FRAND licensing

A commitment by a standard essential patent holder to license its patents on terms that are fair, reasonable, and non-discriminatory — a condition required by major standards-setting organizations (SSOs) such as ETSI, IEEE, and ITU as a prerequisite for including technology in a standard. FRAND disputes are among the highest-value IP cases globally, with aggregate royalty determinations affecting semiconductor, smartphone, and automotive industries at scale. For litigation funders, FRAND cases are attractive because of their damages magnitude but complex because royalty rates are constrained by the FRAND commitment and courts in different jurisdictions apply materially different methodologies for rate-setting. Funders evaluating FRAND cases must analyze both the patent owner's ability to obtain an injunction (which drives settlement leverage) and the realistic FRAND rate range across the product volume at issue.

Because FRAND rate-setting methodologies diverge across jurisdictions and even across judges within the same jurisdiction, funders backing SEP holders build a range of plausible outcomes rather than underwriting to a single rate, weighting heavily whether the case can be brought in a venue with a favorable rate-setting track record. The other half of FRAND underwriting is injunction availability: a jurisdiction where SEP holders can still credibly threaten an injunction changes settlement dynamics materially compared to one where only a FRAND royalty determination is available.