Standard Essential Patents Litigation and Abuse of a Dominant Position: The 'FRAND' Defense in the EU Competition Law Context

Abstract

This dissertation first discusses industry standards, defined as any set of technical specifications providing for products’ interoperability. Standards are adopted by standard-setting organizations (i.e. SSOs), gathering market players, competitors included. To respect Article 101 TFEU, the EC requires SSOs to ensure unrestricted participation, transparent and voluntary processes of standard-development, and effective, yet not compulsory, access to the developed standards. Specifically, SSOs’ members are mandated to disclose potentially standard-essential patents (i.e. SEPs), and to commit to license them on fair, reasonable, and non-discriminatory (i.e. FRAND) terms. The FRAND defense, resulting from the CJEU’s Huawei/ZTE preliminary ruling, is then analyzed. The Court admitted that, in the exceptional circumstances of a FRAND-encumbered SEP, injunctions sought by dominant patentees against alleged infringers could be avoided raising a competition law claim of abuse of dominance. Huawei/ZTE overruled the precedent German Orange-Book jurisprudence, which admitted the FRAND defense only whether the SEP-holder refused a license such favorable terms just unlawfully rejectable, plus if the infringer proved that he behaved as if licensed. It was also disavowed the EC’s enforcement approach in Samsung and Motorola, whereby the alleged infringer could successfully raise the FRAND defense just agreeing to be bound by a third party FRAND- determination, even contemporaneously challenging the SEPs in suit. The CJEU, recognizing that the risks of patent-strategic behavior rest on both parties, defined a negotiating framework, which ensures FRAND remuneration to SEP-holders, and FRAND access to standard- implementers, without use of injunctions and of Article 102 TFEU as bargaining leverages. Lastly, as Huawei/ZTE left open FRAND-related issues, further developments are speculated, in particular whether SEP-ownership implies market-dominance, and how FRAND terms should be determined.