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AN ECONOMIC INTERPRETATION OF FRAND

AN ECONOMIC INTERPRETATION OF FRAND Standard-setting organizations have, for many years, required members to commit to license patents essential to use of standards on fair, reasonable, and non-discriminatory (FRAND) terms. Unfortunately, SSOs have not defined what FRAND means, leaving its interpretation to courts and regulators. This article explains the economic concerns underlying FRAND—hold-up and strategic behavior, leading to inefficient behavior in a standard-setting context—and how a proper economic interpretation of FRAND can eliminate or mitigate those concerns. Ex ante analyses based on the “reasonable” principle can potentially eliminate hold-up, but, as a practical matter, may be costly, difficult to perform, and error-prone. In such circumstances, the “non-discriminatory” principle of FRAND can provide some protection against hold-up even when the “reasonable” principle of FRAND does not. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Competition Law & Economics Oxford University Press

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Publisher
Oxford University Press
Copyright
© The Author (2013). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oup.com
Subject
ARTICLES
ISSN
1744-6414
eISSN
1744-6422
DOI
10.1093/joclec/nht019
Publisher site
See Article on Publisher Site

Abstract

Standard-setting organizations have, for many years, required members to commit to license patents essential to use of standards on fair, reasonable, and non-discriminatory (FRAND) terms. Unfortunately, SSOs have not defined what FRAND means, leaving its interpretation to courts and regulators. This article explains the economic concerns underlying FRAND—hold-up and strategic behavior, leading to inefficient behavior in a standard-setting context—and how a proper economic interpretation of FRAND can eliminate or mitigate those concerns. Ex ante analyses based on the “reasonable” principle can potentially eliminate hold-up, but, as a practical matter, may be costly, difficult to perform, and error-prone. In such circumstances, the “non-discriminatory” principle of FRAND can provide some protection against hold-up even when the “reasonable” principle of FRAND does not.

Journal

Journal of Competition Law & EconomicsOxford University Press

Published: Sep 14, 2013

Keywords: JEL 03

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