We recently came across a new paper written by noted scholars Mark Lemley and Carl Shapiro that we thought was worth passing along. Lemley and Shapiro have written extensively about the interplay between patent issues and standard-setting, including the oft-cited article “Patent Holdup and Royalty Stacking.” In their new paper, titled “A Simple Approach to Setting Reasonable Royalties for Standard-Essential Patents,” Lemley and Shapiro propose a way to tackle the difficult task of determining the appropriate terms for a FRAND-encumbered standard-essential portfolio (if the parties are unable to agree on terms).
Their solution to this common problem? Requiring the parties to enter into a binding “baseball-style” arbitration – where each party must propose its final offer, and the arbitrator picks which one is the most reasonable (the arbitrator cannot choose a different number). In their paper, Lemley and Shapiro describe how their proposed system would work in practice, and claim it would moot many of the FRAND-related disputes ongoing today. Continue reading