In digging through the court documents in Motorola v. Apple, Florian Mueller uncovered the 2.5% royalty rate Motorola is seeking for a license to a standard-essential patent (for wireless devices). The patent is subject to “fair, reasonable and non-discriminatory” licensing, meaning it is essential for a standard and Motorola must offer to license it to all-comers.
Apple challenging the rate requested as excessive. The idea behind FRAND is that standards are necessary in order for technology’s various parts to work together and to keep technology companies from the waste associated with developing multiple, competing technologies that do not serve consumers. Once standards are set, it is inevitable some companies will hold patents essential to that standard, and though those companies have a right to be paid for their IP, the rule of thumb is that the same rate needs to be charged to all companies looking to participate in the standard, and the royalty rate needs to be reasonable.