Wednesday, October 1, 2014

Contreras and Gilbert on FRAND Royalties

Jorge Contreras and Richard Gilbert have posted a paper on ssrn titled A Unified Framework for RAND and Other Reasonable RoyaltiesHere is a link to the paper, and here is the abstract:
The framework for calculating “reasonable royalty” patent damages has evolved over the years to a point at which, today, it is viewed by many commentators as potentially misleading and untethered from its original purpose. We offer a proposal to modify the framework for determining reasonable patent royalties that is based on recent scholarly and judicial analyses of standards-essential patents that are subject to commitments to license on terms that are reasonable and non-discriminatory (RAND).
Many standard setting organizations require owners of patents that are essential to a standard to license those patents on RAND terms, but typically offer little specific guidance to describe the royalty rates that satisfy this requirement. Litigated cases have applied the traditional Georgia-Pacific factors to assess RAND royalty rates with modifications to account for the circumstances of the RAND commitment. We propose that the reasonable royalty analysis should be conducted in essentially the same manner for all patents, whether or not they are encumbered by RAND commitments. We find considerable support for our approach in the historical development of U.S. patent law prior to the advent of the Georgia-Pacific test. Our approach focuses on the technical and economic characteristics of allegedly infringed patents and their incremental value to the overall product offering. 
I may post some specific comments on the paper in a few days--I just downloaded it and haven't finished reading it yet--but for now I would note only that the authors' description of their thesis strikes me as exactly right:  that "the reasonable royalty analysis should be conducted in essentially the same manner for all patents, whether or not they are encumbered by RAND commitments."  Should be an interesting read.

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