Nondiscrimination in standard essential patents; ND Prong v. Art. 102(c) TFEU

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The article analyses the meaning of the nondiscriminatory principle in disputes concerning Standard Essential Patents (SEPs) under EU competition and contract law (that is, ND prong). The article reviews the economics literature, looking at the welfare effect of price discrimination and the interpretation of the ND prong provided by a number of economists. Secondly, the article analyses the case law of the EU Court of Justice on Art. 102(c) TFEU and recent rulings by the German and British courts concerning the scope of the application of the ND prong. A strategy of discrimination in regard to royalty rates may be sanctioned, both under competition and contract law. However, Art. 102(c) requires a higher burden of proof than contract law. As a consequence, it is unsurprising that no case of royalty rate discrimination has ever been sanctioned in Europe as an abuse of dominance. While courts and economists generally agree that the ND prong is applicable only when licensees are “similarly situated,” to date, there is no common understanding of the meaning of this expression. In particular, it is unclear whether, and to what extent, licensees are “similarly situated” if they are not competitors in the downstream market.