End-use-based licensing – An economic perspective

Owners of standard-essential patents (“SEPs”) are increasingly requesting royalties that vary depending on the “end-use” and the value of end-products or services (“end-use-based licensing”), even if the standard is implemented at an intermediate level in the value chain.

In a report prepared for the Fair Standards Alliance, Dr Benno Buehler and Christoph von Muellern discuss how end-use-based licensing can be assessed in the general framework of SEP licensing and they identify likely effects of end-use-based licensing. The report explains that end-use-based licensing can increase the risk of misappropriation by SEP holders under approaches commonly used to quantify FRAND royalty rates. Inflated SEP royalties and inefficiencies from end-use-based licensing may stifle downstream innovation and ultimately result in consumer harm.

The report is available here.

The views in this report are those of the authors and do not necessarily represent the views of CRA and CRA’s clients.