Background
This is a blog series on jurisdictional conflicts in Standard Essential Patents (SEPs) and Fair, Reasonable, and Non-Discriminatory (FRAND) licensing. In this series, we look at how different countries handle these disputes, which often span borders and involve high-stakes in tech. This series is based on a detailed analysis of key cases from 2010 to 2025 across major jurisdictions, plus a comparison of licensing models that highlights ways to reduce litigation.
SEPs are patents essential to technical standards, ensuring devices from different makers work together. Holders must license them on FRAND terms to promote innovation and access, but disagreements over rates and terms lead to global courtroom battles.
Structuring of this series:
- Post 1 (this one): Introduction, background, history of SEP disputes, and economic/legal contexts, technical primers.
- Posts 2-8: Deep dives into cases from Brazil, China, Germany, France, the US, the UK, and India.
- Post 9: Comparing Bluetooth’s smooth licensing to the messy world of HEVC and AAC codecs.
- Post 10: Conclusion with proposals for better global harmony.
Introduction to SEPs and FRAND Disputes
Standard Essential Patents (SEPs) form the foundation of global technology standards, such as 2G, 3G, 4G, 5G, Wi-Fi, Bluetooth, High Efficiency Video Coding (HEVC), and Advanced Audio Coding (AAC), which ensure interoperability across critical industries, including telecommunications, automotive, Internet of Things (IoT), and digital media. These standards, developed collaboratively by Standard-Setting Organizations (SSOs) like theEuropean Telecommunications Standards Institute (ETSI), Institute of Electrical and Electronics Engineers (IEEE), and MPEG LA International, etc. enable seamless communication and functionality across billions of devices worldwide. SEP holders commit to licensing their patents on Fair, Reasonable, and Non-Discriminatory (FRAND) terms, a mechanism designed to balance the incentives for innovation with the need for widespread market access, preventing monopolistic practices such as patent hold-up (demanding excessive royalties) or exclusionary licensing that could restrict competition.
However, SEP/FRAND disputes frequently escalate into complex, multi-jurisdictional conflicts due to divergent legal frameworks, economic priorities, and public policy approaches across major jurisdictions, including the United States, United Kingdom, Germany, China, and India. As this series explores the decisions issued by courts in different jurisdictions, it is clear that each jurisdiction has a different priority–for consumers, implementors, and IP owners.
The decisions from each jurisdiction are taken and the role taken by the Courts in each jurisdiction seen. For instance, China’s role as a global manufacturing hub drives implementer-friendly rulings, such as low(er) FRAND rates in Oppo v. Nokia (2023). This may prioritize affordable device production (CSIS blog post). In contrast, Germany’s emphasis on intellectual property (IP) ownership results in patentee-friendly decisions, such as injunctions in Sisvel v. Haier (2020), protecting SEP holders’ rights to enforce their patents (Juve Patent report). India’s emerging manufacturing sector and evolving IP regime introduce unique dynamics, with pro tem deposit orders in cases like Nokia v. Oppo (2024) favoring patentees but encouraging anti-suit injunctions (ASIs) in jurisdictions like China when implementers seek lower rates. These conflicts, amplified by anti-anti-suit injunctions (AASIs) and competing global FRAND rate-setting, undermine licensing consistency and exacerbate tensions over disproportionate royalty demands, which can inflate device costs and stifle competition.
There are two distinct frameworks in which the decisions issued by each jurisdiction are seen: Competition for the market vs. competition in the market–and-Joseph Borkin’s seminal work of 1949, “The Patent Infringement Suit: Ordeal by Trial (1949) , provides a historical lens for understanding these disputes. Borkin argues that patents, as grants from the public res, are intended to promote public knowledge and competition, stating: “A patent infringement suit is predominantly a problem in public interest… and a problem in the relation between economic law and technology” (p. 635). He highlights the role of economic inequality in litigation (p. 634). This dynamic (economic inequality of parties) is evident in SEP/FRAND disputes, where large SEP holders leverage their financial and legal resources—termed “litigation capital” (p. 636)—to impose high royalties, as seen in India’s high royalty bases in Ericsson v. Lava (2024), potentially marginalizing smaller implementers. The role of financial resources, or “litigation staying power,” in patent disputes is also apparent. Borkin argues that the economic disparity between parties significantly influences the outcome of patent litigation, often overshadowing the merits of the case. In SEP/FRAND contexts, large patent owners, having experienced litigation teams, possess substantial litigation capital, enabling them to sustain prolonged, multi-jurisdictional legal battles. For instance, what might be quoted as a comparable licensee in confidential clubs in a SEP proceeding, might turn out to be a party that had to settle in view of the impending litigation, regardless of the merits of the case.
