Quantifying the Value of the FRAND Litigation Risk in a M&A

A supplier of audio equipment was in the process of being acquired by another supplier in the same sector. The firm to be acquired allegedly violated Standard Essential Patents (SEPs). The acquiring firm was hence concerned with the risk associated with potentially high licensing rates. We were approached to a) determine the rationale for determining the FRAND licensing rate and b) assessing the actual calculations of the FRAND licensing rate.

Our Approach

We assessed U.S. case law with respect to the type of FRAND royalty rate valuations considered admissible to the Court. In doing so, we took under particular consideration FRAND valuation issues associated with the Smallest Saleable Practicing Unit (SSPPU) and Entire Market Value (EMVR) Approach. We furthermore studied the particular business context of this firm and estimated the FRAND royalty rate on that basis.

Impact

The Expert Testimonial helped both firms in determining the sales/purchase price for the firm to be acquired.

Thank you for a detailed and factual expert report!

Chief IP Counsel of the Audio Equipment Manufacturer

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