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F/RAND

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Overview Edit

F/RAND (also written as FRAND) is an acronym for "Fair, Reasonable, And Non-Discriminatory."

Standards-setting organizations are the industry groups which set common standards for particular industry in order to ensure compatibility and interoperability of devices manufactured by different entities.

Standard-setting organizations commonly have rules that govern the ownership of patent rights that cover the standards they adopt. One of the most common rules is that a patent covering the standard must be adopted on "reasonable and nondiscriminatory terms" (RAND) or "fair, reasonable and nondiscriminatory terms" (FRAND). The two terms are generally interchangeable; FRAND seems to be preferred in Europe and RAND in the United States.

In licensing, Fair, Reasonable and Non Discriminatory terms (FRAND) refers to the obligation that is often required by standards-setting organizations (SSOs) for members which participate in the standard setting process. Standards-setting organizations include this obligation in their bylaws as a means of enhancing the pro-competitive character of their industry.

An IPR holder that commits to license its patents on F/RAND terms and conditions has irrevocably committed to allow the standard to be implemented under its IPR on a F/RAND basis and thereby waived the right to exclude others from practicing the standard under its IPR. An IPR holder that commits to license its patents on F/RAND terms and conditions cannot use its hold-up power resulting from the incorporation of its technology into the standard to demand royalties that do not comply with F/RAND.

Once an IPR holder has made a F/RAND commitment, all designers have the right to implement the standard in their products and use the inventions from any declared essential IPRs, and there is no need to wait until all the particular F/RAND terms and conditions have been negotiated with the IPR holder or until a definitive license agreement is executed setting out those terms.

Definition of terms Edit

  • Non-Discriminatory relates to both the terms and the rates included in licensing agreements. As the name suggests this commitment requires that licensors treat each individual licensee in a similar manner. This does not mean that the rates and payment terms cannot change dependent on the volume and creditworthiness of the licensee. However it does mean that the underlying licensing condition included in a licensing agreement must be the same regardless of the licensee. This obligation is included in order to maintain a level playing field with respect to existing competitors, and to ensure the potential new entrants are free to enter the market on the same basis.

Issues Edit

The most controversial issue in FRAND licensing is whether the "reasonable" license price should include the value contributed by the standard-setting organization's decision to adopt the standard. A technology is often more valuable after it has been widely adopted than when it is one alternative among many; there is a good argument that a license price that captures that additional value is not "reasonable" because it does not reflect the intrinsic value of the technology being licensed.


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