ACADEMIC ARTICLE SUMMARY
Licensing Standard Essential Patents with FRAND Commitments: Preparing for 5G Mobile Telecommunications
Article Source: Colorado Technology Law Journal, Vol. 18, pp. 79-159 (2020).
Publication Date:
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ARTICLE SUMMARY
Summary:
As 5G mobile telecommunication technologies develop, some have proposed that courts or administrative agencies should regulate licensing of Standard Essential Patents (SEPs).
POLICY RELEVANCE
Policy Relevance:
Courts should look to industry practice in resolving SEP disputes. Courts should avoid ongoing court supervision of licensing.
KEY TAKEAWAYS
Key Takeaways:
- Generally, SEP holders agree to license SEPs on Fair, Reasonable, and Non-discriminatory (FRAND) terms.
- During standard setting, Standard Setting Organizations (SSOs) build consensus on FRAND commitments, balancing the interests of patent owners and implementers (firms that implement patents in building 5G products and services).
- Some propose that patent licenses be negotiated before standardization, giving implementers more choice among competing technologies; however, SSOs use consensus-building processes like supra-majority voting to choose the best technologies, and commercial patent license negotiations during standard setting would be incompatible with this process.
- Some implementers refuse to negotiate licenses, anticipating that patent holders will fail to assert their rights (“patent holdout”); policies that limit the right of SEP holders to enjoin patent infringement worsen holdout problems.
- Requiring SEP holders to license individual patents to many small component manufacturers rather than licensing patent portfolios to major firms would make negotiations complicated and costly.
- Problems like “patent holdup,” “royalty stacking,” and “patent thickets” rarely occur in practice; FRAND commitments are not intended to address these theoretical issues.
- Courts should avoid regulatory approaches in resolving FRAND disputes.
- Regulatory decrees create an ongoing supervisory relationship between the court and the SEP holder.
- Courts should consider SSO policies, standard industry practice, the common law, and comparable license terms.
- Courts should not impose price caps on royalties, which reduce incentives to innovate.
- Regulatory decrees create an ongoing supervisory relationship between the court and the SEP holder.
- In setting royalties, some assume that a SEP’s value is comparable to that of a hypothetical substitute technology before standardization; this approach reduces incentives to innovate by understating the value that SEPs add to the standard.