Reasonable and Non-Discriminatory (RAND) Terms

Terms used with respect to essential facilities and in standards that refers to the terms under which licenses should be granted subsequent to the adoption of the standard, guidelines, exemption, etc. For example in a European Competition Directorate ‘comfort letter’ on a standards agreement, parties may be required to license ‘all comers’ on reasonable and non-discriminatory terms. Similarly, IEEE in its patent policy with respect to standards policy requires essential patents to practice a standard to be made available to participants:

“That a license will be made available to all applicants … under reasonable rates, with reasonable terms and conditions that are demonstrably free of any unfair discrimination.”

However, the term ‘reasonable’ is in legal terms somewhat of a nightmare, since reasonableness is very much “in the eye of the beholder”; i.e., an offeror’s reasonable may often be an offeree’s unreasonable. When the alternate term FRAND (Fair Reasonable and Non-Discriminatory Terms) is used, the word “Fair” raises many of the same issues as “Reasonable.” Non-discriminatory is an easier term. It essentially means that the offer should be available to all on terms, conditions and at a cost that does not vary substantially. It does not usually mean that the terms have to be identical, though identical terms are perforce non-discriminatory. Thus for example, a license scheme that steps royalty rates with volume might be non-discriminatory if the steps are reasonably accessible to most similarly situated licensees and do not significantly disadvantage new market entrants. However, if they were written in such a targeted way that only one (or tiny proportion) of potential licensee(s) might benefit, or they are exclusionary of a class of new entrants, they might be discriminatory.