FRAND licence

A FRAND licence provides access to patented technology on fair, reasonable and non-discriminatory terms. It is particularly relevant to standard-essential patents (SEPs): patents that must be practised to implement a technical standard. The obligations of a patent holder depend on the applicable undertaking, the standard-setting organisation’s policy and the governing legal framework. A declaration of essentiality is not, by itself, a judicial finding that a patent is valid, essential or infringed.

What a FRAND undertaking seeks to achieve

Standardisation enables interoperability, but can also make access to particular patented technologies commercially necessary. A FRAND undertaking addresses access to those technologies while preserving appropriate remuneration for patent holders. Licensing disputes therefore concern both the terms offered and the parties’ conduct in negotiations.

FRAND does not establish a universal tariff. Nor does non-discrimination necessarily require every licensee to receive identical contractual terms regardless of its circumstances. The undertaking, relevant case law and commercial context must be examined together.

Recurring issues in SEP licensing

• Reasonableness of royalties: the parties may disagree on the contribution of the patented technology, the relevant royalty base and the appropriate valuation methodology.
• Essentiality and validity: declarations and patent counts need to be tested against technical and legal evidence. The same declared portfolio may contain families of differing relevance to the product and territory concerned.
• Non-discrimination: comparisons require attention to the circumstances and contractual package of each licence.
• Royalty stacking: multiple portfolios may cover the same standard or product. The aggregate burden is relevant to the analysis but must be supported by reliable evidence.
• Contractual complexity: territory, duration, releases for past use, cross-licensing, volume and payment structure may materially affect the economic comparison.
• Litigation costs and timing: parallel proceedings and injunction applications may shape the negotiation strategy.

Evaluating the proposed terms

Comparable licences can provide evidence, provided differences between the transactions are identified and justified adjustments are made. A top-down analysis starts with an evidenced aggregate royalty benchmark and allocates a share to the relevant portfolio. Neither approach is reliable merely because it produces a precise number.

For any proposed rate, the analysis should identify the standard and product, the relevant territories and period, the royalty base, the scope and strength of the portfolio, and the contractual benefits included. Assumptions about essentiality, validity and technical contribution should be explicit. The WIPO discussion of the top-down framework explains the importance of the underlying inputs.

Case law and the limits of generalisation

In Unwired Planet v Huawei, the UK Supreme Court delivered its judgment on 26 August 2020. The case addresses worldwide licensing and the non-discrimination undertaking, among other issues. It should not be described simply as a dispute resolved by a licence agreement. The official case page and judgment provide the primary materials.

Outcomes from different courts must be read in their procedural and legal context. A decision on entitlement to an injunction is not necessarily a determination of a portfolio-wide royalty rate. A rate established for one licence cannot be transplanted to another product or period without further analysis.

Negotiation and dispute resolution

A structured process records the information exchanged, the parties’ offers and counteroffers, the supporting valuation evidence and the chronology of their responses. Appropriate confidentiality arrangements can facilitate access to comparable agreements and technical materials. Mediation or arbitration may be suitable where the parties agree on the issues and procedure.

Specialist counsel coordinates the legal and technical analysis, assesses the negotiation record, works with valuation experts and develops the litigation strategy. The objective is to connect the licensing position with the available evidence, the applicable undertaking and the remedies sought.

Related resources and assistance

Our FRAND Litigation Watch brings together decisions and analysis relevant to SEP licensing. Dhenne Avocats advises on FRAND negotiations and represents clients in patent licensing disputes. Discuss an SEP licensing matter with the firm.

This glossary entry provides general information and is not advice on an individual matter.

A FRAND position is built before the writ, in the order of offers, counter-offers and security: that is the purpose of our litigation readiness review for patent disputes.