The Legal Nature of FRAND Under U.S. Law

Abstract

The legal nature of FRAND in the United States has evolved into a complex, integrated system that includes aspects of patent law, contract law, and antitrust law. A SEP owner who fails to commit to FRAND licensing may potentially incur antitrust liability if a SEP is intentionally concealed during the standard setting process. On the other hand, by making a FRAND declaration, a SEP owner both accepts limits on remedies for infringement of that patent and enters a binding contract in which potential licensees of the patent are third-party beneficiaries entitled to enforce the FRAND commitment. Antitrust law further encourages a SEP owner to honor its FRAND commitment, U.S. antitrust laws may be violated by a false FRAND declaration. Of these FRAND-related claims, contract issues are poised to be most important because they often resolve other claims related to SEPs. Indeed, U.S. courts in FRAND contract cases have both determined global FRAND rates and enjoined SEP owners from pursuing related patent infringement litigation both inside of and outside of the United States. SEP owners and potential licensees therefore may find themselves haled into U.S. courts to resolve global FRAND disputes, and the legal effect of FRAND under U.S. law thus extends well beyond the borders of the United States.