Who Gets To Set Global FRAND Rates For SEPs?

International standards have become very important for global consumers who want to be sure that they can enjoy a product meeting basic functionalities. Those standards are also crucial for technological products comprising networking technologies to communicate either with each other or with remote servers.

While Wifi Internet connection, 4G mobile networking and MP3 music files may be easily recognized as existing standards, there are hundreds of thousands of lesser-known standards in force affecting a wide variety of industries. For example, ASTM International promulgates dozens of electronics standards just for products like compound semiconductors and printed electronics. ASTM also sets rules for about 100 other sectors, including 3D imaging, pharmaceutical applications, medical devices and much more.

When a standard-setting organization (SSO) develops a norm, it will solicit information from tech developers who may own patents covering technologies that can be used by the standard. Although different SSOs have different rules on how such patents are vetted, if an SSO approves a patent and makes it part of its standard, that patent becomes known as a standard-essential patent (SEP). Thus, if any company wants to sell an LTE-enabled smartphone, for instance, they can only do so if that company licenses the SEPs listed under the LTE standards developed by SSOs like the European Telecommunications Standards Institute (ETSI).

This would seem to give SEP owners an outsized advantage in negotiating patent royalty rates with standards-implementing companies. To counteract this, most SSOs require that patent owners offer licenses for SEPs to implementers at fair, reasonable and non-discriminatory (FRAND) royalty rates. Aside from this basic directive, most SSOs do not get involved with determining FRAND royalty rates on a per patent basis. SEP owners and standards implementers must negotiate these rates themselves. The complications created by FRAND obligations often require courts to decide disputes arising from the negotiation process.

United Kingdom - the sudden rise of a jurisdiction

Given the international scope of standards, many battles over FRAND rates for SEPs take place over multiple jurisdictions. Costly, sophisticated litigation campaigns are usually required to determine worldwide royalty rates. However, major decisions coming out of the United Kingdom's court system have been recently positioning the UK as the premier player...