SEP licensing: Chief Economist from the European Commission suggests SSOs set stack to help 'top down' approach

On 15-17 June 2021, Concurrences is hosting a conference on the hot issues in IP and antitrust, and on the first day of the conference, the topic was FRAND licensing of SEPs and the value of IP. 

Pierre Régibeau, chief economist, Directorate-General (DG) for Competition of the European Commission gave the keynote speech. The conference and speakers all had interesting thoughts, leading to a spirited discussion, but (perhaps inevitably) it is the thoughts of Mr Régibeau of the European Commission that are of particular interest.

Not unexpectedly, Mr Régibeau expressed his view that licensing at a single level in the value chain makes sense, whereas licensing at multiple levels does not, though he felt this was a distraction from the actual issues. His suggested practical solution to achieving a fair distribution of licensing fees was to focus on a 'top-down' approach to licensing. Standard Setting Organisations (SSOs) could establish a (non-binding) value for the total royalty stack. Presuming judicial (and other) decision makers took that on board, that stack could be divided across SEP holders, with appropriate weighting to reflect different factors such as relative portfolio strength.

It is certainly intriguing to have a glimpse into what is going on at the EC, and in particular to find out that the focus was on 'top-down' analysis rather than looking to comparable licences as evidence of what the market has established. The 'top-down' approach has been used by the English Courts, albeit only to date as a cross-check. 

However, the disputes that arise in that regard tend to be more about relative portfolio strength and the allocation of the overall stack to a particular SEP holder, than about what the level of the overall royalty stack should be per se. Accordingly, whilst clarity of the overall royalty stack no doubt would be helpful, how much it would reduce litigation is perhaps open to interpretation.