Q11. What are FRAND terms and royalties?
There is no one answer to this question. What is “FRAND” will differ between one set of circumstances and another, and there is likely to be more than one value or set of terms that may be considered FRAND – and this may change over time. Ultimately there are two guiding principles. First, there is the initial reason for FRAND, which seeks to balance an incentive to contribute the technology to a standard while balancing the cost of access to the standardised technology. Second, there is the value proposition, or the value of the patented standardised technology to its user.
While these are useful guiding principles, they do not help place a value on a set (portfolio) of patents licensed by an individual SEP owner and the particular circumstances of the respective parties. The best source of information is often comparable licences, but these are usually governed by confidentiality obligations protecting the relevant commercially sensitive information. Nevertheless, a rough assessment of a likely value can be determined from public sources – as such an implementer should seek suitable expert advice to help it understand what may or may not be FRAND terms and royalties for it.
Ultimately, this question can only be answered by an arbitrator or court. Nevertheless, mediation may be a useful and low-cost means of settling a FRAND licence.
Q.12 What are the usual terms in a FRAND licence?
The terms of a licence will in turn govern its FRAND value. The broader the licence, the more likely the higher value it will be and therefore the royalties payable. The most important terms will usually be:
- The standards covered;
- The products and services covered and/or field of use;
- Countries included, although licences are usually global in scope;
- Royalties due and payment terms/auditing;
- Term/length of the licence;
