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FRAND Licensing Under Fire: Are Fair Royalty Rates Becoming Unfair?

Rhea Morgan in Tech & Innovation December 2025 • 4 min read.

"A closer look at how recent challenges to FRAND licensing could disrupt tech industry norms and impact consumer access to innovation."

In the fast-evolving world of technology, ensuring fair access to essential patents is crucial. These patents, often tied to industry standards, are licensed under what’s known as FRAND terms: fair, reasonable, and non-discriminatory. But what happens when the definition of 'fair' is challenged? Recent regulatory actions are stirring debate, questioning whether established royalty models are truly equitable or could be stifling innovation.

At the heart of the discussion is whether setting royalties as a percentage of the final product's price—a common practice—is inherently discriminatory. Critics argue that this method leads to higher costs for consumers and doesn't reflect the actual value of the patented technology. On the other hand, supporters maintain that percentage-based royalties are flexible, adaptable, and crucial for aligning the interests of patent holders and implementers.

This article will dive into the complexities of FRAND licensing, examining the arguments for and against different royalty structures. We'll explore how these debates could reshape the tech landscape, potentially impacting everything from smartphone prices to the pace of technological advancement. Whether you're a tech enthusiast, a business leader, or simply curious about the future of innovation, understanding these issues is essential.

What's the Big Deal with FRAND Licensing?

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FRAND, or Fair, Reasonable, and Non-Discriminatory, commitments are a cornerstone of modern technology. When standards are set for technologies like Wi-Fi, cellular, or video codecs, companies often contribute their patented inventions to these standards. In exchange for this contribution, they agree to license these patents to anyone who wants to implement the standard on FRAND terms.

This system is designed to prevent 'patent hold-up,' where a patent holder could block others from using a crucial technology or demand exorbitant fees. FRAND ensures that essential technologies are accessible to everyone, fostering competition and encouraging innovation. However, the interpretation of 'fair, reasonable, and non-discriminatory' is where things get tricky.

Fair: Implies that royalty rates should be justifiable and reflect the patent's value.
Reasonable: Suggests terms that are commercially viable and don't unduly burden implementers.
Non-Discriminatory: Aims to prevent patent holders from favoring certain licensees over others.

Historically, percentage-based royalties have been a common practice. But recent challenges question if they meet the 'non-discriminatory' aspect, arguing that identical components should not have different royalties based on the device they are incorporated into.

Navigating the Future of FRAND

The debate over FRAND licensing is far from over. As technology continues to evolve, finding a balance that encourages innovation while ensuring fair access will be crucial. Whether through refined interpretations of existing FRAND commitments or the development of new licensing models, the goal remains the same: to foster a thriving technological ecosystem that benefits both creators and consumers.

About this Article -

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Everything You Need To Know

What is FRAND licensing, and why is it important in the tech industry?

FRAND stands for Fair, Reasonable, and Non-Discriminatory. It is a licensing framework used extensively in the tech industry, particularly for patents related to industry standards such as Wi-Fi, cellular technologies, and video codecs. Its importance lies in ensuring that essential technologies are accessible to all, fostering competition and innovation. Without FRAND, patent holders could potentially block others from using crucial technologies or demand excessively high fees, which would stifle innovation and limit consumer access. It promotes a level playing field, allowing businesses to incorporate standardized technologies without facing unfair barriers.

What are the key components of FRAND terms, and what do they entail?

The core components of FRAND terms are Fair, Reasonable, and Non-Discriminatory. 'Fair' implies that royalty rates should be justifiable and reflect the value of the patented technology. 'Reasonable' suggests that the terms should be commercially viable, not unduly burdening implementers. 'Non-Discriminatory' means that patent holders cannot favor certain licensees over others. These terms aim to strike a balance, allowing patent holders to be compensated fairly while ensuring that implementers can access the technology on equitable terms.

Why are percentage-based royalties being challenged within the context of FRAND licensing?

Percentage-based royalties are under scrutiny because of questions about whether they are truly 'non-discriminatory.' The critics argue that this model leads to higher costs for consumers and may not accurately reflect the value of the patented technology. The core issue is that identical components might face different royalty rates based on the final product's price, which could be perceived as unfair. This is particularly relevant in today's interconnected world where the price of final product can vary significantly based on brand value and market positioning of the implementer, not the value of the patented technology.

How could changes to FRAND licensing impact both tech companies and consumers?

Changes to FRAND licensing could have significant implications. For tech companies, modifications to royalty structures could affect their costs, profitability, and competitive strategies. Stricter interpretations or new licensing models could force companies to rethink their product pricing and investment decisions. For consumers, the impact could be felt through changes in product prices, the availability of innovative technologies, and the pace of technological advancements. If FRAND licensing becomes less favorable to implementers, it could lead to higher prices or slower innovation. Conversely, if it shifts too much in favor of implementers, it might disincentivize patent holders from contributing to standards, slowing down the rate of technological evolution.

What does the future of FRAND licensing look like, and what factors will shape its evolution?

The future of FRAND licensing is evolving. Its future will likely be shaped by ongoing debates about royalty structures, regulatory actions, and the continued evolution of technology. The goal is to find a balance that encourages innovation while ensuring fair access to essential technologies. This might involve refined interpretations of existing FRAND commitments or the development of new licensing models. Key factors include how courts interpret FRAND principles, industry practices, and the ongoing need to balance the interests of patent holders, implementers, and consumers. The ultimate objective is to foster a thriving technological ecosystem that benefits both creators and users, ensuring that advancements continue to be accessible and affordable.