They are intended to prevent members from engaging in licensing abuse based on the monopolistic advantage generated as a result of having their intellectual property rights (IPR) included in the industry standards.
[1][5] Without such commitment, members could use monopoly power inherent in a standard to impose unfair, unreasonable and discriminatory licensing terms that would damage competition and inflate their own relative position.
Similarly, a reasonable licensing rate must reward the licensor with adequate compensation for contributing its essential patents to a standard.
Compensation is adequate if it provides the licensor with the incentive to continue investing and contributing to the standard in future time periods.
This obligation is included in order to maintain a level playing field with respect to existing competitors and to ensure that potential new entrants are free to enter the market on the same basis.
RAND terms exclude intangible goods which the producer may decide to distribute at no cost and where third parties may make further copies.
Take for example a software package that is distributed at no cost and to which the developer wants to add support for a video format which requires a patent licence.
The licence may be called "(F)RAND", but the modalities discriminate against a whole category of intangible goods such as free software[11] and freeware.
[12] This form of discrimination can be similarly caused by common licence terms such as only applying to complete implementations of the licensed standard, limiting use to particular fields, or restricting redistribution.
The Free Software Foundation suggests the term "uniform fee only" (UFO) to reflect that such "(F)RAND" licenses are inherently discriminatory.
In 2015, the European Court of Justice interpreted FRAND licensing terms in case Huawei v ZTE (C170/13, ECLI:EU:C:2015:477 significantly diverging from the Orange-Book-Standard.