Licensing Of Standard Essential Patents Research Articles

A FRAND Contractts Intended Third-Party Beneficiary

The FRAND contract gives an implementer the right to obtain an offer to license a portfolio of standard-essential patents (SEPs) on fair, reasonable, and nondiscriminatory (FRAND) terms. By making a FRAND offer, the SEP holder gives the implementer the power to accept and execute that offer in a binding license agreement on FRAND terms. If the implementer rejects the SEP holder’s FRAND offer, either explicitly or by operation of law, the implementer extinguishes its rights as an intended third-party beneficiary of the FRAND contract and thereafter has no rights under the FRAND contract. After the unlicensed implementer has extinguished its rights as a third-party beneficiary, the SEP holder may request and obtain an injunction against the implementer, charge the implementer more than a FRAND royalty, or refuse to license its SEPs to the implementer. The implementer also may not invoke the FRAND contract to demand extraneous license terms. The FRAND contract gives the implementer no more rights to SEPs than what the SEP holder intends to convey to a third-party beneficiary. In particular, there is no evidence that the SEP holder intended to give the implementer the right to demand a la carte licensing of individual SEPs. For a court to construe the FRAND contract otherwise — so as to compel the SEP holder to license its SEPs individually on demand — is to assume that the SEP holder and the SSO would not have cared about the absurdly high transactions costs of licensing that such a contractual provision would cause. The SEP holder, of course, never would have found it commercially reasonable to agree to make that duty part of its FRAND commitment to the SSO. For the same economic reason, the observed norm within a standardized industry such as mobile telecommunications — the usage of trade, in the parlance of contract interpretation — is that SEP holders license their SEPs in portfolios.

An economic perspective of standards and FRAND enforcement in China

China has confronted issues surrounding fair, reasonable and non-discriminatory terms (FRAND) for standard essential patents (SEPs) and has become an important arena for FRAND-related antitrust enforcement and litigation. This article summarizes the key enforcement activities in China to date by the Chinese courts and three antitrust enforcement agencies with regard to FRAND issues. These activities indicate that China’s approach to analysing and enforcing FRAND terms has been under the framework of the abuse of dominance. Chinese authorities’ decisions to date appear to indicate the following logic when deciding the FRAND issues: SEP holders generally possess market dominance in licensing SEPs, and that disputes concerning SEPs licensing terms may be scrutinized for the risks of abuse of market dominance. This abuse may take the form of charging excessive rates, imposing unreasonable licensing terms, or both. They also reflect that Chinese authorities appear to place an emphasis on preserving FRAND commitments, regardless of whether they are requested by a standard setting organization or unilaterally made by an individual company.

Justice Department Agrees IEEE's New RAND Policy Isn't Price Fixing

This column discusses IEEE's recent update to its reasonable and nondiscriminatory (RAND) policy on the licensing of standard-essential patents (SEPs), as well as the Justice Department's announcement that it will not challenge the IEEE proposal.

Standard-Essential Patents (SEPs) and Fair, Reasonable and Non-Discriminatoryy (FRAND) Licensing

FRAND-encumbered SEP owners find themselves in a complex situation because fetters are put on their limited period freedom to exclude others from making, using, selling or offering to sell, and importing the claimed invention in the country of grant. In this paper we discuss some of the issues involved in FRAND-encumbered SEP licensing and their possible solutions. In particular we suggest that SEPs be treated as a separate class of patents of national importance in patent acts for which specific rules are framed for dealing with injunctions; the creation of a SEP tribunal that would decide how best contemporary public interest would be served with minimal FRAND commitments; and government intervention in the form of “march-in” rights on behalf of all those in need of the SEP in question to prevent a potential or real economic crisis from arising due to a lack of sufficient number of licensees or acts of discriminate licensing by SEP owners, to keep the market competitive.

Ten Years of DG Competition Effort to Provide Guidance on the Application of Competition Rules to the Licensing of Standard-Essential Patents: Where Do We Stand?

One of the most intractable competition issues for the European Commission (the “Commission”) over the last ten years has been to define the circumstances in which the licensing conduct or litigation strategy of a standard-essential patent (often referred to as “SEP”) holders amount to an abuse of a dominant position in breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU). This issue has been particularly difficult to handle, not only because of the complex nature of the legal and economic questions it raises, but also because of the significant business issues at stake. Hundreds of millions of dollars may be at stake in licensing negotiations.The enforcement of SEPs has made headlines in the context of the “smartphone war”, where the main device manufacturers (Google Motorola, Samsung, HTC, Nokia, etc.) have been litigating heavily in court. For instance, the patent dispute between Apple and Samsung has generated over 50 lawsuits in a variety of jurisdictions. Some of these manufacturers have also filed competition complaints on both sides of the Atlantic, as well as in other jurisdictions. These complaints have, in turn, triggered investigations into the licensing conduct and litigation strategy of several SEP holders, which will be discussed below.Against this background, the purpose of this paper is to address the competition law issues that may be raised by the licensing conduct and/or enforcement strategy of SEP holders. Section II reviews the Commission’s efforts in recent years to address the competition law concerns raised by SEPs. It will be shown that the Commission has used a variety of approaches to attempt to set some principles regarding the licensing of SEPs. The Commission still needs to create a precedent, which is probably its intention by sending a Statement of Objections to Samsung in December 2012. Section III contains a brief conclusion.