Fixing FRAND: A Pseudo-Pool Approach to Standards-Based Patent Licensing

Jorge Contreras

5/24/2013
(Original Publish Date: 3/13/2013)

Technical interoperability standards are critical elements of mobile telephones, laptop computers, digital files, and thousands of other products in the modern networked economy. Most such standards are developed in so-called voluntary standards-development organizations (SDOs) that require participants to license patents essential to the standard on terms that are "fair, reasonable and non-discriminatory" (FRAND). FRAND commitments are thought to avoid the problem of patent hold-up: the imposition of excessive royalty demands after a standard has been widely adopted in the market. While, at first blush, FRAND commitments seem to assure product vendors that patents will not obstruct the manufacture and sale of standards-compliant products, in reality these commitments are vague and unreliable. Moreover, they have proven ineffective to address the problem of patent stacking, which occurs when multiple patent holders assert rights in, and demand royalties on, the same standard. The recent surge of litigation in the smart phone and other technology sectors, much of which concerns the interpretation and enforcement of FRAND commitments, has brought these issues to the attention of regulators, industry, and the public, and many agree that a better approach to FRAND is needed.