In a world driven by technological innovations, it has become necessary for industry participants to agree upon certain technical standards in a particular industry to permit further advancement. For example, if a headset manufactured in one jurisdiction needs to be able to make a call to a phone manufactured by a different manufacturer in a different jurisdiction, the industry participants need to agree upon industry standards and the patented technologies that make up those standards.

Standard setting is key to permitting this “interoperability.” Competitors routinely collaborate on technical standards that are critical for the creation of new platforms on which innovation occurs. But a balance must be struck. On the one hand, it is desirable to attract the best available technology for inclusion in a standard, which should then be broadly implemented by producers and suppliers of standardized products and services. However, when patents covering technology necessary to comply with a standard are used, then owners of those “standard essential patents” (SEPs) should obtain reasonable compensation for granting licensees access to their IP.

In a perfect world, a voluntary, consensus-based, standard-setting process would always strike the right balance. The standard setting offices (SSOs), usually voluntary creations within an industry, play a key role in this process. When an SSO creates a technology standard that includes patented technologies, it will require patentees to agree to license those patents that are essential to the standard (the SEPs) on “reasonable and nondiscriminatory” (RAND) or “fair, reasonable and nondiscriminatory” (FRAND) terms. In many cases, a FRAND licensing commitment is a condition of participation in the standards body.