You are a Silicon Valley holder of a patent essential to a wireless standard that is subject to a "fair, reasonable, and nondiscriminatory" licensing obligation. How can you get the most favorable royalties and still meet your FRAND obligation? You work at an Orange County software company looking to license a standard-essential patent, or SEP, so that you can practice a standard. How do you ensure that the royalty rate negotiated with the licensor is a FRAND rate? You hold a patent and are considering whether to participate in a standard-setting process that would subject your patents to FRAND commitments. How do FRAND royalty rates compare to the rates you could get if you don’t participate?
Historically, owners and potential licensees of SEPs had little guidance when tackling these questions. On April 25, the court’s decision in Microsoft v. Motorola, C10-1823 (Western District of Washington), is the first decision to set out a framework for calculating a FRAND royalty. This framework is instructive for market participants offering or negotiating FRAND licenses as well as for patent holders deciding whether to subject a patent to a FRAND obligation by declaring it essential to a standard.
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