This article was written by guest author Sam Howard, a 3L at Boston University School of Law and the winner of the 2019-2020 Patent Progress Writing Competition. The article is a shortened version of his full contest entry, which will be published in the Boston University Journal of Science and Technology Law in 2021, and which provides an extended discussion of these issues.
When Standard-Setting Organizations (“SSOs”) set various industry standards, they often require the incorporation of certain technologies (and, therefore, their underlying patents) into the standard. Standard-Essential Patents (“SEPs”) generally require that a patent-holder agree to Fair, Reasonable, and Non-Discriminatory (“FRAND”) terms or Reasonable and Non-Discriminatory (“RAND”) terms in the agreements incorporating their patent into a standard. These terms do what their names suggest and oblige the SEP-holder to, generally speaking, not charge unreasonable fees in licensing their SEPs. What is a “fair” rate? What is a “reasonable” rate? What constitutes “non-discriminatory” practices in the licensing of SEPs? SSOs generally decline to answer these questions themselves, further complicating the matter. Instead, courts solve these problems if and when these terms become the subject of litigation, which they indeed have, in cases across the country brought by SEP-holders, would-be SEP-licensees (“standard-implementers”), and even the FTC. The Federal Circuit has not established a clear-cut rule as to how to determine a FRAND or RAND (henceforth referred to collectively as “F/RAND”) royalty rate, and so this remains an area of high uncertainty today, even compared to the already uncertain field of patent litigation.