Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/204408
Authors: 
Hougaard, Jens Leth
Ko, Chiu Yu
Zhang, Xuyao
Year of Publication: 
2017
Series/Report no.: 
IFRO Working Paper 2017/04
Abstract: 
Setting an industry-wide standard is crucial for information and communication technologies for interoperability, compatibility and efficiency. To minimize holdup problems, patent holders are often required to ex-ante commit to licensing their technologies under Fair, Reasonable and Non-Discriminatory (FRAND) terms. Yet, there is little consensus, in both courtrooms and industries, on the exact meaning of FRAND. We propose a welfare economic framework that enables a precise distinction: fairness in the distribution of royalty payments among patent users, and reasonableness in setting the size of the compensation to the patent holder, where both the size and the distribution of payments are determined in a non-discriminatory way making sure that similar firms are treated similarly. We illustrate our approach in various classic models from industrial organization, and discuss further potential applications.
Subjects: 
FRAND-licensing
Fair royalties
Standard setting
Patent
Shapley value
JEL: 
D63
K2
L3
L44
Document Type: 
Working Paper

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