The Need To Stabilize FRAND…Quickly

by Maxim Waldbaum

In a recent column, I discussed the emerging storm clouds surrounding FRAND—fair, reasonable and non-discriminatory licensing rates and the need to put FRAND back on stable footing. Recent developments have only increased the importance of stability. For example…

*The legal war between Qualcomm and Apple opened up another front when Qualcomm sued for I-Phone manufacturers in California. The reason—not paying royalties after Apple started reimbursing the manufacturers.(1)

*The Federal Trade Commission’s own battle with Qualcomm picked up support, with private sector firms lining up behind the FTC’s claim that Qualcomm has illegally maintained a monopoly over semiconductor chips and has disregarded FRAND en route to building its patent empire.

On a more positive note, InterDigital Communications and Microsoft averted a court battle. InterDigital, developer of a wireless technology patent dropped an infringement case, while Microsoft pulled back its antitrust claim alleging InterDigital failed to provide fair licensing fees.

Yet those positive developments can’t detract from the need for a real framework governing patents that will protect both innovation and the economy as a whole. As the Internet of Things (IoT) gains steam, new fronts are going to be opened up in the ongoing FRAND wars.

A primary example is the automotive industry. For those unversed in IoT, it refers to technology’s ability to connect devices—for example, “smart cars.” If these are going to function as intended, there needs to be an industry standard for technology, which is the only way to enable cars from different manufacturers to communicate.

Microsoft and Toyota were recently able to reach an agreement on licensing rates and that’s very much to the good. But absent a sound governing framework, it will be just one good agreement in an industry where the standardization of technology is moving rapidly.

The array of actors in the IoT ecosystem—everyone from original equipment manufacturers to consumers in a wide range of industries—is going to make proper protection for inventors necessary if we want the technology needed to make the IoT thrive.

To that end, the European Union is working on the development of a framework governing royalties for standard-essential patents (SEPs).This is very much in its nascent phase, but a recent ruling by the High Court Of Justice in England in the case of Unwired Planet International vs. Huawei Technologies(2) may provide at least a hint of where this process will lead.

The EWHC (Her Majesty’s High Court Of Justice in England) first ruled that maintaining a global licensing standard in of itself was FRAND, at least in arenas where the markets and related infrastructure—in this case for mobile phones—crossed jurisdictional lines. The court further ruled that in cases where licensing rates had been previously negotiated, it was necessary to consider whether those rates had been the subject of a competition inquiry and whether profit margins were unfairly leveraged.

The United States Congress needs to take its own steps towards a governing framework. What is needed is access to a Specialized Court, similar in scope and authority to the Court of Claims where disputes by individuals and corporations against the government are adjudicated.

Original jurisdiction could reside with a series of panels comprised of district court judges who had the great familiarity with FRAND. Cases that span multiple jurisdictions and can pull expertise from talent in the particular industries involved. The organizations that presently exist in these industries can assist in evaluations.

Thus far, no legislation for patent reform has been introduced, but there are compelling reasons for both sides of the aisle to take an interest. For one, the political coalitions involved on IP issues don’t split neatly on the Left-Right spectrum and are thus immune to the toxic atmosphere otherwise prevailing in the Beltway.

For another, the complexity of licensing issues and the absence of clear standards that are appropriate to the world of 2017, leave the door open for each court to essentially create its own rules. And that won’t leave inventors confident in receiving fair compensation for their work.

Eaton & Van Winkle partner Maxim Waldbaum has worked on resolving IP disputes for over forty years and has authored several books on the subject and has specialized expertise in the arena of international commercial arbitration intellectual property. Contact Mr. Walbaum and EVW today to set up a consultation regarding your own IP legal needs 

1 (Apple Inc. v. Qualcomm Incorporated, 3:17-cv-00108, CASDC 2017)

2 (Unwired Planet International Ltd v. (1) Huawei Technologies Co. Ltd and (2) Huawei Technologies (UK) Co. Ltd (Unwired Planet LLC, Tenth Party) [2017] E.W.H.C, 711 (Pat), Birss J.)