Formulas for Fair, Reasonable and Non-Discriminatory Royalty Determination
20 Pages Posted: 26 Jul 2012
Date Written: August 15, 2007
Abstract
This paper takes an axiomatic approach to determining “Fair, Reasonable, and Non Discriminatory” (“FRAND”) royalties for intellectual property (“IP”) rights. Drawing on the extensive game theory literature on “surplus sharing/cost sharing” problems, I describe specific formulas for determining license fees that can be derived from basic fairness principles. In particular, I describe the Shapley Value, the Proportional Sharing Rule and the Nucleolus. The Proportional Sharing Rule has the advantage that it is the only rule that is invariant to mergers and splitting of the IP owners. I also explain why, at times, there may be no acceptable to solution. Further, I contrast these rules with the Efficient Component Pricing Rule (“ECPR”) suggested by Baumol and Swanson. Unlike, the ECPR, the rules identified in this paper can uniquely determine license fees when there is more than one owner of essential IP, and also incorporate various notions of fairness and equity.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Intellectual Property Rights and Standard-Setting Organizations
-
Patent Holdup and Royalty Stacking
By Mark A. Lemley and Carl Shapiro
-
Reply: Patent Holdup and Royalty Stacking
By Mark A. Lemley and Carl Shapiro
-
Patents and the Performance of Voluntary Standard Setting Organizations
By Marc Rysman and Timothy Simcoe
-
The Rules of Standard Setting Organizations: An Empirical Analysis
By Benjamin Chiao, Jean Tirole, ...
-
The Rules of Standard Setting Organizations: An Empirical Analysis
By Benjamin Chiao, Jean Tirole, ...
-
The Rules of Standard Setting Organizations: An Empirical Analysis
By Benjamin Chiao, Josh Lerner, ...
-
A Model of Forum Shopping, with Special Reference to Standard Setting Organizations
By Jean Tirole and Josh Lerner
-
A Model of Forum Shopping, with Special Reference to Standard Setting Organizations
By Jean Tirole and Josh Lerner
-
To Join or Not to Join: Examining Patent Pool Participation and Rent Sharing Rules
By Anne Layne-farrar and Josh Lerner