End-use-based licensing – An economic perspective

Owners of standard essential patents (SEPs) are increasingly requesting royalties that vary depending on the “end-use” and the value of end-products or services (end-use-based licensing), even if the standard is implemented at an intermediate level in the value chain.

In a report prepared by Dr Benno Buehler and Christoph von Muellern (Charles River Associates) discuss how end-use-based licensing can be assessed in the general framework of SEP licensing and they identify likely effects of end-use-based licensing. The report explains that end-use-based licensing can increase the risk of misappropriation by SEP holders under approaches commonly used to quantify FRAND royalty rates. Inflated SEP royalties and inefficiencies from end-use-based licensing may stifle downstream innovation and ultimately result in consumer harm.

The report is available here