The FRAND undertaking, a contract under French law

Standard-essential patent disputes almost always open with a number: which rate, which comparables, which base, which territory. That question comes too early. Before asking how much, one has to know why anything is owed at all, to whom, and under which instrument. That prior question is contractual — and it is governed by French law.

The answer fits in a sentence: the FRAND undertaking given to ETSI is a contractual obligation, born of the written and irrevocable declaration provided for by clause 6.1 of the institute's intellectual property policy, and that policy is expressly governed by French law under its clause 12. Everything else follows: the characterisation of the undertaking, the identification of those who may rely on it, the distinction between the undertaking and the licence, and the content of what is owed.

What standardisation creates, and what it does not

A technical standard is not an engineering preference. Where it structures an ecosystem, it organises dependence: a handset that does not implement the cellular standards is not technically deficient, it is commercially out of the market. That dependence generates an expectation that the standardised technology will be accessible.

But an expectation, however legitimate and however widely shared across an industry, is not a right. Nothing in the mere fact that a technology has been standardised legally compels its owner to allow others to use it. Something must convert the expectation into an enforceable obligation. That something is neither the standard itself nor the standards body’s policy taken in isolation: it is the declaration by which the owner commits.

The FRAND undertaking is a contract and it is governed by French law

Clause 6.1: the promise

The ETSI intellectual property rights policy, Annex 6 to the Institute’s Rules of Procedure, provides at clause 6.1 that, when an essential IPR is brought to the attention of ETSI, the Director-General requests the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory terms. The clause sets out the minimum extent of that undertaking: manufacture, including the right to make or have made customised components and sub-systems to the licensee’s own design; sale, lease or other disposal of the equipment so manufactured; repair, use and operation of that equipment; and use of the methods.

Three features matter. The undertaking is written : it is dated, identifiable, and can be produced in evidence. It is irrevocable : its author cannot withdraw it, and it follows the patent on assignment. And it bears on a willingness to license, not on a licence already formed.

Clause 12: the governing law

Clause 12 of the same policy provides that the policy is governed by the laws of France. This is not a drafting detail. It follows that the source, the nature, the scope and the performance of a FRAND undertaking given to ETSI fall to be assessed under French law of obligations, whatever the forum seised of the infringement dispute.

That is why foreign courts are regularly required to apply, or to have proved, French contract law in order to establish what an SEP holder has promised. And it is why an SEP dispute almost always has a French component, even where none of the parties is French.

The characterisation: a stipulation pour autrui

The undertaking is addressed to ETSI; those who invoke it are third parties who were not parties to the instrument and were not identified when it was given. French law offers the figure that fits precisely: the stipulation pour autrui, the third-party beneficiary stipulation governed by articles 1205 to 1209 of the Civil Code as reformed by Ordonnance no. 2016-131 of 10 February 2016.

The mapping is exact. The patent owner promises; ETSI stipulates; implementers of the standard are the beneficiaries. The beneficiary of a stipulation pour autrui may be a future person, provided it is determinable when the promise falls to be performed: that is precisely the position of implementers, unidentified on the date of the declaration but perfectly identifiable once the standard is implemented. The beneficiary acquires a direct right against the promisor, which explains how an implementer may rely on an undertaking to which it was never a party. And the stipulator may itself require performance of the undertaking owed to the beneficiaries.

This characterisation is an analysis, not a statutory provision: it is advanced in the literature and argued before the courts. Its strength is that it accounts, without artifice, for the whole range of effects actually observed.

The undertaking is not the licence

The costliest confusion is to treat the FRAND undertaking as though it were a licence. It is not. The undertaking sits upstream; the licence is the instrument through which it is ordinarily performed, downstream. No licence arises automatically from the declaration: what arises is a right to require that access be made available on conforming terms.

The practical consequence is clear. An implementer who works the standard without a licence is not licensed by the mere existence of the undertaking; it is an infringer, subject to the limits competition law places on injunctive relief. Symmetrically, a court seised of a FRAND dispute does not create an obligation: it gives operative content to a pre-existing undertaking whose terms are in dispute.

