The economic valuation of intellectual property is an area with which IP professionals still need to fully come to grips with. In the context of Standard Essential Patents (SEPs), the valuation of fair, reasonable and non-discriminatory (FRAND) royalty rates adds an additional level of complexity. Against this background, this paper aims at economically clarifying basic elements of FRAND valuation and royalty rate determination. The concept of FRAND will be briefly touched upon, so as to establish the framework for the discussion. Specifically, it discusses FRAND royalty calculations in light of the conception of the ‘present value-added’. The method hinges the concept of value on the ability to generate earnings. The concept can be used in the absence of comparable licenses and/or newly developing business sectors and remains neutral with respect to the royalty base or the question whether a SEP should be valued on an ex-ante basis, that is before the standard was developed or on an ex-post level, that is after the standard was adopted.
Loading...