Class 6: The “RAND” debate(s)
Readings:
Our readings this week focus on short segments from three different articles. The Devlin article represents one version of a view, voiced by others as well, that the RAND model is fundamentally broken. Devlin is a recent law school grad; I enjoy his no-holds-barred writing style even when I disagree with his analysis. The Miller article is well-known and represents a cautious defense of RAND — a defense based on a premise with which some (such as Geradin and Rato) disagree. The Geradin and Rato article represents a full-throated, unabashed defense of the RAND model. The assigned material totals 27 pages so should be manageable; of course feel free to read more of the articles at your option.
Devlin, Alan James, Standard-Setting Organizations and the Failure of Price Competition (July, 04 2009). New York University Annual Survey of American Law, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1429843
Read the introduction only (pages 218-224); remainder optional. Representative quote:
“Unfortunately, the RAND concept is defunct, illusory, lacking in any semblance of objectivity, and emasculated in part by its lack of enforceability. In short, RAND is an inefficacious substitute for ex ante royalty-specific constraints. Given that the majority of IP-holders will require some compensation for the infringement of their rights by a collectively established standard – thus rendering RF licensing ill-suited to many situations – the failure of RAND to impose a meaningful constraint on ex post monopoly lock-in is a serious shortcoming.”
Miller, Joseph Scott, Standard Setting, Patents, and Access Lock-In: Rand Licensing and the Theory of the Firm. Indiana Law Review, Vol. 40, 2006; Lewis & Clark Law School Legal Studies Research Paper No. 2007-6. Available at SSRN: http://ssrn.com/abstract=924883
Read the Introduction (pages marked 5 – 10), and Part II (“Recognition that the RAND promise displaces injunctions,” pages 20 – 24); remainder optional. Representative quote:
“Many leading voluntary standard-setting organizations (SSOs) have adopted intellectual property (IP) policies under which participants must promise to license any patents on technology that they contribute to a standard, and to do so on reasonable and nondiscriminatory terms (RAND). The standard setting literature includes a substantial focus on the widespread use of this RAND promise. A common refrain in these analyses of the RAND promise is that its meaning is dysfunctionally uncertain. We know more about the RAND promise, however, than the existing literature suggests. I show that we already know the RAND promise’s core meaning, and why it remains attractive to SSOs. …
… [I]n the standards context, SSOs enable production of a standards-based technology platform by conditioning contributors’ participation on making the RAND promise, i.e., on granting the whole of the adopter community a property-like access right to contributors’ patented contributions to the standard. This access lock-in, whereby participants cast themselves into a common venture, makes possible post-standardization, mutually-beneficial bargaining over patent license terms by precluding both subsequent patent-based shutouts and holdups from threatened shutouts. In other words, every participating patent owner has, by making the RAND licensing promise, irrevocably waived its right to seek that most traditional of intellectual property law remedies, a court injunction against unauthorized access. The only relief a frustrated patent owner can seek against an adopter thereafter is the reasonable royalty expressly contemplated. Moreover, the RAND promise must run with the patent if the patent is sold to another party; only in this way does the RAND promise ensure that the standard can flourish without hold-up for as long as the market supports the technology.”
Geradin, Damien and Rato, Miguel P.L., Can Standard-Setting Lead to Exploitative Abuse? A Dissonant View on Patent Hold-Up, Royalty Stacking and the Meaning of FRAND (April 2006). Available at SSRN: http://ssrn.com/abstract=946792
Read Part III “IP Licensing under FRAND committments” (Pages 7 – 19), remainder optional. Representative quote:
“[T]he objective of this paper is to demonstrate that the existing FRAND regime works. Ongoing proposals to alter it by tilting the bargaining position of licensors, in particular that of pure innovators, in favour of licensees are not only unnecessary, being based on false premises, but would also prove detrimental to investment and innovation. …
[The paper] reviews the various meanings that have been attributed to the concept of FRAND and argues that a ‘FRAND royalty’ cannot be determined in the abstract. [Additionally,] the argument is made that, contrary to what has been suggested by a number of authors, by giving a FRAND commitment an owner of essential IPR cannot be deemed to have waived its fundamental right to seek injunctive relief in case its rights are infringed. …
[P]roposals … which endorse – in one way or another – a compulsory regime of ex ante licensing, would create insurmountable practical difficulties and could raise serious competition law concerns. …
[D]etermination of appropriate royalty levels for valuable IP should be left to the market.”
Slides:
Available here in .ppt and here in .pdf.
