What do Fair, Reasonable and Non Discriminatory terms (FRAND) mean in practice? What is the right accrual rate for 2G and 3G licensing costs?

2G and 3G licensing costs are payable by any company practising the relevant 2G or 3G standard. The rules of each standard dictate that those practising the standard are required to obtain a patent license to any patents declared essential to the Standard, with the patent holder required to grant a license on FRAND terms. If only it were that simple in practice.

The 2G and 3G essential IP licensors do not make it easy to accurately answer these questions. Licensing rates are maintained on a need-to-know basis at senior VP level and above and FRAND appears almost meaningless as a term when worldwide comparables are drawn.

ipVA’s recent diligence projects have involved having to answer both questions with sufficient accuracy to allow lending banks to fund a private equity acquisition. We are able to share the anonymised results of that work with our clients to enable accrual rates to be set with confidence.

We can also assist with strategies to mitigate essential IPR and non essential IPR licensing costs.

For buyers or investors we aim to provide certainty that the target is sensibly accruing for these costs and will not have additional exposure post transaction.