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RAND – the search for meaning reaches Seattle

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electromagnetic-field-98736_640IEEE 802.11 is a set of standards that cover wireless local area networking.  These standards provide the basis for wireless network products which use the Wi-Fi brand (yes, it is a brand) – most people reading this article will use such technology many times a day.  Patents have played a contentious role in the development of this standard, particularly in the successful licensing campaign carried out by the Australian national science agency CSIRO.  This campaign has attracted strong criticism – for example in this Ars Technica article – and also some robust defence, particularly from Australia in this piece from the Patentology blog.  While clearly no-one likes to be told that they are governed by trolls, hopefully tempers have now cooled, and this is all water under the bridge.

A year later on, and two technology titans are now facing off over the same standards.  Motorola Mobility, the handset and device manufacturer acquired by Google in 2012 after its demerger from Motorola, has been involved in litigation with Microsoft dating back to 2010 relating to licensing of standards-essential patents.  Motorola Mobility patents relating to 802.11 and also to the H.264 video coding standard were involved.  These matters have now been tried in the Federal District Court for the Western District of Washington, and Judge Robart has now published his order setting RAND* terms and a methodology for determining RAND terms.  This is  of considerable interest, as it is believed to be the first time that a U.S. court has made a determination of RAND licensing terms for a standard-essential patent portfolio license between two parties.  As it is notoriously hard to determine what “reasonable and non-discriminatory” means in any specific case, a compelling methodology could be extremely influential.

The full (207 page!) order and a useful initial assessment can be found in this article from the Essential Patent Blog produced by Dow Lohnes PLLC.  While the royalty rate reached is much closer to what was offered by Microsoft than to what was asked by Motorola Mobility, the judge has developed a full methodology based on a simulated hypothetical bilateral negotiation between the parties.  Section III of the order is particularly interesting – this identifies basic principles to be used “economic guideposts” for determining RAND terms – these include that the RAND royalty level should be set so as to promote adoption of the standard, to mitigate the risk of patent hold-up and to address the risk of royalty stacking, but that reasonable royalties should be associated with valuable standards.

It is not yet clear where these economic guideposts will lead us – however, the search for the true meaning of RAND currently needs to take in Seattle.

Richard Lawrence  30 April 2013

*Wondering what the difference between RAND and FRAND is? Richard suggests that “RAND tends to be the term used in the US because their standards bodies tend to use “reasonable and non-discriminatory” whereas European ones tend to use “fair, reasonable and non-discriminatory”.” [ipcopymark]

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