Standard-setting organizations establish rules that govern the ownership of IP rights that apply to the standards they adopt. Companies that help establish the criteria gain an advantage in having their technology included in standards; therefore, one rule commonly adopted is that any patent that applies to a standard can only be licensed on "fair, reasonable, and non-discriminatory terms" (FRAND). A problem arises on exactly what is FRAND.
Now, following the suggestion of Motorola’s own expert that in the event of a disagreement the court has to step in and say what is fair and reasonable, U.S. District Court Judge James Robart has ventured an amount to be considered FRAND, deciding in Motorola v. Microsoft that Microsoft should pay ½ cent per unit for video-decoding technology and 3-1/2 cents per unit for wireless technology, far less than the 2.25% of retail price demanded by Motorola Mobility. An Xbox retails for about $199, so Motorola was seeking $4.50 on every unit sold.
Microsoft had argued that when a patent holder makes a commitment to FRAND, it gives up the right to employ the conventional basis for license negotiations. Motorola experts had offered sample licenses that resulted from normal negotiations. Microsoft countered with licenses deemed comparable in a FRAND setting.