SEP/FRAND Disputes: Arbitration or Litigation?

Disputes as to the licensing of standard-essential patents (SEP) and determination of fair, reasonable and non-discriminatory (FRAND) terms are typically resolved through either negotiation or litigation in national courts. However, international arbitration is increasingly being used as an alternative to litigation, a trend endorsed in recent statements by both the U.S. Patent and Trademark Office and the U.K. Government.

Depending on the circumstances, arbitration may have significant advantages – for example, it may reduce the likelihood of parallel proceedings in multiple jurisdictions and of extensive discovery, and may increase the likelihood of a suitably neutral and expert tribunal and of a swifter and cheaper route to a final determination. Equally, there may be benefits in referring some issues to arbitration and others to litigation (e.g. parties might agree to arbitrate disputes about whether the relevant technology is covered by SEPs and/or what the FRAND price/rate should be, leaving any issues around infringement and invalidity for subsequent litigation).

Both sides need to agree on arbitration in order for this route to be available. Therefore, when SEP/FRAND disputes arise it is important that patent owners and prospective licensees have in mind that there may be an option to litigate or arbitrate, be in a position to weigh-up which route or combination of routes is to be preferred and to engage the other side in discussion before litigation is commenced.

The purpose of this note is briefly to outline the headline considerations that should be taken into account, so that owners and prospective licensees are equipped to make an informed choice. A brief summary of publicly known SEP/FRAND arbitrations is set out at the end of this note.