To reduce the risk of such "hold-up," standard setting organizations (SSOs) usually request patent holders to disclose their relevant intellectual property (IP) rights ex-ante (that is, before the adoption of the standard) and/or to commit to license IP rights which they consider to be essential to the standard on fair, reasonable and non-discriminatory (FRAND) terms. The primary purpose of FRAND is to ensure that a licensor would forgo its right not to license its IP rights or to license only on terms that would appropriate all the rents that can be generated by the standard. However, a FRAND commitment should not prevent the patent holder from extracting rents which derive from the advantages that the chosen standard offers over the next …show more content…
Accordingly, FRAND commitments involve an incomplete contract between licensors and licensees, and the precise implementation of FRAND commitments will naturally be controversial. Courts, within the context of companies' private litigations, appear to be the natural setting where FRAND issues could be dealt with. That was the case a number of times in the United States.3 However, to the extent that a violation of a FRAND commitment involves an exploitation of market power in excess of what ex-ante competition would have allowed, the matter has also been considered by competition authorities. They might also be called upon to assess whether patent holders do not abuse their dominant position by charging a price higher than they would have been willing to commit to ex-ante, conditional on the standard being adopted. It is unclear, though, how competition authorities should assess alleged violations of FRAND commitment. As explained below, there is no commonly accepted method in the economic literature, and the case law does not provide much guidance