The Pros And Cons Of FRAND Patents

The ongoing patent wars ignited by a number of gigantic incumbents, such as Apple, Samsung, Qualcomm, Ericsson, Motorola, Nokia, and Huawei, are primarily shifting from patents of product design, or user interface technology to patents allowing phones to connect to Wi-Fi networks. The technology standards that enable connections are collectively determined by standard-setting organizations (SSOs). Members of SSOs agree to license their standard-essential patents (SEPs) included in the standards on fair, reasonable, and non-discriminatory (FRAND) terms as a condition for participation in the standard setting process. Standard implementers are “locked in” a standard established by a SSO when inertia occurs because of the high enough

Notwithstanding the fact that a patentee has the exclusive right to manufacture, use, and sell its invention under 35 U.S.C. § 271 in the United States, it is the FRAND commitments SEP holders made to SSOs have the power to constrain the exclusivity granted by the statute. There has been a vigorous debate among scholars whether a violation of FRAND commitments constitutes a violation of antitrust law, particularly when a SEP holder refuses to continue negotiation by seeking injunctive relief. The dispute is solved otherwise through the application of contract law by reference to the third-party

The Supreme Court of the U.S. answered “no” in Trinko. In the previous case, Aspen Skiing Co. v. Aspen Highlands Skiing Corp., the Supreme Court developed a two-prong test and inquired whether the conduct in dispute “has impaired competition in an unnecessarily restrictive way.” This issue is particularly complicated in the FTC v. Qualcomm case because it is not clear from the decision where the line is between a “refusal to license” and a “refusal to supply.” A refusal to deal charge includes two subcategories: (1) refusal to supply tangible access or goods, and (2) refusal to license IPRs. While the former involves several situations, such as “forced sharing” under regulation in the Trinko case, “forced sharing” under a natural monopoly, or the disputable cases of the EFD, the latter should be independently discussed because one of the most fundamental characteristics of IPR is “intangibility.” IP is non-rivalry and non-exclusive by nature. IPR owners cannot “refuse to supply” the information included in their IPRs if it is already lawfully known to others. They can only exclude others from using their IPRs within a limited time. This is vital in the FTC v. Qualcomm case because the FTC alleges that the “loss of access to Qualcomm's [modem chips]” added “a surcharge” to the above-FRAND royalties paid by OEMs.