Royalty stacking

Royalty stacking is the cumulative burden of licences covering several patents or portfolios used in the same product. In standardised technologies, it raises a practical question: how should a royalty demand be assessed alongside other rights needed by the product? Aggregation alone does not establish an excessive or unlawful charge.

Three amounts to distinguish

• Announced rates: public tariffs or opening demands, potentially subject to different bases and caps.
• Contractual obligations: agreed commitments, including discounts, lump sums, settlements and cross-licences.
• The effective economic burden: payments and other consideration allocated to the relevant products, territories and periods.

Adding percentages calculated on different bases does not produce a meaningful aggregate burden. Avoid double-counting coverage obtained both directly and through a pool, or overlooking rights already covered in the supply chain. This requires examining the agreements and applicable law.

How can the risk be documented?

Prepare a schedule for each owner: portfolio, standard, products, territory, base, per-unit amount, term, caps and status of the demand. Separate established payments, disputed demands and hypothetical risks. Assess cross-licences and overlapping coverage.

Top-down may test consistency, but requires evidence for both the aggregate burden and allocation. A stacking argument alone neither establishes that cap nor automatically entitles a licensee to a reduction from a particular owner.

An evidential requirement illustrated in the United States

In Ericsson v D-Link (Federal Circuit, 2014, pp. 54–55), the court required concrete evidence to justify jury instructions on hold-up or stacking. Thousands of declared SEPs do not establish that the company must pay every owner. This US damages ruling illustrates why evidence matters; it is not a universal procedural rule.

Useful distinctions

Hold-up concerns leverage arising from technological dependency; stacking concerns the cumulative royalty burden. Non-discrimination addresses the relevant treatment of licensees and cannot be reduced to allocating a budget among patent owners. A pool may simplify licensing without covering all necessary rights.

Source

Ericsson v D-Link, 4 December 2014, pp. 54–55.

Related concepts

FRAND rates and comparable licences · Top-down approach · Patent hold-up