Do you remember the VHS-Betamax war? This was the epic struggle between home video recording technologies. By most standards, Sony’s Betamax format was considered the best. In the end, however, VHS (Video Home System) claimed the field. Key in the fight was the fact that the formats were device-exclusive. Betamax tapes didn’t run on VHS machines and vice-versa.
Today, technology evolution has brought us to where our video (and audio) entertainment streams to us online through various smart devices. It doesn’t matter whether your tool is from Amazon, Apple, Samsung or any of the Chinese companies that dominate the global market. What makes this possible is a combination of two fundamental elements of intellectual property law, patents and licenses.
How they fit together
Patents are government-granted rights for inventors to monetize their ideas. But for individual new ideas to blend into the existing delivery matrix, they need to incorporate hundreds of other existing patents called standard-essential patents (SEPs). Standard-setting organizations (SSOs) establish and manage the standards. To facilitate the money side of the equation, SSOs have created a conceptual model of mass licensing based on provisions deemed Fair, Reasonable, and Non-Discriminatory (FRAND).
Through this legal latticework, members of SSOs pay fees to license SEPs based on FRAND terms. The upshot of all that alphabet soup is the wider adoption of standards. Meanwhile, SEP holders get the financial compensation they are due under their patents and SSO members reduce the risk of patent infringement claims.
As this brief description reflects, the process is complicated. It can be challenging when the stakes involve licensing within the U.S. and even more so within the global landscape. Working with skilled IP attorneys is the way to be confident that such important business aspects get proper attention.