If you’re a big Android fan, you’ll be hearing quite a bit about standard-essential patents (SEPs) in the coming months. Google / Motorola Mobility and Microsoft are ready to duke it out over the exact rules and rates that Google can set on licensing out their patents.
In a reaction to recent court developments between the tech giants, Google made it known that they were against per-unit fixed-rate license fees and preferred negotiated deals with licensees.
The court proceedings that start next month will take a look at exactly how well Google / Motorola Mobility has complied with FRAND (“fair, reasonable and non-discriminatory”) guidelines in the licensing process so far. For example, Motorola originally demanded 2.25% of the end price for items that wished to use their patents (e.g. an entire Microsoft computer), but others regard this rate as unreasonable.
One possible solution for the license fee dispute is to judge the system by the Entire Market Value Rule (EMVR). The EMVR basically states that patent fees can only be set according to the smallest saleable unit a patent applies to unless the patent’s usage drives demand for that end product. So, if the entire reason for buying a product is related to functionality covered under the patent, then companies would pay the higher rate. If not, companies get to pay a smaller rate.
Google, however, isn’t too keen on using the EMVR model:
“Requiring licensing parties to strictly adhere to the EMVR would effectively preclude licensees and licensors from using experience and their sound judgment in efficiently negotiating a license.”
What it all boils down to is that there are a few different ways to look at this problem.
- Businesses can negotiate a deal that works for all parties involved.
- Businesses or a governing body can set a flat rate on all cases of patent-usage. (Similar to cars on a toll road. All cars pay the same price.)
The argument against businesses simply negotiating a deal is two-fold.
- Businesses don’t always agree on a deal, so courts need a consistent way to handle the problem.
- Critics view negotiated deals as a chance for patent-holders to tax other companies based on how widespread the patent usage will be in the new product.
Step one of the deliberation process for Google and Microsoft will take place before Judge Robart without the use of a jury. Later, the case will likely involve a jury in order to set definitive rules on the licensing process going forward.