Vagueness in RAND Licensing Obligations is Unreasonable for Patent Owners

Francois Leveque, Ecole des Mines de Paris - Centre d'Économie Industrielle (CERNA), and Yann Ménière, Mines ParisTech

10/09/2009
(Original Publish Date: 7/29/2009)

Recent evolutions have called into question the traditional practices of standard-setting organizations (SSOs), especially as regards the licensing of essential patents. In the trail of recent antitrust cases, doubts have been cast in particular on the effectiveness of the current IP policies requiring that essential patent owners commit to licensing their IP on RAND terms, the latter commitments being now perceived as too vague. Against this background, the purpose of this paper is twofold. We first highlight the rationale of the old RAND regime, as well as its effects when it becomes ineffective to mitigate the holdup problem. We then discuss the advantages of requiring more precise commitments. We especially analyze and compare the effects of two new IP policies currently experimented in some SSO: requiring that patent owners commit on a royalty cap as experimented by VITA, and allowing patent owners to choose freely whether to commit on a cap or an exact royalty, as experimented with IEEE-SA.