Department of Law Spring Term 2020
Master Programme in Intellectual Property Law Master Thesis 30 ECTS
Patent Pools: An ‘Industry Solution’ to SEP disputes in 5G and Internet of Things A quest for a successful Digital Single Market
Author: Satyoki Koundinya
Supervisor: Kacper Szkalej
Master Thesis Satyoki Koundinya Master Programme in Intellectual Property Law
ACKNOWLEDGEMENT I would like to express my gratitude to Via Licensing Corporation for allowing me to be a part of the esteemed London office, the learnings whereof have culminated into this thesis. I am fortunate to have interacted with and learnt so much from some of the top-notch IP professionals in the world, for which I will be forever indebted. I would like to use this opportunity to convey my deepest regards and gratefulness to Mr. Joseph Siino, President, Via Licensing Corp., who took out his time despite his extraordinary work schedule, to patiently hear my preliminary thoughts and give his very valuable insights and provide a starting point of my research of patent pools being an ‘industry solution’.
I am extremely thankful to Ms. Helene Jay, Director, Sales & Licensing Programs, Via Licensing Corp. for giving me this opportunity of internship, facilitating an easy and comfortable transition thereinto, taking timely updates and helping me course correct at every stage. My heartfelt gratitude to her generosity and kindness. I shall forever be indebted to Mr. Sharaz Gill, Sr. Licensing Counsel, Dr. Deepal Naidu, Sr. Patent Attorney and Ms. Liz Weber, Sr. Public Relations Manager at Via Licensing Corp., my most wonderful guides and persons I have ever met, who gave me the space to improve my understanding, who patiently heard me and took my questions, despite their busy schedules and motivated me to apply the principles of law and technology into this emerging field. Every discussion I had with them, helped me understand the context of my topic in the real world, outside the academia and without their precious practical knowledge, it would have been impossible to write this Master Thesis. I want to thank Prof. Kacper Szkalej, my academic supervisor and the most wonderful professor and person I could interact with during the course, who introduced me to the concept of a Digital Single Market, encouraged me and guided me to incorporate and apply the tools of EU competition law in my thesis. I shall remain deeply indebted to him for his motivating suggestions and encouragement, which helped me finish my Master Thesis in time. I am also extremely thankful to various notable and distinguished Professors and Experts, who visited and gave interesting lectures during our term at University of Uppsala, who helped me shape my thesis to great extent. Last, but not the least, I would also like to thank my lovely wife and my parents for their constant support and motivation and all my friends and colleagues, both from the LLM program and outside, for their valuable support in form of healthy discussions and valid criticisms that helped me successfully completing this Master Thesis.
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SUMMARY Patent pools are a source of collaborative efficiencies when they comprise of patents essential to a standard thereby facilitating access to useful technologies. Despite that, in the context of telecommunication standards, attempts to create patent pools have seemingly not been successful, for example in 2G, 3G and 4G standards, owing to a lack of participation by SEP holders, who have mostly engaged in bilateral negotiations. This had led to significant litigation. Bilateral negotiations are hard to foresee in the 5G and IoT context, where the number of downstream innovators and implementations are large. Essentiality understandings have mostly been evaluated from a SSO policy perspective and a lack of consistency therein has led to further confusion.
In that context, patent pools may be an industry solution to facilitate access to technology and avoid costly and time-consuming litigations and therefore, pose an attractive alternative. Patent pools have however evolved, have infamously resorted to assertions and aggressive licensing approaches. The European Commission has recognized reliance on patent pool mechanisms, as a means, to achieve a Digital Single Market. However, to be able to do so, pools must be properly designed and managed. Against that background, the purpose of the thesis is to discuss the strengths and weaknesses of patent pools, the regulatory framework under which they operate, the essentiality policy weaknesses of ETSI in the development of telecommunication standards, the transformation of pools into assertion entities and concludes with certain suggestions in which they should operate to provide an attractive alternative to bilateral licensing in the emerging 5G and IoT era.
Keywords: Pools, SEP, 5G, IoT, European Commission, Digital Single Market
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GLOSSARY OF TERMS
1G, 2G, 3G, 4G, First generation, Second generation, Third generation, Fourth generation, 5G Fifth generation telecommunication network – generations in telecommunication standards
3GPP Third Generation Partnership Project is an umbrella for development of protocols for mobile communications in 3G
CDMA/W- Code Division Multiple Access, Wideband – CDMA is a mobile CDMA communication protocol used in 2G and 3G standards
CEN/CENELEC European Committee for Standardization, is an association that brings together the National Standardization Bodies of 34 European countries
CJEU Court of Justice of the European Union
DAB Digital Audio Broadcasting is digital radio standard for broadcast of digital audio radio signals
DECT Digital enhanced cordless telecommunications is a standard for cordless telecommunications
DOJ United States Department of Justice
DVD Digital versatile Disc is a video format standard. Also a joint licensing group for licensing of DVD standard
EC European Commission
EDGE Enhanced Data Rates for GSM Evolution is a mobile communication standard for enhancing data rates in 2G standard.
EPO European Patent Office
ETSI European Telecommunications Standards Institute
EU European Union
FRAND/RAND Fair Reasonable and Non-Discriminatory. These are the standards licensing terms must pertain to, to be offered by a SEP holder to a potential licensor.
GPRS General Packet Radio Services is a mobile data standard applicable on 2G and 3G cellular communication network
GSM Global System for mobile communication developed for 2G mobile communication standard
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ICT Information and Communication Technology refers to integration of communication with devices
GDP Gross Domestic Product provides an estimation of size of economy and rate of growth of a country
H.264/H.265 Video compression technology, or codec, that was jointly developed by the International Telecommunications Union (ITU)
Hold-up SEP holders block licensing of SEPs by demanding exorbitant royalties from implementers.
HSPA/HSPA+ High speed packet access is a 3G mobile communication technology for fast data transfers
IEEE Institute of Electrical and Electronics Engineers. SSO known for creating the IEEE 802.11 Wi-Fi standard
IOT Internet of Things allows devices to communicate with each other
JRC Joint Research Center for the European Commission
LPWAN/MIOTY Low Power Wide Area Network is a long range communication protocol allowing communication between devices at a low bit-rate
LTE Long Term Evolution is a standard developed for drastically increasing capacity and speed and is a part of 4G telecommunication standard
Mbps Megabits per second as a unit of cellular transmission
MPEG/MPEG- Moving Picture Experts Group is an SSO (and a patent pool) formed to set LA standards for audio and video compression and transmission.
NPE Non-practicing entity owns a patent but has no intention of using it
PAE Patent Assertion Entity enforces patents but does not utilise the technology for use
Patent Pool/pool Licensing instrument offering a single license to complementary patents owned by several patent holders. Patent pools typically do not own the patents included in the pool license, and typically do not assert the patents against infringers.
PE Practicing Entity owns and practices the patent
RFID Radio Frequency Identification is a standard for identification and tracking of devices using radio frequency
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SSO/SDO Standard Setting/development organization
TDMA Time Division Multiple Access is a telecommunication standard developed for 2G
UMTS Universal Mobile Telecommunications System is a 3G standard developed for packet based transmission of voice and data
USB Universal Serial Bus standard establishes communication, power and interfacing specifications for cables and connectors
VITA VMEbus International Trade Association – SSO in open system architectures
WiMax Worldwide Interoperability for Microwave Access is a broadband communication standard developed over the IEEE 802.11
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TABLE OF CONTENTS INTRODUCTION ...... - 10 - A. BACKGROUND ...... - 10 - B. RESEARCH QUESTIONS & OBJECTIVES ...... - 13 - C. METHOD & MATERIALS ...... - 13 - D. DELIMITATION ...... - 14 - E. ORGANIZATION ...... - 14 - CHAPTER I ...... - 16 - THE NEED FOR AN ‘INDUSTRY SOLUTION’: SETTING THE BACKGROUND ...... - 16 - 1.1. INTRODUCTION ...... - 16 - 1.2. DEVELOPMENT OF 1G TO 5G TELECOMMUNICATION STANDARDS ...... - 16 - 1.3. STANDARD SETTING AND LICENSING COMMITMENTS ...... - 17 - 1.4. LITIGATION IN SEPS...... - 18 - 1.5. SETTING THE LEVEL PLAYING FIELD – HUAWEI V ZTE ...... - 19 - 1.6. POST HUAWEI V ZTE ...... - 19 - 1.7. SEARCH FOR PRIVATE SOLUTIONS – PATENT POOLS ...... - 20 - CHAPTER II ...... - 21 - PATENT POOLS: DEVELOPMENT AND TREATMENT IN SEP LITIGATIONS ...... - 21 - 2.1. INTRODUCTION ...... - 21 - 2.2. HISTORICAL DEVELOPMENT OF PATENT POOLS ...... - 21 - 2.2.1. MARKET-BASED PATENT POOLS ...... - 21 - 2.2.2. STANDARD-BASED PATENT POOLS ...... - 23 - 2.2.2.1. ROLE OF INDEPENDENT ADMINISTRATOR IN PATENT POOLS ...... - 25 - 2.3. TREATMENT OF PATENT POOLS IN SEP LITIGATIONS ...... - 25 - 2.3.1. PATENT POOL LICENSES & COMPARABLE LICENSES ...... - 25 - 2.3.1.1. PATENT POOL LICENSE RATES ...... - 26 - 2.4. CONCLUSION ...... - 27 - CHAPTER III ...... - 28 - EU LAW AND POLICY ON PATENT POOLS ...... - 28 - 3.1. INTRODUCTION ...... - 28 - 3.2. EU COMPETITION LAW VERSUS PATENT POOLS ...... - 28 - 3.3. TREATMENT OF PATENT POOLS UNDER TECHNOLOGY TRANSFER BLOCK EXEMPTION REGULATIONS (‘TTBER’) ...... - 29 - 3.3.1. TECHNOLOGY TRANSFER REGULATION OF 1996 ...... - 29 - 3.3.2. TECHNOLOGY TRANSFER REGULATION OF 2000 ...... - 31 -
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3.3.3. TECHNOLOGY TRANSFER REGULATION OF 2004 ...... - 32 - 3.3.4. TECHNOLOGY TRANSFER REGULATION OF 2014 ...... - 33 - 3.3.4.1. OPENNESS OF PATENT POOLS ...... - 33 - 3.3.4.2. ESSENTIALITY OF POOLED PATENTS ...... - 34 - 3.3.4.3. SAFEGUARDS AGAINST EXCHANGE OF SENSITIVE INFORMATION ...... - 34 - 3.3.4.4. LICENSING – FREEDOM OF CHOICE ...... - 35 - 3.3.4.5. LICENSING ON FRAND TERMS ...... - 35 - 3.3.4.6. NON-CHALLENGE CLAUSES ...... - 35 - 3.3.4.7. PERMISSION TO DEVELOP COMPETING TECHNOLOGIES AND PRODUCTS ...... - 35 - 3.3.5. SUMMARY OF THE TT GUIDELINES ...... - 36 - 3.4. EU POLICY INITIATIVES OF PATENT POOLS POST 2014 ...... - 36 - 3.4.1. PUBLIC CONSULTATION ON PATENTS AND STANDARDS, 2014 ...... - 36 - 3.4.2. REPORT OF THE EXPERT GROUP ON PATENT AGGREGATION, 2015 ...... - 37 - 3.4.3. COMMUNICATION FROM THE EC TO THE EUROPEAN PARLIAMENT, BRUSSELS, 2017...... - 38 - 3.4.4. CEN POSITION PAPER: CWA 95000, 2019 ...... - 38 - 3.5. CONCLUSION ...... - 39 - CHAPTER IV ...... - 40 - DEVELOPMENT OF ESSENTIALITY IN THE CONTEXT OF PATENT POOLS ...... - 40 - 4.1. INTRODUCTION ...... - 40 - 4.2. DEVELOPMENT OF ESSENTIALITY IN ETSI POLICIES ...... - 40 - 4.3. EXTENT, DEGREE AND OVER-DECLARATION OF ESSENTIALITY ...... - 42 - 4.3.1. EXTENT OF ESSENTIALITY – STANDARD ESSENTIAL PATENTS OR STANDARD ESSENTIAL PATENT CLAIMS ...... - 42 - 4.3.2. DEGREE OF ESSENTIALITY – WHETHER TECHNICAL ESSENTIALITY ONLY IS AN UNFAIR STANDARD OF ESSENTIALITY ...... - 43 - 4.3.3. OVER-DECLARATION OF ESSENTIALITY ...... - 43 - 4.4. JUDICIAL TREATMENT OF ESSENTIALITY IN THE EU & US ...... - 44 - 4.5. ESSENTIALITY – A CREATURE OF SSO POLICY ...... - 46 - 4.6. ESSENTIALITY AND PATENT POOLS ...... - 46 - 4.6.1. COMPLIMENTARY TECHNOLOGICAL INCLUSION VIS-À-VIS SUBSTITUTE TECHNOLOGICAL INCLUSION ...... - 46 - 4.6.2. ANALYSIS AND VIABILITY OF COMMERCIAL ESSENTIALITY AS A BASIS FOR LICENSING ...... - 47 - 4.6.3. EVALUATING COSTS AND BENEFITS OF VALIDATION OF ESSENTIALITY ...... - 48 - 4.7. CONCLUSION ...... - 49 -
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CHAPTER V ...... - 50 - PATENT POOLS 2.0 – NEW FORMS OF AGGREGATION ...... - 50 - 5.1. INTRODUCTION ...... - 50 - 5.2. PATENT AGGREGATION AND PATENT POOLS ...... - 50 - 5.3. VIA LICENSING ...... - 52 - 5.4. SISVEL ...... - 54 - 5.5. EU RESEARCH ON HYBRID PATENT POOLS AND NEED FOR POLICY ...... - 56 - 5.6. CONCLUSION ...... - 57 - CHAPTER VI ...... - 58 - RECOMMENDATIONS & SUGGESTIONS ...... - 58 - BIBLIOGRAPHY ...... - 61 -
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INTRODUCTION
A. BACKGROUND The past decade has seen a transformative growth in Information and Communication Technologies (hereinafter ‘ICT’) paving the way for disrupting the way people work, learn, consume and communicate, in other words, live their lives on a global scale in every possible aspect, the catchphrase being ‘interoperability’. This ubiquitous technological shift has also resulted in a social and economic shift illustrated by devices that can communicate with each other, i.e., devices that are ‘smart’. Smart devices are multi-component and bundle multiple technologies that are complex, which were hitherto performed by independent uncommunicable devices. Communicating smart devices need a common interface for interaction, such interface specifications (technical and commercial) or standards allowing interoperability is provided for by standard-setting organization (hereinafter ‘SSO’). In the context of ICT, SSOs in the wireless communications technologies have produced some of the most successful standards such as cellular standards (1G to 5G), Wi-Fi, USB, Bluetooth, adopted globally in diverse fields by millions of devices, consumer electronics, automobiles and the like.
