FRAND Commitments and EC Competition Law

Damien Geradin, and Miguel Rato, Partner at Shearman & Sterling LLP

6/11/2014
(Original Publish Date: 12/23/2009)

In a paper recently published paper, Philippe Chappatte urges the European Commission to use its antitrust powers to enforce FRAND commitments. These commitments are promises by holders of patents that are technically essential to an industry standard that they will grant licenses to such patents on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms. Mr. Chappatte asserts that antitrust intervention to enforce FRAND commitments is justified by “strong policy reasons”, namely, the risk of consumer harm absent intervention, and the need for “a clear legal precedent set by the Commission in this field.” The purpose of this paper is to show that, while Mr. Chappatte’s elegantly drafted thesis may be superficially convincing to the non-expert reader, his claim for the need for “antitrust intervention” is, in fact, unjustified. This is because Mr. Chappatte (i) exaggerates the risks and problems that would be faced by implementers of technology standards; (ii) misrepresents the position of those commentators and holders of essential patents who argue that the FRAND commitment has satisfied its purpose and there is no need for re-interpreting it in a manner that suits the interests of some market actors at the expense of others; (iii) bases his thesis on incorrect premises, in particular with regard to principles of EC competition law and the way they would apply to standards; and (iv) proposes benchmarks and purported principles to define what “fair and reasonable” means that are biased, unsupported and unworkable in practice. As a result of these failings, his conclusion that there is a need for intervention on the part of the Commission is untenable. This paper will not seek to rebut every single allegation contained in Mr. Chappatte’s paper with which the authors disagree. It will instead merely seek to “deconstruct” the main aspects of Mr. Chappatte’s reasoning in order to expose its weaknesses and biases.