Resolving Standard Essential Patents Issues through Competition Law

Author Name KAWAHAMA Noboru  (Faculty Fellow, RIETI)
Creation Date/NO. July 2015 15-J-043
Research Project Globalization, Innovation, and Competition Policy
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The number of disputes relating to standard essential patents (SEPs), in which patent holders submit statements to commit to granting licenses on a fair, reasonable and non-discriminatory (FRAND) basis, have increased. The exercise of SEPs tends to cause problems such as hold-ups and royalty stacking and needs to be constrained somehow. Despite wide recognition of the need to address these problems, devising measures to resolve the issue has not been an easy task since various laws and principles are involved. These include patent and competition laws, as well as the opaque nature of the patent policies adopted by standard-setting organizations in light of relevant contract laws. The Intellectual Property High Court of Japan's decision in the Apple vs. Samsung case on May 16, 2014 provided partial solutions with regards to patent and contract law. However, problems have remained in the field of competition law, such as the question of how the exercise of patents charged with a FRAND commitment needs to be regulated under competition law. In this paper, the author first examines standard setting activities in light of competition law and then assesses the role of FRAND commitments in the standard-setting process. Based on this analysis, the baseline by which reasonable royalty rates should be calculated under competition law is clarified. This is followed by a proposal of an analytical framework for abusive conduct that departs from the above-prescribed baseline and appears to be--or clearly constitutes--a violation of competition law.