Ericsson Sues Micromax for Rs 100 cr, Alleges Patent Violation [Prices Likely To Go Up]

micromax_logo.jpgPatent wars are here in India. Telecom giant Ericsson, has sued India’s fastest growing tablet and smartphone maker Micromax for patent infringement, seeking Rs 100 cr in damages after negotiations between the two companies failed to reach a deal on licensing agreement, according to a new report.

The network equipment maker has alleged that Micromax refused to license technology from Ericsson which has patents over innovations in 2G, 3G and EDGE technology, reported The Economic Times.

This is perhaps the first in a series of big ticket patent litigation in the country.

Prices Likely To Be Pushed Up

The suit was filed in the Delhi High Court, which ruled in an interim order that Micromax must pay royalties of 1.25%- 2% in royalties on every phone and tablet it sells until a final settlement in the case is reached. The two firms have been asked to settle on a deal by April 9.

Micromax has already raised prices for its Canvas 2 phones which by a small percentage after they debuted in the market for about Rs 10,000.

Micromax Responds

When asked about the prices, a Micromax spokesperson said

“Micromax is committed to negotiating a FRAND license with Ericsson as has Ericsson undertaken to providing a Fair Reasonable and Non-Discriminatory (FRAND) license to Micromax. Since the matter is pending before the Hon’ble court it would be incorrect for Micromax to make any further statements on the matter”.

Trouble for IPO

For the homegrown device maker looking to give its investors a partial exit through a Rs 426 cr IPO, expensive litigation might become a dampener. Private equity players Sequoia Capital, Sandstone Capital and Madison India Capital had invested in Micromax, which is reviving its IPO plans after a failed attempt last year. Micromax also stands a good chance of attracting patent suits from other global brands which are active in the country.

The India Opportunity & Patent Wars

In the Indian market, Micromax is the second largest smartphone seller after Samsung. According to IDC Asia Pacific Quarterly Mobile Phone Tracker data for 2012 Q4, the India smartphone shipments reached total of 5.4 mn unit shipments in the fourth quarter of 2012, growing 38% over the previous quarter.

In just a few years, Micromax which started out as a small time brand, has captured a large market share in the smartphone and tablet segment in India. However, the company doesn’t have too many patents to its name. In the race to capture the smartphone and tablet market, patents have become an important tool as examples from the US would show.

Patent fights between almost all leading technology companies such as Apple, Google, Samsung, Ericsson and Nokia are common in the US where law suits tend to be of the order of billions of dollars. Large companies usually leverage their patent stockpile and counter sue their rivals to keep themselves from being harmed. However, a player like Micromax, which doesn’t have too many patents to its name, might be left with little choice but to pay up.

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