Standardization and Technological Innovation: Some Reflections on Ex-ante Licensing, FRAND*

Interoperability, Competition Policy and Antitrust and Standards

Article Snapshot

Author(s)

Damien Geradin

Source

TILEC Discussion Paper No. 2006-017

Summary

This paper review proposals to change how patents are used in standards.

Policy Relevance

Standard-setting organizations now require participating firms to license their technology on fair terms. This seems to work well in practice. Proposals to improve the process would do more harm than good.

Main Points

  • Firms contributing technology often agree with the standard-setting organizations (SSOs) to license it on fair, reasonable, and nondiscriminatory terms (“RAND” or “FRAND”).

  • Some assert problems with FRAND after the standard is set:
    • Patent holders can hold up adoption of a standard by not cooperating.
    • Patent holders might charge too much after the standard is set.

  • But patent holders that try to charge too much lose the opportunity to participate in the standard or license before their patent expires.

  • Proposals to change FRAND to restrict prices include:
    • Requiring up-front disclosure of license terms.
    • Capping royalties or requiring they be shared.
    • Requiring joint negotiation of royalty rates.

  • These proposals would reduce or eliminate competition between producers seeking licenses and discourage innovation, among other serious problems, making consumers worse off.

* Full title: Standardization and Technological Innovation: Some Reflections on Ex-ante Licensing, FRAND, and the Proper Means to Reward Innovators

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