Borkin’s observation that “the fact of litigation may in itself be decisive, regardless of any outcome in court” (p. 641) rings true here, especially in jurisdictions such as India or China or Brazil, as the threat of costly litigation forces implementers to settle or face market exclusion. Large patent owners can afford extensive legal teams, expert witnesses, and appeals, while smaller implementers, struggle to match these resources, creating an asymmetrical power dynamic that favors the patentee.
SEPs and FRAND Dispute Resolution
As will be seen in the coming posts, the current resolution framework of FRAND licensing disputes is sub-optimal and is poised for heightened jurisdictional conflict. If any jurisdiction (say first jurisdiction) adopts choice of law rules of another (second) jurisdiction —such as applying first jurisdiction’s legal principles to determine FRAND royalty rates—but interprets them through its own judicial (second jurisdiction) methods—this hybrid approach could undermine the intent of the law of first jurisdiction, which balances patentee rights with market access, and provoke jurisdictions to reject second jurisdiction rulings as biased. Further complications could arise if courts rigorously examine allegations of patent exhaustion at the base station level or conduct detailed patent-by-patent analyses to assess each SEP’s contribution to devices like smartphones, IoT modules, or telematics units / akin to a hedonic regression approach. This patchwork of legal interpretations would create a race to the bottom for royalty rates in some jurisdictions and a race to the top in others, leaving manufacturers navigating a maze of conflicting obligations. The lack of a unified FRAND framework could increase litigation costs, delay technology deployment, and raise device prices, particularly for budget-conscious consumers in emerging markets.
These developments, combined with SEP holders’ aggressive licensing and litigation strategies, threaten to destabilize the telecommunications ecosystem. SEP holdersmaycounter thesehybridchallenges with alternative licensing models and litigation tactics. Use-based licensing, where royalties vary by device functionality (e.g., higher for 5G smartphones than IoT modules). Time-based licensing, adjusting rates over a patent’s lifespan, accounts for diminishing value as standards evolve. Litigation funding by patent pools, where one member litigates on behalf of others,or coordinated multi-jurisdictional filings, maximizes leverage against hold-out by licensees.These strategies aim to secure fair compensation for innovation—but they escalate conflicts, as defendants face multiplied legal costs and inconsistent rulings across jurisdictions.
The ongoing World Trade Organization (WTO) dispute between the European Union (EU) and China (DS611) exemplifies these tensions, highlighting the clash over ASIs and global FRAND rate-setting. The EU’s WTO complaint already criticizes China’s global FRAND rate-setting, and such a move it is likely that a retaliatorymeasure is issued. Even if the retaliatory measure is not introduced, the general public might have to pay more for encumbered SEPs. Minimizing litigation is essential to serve the public interest, as excessive disputes harm consumers, manufacturers, and innovation.
To reiterate: to serve the public interest, litigation must be minimized: whether byjudicial cooperation to harmonize rulings, knowledge and best practice exchanges or arbitration mechanisms. Transparency in licensing terms and recognition of patent exhaustion would balance SEP holders’ and implementers’ interests, ensuring affordable access to standardized technologies while rewarding innovation.
To promote comity, jurisdictions should adopt judicial self-restraint, soft law guidelines, arbitration, drawing on Bluetooth’s model to standardize rates and reduce conflicts. These solutions balance innovation, competition, and access, ensuring patents serve the public res. By addressing disproportionate royalties and recognizing global repercussions, the SEP licensing ecosystem can achieve fairness and stability, fostering a competitive, consumer-friendly market.
