Global Overview

Standard essential patents and FRAND licensing

Once again this year, much of the activity at the intersection of antitrust and intellectual property law has revolved around the issue of industry standards. Competition authorities recognise that such standards frequently create efficiencies, but remain concerned about potential risks. There is particular focus on standard essential patents (SEPs) and 'patent hold-up' (ie, the prospect of an SEP-holder successfully demanding higher royalty rates or other more favourable terms after a standard is adopted than it could have demanded credibly before a standard is adopted). Standard-setting organisations (SSOs) routinely attempt to mitigate such risks by requiring that SEP-holders agree to license those patents on fair, reasonable and non-discriminatory (FRAND) terms. Failure to meet that obligation has sometimes been deemed a violation of antitrust laws. How to define FRAND and how to assess whether particular licensing terms comply with a FRAND obligation remain a focus of competition authorities and courts around the world.

United States

Starting in November 2017, the leadership of the US Department of Justice's Antitrust Division (DOJ) made a series of statements criticising prior DOJ policy regarding FRAND. Assistant Attorney General Makan Delrahim has now staked out the position that 'antitrust law should not be used as a tool to police FRAND commitments that patentholders unilaterally make to standard setting organisations'. Further, AAG Delrahim has emphasised that he believes that the standardsetting process has inappropriately shifted bargaining leverage from innovators of SEP technology to implementers of that technology and increased the risk of 'patent hold-out', where an implementer refuses to agree to reasonable licence terms demanded by an SEP-holder. Accordingly, AAG Delrahim has announced his intention to focus DOJ antitrust enforcement less on potential 'patent hold-up' and more on 'patent hold-out' by SEP licensees.

Although the Federal Trade Commission's (FTC) leadership have stated publicly that they largely agree with the DOJ's position, the FTC is still concerned with patent hold-up and it continues to litigate its challenge to Qualcomm Inc's SEP-licensing practices. The FTC alleges that Qualcomm has attempted illegally to maintain its monopoly in the sale of baseband processors for mobile handsets by refusing to license its handsets on FRAND terms to all market...

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