As discussed in the first brief of The Patentist SEP Edition, determining a FRAND rate is rarely about finding a single, magical number. It is about the method used to arrive at that rate. Because this ecosystem thrives on predictability and fairness, any effort to shed light on how FRAND determinations are made is a step in the right direction.

The recent study published by the EPO Observatory is thus a welcome addition to the field. Co-authored with Brela Consulting, Methodologies for FRAND determination surveys 65 court decisions across seven jurisdictions to map how global case law addresses the thorny issue of FRAND valuations.

Transparency in this space is sorely needed, and the EPO report offers a valuable synthesis of global judicial trends. However, as we dig into the findings, it is crucial to understand what the report actually tells us—and, perhaps more importantly, what it doesn’t.

Complementary lenses: EPO vs. WIPO

The EPO study and WIPO’s recent FRAND economics report serve different purposes. WIPO’s report is normative and analytical, approaching FRAND valuation primarily from an economic theory standpoint. It explains, among other things, why structured valuation matters, why comparables can mislead when they reflect bargaining distortions, and why bottom-up and top-down methods have distinct economic rationales.

The EPO study takes a different approach. It is descriptive and practice-oriented, asking how courts have, in fact, proceeded when forced to translate FRAND into numbers, ranges, or judgments about offers. Read together, the two reports are highly complementary.

Strong in operational details

The EPO study is particularly strong in its operational details. It does not merely tell us that comparable licenses are common; it shows how difficult the comparables exercise is.

Across the surveyed cases, courts were presented with anywhere from two to 54 proposed comparables, yet accepted far fewer as genuinely comparable. The hard work lies in selection, unpacking, and discretionary adjustment. If a license is a lump sum or a cross-license, what is the effective rate once it is unpacked? If the license reflects different bargaining conditions, how should it be normalized?

Furthermore, the report highlights that forum and procedural posture shape methodology. This nuance is critical to avoiding the trap of conflating legal constraints with economic best practices. FRAND assessments in the sample are heavily concentrated in the EU (especially Germany), often in the context of injunction analysis under Huawei v. ZTE and Article 102 TFEU. By contrast, US cases often arise in patent-damages litigation, while UK cases appear as standalone portfolio-rate determinations. Therefore, any apparent judicial “preference” for one method is inseparable from the institutional task those courts are performing.

Judicial prevalence is not economic superiority

The report’s most quoted finding is that comparable licenses have emerged as the main method relied on by courts, while the top-down approach is used less frequently and often as a “cross-check.”

While this statement reflects the surveyed case law, it does not imply that comparables are economically superior. The fact that UK and German courts often treat top-down as a cross-check should not be mistaken for proof that top-down lacks an independent economic rationale. When applied well, the top-down framework imposes vital discipline on portfolio claims, directly addresses royalty stacking, and tests whether a proposed portfolio rate is plausible once scaled to the standard as a whole. As the EPO study itself acknowledges, Chinese and US courts have at times treated top-down as a principal method, noting insufficient evidence that one method is superior to the other. Neither method is self-executing: methodological pluralism is often wiser than methodological triumphalism!

The danger of unscrutinized comparables

This discussion brings us to a subtle but critical implication from the report’s findings. If courts default to the comparables method without rigorous scrutiny, there is a profound risk of perpetuating rates that are fundamentally non-FRAND simply because precedent treats them as FRAND.

A comparable is only as good as the fairness of the underlying agreement. If past licenses were signed under the threat of an injunction, or between parties with vastly asymmetric market power, using them as a baseline embeds historical imbalances into future FRAND determinations. Therefore, the section of the judicial debate that scrutinizes whether these underlying comparable decisions were fair in the first place is paramount.

A shared vulnerability to data

FRAND discourse often treats the top-down approach as the only method vulnerable to data weaknesses (such as patent counting). The EPO report offers a useful corrective. It shows that data limitations do not solely plague the top-down approach; they affect the comparables method just as much. As the study shows, patent counts, essentiality screens, validity, family deduplication, and portfolio-strength metrics are equally necessary when courts must unpack cross-licenses or adjust rates across disparate portfolios. The report candidly acknowledges that patent counting is rough, the gap between declared and truly essential patents can be large, and no universal measure of SEP value has been accepted by courts—evidentiary challenges that ultimately undermine both methods alike.

