The Challenge of Sanctioning Unfair Royalty Rate by the SEP Holder: ‘When’, ‘How’ and ‘What’

Abstract

The holder of a Standard Essential Patent (SEP) is usually required to license its patent to any licensee on the basis of Fair and Reasonable and Non-Discriminatory (FRAND) terms. In their recent judgments in Unwired Planet and Sisvel v. Haier, the UK Supreme Court and the German Bundesgerichtshof ruled that a ‘range’, rather than a ‘single’ royalty rate, may be considered compatible with the FRAND commitment. On the other hand, a royalty rate ‘beyond the outer boundary of the range’ would not be FRAND. In addition, an ‘unfair’ royalty rate might also be regarded as an abuse of dominant position by the SEP holder, in breach of Article 102(a) Treaty of the Functioning of the European Union (TFEU). The paper analyses whether and under what circumstances Article 102(a) TFEU could be relied on by a competition authority in Europe to sanction a case of ‘unfair’ royalty rate requested by the SEP holder to its licensees. In particular, the paper assesses ‘when’ competition policy should sanction an unfair royalty rate requested by the SEP holder, ‘how’ a competition agency should analyse the case in accordance with the case law of the EU Court of Justice concerning Article 102(a) TFEU and, eventually, ‘what’ remedies the competition authority could adopt. Standard Essential Patent; royalty rate; Fair, Reasonable and Non-Discriminatory terms; unfair pricing; Article 102(a) TFEU; EU Court of Justice; United Brands test; benchmarking methods; efficiency defence; competition law remedies