Monday, January 27, 2020

FRANDs as a Royalty Guide

Dear Rich: I've invented something for the cell phone market and a company I used to work for has expressed an interest in licensing it (and paying for the patent). I'm trying to figure out what is a fair royalty rate. Can I use a FRAND to determine the right rate? If so, where can I find a FRAND for the cell phone industry? 
ACRONYM WARNING!!  Readers who are upset by the overuse of acronyms should bypass this blog entry.
What's a FRAND? Competing companies often must cooperate to create industry standards. For example, computer manufacturers like Apple and Microsoft must agree on the size, shape, and functionality of USB ports and cables. To establish these industry standards, competing companies cooperate to create standard-setting organizations (SSOs). To implement these standards, companies may need to share patents. Patents that are essential to meeting the standard are referred to as "standard-essential patents" (SEPs). To guarantee that SEPs are available to all competitors, industries have adopted FRANDs (Fair, Reasonable, and Non-Discriminatory terms) for SSO members. In some industries, SSOs are bound by FRANDs; in others, FRANDs are advisory.
Your patent. Unless your invention results in a patent that is essential for establishing a cell phone standard, FRANDs wouldn't provide any assistance. In the rare instance that your patent is standard-setting, there is no consensus or template for resolving FRAND interpretation or application. We recommend that you consult an attorney familiar with patent licensing in order to determine appropriate royalty rates (and to look out for your rights during the drafting of your patent application).
More on FRANDS ... You can learn more about FRANDs in two federal decisions:  FTC v. Qualcomm (in which a court imposed a reasonable royalty standard for the licensing of Qualcomm modem chips), and  HTC v. Ericsson (in which a court determined that Ericsson's licensing of 4G cell phone technology was FRAND-friendly).

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