Understanding the RAND Commitment

Abstract

In a typical agreement between a buyer and a seller, price is one of the central terms specified in the deal. Yet, in a surprisingly large number of technology agreements, patent holders today are choosing to leave out that critical detail. Instead, in these modern agreements, patent holders adopt as their pricing term only a commitment to later price at a "reasonable and nondiscriminatory" rate. This RAND commitment has been used in patent deals covering everything from 3G cellular communication to DVD video playback. But why are firms adopting it? And how should courts interpret its language? In this Lecture, I take up these questions, considering the purpose behind this type of price ambiguity and ultimately arguing that, at its core, the RAND commitment is most likely a pro-competitive mechanism primarily designed to guide courts away from patent law's conventional - and here largely inappropriate - damages regime.

Keywords: RAND, patent, license, reasonable, non-discriminatory, standard-setting, SSO

JEL Classification: K21