On Perfection Of Dispute Resolution Mechanism Of FRAND Royalty Disputes

Although it has been a long time since the international standardization organizations(ISO)began to require its members to make a FRAND commitment that they will license their standard essential patents(SEPs)on fair,reasonable and nondiscriminatory(FRAND)terms,the settlement of FRAND license disputes is still costly,time-consuming and controversial,which has attracted a lot of attention from the scholars and practitioners.The determination of FRAND royalties is the critical issue in the FRAND license dispute.In recent years,in light of endless disputes relating to FRAND royalties involving multinational companies such as Qualcomm,Apple,Samsung,Huawei,ZTE,and Ericsson,the difficulty of determining the FRAND royalty has become increasingly prominent.Although the practice of adjudicating the FRAND royalties by the courts where the patents were granted and protected has been developed for a long time,there are still a lot of questions about this approach.Theoretically,the judicial determination of FRAND royalties is necessary considering the flaws in the mechanism of pricing through negotiation,however,currently,courts in different jurisdictions,or even different courts in the same jurisdiction,are divided on the legal issues when determining the FRAND royalties.In an action of contract,chances are good that the "normative interpretation" for the purpose of adjudication replaced the party's autonomy,violating the basic principles of contract law and failing to justify the judicially determined FRAND royalties.At present,the differences in the judicial settlement mechanism of FRAND royalty disputes in various countries are mainly reflected in two aspects,the methodology of determining FRAND royalties and the geographic scope where the determined royalties apply.In terms of the methodology,although the principles or analytical framework for determining royalties are generally similar,there are differences in the specific approaches.First,there are two kinds of FRAND rate calculation approaches,Bottomup approach and Top-down approach,each of which have its own advantages and disadvantages.Secondly,the royalty base is also controversial.At present,there are two choices: " The Smallest Salable Patent-Practicing Unit " and "The Entire Market Value".Finally,the issues such as assessing the comparability of patent licenses and measuring the value contribution rate of patents or patent portfolios involved are also controversial.In terms of the geographic scope,courts also face a dilemma frequently.Generally,the patent right granted and protected by a country or region is only valid within that country or region.Therefore,territorial adjudication is the traditional way for resolution of FRAND royalty disputes in which the court determines the rate applied in that jurisdiction only.However,some courts in the United Kingdom and the United States have begun to consider the global business relationship between the parties or the contractual basis of the FRAND commitment,determining the global FRAND rate and streamlining worldwide FRAND litigation through consolidation of the dispute in one jurisdiction.Inconsistency undermine the stability and predictability of the law,and lead to unhealthy forms of litigation “race”,driving the parties to file a lawsuit prematurely and forgoing settlement of disputes through negotiation,which has increased the difficulty of royalty determination.These problems also reflect the conflict between the restrictive jurisdiction of domestic courts and the global nature of FRAND royalty disputes.On the one hand,the determination of global royalties avoids patent owners seeking license by filing lawsuits in various jurisdictions,promoting efficiency and protecting patent value;on the other hand,whether in terms of jurisdiction rules or applicable law,the legitimacy of this approach is questionable.Compared with litigation,arbitration has a comparative advantage in resolving FRAND license fee disputes.In addition to the general advantages such as program neutrality and strong enforcement,its biggest feature is that it makes global rates possible.However,difficulties in initiation,debated arbitrability over patent validity and antitrust issues,and characteristics of arbitration that contract with the nondiscrimination principle have greatly detracted from the merits of arbitration in the settlement of FRAND royalties disputes.Faced with the problems mentioned above,many scholars and practitioners have proposed some solutions,including improving the industrial property policies of ISOs and reforming the dispute settlement mechanism,among which designing tailored arbitration rules possesses a great deal of merits and superiorities.In order to protect China's legitimate rights and interests,China should make efforts to improve both the legal provisions and the dispute settlement mechanism: for one thing,to improve the legal effect of related rules and make prudent judgments beyond the territorial scope;for another thing,to reform and innovate the arbitration mechanism and launch tailored arbitration rules for FRAND royalties disputes.