Global courts are increasingly determining the royalty rates for Standard Essential Patents (SEPs) used in 5G and 4G networks. According to court filings and industry analysis, these rulings establish “global FRAND rates,” which set the financial precedent for how connectivity protocols are licensed across the automotive and IoT sectors.
Why are FRAND licensing battles escalating?
Standard Essential Patents are patents that any company must use to comply with a technical standard, such as 5G or Wi-Fi. To prevent a single company from blocking an entire industry, patent holders agree to license these technologies on Fair, Reasonable, and Non-Discriminatory (FRAND) terms, according to the World Intellectual Property Organization (WIPO).
Conflict arises because “fair and reasonable” is not a fixed number. Patent holders like Nokia, Ericsson, and Qualcomm seek higher royalties to recoup R&D costs, while implementers—the companies making the phones or cars—push for lower rates to maintain margins. When negotiations fail, companies turn to courts to define the exact price of a license.
How do courts set global royalty rates?
The United Kingdom has emerged as a primary venue for setting global rates. In the landmark Unwired Planet v Huawei case, the UK Supreme Court affirmed that English courts have the jurisdiction to determine a global FRAND license fee. This means a single court ruling can dictate what a company pays for patents used in every country where it sells a product.
This approach prevents “hold-out,” where a company refuses to pay any royalty while waiting for a court to decide the price. By setting a global rate, courts provide a clear price list that applies across borders, reducing the need for dozens of separate lawsuits in different jurisdictions.
Which companies are driving these legal precedents?
The tension between patent holders and device makers has led to high-stakes settlements and lawsuits. Nokia and Apple recently ended a series of global legal battles in late 2023, reaching a multi-year licensing agreement that settled disputes over 5G patents. This settlement followed years of litigation in Germany and the U.S., where Nokia sought injunctions to block Apple product sales.
Ericsson has taken a similarly aggressive stance, frequently using German courts to seek injunctions. Germany’s legal system often allows for faster injunctions than the U.S., giving patent holders significant leverage to force implementers into a settlement. Qualcomm continues to be a central figure in these disputes due to its massive portfolio of modem and connectivity patents, often facing scrutiny over how it bundles licenses.
How will this affect electric vehicles and IoT?
The battle over mobile protocols is moving beyond smartphones. Connected cars and Internet of Things (IoT) devices now rely on the same 4G and 5G standards. This shift has created a clash over how royalties are calculated.
- Device-based royalties: Patent holders typically want a fee for every connected device sold (e.g., a fee per car).
- Network-based royalties: Implementers argue that the value of connectivity is provided by the network operator, not the hardware manufacturer, and that fees should be lower for non-phone devices.
If courts continue to uphold high global rates for mobile handsets, those rates may trickle down into the automotive industry, increasing the cost of connected vehicle features.
Comparison of Legal Approaches: UK vs. USA
The strategy for resolving SEP disputes differs sharply between the UK and the US, impacting how companies negotiate.
| Feature | United Kingdom Approach | United States Approach |
|---|---|---|
| Jurisdiction | Can set a global license rate for all territories. | Generally focuses on damages and injunctions within the US. |
| Primary Goal | Establishing a global FRAND benchmark. | Protecting domestic patent rights and preventing antitrust violations. |
| Leverage | High; a global rate forces a total company-wide agreement. | Moderate; focuses on specific product exclusions or monetary damages. |
What happens next for global connectivity rates?
The next phase of litigation will likely center on the “valuation” of 5G versus 4G. As 5G becomes the baseline, the industry is already looking toward 6G. Companies that secure favorable FRAND precedents today will hold the upper hand in negotiating the next generation of connectivity protocols.
Regulators are also stepping in. The European Commission has explored frameworks to make SEP licensing more transparent, aiming to reduce the number of “patent wars” that disrupt supply chains. However, until a standardized international formula for “fairness” exists, the courts will remain the ultimate price-setters for the world’s digital infrastructure.
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