Thursday, September 27, 2018

Delcamp on FRAND Principles

Henry Delcamp has published an article titled Principes économiques sous-jacents à l’estimation des niveaux de licence FRAND ("Economic principles underlying the estimation of FRAND license rates") in the July-August 2018 issue of Propriété Industrielle (pp. 19- 21).  Here is the abstract (my translation from the French):
If, today, decisions on the characteristics of a fair, reasonable, and nondiscriminatory (FRAND) license for an essential patent have mostly been rendered by North American and British jurisdictions, many nascent disputes in continental Europe give cause for considering what valuation principles can be extracted from the foreign jurisdprudence on this question.
The author distills three principles from four cases, Innovatio, Ericsson v. D-Link, Microsoft v. Motorola, and Unwired Planet.  (TCL may have come out too late for inclusion in the discussion, which is unfortunate since that court's understanding of "nondiscriminatory" is distinct from Mr. Justice Birss's in Unwired Planet.)
1.  A FRAND license should enable the elimination of hold-up, but the patent owner is entitled to expect some portion of the gains associated with standardization without being accused of hold-up.
2.  It is economically justified that the patent owner captures a portion of the value tied to the market power of the standard, even though this portion cannot be precisely defined. 
3.  The obligation to license on nondiscriminatory terms does not imply that the licensing rates must be perfectly equivalent.
The author recognizes that principle (1) isn't consistent with the Federal Circuit's statement in Ericsson v. D-Link that a FRAND rate should not include "any value added by the standard’s adoption of the patented technology (though as he also notes it is consistent with Mr. Justice Birss's view as expressed in paragraph 97 of Unwired Planet).  The author highlights statements in Microsoft v. Motorola (para. 80) that a FRAND royalty should take into account the value of the patent to the standard, and argues that a FRAND royalty should exclude any value attributable to holdup.  Overall the author's view appear consistent with the view expressed by Norman Siebrasse and me in The Value of the Standard, where we also note that the principle of excluding the value of standardization is itself somewhat ambiguous.

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