[Direct answer]In the Beijing area, it is legal for standard essential patent holders to charge licensing fees, but the fee level should comply with the "Fair, Reasonable, and Non-Discriminatory" (FRAND) principle and cannot charge exorbitant prices to lock in their market position. According to Article 24 of the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Patent Infringement Disputes (II)" (effective April 1, 2016), standard essential patent holders have the obligation to make licensing declarations in accordance with the FRAND principle, and implementers can seek fair licensing based on this. If the right holders have a dominant market position and charge unfairly high prices, they may also violate the provisions of the "Anti-Monopoly Law of the People's Republic of China" (amended on June 24, 2022 and effective August 1, 2022) prohibiting the abuse of market dominance. In other words, high prices do not necessarily constitute illegal behavior, but fees that deviate significantly from the FRAND level may be subject to adjustment. When enterprises encounter high quotes, they can first negotiate and fix evidence, and then request to determine the licensing fee rate in accordance with the FRAND conditions. For more details, please refer to the following link:Intellectual property protection and corporate legal services.

1. Problem background and typical scenarios

Standard essential patents (SEPs) refer to patents that are indispensable for implementing technical standards, and they are particularly common in the communication and electronics manufacturing fields. Typical scenarios include: mobile phones, automobiles, and Internet of Things (IoT) products falling into others' SEPs, and being required to pay royalties calculated as a certain percentage of the total sales price; patent holders attaching unequal conditions such as "not challenging the validity of the patent" in the bidding negotiations; patent holders delaying licensing negotiations or directly sending legal letters to exert pressure after the patent is included in the standard; and enterprises encountering multiple layers of patent license fees when purchasing components. Since products must implement the standard, implementers are naturally at a disadvantage in negotiations. Once the royalty rate is excessively high, it will directly erode the product's profitability and even force the product to exit the market. The FRAND principle was specifically designed to balance this structural inequality. For related disputes, please refer to the following sources:Intellectual property protection and corporate legal servicesObtain support.

II. Key points of contention

The focus of such disputes centers on three points. Firstly, whether the FRAND licensing statement has been made and whether the conditions are reasonable: whether the right holder has made a fair, reasonable, and non-discriminatory licensing commitment to the standard-setting organization, and whether the actual offer deviates from this commitment. This is the core of the court's review. Secondly, the determination of market dominance: those who claim monopoly violations need to prove that the right holder has a dominant position in the relevant market. Standard-essential patents naturally bring about a lock-in effect that "every implementer cannot avoid". However, the determination of dominance still needs to be combined with evidence such as market share and control ability. Thirdly, the negotiation process and fault judgment: whether the two parties negotiated in good faith, whether the offers and counter-offers were timely, and whether there was intentional delay directly affect whether the injunction relief can be established and the calculation of licensing fees. In practice, the earlier the implementer fixes the negotiation records and preserves the communication between the two parties more completely, the more likely they are to take the initiative in the rate determination. For cross-border trade and technology transactions, it can be combined withFinancial capital and cross-border legal services involving foreign affairsEvaluate them together.

III. Professional analysis by Hengluo Law Firm

Based on practical observations in handling intellectual property disputes, the most common passive situation that implementers face in standard essential patent licensing negotiations is "evidence omission". Common scenarios include: failing to respond in writing within a reasonable timeframe after receiving the right holder's offer, being accused of delaying negotiations; oral communication without leaving a record, making it difficult to provide evidence for key concessions and factual statements; failing to raise written objections in a timely manner to clauses such as "charging based on the selling price of the whole machine" and "bundling non-essential patents" in the offer, making it difficult to claim exorbitant fees later. Hengluo Lawyers usually advise enterprises to establish a special file for patent licensing negotiations: all offers, counter-offers, and letters questioning the necessity and validity of patents should be put in writing and preserved; clear written objections should be raised against clauses that deviate from FRAND; when negotiations reach an impasse, timely request the determination of licensing rates based on FRAND conditions through litigation or arbitration to replace the protracted tug-of-war with judicial adjudication. Relevant contract negotiations can be followed up accordingly.Legal services for corporate commercial and contract disputesDone.

IV. Practical suggestions and legal basis

The legal basis mainly includes: the provisions of the Patent Law of the People's Republic of China (amended for the fourth time on October 17, 2020 and implemented on June 1, 2021) regarding the patentee's exclusive right to exploit and license the patent; Article 24 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Patent Infringement Disputes (issued on January 25, 2016 and implemented on April 1, 2016) regarding the rule that standard essential patents should be licensed according to the FRAND principle; Article 22 of the Anti-Monopoly Law of the People's Republic of China (implemented on August 1, 2008 and amended and implemented on June 24, 2022) regarding the prohibition of abusive behaviors such as selling goods at unfairly high prices by operators with market dominance; and the "Regulations on the Management of Patents Involved in National Standards" (implemented on January 1, 2014) requiring that patents in standards make fair, reasonable, and non-discriminatory licensing declarations. Practical suggestions: establish a SEP list and response plans; keep written records throughout the negotiation process; raise written objections to abnormally high quotes and unequal terms in a timely manner; and decisively resolve deadlocks through judicial procedures to determine the licensing fee.

