Ghafele on FRAND

As previously noted, on Friday of this week I will be participating in an event titled "OxFirst's Fourth IP and Competition Forum: Globalisation And FRAND: Coming to Grips With The Interplay of IP & Competition Law," to be held at St. Cross College, Oxford.  (Further details here.)  In this regard, forum organizer Professor Roya Ghafele has posted the following two recent papers on FRAND.  The first is titled Economic Perspectives on FRAND.  Here is the abstract:

The economic valuation of intellectual property is an area with which IP professionals still need to fully come to grips with. In the context of Standard Essential Patents (SEPs), the valuation of fair, reasonable and non-discriminatory (FRAND) royalty rates adds an additional level of complexity. Against this background, this paper aims at economically clarifying basic elements of FRAND valuation and royalty rate determination. The concept of FRAND will be briefly touched upon, so as to establish the framework for the discussion. Specifically, it discusses FRAND royalty calculations in light of the conception of the ‘present value-added’. The method hinges the concept of value on the ability to generate earnings. The concept can be used in the absence of comparable licenses and/or newly developing business sectors and remains neutral with respect to the royalty base or the question whether a SEP should be valued on an ex-ante basis, that is before the standard was developed or on an ex-post level, that is after the standard was adopted.

The second is Global FRAND Licensing in light of Unwired Planet vs Huawei.  Here is the abstract:

The 2017 decision by Justice Birss, which was upheld on appeal by Lord Kitchin, and Lord Justices Floyd and Asplin in the matter of Unwired Planet versus Huawei, significantly changes the Standard Essential Patents (SEPs) licensing ecosystem at the global level. In light of the fact that the case will be heard by the UK Supreme Court in October 2019, this paper intends to address its potential effects on future SEPs licensing negotiations that are to be concluded on fair, reasonable and non-discriminatory (FRAND) terms.

The (FRAND) licensing rate set by the judgment, which was set on a global basis, makes the validity, essentiality and infringement of global SEPs contingent on the opinion of the judiciary of England and Wales. At the same time as this allows the patentee to reduce transaction costs associated with global FRAND licensing, it increases information asymmetry with respect to extraterritorial SEPs as a national Court is inherently limited in an international undertaking. This can affect FRAND licensing negotiation that precede formal Court intervention.

To overcome the inherent tension between a territorially limited patent system and an increasingly international economic order, a global FRAND licensing rate should be set (if at all) by an international Court, which is equipped with transnational authority. At the European level, the establishment of such a Court is already under way in the form of the Unified Patent Court which is expected to come into place at some point. 

I should note, by the way, that the U.K. Supreme Court will be hearing the appeals in Unwired Planet and in Conversant next week.   Case details can be found at here, and the order granting review here.  For my recent discussion on Law360, see here.