Calculating a fair royalty for a patent on a complex product with numerous features is very difficult. HIMPP goes to great lengths to accurately and fairly appraise the value of patented features and offer licenses to anyone interested on fair, reasonable and non-discriminatory (FRAND) terms.
Hearing Instruments have many features
Hearing instruments are highly sophisticated and compact devices that utilize an array of complex technologies. Hearing instruments are designed to be as small as possible and to provide a cosmetically appealing product. The size requirements have led to the development of a number of innovations unique to hearing instruments. For example, the battery voltage from a single cell is a mere 1.2 volts while decent battery life calls for a current draw of 1-2 mAmps.
Modern hearing instruments have custom built digital signal processors and wireless communication systems. Advanced signal processing algorithms modify the sound input to service the hearing impaired user optimally and the product itself is encapsulated in a highly reliable miniature enclosure designed to endure daily wear and tear for 5 years or more.
Every hearing instrument may involve a multitude of innovations, all of which are required to provide a truly life-improving product for hearing instrument users.
The value of a modern hearing instrument may well depend on 100 or more features, each of which could be patented and subsequently licensed. The exact value of each patented feature is therefore difficult to assess and typically changes as technology advances. These conditions have a bearing on the kind of royalty rates that are agreed upon in the hearing instrument industry. Moreover, the profit generated by the hearing instrument sale must be determined based on all of the circumstances.
The original 3M portfolio acquired by HIMPP formed a rather complete roadblock for commercialization of programmable, digital hearing instrument technology and was offered at a royalty rate of 3%. The 3% was calculated based on the manufacturer sales price (to wholesale) and included the right to use of all 32 HIMPP patent families.
Excessive royalty rates will inevitably lead to more expensive hearing instruments and ultimately disadvantage the hearing impaired people in need of these solutions.
Effective 1 January 2017, HIMMP has reduced the royalty to 1%.