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Reasonable and non-discriminatory licensing

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contributes to the standard. The development of a patented technology typically requires significant investment in research, and contributing that technology to a standard is not the only option by which a patent holder can recoup that investment and thus monetize its invention. For example, a patent holder has the option to monetize that invention through exclusive use or exclusive licensing. Technology owners might have insufficient incentives to contribute their technologies to a standard-setting organization without the promise of an adequate royalty. The promise of a F/RAND royalty address that problem: the patent holder will typically agree to contribute its technology to the standard, thus forgoing the exclusive use or the exclusive licensing of its technology, in exchange for the assurance that it will receive adequate compensation in reasonable royalties.
322:; fair terms means terms which are not anti-competitive and that would not be considered unlawful if imposed by a dominant firm in their relative market. Examples of terms that would breach this commitment are: requiring licensees to buy licenses for products that they do not want in order to get a license for the products they do want or requiring licensees to take licenses to certain unwanted or unneeded patents to obtain licenses to other desired patents (bundling); requiring licensees to license their own IP to the licensor for free (free grant backs); and including restrictive conditions on licensees' dealings with competitors (mandatory exclusivity). 251:
standard. So, it will often request that a patent holder clarify its willingness to offer to license its standard-essential patents on FRAND terms. If the patent holder refuses upon request to license a patent that has become essential to a standard, then the standard-setting organization must exclude that technology. When viewed in this light, the FRAND commitment serves to harmonize the private interests of patent holders and the public interests of standard-setting organizations. Many scholars have written about these topics, as well as a variety of other legal and economic issues concerning licensing on F/RAND terms.
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among many; there is a good argument that a license price that captures that additional value is not "reasonable" because it does not reflect the intrinsic value of the technology being licensed. On the other hand, the adoption of the standard may signal that the adopted technology is valuable, and the patent holder should be rewarded accordingly. That is particularly relevant when the value of the patent is not clearly known before the adoption of the standard.
268:. One of the most common policies is to require a patent holder that voluntarily agrees to include its patented technology in the standard to license that technology on "reasonable and non-discriminatory terms" (RAND) or on "fair, reasonable, and non-discriminatory terms" (FRAND). The two terms are generally interchangeable; FRAND seems to be preferred in Europe and RAND in the U.S. 349:
the licensee. However it does mean that the underlying licensing condition included in a licensing agreement must be the same regardless of the licensee. This obligation is included in order to maintain a level playing field with respect to existing competitors and to ensure that potential new entrants are free to enter the market on the same basis.
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relates to both the terms and the rates included in licensing agreements. As the name suggests this commitment requires that licensors treat each individual licensee in a similar manner. This does not mean that the rates and payment terms cannot change dependent on the volume and creditworthiness of
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Related to RAND licenses are RAND-Z (RAND with zero royalty) or RAND-RF (RAND Royalty Free) licensing, in which a company promises to license the technology at no charge, but implementers still have to get the licenser's permission to implement. The licenser may not make money off the deal but can
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RAND terms exclude intangible goods which the producer may decide to distribute at no cost and where third parties may make further copies. Take for example a software package that is distributed at no cost and to which the developer wants to add support for a video format which requires a patent
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The most controversial issue in RAND licensing is whether the "reasonable" license price should include the value contributed by the standard-setting organization's decision to adopt the standard. A technology is often more valuable after it has been widely adopted than when it is one alternative
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in future time periods. A licensor which has several different licensing packages might be tempted to have both reasonable and unreasonable packages. However having a reasonable "bundled" rate does not excuse having unreasonable licensing rates for smaller unbundled packages. All licensing rates
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A standard-setting organization is an industry group that sets common standards for its particular industry to ensure compatibility and interoperability of devices manufactured by different companies. A patent becomes standard-essential when a standard-setting organization sets a standard that
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if all licensees were charged a similar rate. According to this view, aggregate rates that would significantly increase the cost to the industry and make the industry uncompetitive are unreasonable. Similarly, a reasonable licensing rate must reward the licensor with adequate compensation for
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On the other hand, commentators stress that the FRAND commitment also serves to ensure that the holder of a patent that becomes essential to the standard will receive royalties from users of the standard that adequately compensate the patent holder for the incremental value that its technology
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Because a patent, under most countries' legal regimes, grants its owner an exclusive right to exclude others from making, using, selling, or importing the invention, a standard-setting organization generally must obtain permission from the patent holder to include a patented technology in its
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Some interpretations of "non-discriminatory" can include time-oriented licensing terms such as an "early bird" license offered by a licensor where terms of a RAND license are better for initial licensees or for licensees who sign a license within the first year of its availability.
