Transparent, predictable licensing requires moving beyond hold‑out tactics. Uniform running royalties – implemented through patent pools – offer a practical and sustainable solution.

By Christine Walmsley

The global landscape for standard essential patent (SEP) licensing has become increasingly fragmented. Major jurisdictions such as the UK, the UPC and the US continue to diverge in their approaches to FRAND, creating uncertainty and widening the gap between commercial licensing practice and litigation outcomes. As these frameworks drift apart, the industry’s stated desire for predictability and transparency becomes harder to achieve in practice. Yet it is precisely in this environment that clarity in licensing structures is most needed.

Recent judicial commentary highlights this growing misalignment. In Wilus v Asus (DE), Judge Schön observed that parties now often choose to litigate first and negotiate a licence only later. This shift reflects an increasingly adversarial approach in the SEP ecosystem. Meanwhile, some SEP owners have begun offering UK interim licences pre-emptively when they anticipate prolonged hold‑out or complex multi‑jurisdictional disputes (Huawei v TP-Link). These developments demonstrate how far commercial negotiations have become entangled with litigation strategy.

Despite these trends, most licences are still concluded outside the courtroom. The Sisvel Wi-Fi 6 pool’s succession of agreements in 2025 and the strong early uptake of the Sisvel Wi‑Fi Multimode programme with five licensees on board earlier this year, show that market driven, transparent solutions achieve rapid acceptance when available. These programmes also provide an important lesson: when parties have clarity regarding licensing terms, royalty structures and patent coverage, they can reach agreements far more efficiently and on a level playing field.

Participants want transparency, but the current system undermines it

Across the industry, both licensors and implementers say they want transparency. For licensors, transparency ensures that the value of their contributions is recognised consistently and fairly. For implementers, transparency allows them to plan costs, assess competitiveness and model long-term product strategies with confidence. Well-structured patent pools already deliver this by publishing patent lists, royalty rates, licensing terms and the identities of licensors – elements that establish clear benchmarks and reduce information asymmetries.

However, the broader licensing ecosystem does not consistently support this aspiration. Divergent legal regimes, confidential bespoke deals and opaque sales information often complicate negotiations. Parties may struggle to assess whether an offer is FRAND compliant or comparable to existing agreements. As a result, transparency remains an objective more often cited than achieved.

Hold‑out behaviour creates large past liabilities and destabilises licensing

It is unsurprising that a key barrier to transparency is hold‑out. When implementers delay taking a licence for years, even while incorporating standardised technology into their products, predictable consequences follow:

• First, by postponing the inevitable, implementers accrue large back royalty liabilities. When negotiations finally begin, these liabilities often overshadow any discussion of the forward-looking royalty rate. The negotiation becomes defined by a single, highly leveraged question: how much back payment can the parties settle on?

• Second, some implementers leverage this past use burden to negotiate an artificially low lump sum settlement. Because they have allowed years of unlicensed use to accumulate, they argue for a discounted one-off payment instead of agreeing to a predictable running royalty structure. Many implementers appear not to budget for ongoing royalties at all when adopting a technology, relying instead on the hope that negotiation delays will reduce their eventual payment obligation. Arguments that implementers cannot calculate the stack are difficult to understand when zero provision has been made for any licence for years.

• Third, lump sum negotiations require implementers to provide historical sales and sales forecasts, which often become contentious. Forecasts rarely align with reality, and disputes about the legitimacy and accuracy of data further prolong negotiations. This creates uncertainty not only for licensors but also for implementers themselves, who receive a distorted view of the true cost of deploying standardised technology.

This cycle – delayed engagement, large, accrued liability and reliance on third party sales data – is at the heart of the unpredictability widely criticised by market observers. And it is directly encouraged by hold‑out behaviour.

Litigation forces disclosure of sensitive information

If negotiations fail and parties move into litigation, transparency takes on a different and often unwelcome form. Litigation frameworks require licensor disclosure of comparable agreements to substantiate FRAND offers. This means that licences involving third parties – almost always competitors – may be placed under examination.

Different jurisdictions handle this tension differently. The UK and US tend to rely on attorneys’ eyes-only regimes, limiting sensitive information to external counsel. Germany and the UPC use broader confidentiality clubs, where the defendant’s in‑house personnel may gain access. Recent cases before the UPC, including SPT v Vivo and Ericsson v Asustek, highlight how contentious these issues have become: despite Apple’s efforts to restrict disclosure of its sensitive commercial information, the UPC Court of Appeal ultimately allowed access under certain conditions.

This forced disclosure is uncomfortable for all parties and erodes confidence in the current system. Neither licensors nor licensees want their confidential sales figures, forecasts or commercial strategies exposed in litigation. Yet litigation is often the direct outcome of lengthy hold‑out, meaning that companies effectively push themselves into a process that undermines their own confidentiality interests.

Uniform running royalties – delivered through pools – resolve all three issues

Running royalties offer a clear answer to the interlinked problems of transparency, holdout and litigation-driven disclosure. In mature licensing markets, running royalties are the norm because they provide several practical advantages.

• First, they offer transparency and predictability: per unit payments directly track actual deployment, eliminating guessing games about sales forecasts. Implementers gain cost certainty, and licensors receive stable revenue aligned with real world market activity.

• Second, running royalties greatly reduce the incentive for holdout. If an implementer knows that royalties will scale naturally with usage, and that back payments will not become the central feature of negotiations, there is little strategic benefit in delaying engagement.

• Third, running royalty comparables are easier for courts and mediators to assess. They require far less complex analysis and therefore reduce the need for extensive disclosure of sensitive sales data in litigation.

Patent pools enhance these benefits. Operating at the centre of hundreds of negotiations, pools provide consistent, published royalty frameworks and operate through licensor consensus, which reinforces discipline and predictability. Sisvel’s Wi‑Fi Multimode programme exemplifies this approach: it launched with full transparency – patent lists, royalty explanations, standard terms and disclosed participating licensors and licensees – giving the market a stable and trusted reference point.

As connectivity expands into new verticals, uniform running royalties supported by transparent pools offer a realistic, market-driven solution to longstanding challenges. While transformation will take time, good faith engagement around clear, predictable royalty structures will bring the industry closer to the transparency it has long sought.

Christine Walmsley is Senior IP Legal Counsel for Sisvel International in Luxembourg.

The opinions expressed within this article are the author’s and do not necessarily reflect the views of Sisvel. The content is for informational purposes and should not be taken as legal advice.