In order to interoperate ICT into the effective transformation of lives, the European Commission (hereinafter ‘EC’) attempts to achieve a Digital Single Market by 20201, i.e., a market where the free movement of goods, services and capital exists not just in the physical aspect, but also in the online and digital world. However, there exist certain fragmentation and barriers2 in achieving such goals, which otherwise do not exist in the physical world. As per EC, bringing down these barriers within Europe may contribute and additional EUR 415 billion3 to European GDP, either in terms of additional profits or reduced costs or both.
Standard setting, in the context of ICTs, is largely participatory and collaborative, having submissions of interested parties in the building of the standard and thereby, integrating private interests in the development process. However, one of the key challenges, in the backdrop of a
1 Commission, A Digital Single Market Strategy for Europe, COM(2015) 192 Final, May 06, 2015, available here, last accessed on May 22, 2020 2 Commission Communication to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions, A Coherent Framework for Building Trust in the Digital Single Market for E-Commerce and Online Services, COM(2011) 942 Final, April 08, 2011, available here, last accessed on May 22, 2020 3 Commission Staff Working Document: A Digital Single Market Strategy for Europe - Analysis and Evidence, SWD(2015) 100 Final, available here, last accessed on May 22, 2020
- 10 - Master Thesis Satyoki Koundinya Master Programme in Intellectual Property Law very successful standard development is to balance the legitimate expectation of amassing profits of private interests for costs incurred during Research and Development (hereinafter ‘R&D’) and building a patent portfolio versus collective interests implied by standardization, i.e., a challenge of access in the context of public versus private rights . This means building more effective methods of declaration of submissions and patents as essential to a standard (hereinafter ‘SEP’) and other Intellectual Property Rights (hereinafter ‘IPR’), managing IPR policies to that extent, ensuring effective licensing mechanisms and royalty rates, keeping in mind, the interests of both the SEP holders/licensors and potential licensees.
By way of an illustration in Figure 1 below, particularly, in the ICT industry, bilateral licensing between multiple patent holders (indicated by P1-P4) and multiple licensees (indicated by L1-L6) lead to complexities in licensing, with greater number of transactions and different royalty rates (indicated by multi-coloured arrows). Bilateral negotiations are, therefore, not successful, exemplified by scores of SEP wars throughout all the continents in the 2G, 3G and 4G standards. The 2G-4G commercialization landscape has been marked by patent wars, high litigation costs, overlapping rights and hold-up scenarios, having chilling effects and disrupting downstream innovation in the process4 and a ‘tragedy of the anti-commons’5. In the context of 5G and IoTs representing the next socio-economic wave of disruption, such negotiations are bound to fail. On the contrary, collaborative licensing mechanisms between the patent holders, such as patent pools, for sharing and cross-licensing of technology inter-alia lead to greater access, unified royalty schemes, significantly reduced transaction costs and are therefore more efficient.
4 Thumm N. et al, Innovation in the European Digital Single Market: The Role of Patents, Thematic Report on the Brussels Conference by JRC Science and Policy Report, March 17, 2015, available here, last accessed on May 10, 2020 5 Heller, M.A., The Tragedy of the Anticommons: Property in the Transition from Marx to Markets, (1998) Harvard Law Review 111 (3), 621-688 at p. 622, available here, last accessed on May 22, 2020. The tragedy of the anticommons occurs when rational individuals (acting separately) collectively waste a given resource by under- utilizing it. This happens when too many individuals have rights of exclusion in a scarce resource.
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Fig. 1 represents a comparative illustration of a bilateral and a collaborative licensing mechanism, P1-P4 indicate patent holders and L1-L6 indicate potential licensees
Patent pools are therefore, an efficient mechanism in resolving SEP disputes and allow a significant reduction of costs involved for parties engaged in bilateral negotiations6, by facilitating transaction through a ‘one-stop shop’ as well as broadening the scope of the technology license. Patent pools minimize the risk of royalty stacking, by setting a unique royalty rate for bundle of SEPs. However, patent pools could also pose negative effects such as disincentivizing development of alternative technologies by exclusive arrangements, abuse of dominance by blocking access to technology, charging multiple fees for its technologies.7
The creation of pooling mechanisms is subject to independent assessment ex-post from the perspective of Competition Law of potential anti-competitive effects, the scope of essentiality in the context of tying non-essential patents being drawn from the respective policy of the SSO. The Commission has defined certain categories or blocks of agreements on technology transfer (Technology Transfer Block Exemptions or ‘’TTBER’) which are prima-facie unproblematic from a competition point of view. While patent pools are not exempt from an assessment of competitive effects, the TTBER provide guidelines to patent pools regarding its creation and working.
6 Merges, Robert P. et al, Measuring the Costs and Benefits of Patent Pools, (2016), Ohio State Law Journal, UC Berkeley Public Law Research Paper No. 2759027 available here, last accessed on April 27, 2020 7 Ullrich. H, Patent pools: Approaching a patent law problem via competition policy, Chapter III, European Competition Law Annual 2005: The Interaction between Competition Law and Intellectual Property Law, Bloomsbury Publishing, 2005 at p. 305
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Pertinently, literature on patent pools in the EU is considerably less and patent pools in respect of ICT standards are also few8.
B. RESEARCH QUESTIONS & OBJECTIVES The present Master Thesis aims to study the evolution and present development of patent pools and law, regulations and policy beginnings in the European Union in the framework of evolution of telecommunication/ICT standards. In particular, it aims to answer the question of whether patent pool mechanisms could become an ‘industry solution’ to SEP disputes. To be able to provide an answer, it is necessary to consider the following ancillary questions -
o To what extent does EU legislation and policy foster creation and governance of pools. o Whether essentiality equates with complementarity and to what extent do patent pools contribute in understandings of essentiality determination in SEPs. o Whether market forces have allowed patent pools to resort to assertion activities, (also called trolling).
C. METHOD & MATERIALS
The thesis provides the background and framework for conducting an assessment of the potential benefits of patent pools and conducting a regulatory and policy assessment of the EU with regard to patent pools in the context of telecommunication standards, specifically in technologies that shall be enabling 5G and the Internet of Things (hereinafter ‘IoT’) and thus leading to a successful Digital Single Market. The research done for this Master Thesis is based on economic/empirical studies conducted for estimating costs and benefits of pooling mechanisms in patent licensing in the telecommunications sector and the method used is to examine the legal position of patent pools in the EU and the US has been through review of selected case law from EU (including CJEU) and institutional documents issued by or made for the various Departments/DGs of the European Commission, in search for optimal and efficient solutions. The approach is based on mainly secondary data available in previous works and in websites of the various organizations and analysis of the official policy documents and published studies for and by European Commission.
8 Bekkers R. et al, Patents and Standards: A modern framework for IPR-based standardisation’ A study prepared for the European Commission Directorate-General for Enterprise and Industry, (2014) Brussels: European Union, available here, last accessed on May 22, 2020, hereinafter ‘Bekkers et al, (2014)’
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Further, this Thesis incorporates a partly comparative and partly descriptive approach to incorporate a wide-ranging discussion of patent pools in the US into the EU dialogue.
The information analyzed during formulation of this thesis was gathered during my tenure at Via Licensing Corp., letting me an insight into the organization and administration of pools. Emphasis has also given to recent publicly available data from other industry bodies and companies working in the field of Internet of Things and Digital Single Market.
D. DELIMITATION
The scope of this Master Thesis is to better understand the regulatory environment for working and organization of patent pools operating in telecommunication standards, however, this Thesis refrains from conducting any full-fledged Regulatory Impact Assessment (hereinafter ‘RIA’) using econometric and quantitative methods and therefore, the attempt is only to provide a background and a framework for conducting such RIA in future.
Further, this Thesis relies on previous empirical studies conducted on SEP access mechanisms, however, refrains from venturing into other antitrust or anti-competitive aspects of the patent licensing, apart from that involved in patent pool mechanisms or even the other legal issues involved or being considered by the European Commission, like Data Privacy, warranties and liabilities etc.
E. ORGANIZATION
In order to achieve the objectives as stated above, this Thesis has been divided into six chapters. Chapter I commences with setting the frame of reference for subsequent parts and discusses the development of telecommunications standards to 5G leading to a global demand for interoperability. Further, the chapter discusses SEP litigations that followed especially in the 2G and 3G standards and an analysis of whether the seminal CJEU decision of Huawei v ZTE9 set the level playing field concluding with the need for a private solution. Chapter II discusses the historical development of patent pools and treatment of patent pools in SEP litigations. Chapter III discusses the changing EU law on patent pools through the TTBER and the recent policy changes brought about to foster the growth of patent pools, in the framework of telecommunications
9 Case C-170/13, Huawei Technologies Co. Ltd v. ZTE Corp & ZTE Deutschland GmbH, [2015], ECLI:EU:C:2015:477 (hereinafter ‘Case C-170/13, Huawei v ZTE’)
- 14 - Master Thesis Satyoki Koundinya Master Programme in Intellectual Property Law standards. Chapter IV addresses the evolution of essentiality qua the IPR policy of ETSI and delves into the parallel treatment of essentiality in patent pools. Chapter V discusses briefly on why pools have started resorting to aggressive licensing tactics and by illustration of a non-aggressive and an aggressive pool, elucidates how pool models have become hybrid assertion entities. Finally, the thesis will be completed with a concluding Chapter VI and would attempt to elicit a set of recommendations to better facilitate patent pools as well as distinguish patent aggregators based on their activities.
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CHAPTER I
THE NEED FOR AN ‘INDUSTRY SOLUTION’: SETTING THE BACKGROUND
1.1. INTRODUCTION This chapter charts out the development of global ‘interoperability’ in the context of the development of telecommunication standards. Development of standards led to development of bilateral negotiations for implementation downstream, and its failure, to SEP litigations. The chapter further analyses the CJEU decision of Huawei v ZTE10 and lays the premise for a patent pooling mechanism as a means to SEP access.
1.2. DEVELOPMENT OF 1G TO 5G TELECOMMUNICATION STANDARDS The early 1980s, with the rolling out of the first cellular wireless telecommunication networks, marked the beginning of a technology which would change the lives of people and organizations forever. The first generation of mobile networks (1G) was built on analogue frequency modulations to transmit voice signals11. Not only were analogue technologies inefficient in the use of network spectrum, the use of such networks was confined within a nation and therefore precluded the use between various nationwide networks. The emergence of second generation (hereinafter ‘2G’) ushering in spectral efficiency and network capacity, improved quality of service for voice services, enabling text messaging and limited mobile Internet connectivity. 2G was limited in interoperability owing to use of two different core network technology standards – GSM or CDMA, however rudimentary tasks such as e-mail and web surfing were possible to a limited extent.
The development of third generation (hereinafter ‘3G’) introducing the age of high-speed internet and mobile applications (hereinafter ‘app’) and ecosystems thereof was a giant leap in interoperability. 3G was built around several core technologies, with the difference of being interoperable with one another, for example, W-CDMA UMTS, HSPA and HSPA+, CDMA-2000 etc., making possible higher download speeds of up to 63 Mbps. However, consumer demand for faster services increased to an extent, not technologically feasible under the core technologies of 3G, to evolve into networks having higher spectral efficiencies, thereby laying the framework for
10 Case C-170/13, Huawei v ZTE 11 Goodman D. et al, 3G Cellular Standards and Patents, (2005) IEEE WirelessCom 1, available here, last accessed on April 30, 2020
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the truly global wireless standard, with high throughput and latency characteristics – the fourth generation (hereinafter ‘4G’) or the long term evolution (hereinafter ‘LTE’).
The 4G network, at its conception, was centered around two competing standards – LTE and WiMax. However, it is noteworthy that, LTE as a technology, departs from its previous generations while integrating seamlessly thereinto all previously developed standards - GSM, UMTS-HSPA, WiFi and Bluetooth, at the same time, its networks being cheaper than any other previous wireless telecommunication network12. LTE is, therefore, able to provide impressive efficiency in cost, spectral gains, capacity, data-rates and quality of service. For instance, LTE enabled network efficiency is a staggering 12,000 times improvement relative to 2G, and a download speed of up to 250Mbps in data rates. LTE inter-alia enables streaming of full length, high definition video streaming, payment portals in mobile networks, location-based GPS services, interruption-free communication through apps based on VOIP telephony. This unprecedented advances in almost every aspect of wireless technology opens new opportunities further downstream – new business models, services and other digital transformation and investments therein. Furthermore, LTE enabled pervasive connectivity in all kinds of consumer devices, using sensors and lays the ground for Internet of Things (hereinafter ‘IoT’). 4G therefore provides interoperability not only between myriad devices and sensors, but dramatic enhancement of cost efficacy, network performance, reliability and energy-efficiency.
IoT enables the disruptive transformation of existing business models to so-called ‘smart’ solutions – from smart homes to smart cars, consumers have access to connected solutions. IoT in the unlicensed spectrum has led to the building of standards such as LPWAN and has impacted age-old processes in manufacturing and agriculture and are leading to innovations in data driven solutions in driving such sectors. Data intensive services, for instance real-time HD video streaming have led to laying the framework for the fifth generation (hereinafter ‘5G’) of telecommunication network, successfully tested in various areas in the world.
