Is Big Tech FRANDly to Competition?

On Tuesday, Apple released a new policy on its website relating to the obscure topic of “FRAND” licensing of patents. That’s an especially obscure corner of the already-obscure area of patent law. But it’s worth the attention of anyone who follows the debates over big tech and platform dominance, because Apple’s statement reveals an important industry-wide shift in many key tech companies’ views on their position in the technology ecosystem. So far, that shift has favored smaller companies hoping to break into the technology market, but current threats could endanger those small companies and competition generally. 

Though you’ve probably never heard of the acronym FRAND, you certainly know some of the acronyms it has produced: Wi-Fi, USB, HTML, 4G LTE. These are examples of “technology standards,” which allow computers and electronic devices to communicate and work with each other. Unsurprisingly, standards are absolutely fundamental to just about every smart device out there today, from your mobile phone to your Wi-Fi juice maker. Standards are the reason that, when you look for a new Bluetooth headset compatible with your latest phone, you find not just one company making them but dozens.

Technology standards don’t arise out of thin air; they are rigorously devised by “standard-setting organizations,” consortia of companies and engineers that assemble technologies into standards. A problem comes up when a company contributes a patented technology to the standard—a patent on a component of Wi-Fi could (and did) allow someone to sue anyone who owns a wireless router. Standard-setting organizations try to avoid that by requiring members to license any patents essential to the standard on terms that are “fair, reasonable, and non-discriminatory,” or FRAND. Implementers of products using the standard can thus feel safe knowing that they will not be pushed out of the market due to overbearing pressure from a patent holder.

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