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Competition Law

Analysis - debate - current awareness

23 AUG 2013

What is FRAND?

 

By John Cassels

FRAND is the acronym for fair, reasonable and non-discriminatory. It generally arises in antitrust cases where an owner of intellectual property rights (IPR) refuses to grant a licence or refuses to grant a licence on FRAND terms.

Failing or refusing to license IPR on FRAND terms can be an infringement of the EU's antitrust rules. For example, the EU Commission recently sent a statement of objections to Motorola Mobility over its attempt to enforce a patent injunction against Apple in Germany (i.e. the Commission has come to the preliminary conclusion that Motorola has infringed the antitrust rules). The patents in question relate to GPRS, a part of the GSM standard, which is used to make mobile phone calls. Motorola accepted that the patents were standard essential patents and had, therefore, agreed that they would be licensed to Apple on FRAND terms. However, in 2011 Motorola tried to take out and enforce an injunction against Apple in Germany based on those patents, even although Apple had said that it was willing to pay royalties, as determined by a German court, to use the patented technology. Samsung has also been the recipient of a statement of objections from the EU Commission. It sought injunctions to prevent Apple infringing patents despite Apple apparently being willing to pay a licence fee and negotiate a licence on FRAND terms. 

However, what is fair, reasonable and non-discriminatory to one person, or in one context, may be unfair, unreasonable and discriminatory to others, or in a different context. This means that the exact conditions under which a licence will be FRAND compliant are not a universally accepted norm.

  • Fair: it is generally relatively easy to identify licence provisions that are clearly unfair. For example, it would be unfair to demand from a licensee concessions that are independent of the licence deal (e.g. purchase agreements, subcontracted production), or to tie the grant of the licence to unrelated obligations. What is fair, is subjective and more difficult to define.
  • Reasonable: this is also a subjective concept but a good starting point for assessing reasonableness would be to benchmark against widespread industry practice. 
  • Non-discriminatory: they key issue here is whether all licensees that are in equivalent circumstances are treated in the same way. Where licensees are treated differently, there should be an objective justification for doing so.

If you would like more information about this topic or just want to talk, please do not hesitate to contact John Cassels at john.cassels@ffw.com  

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