Background: Patents, Competition, Standards, and SEPs
Rationale for Patents and Promotion of Public Knowledge: Patents are legal instruments that grant inventors a temporary monopoly, usually 20 years from the filing date, to exclude others from making, using, selling, or importing their invention without permission. In exchange, inventors must publicly disclose the technical details of their invention in the patent document, contributing to the global pool of technical knowledge. This disclosure is a cornerstone of the patent system, enabling other inventors, researchers, and businesses to study, improve upon, or design around the patented technology, thereby fostering cumulative innovation. See Lemley, Patenting Nanotechnology (2005). The U.S. Constitution (Article I, Section 8, Clause 8) encapsulates this objective, authorizing Congress to “promote the Progress of Science and useful Arts” by securing exclusive rights for inventors. Similarly, international frameworks like the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) emphasize the balance between incentivizing innovation and disseminating knowledge.
By requiring disclosure, patents prevent inventors from relying on trade secrecy, which could stifle technological progress by keeping innovations hidden. TRIPS signatories, from developing countries such as India and Brazil were aware that monopoly power conferred by patents could be abused, leading to market domination and anti-competitive practices. See also, UNESCAP read with Competition Policy and Abuses in the Trips Agreement.
In SEP/FRAND disputes, disproportionate royalty demands, risk creating monopolistic barriers, inflating costs for implementers and end consumers. The public interest rationale is particularly critical in SEP contexts, where patents are essential to standards that underpin global industries. Without FRAND commitments, SEP holders could exploit their monopoly to demand exorbitant royalties, undermining the standard’s adoption and harming consumers. An emphasis on public interest aligns with the need to ensure SEP licensing promotes competition and accessibility, avoiding the “patent peonage” that burdens smaller implementers.
Competition law, known as antitrust law in the United States, is designed to maintain open and competitive markets by preventing monopolistic practices that harm consumers through higher prices, reduced innovation, or limited access to goods and services. In the US, the Sherman Antitrust Act (1890) prohibits monopolization (Section 2) and restraints of trade (Section 1), while the Clayton Act (1914) addresses anti-competitive mergers and practices.
In the European Union, Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) prohibit anti-competitive agreements and abuse of dominant positions, respectively. See, in general, The Slogans and Goals of Antitrust Law, Herbert Hovenkamp, Legislation & Public Policy. Similarly, China’s Anti-Monopoly Law (AML, 2008) similarly targets monopolistic conduct, with a focus on protecting domestic industries.
In SEP/FRAND disputes, competition law intersects with patent law when SEP holders engage in hold-up, demanding excessive royalties to exploit their essential patents, or when implementers practice hold-out, delaying or refusing to take licenses to avoid royalties. Both behaviors disrupt market competition and standard adoption. For example, in Huawei v. InterDigital (2013), China’s AML was invoked to challenge InterDigital’s high royalty demands for 3G SEPs, resulting in a 0.019% rate, ensuring market access for Chinese implementers.
Antitrust law also addresses the tension between patent patent exclusivity and market access. While patents grant a legal monopoly, competition law ensures this monopoly does not unduly harm consumers or competitors. The European Court of Justice’s ruling in Huawei v. ZTE (2015) established a framework for SEP negotiations, requiring SEP holders to offer FRAND terms before seeking injunctions, balancing patent rights with competition. This framework prevent patents from becoming tools of market domination, ensuring that SEP licensing supports rather than undermines competition in the market (rivalry among implementers within a standard, e.g., handset makers for 5G) and competition for the market (rivalry between standards, e.g., 5G vs. WiMax).
Technical Standards
Technical standards are agreed-upon specifications that ensure interoperability, compatibility, and performance across devices and systems. For example, the 5G standard, developed by ETSI and 3GPP, enables global mobile networks to support high-speed data, low latency, and massive device connectivity, critical for smartphones, autonomous vehicles, and smart cities. Contreras (2018) . Similarly, HEVC, standardized by MPEG LA, ensures efficient video compression for 4K/8K streaming, while Bluetooth, managed by the Bluetooth SIG, enables short-range wireless connectivity for IoT devices, wearables, and audio peripherals . Standards are developed through collaborative processes involving industry stakeholders, SSOs, and patent holders, who contribute patented technologies to create a unified framework.
