Licensing standard essential patents, part one: the definition of F/RAND commitments and the determination of royalty rates.

The development of standards contributes to the diffusion of innovation, allowing companies to access the latest technology developed by third parties, and consumers to benefit from the availability of interoperable products at lower costs. Standardization, however, confers increased market power to the holder of a patent which is essential to practicing the standard, a situation which may potential generate anti-competitive effects, especially if the patent holder threatens to hold-up prospective licensees in order to obtain the payment of royalty rates higher than the pre-standardization value of the patent. To minimize this risk, standard-setting organizations commonly require the holder of standard-essential patents to commit to licensing them on fair, reasonable, and non-discriminatory terms (F/RAND). Courts, therefore, are often challenged with the tasks of evaluating the F/RAND nature of royalty rates and licensing terms, and assessing whether the patent holder is entitled to obtain injunctive relief against a prospective licensee. Although the principles that inspire the interpretation of F/RAND commitments appear to be shared worldwide, case law does not yet reflect this uniformity. The harmonization of the rules and methodologies applied by the courts, and the implementation of more comprehensive policies by the standard-setting organizations, appear to be key steps towards ensuring the right balance between the rights of patent holders and licensees. [ABSTRACT FROM PUBLISHER]

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