Non-Discrimination – FRAND’s Last Stand?

Compliance with FRAND commitments by holders of standard-essential patents has largely focused on the “fair and reasonable” component of the commitment. This essay explores the interpretation of the “non-discrimination” component of FRAND. Two court cases that have recently addressed the non-discrimination commitment reach similar interpretations of its meaning but disagree on its enforcement, with one court embracing competition law as the governing principle. We argue that the FRAND commitment should not allow materially different royalty rates for similarly situated licensees. We also propose that standard development organizations encourage their members to disclose royalty rates early in the development of a standard and include measures to limit future royalty increases.

By Jorge L. Contreras & Richard J. Gilbert¹

I. INTRODUCTION

A significant number of technical interoperability standards today are developed under the auspices of standards development organizations (“SDOs”) that require their participants to license patents that are essential to the implementation of those standards (standards-essential patents or “SEPs”) on terms that are “fair, reasonable and nondiscriminatory” (“FRAND”). With few exceptions, SDOs fail to define these terms with any degree of detail.  As a result, the meaning of FRAND has been the subject of litigation in jurisdictions around the world, and each new case seems to increase the divergence