The smartphones we use daily, the connected cars navigating our streets, and the industrial IoT devices transforming manufacturing all have one thing in common: seamless communication across different brands, enabled by technology standardisation.
However, these global standards incorporate countless Standard-Essential Patents (SEPs) held by specific companies. If a patent owner were to monopolise their technology and refuse to let others implement it, global infrastructure would grind to a halt.
To resolve this tension between technological monopoly and widespread adoption, the global community relies on a vital commitment: FRAND.
Recently, the tides surrounding FRAND have shifted dramatically worldwide, and notably within Japan. Based on recent judicial practices and risk assessment criteria, this comprehensive guide covers everything from the fundamentals to the latest industry trends.
1. What is FRAND? Understanding the Three Pillars
FRAND is a voluntary commitment made by a patent holder to a standard-setting organisation (such as ETSI or IEEE), declaring: “If my patent is adopted into the standard, I will license it to anyone under the following conditions.”
| Element | Meaning | Practical Insight in Licensing Negotiations |
| F: Fair | Procedural Fairness | Parties must negotiate in good faith without undue delay, coercion, or tactical gamesmanship. |
| R: Reasonable | Appropriate Compensation | The royalty rate must reflect the value of the technology, ensuring aggregate royalties do not become economically prohibitive. |
| N-D: Non-Discriminatory | Equal Treatment | Similarly situated competitors must be treated equally, preventing the arbitrary exclusion of specific market players. |
2. The Necessity of FRAND: Preventing Patent Hold-Up and Hold-Out
Once a technology becomes the industry “standard,” manufacturers have no choice but to adopt it to build competitive products. This is known as technological “lock-in.”
If a patent holder exploits this lock-in by demanding exorbitant licensing fees under threat of an injunction, it is called hold-up. Conversely, if a licensee uses FRAND as a shield to unreasonably delay negotiations or evade paying fair royalties altogether, it is known as hold-out.
FRAND serves as the cornerstone of good faith in the intellectual property ecosystem, balancing these competing behaviours to maintain market equilibrium.
3. The Golden Rules of FRAND Negotiation: Huawei v. ZTE and Global Guidelines
What concrete steps define a “good faith” (FRAND) negotiation?
The Court of Justice of the European Union (CJEU) answered this in its landmark 2015 Huawei v. ZTE ruling, which remains the global benchmark for courts worldwide. Similarly, Japan’s Ministry of Economy, Trade and Industry (METI) introduced its “Guidelines for Licensing Negotiations Involving Standard Essential Patents” in 2022. These frameworks establish four standard negotiation steps:
- The Patentee’s Licensing Offer: The SEP holder notifies the implementer of the infringement, providing a patent list and claim charts mapping the patents to the standardised technology.
- The Implementer’s Expression of Willingness: The implementer responds by expressing a clear willingness to take a licence on FRAND terms. Crucially, this response must be prompt to avoid allegations of bad faith delay.
- The Patentee’s Specific FRAND Terms: The SEP holder presents a concrete, written licensing offer, explicitly detailing the royalty rate and the objective methodology used for its calculation.
- The Implementer’s Counter-Offer: If the implementer rejects the initial offer, they cannot simply say no; they must promptly submit a FRAND-compliant counter-offer based on objective economic data.
If an agreement cannot be reached, the implementer must continue to demonstrate willingness by providing security (such as putting royalties in escrow) or suggesting third-party arbitration. Deviating from this framework significantly raises the risk of being labelled an “unwilling licensee” by a court of law.
4. The End of Absolute Immunity: The Pixel 7 Injunction and the Tokyo District Court’s New Protocol
For years, Japanese intellectual property practice relied on the Intellectual Property High Court’s 2014 Grand Panel decision (Apple v. Samsung). The consensus was that as long as an implementer remained willing to negotiate, a patentee’s request for an injunction would be rejected as an abuse of rights.
That long-standing assumption has now been completely overturned.
Japan’s First SEP-Based Injunction: The Pixel 7 Case
On June 23, 2025, the Tokyo District Court issued Japan’s first-ever product injunction based on SEP infringement in Pantech v. Google (targeting the Pixel 7 smartphone).
The court found Google to be an unwilling licensee based primarily on its conduct after the court intervened, rather than during initial discussions. Even after the court issued a settlement recommendation, Google failed to disclose critical information necessary for calculating royalty rates without providing a justifiable reason. This failure served as the primary basis for granting the injunction.
As a result, Japan’s judiciary has officially aligned with the rigorous standards of Germany and the Unified Patent Court (UPC), where the sincerity of a party’s negotiation conduct is strictly scrutinised.
Public Disclosure of the “Tokyo District Court New Protocol” (January 2026)
In response to this judicial shift, the Intellectual Property Division of the Tokyo District Court (TDC) released its “Procedural Protocol for Patent Infringement Lawsuits Involving Standard-Essential Patents” in January 2026. Designed to streamline global patent disputes, the framework highlights several progressive expectations:
- The plaintiff (SEP holder) is expected to propose a global FRAND royalty covering their entire global portfolio, rather than limiting the dispute to Japanese patents.
- The calculation must be backed by a transparent methodology, such as a top-down approach or a comparable licences approach.
Key Lesson for Corporate Strategy: If a dispute escalates to litigation, ignoring or obstructing court-ordered disclosures will maximise your injunction risk. The tactical play of “delay via blanket rejection” is now a liability that can lead directly to a product sales ban, threatening core business operations.
5. Modern Controversies: Valuing FRAND and the Collapse of EU Regulations
The most contentious element of FRAND remains the “R” (Reasonable)—the valuation of the licence fee. The tech sector remains sharply divided on the proper economic base for calculations:
- SSPPU (Smallest Saleable Patent-Practicing Unit): Argues that royalties should be calculated based on the price of the specific component that implements the technology, such as the baseband chip.
- EMV (Entire Market Value): Argues that royalties should be assessed against the value of the finished product as a whole, such as the entire smartphone or connected vehicle.
While global jurisprudence increasingly considers EMV frameworks, cross-industry sectors like automotive and IoT—where the cost of the communication module represents only a small fraction of the final product value—continue to debate this fiercely.
Withdrawal of the Proposed European SEP Regulations
To address these market uncertainties, the European Commission had previously proposed a controversial “SEP Regulation” package, which aimed to task the European Union Intellectual Property Office (EUIPO) with mandatory essentiality checks and setting aggregate royalty rates.
However, on February 11, 2025, the European Commission officially announced its intention to withdraw the proposed SEP Regulation, citing an insurmountable lack of consensus among member states and stakeholders.
This withdrawal confirms that the global framework will not shift toward centralised administrative rate-setting. Instead, the industry will continue to rely on market-driven solutions like patent pools (e.g., Avanci) and court-led behavioural assessments, such as the Tokyo District Court’s new protocol.
6. Conclusion: The Bottom Line for Modern Enterprise
FRAND is no longer just an abstract legal concept or an issue confined to the intellectual property department. It is a fundamental operational rule for any enterprise incorporating standardised technologies like 4G/5G, Wi-Fi, or Bluetooth into its products.
As demonstrated by Japan’s landmark injunction and new procedural protocols, stalling tactics or uncooperative negotiation behaviour can quickly trigger devastating sales bans. If your product line relies on wireless connectivity, it is critical to re-evaluate your licensing strategies and approach negotiations with the utmost diligence.
This text was translated by a large language model (LLM).