A Simple Approach to Setting Reasonable Royalties for Standard-Essential Patents

Mark A. Lemley, Carl Shapiro
2013 Social Science Research Network  
A Standard Setting Organization ("SSO") typically requires its members to license any standard-essential patents on fair, reasonable, and non-discriminatory ("FRAND") terms. Unfortunately, numerous high-stakes disputes have recently broken out over just what these "FRAND commitments" mean and how and where to enforce them. We propose a simple, practical set of rules regarding patents that SSOs can adopt to achieve the goals of FRAND commitments far more efficiently with far less litigation.
more » ... r our proposed approach, if a standard-essential patent owner and an implementer of the standard cannot agree on licensing terms, the standard-essential patent owner is obligated to enter into binding baseball-style (or "final offer") arbitration with any willing licensee to determine the royalty rate. This obligation may be conditioned on the implementer making a reciprocal FRAND commitment for any standard-essential patents it owns that read on the same standard. If the implementer is unwilling to enter into binding arbitration, the standard-essential patent owner's FRAND commitment not to go to court to enforce its standard-essential patents against that party is discharged. We explain how our proposed FRAND regime would work in practice. Many of the disputes currently arising around FRAND commitments become moot under our approach.
doi:10.2139/ssrn.2243026 fatcat:7yifk2gayjdr7ir6ryt6uflt7q