SEPs and FRAND: A Never-Ending Conundrum?

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The debate over the conundrum of SEP and FRAND is not new. The difficulty comes up with the perceived ‘standard’ that a patent becomes when it controls a legitimate amount of technology. These standards are reached through the consensus for setting up the ‘Common technology standard’ supported by the Standard Setting Organisation (hereinafter, SSO). The patent becomes very important as it governs the technological standards for which there are no infringing alternatives, commonly known as Standard Essential Patents (hereinafter, SEP).

SEP & FRAND licensing

[Image Source: Managing IP]

When a standard is adopted, for instance, the proprietor of a SEP will automatically have a dominant bargaining position that can be utilized to extract enormous revenues depending upon the value of the standard instead of the basic SEP; likewise, SSO might be hesitant to accept a standard in any case if the SEP owner does not license it in advance on the grounds that the worth of the SEP is an element of the standard’s degree of appropriation. To reduce the risk of standardization resulting in anti-competitive outcomes as well as to prevent licensing “holdups” and ensure access to SEPs, most SSOs require owners of SEPs to commit to license them on FRAND terms to all interested parties. FRAND commitments have been widely used, but the lack of strict enforcement measures have often led to failure to achieve the desired results.

Development & Problem Related to the Concept of FRAND

The study of Rambus Inc. (Rambus, Inc. v. F.T.C., 522 F.3d 456, 469 (D.C. Cir. 2008)) case can be very beneficial to observe this aspect. In a series of misleading demeanor, it exploited its position in attaining patents through a series of technological infringement. It engaged in the anticompetitive ‘hold up’ of the computer memory industry infringing the SSO memory standards. All these experiences changed the working of the SSO, which compulsorily require licensing SEPs, prior to the adoption of a standard, becoming “FRAND encumbered”, ensuring the benefit of each SEP owner.

It is the prerogative of the standard implementers to lay down the FRAND license at a reasonable cost, avoiding royalty staking. In an obvious situation, issues under FRAND obligation generally relate to the standard-setting process, non-sharing of patent information, fixation of royalty rates, and more importantly, the reluctance of the court to issue an injunction.

The injunction has been cited to be an equitable remedy that the IPRs owners may invoke in order to block the activities of a standard-setting process and prevent implementers from developing the selected technology. This, as it has been argued, may happen in case of a conflict arising between licensors and licensees on the level of FRAND royalties to pay. In order to reduce the anti-competitive effects of a hold-up, some authors have proposed to limit the right to seek injunctive relief by the IPRs owners.

Through injunction, the IPRs proprietors may summon so as to obstruct the exercises of a standard-setting process and keep implementers from building up the selected innovation. To lessen the anti-competitive impacts of the hold-up, a few inventors have proposed to confine the option to seek injunctive relief by the IPR proprietors. Various academicians have suggested that the right to seek injunction should be limited in cases where the IPR owner is a non-practicing entity, which means firms not involved in the manufacturing of the final standardized goods. By and large, the inquiry under which an IPR holder can be allowed injunction for an infringement of (F) RAND encumbered essential patent has developed into one of the most discussed issues, at the crossing point of Patent law and Competition law. Various authorities, jurisdictions, and even standard-setting bodies have, as of late, begun to give an expanding consideration to the issue.

Author: Saransh Chaturvedi (an advocate) currently pursuing LLM from Rajiv Gandhi School of Intellectual Property Law (IIT Kharagpur).  In case of any queries please contact/write back to us at support@ipandlegalfilings.com.

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