ABSTRACT
Standards are important enablers for a competitive and dynamic European market where innovation and interoperability go hand in hand. In order for standards to be successful and widely taken up by the market, we believe that it is crucially important to ensure not only that standards essential patent (SEP) holders are appropriately compensated for their contributions to innovation, but also that there are fair, balanced and rational practices in the licensing of SEPs. FRAND – which is a commitment to license on fair, reasonable and non-discriminatory terms – must have a clearer meaning in order for standards to promote innovation, economic growth, competition, and consumer choice. We believe that FRAND should, for example, mean the following (but not in any order of importance): (1) a license for a SEP should be available at any point in the value chain where the standard is implemented, and the important terms of those licenses should be transparent to other companies implementing the same standards; (2) a FRAND royalty should reflect the value of the invention; in most cases, that means that it should be based on the smallest device that implements those patents, and additionally it should take into account the overall royalty that could be reasonably charged for all patents that are essential to that standard; (3) injunctions and similar legal threats should be a last resort; and (4) a FRAND commitment made in respect of a SEP should not fall away simply because the SEP is sold to another company. We are convinced that unfair and unreasonable SEP licensing practices pose a significant risk to the innovation ecosystem, create barriers to entry for new market players, threaten to stifle the full potential for economic growth across major industry sectors and ultimately harm consumer choice.
