Licensing standard‐essential patents in artificial intelligence‐based apps: A theory on dynamic royalty pricing mechanism

• Published date: 01 November 2023
• Author: Sunandan Baruah,Ankur P. Saikia
• Date: 01 November 2023
• DOI: http://doi.org/10.1111/jwip.12278

Received: 27 February 2023

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Accepted: 25 March 2023

DOI: 10.1111/jwip.12278

NOTE

Licensing standard‐essential patents in artificial

intelligence‐based apps: A theory on dynamic

royalty pricing mechanism

Sunandan Baruah |Ankur P. Saikia

Computer Science and Engineering, Assam

Down Town University, Guwahati, India

Correspondence

Ankur P. Saikia, Computer Science and

Engineering, Assam Down Town University,

Guwahati, India.

Email: ankur.saikia@adtu.in

Abstract

Standard‐essential patents (SEPs) are patents that are deemed

essential to a specific technology standard, such as those used

in wireless communication technologies. With the increased

use of artificial intelligence (AI) and machine learning in a

variety of applications, there is a greater demand for SEPs in

the field of AI‐based apps. However, licencing SEPs can be a

complicated process, and there is no agreement on best

practises for SEP licencing in AI‐based apps. The adoption of a

multifactor approach for determining FRAND royalty rates, the

use of ex ante licencing to prevent patent hold‐up, and the

establishment of specialized dispute resolution mechanisms for

SEP disputes are some of the proposed best practices for SEP

licencing in AI‐based apps. As potential solutions to the

challenges associated with determining FRAND royalty rates in

AI‐based apps, this study proposed alternative royalty

schemes, such as the use of a per‐unit royalty rate or a

revenue‐sharing scheme.

KEYWORDS

AI‐based apps, best practices, business models, royalty rates, SEP

licensing

1|INTRODUCTION

Standard‐essential patents (SEPs) are patents that cover technologies that are required to implement a technical

standard. Owners of SEPs are required to licence their patents to anyone who wishes to use the standard on “Fair,

Reasonable, and Non‐Discriminatory”(FRAND) terms. SEP licencing entails determining licencing terms and

conditions for SEP use as well as negotiating with potential licensees.

J World Intellect Prop. 2023;26:490–502.wileyonlinelibrary.com/journal/jwip490

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© 2023 John Wiley & Sons Ltd.