study. For instance, patents bring with them engineering and scientific aspects, determination of royalties bring forth economic and financial concerns and aspects of market dominance and public good bring forth legal and societal concerns. Hence, adjudication of issues would require subject matter experts from various sectors.
A private arbitration process would provide flexibility and means for parties to arbitrate and resolve issues mutually by engaging experts in various subject matters. Judicial or quasi-judicial processes can be burdensome (procedural nature) and time consuming. Therefore, such processes should be sought out as the last resort. Injunctions are universally recognised rights enshrined in Article 47 of the Charter to Fundamental Rights . However, they can potentially restrict competition. Injunction presents two-sided nature of the incentive problem. SEP holders can use injunctions as a tool to coerce implementers, distort licensing negotiations and can restrict competition. On the other hand blanket denial of injunctions would incentivise implementers and would deny SEP holders their basic right to enforce their patent and breach their fundamental right to seek judicial remedy.
Considering the bilateral nature of the bargaining powers, a middle path should be taken to protect the rights of the SEP holders and the implementers. ECJ in Huawei v. ZTE (2015) laid down factors to be satisfied before a SEP holder can seek an injunction:
• SEP holders must provide a written license offer to the implementer, which will include the amount of the royalty and how it is calculated.
• Implementer must diligently respond and provide any counter-offer in good faith.
• If no agreement is reached after a round of offer and counter-offer, parties may by common agreement seek services of a third party to determine licensing royalties.
Seeking injunctions should not be considered per se abusive. Injunctive relief should be available in appropriate cases, such as when the prospective licensee is unwilling or unable to enter into a license on FRAND terms. Courts are fully capable of determining the appropriate remedies for patent infringement. Courts can take into account FRAND obligations wherever appropriate, and can assess facts bearing on whether a SEP holder satisfied its FRAND obligation (e.g., by offering FRAND terms), whether an alleged infringer responded in good faith, and other relevant issues. Deciding such case-specific issues affecting the rights of private parties is precisely the role that courts have filled for centuries. The factors mentioned in Huawei should be considered and if an implementer is found to be unwilling license (i.e. delaying licensing negotiations in bad faith), then injunctions as a remedy should be available for an SEP holder. Further, in a country like India, where IP awareness is still in its infancy and not pervasive, injunctive remedies can act as a deterrent against IP violations, create awareness about IP rights, and provide incentives for firms to invest in R&D, which is critical to make the “Design in India” vision a reality.
The Government of India continues to roll out elaborate plans to boost manufacturing and innovation in India, including in the vital ICT sector, and work towards making India’s IPR regime friendly towards consumers, investors and innovators. Since technological advancement is a proven driver of economic growth, the Government should incentivise innovation to ensure the game-changing government initiatives of ‘Make in India’ and ‘Digital India’ are successful in the long run by offering consumers accessible, affordable and advanced products that have the potential to improve quality of life and capabilities to lead a better life.
Thank you for giving me an opportunity to comment on the wonderful work of GIDRP 1.0, and I look forward to participating in the next steps of the project.
Ashish Bharadwaj, M.Sc LL.M. Ph.D.
Assistant Professor and Assistant Director
Centre for IP and Technology Law, and
Convener of Jindal Initiative on Research in IP & Competition (JIRICO)
Jindal Global Law School (NCR Delhi, India)
http://www.jgu.edu.in/jirico | http://www.jiricoproject.com