Core Principles and Approaches for Licensing of Standard Essential Patents

The “Core Principles and Approaches for Licensing of Standard Essential Patents”, also referred to as “CWA2”, can be found on this website.

What is it?

The CWA2 project was launched within the framework of a so-called CEN CENELEC Workshop Agreement, with the support of Deutsche Institut für Normung (DIN). 

Fifty six organizations from a diverse range of industries, as well as industry associations representing hundreds more, have worked to develop a CWA setting out policy approaches that may be helpful to companies, individuals and policy-makers in evaluating SEP licensing. 

The CWA2 participants include large and small European and international businesses, SMEs and associations from many different industry sectors.  Its efforts have generated substantial public interest, including from the European Commission and various industry organisations. 

Why does it matter?

As industry in Europe and globally develops new standards directed at the so called “Internet of Things” and “5G” applications, it has become ever more important to ensure a balanced system for the licensing to patents that are essential to those standardised technologies. 

Those licenses are crucial to create a level playing field that companies, large and small, can rely on to develop their innovative products and services, to the benefit of consumers in the EU and around the globe.

CWA2 identifies six core principles and approaches that seek to foster a FRAND outcome when engaged in licensing negotiations. 

The document sets forth policy principles and best practices.  Companies, including signatories to the CWA2, remain free to conduct their negotiations as they determine on a case-by-case basis.

Core Principles

1. Injunctions:

A FRAND SEP holder must not threaten, seek or enforce an injunction (or similar de facto exclusion processes) except in exceptional circumstances and only where FRAND compensation cannot be addressed via adjudication, e.g. lack of jurisdiction or bankruptcy. Parties should seek to negotiate FRAND terms without any unfair “hold up” leverage associated with injunctions or other de facto market exclusion processes.

2. License availability:

A FRAND license should be made available to anybody that wants one to implement the relevant standard. Refusing to license some implementers is the antithesis of the FRAND promise. In many cases, upstream licensing can create significant efficiencies that benefit the patent holder, the licensee and the industry.

3. Court FRAND methodologies:

SEPs should be valued based on their own technical merits and scope, not based on downstream values or uses. In many cases this will involve focusing on the smallest component that directly or indirectly infringes the SEP, not the end product incorporating additional technologies. As noted by the European Commission, SEP valuations “should not include any element resulting from the decision to include the technology in the standard.” Moreover, “[i]n defining a FRAND value, parties need to take account of a reasonable aggregate rate for the standard.”

4. Patent bundling:

While in some cases parties may mutually and voluntarily agree to a portfolio license (even including some patents subject to disagreements), no party should withhold a FRAND license to patents that are agreed to be essential based on disagreements regarding other patents within a portfolio. This approach can allow parties to identify areas of agreement within a patent portfolio despite other areas of disagreement. For patents that are not agreed upon, no party should be forced to take a portfolio license, and if there is a dispute over some patents, a SEP holder must meet its burdens of proof on the merits (e.g., to establish that the alleged SEP is infringed and requires payment, and to establish the FRAND rate).

5. NDAs and fairness:

Neither party to a FRAND negotiation should seek to force the other party into overbroad secrecy arrangements. Some information, such as patent lists, claim charts identifying relevant products, FRAND licensing terms, aspects of prior licensing history and the like are important to the evaluation of potential FRAND terms, and public availability of those materials can support the public interest in consistent and fair application of FRAND. A patent holder should not seek to exploit its information advantage regarding the patents or prior licenses to interfere with the potential licensee’s ability to effectively negotiate.

6. Patent transfers:

FRAND obligations remain undisturbed despite patent transfers, and patent sales transactions should include express language to that effect. Patent transfers likewise should not alter value sought or obtained for particular patents. Where SEP portfolios are broken up, the total royalties charged for the broken-up parts (and the remaining part of the portfolio) should not exceed the royalties that would have been found to be FRAND had the portfolio been retained by a single owner, or that were charged by the original owner. And patent transfers should not be used to defeat a potential licensee’s royalty “offset” or similar reciprocity rights.

Information

If you would be interested in knowing ​more about the CWA2, please contact us.

 

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