Immaterialgüter- und Wettbewerbsrecht

Interpreting Non-Discrimination in the Context of FRAND Licensing

Standard setting organizations (SSOs) require their members to license standard essential patents (SEPs) on fair, reasonable, and non-discriminatory (FRAND) terms. The difficulty to interpret the meaning of FRAND derives from the innate incompleteness of the FRAND commitment as a binding contract.

Last Update: 19.12.19

Fundamentally, the difficulty arises due to the complex task to solve the puzzle of “reasonable royalty” to determine whether a standard implementer negotiates with bad faith and forces a SEP holder to accept “unreasonably low” royalty rate. Subsequently, the more complex task is to determine the conditions of similarly-situated licensees to satisfy the non-discrimination requirement of the FRAND commitment.
Non-discrimination works as the general principle, value, and aim that corresponds to other important obligations of EU institutional values. This principle emphasizes three fundamental elements: difference, similarity and justification. Non-discrimination appears in other fields of law, for example, constitutional and employment law.
Previous academic inquiry to the non-discrimination prong of FRAND centers around two issues: First, whether it helps to achieve the openness aim of technological standardization; secondly, whether it means a SEP holder should grant licensees a uniform FRAND rate.
The first issue directs thinkers to deem that implementers should have access to FRAND-encumbered technologies. Under the premise that SSOs encourage adoption of FRAND-encumbered technologies to build more products, some consider that the goal of the FRAND commitment is to spur widespread adoption. Still, SEP holders can prevent market entrants by exercising control over unauthorized production and sales. Particularly, there are real cases in which SEP owners deny access to rivals and downstream implementers. Therefore, the first group of research questions presents these difficulties and relates to the issue of “level discrimination,” which means a patent holder only license to end-product manufacturers but restricts or apply conditions to component makers in the multi-component products market.
As regards to a uniform royalty rate, one interpretation of the non-discrimination prong is to apply a uniform rate assessed against a single common component. A uniform rate set by an ex ante negotiation, however, does not pacify all the disputes. Scholars have concerns over a variety of issues, such as inflexibility, facilitating collusion, extremely low royalty rates, etc. Another interpretation of the nondiscrimination prong could be requiring license terms to be similar for similarly situated firms. Part of the common concerns for both methods is technological substitution and downstream competition.
In this context, the project addresses the following research questions: Do all implementers have similarities that help to define them under the non-discrimination prong of FRAND commitment? What are the changes of commercial relationships, portfolios, and standard-compliant technologies? Do they influence the interpretation of non-discrimination?


Doctoral Student

Tien-Hsin Wang

Main Areas of Research

II.1 Technologiegetriebene Märkte