Explained: Apple's not-so-secret favorite patent argument

What the heck is "frand"? No, not "fraud" but "frand." CNET breaks down what this obscure legal term means, and why it's so important to companies such as Apple and Samsung.

With patent lawsuits all the rage nowadays, one term is popping up more frequently: "frand."

Apple, Google

Frand--also known as "rand" in the U.S.--is an obscure legal acronym that stands for "fair, reasonable, and nondiscriminatory," and is based on the principle that fair licensing of intellectual property is often needed because sometimes certain ideas and patents just need to be shared for everything to work together properly. It's a fairly simple idea, but one that's been rocking the tech industry in recent years.

Apple loves frand, as it's become one of the company's most useful tactics in the courtroom. Samsung is under fire for potentially violating the principle in Europe. For years, Qualcomm was burdened with accusations that it violated the notion. Recently, frand is figuring into some of the most high-profile technology lawsuits, including the ones between Apple and the various Android handset manufacturers.

The use of frand begins with the inception of a standards body for a particular technology. Oftentimes, many companies have to come together and agree to a set of standards for a certain technology in order for that technology's various parts to work together. Specific to a few of the recent wireless lawsuits, frand relates to the agreed-on technology used to form the 3G cellular standard called UMTS. Several companies hold what are known as essential patents, and are obligated to license them to all the other participants in a fair, reasonable, and nondiscriminatory manner.

"The fear is that you can't have people talking freely about what they're going to implement and worrying that someone will come back and say, 'gotcha!'" said Mark Kesslen, a partner at Lowenstein Sandler, who heads up the law firm's intellectual-property practice.

Though all of this cooperation between different companies might smack of a monopoly, the frand principle is deeply rooted in preventing the abuse of power and the formation of a potential trust. The doctrine makes it difficult for one company to use its patents--particularly if they're more essential than others in the standard--to overcharge competitors on licensing fees and gain an unfair advantage.

One issue with the principle is determining what exactly is reasonable. The general idea is that a company needs to charge the same rate to every company looking to participate in the standard. Companies have a right to generate revenue off their patents, but it's debatable just how much money a company should be able to make, and how standard such a rate can be. Consequently, there isn't really a standard definition for "reasonable."

"The words sound great," Kesslen said. "But there's nothing really that defines what 'reasonable' is."

It's that gray area that Apple has fully embraced. Today, Apple was able to temporarily halt a ban on its products in Germany by invoking a frand claim against Motorola Mobility. Motorola had won the ban last month when a German court ruled that Apple had illegally violated an essential patent related to 3G UMTS technology. Apple claimed it had been attempting to work out an agreement but that Motorola had violated its obligation to act fairly in negotiating terms.

"Apple appealed this ruling because Motorola repeatedly refuses to license this patent to Apple on reasonable terms, despite having declared it an industry standard patent seven years ago," said an Apple representative.

Motorola argued that it had approached Apple in 2007 with fair licensing terms and attempted to work out a deal for three years with little result.

But Apple's defense is fairly positive. Its argument that it is entitled to a licensing deal under frand was enough to win a speedy halt on Motorola's ban, despite Motorola's protests.

"Apple's refusal to negotiate in good faith, as well as their aggressive litigation campaign against Android, left Motorola Mobility with no option other than to seek to enforce the company's rights and patent portfolio," said a Motorola representative. The company added that it remains committed to licensing rather than litigation.

Apple and the Android players have opted to use different strategies in their patent offensives. Companies such as Motorola and Samsung have gone after Apple using industry-standard patents. While these are vitally important pieces of intellectual property, they also leave these companies open to frand claims by Apple.

Apple doesn't appear to have invoked any essential patents in its lawsuits against the Android companies, said Florian Mueller, a legal consultant who has done work companies such as Microsoft and runs the blog Foss Patents.

The counterargument is that because those patents are so essential, they make for a more potent case against Apple. Frand could potentially just be a stall tactic for Apple.

Because frand patents are based on technology that everyone is supposed to have fair access to, the use of them in patent litigation comes with many pitfalls.

"The Android camp would like to leverage those kinds of patents to reach a state of mutually assured destruction, but that's a very problematic strategy," Mueller said. "The fallout from this would far transcend the current mobile patent wars."

For instance, Samsung's aggressive use of essential patents in its lawsuits could come back and haunt it, with the European Union focusing its antitrust lens on the company's recent activity . The EU's European Commission arm is attempting to determine if Samsung is charging unfair rates or holding back on access to patents to stifle competition.

The European Commission's decision on Samsung could have a ripple effect on how patents are used in litigation. Frand was set up for the good of the industry. But the essential patents that fall under its guidelines have increasingly been used as weapons, which flies in the face of the original intent of frand. Mueller says frand does allow for a light form of patent enforcement--but not a more heavy-handed approach.

"Frand patents are great parking meters, but [they're] not supposed to be used as guns," Mueller said.

 

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