Universal Royalty-Free Reciprocity: when is Royalty-Free not FRAND?

Resumo

Royalty-free licensing of patents essential to a technology has been a compelling argument for implementation of that technology. The IPR policy adopted by W3C has been a RF model for other standards bodies, including the Alliance for Open Media. This article examines these IPR policies and notably their terms for reciprocity. These can create a licensing framework of “Universal Royalty-Free Reciprocity”, arguably an all-encompassing ecosystem covering standards development participants, other SEP holders and implementers. As a result, the headline royalty rate for AOM’s AV1 video codec specification, $ 0 per device, compares favorably with the rates – between $ 0.277 and $ 1.677 per device – published for other leading video codecs, HEVC and VVC developed by FRAND-based standards development organizations. This article assesses the purported benefits of RF licensing, when coupled with Universal Royalty-Free Reciprocity, and presents its disadvantages. One key issue is that the RF ecosystem is porous; there are many SEP holders that fall outside the reciprocity framework. Indeed those purportedly bound by the framework are free to step away and offer FRAND (royalty-bearing) terms. This article is timely because of the investigation conducted by DG Competition of the European Commission into AOM’s licensing practices and the similar interest recently shown by the Antitrust Division of the US Department of Justice. AOM’s “clarification” to its IPR policy in May 2023, in response to the Commission’s investigation, has received little commentary. This article is also timely in connection with this special edition of the Revista Brasileira de Direito on FRAND and SEPs in the light of recent proceedings before the Court of Justice of Rio de Janeiro brought by an AV1-essential patent holder against an AV1 implementer.