In Microsoft Co., v. Motorola, Inc., No.
2:10-cv-01823-JLR (W.D. WA), the court provided basic guidelines for assessing
FRAND royalty for standard essential patents (SEPs). The guidelines are based
on the Georgia-Pacific analysis
of the reasonable royalty (Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120
(S.D.N.Y. 1970)) modified for taking into account SSOs’
primary goals for adopting FRAND commitments. The court provided five primary goals
for adopting FRAND commitments: 1. Promotion of widespread adoption of SSOs’
standards; 2. Avoidance of patent hold-up; 3. Avoidance of royalty stacking; 4.
Creation of valuable standards; 5. Exclusion of hold-up value in the reasonable
royalty. The court, then, modified the Georgia-Pacific factors to
account for the five primary goals for adopting FRAND commitments. The key
modification to the Georgia-Pacific factors leads to the reasoning that a royalty in a
patent pool for the specific SEPs at issue or comparable licensing transactions
as a candidate for the royalty established through negotiation under FRAND
commitments. Thus,
the royalty rate in the recently formed LTE patent pool may provide expected FRAND licensing revenue.
Via licensing’s LTE patent pool set the royalty rate as 3%
for end user producuts (e.g. smartphones), 1% for data terminals (e.g. data
cards), and 2% for Femtocell devices with volume discount up to 30%. According to LTE market research by Signals and Systems Telecom, LTE
devices shipment in the world market will reach around 600 million units in
2016. Thus using the royalty about $2 per unit, 4G LTE patents FRAND
licensing revenue is expected to be around $1.2 billion in 2016 globally.
Because the royalty per unit is not dependent on the number of holders of SEPs,
one may calculate licensing revenue for each holder of SEPs proportional to its
number of SEPs (e.g. http://techipm-innovationfrontline.blogspot.com/2013/05/4g-lte-standard-essential-patent.html).
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