Our lives revolve around technological devices. We can’t live without the internet. Smartphones and laptops have become the center of our lives. Technology in each component has to work together in order to function. Thus, devices need to comply with the standards. These standards may implicate several thousands of patents that claim parts of technology that make the product work. Any patent that controls the function of any part of the technology used in a standard is called Standard-Essential Patent (SEP). These are important to the modern world but they pose serious difficulties. Once a standard is adopted, its owner will have superior bargaining position to an extent depending on the value of the patent. The Standard Setting Organization (SSO) might be reluctant to adopt a standard if the SEP owner refuses to license the patent because the SEP’s value is a function of the standard’s level of adoption.
In order to prevent the licensing holdups and to ensure the access to SEPs, the SSO created FRAND (Fair, Reasonable and Non-Discriminatory) terms. It is a requirement on which SSO members license SEPs to other members of the SSO and sometimes to the non-members who use the standards. FRAND is sometimes referred to as RAND or F/RAND but they are all same. It facilitates the use of standards and gives benefits to the SEP holders.
Sometimes, the SEP holders create a monopoly which is detrimental to the inventors as they a will have no say in discriminatory terms brought before them. They will be forced to succumb to such terms. A common issue is that the patent becomes nearly impossible to replace, creating a burden on the license holders which cause a rise in royalty rates, thereby burdening the license companies. In order to evade such prejudiced demands of the SEP holders, the concept of FRAND was incorporated. The patentee must take care of FRAND in various situations:
1. Royalty Stacking
The patentee must take care of the situation where he/she has to get the royalty for his/her SEPs. They must take care if the royalty is of proper amount.
2. Availability of Injunctive Relief
It becomes a powerful weapon for the patent holder. The use of injunctive relief against willing licensees is the prima facie breach of FRAND commitment. The principal behind granting of an injunction in India is based on the principles of equity. The moment a SEP holder indulges in adherence to the policies set by SSO, he inevitably accents to license the technology on FRAND terms.
3. Uniformity in approach
FRAND has enormous effects for patentees and patent holders. It helps in generating awareness among them. Thus it ensures some uniformity in an approach of theirs.
4. Clarify with the owners
Potential licensees must clarify with the patent owners or patent licensors The SSO’s bylaws have to be read and agreed upon before the patent is licensed. There is no necessity to mention FRAND clauses or a separate contract for FRAND terms.
These are the things to be taken care by a patentee. In the case of any queries, feel free to contact LegalRaasta.
This article has been contributed by Shruti Kakkar, Content Writer, LegalRaasta– an online platform for GST Software, GST Return Filing, Patent Registration, GST Registration, ITR Filing, etc.