NAIP Patent Blog

Background

Purpose & Function

1. Provide contributors incentive to reveal and contribute technologies (through opportunities to maximize and optimize market price and volume).

2. Allow SSOs to select and implement the best available technologies.

3. Ensure a competitive outcome in a potentially monopolistic/oligarchic market that might result from the setting of a standard.

Implementation

When an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licenses on fair, reasonable and non-discriminatory terms and conditions under such IPR to at least the following extent:

● MANUFACTURE, including the right to make or have made customized components and sub-systems to the licensee's own design for use in MANUFACTURE;
● sell, lease, or otherwise dispose of EQUIPMENT so MANUFACTURED;
● repair, use, or operate EQUIPMENT; and
● use METHODS.

"Defining" FRAND

• By employing FRAND terms, IPR holders are in a position to attract more licensees and to generate more royalties.

• Standards (ex. Mobile phone industry), which use FRAND licensing terms are used by huge numbers of manufacturers, increasing the potential royalty income for a holder of an essential patent in that standard.

• By employing FRAND terms, IP holders are in a position to negotiate cross-licenses with licensees, thereby strengthening their own patent portfolios.

• Under anti-trust/anti-competition legislation in various countries and/or regions, IPR holders can be forced to license their exclusive patent rights under FRAND terms.

• The terms of the licensing agreement are restricted by the FRAND limitations.

• FRAND creates uncertainty – there is no universal guideline as to what FRAND means – every licensing deal should be dealt with separately.

• FRAND terms provide licensees with the right to demand a license to essential patents – on condition that such patent(s) are essential to the standard.

• Licensing under FRAND terms has a lower transaction cost than separate licensing.

• One-stop shopping for licensees – by obtaining licenses to the essential patents of a standard, licensees avoid the time-consuming exercise of searching individual patents which might be infringed by the technology.

• Decreased risk of infringement.

• Cross licensing opportunity with IPR holder (if the licensee has essential patents of his own).

• FRAND terms are uncertain/ambiguous – royalty rates are not clear and "fair and reasonable" is usually not defined.

• Collusion by IPR holders, who are members of a patent pool or standard setting body, may easily appear.

• IP holders may manipulate the standard setting process: they may wait for a wide adoption of the standard before disclosing their patent and then charging excessive royalty fees to those who employ the standard.

• FRAND terms can be used to force a licensee to buy a patent that they don't really need.

• Standards are open to all who can afford the FRAND terms.

• Pooling patents and licensing them under FRAND terms can be welfare enhancing.

• FRAND terms may impact fair trade by monopolizing the market and fixing prices.

• Quantifying FRAND is very hard – the uncertainty of fair and reasonableness leaves the door open to disputes that are difficult to judge.

1. To encourage research and investment, amendments have relaxed the requirements for extension of patent term requests. Currently, applying for patent term extension under the current Patent Act requires having had a minimum two-year delay in entering the market due to government approval procedures. In keeping with the concept of using patent term extensions to compensate for lost capitalization opportunities, the minimum two-year threshold will be eliminated.
   
   
*Note: other countries such as Japan, Korea, the United States, Germany and the United Kingdom have no minimum delayed time period requirement.


2. A pharmaceutical product, i.e. a drug or an agricultural product, may often have more than one application. However, to prevent abuse of the system—by continually applying for patent term extensions for different applications—an extension of patent term may now officially only be granted once and valid only for the application specified. For example, when an invention includes two claims, as an antiseptic and as an insecticide, if the patent term of the antiseptic is granted an extension with an agricultural permit, protection for the invention’s application as an insecticide may NOT be extended.



3. Extension of patent terms may now no longer be accepted for veterinary drugs.



4. Research on a generic drug does not violate the patent rights of the corresponding brand-name drug's IPR holder. In addition, so-called "listing trials" are not considered a form of research and not required for approval of a market license.



5. In order to cope with international emergencies, or to make non-profit-seeking use of a patent for enhancement of public welfare for developing countries and least developed developing countries that may not manufacture drugs within their countries, the Patent Authority may, upon an application, grant a right of compulsory licensing to the applicant to put the patented invention into practice; provided that such practicing shall be restricted mainly to the purpose of satisfying the requirements of the specific market with limited quantities.