The Meaning of 'Fair and Reasonable' in the Context of Third-Party Determination of FRAND Terms
38 Pages Posted: 24 Oct 2013 Last revised: 30 Jan 2017
Date Written: October 23, 2013
Although much of the policy debate has focused during the past several years on the availability of injunctions to enforce SEPs against infringers, the meaning of FRAND remains of considerable importance in a context where there may be a need for settling SEP-related licensing disputes through third party determination of FRAND terms. For instance, Judge Robart in the Western District of Washington in Microsoft Corp. v. Motorola, Inc., set a both FRAND rate and range per unit for the Motorola’s video coding and wireless networking patents,for the purpose of helping the jury to determine whether Motorola had breached its FRAND commitment. More recently, Judge Holderman of the US District Court for the Northern District of Illinois Eastern Division in In re Innovatio IP Ventures, LLC determined the FRAND rate per chip that manufacturers had to pay to Innovatio for licensing its wireless networking patents.
Given the positions recently adopted by the FTC in its Google consent decree and the growing interest of scholars and practising lawyers in the potential need for third party determination of FRAND terms, there are reasons to believe that Judges Robart and Holderman’s decisions will not remain isolated and that parties to licensing negotiations will increasingly resort to courts or other forms of third-party determination, such as arbitration, to have them set the terms on which they are unable to reach an agreement. This raises the question of which methodologies these courts or arbitration tribunals should use when asked to set FRAND-compliant licensing terms.
Keywords: Standards, standard essential patents, SEP, hold up, royalty stacking, incremental value, numerical proportionality, ETSI, FRAND, injunctions, royalties, licensing, patents, IP
JEL Classification: K11, K12, K21, K41, L40, L63
Suggested Citation: Suggested Citation