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The Economic Approaches Used to Determine FRAND Royalty Rates in TCL v Ericsson

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On November 8, 2017, Judge James Selna of the US District Court in the Central District of California issued a decision (published later on December 21st) in TCL v. Ericsson determining fair, reasonable, and non-discriminatory (FRAND) royalty rates for Ericsson’s standard essential patent (SEP) portfolios for the 2G, 3G, and 4G cellular standards. Not only does this decision establish the FRAND royalty rate for a major licensor’s cellular SEP portfolios, but it also lays out an economic framework for determining FRAND royalty rates that may be used by manufacturers, SEP holders, and courts in future FRAND rate-setting contexts. In this article, the authors unpack how the Court arrived at the FRAND rates, highlight a few key takeaways, and provide their own view on some of the relevant issues.