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http://ssrn.com/abstract=2243026
 
 

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A Simple Approach to Setting Reasonable Royalties for Standard-Essential Patents


Mark A. Lemley


Stanford Law School

Carl Shapiro


University of California, Berkeley - Haas School of Business

November 5, 2013

Stanford Public Law Working Paper No. 2243026

Abstract:     
Standard Setting Organizations (SSOs) typically require their members to license any standard-essential patent on Fair, Reasonable, and Non-Discriminatory (FRAND) terms. Unfortunately, numerous high-stakes disputes have recently broken out over just what these “FRAND commitments” mean and how and where to enforce them. We propose a simple, practical set of rules regarding patents that SSOs can adopt to achieve the goals of FRAND commitments far more efficiently with far less litigation. Under our proposed approach, if an standard-essential patent owner and an implementer of the standard cannot agree on licensing terms, the standard-essential patent owner is obligated to enter into binding baseball-style (or “final offer”) arbitration with any willing licensee to determine the royalty rate. This obligation may be conditioned on the implementer making a reciprocal FRAND Commitment for any standard-essential patents it owns that read on the same standard. If the implementer is unwilling to enter into binding arbitration, the standard-essential patent owner’s FRAND commitment not to go to court to enforce its standard-essential patents against that party is discharged. We explain how our proposed FRAND regime would work in practice. Many of the disputes currently arising around FRAND commitments become moot under our approach.

Number of Pages in PDF File: 32

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Date posted: April 2, 2013 ; Last revised: December 29, 2013

Suggested Citation

Lemley, Mark A. and Shapiro, Carl, A Simple Approach to Setting Reasonable Royalties for Standard-Essential Patents (November 5, 2013). Stanford Public Law Working Paper No. 2243026. Available at SSRN: http://ssrn.com/abstract=2243026 or http://dx.doi.org/10.2139/ssrn.2243026

Contact Information

Mark A. Lemley (Contact Author)
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
Carl Shapiro
University of California, Berkeley - Haas School of Business ( email )
545 Student Services Building
Berkeley, CA 94720
United States
510-642-5905 (Phone)
HOME PAGE: http://faculty.haas.berkeley.edu
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