The content of the obligation: substance and conduct

Substance

The requirement of reasonableness disciplines the attribution of value: what is remunerated is the technical contribution of the patent, not the lock-in effect standardisation confers on it. The requirement of fairness empêche que l’extraction écartée du taux soit réintroduite par des mécanismes annexes : portée, durée, clauses de non-contestation, ventes liées, obligations de rétrocession. Le caractère non-discrimination targets unjustified disparities between licensees in comparable positions, without hardening into a most-favoured-nation rule that would forbid any differentiation at all.

Conduct

The obligation also governs how each side negotiates. The sequence set out by the Court of Justice in Huawei v ZTE (notice of infringement, expression of willingness to contract, written offer with figures, diligent counter-offer, provision of security) supplies serious indicators, not an algorithm. It sanctions conduct, it does not calculate a rate.

The unifying test is an intensified requirement of good faith, running in both directions: the owner may not exploit the dependence standardisation creates; the implementer may not invoke FRAND to justify strategic delay. Hold-out and hold-up are two breaches of the same standard.

What competition law does not say

Huawei v ZTE (CJEU, 16 July 2015, C-170/13) frames the exercise of injunctive relief by the holder of an essential patent in a dominant position. It does not say where the FRAND obligation comes from, who is entitled to it, or what it contains. Competition law disciplines the use of a right; it is not its source. Patent law, for its part, explains exclusivity but not why its holder should be bound towards third parties who never negotiated with it.

Treating FRAND as a pure competition question leads to two symmetrical dead ends: either the court becomes a regulator of technology markets, or the undertaking dissolves into a defence with no content of its own. The contractual reading avoids both, and lets each discipline operate at its proper level.

What this changes in practice

For the owner. The ETSI declaration is a legal act, not an administrative formality: its date, its perimeter and its scope condition the litigation that follows. Assigning the portfolio does not erase the undertaking. An offer made to an implementer must be defensible in its structure, not merely in its amount.

For the implementer. The direct right arising from the stipulation allows a party to act without waiting to be sued, and to bring before a French court a dispute whose governing contract is French. But it must first have met the conduct requirements: a quantified, reasoned and diligent counter-offer is the first document in the file.

For both. The evidential forum and the contractual forum are not the same question. An infringement action before the Unified Patent Court can coexist with French contractual proceedings on the undertaking itself.

Key takeaways

Frequently asked questions

Can an implementer rely on the undertaking without being a party to the ETSI declaration?

Yes, on the stipulation pour autrui analysis: the beneficiary has a direct right against the promisor even though it was not identified when the undertaking was given.

Does the FRAND undertaking amount to a licence?

No. It requires access to be made available on conforming terms. The licence is the instrument of performance; until it is concluded, working the standard remains infringement, subject to the limits placed on injunctive relief.

Why does French law apply when the parties are not French?

Because clause 12 of the ETSI IPR Policy expressly says so. The law governing the undertaking is determined by the instrument, not by the nationality of the parties or the place of the infringement.

Does assigning the patent extinguish the undertaking?

The undertaking given to ETSI is irrevocable. Assignment of the title cannot, of itself, release the holder; whether and how it passes to the assignee is one of the points that assignment documentation must be checked against.

Asking the right question first

La détermination du taux vient à sa place, c’est-à-dire à la fin. Ce qui la précède (la source de l’engagement, l’identification des créanciers, la distinction entre engagement et licence, le contenu de ce qui est dû) se traite en droit des contrats, et en droit français. Dhenne Avocats conduit ces contentieux en demande comme en défense, devant le tribunal judiciaire de Paris, la Juridiction unifiée du brevet et en arbitrage. Talk to us.

This article is an original, expanded adaptation of an analysis by Matthieu Dhenne first published on Kluwer Patent Blog.

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