FRAND negotiation framework

The FRAND negotiation framework is the sequence of steps the parties must follow before an injunction can be sought on the basis of an essential patent for a standard. It derives from the judgment in Huawei v ZTE given by the Court of Justice of the European Union on 16 July 2015 (Case C-170/13), which framed the exercise of the right to seek an injunction under Article 102 of the Treaty on the Functioning of the European Union.

The steps of the FRAND negotiation

The patent holder first alerts the user of the standard, identifying the patent and the way in which it is used. The user then expresses its willingness to take a licence on FRAND terms. The patent holder next makes a written offer specifying the royalty and how it is calculated. A user who rejects it must respond diligently with a counter-offer and, if that is rejected, provide security while continuing to use the technology. The entry on FRAND offer and counter-offer describes this sequence in detail.

Limits of the grid

The sequence governs the parties' conduct without fixing the rate. Valuation methods remain disputed, whether based on comparable licences, the top-down approach or the level of the value chain at which the licence is granted. The framework also leaves open the question of geographical scope, a worldwide licence often being offered by the patent holder and contested by the user.

Use of the framework by the courts

National courts and the Unified Patent Court assess the parties' conduct against this FRAND negotiation framework, looking at each party's real diligence rather than formal compliance with the steps. A user who stalls is exposed to an injunction; a patent holder who refuses to explain its offer sees it disregarded. Documenting the FRAND negotiation (letters, quantified offers, security) therefore makes up most of the case file.

Key points

The framework is a method for assessing conduct, not a tariff. Both parties must build their case as the exchanges unfold, each letter becoming an exhibit. Silence, excessive response times and unexplained offers come at a price at the litigation stage, however strong the portfolio relied on.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats handles FRAND licences, standard essential patents and contracts bearing on patents, in advisory work as well as in litigation.

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