This paper – which can be found here – criticises the use of “antitrust sanctions on holders of standard essential patents (“SEPs”) for seeking injunctive relief against alleged infringers and for reneging on their commitment to license their patents on fair, reasonable, and non-discriminatory (“FRAND”) terms”.
They make two main criticisms of the use of antitrust to regulate FRAND licensing:
- First, they criticise the assumption, underpinning these developments, that patent “holdup” is a widespread problem that leads to significantly adverse consequences for competition and innovation. Instead, they argue that: (i) there is no empirical support for this assumption. On the contrary, sectors where SEPs are preponderant are among the most competitive ones around; (ii) as economic theory would predict, patent holders and those seeking to license and implement patented technologies write their contracts so as to minimize the probability of holdup; (iii) several mechanisms – including reputation and business costs – are available to transactors to mitigate the incidence and likelihood of patent holdup. Recognizing the theoretical nature of holdup concerns, the United States Court of Appeals for the Federal Circuit has held that a claim of holdup must be substantiated with “actual evidence,” and that the burden is on the accused infringer to show the patent holder used injunctive relief to gain undue leverage and demand supra-RAND royalties.”
- Secondly, they criticise the view that, even if patent holdup was widespread, it would require an antitrust remedy. Instead, the law of contracts is sufficient to provide optimal deterrence. Thus, no United States court has held that seeking injunctive relief on a RAND encumbered SEP violates antitrust laws. Instead, every United States court that has addressed the issue has done so under contract law principles. A second element of this criticism is that applying antitrust is likely to be harmful to both competition and consumers by diminishing the value of patents. This would reducing incentives to innovate and to participate in standard setting, since significant monetary sanctions (arising from infringing competition law) are likely to over-deter pro-competitive participation in Standard Setting Organisations. Furthermore, FRAND-encumbered SEP holders need the credible threat of an injunction if they are to recoup the value added by their patents and have no other adequate remedy against an infringing user.