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Business Articles Awards > Intellectual Property

Defining “Reasonable” in RAND: A Bit of Common Sense

Sean Gates, CPI Antitrust Chronicle (1), March 2015

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What is RAND? It’s a simple question. Given the ubiquity of the term, one would think that the answer would be clear. After all, standard-setting organizations (“SSOs”) around the world require patent holders to declare their standard-essential patents and commit to license on RAND terms. Competition law enforcement agencies have mandated RAND licensing in remedial orders. Courts have been asked to determine whether licensing offers are consistent with RAND. Yet after more than a decade of wrangling in legal disputes, antitrust enforcement investigations, and policy debates across the globe, the definition of RAND is still, to a large degree, an open and multifaceted question.
One of the most hotly debated aspects of the question is: What is a “reasonable” royalty for a RAND-encumbered patent? The answer to this question is vital. Millions, perhaps billions, of royalty dollars ride on the answer. Moreover, whether a particular patent holder’s licensing offers and licenses are “reasonable,” and thus consistent with a RAND commitment, has implications for the ability to obtain injunctive relief, potential liability for breach of contract, and whether the patent holder’s conduct violates competition law.
The debate over this issue is fierce.3 It has recently focused on what standard-setting participants intended RAND to mean. The positions are starkly different, and weighing the divergent views is a complex and difficult task. Applying a little common sense, however, goes a long way to understanding this issue.

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