Fostering worldwide interoperabilityGeneva, July 2009 Recommendations on FRAND Principle in IPR Policy CCSA Global Standards Collaboration (GSC) 14 DOCUMENT #:GSC14-IPR-006 FOR:Presentation or Information SOURCE:CCSA AGENDA ITEM:IPR WG Agenda Item 6 and Item 7 CONTACT(S):Congxing Ouyang

Fostering worldwide interoperability2 Existing IPR Policy For most of SDOs, the current existing IPR Polices: Require members to disclose as earlier as possible potential essential patents during the process of standardization. For the disclosed patents, require the relevant patent holders to provide licensing declaration, such as declaration of royalty-free license, FRAND license or refusal to license. Most patent holders will choose the option of FRAND license. The existing IPR Polices, especially the FRAND principle thereof, have produced positive effects on the making and implementation of standards.

Fostering worldwide interoperability3 Vagueness exists in the concept of FRAND However, FRAND licensing declaration without specific terms is vague, and is helpless to avoid the IPR-blocking risk Licensors and licensees have different expectations to what is FRAND, and such different expectations have resulted in many disputes in practical licensing negotiation, and thus discouraged the implementation of standard, and hurt the healthy development of the industry.

Fostering worldwide interoperability4 Recommendations As is well known, a reasonable royalty for a patented invention should be based on the value attributable to the invention’s contribution over the prior art. For a standardized technology, reasonable royalties should be based on the value contributed by the technology. Therefore, we recommend to make some clarification to the definition of FRAND as to include the following items: Royalty rate should be based on the value of module, which indicates the substantially contribution of a standardized technology. Royalty for one patented invention can only be charged at one link, rather than two or more links, in the industrial chain.

Fostering worldwide interoperability5 Effects of the Recommendations If the recommendations are accepted and abided by in licensing practices, the following beneficial effects can be achieved: The determination on the reasonability of the royalty rate will become more intuitionistic, and thus improve the predictability and transparency of IPR cost with respect to implementation of standards, ensure the healthy and continuing development of the industry, and finally promote the contribution of the standardized technologies to social progress and consumer welfare.

Fostering worldwide interoperability Thank you for your attentions!