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Basics & FAQ

  • Abuse of dominant position. :
    See Article 82.
  • Article 81 :
    Article 81 of the Treaty of Rome, later revised to establish European Union, prohibits cartels and other concerted practises against free competition.
  • Article 82 :
    Article 82 of the Treaty of Rome, later revised to establish the European Union, prohibits anticompetitive practices by companies enjoying a dominant position on their market.
  • Cross-licensing :
    Two or more parties license their patents to each other. Often no royalties are paid. Cross-licensing can be used to create a patent pool.
  • Collusion :
    An explicit or tacit agreement between competitors to raise price or lower output. See Article 81.
  • De facto standard :
    Also called as market standard, a de facto standard is a widely accepted technical standard created typically by one company (market leader) without any coordination from a standardization organization. Popular document formats are examples of de facto standards.
  • De jure standard :
    A technical standard created by a standardization organization or a government. Sometimes only government standards are called as de jure standards.
  • Disclosure :
    In standardization process one party informs the other parties of patent applications it has filed. There is no legal requirement to disclose patent applications, which may be secret until the patent office publishes them.
  • Double marginalization :
    Whenever two monopolies producing complementary goods do not coordinate their pricing decisions, the price for the final consumer is two high for it contains two monopoly margins. The setting of a coordination mechanism (i.e., two owners of essential patents pooling their intellectual property rights) will result in a lower price and a higher joint profit.
  • Essential facility :
    Both United States anti-trust and European competition laws include an essential facility, or essential facilities doctrine. According to this doctrine a right holder in a monopoly position (holding an “essential facility”) cannot refuse to license this right to competitors if the refusal harms competition. The doctrine has developed in case law and there are subtle differences between the American and European version.
  • Essential patent :
    Any patent which is necessary to implement a given standard. Standardization organizations may require parties in a standardization process to license essential patents in certain licensing terms such as RAND, FRAND or royalty free.
  • Free software :
    Software licensed with free software licenses. Free Software Foundation may accept licensing terms as free software. One of the requirements is royalty free licensing terms.
  • Grant back
  • A licensing term :
    which requires the licensee of a given technology to license or assign back, usually free of charge, any improvements the licensee has made.
  • Injunction :
    A patent holder may apply a court to issue an injunction against a potential infringer, which usually prohibits the infringer from practicing the patent. In most cases injunctions are preliminary or interlocutory meaning that they are granted in a separate process before an infringement trial, and are applied until the court makes a final decision after the trial. Before a preliminary injunction is granted, it is generally required that the patent holder is able to prove likelihood of success in the upcoming trial and that there would be irreparable harm if the injunction is not granted.
  • Non-assertion :
    Also called as covenant not to enforce or commitment not to enforce patent rights. For example some companies in the software industry have made non-assertion declarations of their patents that apply to certain open source software.
  • Non-practicing entity (NPE) See Patent troll.
  • Open source software :
    Software licensed with open source software licenses. Open Source Initiative is an organization that certifies licensing terms that comply with Open Source Definition as open source. One of the requirements is that the licensing terms are royalty free.
  • Patent ambush :
    A party in a standardization process does not disclose its patent applications may “ambush” other parties. When the standard is accepted and taken into use, that party may enforce its patent against other parties. This practice may against anti-trust or competition laws.
  • Patent fragmentation :
    Fragmentation happens when two or more companies are holding separately patents for a given technology. For example modern technical standards may include hundreds of patents held by a number of companies. Problems emerge when some of the patent holders are not willing to license their patents to others or disagree with licensing terms. Formal standardization processes and patent pools are possible way to tackle the problems of fragmented patents.
  • Patent hold-up :
    By holding up, a patent holder may be able to charge more than the patent is worth from other parties who are committed to use certain technology, which includes the patent.
  • Patent misuse :
    In United States patent law, patent misuse can be used as a defense against an infringement claim. Misuse doctrine has developed in case law. It typically refers to an attempted expansion in the scope of the patent.
  • Patent pool :
    Two or more companies may cross-license patents relating to a particular technology and then form a patent pool. Usually a separate organization is founded to manage the licensing of the pooled patents to other parties.
  • Patent troll :
    A debated term used for someone who is enforcing patents it holds opportunistically against others. Usually the patent holder does not use these patents for other purposes than enforcing. Sometimes such patent holders are called as non-practicing entities (NPE)
  • RAND/FRAND :
    Licensing terms may include a “Reasonable And Non-Discriminatory” or “Fair, Reasonable, and Non-Discriminatory” obligation. Several standardization organizations require that any patents included in the standard (essential patents) must be licensed with RAND or FRAND terms. In that case parties in the standardization process may commit into RAND or FRAND licensing terms. The exact meaning of these terms is subject to debate. It is usually thought that “fair” refers to anti-trust compliance, “reasonable” refers to royalty rate, and “non-discriminatory” refers to equal treatment. There is no accepted legal definition for RAND or FRAND.
  • Refusal to license :
    See Essential facility.
  • Royalty free :
    Licensing terms may include a royalty free (or RF) obligation. Some standardization organizations require that any patents included in the standard (essential patents) must be licensed with royalty free terms. Strictly speaking royalty free licensing terms may include other payment obligations such as a one-time fee.
  • Royalty stacking :
    If one company has to license patents from multiple parties in order to bring a product to market, this may lead to royalty stacking. The company will have to bargain and sign several licensing contracts. Moreover, if patents are essential the company will be confronted with the double marginalization issue. Eventually, the combined royalties may make the final product unprofitable.
  • Sherman Act Section 1 :
    A part of United States anti-trust law, which prohibits contracts and agreements that restrain trade unreasonably.
  • Sherman Act Section 2 :
    A part of United States anti-trust law, which prohibits monopolization and attempted monopolization.
  • Standardization organization :
    Also called as a stand-setting organization, is a legal body under whose rules parties agree on new technical standards.
  • Statement of objections :
    European commission may send a document called statement of objections to a company it suspects may not comply with competition laws. Sending this kind of document does not necessarily mean the Commission will be pursuing formal competition law enforcement against the company.