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rights (IPR) included in the industry standards. Once an organization is offering a FRAND license they are required to offer that license to anyone (wishing to access the standard), not necessarily only members of the organization. Without such commitment, members could use
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Some commentators argue that standard-setting organizations include the FRAND obligation in their bylaws primarily as a means of enhancing the pro-competitive character of their industry. They are intended to prevent members from engaging in licensing abuse based on the
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Mariniello, Mario (2011) Fair, Reasonable and Non Discriminatory (FRAND) Terms: A Challenge for Competition Authorities - Journal of Competition Law and Economics, Oxford University Press, Vol. 7, n. 3; Tim W. Dornis, J. EUR. COMP. L. & PRACT. 11 (2020), 575
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licence. If there is a licence which requires a tiny per-copy fee, the software project will not be able to avail of the licence. The licence may be called "(F)RAND", but the modalities discriminate against a whole category of intangible goods such as
239:. U.S. courts, as well as courts in other jurisdictions, have found that, in appropriate circumstances, the implementer of a standard—that is, a firm or entity that uses a standard to render a service or manufacture a product—is an intended 263:
that apply to the standards they adopt (the patent policy). In the United States, the patent holder's agreement to adhere by the patent policy creates a legally binding contract, as the Court of Appeals for the Ninth Circuit ruled in
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This form of discrimination can be similarly caused by common licence terms such as only applying to complete implementations of the licensed standard, limiting use to particular fields, or restricting redistribution. The
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Memorandum from J. Gregory Sidak, Chairman, Criterion Economics LLC to the Ministry of Commerce & Industry, Department of Industrial Policy & Promotion of India (Mar. 30, 2016),
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power inherent in a standard to impose unfair, unreasonable and discriminatory licensing terms that would damage competition and inflate their own relative position.
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The negotiating process for FRAND licenses places requirements on the patent owner and the envisioned patentee. The terms for these negotiations were set in German
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refers mainly to the licensing rates. According to some, a reasonable licensing rate is a rate charged on licenses which would not result in an unreasonable
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While there are no legal precedents to spell out specifically what the actual terms mean, it can be interpreted from the testimony of people like Professor
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to a standard. Compensation is adequate if it provides the licensor with the incentive to continue investing and contributing to the
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still stop some type of products or require some type of reciprocity or do more subtle things like drag out the licensing process.
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often request from the owner of an intellectual property right (usually a patent) that is, or may become, essential to practice a
495:"ICT Standards, standardization, GSM, TETRA, NFV, GPRS, 3GPP, ITS, UMTS, UTRAN, M2M, MEC, Mobile, IoT, Security, standardisation" 265: 861: 523: 235:. Put differently, a F/RAND commitment is a voluntary agreement between the standard-setting organization and the holder of 185: 121: 770: 848: 382:
suggests the term "uniform fee only" (UFO) to reflect that such "(F)RAND" licenses are inherently discriminatory.
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In 2013, court decisions and scholarly articles cited FRAND commitments 10 times more often than in 2003.
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https://www.criterioneconomics.com/apportionment-frand-royalties-comparable-licenses-ericsson-dlink.html
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Innovatio IP Ventures, LLC Patent Litig., MDL No. 2303, 2013 WL 5593609, at *4 (N.D. Ill. Oct. 3, 2013).
