The Troubling Use of Antitrust to Regulate FRAND Licensing

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Douglas Ginsburg, Koren Wong-Ervin, Joshua Wright, Oct 14, 2015

In the last year, we have seen a growing—and troubling—trend as courts and competition agencies around the globe propose and impose antitrust sanctions on holders of standard-essential patents for seeking injunctive relief against alleged infringers and for reneging on their commitment to license their patents on fair, reasonable, and non-discriminatory terms. These new rules, recently adopted in the European Union and in Korea, proposed in Canada and Japan, and favored by some government officials in the United States, are premised upon the erroneous beliefs that (1) patent “holdup” is a widespread problem that results in significantly adverse consequences for competition and innovation and (2) whatever the magnitude of the problem, it requires an antitrust remedy.

Patent holdup occurs when an SEP holder that has made a commitment to license its patents on FRAND terms instead uses the essential nature of its patent to charge an unjustifiably higher royalty than would have been possible before its patent was included in the standard. Proponents of the new rules suggest the risk that ex post royalty rates will be higher than the ex ante rate was or would have been reflects a market failure requiring an antitrust response rather than a problem that could be resolved readily by standard-setting organizations (“SSOs”) themselves or by or

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