Pricing Patents for Licensing in Standard-Setting Organizations: Making Sense of Frand Commitments
![handle is hein.journals/antil74 and id is 679 raw text is: PRICING PATENTS FOR LICENSING IN STANDARD-
SETTING ORGANIZATIONS: MAKING SENSE OF
FRAND COMMITMENTS
ANNE LAYNE-FARRAR
A. JORGE PADILLA
RicHARD SCHMALENSEE*
I. INTRODUCTION
Fair, reasonable, and non-discriminatory are an interesting col-
lection of commonly used, but emotion-laden words that become even
more emotionally charged when strung together. The acronym,
FRAND, which yokes these words together, turns out to have consider-
able practical importance, especially in standard-setting situations. A
FRAND commitment has serious legal implications: a commitment to
offer intellectual property (IP), such as patents, to licensees on fair, rea-
sonable, and non-discriminatory terms and conditions. Unfortunately,
even though many are committed to FRAND licensing, there is no uni-
versally agreed upon operational definition of that commitment.'
* Anne Layne-Farrar is a Director at LECG Consulting; A. Jorge Padilla is a Managing
Director at LECG Consulting and a Research Fellow at CEMFI Madrid and CEPR
London; Richard Schmalensee is the Howard W. Johnson Professor of Economics and
Management at Massachusetts Institute of Technology. The authors thank Damien Ger-
adin, Mike Hartogs, Doug Lichtman, Alison Oldale, Trevor Soames, and Richard Taffet
for comments and suggestions. We also thank Melissa DiBella and Lubomira Ivanova for
invaluable research support. Financial support from Qualcomm is also gratefully acknowl-
edged. The ideas and opinions in this article are exclusively our own.
'Daniel Swanson and WilliamJ. Baumol note: It is widely acknowledged that, in fact,
there are no generally agreed upon tests to determine whether a particular license does
or does not satisfy a RAND commitment. Daniel G. Swanson & William J. Baumol, Rea-
sonable and Nondiscriminatory (RAND) Royalties, Standards Selection, and Control of Market
Power, 73 ANTITRUST L.J. 1, 5 (2005). Larry Goldstein and Brian Kearsey echo this: Unfor-
tunately, [RAND and FRAND] are not well defined. Ambiguity in the definition of
'FRAND' is, in our opinion, one of the core problems in the licensing of rights to patents
essential for implementation of a written technical standard. LARRY M. GOLDSTEIN &
BRIAN N. KEARSEY, TECHNOLOGY PATENT LICENSING: AN INTERNATIONAL REFERENCE ON
21ST CENTURY PATENT LICENSING, PATENT PooLS AND PATENT PLATFORMS 27 (2004). Like-
wise, Richard Rapp and Lauren Stiroh state: The typical [standard setting organization]
patent policy mandating that a royalty be 'fair, reasonable and non-discriminatory' gives](ViewImageLocal?handle=hein.journals/antil74&div=23&collection=journals&method=preview&ext=.png&size=3)
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Pricing Patents for Licensing in Standard-Setting Organizations: Making Sense of Frand Commitments
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