FRAND licensing needs a taxonomy: valuation absent context is misvaluation

The World Intellectual Property Organization's recent report on SEP valuation methodologies provides a useful overview of comparable licences, bottom-up valuation and top-down approaches. However, in my view, the most important issue in FRAND valuation remains underexplored: the need to distinguish between fundamentally different categories of licensing and commercial arrangements.

This article argues that much FRAND analysis suffers from false commensurability. Bilateral licences, cross-licences, collective licensing platforms, patent pools, paid-up lump-sum settlements and royalty-free regimes are frequently converted into common metrics such as ad valorem rates or dollar-per-unit royalties and then treated as directly comparable. In the process, critical commercial context can be lost in translation.

Using examples including Nokia's agreements with Apple and Microsoft, Avanci's $32-per-vehicle automotive licensing model, public licensing programmes from Qualcomm and InterDigital, and recent FRAND decisions including Samsung v ZTE, Optis v Apple and InterDigital v Lenovo, I examine how royalty metrics, payment structures, bargaining conditions and strategic objectives can materially affect negotiated outcomes.

I also discuss the risks associated with cross-licence unpacking, portfolio-strength-ratio methodologies, patent counting, manufactured comparables, and the tendency to treat complex licensing agreements as if they can be translated mechanically into equivalent royalty rates.

My central thesis is simple:

The first question in FRAND valuation should not be "Which methodology should we use?" but "What exactly are we trying to value?"

The resulting rates may appear objective and comparable, but instead still reflect the bargaining asymmetries, strategic objectives, risk allocations and other distortions that shaped the original deal.

Download the full article from SSRN, here.