Standards reduce development costs, eliminate redundant technologies, and drive market adoption by ensuring devices from different manufacturers work seamlessly. For example, a 5G smartphone from Samsung can connect to a Nokia base station because both adhere to the same standard. However, standards often incorporate SEPs, requiring licensing to avoid infringement. Without FRAND commitments, SEP holders could block standard implementation, undermining interoperability and competition. The success of standards like Bluetooth, with over 5 billion devices shipped annually, demonstrates the importance of accessible licensing. Contrast this with the fragmented licensing of HEVC/AAC, with multiple patent pools and high royalties, slows adoption and fuels disputes.
SEPs are patents that are technically essential to implementing a standard, meaning compliance with the standard inevitably infringes the patent. SEP holders declare their patents to SSOs, committing to license them on FRAND terms to ensure broad access. For example, if an entity has a patent on a particular 5G modulation technique, that patent is an SEPs, as no 5G device can function without infringing that particular patent (that modulation scheme is a must for 5G).
Similarly, if an entity has SEPs for HEVC video encoding, these patents are essential for compliant streaming devices. FRAND commitments prevent hold-up, where SEP holders demand excessive royalties, and ensure non-discriminatory access, allowing implementers of all sizes to adopt the standard.
An easier way to understand standards and SEPs in communication technologies such as 2G, 3G, 4G, 5G, IoT etc. is to consider ‘what leaves the handset or terminal’ / ‘what enters the handset or terminal’ is standard essential. Some examples, should help: What Leaves the Handset (Signal): This includes technologies like modulation (e.g., OFDM in 4G/5G), encoding, or signal formatting that enable a device to send data over a network. This signal how a device formats signals for transmission. What Enters the Handset (Signal): This covers technologies for decoding, demodulating, or processing incoming signals to ensure compatibility with the network. For example, a 5G device must use patented error-correction or channel-coding techniques to interpret incoming data, making those patents SEPs. This framework highlights that SEPs are tied to the essential input/output functions of a device’s communication with a network, simplifying the complex patent landscape for standards like 2G (GSM), 3G (UMTS), 4G (LTE), 5G (NR), or IoT protocols (e.g., NB-IoT, MQTT).
Disputes may arise when parties disagree on FRAND terms, including royalty rates, licensing scope (global vs. territorial), and compliance. Disproportionate royalty demands have the possibility to exclude smaller implementers, while hold-out by implementers, delays licensing and harms SEP holders. These disputes often span jurisdictions, with courts applying different legal standards, leading to conflicts over choice of law, jurisdiction, and enforcement, exacerbated by economic priorities—manufacturing hubs like China prioritize implementers, while IP-centric jurisdictions like Germany favor SEP holders.
Historical Context
Market Dynamics: In late 1990s and early 2000s, the market was dominated by phones from Nokia, Motorola, and Ericsson, with large players able to afford licensing fees or negotiate cross-licenses. Litigation was primarily confined to US and EU courts, with limited jurisdictional conflicts due to the concentrated nature of the industry. ee Lemley, Mark A. and Shapiro, Carl, Patent Holdup and Royalty Stacking.
Late 1990s–Early 2000s: The Rise of Qualcomm, Ericsson, and Nokia SEP disputes emerged in the late 1990s with the proliferation of 2G (GSM) and 3G (CDMA, UMTS) mobile telecommunications standards, driven by the rapid growth of mobile phones. Major players like Qualcomm, Ericsson, and Nokia held significant SEP portfolios, controlling key technologies for mobile connectivity.
Qualcomm’s CDMA Dominance: Qualcomm’s patents on Code Division Multiple Access (CDMA), a 3G standard, gave it substantial leverage. Disputes with Nokia and Ericsson arose over Qualcomm’s high royalty demands, often exceeding 5% of device price, raising hold-up concerns. In 2005, Qualcomm settled with Nokia through cross-licensing, but the high royalties set a precedent for FRAND disputes. discussing in general FRAND disputes.
