FRAND Defense In Antitrust Investigations
When a company agrees to license its standard-essential patents (SEPs) on fair, reasonable, and non-discriminatory (FRAND) terms, that commitment can come into play in more ways than just licensing negotiations. Increasingly, we’re seeing FRAND commitments used as a defense in antitrust investigations. This area is evolving, especially as regulators around the world question whether certain SEP holders are abusing their position. Working with an experienced FRAND lawyer can help businesses identify where those commitments intersect with competition law.
Licensing Disputes
Standard-setting organizations (SSOs) often require participants to commit to FRAND licensing before their technology is adopted into an industry standard. These agreements are meant to prevent patent holders from later charging unreasonable fees or discriminating against certain licensees. However, when disputes arise, particularly over licensing terms or refusals to license, regulators sometimes step in, viewing such actions as potential abuses of market dominance.
This is where a company’s prior FRAND commitment becomes important. In some cases, SEP holders have pointed to those commitments as evidence of good faith. The argument is that a company willing to license on FRAND terms cannot at the same time be acting in a way that violates antitrust laws. While not always successful, this approach has been used in investigations by agencies in the U.S., European Union, and Asia. This now global approach to IP issues is adding pressure as countries use different approaches.
On the other side, implementers — those using the standard — may also raise antitrust issues when they believe a patent holder is charging excessive rates or engaging in hold-up tactics. In these cases, it’s not uncommon for the SEP holder to point to their FRAND declaration and past licensing offers as proof that they’re not blocking competition. The challenge is that what qualifies as “fair” or “reasonable” is still very much up for debate. That is why working with a lawyer is so important.
Regulators don’t always accept FRAND declarations as a defense. They tend to look closely at whether licensing practices actually reflect FRAND principles in action, not just on paper. For instance, if a company applies vastly different rates to different licensees without a clear basis, that could still raise concerns. Similarly, making a FRAND promise and then refusing to negotiate in good faith can undermine the defense.
Antitrust risk is particularly high when SEP holders engage in injunctions or exclusion orders against implementers. Courts in the U.S. and EU have taken different positions on whether seeking such remedies violates competition law. SEP holders often cite their FRAND commitments as proof that they are not acting abusively, but the outcome usually turns on the conduct during licensing discussions. Remember, it is not just what is on paper but also the actions surrounding these agreements.
At COFFYLAW, we’ve advised clients on how to use FRAND commitments strategically and how to respond when those commitments are challenged. We don’t rely on abstract argument. We work with clients to build fact-based defenses that hold up under regulatory scrutiny. We’re proud to have earned a 10.0 rating with Justia and an A+ BBB Rating for our work.
If your company is facing an antitrust investigation related to SEP licensing or wants to strengthen its FRAND compliance strategy, we’re here to help. Reach out to COFFYLAW to schedule a confidential consultation and get the support you need to move forward with confidence.