Apple to EU: Set FRAND Licensing Standards

Apple is hoping to convince the EU’s European Telecommunications Standards Institute to set guidelines for how patents that cover industry standards are licensed. In a letter to the organization, Apple’s legal team said that the lack of licensing standards has led to lawsuits that otherwise could’ve been prevented.

“It is apparent that our industry suffers from a lack of consistent adherence to FRAND principles in the cellular standards arena,” Apple’s intellectual property boss, Bruce Watrous, said.

Apple says it's time for FRAND licensing standardsApple says it’s time for FRAND licensing standards

FRAND, or fair, reasonable and nondiscriminatory, refers to patents that cover necessary components in industry standard technologies. Companies that hold FRAND patents are expected to license the technology on fair and reasonable terms, although there aren’t any standards in place to clearly denote which patents should be licensed as FRAND, nor are there any guidelines to say how much patent holders should charge for those licenses.

Apple’s letter doesn’t stop with claiming there is a licensing issue. It goes on to suggest a solution. “Apple’s letter then moves on to propose a solution based on three specific principles: appropriate royalty rate; common royalty base; no injunction,” Flourian Muller of Foss Patents said.

The Mac and iPhone maker’s letter was penned in November 2011, although it came to light a day after word that Motorola Mobility is looking to take 2.25 percent of Apple’s iPhone sales in patent licensing fees. Apple, however, claims it is already covered by licensing fees Qualcomm pays for the chips used in the iPhone.

Apple is hoping to get Motorola Mobility’s licensing agreements with other phone makers into court so it can determine whether or not 2.25 percent is a reasonable since could end up paying out more than US$1 billion in licensing fees based on 2011’s iPhone sales.

Motorola is asking for licensing fees based on the value of the finished product — a prospect that Apple isn’t happy with. Instead, Apple is suggesting licensing fees should be paid based on the value of the components the patents cover.

“This common base, as between two negotiating parties, should be no higher than the industry average sales price for a basic communications device that is capable of both voice and data communications,” Mr. Watrous said in Apple’s letter. In other words, paying licensing fees on the finished product isn’t reasonable when instead companies should pay based on individual parts and technologies.

The European Telecommunications Standards Institute has not commented on Apple’s letter.