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A conceptual model for FRAND royalty setting

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  • Hougaard, Jens Leth
  • Ko, Chiu Yu
  • Zhang, Xuyao

Abstract

Setting an industry-wide standard is crucial for the interoperability, compatibility, and efficiency of information and communication technologies. To minimize holdup problems, patent holders are often required to ex-ante commit to licensing their technologies under Fair, Reasonable, and Non-Discriminatory (FRAND) terms. Yet, there is little consensus, in both courtrooms and industries, on the exact meaning of FRAND. We propose a new framework that enables a precise distinction: fairness in the distribution of royalty payments among patent users, and reasonableness in setting the size of the compensation to the patent holder, where both the size and the distribution of payments are determined in a non-discriminatory way that ensures similar firms are treated similarly.

Suggested Citation

  • Hougaard, Jens Leth & Ko, Chiu Yu & Zhang, Xuyao, 2023. "A conceptual model for FRAND royalty setting," Mathematical Social Sciences, Elsevier, vol. 123(C), pages 167-176.
    • Handle: RePEc:eee:matsoc:v:123:y:2023:i:c:p:167-176
    DOI: 10.1016/j.mathsocsci.2023.03.005
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    References listed on IDEAS

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    More about this item

    Keywords

    FRAND-licensing; Fair royalties; Standard setting; Patent; Shapley value;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • K2 - Law and Economics - - Regulation and Business Law
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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