Transparency FRAND: The use (and misuse) of confidentiality obligations in FRAND licensing negotiations

Brussels, February 13, 2017 – Some companies that claim to own standards essential patents (SEPs) demand that the companies they approach for licensing first must enter into broad non-disclosure agreements as a condition of receiving more detailed information about the relevant SEPs and proposed license terms. This paper addresses such practices, and explains that – in order to fairly and transparently assess whether a licensing proposal is or is not FRAND – a potential licensee should be entitled to obtain, without demands for excessive secrecy, details regarding the alleged basis and support for the patent holder’s SEP licensing demands.

To be clear, voluntary provisions regarding confidentiality are certainly permissible. However, the practice of SEP holders forcing potential licensees to accept excessive secrecy (e.g., requirements that the licensee accept extensive non-disclosure prohibitions as a condition of entering into negotiations) can be unfair and unreasonable. In addition to harming the particular licensees involved, such practices can interfere with FRAND’s basic public interest function, and the goal of ensuring a robust, fair and transparent SEP licensing ecosystem.