Introduction
Patent licensing plays a significant role in the advancement of technology. Some patented inventions have over time become so fundamental to an industry that they have been declared as a standard in that industry. Such patents are known as Standard Essential Patents (“SEPs”). Given the importance of SEPs in technological advancements, licensing an SEP raises unique legal and commercial issues that do not arise in ordinary patent licensing.
In this article, we examine the concept of FRAND licensing for SEPs, the legal principles underpinning FRAND commitments, the commercial dynamics of FRAND negotiations, and the key issues that continue to shape this area of patent law.
What is FRAND?
FRAND stands for “Fair, Reasonable And Non-Discriminatory.” It is a legal mechanism that requires an SEP owner to grant licenses over their SEP to prospective licensees or implementers. Under the FRAND System, an SEP owner gives a voluntary undertaking that if any licensee or implementer intends to use the SEP, the SEP owner will grant them a license to do so on terms which are fair, reasonable, and non-discriminatory to them. The FRAND undertaking is a unilateral commitment by the SEP owner such that it can be enforced by any implementer who desires to use the SEP.
Common Terms in FRAND Licensing
Technical Standards
A Technical Standard (“TS”) is an agreed standard required for different products to interact with one another. Put simply, a TS is the minimum agreed standard for a product in an industry. The reason for prescribing TS is to ensure interoperability. If different products do not have a uniform standard, it may be difficult for them to interact with one another, and a product from one manufacturer cannot interact with one from another manufacturer, despite serving the same purpose. Take for example the GSM Technology which is found in most mobile phones. GSM technology is a TS in the mobile telecommunications sector. Thus, any person who manufactures mobile phones has to implement it, otherwise their product may not be able to interact with other mobile phones. So, a Samsung user for instance, can place a call from their phone, and the recipient who uses a Nokia phone will receive the call. The reason is because both devices run with the same GSM technology, thereby creating interoperability.
Standard Development Organizations
Standard Development Organizations (“SDOs”) are regulators/bodies that prescribe the applicable TS for an industry. SDOs usually involve industry players coming together on a large scale. Once developed and agreed upon, all operators in the industry are expected to implement the TS. In Nigeria, the regulators of the various industries can double as the SDOs being the ones statutorily empowered to prescribe the standards of operations in their respective industries. In the communications sector for instance, the Nigerian Communications Commission can easily pass as the SDO. In advanced jurisdictions like the UK and US, SDOs often have an Intellectual Property Policy (“IPP”) which requires implementers of a TS to declare when their inventions are covered by an SEP. On November 6, 2025, The Federal Executive Council of Nigeria also approved its own IPP, but it has no provision in relation to FRAND licensing1.
The Three Pillars: Fair, Reasonable, and Non-Discriminatory
FRAND Licensing operates on three pillars in the sense that a license must be “fair”, “reasonable” and “non-discriminatory”. These are not three independent obligations. In Unwired Planet International Ltd. v. Huawei Technologies Co. Ltd. (2020) UKSC 37, the UKSC described it as a “unitary” obligation and not three independent obligations. In some jurisdictions like the US, it is also referred to as “RAND” i.e. “reasonable” and “non-discriminatory”, although both terms are used interchangeably.
What is Fair?
The word “fair” cannot specifically be defined. However, according to Blacks Law Dictionary2, it refers to an act which is characterized by honesty, impartiality and candour. Using this definition, a fair license is one which is impartial to both parties. From a competition and anti-trust legal perspective, fair terms could mean terms that are neither anti-competitive nor unduly restrictive in nature. What is fair is a question of fact to be determined on a case-by-case basis.
From a finance/economic perspective however, the concept of “fairness” is approached differently using a metric that allows for more precision. Finance professionals and economists use the concepts of “reservation price” and “surplus” to determine a fair transaction. Under this approach – which was propounded by Robert Frank of Cornell University, United States,3 finance professionals and economists derive a more operational definition of a “fair” transaction. According to Robert Frank, “a fair transaction is one in which the surplus is divided (approximately) equally. The transaction becomes increasingly unfair as the division increasingly deviates from equality.” To explain this concept, consider the hypothetical license transaction below.
X is an SEP owner who is willing to grant a license to Y over the use of an SEP, WiFi technology. X is willing to grant the license for at least $10m while Y is willing to take the license for at most $15m. Each party’s bargaining position is unknown to the other.
The “reservation price” for the transaction is the worst amount which X and Y are willing to offer/take for the license. In this case, X’s reservation price for granting the license is $10m while Ys reservation price for obtaining the license is $15m. The “surplus” on the other hand is the difference between the two reservation prices, in this case is $5m.
