Disentangling the FRAND Conundrum

Abstract

Courts, antitrust authorities, and policy makers across the world have been over concerned by holdup risks involving the strategic use of standard essential patents (SEPs). In order to avoid or at least mitigate holdup problems, it has been adopted the view that a fair, reasonable, and non-discriminatory (FRAND) commitment implies a waiver of the right to seek injunctions against infringers. However, contrary to the mainstream belief, there is no empirical evidence of structural and systematic problems of holdup and royalty stacking affecting SEPs licensing. Therefore, there is no convincing reason for laying down an exceptional antitrust treatment for FRAND-encumbered patents. Problems afflicting SEP licensing stems from the lack of contractual or organizational solutions provided by standard setting organizations (SSOs) which exacerbates the risk of strategic behaviors. First and foremost, SSOs should require all SEP owners involved in a standardization process to disclose, ahead of the standard adoption, the most restrictive licensing terms. Secondly, since holdup and royalty stacking problems increase proportionally with the number of SEPs and many patents declared essential by SSOs lack this characteristic, essentiality checks carried out by independent third parties should be imposed to mitigate the risk of over-declaration.