1.3. STANDARD SETTING AND LICENSING COMMITMENTS At the core of this phenomenal success and standard-setting process, is technology sharing and licensing of patents essential to the standard (or SEPs). SSOs require that licenses to standard
12 Adeel. J, 5G Technologies: Fundamental Shift in Mobile Networking Philosophy, (2013) available here, last accessed on May 01, 2020
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implementers are made available and generally such co-ordination mechanisms operate on two different principles – A) a Royalty-free mechanism whereby the SSO require licenses for essential patents be made free of charge with the intention to build an open-source community; and B) FRAND (or RAND) set-up whereby holders of essential IPR make the IPR available on fair, reasonable and non-discriminatory terms (hereinafter ‘FRAND’). A royalty free co-ordination mechanism of license conflicts with the interests of existing market players as costs for R&D can be recouped primarily by revenue streams due to licensing. In this regard, while royalties may be obtained on FRAND basis, limitations arise due to non-uniform and lopsided interpretations of what could constitute fair and reasonable. Further, parties are generally reluctant to disclose details of patent licenses with all potential implementers, which are part of bilateral licensing negotiations and, it is very difficult to determine qualitatively whether the criteria of non-discrimination has been met.
1.4. LITIGATION IN SEPS In the past decade and despite such assurances, we have seen a spurt of SEP litigations in 3G/4G telecommunication standards all over the world – in EU, US and Asia. Litigation initiate at the behest of the implementer or the SEP patent holder, the implementer, challenges the essentiality of the SEP and that the SEP holder’s royalty demand is unreasonably high and therefore a breach of its FRAND commitment. The SEP holder lays a claim for infringement of implementing product being infringing due to its de-facto practice of the standard13. However, the extensive litigations came with heavy costs, not just for the SEP holders, but also for the implementers of the patents, who, at the same time, had to ensure that special position enjoyed by owners of the SEPs are neither abused nor the implementers are charged with burdened with excessive prices.14 The burden of formulation of amongst others, essentiality determination and setting of FRAND rates is yet a bone of contention between the parties.
13 Contreras J., Patents, Technical Standards and Standard-Setting Organizations: A Survey of the Empirical, Legal and Economics Literature, Research Handbook on the Economics of Intellectual Property Law, Vol. II – Analytical Methods, Edward Elgar Publishing, 2019. The chapter discusses in detail several well known cases such as Microsoft Corp. v. Motorola Inc., 795 F.3d 1024 (9th Cir. 2015) and Ericsson Inc. v. D-Link Sys., 773 F.3d 1201 (Fed. Cir. 2014). 14 Since a detailed discussion on this topic is beyond the scope of the present Thesis, kindly see Putnam J., Latest Developments in FRAND and SEP Litigation, published in I-AM Yearbook (2016), available here, last accessed on 03 May 2020. Also see Mutimear J., International FRAND: The last 18 months and what lies ahead for a brief summary and understanding of the contentious issues involved and the stand of the innovators and the alleged infringers, available here, last accessed on 03 May 2020.
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1.5. SETTING THE LEVEL PLAYING FIELD – HUAWEI V ZTE In light of the afore-mentioned, in the much-celebrated case Huawei v ZTE15, the CJEU built a model framework for the analysis of implementer liabilities and laid down that setting of royalty rates are a matter of national courts (in place of the European Commission) and the obligation to arrive at a FRAND license is on both the parties and there lies no antitrust actions, if the patentee seeks injunctive reliefs in suitable cases against unwilling licensees, intending to harness higher rents and improving their position while negotiating a license for SEP. The CJEU created a level playing field for both, patentees and users of SEPs, provided, both the parties16 act timely and in good faith. The CJEU also suggested that FRAND is not a specific royalty rate, but a point of reference and while it has a procedural meaning, it should not be construed to be an imposing or having one-sided obligation with predetermined pricing levels or valuation methods17. In this regard, the CJEU outlined the responsibility of the parties to engage in meaningful negotiation as a primary way of avoiding SEP litigations and costs therein. Accordingly, licensing of SEP portfolios subject to the price of end-product made sense, given that most implementing devices were cellular devices dedicated to cellular communication.
1.6. POST HUAWEI V ZTE In the above backdrop, post Huawei v ZTE, reliance on parties’ initiative to arrive at FRAND solutions have not worked18 and will not work in each other’s favor, especially in the context of the enormous potential of building wireless devices which were hitherto unconnected, in 5G and IoT based solutions. Cellular components have found its ingress into other multi-component devices thereby, increasing the complexity. A very recent matter of Continental Automotive v. Avanci19 filed in the US involving implementation of telematics control units (TCUs) that report collision and other data to remote servers using an onboard network access device (NAD), the NAD including an integrated baseband chip, exemplifies challenges that have increasingly become
15 Case C-170/13, Huawei v ZTE 16 Case C-170/13, Huawei v ZTE at para 65. Also see Rato M. et al, An Assessment of Injunctions, Patents, and Standards Following the Court of Justice’s Huawei/ZTE Ruling”, (2016), Journal of European Competition Law & Practice, Vol. 7, No. 2 17 Case C-170/13, Huawei v ZTE at para 67-68. Also see CEN and CENELEC position paper on: SEPs and FRAND Commitments, available here, last accessed on May 3, 2020 18 Kastler H., FRAND Case Law in Europe After Huawei v. ZTE, (April 09, 2019), available here, last accessed on May 22, 2020 19 Case No. 5:19-cv-02520, Continental Automotive v. Avanci, case brief filed in May 2019 at in the Northern District Court of California and presently awaiting orders
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inherent in valuing SEPs. With the transition of non-telecommunication companies integrating cellular technology, the number of implementers has become very large and bilateral negotiations between SEP holders and licensees, is not only an added cost but also, in a highly complex technology environment, are more likely to break down. This, added to essentiality claims of SEP holders has prompted the European Commission in its communication on SEPs to note, “This scenario places a high burden on any willing licensee, especially SMEs and startups, to check the essentiality of a large number of SEPs in licensing negotiations”. 20
1.7. SEARCH FOR PRIVATE SOLUTIONS – PATENT POOLS Patent pools offer a private industry solution to this roadblock and help solve some problems faced with the two co-ordination mechanisms as mentioned above in Section 1.3. Patent pools are typically formed as an arrangement between two or more patent holders to aggregate their patents and to be able to license one or more of their patents to one another or to third parties21 and typically offer standard licensing terms to licensees who are not part of the pool22. Patent pools, although in existence for more than 100 years, is set to play an increasingly important source of SEP licenses, especially in the field of telecommunication standards. With the rise in the number of SEPs and standards, patent pools, when properly organized, operating on behalf of their members, increase predictability of licensing and avoiding litigation by bundling together complimentary technology (patents), providing unbiased and independent verification of essentiality and thereby, facilitating licensing vide a one-stop portal. Qua pooling mechanisms, SEP holders are provided appropriate compensation for license of SEPs for their innovations and potential willing licensees can have access to a broad scope of technology. In several litigations as will be discussed in the next chapter, pool licenses have been held as comparable licenses and license rates as FRAND compliant rates. Further, independent assessment of essentiality in respect of SEPs have resulted in bundling of complimentary technology.
20 Communication from the Commission to the European Parliament, The Council And The European Economic And Social Committee, Setting out the EU approach to Standard Essential Patents, COM(2017) 712 final, available here last accessed on May 03, 2020 21 USPTO, White Paper on Patent Pooling (2001), available here, last accessed on April 30, 2020. The Paper defines a function of “… aggregation of intellectual property rights which are the subject of cross-licensing, whether they are transferred directly by patentee to licensee or through some medium, such as a joint venture, set up specifically to administer the patent pool.” 22 Merges, R.P., Institutions For Intellectual Property Transactions: The Case for Patent Pools, (1999) available here, last accessed on April 28, 2020, hereinafter ‘Merges (1999)’ at p.18,
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CHAPTER II
PATENT POOLS: DEVELOPMENT AND TREATMENT IN SEP LITIGATIONS
2.1. INTRODUCTION This chapter charts out the development of patent pools, as a market forces driven industry solution for facilitating access to technology, in order to understand circumstances that necessitate their creation and the risks they give rise to. The chapter distinguishes technical standard-based pools from pure market-based pools and places a critical analysis to independent administrator-based pool mechanisms. Further, the chapter draws upon judicial treatment of pools in SEP litigations.
2.2. HISTORICAL DEVELOPMENT OF PATENT POOLS Patent pools have been existence, primarily in the US since the late 19th century and in order to examine the opportunities and risks that a patent pool may pose, it will be worthwhile to examine the different situations that necessitate the formation of patent pools. Based on a chronological assessment, patent pools have generally been divided into two categories – (a) Market-based patent pools (late 19th century up to the 1990s); and (b) Standard based patent pools23.
2.2.1. MARKET-BASED PATENT POOLS The earliest patent pools were formed as a market solution. Such pools addressed blocking positions created by registered patents and reduction of patent hostilities created thereby. Some such pool-based discussions were also initiated by government intervention, for facilitating access to technology in times of a national emergency, for example, wars and pandemics. Market based pool structures were also formed by colluding parties with the intention to create market division in the horizontal market as well as price-fixing led by a collective bargaining position24 - a behavior now known to cause anti-competitive effects in the market.
Table 1 below is a representation of some documented well-known patent pools. The earliest documented patent pools until the middle of the 20th century were formed in the US and therefore, played a vital role in shaping the industry and the law in the US.
23 Merges (1999) at p. 18 24 Bekkers et al, (2014) at p. 12
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Table 1: Overview of certain well-known patent pools Old Patent Pools Activity Description Sewing Machine (1856) The sewing machine patent pool was presumably one of the earliest patent pools consisting of sewing machine patents25. Sewing machine manufacturers such as Grover, Baker, Singer, Wheeler, and Wilson, who prior to formation of the pool, were suing each other for patent infringement. The pool was assigned to aggregate the patents, collect and apportion royalties among the members of the pool.
Movie Projector (1908) Armat, Biograph, Edison and Vitagraph were the primary members of this pool and the arrangement was to license patents in respect of motion picture industry to licensors such as movie exhibitors as well as the agreement specified the royalties payable for it26. The patents were assigned to the pool entity.
Bed (1916) Devoplane Bed Company, Seng Company, Pullman Couch Company and a couple of individual inventors were party to this pool. While there was no assignment to the pooled entity, the royalty apportionment was based on a formula taking into account the patent size in the pool (Seng had the largest portfolio)27.
Aircraft Manufacturing (1917) The Manufacturer’s Aircraft Association was formed on the initiation of the US Navy (on the behest of the US government headed by then president, Mr. Franklin W Nixon). The association was formed primarily comprising of two pioneer companies – the Wright company and the Curtiss company which held a significant proportion of patents in the area, and which were blocking the manufacture of aircrafts needed during World War I28.
Radio (1924) The Associated Radio Corporation later renamed into the Radio Corporation of America included the likes of American Marconi, General Electric, American Telephone and Telegraph (AT&T) and Westinghouse. The pool
25 Carlson S., Patent Pools and the Antitrust Dilemma, (1999), 16 Yale Law Journal On reg. 359, 373, available here, last accessed on April 30, 2020 26 Bekkers et al, (2014) at p. 13 27 Bekkers et al, (2014) at p. 13 28 Dykman H., Patent Licensing within The Manufacturer’s Aircraft Association (MAA), (1964), United States Air Force Jag Bulletin 6, no. 5, pp. 28-34
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eventually led to standardization of radio parts, airway’s frequency locations and television transmission standards.29
Stereo Television (1980) This pool initially called IGR was established in Germany and dealt with patents essential for stereo television and was functionally responsible for grant of licenses to members, who were within Germany. Refusal to grant license to a Finnish TV manufacturer Solera looking at establishing a market in Germany, led Solera filing a complaint at the European Commission, which directed IGR to license to all third parties30.
2.2.2. STANDARD-BASED PATENT POOLS Within the USA, post-World War II and 1990s, there does not seem to be evidenced history of pool operations. The reason for it could possibly be the regulatory interference of US authorities (specifically the competition authorities, such as FTC) due to market-based pool behavior being anti-competitive. In the 1970s the US Department of Justice (hereinafter ‘DOJ’) banned the operation of patent pools as prima-facie anticompetitive31, as part of a list of anti-trust restrictions, which were later formally abandoned in 198632.
In the late 1990s, as mentioned previously, the development of telecommunication standards by SSOs such as ETSI also led to establishing pools dealing with aggregation and dealing of technologies essential to the standard. Inter-operability of essential technologies lent pro- competitive effects to the bundling of essential technologies and reduction in costs and therefore, pooling mechanisms as a market model began to become popular33. The DOJ, based on the recommendation of several willing licensors and other parties, established a business review
29 Bekkers et al, (2014) at p. 13 30 Lang, J.T., Defining legitimate competition: Companies’ duties to supply competitors, and access to essential facilities, Annual proceedings of the Fordham corporate law institute: International antitrust law & policy (1995), B. Hawk (Edn.), New York: Juris Publishing at pp. 245-313 31 Gordon, G.G., Analyzing IP License Restrictions Under the Antitrust Laws: A General Outline of Issues. (A submission to the United States Department of Justice Antitrust Division and the Federal Trade Commission Joint Hearings on Competition and Intellectual Property Law and Policy in the Knowledge-Based Economy), (2002) available here, last accessed on April 30, 2020. The DOJ published a list of “nine no-no’s” of competition/anti-trust violations – also called hardcore restrictions of which patent pools were a part and therefore, banned. 32 Ibid. Also, Beeney, G.R., Pro-competitive aspects of intellectual property pools: a proposal for safe harbor provisions (A submission to the United States Department of Justice Antitrust Division and the Federal Trade Commission Joint Hearings on Competition and Intellectual Property Law and Policy in the Knowledge-Based Economy) (2002), available here, last accessed on April 30, 2020 33 Bekkers et al, (2014) at p. 15
- 23 - Master Thesis Satyoki Koundinya Master Programme in Intellectual Property Law procedure (later emulated by the European Commission, as will be discussed later). The business review procedure required willing firms to disclose the model of patent aggregation and the DOJ provided a preliminary opinion on whether such a model could have a potential anti-competitive effect on the market34. By way of example, MPEG-235 and DVD36 in the audiovisual industry are two important pool models approved by the DOJ, which demonstrate the aforesaid. Pool models have evolved since, as tabulated in Table 2 below and generally categorized based on their structure, typically they could be Joint Licensing Schemes, Patent pools with licensing administrators and Pooled Patent platforms.
