Fair, Reasonable and Non-Discriminatory, But Controversial: IEEE Adopts a New FRAND Policy

The Institute of Electrical and Electronics Engineers (IEEE) is a self-described “professional association dedicated to advancing technological innovation and excellence for the benefit of humanity.” One role that the IEEE plays is that of a standard-setting organization. In this regard, its members are required to adhere to licensing obligations in order for the members to take part in the standard-setting process.

On February 8, 2015, the IEEE approved a change to its current “Reasonable and Non-Discriminatory” (RAND) policy, often referred to as the “Fair, Reasonable and Non-Discriminatory” (FRAND) policy.

The IEEE FRAND policy requires members who own patents covering “Essential Patent Claims” to license those patents to other members on either royalty-free or reasonable and non-discriminatory terms. However, the IEEE expressly declines any responsibility for “determining whether any licensing terms and conditions … in any licensing agreements are reasonable or non-discriminatory.” Although the newly approved amended policy maintains this disclaimer of responsibility, it provides further guidance on what would be considered a “Reasonable Rate”. This clarification may assist IEEE members when negotiating reasonable licensing provisions for Essential Patent Claims.

Although the Department of Justice has lauded the IEEE’s policy change, other commentators, such as Qualcomm’s CEO Emeritus Irwin Jacobs, argue that the changes provide short term commercial benefits to manufacturers of standard-compliant products, but hinder innovation by discouraging companies from investing in research and development (see the letter to the IEEE from Irwin Jacobs).

Controversy aside, it is not surprising that the IEEE sought to clarify the requirements of a fair, reasonable and non-discriminatory licensing process, in light of the myriad of recent litigation focused on the issue (see, eg,Microsoft v Motorola, Apple v Motorola, and Ericsson v D-Link). Hopefully, the clarifications provided by IEEE to its FRAND policy will reduce the time and effort spent by litigants, judges and juries in delineating the requirements and remedies available to parties entangled in litigation involving the licensing of Essential Patent Claims.

For other articles on this decision, see: Patently-O and JD Supra