It doesn't matter what the intention was. Once you agree to put a patent into FRAND you don't get to put conditions on it and say things like 'but there will be different terms for those making high end smart phones versus those making cheap flip phones' because that violates the Non Discriminatory part of the FRAND rules.
True, the contract must cover the same things, but the rates can be different, plus they're often tied to the price of a phone as a percentage. (So yes, high end makers would have to pay more.)
As you noted, FRAND is not a standalone legal requirement, but a voluntary legal agreement. Once a company voluntarily submits its standards related patents to a Standards Group, they must then abide by the group's IP Policy.
In the case of ETSI, a group for radio standards,
the IP policy (Section 6) states that the company must then be "
prepared to grant irrevocable licences on fair, reasonable and non-discriminatory terms and conditions ..."
ETSI FRAND Terms
Note that ETSI's FRAND pricing terms are not spelled out, except for this single line: "
The above undertaking may be made subject to the condition that those who seek licences agree to reciprocate", which drives Apple crazy because they don't want to be required to cross license anything (*)... despite the fact that probably every other ETSI member has done so in order to keep IP costs lower. (**) Unsurprisingly, now that Apple is in the game, they want to change the rules.
FAIR and NON-DISCRIMINATORY
What the license covers has to be fair and non-discriminatory. In other words, they can't unfairly require buying non-related products or require unfair product restrictions. They must also not discriminate as to who can get a license.
REASONABLE
- ETSI doesn't set rates. Neither do courts. Fees just have to be reasonable... or more importantly, in a court's eyes they have to be not unreasonable.
- Fees don't have to be the same for everyone. Cross-licensing is one common way to lower rates. Another is of course to have good credit, buy in quantity, and/or be a longterm licensee.
- What is ‘fair and reasonable’ after a legal infringement challenge, can be higher than it was before that challenge. Sue, and your rate can go up.
(*) It is generally reported that Apple ended up cross-licensing some of its IP to Nokia in return for a lower rate on FRAND patents. In addition to future royalties, Apple also paid back royalties of an estimated $500-750 million, or about $5 per phone.
(**) Patent licenses can amount to 20-30% of the cost of a phone. Recently we learned that MMI/Google asks 2.25% for their wireless patents. For comparison, Qualcomm gets 3.4% of the total cost for their IP.