CEN-CENELEC IPR policy on Standard Essential Patents: "FRAND is procedural, not distributional”

CEN and CENELEC, two of the main Standard Setting Organisations, just released a new IPR policy position paper on Standard Essential Patent and Fair, Reasonable and Non-Discriminatory (FRAND) commitments.  Link to the CEN-CENELEC PDF version of the Paper

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According to CEN-CENELEC paper, there is no objection to the development of a standard that includes patented inventions provided that patent holders commit to make their technology available and grant a licence under FRAND conditions. In fact, the right application of intellectual property rights, including patents, drives innovation by incentivizing investment in R&D, and it is conducive to long term growth.

The papers also recalls that licensing declarations are irrevocable, as long as the patent remains essential and adds that it is not in the role of Standards Setting Organisations to undertake the assessment of patent essentiality, scope, validity and strength.

In reference to recent initiatives, such as the new IEEE patent policy, providing guidance on, or imposing compliance with, FRAND pricing, the CEN-CENELC papers indicates that such initiatives create high risks of antitrust liability under the rules on anticompetitive agreements and that they should therefore be avoided. Most importantly, it stresses that FRAND has no precise pricing content, but instead is a “comity device”. 

In line with the framework set out by the CJEU in the Huaweï v ZTE judgment, the paper recalls that the interpretation of FRAND should be procedural, and NOT distributional.

CEN and CENELEC consider that licensing discussions are transactional issues that do not fall within their remit and that Standards Developing Organizations (SDOs) and Standard Setting Organization (SSOs) shall never interfere with licensing negotiations.

The paper concludes that this framework has two merits. It supports ex ante incentives to participate in standardization and it fully insulates standardization organizations from risks of antitrust liability. As a result, the procedural understanding of FRAND is good practice because it is accommodative to both innovation and competition considerations.