The viability of FRAND policies: How the Seminal Microsoft Ruling Could Impact the Value of Standard Essential Patents and the Future of Telecom Standards

A paper of Bowman Heiden, from the Centre for Intellectual Property (CIP) in Chalmers University of Technology, Gothenburg, Sweden, addresses the viability of F/RAND policies to regulate the equilibrium between patent holdup and freeriding (or patent holdout) in the context of telecommunication standards and highlights the danger of the IEEE rules.

 Using the landmark Microsoft ruling, a characterized case of patent holdup, in the US Federal Court of the Western District of Washington in 2013, which was affirmed by the US 9th Circuit Court of Appeals in 2015, this paper addresses several potential implications for reflection by industry and policy makers that impact the viability F/RAND and telecom standards.

  1. A potential re-imbalancing of the value of SEPs from ad hoc holdup to systemic freeriding (i.e. holdout), as shown in our IEEE case study
  1. Innovation specialists may need to reconsider the risk profile of their standardization strategies and business models
  1. Firm strategy will continue to shift from winning the game to changing the rules of the game: their will be incentive to delay negotiation of F/RAND licenses and instead focus on weakening the concept of F/RAND through judicial, legislative, policy, and regulatory means.
  1. Reinforcement of the fear of holdup leading to new policy proposals by SSOs, regulatory bodies, and legislators 

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Topics: injunctions ip critics Patent