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FRAND – rates and international trade – Lexology

IP rights are temporary exclusive rights granted to innovators to protect their investments. Patents and other IP rights play an increasingly prominent role in the knowledge-based economy, especially in market competition. When each competitor’s product must interoperate with other competitors’ products, it is typical for all competitors to adopt a single technology standard, defined by a set of patents that are essential to that standard. Because such patents are necessary to implement the standard, their owners commit to licensing them under FRAND terms and conditions. Patent owners and implementers of technology standards often dispute whether the terms and conditions offered by a patent owner are FRAND. This chapter summarises our experiences in recent cases involving disputes at the intersection between FRAND-related patent licensing issues and international trade, in the context of competition and IP rights protection developments in China.

FRAND

The FRAND commitment arose out of concerns that SEP owners will engage in ‘hold-up’. In this context, ‘hold-up’ means that an SEP owner could demand unreasonable licensing terms after an implementer has invested in products that ‘implement the standard’ and therefore require use of the patent. To prevent hold-up, standard development organisations require that an innovator who contributes a patent to a technical standard must commit to license it on FRAND terms and conditions (European Telecommunications Standards Institute (ETSI) IP Rights Policy, ‘IPR Information Statement and Licensing Declaration’ and Clause 6.1.)

Implementers often argue that, because of
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