What’s missing and what’s next

We should read the EPO report as a beginning rather than an ending. Public availability of data remains uneven and exceptionally thin. Arbitration outcomes and valuation methods are generally confidential, leaving the pool of observable SEP licenses small and incomplete. We need more information from private, undisputed contracts if we want comparables analysis to become robust.

In short, the EPO is an excellent, careful survey of judicial practice. But if we want to know which method is economically justified, we must keep the WIPO report close at hand. The real challenge for the next phase of this debate is bringing these two conversations together. The field now needs better public data on licenses, reliable essentiality-checked portfolio metrics, and standard, objective frameworks to value technical contribution.

I hope you enjoyed this brief. If you did, please consider subscribing to The Patentist SEP Edition.1 It is free, and you can unsubscribe at any time.

1

To subscribe to The Patentist SEP Edition, subscribe to The Patentist, then open “Manage subscription” and turn on the “The Patentist SEP Edition” section.

In this first brief of The Patentist SEP Edition, I discuss WIPO’s recent report on FRAND valuation. One reason the report is interesting is that it brings together perspectives from both sides of the SEP ecosystem: those closer to standard developers and those closer to implementers. That is also what makes the exercise valuable. SEP debates are often polarized, and the report seeks to provide a balanced, economics-based view of the issue. I should disclose that I served as a peer reviewer for the report, but the views expressed here are my own.

Standards solve one economic problem and create another. They allow firms to coordinate around common technologies, making products interoperable, markets larger, and complementary innovation easier. But once a technology is embedded in a widely adopted standard, pricing becomes difficult. Implementers may no longer have realistic alternatives, while patent holders are constrained by their commitment to license standard-essential patents, or SEPs, on FRAND terms: fair, reasonable and non-discriminatory.

WIPO’s report, FRAND Economics: Valuation Methods in Licensing Standard Essential Patents, is valuable because it treats this problem for what it is: not only a legal issue, but an economic valuation problem.

The report’s core insight is that FRAND is not a single number waiting to be discovered. It is a disciplined attempt to identify a plausible range of licensing terms that preserves incentives on both sides of the standardization ecosystem.

That balance matters. SEP holders invest in technologies that may become part of standards. Implementers invest in products, services, distribution, and complementary innovation that make those standards valuable in the market. A standard creates value jointly. The economic challenge is to divide that value without allowing either side to exploit the other after the market has coordinated around the standard. I like to think of the relationship as symbiotic. Each side hopes to enjoy a larger slice of the cake, but the cake itself exists only because both sides helped bake it.

The report reviews three main approaches to valuation. The first is comparables: looking at real-world license agreements as market evidence. The main strength of this approach is its grounding in actual transactions. But SEP licenses are not ordinary market prices. They may reflect litigation pressure, cross-licenses, confidentiality, injunction risk, geographic scope, or bargaining power. Comparable licenses are therefore useful, but they need to be unpacked carefully.

The second is the bottom-up approach. This asks what incremental value the patented technology contributed over the next-best alternative before the standard created lock-in. Economically, this is close to the ideal benchmark: reward the technology, not merely the fact that it was selected into the standard. But the method is hard to apply because the relevant counterfactual is often difficult to observe.

The third is the top-down framework. This starts from a reasonable aggregate royalty for the standard and allocates a share to a particular portfolio. Its strength is discipline: it guards against royalty stacking. Its weakness is measurement. If allocation relies too heavily on declared SEP counts, it inherits all the familiar problems of patent statistics: not all declared SEPs are essential, valid, or equally valuable. It is also sensitive to aggregate benchmarks and allocation rules.

The report’s main contribution is not to settle the FRAND debate. It does something more modest and more useful: it clarifies the problem’s economic structure. FRAND valuation is about bargaining under lock-in, complementary innovation, imperfect information, and noisy evidence.

That is why this report is a good starting point for The Patentist SEP Edition. SEP disputes are often presented as legal battles or industry lobbying. They are also, fundamentally, applied economics problems.

I hope you enjoyed this first brief. If you did, please consider subscribing to The Patentist SEP Edition.1 It is free, and you can unsubscribe at any time.

1

To subscribe to The Patentist SEP Edition, subscribe to The Patentist, then open “Manage subscription” and turn on the “The Patentist SEP Edition” section.