Following on from the introductory overview published in July/August issue 2021, our industry experts bring you the second installment on the jurisdictional comparison of FRAND [fair, reasonable, and non-discriminatory] terms, this time in a supply chain scenario.
A typical FRAND license would be issued by the SEP [standard essential patent] owner for an end-product, but there are many products that will have multiple components that will require licenses for the use of SEPs during the manufacturing process along the supply chain. This is particularly true within the automotive field.
But how do FRAND licenses work within a supply chain? And how does this differ between jurisdictions? The Patent Lawyer asked SEP experts in three jurisdictions to provide an overview.
United States: Eugene Goryunov, Partner at Haynes Boone and U.S. Patent Specialist
Recent U.S. case law provides further clarification on FRAND defenses in supply chain cases. Two recent court of appeal decisions, albeit from different circuits, find that SEP holders are not required to grant a “license-to-all” entities within a supply chain.
Most recently, in February 2022, the Fifth Circuit in Continental v. Avanci held that SEP holders do not have to license to all entities within the supply chain as long as they license at the end device level (OEM) on FRAND terms. The decision rejects the argument that SEP holders are obligated to grant a “license-to-all” entities within the chain of production. In Continental, Continental argued that it was injured because Avanci refused to grant it a license. The court disagreed, finding that Continental was merely an incidental beneficiary. As a supplier, Continental did not claim membership in the relevant SSO’s and did not need SEP licenses to operate since Avanci licensed OEMs that incorporated Continental’s products. There was also no evidence that the SEP holders and SSOs intended to require redundant licensing of third parties up the supply chain. As an incidental beneficiary, Continental had no right to enforce the FRAND contract, according to the court.
Even if Continental was entitled to a license on FRAND terms as a third-party beneficiary, the court found that Avanci fulfilled its obligations to the SSOs with respect to Continental because Avanci and the SEP-holder defendants were actively licensing to OEMs. In effect, the licenses to OEMs made licenses indirectly available to Continental because the OEMs implemented Continental’s products.
Excerpted from The Patent Lawyer. To read the full article, click here. (See P. 8)
A typical FRAND license would be issued by the SEP [standard essential patent] owner for an end-product, but there are many products that will have multiple components that will require licenses for the use of SEPs during the manufacturing process along the supply chain. This is particularly true within the automotive field.
But how do FRAND licenses work within a supply chain? And how does this differ between jurisdictions? The Patent Lawyer asked SEP experts in three jurisdictions to provide an overview.
United States: Eugene Goryunov, Partner at Haynes Boone and U.S. Patent Specialist
Recent U.S. case law provides further clarification on FRAND defenses in supply chain cases. Two recent court of appeal decisions, albeit from different circuits, find that SEP holders are not required to grant a “license-to-all” entities within a supply chain.
Most recently, in February 2022, the Fifth Circuit in Continental v. Avanci held that SEP holders do not have to license to all entities within the supply chain as long as they license at the end device level (OEM) on FRAND terms. The decision rejects the argument that SEP holders are obligated to grant a “license-to-all” entities within the chain of production. In Continental, Continental argued that it was injured because Avanci refused to grant it a license. The court disagreed, finding that Continental was merely an incidental beneficiary. As a supplier, Continental did not claim membership in the relevant SSO’s and did not need SEP licenses to operate since Avanci licensed OEMs that incorporated Continental’s products. There was also no evidence that the SEP holders and SSOs intended to require redundant licensing of third parties up the supply chain. As an incidental beneficiary, Continental had no right to enforce the FRAND contract, according to the court.
Even if Continental was entitled to a license on FRAND terms as a third-party beneficiary, the court found that Avanci fulfilled its obligations to the SSOs with respect to Continental because Avanci and the SEP-holder defendants were actively licensing to OEMs. In effect, the licenses to OEMs made licenses indirectly available to Continental because the OEMs implemented Continental’s products.
Excerpted from The Patent Lawyer. To read the full article, click here. (See P. 8)