Now, assuming that after negotiations, X eventually grants the license to Y for $12.5m, X acquires a surplus of $2.5m above his reservation price of $10m. Y on the other hand also acquires a surplus of $2.5m below his reservation price of $15m (it is a surplus for Y because he was willing to pay more if X had insisted). Both parties therefore have an equal distribution of the surplus at $2.5m each. Since both parties have an equal distribution of the surplus, this is a perfectly fair transaction. If the surplus was distributed at the rate of $3m to $2m between X and Y respectively, the transaction will still be slightly fair (although less fair than the previous example where there is an equal distribution). Here, the distribution is approximate.
On the other hand, the larger the difference in the distribution of the surplus, the more unfair the transaction would be. Thus, if for instance X eventually granted the license to Y for $14m, he would have acquired a $4m surplus above his reservation price of $10m, while Y on the other hand acquires only a $1m surplus below his reservation price of $15m. In this case, the surplus is neither equally nor approximately distributed, and the transaction would be considered unfair.
What is Reasonable?
Reasonability relates mainly to the licensing rate. It requires that the royalty and other amounts payable by the licensee as consideration for the license must reflect the current market rates in the industry for similar licenses, otherwise it would be unreasonable. See Georgia Pacific Corp. V. Unites States Plywood Corp. 318 F. Supp. 1116. This is also a question of facts.
What is Non-Discriminatory?
The requirement of “non-discrimination” means that all licensees must be treated equally by the SEP owner. This does not mean that the rates and payment terms cannot change dependent on the nature of the license and creditworthiness of the licensee. It only means that the underlying conditions included in a licensing agreement must be the same or at least similar regardless of the licensee. This obligation is included in order to ensure that potential implementers are free to enter the market on the same basis.
Why FRAND Matters
FRAND licensing is important because it balances the private interest in patent rights against the public interest in technological advancements. On the one hand, FRAND licensing prevents what is known a “hold up” situation. A “hold up” occurs when SEP owners use the threat of an injunction/infringement to extract unfair license terms from prospective implementers. It also prevents what is known as “hold out” situation. A “hold out” occurs when a prospective implementer tries to use an SEP without obtaining the relevant license from the SEP owner. These are explained in more detail under the legal principles guiding FRAND obligations below.
Standard Essential Patents and FRAND Obligations
As already noted in the Introduction, sometimes a patented invention is declared as a TS for an industry. When this happens, the invention becomes a Standard Essential Patent (SEP), and all industry players are required to implement it. The owner of an SEP enjoys a certain monopoly above the ordinary patentee. What then happens for instance, when a person desires to implement a TS, but the SEP owner refuses to grant them a license? The implementer cannot use the SEP without acquiring liability for patent infringement. On the other hand, if they do not use the SEP, their own invention cannot be developed or even if developed, will lack interoperability with other products. In order to deal with this situation, patent law evolved to place an obligation on the SEP owner to grant a license to the implementer, such license to be granted on fair, reasonable and non-discriminatory terms (otherwise known as FRAND terms).
In Unwired Planet International Ltd. v. Huawei Technologies Co. Ltd. (2020) UKSC 37, the UK Supreme Court summarized the legal principles guiding the grant of licenses on FRAND terms. We refer to these principles as FRAND obligations, and they are set out below:
- Patents are territorial in nature because they are created by the municipal law of a State. As such, a patentee can only claim exclusive rights within the territory where they have a patent but not outside it. SEPs can therefore only be enforced in the territory where they are declared but not outside it.
- To become an SEP, a patentee is required to provide an irrevocable legal undertaking to grant to an implementer (the licensee) a license over the SEP on FRAND terms. This is known as a FRAND undertaking. If they do not provide this FRAND undertaking, their patent will not be incorporated as an SEP, and another technology will be used. Since TS are global in nature, the FRAND undertaking is a global one and can be cited by any implementer.
- If the implementer is unwilling to take the license on FRAND terms, the SEP owner’s FRAND undertaking is discharged, and the implementer becomes liable to an injunction restraining them from using the SEP. This prevents a “hold out” situation by affording a remedy against unwilling licensees. On the other hand, if the SEP Owner is unwilling to grant the license on FRAND terms, the implementer is entitled to use the SEP on FRAND terms. If the SEP owner sues for infringement or an injunction, their FRAND undertaking to the SDO is a complete defence to the action. This prevents a “hold up” situation by affording a remedy against unwilling licensors who may want to grant licenses on outrageous terms.
In November 2025, the mobile communications giant company Ericsson sued Transsion, China’s fourth-largest smartphone supplier, in an unprecedented SEP litigation filed at the Federal High Court, Lagos Division, Nigeria, over some patents involving 4G and 5G technology. The suit was also filed in other countries including Brazil, India, and the Unified Patent Court. According to Ericsson in its official statement of November 14, 20254, they have been in discussion with Transsion since August 2017 where they made some FRAND offers to Transsion in accordance with their FRAND commitments. However, Transsion continued to reject those FRAND offers which makes them an unwilling licensee and entitles Ericsson to take legal action for an injunction. However, on July 8, 2026, Ericsson announced that it had reached a global settlement with Transsion on the dispute and that all pending suits will be withdrawn globally5. The case, if decided, would have been the first judicial precedent on SEP litigation in Nigeria. - An unwilling licensee or licensor cannot invoke the jurisdiction of the Court to determine what terms are (F)RAND. Only a willing licensor or licensee can do so.