Table 2: Overview of business models of standard based patent pools.
Patent Pool Model Activity Description Joint Licensing Schemes37 Joint Licensing Schemes as the name suggests are initiated and managed by the licensors themselves. In particular instances, a single licensor may be appointed on behalf of the other licensors to administer the pool. For example, in respect of the DVD and the DAB joint Licensing scheme, Philips is the appointed administrator.
Patent Pools with Licensing One of the more successful pool models, an independent administrator38 administrator is appointed for the pooling of essential patents, the initiation may be voluntary or initiated by the administrator itself. Several such pools such as Via Licensing, Sisvel, Avanci etc., are operational today. The licensing administrator performs an independent evaluation of essentiality (as will be discussed later), sets the royalty rate for the pooled patents and apportions the royalty appropriately to the pool members. The licensors generally, retain their freedom to license outside of the pooled arrangement (non-exclusivity).
Patent Platforms39 Patent platforms were established as an alternate model to Joint Licensing schemes in the manner that the platform is open to
34 Bekkers et al, (2014) at p. 16 35 DOJ Response To Koninklijke Philips Electronics, N.V.'s, Sony Corporation Of Japan's And Pioneer Electronic Corporation Of Japan's Request For Business Review Letter, available here, last accessed on April 30, 2020 36 DOJ Response To Hitachi, Ltd.'s, Matsushita Electric Industrial Co., Ltd.'s, Mitsubishi Electric Corporation's, Time Warner Inc.'s, Toshiba Corporation's, And Victor Company Of Japan, Ltd.'s Request For Business Review Letter, available here, last accessed on April 30, 2020 37 Bekkers et al, (2014) at p. 16 38 Bekkers et al, (2014) at p. 16 39 Dessy C., Competition law analysis of patent licensing arrangements: the particular case of 3G3P, Competition Policy Newsletter, (2003), Number1-Spring, available here, last accessed on April 30, 2020
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both licensors and licensees, whereby the licensees have the option to pick and choose between the aggregated patents. The platform thereby gave the licensors the freedom to choose between the Platform’s Standard Licence and a negotiable individual licence. 3G Platform (or 3G3P) is a patent platform established as a pooling mechanism.
2.2.2.1. ROLE OF INDEPENDENT ADMINISTRATOR IN PATENT POOLS Owing to the multiplicity of standards during the development of telecommunication standards, bilateral negotiations between SEP holders and licensees were breaking down and aggregation of patents by a knowledgeable administrator was necessary in order to avoid unnecessary patent litigation40. In an independent administrator-based patent pool, presence of the administrator helps safeguard the patent pool from potential competition issues such as hold-ups. Patent pools with independent administrator combine experiences from diverse fields comprising technology, law, management and other skill sets necessary to successful patent pool formation and pool licensing. The independent administrator is motivated to facilitation of licenses and therefore, plays a better role in avoiding blocking positions by SEP holders. Further, an independent administrator forms a layer between the pool members as well as potential licensors, which therefore, helps prevent pilfering of sensitive business information including confidential information and trade secrets. This would lead to better participation and better governance of licensing programs.
2.3. TREATMENT OF PATENT POOLS IN SEP LITIGATIONS The treatment of patent pools as discussed below, have generally been with the viewpoint that formation of patent-pools and cross-licenses for an essential patent to members of the pool is neither anti-competitive nor amounts to an abuse of dominance and the royalty can be presumptively considered to be determined on FRAND principles unless proved to the contrary.
2.3.1. PATENT POOL LICENSES & COMPARABLE LICENSES In the setting of FRAND rates in a SEP litigation, the Court generally investigates the value of the SEPs by taking into account the prevailing market conditions including the cost of available non- infringing alternatives at the time of commencement of licensing negotiations41. As long as,
40 Gilbert, R. Deal or No Deal? Licensing Negotiations in Standard‐Setting Organizations Antitrust Law Journal, (2011), Vol. 77, pp. 855–888 41 Contreras, J., Fixing FRAND: A Pseudo-Pool Approach to Standards-Based Patent Licensing, (2013), 79 Antitrust Law Journal 47
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similarly situated licenses can provide a base, inter-alia established by expert testimony for setting of the royalty rates, such licenses can be admitted as comparable licenses42. However, prior to any similarity comparison, the weight of such comparable licenses must be tendered and distinguished from the license at issue.43
In Europe German and UK courts have relied upon royalties in comparable licenses, as a starting point for the formulation of FRAND rates. In the context of pools, in Sisvel v Haier44 the Düsseldorf District Court considered Sisvel’s licensing agreements for UMTS and GPRS as comparable licenses. Notably, in the case of St. Lawrence Communication v Vodafone45, the Court was placed with evidence of bilateral licensing agreements of six implementers as well as SIPRO pool agreement to the AMR-WB-standard, albeit with lesser royalty rates. The court observed that given that the pool agreement comprised of multiple patents apart from the suit patents, the claimed royalty could be considered as FRAND determinative.
2.3.1.1. PATENT POOL LICENSE RATES In Microsoft v Motorola46, licenses in respect of two pools for Wi-Fi and video compression standards, i.e., IEEE 802.11 and H.264, both of which managed by Via Licensing Corporation, were placed as comparable licenses. The H.264 license, owing to greater number of patent holders was considered as a more appropriate comparable license. The Court also observed that pools offer other benefits, in terms of grant backs, apart from royalty revenues, in view of which, pool rates are generally lower than bilateral royalty rates. The Court also placed importance on essentiality coverage of the pooled patents whether the patents were highly important or moderate to the
42 Apple Inc. v Motorola Inc., 757 F.3d 1286 (Fed. Cir. Apr. 25, 2014). Also see Realtek Semiconductor Corp. v LSI Corp., 946 F. Supp. 2d 998, United States District Court, N.D. California (2013), the Court laid down a seven factor test in determining the comparability of other licenses: 1) the patents included in the license agreement, 2) the date of the license, 3) any limitations on the use of the licensed technology, 4) the inclusion of other consideration in the agreement, 5) whether the license was part of a settlement of litigation or arbitration, 6) whether the royalty was a lump sum or a running royalty rate, 7) opinion testimony of qualified experts. 43 Ericsson v D- Link, 773 F.3d 1201 at 1228 (Fed. Cir. 2014) 44 Sisvel v Haier, 4a O 144/14 und 4a O 93/14, Düsseldorf District Court, 2015 45 St. Lawrence Communication v Vodafone, 4a O 73/14, Düsseldorf District Court, 2016 46 Microsoft Corp. v Motorola, Inc., No. 10-cv-1823, Order of Findings of Fact and Conclusions of Law, April 25, 2013, at paras 425 and 465 (W.D. Wash.)
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standard. The Court in the later case of In Re: Innovatio47, took into consideration the number of licensees thereby, broadening the scope of the significance of the pooled patents to the standard.
Similarly, in Unwired Planet v Huawei48, the UK court observed that it was possible to derive a benchmark rate from comparable licenses, provided that a benchmark rate reflects the terms of all the comparable licenses offered to similarly situated parties.
2.4. CONCLUSION In the previous sections, it is apparent that patent pools first originated in the US, have currently evolved into standard-based patent pools. Further, an independent licensor-based patent pool is a better designed pool owing to greater transparency and predictability of unbiased licensing attempt. Patent pools emerged much later in the EU with pool licenses deemed to be pro- competitive unless proven otherwise. Much of the discussions and learnings on managing anti- competitive aspects of pools have arisen in the US, while a lot of the EU law and policy, as will be discussed in Chapter III, being formulated much later49.
47 In re: Innovatio IP Ventures, LLC Patent Litig., MDL No. 2303, 2013 WL 5593609, at pp. 69-70 (N.D. Ill. Oct. 3, 2013) 48 Unwired Planet v Huawei [2017] EWHC 711 (Pat) 49 Bekkers et al, (2014), at p. 20
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CHAPTER III
EU LAW AND POLICY ON PATENT POOLS
3.1. INTRODUCTION EU competition law bans agreements between firms which aim to reduce or eliminate competition on the common market or parts thereof. This is regulated under Article 101 TFEU50, which provides legal grounds for the Directorate-General of Competition of the European Commission (hereinafter called ‘EC’) to ban, eliminate and punish enterprises51 which establish cartels52. This chapter deals with how law and policy have been formulated and has evolved in EU regarding patent pools. Specifically, the chapter addresses and analyses the evolution of the block exemptions regulations in the EU, of which patent pools are not, by itself, a part, but the regulations are accompanied by guidelines that delve into organization and governance of pools. The chapter also analyzes recent policy research being done for the promotion of pool formation.
3.2. EU COMPETITION LAW VERSUS PATENT POOLS Prima-facie and as discussed previously, patent pools have the potential to cause anti-competitive effects and accordingly, patent pools are subject to EU Competition law under Art. 101 of the TFEU. Nevertheless, under exemptions provided by Art. 101(3) of the TFEU, upon notification to the EC of the intention to enter into an agreement, the EC may recognize a given agreement as complying with EU competition law, if an agreement contributes to improving the production or distribution of goods or to promoting technical or economic progress, based on which, the EC can grant or decide not to grant the exemption.
50 Treaty on the Functioning of the European Union, hereinafter TFEU. 51 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty establishing the European Community (TEC), Official Journal L 001, 04/01/2003 P. 0001 – 0025, available here, last accessed on May 23, 2020. Specifically, see Chapter V for powers of investigation and Chapter VI for penalties 52 It is worthwhile to note that competition laws were included in the Treaty of Rome in 1957. The wording of Art. 101 remains unchanged, and the only change is in article number (Art. 85 in the Treaty of Rome, Art. 81 – in the Treaty of Amsterdam) furthered to TEC.
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3.3. TREATMENT OF PATENT POOLS UNDER TECHNOLOGY TRANSFER BLOCK EXEMPTION REGULATIONS (‘TTBER’) In order to simplify the aforesaid assessment, the Commission has defined certain categories or blocks of agreements on technology transfer (Technology Transfer Block Exemptions or ‘’TTBER’) which are putatively unproblematic from a competition point of view. The first block exemption was created in 1965, applicable to specific category of licence agreements53, the analysis whereof is however irrelevant from a patent pool perspective. Additionally, patent pool licenses being multilateral agreements do not fall within the scope of TTBER regulations, which cover bilateral agreements only. Nevertheless, TTBER has historically tried to regulate or provide guidelines for management of pools and the sections below illustrate the chronological development of patent pool regulations under the TTBER.
3.3.1. TECHNOLOGY TRANSFER REGULATION OF 1996 The TTBER of 199654 has a narrow scope due to the fact, that it covers only specific types of agreements while playing an important role in the development of innovation in the EU economy and contributing to the competitiveness of business in the Community. The Commission evaluation report indicates that the TTBER of 1996 aims to achieve three major objectives of (1) simplifying rules on licensing agreements by combining block exemptions on know-how and patent licensing into one single regulation, (2) guaranteeing effective competition in technologically new or improved products and (3) creating a more favorable environment by providing legal certainties for companies investing in the EU55. The scope of the TTBER of 1996 is to exempt certain licensing agreements entered, between only two parties for manufacturing purpose, use and commercialization56. The TTBER of 1996 only applies if the licensee himself manufactures the licensed goods or provides the licensed services or has them manufactured or provided for his account57.
53 Council Regulation No. 19/65/EEC on the application of Art. 85, paragraph 3 to certain categories agreements and concerted practices, DUWE 36/533, 06.03.1965, available here, last accessed on April 13, 2020 54 Commission Regulation on the Transfer Technology Block Exemption Regulation no. 240/96, OJ L 31, 9.2.1996, p. 2–13, available here, [No longer in force, Date of end of validity: 30/04/2004] available at, last accessed on April 13, 2020 (hereinafter called ‘TTBER of 1996’) 55 Commission evaluation report on the Transfer Technology Block exemption regulation NO. 240/96 Technology Transfer Agreements under Article 81 of the Treaty, COM(2001) 786 final available here, last accessed on May 13, 2020, hereinafter ‘Commission evaluation report of 2001’ 56 TTBER of 1996 at Art. 1.1 57 TTBER of 1996 at Recital 8
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The TTBER of 1996 primarily concerns pooled technology as a part of patent, know-how and mixed agreements and provides for the possibility of providing block exemptions without taking into consideration, the specific manners in which licensors could protect their patents. Specifically, Art. 5.1 of the TTBER 199658 makes clear the Regulation does not apply to:
(1) agreements between members of a patent or know-how pool which relate to the pooled Technology; (…) (3) agreements under which one party grants the other a patent and/or know-how licence and in exchange the other party, albeit in separate agreements or through connected undertakings, grants the first party a patent, trademark or know-how licence or exclusive sales rights, where the parties are competitors in relation to the products covered by those agreements;
However, Art.5.2(2) creates an exception making the Regulation apply to: …agreements to which paragraph 1(1) applies and to reciprocal licences within the meaning of paragraph 1(3), provided the parties are not subject to any territorial restriction within the common market with regard to the manufacture, use or putting on the market of the licensed products or to the use of the licensed or pooled technologies [emphasis added]
The applicability of TTBER of 1996 is only limited to the licensee’s self-manufacturing of products or services (or manufactured or provided for his account). Accordingly, patent pools were exempted from TTBER of 1996 only in the scenario where the parties are not subject to any ‘territorial restriction within the common market’. The general interpretation of the phrase ‘any territorial restriction within the common market’ in Art. 5.2(2) is that the applicability of the exemption to a patent pool will effect only when the license is in force within a sole territory, i.e., the common market, however the exemption does not apply within an exclusive territory in place of territorial restrictions, in that it limits the places where the licensor may put the product on the market.59
In the Commission evaluation report,60 the Commission excludes patent pool with multilateral agreements from the scope of the TTBER of 1995 while selectively permitting the group
58 See Art. 5 of TTBER of 1996 59 Korah, V., Technology Transfer Agreement in the EC Competition Rules, 1996, Oxford: Clarendon Press at p.104- 105. 60 Commission evaluation report of 2001 at p.32
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exemption to apply to pools between bilateral non-competitor parties. While, neither the recitals of TTBER of 1996, nor any literature explains the necessity for building such a selective exception, it could be that the EU was not sure of whether pool mechanisms could exist as efficient facilitators of licensing. Further and in view of the applicability of TTBER of 1996 to an agreement containing one of the provisions laid down under Art.1(1) (Paras 2-6 confer territorial protection), the Commission merely concentrates on sharing of territorial markets within the EU common market and could ideally permit operation of the pool and to raise prices or royalties on the condition that no territorial restriction exists.
