Frand V. Compulosry Licensing: The Lessor of the Two Evils

Abstract

This paper focuses on two types of licenses that can best be described as outliers — FRAND and compulsory licenses.

Overall, these two specific forms of licenses share the objective of producing a fair and reasonable license of a technology protected by intellectual property. The comparable objective notwithstanding, each type of license achieves this end using different mechanisms. The FRAND license emphasizes providing the licensee with reasonable terms, e.g., by preventing a standard patent holder from extracting unreasonably high royalty rates. By contrast, compulsory licenses emphasize the public benefit that flows from enabling access to an otherwise inaccessible invention. Ultimately, both forms of license attempt to create a value for the licensed product that can be remarkably different from the product’s true market value. Nevertheless, both forms ultimately benefit the end-consumer who pays less to access a product subject to either of these forms of license. In comparing these two forms of licenses, the paper hopes to determine whether one form is better than the other, and if so, from whose perspective — the consumer, the licensor or the licensee. In doing so, this paper compares the different prevailing efforts to embrace such licenses as well as the impact of such licenses on the industry.