DOJ Continues to Focus on FRAND Negotiations

Citing a recent spike in litigation over fair, reasonable, and non-discriminatory patent royalties as evidence that the current system is “not working very well,” a senior U.S. Department of Justice (DOJ) official on Tuesday said that there need to be clearer rules for setting FRAND rates. According to Renata Hesse, the Deputy Assistant Attorney General for Criminal and Civil Operations in the DOJ’s Antitrust Division, international standards-setting organizations should clarify their intellectual property policies so that patent-holders and potential licensees will be “at least speaking the same language when they’re sitting at the bargaining table.” The inability of both sides to find common ground in negotiations over the value of patents is causing significant market distortions, Hesse said during a panel discussion put on by the Global Competition Review. She emphasized that the DOJ is not seeking lower licensing rates, but rather that the Department is “trying to help people set up a framework in which they can actually figure out” FRAND royalties. Hesse’s comments came in response to the claim by co-panelist F. Scott Kieff, a Republican commissioner at the ITC, that potential licensees of standard-essential patents have an incentive for negotiations to break down so that a court or other third party can then set a lower royalty. Kieff and others have suggested that antitrust regulators such as the DOJ and FTC should not be as involved in FRAND issues because they are simply contract disputes. Hesse argued that the ability of SSOs to confer market power on patent owners makes competition law an appropriate mechanism for correcting abuses of that power.

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