Interpreting and Enforcing the Voluntary FRAND Commitment

Abstract

Although often debated as though it were public law, a FRAND undertaking is a private contract between a patent-holder and an SSO. Applying ordinary principles of contract interpretation to the case of ETSI IPR policy reveals that “interpretations” of FRAND advocated by some authors—including cumulative royalty limits, royalties set by counting patents, or a prohibition on capture by the patent-holder of any gains created by standardization—cannot be correct. Rather, a FRAND obligation leaves wide latitude to private parties negotiating a license. However, this does not mean that a FRAND commitment has no substance to be enforced by courts. In this paper, the authors review how, consistent with both contract principles and established judicial method, courts can enforce a contractual obligation to offer licenses on FRAND terms, without becoming IPR price regulators. Similarly, ordinary principles of contract interpretation reveal that the “non-discriminatory” portion of FRAND cannot be interpreted to be coextensive with common “most favored nations” provisions, but instead contemplates substantial latitude for private parties to negotiate terms suited to their particular situations.