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Guan Yuying: An Analysis of the Legal Nature of FRAND Declaration by the SEP Holder

Fair, reasonable and non-discriminatory (FRAND) declaration is a written undertaking made by a standard-essential patent (SEP) right holder to a standard-setting organization (SSO) that it has prepared to grant irrevocable license under FRAND terms and conditions to any willing standard implementer. An explicit understanding of the legal nature of such declaration is a basic theoretical issue affecting the approaches to the solution of SEP-related disputes. Currently there is still no consensus either in academic circle or judicial circle on this issue, and the doctrines adopted by the judicial organs in different jurisdictions are also inconsistent and lack enough logic reasoning. The patent policies of the main international communication technology SSOs show that the FRAND declarations are mostly announcements of principles that lack substantive legal commitments. As a result, currently no existent legal theory could give a perfect interpretation to the nature of FRAND declaration. However, recent developments of SEP-problem-handling practices in different jurisdictions indicate that a consensus has been reached on the explanation of FRAND declaration, that is, a commitment to negotiation in good faith, which should be abided by both SEP holders and standard implementers during the whole negotiation process of patent licensing. In light of the legal tradition and present judicial experience of SEP dispute-resolution in China, this author believes that a FRAND declaration should be treated as an invitation for offer that establishes the duty of negotiation in good faith for the SEP holder, so as to better explain its legal nature and effects, and increase the predictability of dispute resolution.