The Judicial Application Of FRAND Principle Of Patent Licensing

After the standardization of patented technology, fair, reasonable and non-discriminatory principle of patent licensing is gradually formed in practice to balance the benefit between standard essential patent holders and standard implementers. With Chinese enterprises’ actively joining relevant industry technical standards, they are faced with increasing negotiations for patent licensing of standard essential patents. As standard essential patent holders, many foreign companies are likely to force Chinese enterprises to compromise on an expected royalty or other licensing terms, which are not achieved by patent licensing negotiations, with litigations. The emergence of Huawei v. Inter Digital Group case provides a good suggestion for such problems: Chinese enterprises are possible to change the disadvantageous situation in patent licensing negotiations, if they are capable of utilizing fair, reasonable and non-discriminatory commitments of standard essential patent holders. In view of this, this paper would like to analyze the mechanism of fair, reasonable and non-discriminatory principle and give suggestions on the problems of the judicial application of fair, reasonable and non-discriminatory principle by referring to the judgments of domestic and foreign cases.Firstly, a legal protection foundation based on contract law is established by combining the theoretical discussion and judicial practice of Article 64 of Chinese Contract Law with the theory of third party beneficiary contract. Secondly, for the problem of whether a standard essential patent holder has breached its FRAND commitment, this paper would like to combine the general principle of ―burden of proof borne by the claimant‖ in our country with the concept of ―affirmative defense‖ to determine that the standard implementers should bear the burden of proof. Thirdly, principles of determining royalty rates in judicial practice in our country are proposed:(i) a patent holder may only obtain an proper profit based on its patented technology itself, apart from the extra benefit associated with incorporation of the patented technology into the standard;(ii) the contribution of the patented technology to the relevant standard and the contribution of the standard to the standard-complaint product should be considered when setting a FRAND royalty rate, and a maximum royalty rate should be set to control overall royalties;(iii) a proper reference object should be selected when setting a FRAND royalty rate to achieve a non-discriminatory licensing.