Top-down approach
Definition : Top-down approach
The top-down approach assesses a SEP portfolio royalty from an aggregate royalty burden for the standardised technology. It asks two separate questions: what total burden is justified, and what share belongs to the portfolio? The result depends on the quality of both answers.
The calculation
In a simplified proportional model: portfolio royalty = aggregate burden × attributable portfolio share. This explains a method. It is neither a statutory tariff nor a mandatory judicial formula. The royalty base, standard scope, products, territories and period must match or be made comparable.
Public commitments, agreements and economic analyses may inform the aggregate burden. A commercial declaration does not, by itself, impose a cap on every patent owner. Actual payments and the value of the relevant technologies require examination.
Why counting patents is insufficient
Declared SEPs are not necessarily all essential, valid or used by the products at issue. Counting publications instead of families may count the same invention repeatedly. Conversely, treating every family as equal obscures differences in technical contribution and coverage.
The numerator and denominator must use a consistent method: family definition, standard version, observation date, countries and essentiality assessment. Sampling requires an explanation of selection and limitations. Expiry and transfers can change the portfolio share during the agreement.
What does the case law show?
In Unwired Planet v Huawei (2020, paragraphs 40 to 47), the Supreme Court describes comparables as the principal method and top-down as a cross-check. It also discusses Japanese and Chinese approaches without imposing one method on all jurisdictions. A rate in one case is therefore not a tariff for another standard or period.
Top-down, bottom-up and comparables
Top-down allocates an aggregate burden. Bottom-up examines a technology’s economic contribution, including pre-standardisation alternatives. Comparable-licence analysis examines contracts. These approaches may support each other but are not synonyms. Royalty stacking is a risk to investigate, not automatic proof that a top-down result is correct.
Requirements for a probative analysis
Identify evidence for the aggregate burden, portfolio data and counting limitations. Vary disputed assumptions. Cross-check against comparable licences. If the burden or portfolio share cannot be substantiated, present conditional scenarios rather than a supposedly certain range.
Source
Unwired Planet v Huawei, [2020] UKSC 37, paragraphs 40 to 47.
Related concepts
This glossary entry is general in scope and does not constitute legal advice.
Dhenne Avocats litigates patent disputes before the Paris Judicial Court, the Paris Court of Appeal and the Unified Patent Court. Where the question arises in a real case, the useful moment is almost always before proceedings are issued.
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