Judicial Determination Of RAND Royalty In Standard-Essential Patents Licensing

The fusion of standards with lock-in effects and patent rights with legal monopoly has fiercely influenced the market competition order, which promotes the traditional patent wars to an entirely new stage. The RAND principle, aiming at dealing with the interest conflicts caused by patent standardization, has a core value to ensure that standards will be adopted widely, meanwhile standard-essential patentees will reap a reasonable payoff basing on their technological innovation. Nevertheless,the unclear definition made RAND principle hard to be applied in specific cases. As the determination of RAND royalty is a main issue in the application of RAND principle, this paper is designed to analyze the regulations and barriers about the judicial determination of RAND royalty in China, and explore appropriate solutions to complete related regulation system and realize RAND’s core value.This paper is divided into four chapters: The first chapter analyzes the issues arose by the standardization and the necessity of judicial intervention on RAND royalty. Holdups and royalty stacking caused by the standardization drive common royalty far away from RAND principle. Thus it is necessary to control the RAND royalty by judicial approach, and judicial intervention should conform to related regulations and legal procedural.The second chapter introduces institutional background and the current judicial application rules about RAND royalty’s determination. According to the current rules,the interpretation of RAND still lacks operability. The four reference factors combined with proportionality principle, anti-holdup, anti-royalty stacking are not referred during the overall process, while the preconditions of reference object in comparative method are not so clear. Moreover, SSOs(standard-setting organizations)never review the essentiality of SEPs, which makes the judicial determination of RAND royalty more difficult.The third chapter analyzes approaches to determine RAND royalty in some specific cases of U.S., EU, and Japan, viewing to find referential experience to determine RAND royalty. The approaches include hypothetical negotiation,Georgia-Pacific factors, “top-down” approach, etc.The last chapter is based on the previous parts, putting forward some proposals to improve RAND royalty’s judicial determination system in China. In order to establish the basic principles to determine RAND royalty, RAND’s definition should be clarified, and various reference factors should be made. Profits of terminal product is the basement of calculating the RAND royalty, and proportionality principle combined with factor distribution approach, as well as comparison principle combined with basement and adjustment approach can be used to determine RAND royalty by the courts. Besides, SSOs should better take responsibility for reviewing the essentiality of SEPs, and former related royalty rates should better be disclosed. In the end, RAND royalty litigation should link the procedure with antitrust litigations to save judicial costs.