An Integrated Regulatory and Statutory Framework for Standard-Essential Patents in Implementer-Dominated Emerging Economies

Authored by Sankalp Mirani, LLM, GNLU Gandhinagar, & Reyanshi Bansal, Student, MNLU Mumbai.

Introduction

There is a deep structural imbalance in the world's standard-setting system. Standard-essential patents (SEPs) are patents that cover technologies that are essential for complying with industry standards including 4G, 5G, Wi-Fi, and high-efficiency video coding, and are massively dominated by a handful of multinational companies located in net-exporting, highly developed countries. On the other hand, emerging economies are basically “implementer-dominated” markets. In these countries, the local industry is building, assembling, integrating the software, and distributing the standard-compliant products after the manufacture. This imbalance in intellectual property rights ownership results in significant geopolitical and economic tensions between net-implementer countries (which want to keep device costs low in order to attain digital inclusion) and foreign SEP holders (who want to generate the maximum possible licensing income worldwide by enforcing their patent portfolios). This asymmetry poses a direct challenge for emerging markets such as India, Brazil, Vietnam, and Indonesia, where states have recently been implementing various measures to support their industries. India's flagship Production Linked Incentive (PLI) schemes, for instance, provide cash incentives on incremental sales to local and foreign manufacturers of mobile phones and electronic components, and thus are very sensitive to licensing costs. Cumulative royalties by foreign SEP holders can make it difficult for domestic manufacturing centres to be financially viable if the royalties exceed or equal those incentives provided by states. Moreover, as good connectivity is essential to engage in today's digital economy, high royalties are a regressive tax on consumer devices and are directly counter-productive to public sector commitments to digital inclusion and poverty reduction.

In the past, emerging economies have solved patent issues on a piecemeal and ad hoc basis. Applications are considered individually by the intellectual property offices, valuation issues are difficult to resolve in civil courts, and competition authorities enter the fray only when it becomes an issue of abuse of a dominant position. This uncoordinated approach has resulted in different interpretations of the law and in the possibility of regulatory arbitrage. The gaps in the system are often used by foreign SEP holders to enforce extraterritorial injunctions or engage in forum shopping to enforce rates throughout the world in jurisdictions more favorable to SEP holders, such as in the UK High Court or the Unified Patent Court in Europe.

This article makes the case for moving from a reactive, broken approach towards an integrated regulatory and statutory framework of implementer-dominated emerging economies. Any such kind of framework should integrate three components:

• Improving eligibility requirements and examination practices to stop the granting of “low-quality, overdeclared software patents” that inflate standard-essential portfolios.

• Establishing appropriate, quasi-judicial administrative bodies with an aim to determine fair, reasonable, and non-discriminatory (FRAND) royalty rates with ‘top-down' methods and by means of balanced pro tem security deposits to ensure that market access remains unaffected in the case of disputes.

• Giving competition authorities the authority to consider the strategic use of injunctive relief and forced licensing as an abuse of dominance, thereby curbing patent hold-up.

A unified regulatory framework for the three can provide a stable and lawful framework, balancing legitimate innovator rights and goals of digital inclusion and inclusion of emerging economies, in accordance with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Patentability Reforms and Quality Control for Computer-Related Inventions (CRIs)

The best way to curtail the common patent abuses is to avoid providing low-quality, over-declared patents to begin with. To ensure that patent owners do not find themselves at the margins of the standard process and unable to implement the standard, SDOs rely on patent owners' self-declaration of thousands of patent applications as "potentially essential" to a developing standard, without independent verification of essentiality. Empirical research shows that up to 50% of the self-proclaimed SEPs are either invalid or non-essential or targeted towards trivial software implementations. In developing countries, this "essentiality bloat" results in an artificial taxation of licensing.

Emerging economies have the opportunity to establish strict patentability requirements for CRIs to counter this "bloat". The Indian Patents Act, 1970, provides a specific exception to the patentability of a business or mathematical method, as well as a computer programme per se or an algorithm, in Section 3(k). The meaning of the term per se has been the subject of much debate between innovators and implementers. In July 2025, the Indian Patent Office (CGPDTM) released its Revised Guidelines for Examination of Computer Related Inventions. These guidelines, based on a series of landmark decisions by the Delhi and Madras High Courts, including Ferid Allani v Union of India and Caleb Suresh Motupalli v Controller of Patents, provide a structured and clear approach to computer-related inventions, especially those incorporating Artificial Intelligence (AI), machine learning (ML), or blockchain technology.

