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Saturday, December 12, 2015

Fair Standards Alliance- friend of FRAND

A group of companies which include global firms such as BMW, Cisco, Dell, HP, Intel and Lenovo launched the Fair Standards Alliance this week in Brussels, aimed at ensuring licensing of standard-essential patents is done on fair, reasonable and non-discriminatory (FRAND) terms. The support revision made by IEEE. On the critical issue of Royalty on SEP, they state:
(a) Fair and reasonable royalties for a SEP must not tax features of a product that are unrelated to the patented invention 
Some SEP holders suggest that licensing rates should be based on downstream uses of standardised technology. Licensing polices that seek to charge such rates are unfair – they violate the FRAND commitment because they seek compensation for unpatented technologies or technologies that the patent holder did not invent or create. For example, when a smartphone has an innovative user interface that helps drive consumer demand for that device, the owner of a patent essential to a cellular standard should not be permitted to use that patent to appropriate any portion of the value of the user interface. Instead, in most circumstances, FRAND licensing rates should be determined with reference to the device, or the part of the device, that implements the patented invention; this ensures that the patent holder obtains fair compensation for what it actually invented, and not compensation for the value of others’ work or contributions. In other words, the price of a brick should be independent of whether that brick is used for building a garage or a mansion – and the royalty for a SEP associated with a standard that enables an Internet of Things (IoT) device to be wirelessly connected to other IoT devices (or the cloud) should be independent of whether that first IoT device is a smart watch, a refrigerator or a car. That is why it is so important to not blindly base royalty rates for SEPs on the overall value of an end device that makes use of the SEP’s invention, but to rather carefully consider the actual value that the SEP contributes to that end device. Often, that assessment can greatly be aided by considering the smallest component that actually implements the patented invention. When that part can be isolated as a separately saleable unit (a brick for building various types of buildings), a fair royalty rate will typically bear a relation to the price of that unit. 

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