Reversing The Hold Up vs Hold Out Debate?

By: Alfonso Lamadrid (Chilling Competition)

Exactly 7 years ago, on 16 July 2015, the CJEU rendered its Judgment in Huawei v ZTE (here are the comments I published that day).

The Huawei v ZTE Judgment essentially sought to clarify the circumstances under which the seeking of injunctions by a SEP holder could constitute an abuse of dominance. The Judgment confirmed the view, initially advanced in academic circles, and endorsed by the European Commission in Samsung and Motorola, (and vehemently opposed by many) that in certain cases patent hold up was a competition law problem connected to the leveraging of market power obtained through standardization. The underlying idea was that hold up could materialize in refusals to licence, excessive royalties or injunctions. In that Judgment the Court set up a procedural framework balancing the different stakes and incentives at issue.

7 years later many of these debates remain (and remain equally bitter). Interestingly, though, there appears to have been an effort to shift attention away from hold up and focus, instead, on hold out  (i.e. the situation where implementers would allegedly refuse to negotiate in good faith). The argument is that innovation on the part of SEP holders would be discouraged should their royalties not be high enough as a result of hold out.

Paying attention to potential hold out on case-by-case assessments might be, to some extent, natural because  implementing the procedural framework set out in Huawei v ZTE necessarily requires assessing whether implementers have entered into bona fides negotiations…