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https://www.criterioneconomics.com/standard-essential-patents-indian-ministry-commerce-industry.html
460:"Pricing Patents for Licensing in Standard-Setting Organizations: Making Sense of FRAND Commitments" 329: 910: 305: 131: 418: 905: 243:
of the FRAND agreement, and, as such, is entitled to certain rights conferred by that agreement.
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http://www.criterioneconomics.com/meaning-of-frand-royalties-for-standard-essential-patents.html
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https://www.criterioneconomics.com/a-frand-contracts-intended-third-party-beneficiary.html
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Standard-setting organizations commonly adopt policies that govern the ownership of
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Apportionment, FRAND Royalties, and Comparable Licenses After Ericsson v. D-Link
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A Simple Approach to Setting Reasonable Royalties for Standard-Essential Patents
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Comparative Law and Economics of Standard-Essential Patents and FRAND Royalties
771:"The European Court of Justice on enforcement of FRAND patents: Huawei v. ZTE" 175: 126: 100: 881: 701: 546:"Formulas for fair, reasonable and non-discriminatory royalty determination" 530:, 22 TEX. INTELL. PROP. L.J. 311 (2013); Mark A. Lemley & Carl Shapiro, 823: 318:
relates mainly to the underlying licensing terms. Drawing from anti-trust/
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Standardization Feedback for the National Science and Technology Council
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Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 884 (9th Cir. 2012);
598:"" FRAND ": statistical comparison between cases and research papers" 434: 171: 39: 458:
Layne-Farrar, Anne; Padilla, A. Jorge; Schmalensee, Richard (2007).
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Fighting the Smartphone Patent War with RAND-Encumbered Patents
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FRANDly fire: are industry standards doing more harm than good?
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Patenting methodology intended to produce a technical standard
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Schaumberg, Tom M.; Emi Ito Ortiz (February 25, 2013).
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significantly diverging from the Orange-Book-Standard.
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Journal of Intellectual Property Law & Practice
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A FRAND Contract's Intended Third-Party Beneficiary
312:that the individual terms are defined as follows: 276:advantage generated as a result of having their 310:United States Senate Committee on the Judiciary 864:, Vol. 12, Annual Review, pages 209–240, 2012. 247:adopts the technology that the patent covers. 193: 8: 18:Reasonable and Non Discriminatory Licensing 417:interpreted FRAND licensing terms in case 200: 186: 31: 851:by Andy Updegrove, dated 26 February 2012 221:fair, reasonable, and non-discriminatory 95:Fair, reasonable, and non-discriminatory 624:The Meaning of FRAND, Part I: Royalties 445: 361:Excluding costless distribution schemes 154: 108: 66: 45: 34: 570:, 2016 U. ILL. L. REV. (forthcoming), 7: 800:Pat Treacy and Sophie Lawrance, " 25: 808:Pat Treacy and Sophie Lawrance, " 213:Reasonable and non-discriminatory 862:Berkeley Technology Law Journal 548:. Munich Personal RePEc Archive 702:"A Buyer's Guide to Standards" 654:Free Software Foundation, 2012 1: 604:(in French). January 27, 2014 122:Defensive patent aggregation 927: 845:Note dated 24 January 2002 398: 237:standard-essential patents 155:Clauses in patent licenses 831:, the licensing body for 415:European Court of Justice 602:Concurrentialiste Review 544:Salant, David J (2007). 