On April 30, the Office of the U.S. Trade Representative released its 2026 Special 301 Report, an annual assessment of policies worldwide that undermine American intellectual property rights.
This year’s report places standard essential patents at the center of global trade tensions, warning that foreign approaches to patent enforcement are distorting the licensing markets that underpin modern technology.
At the heart of those concerns is the licensing agreement, the mechanism through which companies access and monetize the technologies embedded in global standards. Those agreements rest on a basic principle: When two or more parties enter into a formal, written contract, the contract is legally binding and enforceable.
That principle sustains modern commerce. All sectors of the global economy — from semiconductors and automotive manufacturing to the technological underpinnings of AI — depend on orderly transactions and commitments that have the force and effect of law, and that assure that courts and arbitrators will respect and enforce those commitments consistently and predictably.
Agreements involving intellectual property rights are no exception. In fact, patent license agreements are at the heart of one of the quiet successes of today’s technology marketplace: Devices made by separate and unrelated companies can seamlessly talk to one another. Phones from one manufacturer can connect to WiFi routers made by another, and cars can communicate over 5G networks designed and made by yet another.
This interoperability is seamless and invisible to consumers, but it exists only because hundreds of companies work together to devise technological standards by which their respective devices will operate and interact.
Often, these companies own patent-protected technologies that they could exclude others from using, but which are essential to comply with a standard.
Because interoperability is the ultimate aim, these companies will commit to license such standard essential patents, or SEPs, on terms that are fair, reasonable and nondiscriminatory, or FRAND.
In so doing, the most innovative companies are encouraged to participate in the standard-setting process, and the standards so developed are accessible to all, ensuring that the technology is widely adopted and put into commercial use.
For the most part, this system works as intended. Companies engage in good faith negotiations and abide by the commitments they’ve made in such SEP licenses without complaint or public controversy. Collaborators and competitors alike are given access to essential technologies and are able to design the many products that connect to global networks and operate across common platforms and technologies.
But over the past decade, a handful of high-profile disputes have come to illustrate how fragile this system is. While regulators have traditionally focused on the threat of holdup, i.e., where a SEP owner demands terms or royalties above market rates, the greater threat to our innovation ecosystem has come from those who hold out in refusing to take a license or to abide by the terms previously negotiated.
In a series of disputes between Apple and Qualcomm, for example, Apple filed suit against Qualcomm in the U.S. District Court for the Southern District of California, accusing it of anticompetitive practices in its licensing practices. Qualcomm responded by showing that Apple had encouraged its contract manufacturers to withhold royalties that those manufacturers owed Qualcomm under separate agreements, even as Apple continued to use those devices incorporating Qualcomm’s patent-protected technologies.
The companies settled in 2019, with Apple making a payment to Qualcomm and executing a multiyear license agreement and chipset supply agreement.
In a similar dispute, Vringo accused ZTE of infringing upon its SEP technologies by utilizing them without a license. After lengthy and complicated multijurisdictional litigation, but before trial, the parties agreed to settle the dispute in 2015, with ZTE making a substantial payment to Vringo.
And more recently, Access Advance accused Dahua, a Chinese video-security manufacturer, of infringing its patents covering video standards by refusing to pay royalties it owed under their license agreement, and in refusing to submit to a royalty audit. China’s Supreme People’s Court issued a complicated and inconclusive ruling in January, though the parties have not yet reached a settlement.
These instances underscore an important point: When a company continues using a patented, standard-essential technology while refusing to pay agreed-upon royalties, it deprives the inventor of the compensation that justified the original R&D investment.
But the harm extends beyond any single contract. Patent owners, including SEP owners, depend on predictable royalty payments to fund research, participate in standards development and make long-term commercialization decisions.
When licensees unilaterally stop paying — or attempt to revise terms they previously agreed to — it signals to the entire market that even negotiated, FRAND-compliant agreements might not be enforceable.
If that behavior spreads, innovators will hesitate to contribute their technologies to shared standards, knowing that licensees could undermine the value of those contributions after the fact. Development of next-generation platforms will slow as the economic incentives for participating in standard-setting become less certain.
Another area where the patent licensing system is fraying is in the failure of national courts to respect and enforce arbitration awards regardless of the country of origin of those awards.
Many SEP licenses include the parties’ good faith agreement to settle disputes arising from the agreement through binding arbitration. Arbitration is a common tool for resolving disputes that avoids prolonged, costly litigation and ensures that disputes can be resolved by neutral experts. Nations around the world have agreed — through long-standing international treaties — to honor these awards.
If a national court allows a losing party to relitigate a question already resolved through arbitration, it threatens the reliability of arbitration as an alternative dispute-resolution mechanism. This undermines the patent license in question as well as the dependability of international contracts on which global commerce depends.
The solution is not complicated, and it does not require rewriting long-standing frameworks. It simply requires courts and arbitrators to do what commercial systems have depended on for centuries: enforce contracts according to their terms.
When parties agree to FRAND terms in patent licenses, those commitments should be respected and upheld. When they agree to binding arbitration, the resulting awards should be respected by courts, regardless of the parties’ nationality. And when a party withholds payment or attempts to unilaterally revise the terms of an agreement, courts should nonetheless apply the agreement as written.
To do otherwise undermines international commerce by negating commitments and expectations that the parties agreed to as a result of careful, presumably good faith negotiations. The freedom to contract, and the reliable enforcement of those arrangements, are the foundation of successful and prosperous economies.
Policymakers also have a role to play. Supporting innovation is not only about funding new research or encouraging investment in the next breakthrough technology. It also means protecting the legal regime that secures to inventors the exclusive right to their invention, and thereby allows those technologies to be developed and commercialized at scale.
Trade policy, procurement standards and international coordination all need to reinforce the primacy of personal property rights and the expectation that contractual commitments — including those relating to global technology standards — will be honored. The SEP licensing framework has enabled decades of innovation, investment and broad interoperability. Preserving that progress requires maintaining the straightforward expectation that commerce relies upon: When parties make a deal, they must keep it. And if they do not, the law will be there to ensure that the agreement can be reliably enforced.