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.