3.3.2. TECHNOLOGY TRANSFER REGULATION OF 2000 The TTBER of 200061 is directed specifically to Research & Development (‘R&D’) agreements and is built on the premise that R&D co-operation is generally pro-competitive. In respect of patent pools under the purview of TTBER of 2000, patent pools directed to collaboration for R&D are exempted from Art. 81, where the parties are not competing with each other or competing undertakings having a combined market share not exceeding 25 percent.
Further, Recital 3 of TTBER of 2000, provides that:
Agreements on the joint execution of research work or the joint development of the results of the research, up to but not including the stage of industrial application, generally do not fall within the scope of Article 81(1) of the Treaty [emphasis added]. Accordingly, when the parties make complimentary contributions or the co-operation does not
extend beyond the R&D, the same would not infringe Art. 81(1) of the Treaty.
If in some circumstances the agreement would still invite investigation under Art. 81(1) of the Treaty62, the Commission might still grant an individual non-binding exemption or a comfort letter63 for commencement of business. Specifically, these comfort letters are categorized into two basic types – (1) Negative clearance letter stating that the agreement is completely outside the purview of Art. 81 of the Treaty; and (2) Exemption letters stating that while, the agreement falls
61 Commission Regulation (EC) No 2659/2000 of 29 November 2000 on the application of Article 81(3) of the Treaty to categories of research and development agreements, OJ L 304, 5.12.2000, p. 7–12, [No longer in force, Date of end of validity: 31/12/2010], available here, last accessed on May 13, 2020 (hereinafter called ‘TTBER of 2000’) 62 Treaty establishing the European Community (Nice Consolidated), OJ C 325, 24.12.2002, p. 64–65, available here, last accessed on May 13, 2020 63 TTBER of 2000 at Recital 27
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under the scope of Art 81, it is exempted by terms listed in Art 81(3). It is worthwhile to note that none of these comfort letters were made public and the receivers were not authorized to publish them64. However, some of the administrative allowances for operation of the MPEG and the DVD pool by the EC can be read from the EC press releases65. The EC changed its regulation, again in 2004 and eliminated the concept of comfort letters.
3.3.3. TECHNOLOGY TRANSFER REGULATION OF 2004 The TTBER of 200466 is applicable to technology licensing agreements where the licensor permits the licensee to exploit the licensed technology for the production of goods and services. The TTBER of 2004 creates a ‘safe harbor’ for agreements, in respect of which the positive effects outweigh the restrictive effects, evaluated in terms of whether the parties are competitors and their corresponding market share67. However according to Recital 7, the TTBER of 2004, does not cover patent pools within the exemptions which provides that:
It should also not deal with licensing agreements to set up technology pools, that is to say, agreements for the pooling of technologies with the purpose of licensing the created package of intellectual property rights to third parties [emphasis added]. The TTBER of 2004 was also adopted with a set of Guidelines,68 which as soft law under Art. 288 of the TFEU, set out the principles for the assessment of technology transfer agreements69 particularly, on the application of Art. 81 to aspects of patent pools, that the EC believes to be incompatible with competition laws and what types of arrangements are allowed. In this regard, the Guidelines inter-alia proposes that, pools should only include essential technology (Paras 219- 221), include complimentary technologies in place of substitute technologies (Paras 219-221), be open to all interested parties ‘representing different interests’ (Para 224), base royalties on fair,
64 Bekkers et al, (2014) at p.20. Also see European Commission’s XXXth Report on Competition Policy, 2000, available here, last accessed on May 13, 2020 65 Commission approval for the MPEG – 2 Licensing program, available here, last accessed on May 13, 2020. Also see, Commission approval for the DVD licensing program, available here, last accessed on May 13, 2020 66 Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements, Official Journal L 123 , 27/04/2004 P. 0011 – 0017, [No longer in force, Date of end of validity: 30/04/2014], available here, last accessed on May 13, 2020 (hereinafter called ‘TTBER of 2004’) 67 TTBER of 2004, Recitals 10 and 11 place a threshold of below a 20% market share threshold for agreements between rivals and below a 30% market share threshold for agreements between non-competitors 68 Commission Notice Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements (2004/C 101/02), available here, last accessed on May 13, 2020, hereinafter ‘Guidelines of 2004’ 69 Guidelines of 2004 at Chapter I
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reasonable and non-discriminatory terms (Para 224), allow further development of technologies, specifically, have non-exclusive grant backs limited to developments associated to the pooled patents (Para 228). The Guidelines also evaluates the creation and organization of patent pools as determinative of any potential anti-competitive effect (Para. 230).
3.3.4. TECHNOLOGY TRANSFER REGULATION OF 2014 The TTBER of 201470 and the corresponding TT Guidelines71, presently in force, retains the same structure as that of its predecessor and in general continue the EC’s economic approach towards technology transfer agreements and is important from the perspective of patent pool regulation. The TTBER of 2014, in Recital 7 excludes from its scope, agreements accruing via patent pool mechanisms, however, the TT Guidelines tries to lay down a more elaborate structure of a patent pool and divides the evaluation between pool agreements and licensing agreements72. The TT Guidelines specify a new ‘safe harbor’ for patent pools, doing away with the market share of the parties73, as was the case with its predecessor. This is an important change given that determination of market share can be difficult and unsteady because of the fluctuations of market share when licensing intellectual property on the technology market74. This safe harbor is associated to seven evaluating factors (enumerated in Para 261) of the TT Guidelines in a patent pool as enumerated below –
3.3.4.1. OPENNESS OF PATENT POOLS The TT Guidelines necessitate openness of pool creation75 to every patent owner who is interested in participation and does away with the portion of “different interests” as present in the predecessor guidelines. The TT Guidelines suggest participation of “all interested parties” which suggests the open participation of the interested patentees/licensors, the inclusion of which as pool members to a technology standard only, contributes to the completeness of the standard.
70 Commission Regulation 316/2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements, Official Journal L 93/17 (28 March 2014), available here, last accessed on May 13, 2020, (hereinafter called ‘TTBER of 2014’) 71 Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements, Official Journal C 89/03 (28 March 2014), available here, last accessed on May 13, 2020, (hereinafter called ‘TT Guidelines’) 72 TT Guidelines, para 266 expressly declaring, see 4.4.1 (para 248 et seq.) and 4.4.2 (para 266 et seq.) 73 TTBER of 2014 at Sec 4.4 74 Andewelt R., Analysis of Patent Pools Under the Antitrust Laws, (1984-1985) 53 Antitrust Law Journal 611 at p. 624 75 See Para 261 (a) of the TT Guidelines
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3.3.4.2. ESSENTIALITY OF POOLED PATENTS The TT Guidelines stipulate exclusive integration of essential patents76 which are complimentary. The criteria for establishment of essentiality is provided for as (a) lack of substitutes ‘inside or outside the pool’ or (b) presence of standard essential technologies, where the TT Guidelines provide for a rebuttable presumption that the standard essential technologies are necessarily compliments. Nevertheless, the actual purport of “inside or outside” the pool is yet to be established by way of judicial precedents. It is worthwhile noting that the tying of substitute patents by the patent pool violates Article 101(1)(e), if the patent pool has an anti-competitive effect on the relevant market77 and, if the patent pool creates a dominant position, Article 102(d) TFEU. The bundling of essential patents, on the other hand, creates a pro-competitive effect as it enables access to the technology, without the creation of patent thickets. Nevertheless, and by way of precedents, the EC and national courts have relied on determination of essentiality via independent experts78. Bundled licensing non-essential patents which are complimentary to the pooled standard may be, in certain cases, necessary to provide access to the entire technology, thereby avoiding the additional transactional costs involved in bilateral licensing of the said patents – this is a situation not envisaged by the TT Guidelines. Both situations are covered in the next chapter in detail.
3.3.4.3. SAFEGUARDS AGAINST EXCHANGE OF SENSITIVE INFORMATION The EC places this guideline79 to act as a deterrent against exchange of sensitive information such as pricing and output data between competitors, with the intention to secure fair competition in the market. However, the scope of sensitive information is restricted to the ambit of price fixing and other information ancillary to pricing. It does not limit exchange of information vital to creation and operation of the pooled technology, for example, relevant technical know-how and other use- oriented technology. In order to differentiate between the restricted sensitive information and allow use-oriented information, the TT Guidelines suggest the administration of sensitive information by an independent licensing administrator or by an independent expert80.
76 See Para 261 (b) of the TT Guidelines 77 See Para 262 of the TT Guidelines 78Investigation of the EC into the Philips CD-Recordable Disc, available here, last accessed on April 15, 2020 79 See Para 261 (c) of the TT Guidelines 80 See Para 259 of the TT Guidelines
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3.3.4.4. LICENSING – FREEDOM OF CHOICE The TT Guidelines place a requirement of a non-exclusive licensing of patents into a patent pool81, thereby enabling pool members or licensors to retain the right to license the patents individually and independently to licensees. Licensees are also placed at an advantage by the possibility of choosing between an individual licensing mechanism versus a pooled license mechanism, which bears relevance in the presence of non-essential complimentary patents.
3.3.4.5. LICENSING ON FRAND TERMS The TT Guidelines suggest licensing on fair, reasonable and non-discriminatory (‘FRAND’) terms82, however is silent on the concrete meaning or interpretation of the meaning of FRAND. Setting and apportionment of royalties have been placed as discretionary on the pool members83 and is not per se anti-competitive. The TT Guidelines places the market position as one of the determinants in investigating whether a pool resort to anti-competitive behavior. For example, equal treatment of licensees, whether part of pool or external thereto, not unduly foreclosing third party technologies or limiting the creation of alternative pools84.
3.3.4.6. NON-CHALLENGE CLAUSES The TT Guidelines permit pool members and licensees to challenge pooled patents on grounds of their essentiality and validity85, without risk of termination of the license– a scenario not envisaged by the predecessor of the TT Guidelines. The said paragraph is in line with Art. 5(1)(b) of the TTBER of 2014 which exempts from its scope, non-challenge clauses from the scope of block exemptions.
3.3.4.7. PERMISSION TO DEVELOP COMPETING TECHNOLOGIES AND PRODUCTS The TT Guidelines require a patent pool to permit its members and licensees to freely develop alternate technologies and products86 based on the pool technology. This is based on the premise that foreclosure of third-party technologies as well as downstream markets must not be affected and allowing all parties for application and use of alternate technologies minimizes the said risk.
81 See Para 261 (d) of the TT Guidelines 82 See Para 261 (d) of the TT Guidelines 83 See Para 268 of the TT Guidelines 84 See Para 267 of the TT Guidelines 85 See Para 261(f) of the TT Guidelines 86 See Para 261(g) of the TT Guidelines
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3.3.5. SUMMARY OF THE TT GUIDELINES As a summary, the TT Guidelines assesses the market power of the pool in arriving at whether a pool has resorted to anti-competitive conduct. Further, the TT Guidelines enable a reasonable differentia in royalty rates, i.e., there could be different royalty rates for different licensees based on whether such licensees are similarly situated87. While the TT Guidelines have diluted the hardcore restrictions, nevertheless, the TT Guidelines fail to address the unevenness in the development of standards versus pool formation88. Accordingly, there is a growing need for placing more emphasis on pool formation by strengthening the relationship between SSOs and pools, clarity in essentiality determination and incentivizing participation in monetization of valuable patents to achieve a Digital Single Market89.
3.4. EU POLICY INITIATIVES OF PATENT POOLS POST 2014 Addressing the concern that potentially valuable patents are not commercialized in a rapidly changing technological space and a need to establish a transparent, fair and liquid market for patent licensing in the wake of a fairly opaque, asymmetric and distorted market and the role of patent pools therein, the EC appointed several expert groups post 2014 to provide recommendations for gathering industry expertise and additional expertise in the area of patent aggregation90 as well as recommend policy changes to counter the gap in legislation in so far as bundling complimentary patents versus access to broader scope of technology is concerned, so that incentives may be provided for creation of pro-competitive patent pools91.
3.4.1. PUBLIC CONSULTATION ON PATENTS AND STANDARDS, 2014 The EC called for a stakeholder/industry level participation on to gather information and views on the interplay between standardization and patents92, in order to premise a harmonization standard and an efficient standardization system. From a patent pool perspective, the EC sought comments
87 See Para 269 of the TT Guidelines 88 Königs M, The Guidelines on technology transfer agreements: the second edition and its consequences on patent pools, (2014) Journal of Intellectual Property Law & Practice, Volume 9, Issue 12, pp. 1012–1016 89 Report of the Expert Group on Patent Aggregation, Towards enhanced patent valorisation for growth and jobs, (2015) available here, last accessed on April 15, 2020.. 90 Ibid at p. 8. This group was convened by the European Commission to investigate whether there is a need for EU level intervention to foster the development of patent markets, in particular through aggregation of patents, with a focus on patent pools and funds. 91 Commission Staff Working Document, Impact Assessment accompanying the TTBER of 2014 and TT Guidelines, SWD (2014), available here, last accessed on May 23, 2020. See pp 27-30 for example 92 Public consultation on patents and standards: A modern framework for standardisation involving intellectual property rights, October 14, 2014 – February 15, 2015, available here, last accessed on April 16, 2020.
