A Practical Guide to Determining FRAND in the Telecommunications Industry

David Kennedy and Larry Tedesco write about royalty rates, FRAND licence negotiations, and returns for owners of standard-essential patents.

Debate in the telecommunications industry has been growing over the application of the fair, reasonable and non-discriminatory (FRAND) licensing requirements related to licensing commitments entered into by owners of standard-essential patents (SEPs). This debate has grown in recent years as an increasing number of manufacturers have entered the mobile handset market, many of which have made little, if any contribution to the development of mobile communication technology and standards. Some of those companies have captured a significant market share without licensing the standardised technology underlying their products, leaving innovative SEP portfolio owners without compensation for the decades spent investing in and creating essential mobile technologies. In an economic sense, these new-entrant manufacturers are sometimes referred to as ‘free riders’. Often, the innovators which are otherwise willing to license on FRAND terms have no choice but to turn to expensive and protracted litigation against unwilling, free-riding manufacturers. This chapter addresses several current FRAND issues and challenges facing licensing professionals during the process of negotiating and completing license agreements to SEPs in the telecommunications industry.