Introduction: Collision of Two Worlds

By the end of 2025, the significance of an automobile will be transformed altogether. An automobile is not merely a mechanical assembly of pistons, gears, and steel anymore, but rather a hyper-connected, roving data centre on wheels. From autonomous emergency braking and real-time navigation to Over-the-Air software updates and in-cabin entertainment, modern vehicles rely greatly on cellular standards, including 4G, 5G, and Wi-Fi.

This technological integration has fired off a major legal collision between two industrial giants, namely the Telecommunications Sector, comprising the innovators who build the connectivity standards, and the Automotive Sector, comprising implementers who use these standards. At the heart of this conflict lies the complex and lucrative world of Standard Essential Patents, or SEPs. As this year draws to a close, the Delhi High Court has devised one of the most critical grounds around the world for determining the value of these technologies, with billions of dollars in royalties at stake.

What is SEP? The “Gatekeeper” Patents

To understand the war, one needs to understand the weapon. A Standard Essential Patent, or SEP, is a patent that claims an invention necessary to comply with a technical standard. Unlike a regular patent, where a competitor can invent a “workaround”, an SEP has no alternative. If you want your car to connect to a 5G network, then you need to use the patented technology owned by companies like Nokia, Ericsson, or Qualcomm.

As these patents are unavoidable, they grant immense power to the patent holder. To avoid the misuse of such power, standard-setting organisations, such as ETSI, demand that SEP holders commit to licensing their technologies on FRAND terms:

• Fair: The terms should not be exploitative.

• Reasonable: It should be based on the value of the technology, and not on hold-up value.

• Non-discriminatory: Patent holders cannot charge $5 to Toyota and $50 to Tata Motors for the very same technology.

While FRAND sounds simple in theory, it is an absolute nightmare in practice. “Reasonable” is at the moment the most litigated word in IP law.

Core Conflict: “SSPU” versus “Entire Market Value”

The first point of friction between telecom giants and car manufacturers is, at the moment, not whether they have to pay but how much. That comes back to valuation methodology:

1. “Smallest Salable Patent Practising Unit” (SSPU) Approach:

Automotive firms-the Implementers-insist that royalty should be determined by the component using the technology, usually the TCU or the connectivity chip. These chips cost between 20 and 50 dollars. They also believe it does not make sense to pay a percentage of the full price for the car since the wheel, seats, and engine of the car are not improved by the 5G patent. They push for a “chip level” valuation.

2. The “Entire Market Value Rule” Approach :

The telecom companies, the so-called Innovators, insist that the chip is worthless without the connectivity it enables, and that the intrinsic value of 5G is in the services it unlocks for the driver: safer navigation, streaming, and predictive maintenance. They, therefore, believe the royalty should be based upon the value of the end product, the car, or at least a flat rate per vehicle, reflecting the utility of that car.

The “Avanci” Model: Netflix for Patents?

The frustration of having to negotiate a plethora of bilateral licenses with numerous patent holders led to the development within the industry of so-called Patent Pools, most notably Avanci.

Avanci is an aggregator. It combines thousands of wireless patents from licensors, namely Nokia, Ericsson, and Qualcomm, into one package. Car manufacturers can pay a flat, non-negotiable fee, for example, $15-$20 per vehicle for 4G and more for 5G, to obtain a “one-stop” license for everything in the pool.

In 2025, it gained significant traction. Major global players like BMW, Volkswagen, and Hyundai have signed onto Avanci. However, Indian manufacturers were traditionally quite sceptical. The friction arises because patent pools are “take it or leave it.” Indian implementers often argue that these pool rates are set globally and do not account for the price sensitivity of the Indian market, where a $20 royalty per car eats significantly into the profit margins of a budget hatchback compared to a luxury German sedan.

Shift in Indian Judicial Attitude

For many years, India was regarded as a “defendant-friendly” jurisdiction where the enforcement of patents was slow, and damages were low. However, dramatic changes have taken place in the Delhi High Court during 2024 and 2025, which have made India one of the favourite destinations for SEP litigation.

Two key trends define this shift:

1. Rise of “Pro-Tem” Payment Orders:

In the recent high-profile disputes, Indian courts have been willing to order security deposits “pro tem”, that is, until the conclusion of the trial, which often takes years. This requires the implementer to deposit a substantial amount with the court, as insurance for any damages awarded to the patent holder. Needless to say, this prevents companies from engaging in tactics to delay payment of royalties.

2. Confidentiality Clubs:

SEP litigation necessarily involves extremely sensitive commercial information, patent agreements, royalty rates, and sales figures. In order to balance transparency with secrecy, the Delhi High Court has employed the use of “Confidentiality Clubs.” These legal mechanisms provide lawyers and selected experts access to sensitive documents hidden even from the parties, the clients themselves. This mechanism has smoothed complex trials that earlier stalled due to fear of trade secret leaks.

Why This Matters for the Future?

These SEP disputes will have direct implications for the Indian consumer and economy as we head into 2026.

• Because the courts rule in favour of higher royalty rates based on the entire vehicle value, the cost of entry-level connected cars in India will go up. The licensing cost will be directly passed to the buyer by the manufacturer.
• For the Economy: India wants to be a global manufacturing hub. To get there, it has to respect IP rights if it is to attract foreign technology investments. A strong SEP regime sends a signal to the rest of the world that India is safe for innovation. But if the pendulum were to swing too far, it would overburden domestic manufacturers with exorbitant costs, impeding the local start-up ecosystem.

Conclusion

The “Smartphone on Wheels” era blurred the boundaries of Intellectual Property law. We are moving away from simple infringement suits to complex economic arbitrations regarding the fundamental value of connectivity.

What was earlier a legal niche, the “SEP War”, has now become a critical business risk for every automotive company in India. As the Delhi High Court continues to flesh out the rules on FRAND licensing, the industry will need to be prepared for a future where the invisible network connecting the car becomes as valuable and expensive as the engine under the hood. The message, quite simply, is that the technology is vital, and the rent is payable.

References

1. Intex Technologies (India) Ltd. v. Telefonaktiebolaget LM Ericsson, 2023, Delhi High Court.
2. Nokia Technologies Oy v. Daimler AG (global context of automotive SEPs).
3. InterDigital Technology Corporation v. Xiaomi Corporation, 2021, Delhi High Court.
4. Competition Commission of India, Reports on Standard Essential Patents and FRAND Terms, 2013-2025.
5. J. Gregory Sidak, The Meaning of FRAND, Part II: Injunctions, 11 J. Competition L. & Econ. 201 (2015).
6. Bar & Bench, “The Evolution of Confidentiality Clubs in Indian IP Litigation” (2024).
7. Avanci, Licensing 5G for the Automotive Future (White Paper, 2025).