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Validity of Non-Disclosure Agreements in SEP Licensing

Requiring a Non-Disclosure Agreements (NDAs) is a common business practice used to safeguard the commercial interests of a licensor and a licensee in intellectual property licensing matters. The recent litigation involving Standard Essential Patents (SEP) has, however, raised doubts over the practice of patentees requiring NDAs before licensing SEPs to putative licensees. It has been argued that the inclusion of royalty rates in NDAs leads to discriminatory pricing of technology — a violation of the commitment to licence under fair, reasonable and non-discriminatory (FRAND) terms. That is, licensees cannot know if they receive non-discriminatory terms, if they cannot compare their licences due to NDAs. This article examines this issue from both theoretical and practical perspectives, and concludes that the inclusion of royalty rates in NDAs may be justified in view of the technological and commercial realities involved in SEP licensing.