According to the 2025 CRI Guidelines, the Indian Patent Office applies an extremely strict "technical contribution" or "technical effect" test:

• Inventions that involve software and/or algorithms, but only use the computer to process data to create a more useful informational output or mathematical result, are barred under Section 3(k) as a computer program or algorithm alone.

• By far the most significant requirement is for a ‘technical effect,’ which means that the computer program, when run on a general-purpose processor, substantially improves the physical performance of the processor itself (the system itself) in a manner that is "technical," and is not "trivial" or "obvious".

• Examiners will consider the substance of the claims instead of the actual form of the writing. Section 3(k) exclusions cannot be avoided by using a "system," "method," or "computer-readable medium" to describe a software algorithm.

Designing the Administrative FRAND Rate-Setting Tribunal (AFT)

Once the standard-essential patents pass the first round of patentability tests, implementers are left with the question of getting a FRAND license. If negotiations fail, parties seek the civil judicial system. Yet, there are many inefficiencies in the judicial rate-setting process. Civil court litigation takes a long time and is costly, with limited economic expertise. Moreover, "judicial imperialism" has become more frequent in developed countries' courts. In cases such as Unwired Planet, the Supreme Court of the United Kingdom ruled that UK courts have jurisdiction to determine global FRAND rates, based on which a local injunction could be issued against domestic manufacturers that refuse to comply with the FRAND rate imposed by the court. In order to regain control and restore economic rationality to the licensing process, implementer-dominated emerging economies should set up a specialized Administrative FRAND Tribunal (AFT).

The AFT should oppose the granting of subjective ‘comparable licenses’ that are a function of the asymmetric bargaining power of SEP holders and that would lead to "royalty stacking." Rather, the Tribunal's statutory guidelines should specify that a Top-Down Methodology should be adopted.

The AFT can use a ‘balanced interim security deposit’ to combat ‘patent hold-out,’ in which an uncooperative implementer delays payment of any royalties. This is in line with the decision of the Delhi High Court in Dolby International AB v Lava International Limited, where the court, instead of stopping the sale of Lava products, asked for a pro tem security deposit while allowing the company to manufacture its products without interruption.

Under the proposed AFT model:

• The AFT will prepare a conservative, preliminary calculation of the royalty rate at the beginning of the rate-setting process.

• The implementer shall make those quarterly payments into an interest-bearing safekeeping account.

• Legally protects the implementer from any domestic civil injunction or customs seizure of standard-compliant components as long as the implementer retains this escrow deposit.

Dynamic Antitrust Oversight as a Safety Valve

Failure to comply with this FRAND commitment, together with the misuse of the monopoly power generated by the standards, constitutes an antitrust violation under competition law. In implementer-dominated emerging economies, competition authorities must recognize that each individual SEP, or a tightly integrated portfolio of SEPs, constitutes a separate relevant economic market. Because a design-around is impossible, the owner of an SEP possesses a 100% market share and holds a dominant position under the law.

A major operational barrier to cohesive antitrust intervention has been jurisdictional conflict between competition authorities and civil courts. This turf war was highlighted in India, where the Supreme Court formally concluded the long-running dispute in Telefonaktiebolaget LM Ericsson v Competition Commission of India.

 Conclusion

For implementer-dominated emerging economies, the standard-essential patent ecosystem has long been a source of economic vulnerability, creating persistent friction between international intellectual property enforcement, national industrial goals, and digital inclusion mandates. The traditional, fragmented approach of relying on generalist courts and reactive antitrust measures has proved inadequate to counter the strategic enforcement practices of multinational patent holders.

This tripartite framework does not expropriate intellectual property; rather, it restores balance to the licensing table. It ensures that standard-essential patent holders receive fair compensation for their genuine, validated technical contributions, while safeguarding domestic manufacturing incentives, preserving consumer device affordability, and supporting digital inclusion across the developing world.