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to better understand how patent pools could play a more efficient role in licensing of SEPs and the role of public authorities and SSOs/SDOs in facilitation of the same. Based on the responses of stakeholders, the EC concluded in its summary to the consultation93, that patent pools while efficient and cost-friendly, could pose challenges in pool members with different business interests agreeing to commercial terms. The EC also noted that narrower reach of technology and well- defined scope in pool portfolio, i.e. covering all or most of the SEPs could be more successful as a licensing mechanism.
3.4.2. REPORT OF THE EXPERT GROUP ON PATENT AGGREGATION, 2015 The Expert Group on Patent Aggregation (‘Expert Group’)94 while, noting that patent pools are an efficient mechanism for SEP licensing and in the scenario where they comprise of complementary technologies. Patent pools inter-alia can (A) improve transparency and reduce asymmetric information by providing exhaustive and professional information on the pooled patent portfolio; (B) provide an efficient method for collection and apportionment of royalties, avoid excessive royalties due to avoiding of ‘stacking’ as well as transaction costs; (C) ease access to disruptive services , for example connected vehicles driven by IoT or 5G sector, which will further technological innovations in the said field95.
The Expert group however, has recommended clarification on: (A) the purport of the requirement of essentiality laid down in the TT Guidelines96; (B) substitutable and non-essential complimentary patents as a part of the pool licensing package97; (C) conflict resolution in matters of royalty distribution98; (D) determination of essentiality and complementarity in the pooled patents99 and (E) treatment of patent pools behaving like trolls100.
93 European Commission, Summary Report on Public consultation on patents and standards: A modern framework for standardisation involving intellectual property rights, October 27, 2015, Brussels, available here, last accessed on April 20, 2020, hereinafter ‘Commission Report of 2015’ 94 Commission Report of 2015 at page 33 95 Commission Report of 2015 at page 33 96 Commission Report of 2015 at page 38 97 Ibid 98 Commission Report of 2015 at page 41 99 Ibid 100 Ibid
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3.4.3. COMMUNICATION FROM THE EC TO THE EUROPEAN PARLIAMENT, BRUSSELS, 2017 The EC Communication to the EU Parliament titled “Setting out the EU approach to Standard Essential Patents”101, laid emphasis on the changing digital market, particularly the role of IoT applications in devices for humans, homes, offices, factories, worksites, retail environments, cities, vehicles and the outdoors, was an important backbone to the Digital Single Market and therefore, considered the need to set out key principles for fostering inter-alia a balanced and smooth approach for SEPs, particularly (A) incentivizing the development and inclusion of top technologies in standards, (B) preserving fair and adequate return for these contributions, and (C) ensuring smooth and wide dissemination of standardized technologies based on fair access conditions102. With regard to patent pools, the EC referred to such mechanisms as a potential means to license SEPs, the EC opined specifically that patent pools address many of the SEP licensing challenges by offering better scrutiny on essentiality, more clarity on aggregate licensing fees and one-stop-shop solutions103. The EC also encouraged setting up of pool mechanisms in respect of key standardized technologies by facilitating access to pool management offers and by technical assistance from SSOs104. Furthermore, the EC observed that individual SEP cannot be taken in isolation and parties negotiating a licence must consider a reasonable aggregate rate for the standard, taking into account, the overall added value of the technology – enabled by transparency in SEP information. The EC observed that this need could be facilitated best by patent pools and recommended a clearer scope in the EU Competition Law105.
3.4.4. CEN POSITION PAPER: CWA 95000, 2019 CEN/CENELEC, one of the primary SSOs on development of standards in telecommunication prepared the CEN Position Paper titled “Core Principles and Approaches for Licensing of Standard Essential Patents”106 in consultation with members of the SSO. The said position paper promotes six core principles on FRAND licensing practices for both bilateral negotiations between a single patent owner and a prospective licensee, and negotiations in which a patent pool or licensing
101 Communication from the Commission to the European Parliament, the Council and the European Economic And Social Committee, Setting out the EU approach to Standard Essential Patents COM (2017) 712, Brussels, November 29, 2017, available here, last accessed on May 23, 2020, hereinafter ‘Commission Report of 2017’ 102 Commission Report of 2017 at p. 2. 103 Commission Report of 2017 at p. 7 104 Ibid 105 Commission Report of 2017 at p. 10 106 CEN Workshop Agreement 95000, Core Principles and Approaches for SEP Licensing (CWA), published on 12th June, 2019, available here, last accessed on April 17, 2020
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platform are involved. The position paper particularly noted that (a) Pool mechanisms should be an alternate mechanism to bilateral FRAND negotiation and therefore, not determinative of unwillingness of a potential licensee; (b) pool licensing royalties must be based on FRAND terms; and (c) pool licences to licensee’s potential suppliers and other downstream actors should ideally be made transparent, in order to avoid double dipping in the same product and the royalty rates be adjusted accordingly.
3.5. CONCLUSION Based on the readings of the EU legislation and policy, it is clear that the EC recognizes pool mechanisms as efficient, cost effective and beneficial and there is a need to improve policy initiatives for enhancing information symmetry around pools as well as for incentivizing their creation, governance and member participation. One of the key points on which competition behavior hinges vis-à-vis pool mechanisms is whether a pool is bundling complimentary technologies, i.e., is limited to patents essential to implement a standard. However, as will be explained in the next chapter, the definition of essentiality can take different meanings and the current interpretation of essentiality drawn from SSO (specifically ETSI) IPR policy as equated to non-substitutability, may not suffice broad access to technology, especially in the context of 5G and IoT.
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CHAPTER IV
DEVELOPMENT OF ESSENTIALITY IN THE CONTEXT OF PATENT POOLS
4.1. INTRODUCTION Determination of essentiality, i.e., determination of whether a patent is standard compliant is the backbone to a SEP licensing negotiation. Most standard setting/development organizations (‘SSO’) have adopted policies that require a participant to disclose and license patents that are essential to implementation of the SSO standards. This chapter addresses the role of patent pools in essentiality determinations as it has evolved vis-à-vis the European Telecommunications Standards Institute (hereinafter ‘ETSI’) disclosure norms, interpretation of essentiality and what essentiality entails in practice.
4.2. DEVELOPMENT OF ESSENTIALITY IN ETSI POLICIES The genesis of the European Telecommunications Standards Institute is based on an agreement of four major European telecom agencies – i.e., French, German, Italian and the UK107, the agreement established rules for technical co-operation among the said agencies in the field of 2G communication – primarily the fact that in the event that any of the suppliers of the telecom agencies held a patent ‘essential’ to operation of 2G, it was obliged to provide a non-exclusive license to any European firm wishing to produce or sell GSM-compliant equipment108.
The definition of essentiality109 in the DCR agreement, notwithstanding that the definition was applicable to the parties to the DCR agreement, was used as a base in formulation of ETSI policies for declaration of essentiality, pursuant to the formation of the ETSI in 1988110. The interim policy
107 DCR Agreement at supra 12 108 Contreras, J., Essentiality and Standards-Essential Patents, The Cambridge Handbook of Technical Standardization Law: Competition, Antitrust, and Patents (2017), Cambridge: Cambridge University Press at pp. 209- 230, hereinafter ‘Contreras (2017)’ The chapter reviews the DCR agreement, which defines ‘essential’ as: ‘…patents from which the standard is directly derived but also as the patents which could be considered as absolutely necessary for the realization of the standard.’ 109 Ibid 110 Bekkers R. et al, Intellectual Property Rights and Standardization: the case of GSM, (2002), 26 Telecommunications Policy 171. The article enunciates the historical development of GSM and particularly notes that till 1988, GSM was being developed within CEPT, the European Conference of Postal and Telecommunications Administrations (CEPT), hereinafter ‘Bekkers at al, (2002)’
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Nevertheless, the 1993 policy is particularly important from the perspective of essentiality (the definition of essentiality was adopted in verbatim in the ETSI 1994 policy) 112. In comparison to the definition and the ‘absolutely necessary’ standard provided for in the DCR agreement, the definition of essentiality within the confines of the ETSI 1993 policy is more defined and nuanced. Firstly, the definition of ‘essential’ distinguishes technical essentiality from commercial essentiality as well as absolute grounds for compliance. By the definition, this means that an ‘essential’ patent is one, in absence of the technical matter of which, it is impossible for any product to be standard compliant. Strictness of a standard compliance results in lesser patents or declarations meeting the essentiality criteria. This also meant that it was difficult to circumscribe the stringent standard of essentiality that any feasible patent/technical solution must meet to adhere to ETSI policies.
The said definition has been carried over to the ETSI IPR policy of 2019113 adopted in December 2019. The ETSI policy mandates an undertaking on behalf of the patent owner to license an essential patent to any potential licensee in Fair, Reasonable and Non-Discriminatory (FRAND) terms114 - a view promulgated by the European Commission in 1992, during the formation of the ETSI 1992 policy115. In view of the same, the definition of essentiality paved the way for the European commission to act as gatekeepers for potentially untapped and lucrative markets such as 2G and beyond116.
111 Bekkers at al, (2002) at p. 21 112 ETSI 1993–Policy, Appendix A, Annex 1, Sec. 6 states - ‘"Essential" as applied to IPR means that it is not possible on technical but not commercial grounds, taking into account normal technical practice and the state of the art generally available at the time of standardisation, to make, sell, lease, otherwise dispose of, repair, use or operate equipment or methods which comply with a standard without infringing that IPR. For the avoidance of doubt in exceptional cases where a standard can only be implemented by technical solutions, all of which are infringements of IPRs, all such IPRs shall be considered essential’ 113 ETSI 2019 - Policy, Rules of procedure adopted on December 04, 2019 available here, last accessed on April 30, 2020. See Sec.15.6 for example 114 Ibid at Clause 6 115 European Commission, Communication on Intellectual Property Rights and Standardization, (1992), COM (92) 445 final. See para 2.3.3 for example 116 Contreras (2017) at p.4
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4.3. EXTENT, DEGREE AND OVER-DECLARATION OF ESSENTIALITY The ETSI IPR Policy of 2019 mandates members to disclose a technical proposal during the development of a standard and subsequent to the development and adoption of the standard, inform the SSO of any IPR which is essential to the standard. However, the extent to which such IPR is essential to the standard as well its degree of essentiality (i.e., whether non-consideration of secondary considerations such as commerciability exclude patents as essential patents) is not defined within the policy as enumerated below.
4.3.1. EXTENT OF ESSENTIALITY – STANDARD ESSENTIAL PATENTS OR STANDARD ESSENTIAL PATENT CLAIMS Patents contain dozens of claims, some of which may comprise of technology essential to an adopted standard, whereas other claims may not be essential. From the perspective of licensing, in such a scenario, is the obligation of the licensee to license a SEP limited to only that particular claim (or set of claims) essential to the standard or extendible to all the claims in the SEP. In the case of In Re: Innovatio117, the US District court of Illinois rejected the argument basing on the language of the IEEE policy as well as general provisions of patent law. The Court specifically referred to IEEE Bylaws118, used by the parties defining the terms of Innovatio’s RAND commitment and contemplated that a patent can be considered as a SEP, even if certain claims do not conform completely to the specific IEEE Standard. Further, the Court went on to observe that a promise to license a standard essential patent must be interpreted as a promise to license a standard essential claim(s), the basic unit of evaluation, premising on the general principle of scope of a patent defined by its claims.
In this regard, we can draw the same inference from In re: Innovatio in respect of ETSI, given that the ETSI IPR policy of 2019 fails to specify whether the claims or the whole patent is licensable as standard essential. This incongruence leads to assumptions of whether the whole patent having non-essential claims also falls within the purview of a license agreement.
117 In re: Innovatio IP Ventures, LLC Patent Litigation, 956 F. Supp. 2d 925 (N.D. Ill. 2013) 118 IEEE Bylaws Sec. 6.2, available here, last accessed on May 14, 2020. The section reads that “…an Essential Patent Claim does not include . . . any claim other than that set forth above even if contained in the same patent as the Essential Patent Claim”
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4.3.2. DEGREE OF ESSENTIALITY – WHETHER TECHNICAL ESSENTIALITY ONLY IS AN UNFAIR STANDARD OF ESSENTIALITY ETSI stipulates that in order for a patent to be deemed essential to a standard adopted by ETSI, it must not be possible to make, use or sell a standardized product without infringing the patent, the analysis whereof is conducted solely in terms of technical possibility, “taking into account normal technical practice and the state of the art generally available at the time of standardization”119. However, an inconsistency in the interpretation of the said standard is whether the patented technology forms a non-alienable part of the standard implementing product or factors such as manufacturability, manufacturing cost, efficiency, reliability etc. of the patented technology not strictly implemented in the standard compliant product also be considered in essentiality analysis120.
As a matter of policy, consideration of above-mentioned secondary factors directly related to commercial viability of a product as essential would lead to more patents being included as essential as opposed to the presently understood strictly interpreted ETSI definition of essentiality. Nevertheless and for interpretation of the standard language, a useful secondary source of interpretation could be the excerpts of recorded party meetings of ETSI (and other SSOs) during the adoption of the standard, which may be referred to have a clearer horizon on the understandings and expectations of the participants of the SSO121.
4.3.3. OVER-DECLARATION OF ESSENTIALITY Clause 4.1 of the ETSI IPR Policy 2019 relies upon ‘reasonable endeavors’ of a patent- holder/member to the SSO to submit a technical declaration and an IPR thereafter, as essential in adoption of a standard. Owing to the fact that ETSI (and other SSOs) are a consortium of organizations and in the absence of specific in-house resources, the review threshold of adoption of a patent declared as a SEP is low subject to parties present at the SSO meetings, and its merit- based determination, only in a potential litigation. This situation leads to over-disclosure or over-
119 ETSI 1993 Policy, See definition of ‘essentiality’ 120 Bekkers. R et al, A Study of IPR Policies and Practices of a Representative Group of Standard Setting Organizations Worldwide, (2012) Presented at National Academies of Science Symposium on Management of IP in Standards-Setting Processes, available here, last accessed on April 26, 2020 121 Bartlett .J, Rationalizing FRAND Royalties: Can Interpleader Save the Internet of Things? (2017). 36 Review of Litigation 285; University of Utah College of Law Research Paper No. 185, available here, last accessed on April 26, 2020. The paper discusses how the norms and expectations of SDO participants have been used to establish obligations relating to patent disclosure in SDOs in the absence of clear policy language, and even in the presence of contradictory policy language, in cases such as Rambus (FTC) and Qualcomm v. Broadcom.
