UK Government rejects FRAND Rate Determination Track in favour of transparency and early dispute resolution measures

The UK has become a leading forum for disputes over standard-essential patents (SEPs) - patents covering technology needed to comply with standards such as 5G, Wi-Fi and video coding, which owners commit to license on fair, reasonable and non-discriminatory (FRAND) terms. Such cases can take years and involve several costly trials. The Government, following consultation with stakeholders about possible changes to the SEP dispute resolution framework, has published a package of targeted, incremental measures.

The end of the Rate Determination Track proposal

The consultation’s headline proposal was a ‘Rate Determination Track’ in the Intellectual Property Enterprise Court, offering a quicker, cheaper route to setting FRAND rates where infringement, essentiality and validity were not disputed. Respondents broadly supported that aim, but no consensus emerged in favour of the track itself. The Government has abandoned it, for three main reasons:

• Separating the issues: rate-setting is difficult to isolate in practice from wider disputes over infringement, validity and essentiality.
• Complex evidence: FRAND valuation is evidentially and methodologically complex and does not suit a streamlined process.
• Speed versus quality: a standalone track risked not delivering the promised time savings, while prioritising speed and cost could undermine the quality of outcomes and confidence in the system.

The Government also concluded that the courts already have the procedural powers they need; the problem is that these are not used early or consistently enough in SEP disputes.

What replaces it?

The Government intends instead to develop three measures, each aimed at a different stage of a dispute and designed to work as a package:

• Court-anchored early neutral evaluation (ENE): working with the judiciary, the Government will explore a structured process in which a judge gives the parties an early, non-binding view on FRAND terms within existing proceedings, building on the court’s case management powers. Options include a pilot practice direction, an automatic stay in suitable FRAND cases to allow evaluation or other ADR, and costs consequences for parties that fail to engage constructively. Parties could still proceed to trial if no settlement is reached.
• Potential IPO FRAND opinion service: the Intellectual Property Office (IPO) will consult this autumn on a voluntary, non-binding service indicating whether a licence offer falls within a plausible FRAND range. It would not rule on validity or infringement, set a binding global rate or replace the courts. If feasible, it would be piloted and may require legislation.
• FRAND guidelines: non-binding guidelines, developed with stakeholders, will explain how parties should use the new measures together, encouraging more consistent and predictable use of existing processes without prescribing outcomes.

In practice, the opinion service could help parties test offers before a dispute escalates, while early evaluation would give litigating parties a judicial steer well before trial, with the guidelines linking the two.

Transparency measures

Patent owners will be invited to file standard-related patent information voluntarily with the IPO, creating a central searchable source of SEP information for future standards. Mandatory disclosure may be revisited if take-up is poor – we expect that a mandatory disclosure regime may ultimately be necessary to ensure the database is sufficiently comprehensive, although further safeguards would be needed to ensure the accuracy of the information provided. Separately, the Government will look, with the judiciary, at a targeted approach to encourage earlier information exchange before litigation, within the existing court rules.

What remains unchanged?

• Injunctions:  no reform; the current framework is considered broadly adequate. Negotiation guidance will address bad-faith tactics instead.
• Essentiality checking: no IPO-run service for now.
• ADR:  no new SEP mediation or arbitration service; guidance and signposting will be improved instead.

Comment

The Rate Determination Track was an ambitious proposal, which would have been complex to create and with no guarantee that parties would use it as intended (or at all).  It is not a surprise that no consensus was reached for its introduction. The Government’s ENE alternative is more pragmatic, although it remains to be seen whether it will have a material impact on resolving FRAND disputes.

The Government’s efforts to streamline FRAND disputes reflect the apparent sentiment of the High Court judiciary, with Lord Justice Arnold being the most outspoken advocate of alternative solutions. For example, in Optis v Apple, he described the existing system as “dysfunctional” and called for binding arbitration through standard-setting organisations.

The Government’s proposals seek to make the existing system work better, rather than fundamentally changing it. While they may achieve that limited aim, they do not address the underlying absence of an effective international dispute-resolution mechanism and while that situation persists Lord Justice Arnold will no doubt continue to give us his views.

Co-authored by Victoria Mitchell, PhD, Trainee Solicitor (Graduate Solicitor Apprentice)