This article is the first in a series on a rapidly-evolving area of patent law: determining the “reasonable and non-discriminatory” (RAND) royalty rate for licensing a standard-essential U.S. patent. RAND royalties arise when technology promulgated by a standards-setting organization (SSO), such as the Institute of Electrical and Electronics Engineers Standards Association (IEEE-SA), is accused of infringing a patent claim contended to be “essential” to practicing the standard. In Europe, they are known as fair, reasonable, and non-discriminatory (FRAND) terms, but are considered synonymous with RAND. Who is impacted by this developing area of patent law? Anyone at a company whose products incorporate standardized technology.
Technology standards proliferated rapidly over the last 20 years. For example, the IEEE 802.11 standards family for wireless local area networks, commonly branded as “Wi-Fi,” is easily the most prevalent and commercially successful technological specification. Wi-Fi enabled devices are found worldwide in computers, tablets, phones, printers, and most recently, in appliances and other devices in the home, such as thermostats, alarm systems, and even refrigerators. The emerging interconnectivity of such objects is called the Internet of Things (IoT) or Internet of Everything (IoE). Unfortunately, the marketplace dominance and ubiquity of standards-based products make them attractive targets for patent litigation, especially to non-practicing entities (NPEs), otherwise commonly known as “patent trolls.”