tag:blogger.com,1999:blog-5202549570150301909.post5533280638627915142..comments2024-03-15T00:21:23.406-07:00Comments on Comparative Patent Remedies : Reflections on Holdup and Royalty Stacking, Part 2Thomas Cotterhttp://www.blogger.com/profile/07145440504421320263noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-5202549570150301909.post-51063677381099712402014-11-14T07:44:51.879-08:002014-11-14T07:44:51.879-08:00You seem to be correct as to the fifth point above...You seem to be correct as to the fifth point above. On the nondiscrimination issue, Carlton & Shampine address this issue in their paper "An Economic Interpretation of FRAND," http://ssrn.com/abstract=2256007, at p.14. In their view, the nondiscrimination condition is sufficiently important that B shouldn't be required to pay more than A. Absent the FRAND commitment, that wouldn't make any sense. If their point about nondiscrimination is correct, it highlights an important difference between FRAND royalties and other royalties, which perhaps we should think about some more. Alternatively, perhaps one could argue that the parties are no longer similarly situated and thus that the royalty is not discriminatory in effect. Of course, if B can't be required to pay more than A, there won't be any need to recalculate the royalty at all, which conserves on adjudication costs but perhaps at substantial accuracy cost. Thomas Cotterhttps://www.blogger.com/profile/07145440504421320263noreply@blogger.comtag:blogger.com,1999:blog-5202549570150301909.post-55473933685292835762014-11-10T14:04:48.274-08:002014-11-10T14:04:48.274-08:00As you note in your fifth point, Holderman J expre...As you note in your fifth point, Holderman J expressly stated that the rate should be based on the assumption that the patents are valid, and he rejects some comparators on the basis that they were negotiated under conditions of uncertainty. But I’m not sure the top-down methodology is consistent with that assumption. The top-down methodology caps the royalty at the manufacturer’s profit, on the view that otherwise the manufacturers “would leave the chip-making business altogether, rather than pay a royalty that would obliterate their profits.” Innovatio’s witness, Teece, makes the very obvious point that no they wouldn’t, they would just raise their prices. Holderman J responded to that by noting that there were three major manufacturers who had already licensed from Innovatio, and competition from those manufacturers would stop the defendant manufacturers from raising their prices. In effect, the licence negotiated by the three licensed manufacturers is being used as a comparator, albeit indirectly. But it seems to me that the licenses to those three manufacturers must have been negotiated under conditions of uncertainty regarding validity. So it seems to me that the top down approach indirectlly uses licenses negotiated under uncertainty as comparators, even though that was expressly rejected when it was tried directly. <br /><br />On another note, how does the assumption of validity interact with the non-discriminatory part of the FRAND commitment. If A negotiated prior to any litigation its royalty will be discounted by the probability of invalidity. If B then litigates, and the patent is held to be valid, essential and infringed, then the royalty should be calculated on the assumption that the parties would have known that. This implies that the royalty paid by B will necessarily be higher than that paid by A. That looks discriminatory to me.Normanhttps://www.blogger.com/profile/17573687140337856397noreply@blogger.com