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declaration of patents claimed by the patent holder to be essential to a standard122. This is because computation of royalties are based on the number of SEPs being licensed, which incentivizes patent-holders to have as many patents essential to a standard. Further and based on judicial precedents such as In re. Dell123, Broadcom v. Qualcomm124, In re. Rambus, Inc.125etc., patent- holders could face penalties for failure to disclose essential patents, such penalties including unenforceability of undisclosed patents. On the contrary, regulatory hassles vis-à-vis, SSOs for over-declaration of patents are low. Several studies have conducted empirical studies on over- declaration and pointed have out the discrepancies in the actual numbers. For example, Fairfield Research have pointed out only a 28%, 29% and 50% of the ‘essential’ patent families in ETSI’s 2G, 3G and 4G wireless telecommunications standards, were actually ‘essential’ to the said standards126.
4.4. JUDICIAL TREATMENT OF ESSENTIALITY IN THE EU & US Essentiality challenges by a standard implementer can be brought as a defence in an infringement proceeding and may be either that (1) the alleged SEPs not being declared essential during the development of the standard, therefore amounting to a violation of the SEP holder’s obligations under the SSO policy; or (2) the alleged SEPs are not essential to the standard and therefore, devaluing the patent portfolio (as comprising of non-essential patents).
With respect to point (1), the European Commission has seen challenges the form of lodging a complaint at the European Commission alleging fraudulent declaration of SEPs to the standard in MicroElectronica127, where the respondents, Sun Microsystems filed its declarations too late (after the standard had already been developed) as well as was found to include non-essential patents as part of the standard. The Commission’s investigation report observed inconsistencies in arriving
122 Lemley M., Ten Things to do About Patent Holdup of Standards (And One Not To), (2007), 48 Boston College Law Review 149. 123 Dell Computer Corp. (F.T.C. 1996) (consent decree settling alleged failure to disclose patent to standards body) 124 Qualcomm Inc. v. Broadcom Corp. (Fed. Cir. 2008, 1008) (“silence in the face of a duty to disclose patents in a standard-setting organization”) 125 Rambus, Inc. (F.T.C. 2006) (liability for alleged concealment of patents in face of disclosure duty) 126 Fairfield Resources International. 2008 Analysis of Patents Declared as Essential to GSM as of June 6, 2007, available here last accessed on April 26, 2020. Also see Fairfield Resources International. 2009. Review of Patents Declared as Essential to WCDMA Through December, 2008.Also, Fairfield Resources International. 2010. Review of Patents Declared as Essential to LTE and SAE (4G Wireless Standards) Through June 30, 2009, available here, last accessed on April 26, 2020 127 Carter E., IPR Policy of the DVB Project: Negative Disclosure, FRAND Arbitration Unless Pool Rules OK, Part 1, (2008), 6 International Journal of IT Standards & Standardization Research 21
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The UK High Court in Nokia v InterDigital128, where Nokia had sought a declaration of non- essentiality in respect of two matters related to the 2G and the 3G- UMTS standard, asserted a pre- emptive negative declaration of non-essentiality of InterDigital’s allegedly SEPs to the standard. The Court observed that declaration of non-essentiality could have significant bearing on any potential licensing with an implementer.
Detailed essentiality evaluation was carried by the District Court of Illinois, US in the case of In Re: Innovatio129, the Court evaluated the essentiality of more than 400 claims in respect of 168 SEPs, asserted as infringing upon implementer router devices related to the IEEE 802.11 standard. Based on a reading of the IEEE’s patent policy of 2007, of essentiality as the only “technically and commercially feasible” way of implementation, the Court based a strict compliance of the claim elements into the standard, i.e., enabling technologies not strictly required for complying with the standard are not essential. Based on this interpretation, the Court further classified the patents into fifteen categories of technology, and assessed the patents based on the category. This case is a useful roadmap into understanding of standard mapping in essentiality charts.
In the much-acclaimed matter of Unwired Planet v Huawei130, the UK High Court sought affidavits for claim construction of the suit SEPs to the standard, in line with ETSI’s patent policy. The Court in its detailed judgement, agreed on the side of plaintiff’s claim construction and concluded that the patents were essential to the standard. Notably, the plaintiff, Unwired Planet is a patent assertion entity, who acquired a portfolio of more than 2500 patents from Ericsson in the 3G, 4G-LTE standards.
Pursuant to the Unwired planet decision as mentioned above, the Higher Regional Court of Düsseldorf in the matter of Sisvel v. Haier131 required the SEP owner to furnish a “proud list” of,
128 Nokia Corporation v. InterDigital Technology Corporation, EWHC 2004. Also, Nokia Corporation v InterDigital Technology Corporation, EWHC 2006 129 In re: Innovatio IP Ventures, LLC Patent Litig., MDL No. 2303, 2013 WL 5593609, at *69-70 (N.D. Ill. Oct. 3, 2013) 130 Unwired Planet Intl. Ltd. v. Huawei Technologies Co., Ltd., EWHC 2015 131 Sisvel v. Haier, Düsseldorf District Court, 4a O 144/14 und 4a O 93/14, Also see Sisvel v. Haier, Düsseldorf Court of Appeal, Decisions of 13 January 2016 – 15 U 65/15 und 15 U 66/15
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e.g., ten to fifteen of the strongest SEPs in the portfolio, classifying and explaining the proud patents’ relevance based on the documentation for the applicable standard and the reasons for selecting the patents on the proud list.
4.5. ESSENTIALITY – A CREATURE OF SSO POLICY As illustrated above, the definition of essentiality is derived out of the SSO policy language, in the context of telecommunication standards in EU, a technical essentiality requirement can be drawn from ETSI IPR policy. It is understood that while the threshold of essentiality declaration at SSOs is low, it is also subject to challenge at the court. However and as a brainchild of SSO policy, a blurred inconsistency exists between commercial and technical essentiality as well as equating essentiality with non-substitutability in the context of patent pools, which is discussed in the section below.
4.6. ESSENTIALITY AND PATENT POOLS Patent pools as mentioned previously, are efficient mechanisms for the purposes of licensing, primarily owing to its role in tremendous deduction of transaction costs as well as reduction of royalty stacking. However, and as discussed below, pool mechanisms vis-à-vis essentiality must ideally comprise of technologies that are complimentary to the standard and not have substitutes. Further, pools increase efficiency owing to independent evaluations of essentiality (in comparison to the lesser threshold of meeting essentiality standards in SSOs), the costs and benefits whereof is discussed below. Additionally, patent pools also provide mechanisms for discussion of commercial viability of an otherwise technically non-essential patent, thereby increasing the scope and usage of the standard.
4.6.1. COMPLIMENTARY TECHNOLOGICAL INCLUSION VIS-À-VIS SUBSTITUTE TECHNOLOGICAL INCLUSION Complimentary technologies independently cover the features of a standard, a combination of complementary technologies pooled for licensing of a standard achieves significant reduction in transaction costs132. Inclusion of complementary technologies in a pool enable clearing of patent blockage created in individual patent transactions, also called ‘patent thickets’133, that leads to
132 Layne-Farrar A. et al, To Join or Not to Join: Examining Patent Pool Participation and Rent Sharing Rules, (November 15, 2006), available here, last accessed on April 27, 2020 133 Shapiro C., Navigating the patent thicket: cross licenses, patent pools, and standard-setting, (2001) Innovation Policy and the Economy, 1, Adam, Jaffe, Josh, Lerner, Scott, Stern (Eds.), hereinafter ‘Shapiro (2001)’ at pp. 119– 150
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reduction in innovation and competition. In this regard, competition is also stifled when pools of substitutable technology is formed. Pooling substitutable technologies lead to disincentivizing of innovation in the lesser popular yet substitutable standard as royalties trickle down from the well- known and popular standard134. Inclusion of patents in a pool which are essential to the standard placed for license reduces the risk for substitution.
Within the purview of analysis of business review letters (as used to be case for approval of operation of patent pools), the Department of Justice (hereinafter ‘DOJ’) in the MPEG-2 and DVD standards pool emphasized upon the necessity of including only patents essential to comply with the relevant standards135. The thesis would like to mention the DOJ’s review of the 3rd Generation Partnership Project (hereinafter ‘3GPP’). The 3GPP comprised of five competing 3G wireless standards – CDMA 2000, W-CDMA, UMTS, TDMA-EDGE and DECT. However, essential patents under each standard would be separately pooled and licensed without the co-ordination of the 3GPP or among the five patent pools, however having a common administrative structure in terms of common methodology of royalty calculation and a standard set of licensing terms136. Based on the said proposal and evidence that the five standards were competing with each other, the DOJ approved of this approach as being prima-facie pro-competitive137. Such an evaluation, if any in the absence of a framework of preliminary determination, would happen ex post on potential anti-competitive effects in the EU.
4.6.2. ANALYSIS AND VIABILITY OF COMMERCIAL ESSENTIALITY AS A BASIS FOR LICENSING As noted above, the interpretation of essentiality, albeit a matter of SSO policy, should also address participant expectations. ETSI provides for a ‘technical essentiality’ criterion, restricting the scope of essentiality to mean only lack of technological alternatives to implement the standard, such technological alternatives, if any must lead to an infringement of the IPR. It is also possible for economically feasible alternatives that infringe upon essential patents to exist. While, the DOJ
134 Shapiro (2001) at p. 124 135 DOJ -1997–MPEG-2 Letter. Letter from Joel I. Klein, Acting Assistant Attorney Gen., Antitrust Div., U.S. Dep’t of Justice, to Garrard R. Beeney, Sullivan & Cromwell LLP (Jun. 26, 1997). The DOJ the DOJ explains in its 1997 MPEG-2 letter at pp. 10: “The limitation of the Portfolio to technically essential patents, as opposed to merely advantageous ones, helps ensure that the Portfolio patents are not competitive with each other and that the Portfolio license does not, by bundling in non-essential patents, foreclose the competitive implementation options that the MPEG-2 standard has expressly left open.” 136 DOJ - 2002–3GPP Letter, Letter from Charles A. James, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, to Ky P. Ewing, Vinson & Elkins LLP (Nov. 12, 2002) 137 DOJ - 2002–3GPP Letter
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relied on a strict interpretation of the technical essentiality standard (in line with the ETSI IPR Policy) to approve the 3GPP pool, 138 in the business review letter in respect of DVD-6C patent pool, the DOJ observed that alternatives to essential patents complying with the standard could, subject to SSO policy, be also determined based on economically feasible options.139 It is noteworthy that a few SSOs (e.g., IEEE and VITA), however, include the concept of “commercial essentiality” in their IPR policies, meaning that non-infringing commercial alternatives can also form a part of secondary evaluation considerations. It is pertinent to mention that in the business review letter for RFID in 2008, the DOJ considered production or design costs, consumer preferences or other reasons to make, use or sell standard-compliant products, which could also be economical alternatives, rather than only technical. The DOJ approved of this approach as viable, if applied in a prudent manner.140
4.6.3. EVALUATING COSTS AND BENEFITS OF VALIDATION OF ESSENTIALITY Patent pools are also beneficial as they work to strengthen the threshold of essentiality determination, by establishing an independent mode of essentiality determination by an independent expert. An independent expert determination of essentiality also helps pool complimentary patents instead of substitute patents141. Accordingly, a useful analysis would be to understand whether there are any economic implications on an independent essentiality, given that each standard, especially in the ICT sector, has more than 8,000-10,000 technical submissions in inter-alia, in the forms of patents. The cost of essentiality review by independent experts (who are typically patent attorneys) is a part of several empirical studies, one of which conducted by Mattioli and Merges (2016)142 placed an independent determination at USD 7,500 per patent and another study conducted by Régibeau (2016)143 places USD 2000 per patent for an internal evaluation by
138 DOJ -2002–3GPP Letter. Letter from Charles A. James, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, to Ky P. Ewing, Vinson & Elkins LLP (Nov. 12, 2002) 139 DOJ -1999–DVD6C Letter, Letter from Joel I. Klein, Assistant Att’y Gen., U.S. Dep’t of Justice, to Carey R. Ramos, Paul, Weiss, Rifkind, Wharton & Garrison LLP (Jun. 10, 1999) 140 DOJ - RFID Letter. Letter from Thomas O. Barnett, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, to William F. Dolan & Geoffrey Oliver, Jones Day (Oct. 21, 2008) 141 DOJ -1997–MPEG-2 Letter at supra 136 – the DOJ observed that “…the continuing role of an independent expert to assess essentiality is an especially effective guarantor that the Portfolio patents are complements, not substitutes” is an important fact-finding to establish pro-competitive behavior.” 142 Merges R. et al, Measuring the Costs and Benefits of Patent Pools, (2016). Ohio State Law Journal, 2016; UC Berkeley Public Law Research Paper No. 2759027, available here, last accessed on April 27, 2020 143 Régibeau P. et al, Transparency, Predictability, and Efficiency of SSO-based Standardization and SEP Licensing, A Report for the European Commission, (2016), Prepared for the Executive Agency for Small and medium-sized
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the pool and USD 9000 per patent, if conducted externally. In the matter of TCL v Ericsson144, Ericsson in its brief, estimated an expenditure of USD 26 million for essentiality analysis of its patents part of 2G, 3G and 4G standards.