5. Henglu Law Firm's Advice

When facing high-priced offers from standard essential patents, the prudent approach for enterprises is to "avoid escalation, maintain a firm stance, and seize opportunities". Avoid escalation: Avoid emotional confrontations or unilaterally ending negotiations, leaving room for rights holders to accuse of delaying; Maintain a firm stance: Document all offers, questions, and counteroffers in writing, and when necessary, entrust professional institutions to provide rate comparisons and patent necessity analyses; Seize opportunities: When negotiations reach an impasse, decisively request a licensing rate determined under FRAND conditions through litigation, transferring pricing authority to judicial adjudication rather than unilateral offers. At the same time, note that claiming that the other party violates antitrust laws requires proving the relevant market and dominance, with high evidentiary standards. It is advisable to make comprehensive decisions based on business losses and litigation costs. For further needs, please contact us.Beijing Henglu Law FirmPlease contact the official website for consultation.

VI. Frequently Asked Questions

Q1: Is it illegal to charge high licensing fees for standard essential patents? Can I refuse to pay them?

The charging itself is legal, and standard essential patent holders have the right to charge reasonable royalties for others' use of their patents; however, the charging should follow the principles of fairness, reasonableness, and non-discrimination (FRAND). According to Article 24 of the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Patent Infringement Disputes (II)", standard essential patent holders should make licensing declarations in accordance with the FRAND principle. If they refuse to license according to this principle, the implementers can seek judicial remedies; if the right holders have a dominant market position and the charges significantly exceed the FRAND level, it may constitute an unfair high price prohibited by the Anti-Monopoly Law. Simply "not paying" may face infringement accusations. A prudent approach is to negotiate while fixing evidence, and if necessary, request that the royalty be determined according to FRAND conditions, rather than passively resisting.

Q2: What evidence do I need to prepare to challenge high licensing fees?

The core evidence includes: the FRAND licensing statement made by the rights holder (which can be verified in the public documents of the standard organization), the negotiation letters and quotation records between the two parties (to prove the level of the quotation and the negotiation process), the patent list and the comparison table of the rights claims (to prove the necessity and the scope of the value contribution), the comparison materials of the licensing rates of similar patents (to prove that the quotation deviates from a reasonable level), the evidence of the rights holder's market position (used to claim dominance), and the sales volume of the enterprise's products and the affected profit data. The goal of organizing the evidence is to restore the two facts of "whether the quotation deviates from FRAND" and "whether the negotiation is conducted in good faith". The more complete the materials are, the more conducive it is to strive for the determination of the licensing rate according to FRAND conditions in litigation or arbitration, and it can also lay a foundation for anti-monopoly claims.

Q3: How much does it cost to litigate a dispute over licensing fees for standard essential patents?

The litigation fees shall be calculated in accordance with the "Measures for the Payment of Litigation Costs" based on the amount of the litigation request. For requests to determine the licensing rate or compensate for losses, the fees are usually calculated based on the amount of the dispute and shall be borne by the losing party or shared proportionally. The attorney's fees shall be determined through consultation based on the complexity of the case and the technical and legal workload. Such cases are highly technical and often require the support of expert assistants and patent analysis reports. The related expenses shall be settled separately according to the actual occurrence. If the amount of the dispute is huge, it can be evaluated to use arbitration or mediation to reduce costs. It is recommended to entrust a professional team to evaluate the chances of winning and the costs before suing, focusing on the core claim of "determining the licensing rate according to FRAND conditions" to avoid diluting resources with multiple claims.

Q4: How long does it usually take to adjudicate such cases?

The trial period is greatly affected by the complexity of the procedure. The first-instance ordinary procedure usually takes six months, but cases involving standard essential patents often involve many technical facts and specialized issues such as patent validity, necessity, and market definition, which require additional appraisals or technical investigations, so the actual period often exceeds one year. If the parties appeal, the second-instance procedure usually takes three months. If a temporary injunction or reverse preservation is applied for during negotiations, there is an independent review procedure. Due to the high professionalism of the case and the large amount of evidence, it is recommended to lock in the core claims in advance (such as only requesting to determine the fee rate according to FRAND conditions), control the scope of the dispute, and avoid prolonging the period by engaging in a full-scale legal battle. When necessary, mediation and arbitration can be used to shorten the overall resolution time.

Q5: If a company is asked to pay a high SEP licensing fee, what should it do specifically?

It is recommended to take four steps to deal with this situation: First, form a response team to sort out the product's infringed patent claims and patent lists, and verify whether the FRAND licensing declarations of the rights holders are publicly available and verifiable. Second, respond to the offer in writing, clarify written objections to the rate calculation basis (such as based on the whole machine's selling price), bundling non-essential patents, and adding unequal conditions, and keep a record of the whole process. Third, entrust a professional institution to conduct a comparative analysis of the patent's necessity and the licensing rate, and prepare supporting materials. Fourth, when negotiations reach an impasse, decisively request the determination of the licensing rate according to the FRAND conditions through litigation or arbitration, and at the same time evaluate the other party's market dominance and the scope of anti-monopoly claims. It is crucial not to ignore the situation or implement the agreement without paying royalties - the former may lead to an injunction, and the latter may result in a lawsuit for infringement. Rational negotiations combined with judicial safeguards are the only reliable path to follow.

The above questions and answers are mainly based on the judicial practice in Beijing. There may be differences in the adjudication standards in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with evidence materials, to avoid missing the statutory time limit. →Intellectual property protection legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.