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Academic Articles Awards > Intellectual Property

Antitrust and FRAND Bargaining: Rejecting the Invitation For Antitrust Overreach Into Royalty Disputes

James F. Rill, James G. Kress, Dina Kallay, and Hugh M. Hollman, Antitrust, Vol. 30, No. 1, Fall 2015

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Allegations of ex ante "deception" committed by owners of patented technology that standard development organizations (SDOs) “relied upon” in selecting that technology for inclusion in the standard, thereby excluding alternative technologies, have long served as the theoretical linchpin for antitrust enforcement against holders of standard essential patents (“essential patent”). More recently, a growing chorus of commentators and litigants have espoused that “opportunism,” in the form of excessive royalty demands for essential patent licenses, should also be sufficient to invoke Section 2 of the Sherman Act in the context of a FRAND commitment. In one variant of that excessive pricing argument, proponents of an opportunism standard have seized upon the emerging patent law concept of the smallest salable patent-practicing unit (SSPPU) to argue that “fair” and “reasonable” royalties must be calculated on the value the essential patent contributes to the SSPPU. Failure to do so, they contend, constitutes a breach of the FRAND commitment and amounts to an antitrust violation, at least where viable substitute technologies were available when the standard was adopted.

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