The emergence of smartphone industry which is fusion of information, computer, telecommunication industry where improvement of prior arts by specific patent is usually narrow and overlapping brings the concerns of patent holdup that the patentee attempts to extract more value for the technology from users of that patent opportunistically. Especially, Standard Essential Patents(“SEP”)-patents covering technology necessary to comply with standard which is set by Standard Setting Organization( “SSO”), is at the center of this contention because competing firms, vendors in downstream and even consumers are “locked in” the standard by the promise of “openness” of the SSO standard and “network effect”-utility of consumers to products increases in response to an increase in the number of other consumers of the same or networked product and the aggregation of consumers leads to the manufacture of other complementary products- of standard makes it impossible to take alternative technologies. Recent surge of patent infringement lawsuits by SEP patentee makes it real concerns of smartphone industry.
In response of these concerns, most SSOs have employed measures to mitigate patent holdup threat by SEP through adopting by-laws to bind members and standard participating non-members. These by-laws comprises of disclosure policy which requires participants of SSO process to disclose SEP held by participants and FRAND commitment which requires participants to make any SEP available to the public, on “fair, reasonable and nondiscriminatory terms(“FRAND”),” of any SEP. However, internal regulation by SSOs has significant shortcomings originated from ambiguities and incompleteness. To shore up these problem, there has been much debate in the US and EU on regulation by competition law like “Act on Regulation of Monopoly and Fair Trade” centered on FTC’s enforcement actions and recently the focus moves to the direction of how the issue can be solved in the patent infringement suits.
This article leads to the following conclusions based on comparative studies with the US and EU against patent holdup using SEP in smartphone patent disputes. In Korea, regulation by “Act on Regulation of Monopoly and Fair Trade” is improper except cases in which significant fraudulent violating acts are involved. Also, accommodation of patent holdup issue in patent infringement litigation differs in countries whether they recognize FRAND commitment as a kind of valid contracts, how to see and apply doctrine of abuse of power, how to recognize patent infringement damages in practices, though it is yet in a developing stage. These differences are attributed to the difference of each country’s legal system in recognizing obligation of duty of good faith and fair dealing in bilateral negotiation and analyzing breach of this obligation. Meanwhile chronic conundrums of insufficient damage award and discretion of judges granting of injunction in Korea’s patent infringement litigations should be solved to cope with this patent holdup by SEP.