Comparative Analysis of Court-Determined FRAND Royalty Rates

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This article reviews and compares the two most recent court decisions in FRAND rates in cellular standards, Unwired Planet v. Huawei, and TCL v. Ericsson, to determine the extent to which the two decisions are consistent with each other and the implication for future litigation. The authors conclude that the two decisions found different rates for Ericsson’s LTE SEP portfolio primarily because they reached different conclusions from their respective comparable license analyses. This is likely due to the fact that different licenses were considered most comparable and the sales forecasts used to unpack Ericsson one-way rates might be different as well. The two decisions also differed substantially in their respective implied assessments of Ericsson’s portfolio strength. From the Unwired Planet court’s calculations, the implied Ericsson share of all LTE SEP value was 9.1 percent. The TCL court, on the other hand, concluded that Ericsson’s share of all LTE SEP value was only about half as large. Interestingly, these two factors roughly canceled out so that the two decisions were in rough agreement as to the aggregate royalty burden for all LTE SEPs. This suggests that future FRAND rate litigation in the cellular space may focus more on the measurement of relative portfolio strength and less on the level of the aggregate royalty burden.