FRAND Definition Is Evolving

Recent court decisions in a dispute between Microsoft and Motorola Mobility (Motorola) are beginning to define the terms “fair” and “reasonable” as applied to licenses and royalties for standards-essential patents (SEPs). Companies need to license SEPs to implement standardized technologies such as video formats or network protocols to ensure interoperability between various devices and applications. Although Motorola is likely to appeal, and other litigation related to fair, reasonable, and non-discriminatory (FRAND) licensing of patents is pending in several U.S. jurisdictions and the E.U., the chance of future injunctions and royalties increasing the cost of using technology based on SEPs is greatly reduced.

Fair and Reasonable

Standards are developed by interested parties, including governments, manufacturers, and nonprofit organizations, to ensure interoperability between hardware and software used in networked devices such as computers and smartphones. For example, many devices use a video compression standard called H.264/MPEG-4 Part 10 or Advanced Video Coding; it allows a user to watch a video on a device without having to locate specialized software or a particular version of the video. Some standards are simply technologies that have succeeded in the marketplace (sometimes called de facto standards), but others are defined by formal standards bodies organized by governments or vendors such as the American National Standards Institute (ANSI) or the World Wide Web Consortium (W3C).