Simply put lets postulate that company A owns the patent to swipe sideways to unlock a smartphone or tablet home screen. Unless company B (or BB or MS) pay some usually totally arbitrary and extraordinary amount to company A it cannot use a side swipe.
US courts are sick of the bickering over whether one company copied another and have said that FRAND interpretations must be fully exhausted before court action.
And this is where it gets interesting.
Fair has been largely interpreted as licensing cannot be used for anti-competitive outcomes. If people want to side-swipe (i.e. it is a definitive essential standard) then it is unreasonable for the patent owner to attempt to stop its use by imposing unreasonable license fees or conditions on company B. Courts take a dim view of this.
Reasonable is also a legal minefield. It stops company A charging differing rates to other companies just because it can. It levels the playing field.
Non-discriminatory is a clever addition to the definition as it means that company A cannot preclude the use by another company because it does not like it or because it’s a competitor.
A recent ITC FRAND ruling was given over a dispute between RealTek v Agere over the formers use of 802.11 N WLAN. This acted as a precedent in another case between Samsung and Apple that will probably force Samsung to enter into FRAND negotiations instead of suing first.
Opinion: - I am not a lawyer…
At last – common sense and the phrase “Why can’t they just be FRANDS?” is being used as an effective caution.
FRAND is having some interesting side effects – vitriol and spite are no longer excuses for court action providing at least one party is prepared to have FRANDLY talks. See Microsoft and Google agree on YouTube Client .
It has also been used in the Microsoft and Motorola dispute where Motorola came off decidedly second best. I quote from Foss Patents
If someone initially demands $4 billion a year (Motorola), still seeks hundreds of millions later in the game, and is awarded less than $2 million (i.e., less than a 20th of a percent of the initial demand), he obviously didn't win -- and he's also highly likely to lose the second trial over the breach-of-contract claim….