The Royalty Rate Is FRAND or Excessive? The Practice in the EU, China, and the Applicability of Selected Economic Models

Abstract

Excessive pricing would raise competition concern not only in the EU, but also in China. Dominant undertakings are required, in some refusal-to-license related cases, to license their IPRs on fair, reasonable, and non-discriminatory (“FRAND”) terms. This paper, firstly from a legal perspective, distinguishes two situations involving the concept of FRAND. Then this paper investigates the definition of FRAND concept and the practice respectively in the EU and China. To strike a balance between maintaining competitive market order and providing sufficient compensation for IPR holders, economists have proposed several models, by which the economic value of the IPR at issue could be indirectly calculated and thus a FRAND royalty rate could be determined. However, those models leave many issues open in the real markets and the limitation is particularly obvious in the licensing scenario following an abusive refusal to license ruling.