Innovation Asset Blog

Courts could soon set standards-essential royalty rates

The past few years have seen a notable increase in the number of legal disputes surrounding the licensure of standards-essential patents (SEPs). With more companies reaching an impasse on what constitutes fair and reasonable royalty rates, at least one judge has expressed a vision for taking a more proactive role in proceedings.

In a 207-page opinion regarding a prominent case between Microsoft and Motorola, presiding justice James Robart elaborated on a potential framework from which licensing fees could be more objectively determined. According to The Economist, Robart hearkened back to one patent infringement case from the 1970s to help compile factors that could be used to calculate reasonable royalties. Several minor adjustments were made, however, to honor the standards-essential qualities of the asset.

Considering the fact that many companies may own SEPs related to a given technology, Robart would like to see the total number of licensors paid accounted for in the rate-setting process to promote greater affordability. Similarly, he insisted that pricing should be tied to the percentage of total inventive value licensors contribute with their selected patents.

In the case of smartphones, for example, a revitalized royalty management framework could see courts reduce the rate paid by a licensee of an SEP related to 4G connectivity upon learning that the entity is already paying several dozen SEP holders for access to similar foundational technologies.

Peter Ackerman

Peter Ackerman

Founder & CEO, Innovation Asset Group, Inc.