recent DISCUSSION

• Mattias Ganslandt says:

  Tim, While little consensus exists regarding the precise meaning of FRAND, it is not lacking meaning. FRAND is a commitment to license. The meaning must be seen in this perspective. Fair in the EU context means non-excessive (i.e. not full exploitation of ex post market power). Reasonable means non-prohibitive, i.e. a price that would have been accepted while technology competition still remained. Non-discriminatory means, well, non-discriminatory (i.e. likes are treated alike). Hard to enforce? Sure. Meaningless? No. The inherent vagueness of the FRAND concept is intentional. It is an incomplete contract that allows some issues to be sorted out after some uncertainty is resolved. A more explicit, precise and rigid concept could very well prove to be prohibitively expensive to implement contractually./Mattias
• Rick Jelliffe says:

  But most patents never make it to market. If you look at Microsoft’s and IBM’s patents, for example, the number of patents that are applied for dwarfs the number that they could possibly implement. Do you think that Adam Smith would have been keen on rewarding people who wanted to *prevent* new technologies from coming out? (The companies will obviously select the technologies that are most advantageous to them, and will also of course get defensive patents.) Especially when the companies capable of getting this advantage were disproportionately the richest companies of developed countries.
• Helen Disney says:

  @ Rick – yes, it is, but importantly it is only a temporary one and even Adam Smith argues in ‘The Wealth of Nations’ that the “temporary monopoly granted to the inventor of a new machine could be justified as a means of rewarding risk and expense”.
• Rick Jelliffe says:

  But a patent, being a monopoly grant, is surely the opposite of letting the market “have its role”?
• Helen Disney says:

  Thanks for all the comments. Some specific responses to Tim’s points first (which may be relevant to others as well):

  re 1) So who defines what a meaningful FRAND should be? And does this apply to all types of standards and all circumstances?

  re 2) While this is true, this paves the question of policy choices – are we assuming that IP owners will always opt for an abuse (fear of patent hold up) and therefore we should go for a “blanket type” of ex ante requirements or should we still assume that the market should have its role, despite the risks? I opt for the latter.

  re 3) I’m not sure exactly what you want to say, but if the intention is to imply that all standards should be based on royalty-free mechanisms then I think we are in disagreement. Many standards involving IPRs are publicly accessible at a reasonable, transparent and non-discriminatory price – hence, they are open. Many patent pools also exist. What about MPEG LA and the Open Patent Alliance for the field of WiMAX technology (4G wireless technology), etc? So my view is that in an open market there is a role for many sorts of standards.
• Peter Gray says:

  Surely the benefits which result from the requirement of clear licensing conditions, such as FRAND, outweigh the risks to competition etc. While increased dialogue is certainly desirable, what alternative outcome do you expect to stem from this?
• James Bryce Clark says:

  Helen, thanks for your point about royalty-free standards and mandatory licensing. Historically, participation in open data standards has been voluntary. So no-one is compelled to contribute their thoughts, or patents, unless they chose to work in the communal “pool.”

  The point of patent disclosure, in standardization and competition law, is to give a standard’s users fair warning that a standard may carry licensing requirements. In the voluntary context, this allows the user to choose whether to implement, with better understanding of the costs.

  Do the same principles apply, when governments mandate use of a “voluntary” standard?

  It’s notable that the key foundational standards which created the Internet (URLs, e-mail, the web, etc.) are freely available. Experts in our field often also tend to believe that, where there’s only one encumbered way to do something, legitimate un-encumbered alternatives might be developed.

  At OASIS, we worked with the Berlaymont (then-IDA or IDABC) a decade ago, to facilitate use of royalty-free open standards for intergovernmental data sharing in the new accession states. Cost of implementation, and “DIY”, were key issues then. They still may be today, in some public policy contexts. Should policymakers never specify or favor freely-available methods?

  Regards JBC
• Tim Simcoe says:

  While this is a valid argument, I want to register three objections:

  1) In the absence of any meaningful/enforceable definition of “Fair, Reasonable and Non-Discriminatory” does a FRAND promise really have much bite? The analogy to compulsory licensing breaks down if the licensor has complete flexibility to set prices.

  2) Patent hold-up under an “anything goes” licensing policy may be just as damaging to innovation incentives as any ex ante licensing requirements. The relative importance of these effects is an empirical question that cannot be answered by an appeal to one theory or another.

  3) What’s the best available *empirical* evidence on the effects of tightening IPR policies? I would argue that it is the W3Cs switch from FRAND to a mandatory royalty-free regime. While I am *not* arguing that as the correct path for every SSO, it is very notable that the wheels did not come off at W3C following that switch.