Ericsson vs. Nokia (2003): Ericsson sued Nokia in US and EU courts for infringing 2G GSM SEPs, alleging Nokia’s devices used its modulation patents without a license. The dispute settled with a licensing agreement, highlighting early tensions over FRAND terms.
Economic and Legal Context: These early disputes laid the groundwork for global SEP conflicts, as economic power imbalances favored large SEP holders. Post 2010 onwards, cheaper phones were available and alongwith it came, escalating jurisdictional conflicts. The 2000s marked a transformative shift in the mobile industry, with smartphones becoming affordable and accessible, driven by China’s emergence as the world’s leading phone manufacturer. By 2024, Chinese firms like Huawei, Oppo, Xiaomi, and ZTE produced about 60% of global smartphones, leveraging low-cost production and razor thin margins to capture emerging markets.
Contrast this with SEP owners who claimed royalty as a percentage of net selling device price, often 2–5%. For example, in Huawei v. InterDigital (2013), Huawei challenged InterDigital’s 2% royalty demand for 3G SEPs, leading to a Chinese court setting a 0.019% rate under AML, prioritizing market access. Thus, emerged jurisdictional conflicts. China’s courts began asserting influence, issuing ASIs to block foreign litigation, as in Huawei v. Conversant where the Supreme People’s Court issued an ASI to prevent Conversant from enforcing EU injunctions. These ASIs clashed with Germany’s injunctions, as in Sisvel v. Haier, where the Federal Court of Justice granted an injunction against Haier for bad-faith negotiation. India’s pro tem deposits, as in Nokia v. Oppo, further complicated the landscape, attracting patentees but prompting implementers to seek Chinese ASIs.
See also Anti-Suit Injunctions and Jurisdictional Competition in Global FRAND Litigation: The Case for Judicial Restraint, available here.
Comparing EPO and USPTO Approaches to AI/LLM Usage
- Skeptical Stance on LLMs: The T 1193/23 decision (section 1.1.1) explicitly rejects LLMs as proxies for the skilled person, citing their opaque training data and query sensitivity. The EPO requires LLM evidence to be substantiated with technical literature, emphasizing human expertise.
- Person Skilled in the Art: The EPO defines the skilled person as a hypothetical expert with general knowledge in the field, relying on prior art and standard practices. LLMs fail to meet this standard due to their lack of technical grounding (T 0206/22).
- Procedural Rigor: The EPO’s Rules of Procedure of the Boards of Appeal demand robust evidence, as seen in T 1193/23’s dismissal of unsubstantiated ChatGPT responses. AI tools might be permissible as supplementary aids but not authoritative sources.
- Policy Context: The EPO’s cautious approach aligns with its strict patentability criteria (e.g., Articles 54, 56 EPC), prioritizing technical contribution and clarity in claim interpretation.
- Pragmatic Embrace of AI: The USPTO has embraced AI tools to enhance efficiency, as seen in initiatives like the AI-based Patent Search System. However, no explicit guidance equates LLMs with the skilled person, and their use in legal arguments remains untested in precedential cases.
- Person of Ordinary Skill in the Art (POSA): The USPTO’s POSA, defined under 35 U.S.C. § 103, is similar to the EPO’s skilled person, requiring ordinary creativity in the field. Courts (e.g., KSR v. Teleflex, 2007) emphasize human judgment, suggesting LLMs would not qualify as POSAs without substantiation.
- Flexible Evidence Rules: The USPTO’s Manual of Patent Examining Procedure (MPEP) allows diverse evidence, including technical publications and expert declarations. LLM outputs could be admissible if corroborated, as seen in reexamination or PTAB proceedings, but no case directly addresses this.
- Policy Context: The USPTO’s focus on innovation, as outlined in its 2024 AI Guidance, encourages AI use in patent examination (e.g., prior art searches) but maintains human oversight. The guidance does not address LLMs in legal arguments, leaving room for flexibility compared to the EPO’s stricter stance.