Judicial Determination of FRAND Royalties: the English High Court’s Valuation in Unwired Planet v. Huawei. Moving Away from Mainstream Economic Valuation Approaches? Who Should Determine FRAND Royalties and How? Iudex non Calculat?

Abstract

Connectivity plays a key role in today’s economy and increasingly so as the Internet of Things develops. Standards, as enablers of connectivity, are central to this development. The fifth generation technology standard for cellular networks (5G) is pushing new industries to consider access to standards, including the licensing of standard-essential patents (SEPs), which are patents that need to be accessed for a product to comply with a standard. A predictable and efficient licensing environment is therefore key for companies’ strategies worldwide. To ensure accessibility to standards, some standard setting organisations require SEP holders to commit to license on fair, reasonable and non-discriminatory (FRAND) terms. These terms are subject to different interpretation, which gives rise to legal uncertainty and increased litigation. Despite this, judicial FRAND determination has been rare in Europe. This paper analyses the principles and methods applied by the courts to determine FRAND royalties, with a focus on the valuation methods adopted by Birss J in the landmark English Unwired Planet v. Huawei decision. It argues that the comparables method applied by Birss J is generally in line with mainstream economic valuation approaches and that judicial FRAND royalty determinations benefit the licensing system, albeit methods and access to data, including regarding SEP essentiality, need improvement.