Jorge L. Contreras S.J. Quinney College of Law University of Utah November 21, 2014.

UNIVERSITY OF TORONTO 3RD ANNUAL PATENT COLLOQUIUM

MARKET RELIANCE and FRAND Commitments

Jorge L. ContrerasS.J. Quinney College of LawUniversity of Utah

November 21, 2014

2

Patentees make FRAND Commitments to:

Reassure the market No hostile intentions No hold-up

Induce the market To adopt a standardized technology To utilize an open platform

3

Desired Result(s)

Broad market adoption of common technology platforms

Interoperability Network effects

4

Market Impact is Significant…

5

Enforcement?

We should want to enforce patent pledges because:

Market benefits (instrumentalist)

Reliance (fairness)

Promise (morality)

6

Current Enforcement Theories

A. Contract (common law)

B. Promissory Estoppel

C. Antitrust

D. Equitable Servitude

7

A. Contract

Patentee and SDO “agree” on FRAND

Other SDO members (and vendors?) are beneficiaries

8

Problem: Non-contractual Commitment Structures

1. Multilateral Agreement

2. Membership Agreement

3. Bylaws/Policy4. Letter of Assurance5. Voluntary Declaration,

SDO6. Voluntary Declaration,

Non-SDO Regulatory Proceedings Press Release

9

Problem: Incidental Beneficiaries?

10

B. Equity and Promissory Estoppel?

Unilateral promise can be enforced if reasonably and detrimentally relied upon

BUT actual reliance must be shown

11

C. Antitrust

Monopolization Market power Exclusionary conduct

(deception)

Exclusion/Essential Facility

Section 5 (unfair methods of competition)

12

D. Equitable Servitude

13

A New Enforcement Theory: Market Reliance

Market Reliance =

Promissory Estoppel +

Presumption of Reliance

Contreras, A Market Reliance Theory for FRAND Commitments and other Patent Pledges, __ Utah L. Rev. __ (2015 forthcoming)

14

Market Reliance defined

Promissory Estoppel Unilateral promise will be enforced if intended

to be relied upon and made to the marketplace at large

Without a requirement of actual reliance Presumption of reliance if promise is made to

the “marketplace” Similar to “fraud on the market” theory under

Federal Securities Law

15

Inspired by “Fraud on the Market”

Efficient Markets Hypothesis:In an efficient capital market, all material information is reflected immediately in price.

Reliance on false statements by market participants is presumed

Basic v. Levinson (US 1988)

16

Market Reliance: Benefits

Eliminate legal fiction of contract framework

Enhance enforceability of “non-contractual” statements

Remove distinction between FRAND and other Pledges

Reduce risk from patent transfer

17

Challenges

“Fraud on the Market” theory challenged, but survived (Halliburton v. Erica P. John Fund (US 2014))

Entrenchment of Contract theory in judicial decisions

Thank you!

Jorge L. ContrerasUniversity of UtahS.J. Quinney College of LawSalt Lake City, [email protected] page: http://ssrn.com/author=1335192