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32 Berkeley Tech. L.J. 1381 (2017)
Why Incentives for "Patent Holdout" Threaten to Dismantle FRAND, and Why It Matters

handle is hein.journals/berktech32 and id is 1435 raw text is: WHY INCENTIVES FOR PATENT HOLDOUT THREATEN TO DISMANTLE FRAND, AND WHY IT MATTERS Richard A. Epsteint & Kayvan B. Noroozitt ABSTRACT An increasing number of judges, legislators, and scholars, particularly in the United States, have wrongly come to believe that the commitment that standard-essential patents be licensed on fair, reasonable, and nondiscriminatory terms (FRAND) was principally created to advance the interests of technology implementers, and have too often given a preference toward implementers' interests in interpreting FRAND agreements. That premise has led American courts to take a categorically hostile view toward awarding injunctions against implementers who infringe valid standard-essential patents, fearing that the injunctive remedy would give innovators undue leverage. Indeed, American courts have been so unilaterally concerned with innovators' conduct that some have even allowed implementers to sue innovators simply for making an opening licensing offer that is later deemed too high, even if the implementer refused to make any counteroffer at all. An implementer-centric view of FRAND has also caused several courts to conclude that innovators are not entitled to any share of the commercial benefits arising from the standardization of their technologies, and that all such benefits must go to implementers alone. This Article argues that an implementer-centric view of FRAND's origins and purposes is false. FRAND is a contractual agreement that reflects a voluntary reciprocal exchange of benefits and obligations driven by the need to solve significant coordination problems in the face of otherwise prohibitive transaction costs. As part of that bargain, innovators agree to disclose their latest, confidential discoveries to standard-development organizations and to waive their injunction rights as to eventual patents on those discoveries, in exchange for contractual protection against patent holdout by implementers. Those implementers are then permitted to use standard-essential patents on the condition that they agree to pay fair and adequate royalties for that use, with the royalty amount to be set through mutual good-faith negotiations. DOI: https://doi.org/10.15779/Z38WD3Ql9B C 2017 Richard A. Epstein and Kayvan B. Noroozi. f Laurence A. Tisch Professor of Law, New York University School of Law; Peter and Kirsten Bedford Senior Fellow, The Hoover Institution; James Parker Hall Distinguished Service Professor of Law Emeritus and Senior Lecturer, University of Chicago Law School. tt Principal at Noroozi PC and CEO of Koios Pharmaceuticals LLC. The author is trial counsel to Core Wireless Licensing S.a.r.l. in litigation against LG Electronics and Apple with respect to FRAND-committed standard-essential patents. The views expressed in this Article, however, are entirely the author's and were not discussed with or supported by any client or company. The authors thank Bijan Aboutorabi, Philip Cooper, Jeremy Rozansky and John Tienken of the University of Chicago Law School for their excellent research assistance.

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