409:in a case regarding the 380:Free Software Foundation 85:Defensive Patent License 874:The National Law Review 839:Current Patent Practice 241:third-party beneficiary 229:standards organizations 219:) terms, also known as 163:Field-of-use limitation 464:Antitrust Law Journal 399:Further information: 278:intellectual property 266:Microsoft v. Motorola 90:Defensive termination 824:10.1093/jiplp/jpm212 704:. September 20, 2002 669:End Software Patents 526:; Thomas F. Cotter, 411:Orange-Book-Standard 401:Orange-Book-Standard 342:must be reasonable. 255:F/RAND as a contract 75:Compulsory licensing 652:"FRAND" is a FRAUD 522:, 69 FLA. L. REV., 395:Negotiating process 306:Stanford University 132:Patent monetization 622:J. Gregory Sidak, 566:J. Gregory Sidak, 518:J. Gregory Sidak, 423:ECLI:EU:C:2015:477 346:Non-discriminatory 308:, in front of the 233:technical standard 335:essential patents 333:contributing its 210: 209: 117:Catch and release 16:(Redirected from 918: 892: 890: 888: 789: 787: 785: 783: 767: 761: 760: 759: 757: 752: 742: 736: 735: 733: 731: 726:. 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Chia, " 852: 846: 836: 829:3G Patents Ltd 826: 806: 796: 795:External links 793: 791: 790: 762: 737: 715: 693: 689:Words to Avoid 681: 656: 644: 634: 615: 589: 576: 559: 536: 511: 486: 473: 444: 442: 439: 438: 437: 430: 427: 396: 393: 387: 384: 362: 359: 330:aggregate rate 297: 294: 256: 253: 208: 207: 205: 204: 197: 190: 182: 179: 178: 166: 165: 157: 156: 152: 151: 150: 149: 144: 139: 134: 129: 124: 119: 111: 110: 106: 105: 104: 103: 98: 92: 87: 82: 77: 69: 68: 64: 63: 62: 61: 56: 48: 47: 43: 42: 26: 24: 14: 13: 10: 9: 6: 4: 3: 2: 923: 912: 909: 907: 904: 903: 901: 883: 879: 875: 871: 866: 863: 859: 858: 853: 850: 847: 844: 840: 837: 834: 830: 827: 825: 821: 817: 813: 812: 807: 804: 803: 799: 798: 794: 778: 777: 772: 766: 763: 749: 748: 741: 738: 725: 719: 716: 703: 697: 694: 690: 685: 682: 670: 666: 660: 657: 653: 648: 645: 638: 635: 632: 629: 625: 619: 616: 603: 599: 593: 590: 586: 580: 577: 573: 569: 563: 560: 547: 540: 537: 533: 529: 525: 521: 515: 512: 500: 496: 490: 487: 483: 477: 474: 469: 465: 461: 454: 452: 450: 446: 440: 436: 433: 432: 428: 426: 424: 420: 416: 412: 408: 402: 394: 392: 385: 383: 381: 375: 373: 369: 368:free software 360: 358: 354: 350: 347: 343: 340: 336: 331: 327: 323: 321: 317: 313: 311: 307: 303: 295: 293: 290: 286: 284: 279: 275: 269: 267: 262: 261:patent rights 254: 252: 248: 244: 242: 238: 234: 230: 226: 222: 218: 214: 203: 198: 196: 191: 189: 184: 183: 181: 180: 177: 173: 170: 164: 161: 160: 159: 158: 153: 148: 145: 143: 140: 138: 135: 133: 130: 128: 125: 123: 120: 118: 115: 114: 113: 112: 107: 102: 99: 97:(FRAND, RAND) 96: 93: 91: 88: 86: 83: 81: 78: 76: 73: 72: 71: 70: 65: 60: 57: 55: 52: 51: 50: 49: 44: 41: 37: 33: 30: 19: 885:. 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Index

Reasonable and Non Discriminatory Licensing
Licensing
patents
Licensing
Royalties
Compulsory licensing
Cross-licensing
Defensive Patent License
Defensive termination
Fair, reasonable, and non-discriminatory
Shop right
Catch and release
Defensive patent aggregation
Patentleft
Patent monetization
Patent pool
Stick licensing
Patent trolling
Field-of-use limitation
Patents
Patent law
v
t
e
standards organizations
technical standard
standard-essential patents
third-party beneficiary
patent rights
Microsoft v. Motorola

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