- FRAND terms are determined objectively, not subjectively. FRAND terms are those that would be agreed by a reasonable willing licensor and licensee in a hypothetical transaction. The real question is whether the terms agreed by the parties is in law FRAND, and not whether the parties have agreed to it. As Lord Justice Arnold of the English Court of Appeal put it in Lenovo v. Ericsson (2025) EWCA Civ. 182 at par. 21 “...to decide willingness, one first has to determine what rate is FRAND and then find out who is willing or unwilling to license at the FRAND rate.” See also Alcatel v. Amazon (2025) EWCA Civ. 43.
- FRAND licensing operates based on a functional dispute resolution system. In some cases, FRAND terms can be agreed between the parties. When that is the case, there is hardly any dispute because both parties are bound by their contract to the extent permitted by law. On the other hand, when the parties cannot agree on what constitutes FRAND terms, a dispute resolution system is required to resolve the dispute. This could be by arbitration, mediation, or even litigation in the court of competent jurisdiction.
Current Challenges/Emerging Trends
One of the major challenges with FRAND licensing is the territoriality of patents and by extension, SEPs. As already stated, an SEP owner cannot sue for infringement of their SEP in another jurisdiction unless they have it declared as such in that jurisdiction. Without being protected as an SEP, there is no FRAND obligation. The implication is that SEP owners have to file and enforce their SEPs separately in each jurisdiction. This creates a tactical weapon in the hands of implementers who can simply exploit an SEP without a FRAND license in a jurisdiction where there it is not locally protected as such. It also places a burden on patentees to sue in each of those jurisdictions. As Lord Justice Arnold of the English Court of Appeals put it in Lenovo v. Ericsson (supra), the result is a “war of attrition” between patentees and implementers which tends to favour the latter.
To avoid this problem, SEP owners simply sought declarations in the Court of one country that FRAND obligations are global, which an implementer must either accept or face exclusion from that country’s market by an order of injunction. This approach will, at least in theory, exclude the necessity for independent enforcement in each jurisdiction (since the FRAND obligations are global). But the problem remains that most patent infringement claims are met with a defence of invalidity. A Court however has no jurisdiction to determine the validity of a patent granted by another country6. When such defence arises, proceedings have to be stayed for a “technical trial” where the issue of validity will be determined by the court of the country which granted the patent, after which the infringement proceedings can resume. This in turn prolongs the enforcement process.
There is also the more recent question of whether a willing licensor has an obligation to grant an “interim license” to a licensee pending the determination by the Court or other tribunal of what terms are FRAND for a final license. This question was considered by the English Court of Appeal in Panasonic v. Xiaomi (2024) EWCA Civ. 1143 and more recently in Lenovo v. Ericsson (supra). In that case, Xiaomi requested that Panasonic grant them an interim licence pending entry by the parties into the final licence agreement after the determination by the Patents Court of what terms are FRAND. Panasonic refused, even though Xiaomi offered to pay royalties for the interim licence. Xiaomi applied for a declaration that a willing licensor in the position of Panasonic would grant them an interim licence. Leech J. refused Xiaomi’s application, but the English Court of Appeals allowed Xiaomi’s appeal and made the declaration thereby affirming the obligation of the licensor to grant an interim license.
Conclusion
FRAND Licensing balances the private interest of SEP owners with the public interest in technological advancements. Through FRAND undertakings, it is guaranteed that implementers will have access to patented technology, while the SEP owners themselves will receive fair and reasonable remuneration of their inventive efforts.
Footnotes
1 WIPO, Nigeria’s Federal Executive Council Approves its National Intellectual Property Policy and Strategy https://www.wipo.int/en/web/office-nigeria/w/news/2025/nigeria-s-federal-executive-council-approves-national-intellectual-property policy-and-strategy
2 Garner B.A., Blacks Law Dictionary 9th Ed.
3 Robert H. Frank, Passions Within Reason: The Strategic Role of the Emotions 165 (W. W. Norton & Co. 1988)
4 Ericsson compelled to take legal action against Transsion https://www.ericsson.com/en/news/2025/11/ericsson-compelled-to-take-legal action-against-transsion
5 Ericsson, Transsion settle global patent litigation https://www.ericsson.com/en/news/2026/7/ericsson-and-transsion-settle-global-patent litigation
6 See the decision of the Court of Justice of the European Union in BSH v Electrolux case (Case C-339/22)
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