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Patent hold-up

Definition : Patent hold-up


Patent hold-up is the risk that a patent owner exploits dependency created by investments or adoption of a standard to obtain terms reflecting switching costs rather than the invention’s contribution. It is an economic concept used in legal debate, not a legal finding automatically established whenever a SEP is asserted.

Identify the alleged leverage

Examine the chronology: technology selection, specific investments, available alternatives and changes in demanded terms. Distinguish technical value from bargaining power potentially enhanced by lock-in. A high demand, commercial disagreement or threatened proceedings alone does not establish abuse.

Which elements should be documented?

  • The relevant licensing commitment, declarations and successive offers.
  • Technical alternatives available when choices were made and documented switching costs.
  • Meaningful comparables, access arrangements and confidentiality.
  • Notices, responses, counter-offers, security and both parties’ conduct.

Rate comparisons require attention to the base, portfolio and consideration. Refusal to disclose a confidential agreement does not necessarily establish hold-up: assess the need for information and proposed safeguards.

Two distinct legal contexts

European Union: Huawei v ZTE (2015, paragraphs 60 to 71) addresses certain injunction claims by a dominant SEP owner committed to FRAND licensing. Notification, willingness, the offer and the implementer’s response interact. It does not create a general prohibition on SEP owners suing.

United States: in Ericsson v D-Link (2014, pp. 54 and 55), the Federal Circuit required concrete evidence for a jury instruction on hold-up. This damages decision neither establishes hold-up in every FRAND dispute nor transposes the European test.

Scope and limits of the concept

It helps explain alleged imbalance and identify relevant evidence. It does not replace analysis of the contract, competition law, the patent and injunction requirements. Hold-out concerns implementer conduct. Royalty stacking concerns cumulative royalties. These issues may interact but remain distinct.

Sources

Huawei Technologies v ZTE, C-170/13, paragraphs 60 to 71. Ericsson v D-Link, pp. 54 and 55.

Related concepts

Patent hold-out · Royalty stacking · FRAND rates and comparable licences


Further reading

Going further

Work by Matthieu Dhenne on this notion: Munich’s FRAND Guidelines: A Compass Drawn Too Finely.


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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