The smartphone wars arms race - FRAND* limitations on patent deployment

Originally published 9 September 2011

Keywords: intellectual property, patent, FRAND patent licences, smartphone,

Summary and Implications

The patent wars raging in the global technology sector show no signs of a ceasefire. If anything, the tempo is increasing. The sector is currently seeing a wave of acquisitions of massive multi-billion dollar patent portfolios covering smartphones and computer tablets, driven by their purchasers' desire to equip themselves with ammunition in the increasingly vicious battle for global supremacy over mobile platforms.

One of the significant features of telecoms patents is the complex interlocking network of technical standards and the availability of FRAND patent licences (i.e. licence terms that are "fair, reasonable and non-discriminatory"). These could have a number of vital strategic implications for the combatants in the current patent wars, which could dramatically re-shape the outcomes and determine the ultimate global victors in the mobile platform wars.

By committing patents to technical standards their patentees are obliged through their obligations to the standards setting organisation (SSO) to licence them on FRAND terms to willing licensees where those patents - or particular claims - are essential to the relevant standard. This enables competitors to win ready access to patentees' standards patents only at the cost of paying a reasonable royalty, leaving the patentees powerless to prevent their competitors from gaining such access. Patentees cannot get injunctions against competitors who are willing licensees of their standards patents. This has forced the battle onto different terrain, as the combatants fight over whether such patents are truly "essential". Patentees will look for grounds to assert that FRAND-based licences are not applicable, and their competitors to counterattack by alleging that non-declared patents should properly be treated as being FRAND-based. The value of patents that are not encumbered by FRAND-based licences is therefore commensurately greater. The same applies to other non-patent IP rights that have the potential to dominate strategic bottlenecks such as the shape and design of smartphones and computer tablets. A major issue between the combatants is likely to be the extent to which a patentee of a FRAND-encumbered patent can use these patents to force its competitor to cross-licence unencumbered patents. The commercial imperative to seek to do so is clear, but this issue remains to be determined by the main Courts around the world. FRAND standards

It is commonplace in many fields of technology – mobile phones included - for SSOs to set technical standards to ensure that different manufacturers' products are compatible. The central importance such standards play in the mobile platform wars is underlined by some of the technologies covered by standards and which will be familiar to every user of a mobile device – GSM, GPRS, EDGE, 3G, and 4G through to the JPEG standard for digital photography if the mobile device is camera-enabled.

When setting a standard the relevant SSO will require industry participants in the...