Compulsory licensing of Standard Essential Patents to remedy abuses of dominant position

Abstract

When implementers use Standard Essential Patents (SEPs) without obtaining licenses – because parties cannot agree on royalties –, patent owners are entitled to bring infringement actions against them, seeking prohibitory injunctions and the recall of products. However, as SEP holders gave commitments to grant licenses to third parties on Fair, Reasonable and Non-Discriminatory (FRAND) terms, alleged infringers accuse SEP owners of abusing their dominant positions for bringing the aforementioned actions. Due to an absence of express guidance from Standard Setting Organizations’ patent policies, there was a considerable degree of uncertainty as to the lawfulness of SEP holders’ behaviour. Accordingly, the European Commission – in Samsung and Motorola – and the European Court of Justice (ECJ) – in Huawei v. ZTE – pronounced on the issue. Both treated that conduct as a specific and novel category of abuse within the meaning of Article 102 TFEU. Nevertheless, it should have been treated as a refusal to deal – to grant SEP licenses. In order to do that, it must be argued that bringing those infringement actions by SEP holders constitutes a ‘constructive’ refusal to grant licenses, in consistency with a critical review of IMS Health – issued by the ECJ. In this way, Huawei v. ZTE would be consistent with the ECJ’s case law on refusal to deal. Consequently, the compulsory license would emerge as the most proportionate and necessary remedy to end effectively the infringement of Article 102 TFEU committed by SEP owners. In US, de facto compulsory licenses – ‘ongoing royalties for future infringements’ – are also employed, although to remedy patent infringements. Nevertheless, that divergence between US and EU illustrates that when parties fail to enter into licensing agreements on FRAND terms, the compulsory license might be ‘the tool’ to make SEP licenses available to all stakeholders.