Perilous deviations from FRAND harmony- operational pitfalls of the 2015 IEEE patent policy

Standard Development Organizations (SDOs) have one thing in common: they uniformly refrain from formally defining the meaning of "Fair, Reasonable and Non- Discriminatory" (FRAND) licensing terms required for patents essential to implement technical standards, called standardessential patents (SEPs). This uniformity in non-definition is called FRAND Harmony. However, in a bitterly contested and controversial move, the IEEE Standards Association (IEEE-SA) amended its patent policy, effective March 15, 2015, to become the only major SDO to substantively define FRAND licensing terms, a definition at great variance with other SDOs' practice and a substantial deviation from IEEE's traditional neutrality on FRAND terms. IEEE's new departure from de facto industry standard licensing practice will put parties into irreconcilable legal positions: SEP licenses for new standards may not simultaneously conform to the new FRAND terms mandated by the 2015 IEEE patent policy, and to legacy FRAND terms in the old licenses that necessarily follows legacy technology. This will undermine dynamic efficiencies in innovation where new standards incorporate other legacy standards by reference as "normative," and where standard amendments are rolled-up into new revisions of the standard. Under this new patent policy, IEEE Societies will be handicapped in developing new standards that build on legacy standards. IEEE's deviation from FRAND Harmony has the additional potential of inducing a practice that would discriminate among SEP holders in adopting technologies in IEEE standards. Many top quality and complex standards projects may grind to a halt unless IEEE-SA reverses course, as another SDO did two decades ago when their similar experiment with FRAND disharmony failed.