The viability of FRAND: How the seminal landmark Microsoft ruling could impact the value of standard essential patents and the future of telecom standards
Recently, telecommunication standards have become a battleground over the nature of F/RAND commitments that determine the value of standard essential patents. In 2015, the US federal court system reaffirmed the 2013 landmark ruling in Microsoft v. Motorola on the valuation of SEPs through the determination of a F/RAND royalty rate. This study deconstructed the courts valuation method and found that it deployed a comprehensive set of principles for apportionment of SEP value in line with the general economic theory of patent holdup and freeriding, but that the lack of technical strength of the SEP portfolios limited the full understanding of the generalization of the methodology to future contexts. Key implications include a greater capability of the US court system to manage F/RAND disputes, false reification of patent holdup as a systemic problem, and a potentially normative, negative impact on patent value, where the total impact on both static and dynamic efficiency requires further research and potentially new knowledge based economic theories.