Determination of FRAND royalty rates: an examination of prominent SEP cases

Technology standards are critical in creating a common interface, allowing interoperability between individual components, devices and networks. Technology standards often incorporate many essential patented inventions, which are referred to as standard-essential patents (SEPs). Owners of declared SEPs provide commitments to standard setting organizations (SSOs) that they will license their SEPs on fair, reasonable and non-discriminatory (FRAND) terms to companies that practice the standards.However, it is sometimes disputed whether or not these royalty rates are FRAND; in these cases, the burden of determining a FRAND royalty falls to courts. It is important for parties involved in SEP litigation to be knowledgeable of the appropriate economic tools and models to address the various issues arising in these unique and challenging patent disputes.This article discusses how various approaches to patent valuation have been applied in prominent SEP cases over the last decade.