FRAND licenses: the legal and practical issues raised by 5G

1. Expected trends in the Standard Essential Patent market for the coming years

One can easily see that the deployment of the fifth-generation technology standard for broadband cellular networks (5G) is set to revolutionize the way and the speed at which we communicate. 5G allows for connected vehicles to share data to prevent accidents, medical professionals to diagnose patients remotely via connected sensors, customers to experience virtual shopping and factories to control industrial robots. Beyond these use cases, the emergence of Metaverse and artificial intelligence, the digitalization of industries and businesses, the need to work from home and the climate crisis will accelerate the use of 5G more than we can imagine today.

As things progress, the need for FRAND (Fair Reasonable And Non-Discriminatory) licenses will no longer be the prerogative of the telecommunication industry. It is expected to become part of the roadmap of most industries such as the automotive, home appliances, manufacturing, energy and healthcare sectors. This is why market researchers foresee a strong increase in the compound annual growth rate of royalty income over the upcoming years, and expect the FRAND royalties to grow at the same rate than the underlying market.

2. What are the challenges brought by 5G licensing practices ?

5G is subject to hundreds of thousands of declared Standard Essential Patents (SEPs) that every 5G implementer is, in principle, required to use to implement the standard.  However, with 5G being integrated into most technology sectors, the number of products using SEPs is going to be higher than ever. This means that the number of companies requiring licensing rights for their products will similarly reach new highs.

Licensors thus face the challenges of identifying the multiple companies using their standard essential patents and negotiating licensing terms at an unprecedented scale. Implementers, on the other hand, have to determine whose SEPs they use in their products, how much they will end up paying and of course engage in FRAND negotiations.

The nature of FRAND negotiations themselves brings another challenge for both licensors and licensees. In spite of many court decisions around the world, the determination of Fair Reasonable And Non-Discriminatory licensing terms is still highly complex and contentious. Besides, while the negotiation of licenses for 4G and 5G is relatively common in the smartphone world, it is still very new in other sectors, which augurs even more challenging negotiations.

3. How can companies address these issues?

To give themselves the best chance of success, companies should rely on tools specifically designed to help them navigate the treacherous waters of SEPs. Both licensors and implementers need reliable and comprehensive data as well as SEP experts to anticipate the licensing issues they will encounter, develop their FRAND strategy and reduce their risks.  In particular, they need a safe haven where they can negotiate in good faith and avoid any hold-up or hold-out situation.

This is why we have created FrandAvenue, a marketplace specifically designed to allow efficient FRAND negotiations for both licensors and implementers.

On FrandAvenue you can easily find all 400,000 SEPs declared to ETSI and all technical standards. FrandAvenue members can in one click know which patent portfolios relate to a given technical specification and how they compare to each other. Licensors can also easily display their SEP portfolios while implementers can have a complete picture of the SEPs for which they need to get a license. Moreover, companies willing to save time and costs can use a custom and secure negotiation tool to help them comply with their respective legal obligations, including in the event where they would have to litigate.

For more information on FrandAvenue, please visit https://www.frandavenue.com/en/home or contact us at contact@frandavenue.com