The UPC has recently issued its first two decisions on FRAND, setting important guidelines for SEP owners and implementers. These rulings have triggered much discussion—but what do they mean for your licensing strategy?
The Local Divisions in Mannheim and Munich have started to flesh out the UPC's approach to FRAND. The judgments provide important guidelines for any company active in the SEP space —guidelines that must be taken into consideration if you do not want to risk dropping the ball in what is sometimes called the "FRAND ping-pong".
The SEP owner has to take the initiative, and it seems that the UPC will take a slightly more formal approach to the first steps than, for example, the German courts used to. If you want to begin licensing discussions with a company you believe uses your SEP, it is important that you start with a written notice. This notice should list the SEP in question, the infringing products and an infringement mapping on the relevant standard. Comprehensive claim charts are not required but the implementer must be able to understand if and why the patents are infringed.
As the recipient of such a notice, you need to react swiftly and make it clear that you are willing to take a license. There is no need for a counter-offer yet, but you need to show your availability for discussions and analyze the information provided.
Once the implementer has demonstrated the willingness to negotiate, the SEP owner has to provide a license offer and explain why the requested royalties are considered to be FRAND.
After these first steps, both sides need to engage in good faith. If you disagree with the technical information or the commercial proposal, you must voice your criticism swiftly. Objections that were not raised before litigation might be disregarded in court. Once a detailed and constructive discussions starts, the SEP owner should disclose comparable license agreements, if they exist.
If the implementer does not accept the proposed license, you must make a counter-offer in due course and provide security for the royalties. To be on the safe side, the security should cover the SEP owner's ask. This is currently the position taken by the Higher District Court in Munich, though the UPC has not yet taken a stance on this.
Note that there is no strict sequence of steps in the FRAND dance. The UPC takes a holistic approach and considers the overall behavior of both sides. Therefore, it is important that you respond swiftly and in good faith at all times. This will not only serve you in litigation—it could even help avoid it altogether.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
