FRAND Technology May Alter The Bargaining Power of Licensors

Under US patent law, a FRAND technology (fair, reasonable, and nondiscriminatory patent licensing) is standard and essential to the ongoing operation of a particular product. Thus companies that own such patents are not allowed to “gouge” licensees. Licensors should consider whether or not the license they are granting covers a FRAND technology, because if so, the licensor will be expected to provide its product or component to another company on fair and reasonable terms. These terms might differ significantly from what would otherwise be standard in the marketplace. Licensees will also want to know whether the technology they seek to use is covered by FRAND. This will place them in a stronger bargaining position.

This article concerns a lawsuit between Apple and Ericsson. The companies were in disagreement about whether the Ericsson LTE technology in Apple’s products is essential to cellular operation, and were in dispute over the fairness of a FRAND license extension Apple was expected to sign.

Read the article here.

Take away:

• It is important for both licensors and licensees of patented IP to determine whether the IP is standard and essential to the ongoing operation of a particular product, and thus covered by the FRAND provisions of US patent law.