FRAND Hijacking in Standard Essential Patents

On April 17, 2015, the result of the dispute over standard essential patent royalties between Huawei and IDC of the United States was initially revealed, ending the five-year patent dispute with IDC losing the lawsuit and compensating Huawei 2O 0 yuan. This case is the first time in China to explain the issue of patent hijacking from the judicial level, which is of great significance to the standard necessary patents.

Regarding the standard essential patent (Standards-Essential Patents), different standardization organizations have different regulations, and there is no consensus at present. Article 4 of my country's "National Regulations on the Administration of Standard Patents (Interim)" stipulates: "The patents involved in the national standards shall be necessary patents, that is, patents that are essential to the implementation of the standards." The International Telecommunication Union (ITU) defines the standard-essential patent community as: "any patent or patent application that may fully or partially cover a draft standard." The American Institute of Electrical and Electronics Engineers (IEEE) believes that the standard essential patent claims refer to: "The standard clauses of a draft standard (whether it is mandatory or optional) must be used for patent claims (including The claims of the patent application), and when the draft is approved, no other commercial or technical alternatives exist." Some scholars believe that "if the implementation of technical standards must be based on the infringement of patent rights, even if there are other technologies that can be accepted as standards, the patent is a necessary patent for the relevant technology". Some scholars also believe that the standard essential patent refers to "the implementation of a standard essential patent".

The F R A N D principle is called "Fair, Reasonable and Nondiscriminatory", which means that the standard necessary patentee licenses the patent to the patent implementer "fairly, reasonably and without discrimination. In today's international community, most standard-setting organizations use the FR A N D principle as a patentee statement when a patent is accepted as a standard. The principle states that the patentee can only obtain benefits equivalent to the value of all his patents, and the patent must be a unique patent in the standard.

The F R A N D principle should not only delimit the behavior of the patentee, but also regulate the behavior of the patent implementer. When the patent implementer enters the standard market, he should first adhere to the principle of "fairness, reasonableness and non-discrimination" and actively seek the patent license of the patentee. The patent implementer ignores the legitimate rights and interests of the patentee and, against the wishes of the patentee, demands to implement the patent free of charge or at an unfair price, even deliberately delays the negotiation time and refuses the patentee's reasonable license fee, which violates the F R A N D principle.

The F R A N D principle, whether it is the original intention of the formulation or the specific implementation requirements, is the perfect criterion for binding the parties to the standard necessary patent. While the principle is theoretically perfect for preventing patent hijacking and F R A N D hijacking, in fact the strengths of the F R A N D principle are also its weaknesses. The F R A N D principle is not a provision related to the specific operation in the patent licensing process. Its refined language and highly generalized conception show the value judgment of the law and can accommodate the solutions to various problems in the standard necessary patent to the greatest extent. However, it is precisely because of the vague wording and the insufficient detailed clauses that its operability in practice is not good.

What is "fairness and reasonableness"? What is "non-discrimination"? Due to the different starting points and interests of the relevant personnel, the interpretation of these two terms is also different. Specifically, even if it is understood in good faith, whether the license fee should be "the value of staying in the open competitive market" or "the right of the patentee to obtain the remuneration of the investor's research and development and the right to set the license fee", and whether the "same situation" in the "same situation of the company" refers to the economic strength, production situation, market share, business scope or the degree of need for standard necessary patents, there are huge controversies. At the same time, driven by interests, the parties tend to explain themselves in their own favor when using the FRAND principle, and some "ulterior motives" enterprises tend to be more self-interested.