Wednesday, February 21, 2018

Some New Papers on the Appropriate Royalty Base for FRAND-Committed Patents

1. Fredrick Nilsson has published a paper titled Appropriate Base to Determine a Fair Return on Investment:  A Legal and Economic Perspective on FRAND, in the December 2017 issue of GRUR Int. (pp. 1017-1023).  Here is the abstract:
This paper aims at contributing to the discussion regarding Fair, Reasonable and Non-Discriminatory (FRAND) licenses in the telecom industry.  Although there are many topics to debate this paper focuses solely on the royalty base.  As of today, there are two royalty bases favored by industry players:  the Entire Market Value Rule (EMVR) and the Smallest Salable Patent Practicing Unit (SSPPU).  By exemplifying with a case study on the Intellectual Property Right (IPR) Policy governing the Wi-Fi standardization process this article analyses which model is more likely to have a positive impact on technology creation and diffusion in the telecom industry when used as royalty base by the patent holder and implementer in their bilateral FRAND negotiations.
2.  Taking a somewhat different view of the matter is a paper by law student Zachary Coots titled Standardizing the Smallest-Functional Unit: A Tier-Stacking Approach to Frand Royalty RatesHere is  a link to the paper, and here is the abstract:
Apple's recent fight with Qualcomm, alleging that Qualcomm is overcharging apple to license Qualcomm's FRAND-encumbered standard essential patents (SEPs), raises an interesting issue regarding patent hold-up: whether a FRAND royalty rate should limit an SEP holder’s ability to extract larger royalties from end-product manufacturers — resulting from that manufacturer's increased sales prices due to unrelated, end-product advancements. This Paper advocates that uniformly assessing all FRAND-encumbered licenses against the smallest-functional unit would ameliorate this concern, and it further provides two methods for achieving this end while also avoiding issues of excessive royalty stacking.
3.  In this vein, I should also mention that Richard Stern has published a very interesting paper titled  Who Should Own the Benefits of Standardization and the Value It Creates?, 19 Minnesota Journal of Law, Science & Technology 107 (2018).  The paper discusses the appropriate royalty base, among several other topics relevant to calculating FRAND royalties; and though Mr. Stern and I may have to agree to disagree on certain issues (see, e.g., pp. 223 et seq.), the paper certainly merits the attention of readers interested in these issues.   Here is a link (I'm not finding an abstract).

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