In a landmark decision in the matter Huawei v ZTE, the Court of Justice of the European Union (CJEU) established a well-balanced framework for the licensing of Standard Essential Patents (SEPs) on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. Following this judgement, national courts in Europe have been providing further guidance on several key questions related to the ruling, as illustrated in summary infographic starting on page 215. A significant portion of this case law has been developed in Germany. In their effort to interpret the Huawei v ZTE FRAND framework, German courts have repeatedly addressed an issue with significant practical relevance for the licensing of SEPs, which the CJEU did not expressly raise in its decision: The protection of confidentiality in the context of FRAND licensing negotiations and FRAND related litigation. The present paper examines whether the efforts of the German jurisprudence have produced viable solutions in this respect so far.
In April 2018, the Court of Justice of the European Union (CJEU) issued a decision in MEO v. Autoridade da Concorrência that clarified the circumstances in which price discrimination would trigger liability under Article 102(c) TFEU. The decision in MEO has so far received sparse attention from lawyers, academics, and competition law commentators. Yet, it represents an important addition to the analysis of price discrimination under EU competition law. The CJEU emphasized that Article 102(c) TFEU does not categorically prohibit a dominant firm from engaging in price discrimination, but instead prohibits only price discrimination that “tends to distort competition on the downstream market.�? The CJEU also said that one cannot assume that price discrimination will have that prohibited effect, but rather one must examine the circumstances of each case to determine whether the challenged practice has a prohibited effect on the downstream market and thus violates Article 102(c) TFEU.
Although MEO concerned the licensing of copyrights, for two reasons it has important implications for disputes concerning standard-essential patents (SEPs) that are subject to the owner’s commitment to offer to license them on fair, reasonable, and nondiscriminatory (FRAND) terms. First, MEO clarifies that an SEP holder’s differential offers to its licensees are discriminatory within the meaning of Article 102(c) TFEU only when that differential treatment is so substantial as to be capable of distorting competition in the market in which the licensees compete. Thus, after MEO, scrutiny of an SEP holder’s licensing practices under Article 102(c) TFEU turns on the potential effects of the differential treatment. Second, to the extent that the prohibition against discrimination in the FRAND contract is equivalent to the prohibition against discrimination contained in Article 102(c) TFEU, MEO will require an effects-based analysis in cases alleging a breach of the FRAND contract. In those cases, MEO provides guidance for scrutinizing an SEP holder’s discharge of its duties under the FRAND contract, not only in the European Union, but also in foreign jurisdictions where a court must construe and enforce the nondiscrimination requirement of an SEP holder’s FRAND contract.
In patent-infringement litigation involving standard-essential patents, one must apportion the value of the patents in suit by deriving an appropriate measure of each patent’s value relative to the value of other patents that are also declared essential to the standard. Using data on patents declared essential to the LRDIMM standard, we have analyzed multiple methodologies that purport to measure the relative value of patents. We conclude that the choice of a particular patent-valuation methodology is secondary to the apportionment inquiry. In other words, we find that the particular weighting method that a researcher chooses to use is of secondary importance to the researcher’s decision to use some weighting method, rather than none. A simplistic patent-counting methodology that assigns each patent equal value relies on assumptions that are rarely satisfied in the real world. It produces a result that meaningfully differ from the results of any of the methods that rely on forward citations to measure a patent’s value.
We propose a half-life citation-weighting method that researchers might decide to use, in addition to adjustments for technology fields or unweighted citation counts. By placing greater weight on more recent citations, our proposed method attempts to account for the increasing number of citations and patents over time and the importance of speed during the standard setting process. Our proposed method might be particularly appropriate for standards in which the declared-essential patents cover similar technologies or in cases where innovation (and, consequently, the standards-development process) occurs rapidly.
4. D. Daniel Sokol recently noted on the Antitrust & Competition Policy Blog that Professor Peter Picht will be presenting a webinar on industry challenges after recent case-law on confidentiality of FRAND agreements, and other relevant aspects of FRAND case law, on November 22 from 4-5 p.m. CET. Details here.