Published: 10/1/14
This article analyzes FRAND determinations in adjudicated cases and addresses the question of how to interpret FRAND in light of ambiguities in the meaning of reasonableness. The article argues that “[a]lthough ambiguous, the RAND commitment can impose real constraints, because, like any standard of reasonableness, it draws meaning from its purpose.” This purpose, it states, is “to foster optimal adoption of the standard by deterring holdup and royalty stacking.” The article goes on to discuss the incremental value approach, under which the appropriate FRAND royalty is a SEP’s incremental value over the next best technology that was available before the standard’s adoption. Although this approach appropriately compensates SEP holders, the article also pointed out the “many opportunities for stacking when a single high-technology product implicates hundreds of standards with thousands of complementary SEPs, many with monopoly power.” Thus, “[e]conomists also agree that a RAND royalty should prevent royalty stacking, which occurs if owners of strongly complementary SEPs individually charge profit-maximizing royalties to an implementer.”