Why Is FRAND Hard?

Abstract

Standards, common platforms that allow products to work together, are essential to the modern economy. But standards often are based on patented technologies. And in what has been referred to as "patent holdup," the owners of patents incorporated into standards may exploit that power by refusing to license their patent or charging excessive royalties. For this reason, many standards development organizations ("SDOs") have required patent holders to commit to licensing their patents on fair, reasonable, and nondiscriminatory ("FRAND") terms.

The FRAND solution sounds promising in theory. But it has proven challenging in practice. Why? In this Article, I offer eight reasons: (1) excessive attention on patent holdup; (2) unsupported positions on holdup; (3) the role of funding; (4) patent trolls; (5) modest challenges based on clear rules or facts; (6) medium challenges based on unclear rules or facts; (7) significant challenges arising from the meanings of “fair and reasonable” and nondiscriminatory; and (8) extraordinary challenges relating to global issues.

The first four challenges offer low-hanging fruit that could clarify FRAND issues. The remaining four pose varying levels of difficulty. While not all of these challenges can be addressed with simple solutions, an awareness of the types of challenges presented by FRAND could prove helpful in the years ahead.

Keywords: standards, patents, FRAND

JEL Classification: K21, L40, L41, L63, O31, O34