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In a new economic analysis for the CCIA Research Center, Managing Director Kristopher Boushie and Affiliated Consultant Sharon Brown-Hruska explore how the licensing process for standard essential patents (SEPs) can fail to be fair, reasonable, and non-discriminatory (FRAND), harming innovation, efficiency, and consumers. The paper reveals the risk of overcompensation of patent owners and reduced implementation in cases in which SEP owners exclusively license at the original equipment manufacturer-level in industries in which OEMs invest significantly in their brands.

Mr. Boushie and Dr. Brown-Hruska find that, despite the requirement that SEP owners license on FRAND terms, differences in interpretation of FRAND create uncertainty and could result in reduced patent implementation and increased litigation. They ultimately conclude more transparency of actual FRAND royalty rates could reduce transaction costs.