Edible Apple

As you all know, Apple has for many months now been involved in ongoing legal disputes with both Motorola and Samsung regarding various smartphone technologies. While both sides are wielding patents against one another, there’s an important difference between the patents being asserted by Apple and those being asserted by Samsung and Motorola.

The patents Apple is accusing Motorola and Samsung of infringing are entirely proprietary, meaning that Apple can license out the underlying technology at any rate of its choosing. On the other hand, Apple is also well within their rights not to license out their patents at all.

This stands in stark contrast to Motorola and Samsung who have made a worrisome habit of asserting FRAND encumbered patents against Apple in multiple jurisdictions across the globe.

But what, exactly, are FRAND encumbered patents and why is this such a big deal?

In short, when a company offers up its patented technology to be included in a proposed technological standard, the trade-off for inclusion is that said company must offer a license for that technology to all interested parties on fair, reasonable and non-discriminatory terms (FRAND). Otherwise, companies such as Motorola, which owns various patents essential to the 3G standard, could preclude all other competitors from releasing any 3G based product.

That said, the patents being asserted by both Motorola and Samsung largely pertain to patents subject to FRAND terms, and watching Motorola and Samsung use those patents in an offensive manner runs contrary to the very notion of technological standards and the type of reasonable licensing agreements that keep all parties happy.

Recently, it emerged that Motorola’s “reasonable” request for licensing fees with respect to their 3G patents was $2.25 per for each iPhone and iPad Apple sells. Indeed, if every company with a patent essential to a standard demanded such a high royalty rate, the result would stymie innovation rather quickly. The whole point of FRAND terms is to reward the original patent holder while giving everyone else the ability to take advantage of the patented technology. The offer of high licensing fees to coerce a third party into a settlement for FRAND encumbered technology undermines the entire setup of the patent system.

Consequently, Apple last week penned a letter to the European Telecommunications Standards Institute (ETSI) asking the body to establish consistent royalty rates for FRAND encumbered patents.

Apple’s letter reads in part,

It is apparent that our industry suffers from a lack of consistent adherence to FRAND principles in the cellular standards arena. Apple believes the industry would benefit from a more consistent and transparent application of FRAND, especially related to the licensing of celluar standards essential patents. To this end, Apple is committed to a FRAND licensing framework for celluar standards essential patents based on three basic elements – appropriate royalty rate, common royalty base and no injunction.

While it remains to be seen what ultimately happens as a result, Apple isn’t the only party cognizant of the blatant misuse of FRAND encumbered patents. The European Commission is taking a close look at Samsung’s patent strategy and is probing the company for patent rights “abuse.”

via WSJ