ACT | The App Association Asks Federal Appeals Court to Assert Obligation to Fair, Reasonable, and Non-Discriminatory (FRAND) Licensing Terms

WASHINGTON – In an amicus brief filed with the U.S. Court of Appeals for the Federal Circuit, ACT | The App Association asserted its members’ vital interest in the judicial enforcement of the fair, reasonable, and non-discriminatory (FRAND) licensing commitments that standard-essential patent (SEP) holders agree to when they voluntarily submit their technology into a standard.

“SEP holders and their licensing pools, after using the standards process to secure a monopoly and making a promise to provide FRAND licenses to all, are walking back on those promises. This behavior is particularly detrimental to our small business members that rely on SEP holders’ adherence to their FRAND commitments,” said Morgan Reed, president of ACT | The App Association. “It is critical that courts recognize how the FRAND commitment counterbalances the inherent advantage SEP holders have over those that use standards to innovate and compete across consumer and enterprise markets, and the important role of courts in enforcing that commitment.”

In its brief, the App Association detailed how significant power asymmetries allow SEP holders to discriminate against small companies, citing court-identified disparities in multiple cases:

• In InterDigital v. Lenovo, small companies were found to be paying rates seven times higher than larger licensees.
• In TCL v. Ericsson, the initial demand was six times higher than the court-determined FRAND rate.
• In Microsoft v. Motorola, the initial demand was 214 times higher than the court-determined FRAND rate.
• In In re Innovatio, the initial demand was 386 times higher than the court-determined FRAND rate.

The brief further explains that small businesses are uniquely vulnerable because they lack the resources to negotiate or litigate against these tactics. The costs involved in licensing SEPs (search, negotiation and litigation costs) are easily enough to drive small businesses out of standards-driven markets and out of business.

“A clear and stable legal framework is essential to foster the downstream innovation, consumer choice, and healthy market competition that standardization is intended to promote. We call on the Court to reinforce the FRAND commitment’s role in supporting standards and technological progress, and to ensure that SEP holder promises made are promises kept” said Morgan Reed.

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