4.7. CONCLUSION Based on the discussion in the previous sections, for example in Sec. 4.3.2, it becomes clear that particularly in the ICT sector, the divide between technical essentiality and commercial essentiality is blurred with the definitions of standards changing continuously as well as rapid growth of new disruptive players replacing the traditional players with newer business models. Essentiality cannot be directly equated with non-substitutability. Basing a licensing negotiation only based on a strict interpretation of technical essentiality may lead to breakdown of negotiations and therefore, an independent assessment, made possible by a pool mechanism, for example, DOJ approval of the RFID pool in Sec. 4.6.2, is successful in eliminating the risks of litigation and bearing undue costs.
On the other hand, dilution of standard of essentiality to include substitutes, can greatly undermine a pool’s market power by increase in licensor/competitor’s challenges, which has led pools to resort to aggressive licensing tactics, especially in the context of 5G and IoT, where an enormous asymmetry of information subsists between buyers and sellers. Empirical studies indicate that pools combining weak, non-essential and potentially vulnerable patents have become more of assertion entities or trolls (in place of a licensing entity), in order to retain their market power145. This is analyzed in the next chapter, taking the business models of two operating pools to indicate how pools have started resorting to belligerent licensing tactics.
enterprises on behalf of the European Commission as part of Specific Contract No 07/2015 Implementing Framework Contract No MARKT/2011/022/B2/ST/FC 144 TCL Communication Tech. Holdings, Ltd. v. Telefonaktiebolaget LM Ericsson (C.D. Cal. 2017) 145 Lampe R. et al, Patent Pools, Competition, and Innovation—Evidence from 20 US Industries under the New Deal, (March 2016), The Journal of Law, Economics, and Organization, Volume 32, Issue 1, pp. 1–36
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CHAPTER V
PATENT POOLS 2.0 – NEW FORMS OF AGGREGATION
5.1. INTRODUCTION The understanding of patent pools has been that pools lead to reduction in licensing fees for standards in respect of patents for which no substitutes exist, in other words, essential patents. Such reduction of fees, removal of blocking positions by patent holders and predictability of licensing, allow pools to promote innovation downstream. However, substitute patents are equally important and desirous for access to a broader scope of technology. But inclusion of substitutes (not technically essential) lead to increase in royalties due to increase in portfolio size or create chilling effects on development of alternate technology and thereby increase the possibility of challenge to the said patents. Challenges to pooled patents are not only detrimental to pool participation, but also weakens the pool’s market power. As a result, and in a highly complex, information asymmetric and fragmented market, pools have started resorting to patent assertions. This chapter builds upon the theory of patent aggregation and assertion as a means of aggregation and further, on a comparative basis, uses the business models of two presently operating pools to illustrate the same. Further, the Chapter draws upon the recent research of the EC to illustrate the need of a policy to regulate the new age pools.
5.2. PATENT AGGREGATION AND PATENT POOLS Patent aggregation is conceived as building of efficient mechanisms for monetization of patents beyond the sale of patent implementing products, through licensing of patents either by practicing entities (‘PE’) or non-practicing entities (‘NPE’) or through creation of patent funds146. A patent pool as described earlier is typically a NPE, developed as a concept of earning royalties through licensing of collaborative patent portfolios, as portfolio rights spread over an entire standard, offers broader scope and higher earnings. However, of late, the role of a patent pool has changed from a SEP licensing entity to a patent assertion entity (‘PAE’), owing to an increasing number of
146 Giuri P. et al, Report of the Expert Group on Patent Aggregation, (2015), available here, last accessed on May 14, 2020, hereinafter ‘Giuri (2015)’. The expert group was set up for implementation of (i) Innovation Union flagship initiative; and (ii) Enhancing patent valorization for growth and jobs. Also see, EPO Economic and Scientific Advisory Board, Patent aggregation and its impact on competition and innovation policy, (EPO Workshop Report, 2014), available here, last accessed on May 14, 2020
- 50 - Master Thesis Satyoki Koundinya Master Programme in Intellectual Property Law essential patent owners transferring their SEPs to such PAE’s for financial and strategic reasons (these kinds of practices is called ‘privateering’)147. Portfolio transfer to PAEs expose a potential willing licensee to being coerced into a licensing agreement or cause apprehensions thereof. There is increasing evidence of transfer of patent portfolio in the US and EU by patent holders who are participants to an SSO, for enforcement purposes in privateering transactions148.
The European Commission’s Joint Research Centre (hereinafter ‘JRC’) conducted a qualitative study on the behavior of such PAEs and based on interviews conducted with industry participants, observed that a large number of patent portfolio transfers are in the telecommunications sector149, which have applicability and could be enforced in a plethora of devices. Assertions are more in Germany owing to high patent litigation value.150 Further, development of the more successful telecommunication standards have been in consonance with ETSI, however, many of the European players that co-developed those standards are no longer active in these markets and resort now to PAEs in order to monetize their patents151. The JRC report observes that certain PAEs are formed as a hybrid pool and defensive patent aggregator that engages in patent acquisition in a ‘catch and release’ or for initiation of suits against potential licensees152. In order to maintain a pro- competitive nature, the JRC report observed that patent pools should refrain from behaving as a PAE by buying patents in the interest of not increasing costs of standardization and financial burdens on standard compliant products.
147 Rubinfeld D., IP Privateering in the Markets for Desktop and Mobile Operating Systems, (2018), Berkeley Technology Law Research Paper No. 2906944, available here, last accessed on May 14, 2020 148 Lundqvist B., Standardization Under EU Competition Rules and US Antitrust Laws: The Rise and Limits of Self- Regulation (2014), Edward Elgar Publishing at pp. 412, discussing Microsoft’s and Nokia’s patent transfers to Mosaid, Philips’s transfer to Sisvel, and Ericsson’s transfer to Unwired Planet. Well–known cases involving SEP assertions by PAEs and other NPEs, include: In re Innovatio IP Ventures (921 F. Supp. 2d 903, 907 (N.D.Ill. 2013)), Rembrandt v. Samsung (2:13-CV-213-JRG, 2014 WL 3385125 (E.D. Tex. July 10, 2014)), and CSIRO v. Cisco (6:11-CV-343, 2014 WL 3805817 (E.D. Tex. July 23, 2014)). 149 Thumm N. et al, Patent Assertion Entities in Europe: their impact on innovation and knowledge transfer in ICT markets, European Commission Joint Research Center, (2016), Publications Office of the European Union, available here, last accessed on May 14, 2020. See for example, at p. 19, hereinafter ‘Thumm, (2016)’ 150 Helmers, C. et al, Trolls at the High Court, (2012), LSE Legal Studies Working Paper No. 13/2012. London: London School of Economics, available here last accessed on May 14, 2020, hereinafter ‘Helmers, (2012)’ 151 Thumm N., The good, the bad and the ugly – the future of patent assertion entities in Europe, Technology Analysis & Strategic Management, (2018) Routledge Journals, Taylor & Francis Ltd. See for example, pp. 1046-1056 152 Helmers, (2012) at p. 133 – a ‘catch and release’ strategy entails a PAE acquiring a patent, granting a license and reselling in the open market. As a result, non-licensees are exposed to a risk of litigation and incentivized
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The section below substantiates the above-mentioned theory by illustrating the business models of two well-known patent pools – Via Licensing, which per se is a licensing entity and Sisvel, which has, of late, become an assertion entity.
5.3. VIA LICENSING Via Licensing Corporation (hereinafter called ‘Via’) was set up in 2002, as an independently managed subsidiary of Dolby Inc.153, in order to meet the demand for an independent administrator of licenses. Via, thereafter, has grown significantly in its effectiveness and its expertise not only for patent pool formation, but also for facilitating pool formation on emerging technology standards. Via, one of the largest patent pools, inter-alia offers and manages nine licensing programs in the fields of audio, wireless and within the emerging technology space154. A brief overview of the licensing programs managed by Via is tabulated below.
Table 3 provides an overview of the application areas and the standards, Via is currently engaged in155:
Application Area Relevant Standard in Number of Licensors License fees (royalty respect of pooled and Licensees per unit sale) patents Audio (including AAC 879 Licensees USD 0.10 – USD 0.98 digital radio) DRM 13 Licensors based on sale volumes MPEG – 4 AAC USD 0.015 – USD 0.098 based on sale volumes MPEG Surround 6 Licensors USD 0.075 – USD 0.49 based on sale volumes Wireless Multi-Generational 9 Licensors - USD 2.25 – USD Connected Motor 3.00 based on sale Vehicles volumes - USD 0.30 for eCall unit Multi-Generational 19 Licensors USD 1.50 – USD 3.00 Mobile Devices & based on sale volumes General Products
153 Overview of Via Licensing Corporation, available here, last accessed on April 30, 2020 154 Ibid 155 Overview of Via Licensing Corp. managed programs, available here, last accessed on April 30, 2020
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LTE (includes LTE - 26 Licensors USD 1.10 – USD 2.10 Advanced and LTE – based on sale volume Advanced Pro) WCDMA 13 Licensors USD 0.22 – USD 1.00 based on sale volume 802.11 USD 0.05 – USD 0.55 based on sale volume Middleware OCAP tru2way 4 Licensors USD 1.50 (Consumer (software) for device) interactive television USD 0.30 per subscriber (service provider) Encoding and AGORA – C 5 Licensees € 0.05 - € 0.50 based decoding of location 3 Licensors on sale volume for GPS
Based on assessment of a standard, Via identifies and forms a patent pool comprising of essential patents held by multiple entities. While, the success of a pool cannot be assured by the number of the patents or licensees, generally, the number of essential patents covering a standard, amounts of greater cumulative royalties and the more pro-competitive and beneficial the pool is likely to be. Via issues an open call to invite any company that, it believes owns a patent essential to the standard. The pool is also open to any patentee or potential licensor for submission of patents for determination of essentiality of the patents (to the standard) and subsequent inclusion into the pool.
Patents are subsequently evaluated independently by a team of independent experts identified by Via, who are typically not Via’s employees and have proven technical expertise in the domain. For the essentiality evaluation report to be free of any credible claim of bias, the selection of the expert also takes into consideration, of any potential/actual relationship between patentees and the evaluator.
Pursuant thereto and based on the determination of essentiality of the patents, Via advises the patent holders of the critical issues that the patent holders must decide as well as the market possibilities, such issues inter-alia comprise products to be licensed, royalty rates, scope and field of use of the granted license, duration of the license and renewals, audit provisions, distribution of
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collected royalties, grant back provisions, choice of law and venue for and type of dispute resolution, length of licensee commitment to the pool program156.
Via also declares certain key principles in facilitating and promoting a pool license, such principles include: transparency of what is being licensed, licensor commitment to licensing outside the pool, fairness to licensors and licensees, confidentiality in reporting and other steps to prevent disclosure of competitively sensitive information, non-discrimination among similarly situated licensees; and pool open to all patentees who have essential patents157.
5.4. SISVEL Sisvel S.A. (hereinafter ‘Sisvel’) was incorporated as a patent management company in Italy by an agreement between Italian television manufacturers in order to facilitate the patents that they owned. Currently, Sisvel acts as an independent licensing administrator for several licensing programs.
Table 4158 below, provides a brief overview of the telecommunication-based standards that Sisvel manages.
Application Area Relevant Standard in Number of Licensors License fees (royalty respect of pooled and Licensees per unit sale) patents Wireless 2G-4G - Not available GSM W-CDMA (Patent families acquired from Nokia) 3G – UMTS 6 Licensors € 0.35 (for 3G- 4G – LTE (including Sisvel) UMTS compliant rate) € 0.53 (for 4G-LTE compliant rate) based on sale volumes LTE 10 Licensors Not available LTE-A
156 Submission of Via Licensing Corporation Addressing Key Issue No. 5 in respect of European Commission’s call to Public Consultation on Patents and Standards, February 13, 2015 157 Ibid 158 Sisvel International S.A., Licensing Programs Background, available here, last accessed on May 3, 2020
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(also includes patents acquired from Nokia) MIOTY 2 Licensors € 0.13 - € 0.26 LPWAN (unidirectional end TS-UNB point) € 0.325 - € 0.618 (bidirectional end point) € 3.25 - € 6.18 (gateways)
802.11 8 Licensors € 0.25 (compliant rate) based on sale volume along with a one-time refundable fee of € 5000
As evident from the table above, Sisvel manages their own patents and patents assigned by third parties by negotiating with them licensing terms, fees and dividends of profit., which are subsequently or jointly licensed to potential customers159. Apart from wireless communications, Sisvel and its subsidiaries also manage licensing programs in audio and video codecs, broadband and digital displays160.
Sisvel, however is not a typical patent pool, it also behaves as a PAE with the highest number of SEP assertions in Germany (2000-2008 cumulatively) and in the UK (2000-2013 cumulatively) in audio and video standards on behalf of the original patentees (from which the patent portfolios were acquired by Sisvel) .161
Sisvel allegedly targets infringing firms that are not pool members162, in order to coax such firms into subscribing to pool membership – depicting a hybrid form of pool assertion. To illustrate the
159 Forbes, Sisvel: The patent troll we actually like, (2012) available here, last accessed on May 3, 2020 160 Sisvel International S.A., Licensing Programs Background, available here, last accessed on May 3, 2020 161 Contreras J. L., et al, Litigation of Standards-Essential Patents in Europe: A Comparative Analysis, (2017), Berkeley Tech. Law Journal 32, 1457, available here last accessed on May 14, 2020 162 3G Licensing S.A. Enforces its 3G Patents at IFA 2016, 3G Licensing S.A., available here, last visited on May 3, 2020. This article states: “We are a negotiation first licensing administrator . . . however, to secure FRAND conditions and a level playing field for all the users of the patented technology, in these two cases we were left with no other choice than enforcing the 3G SEPs which are owned by [Sisvel subsidiary] 3G Licensing S.A.”
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above, the table below enumerates the SEP litigations currently pending in Europe and the US, having Sisvel as party to the suit in the last year.
Table 5163 – Overview of Sisvel instituted SEP litigations (EU and US) in 2019-2020:
Parties sued Date of Standard Court/ Country institution U-Blox AG March 16, 3G-UMTS California Southern 2020 (from the District Court MCP program) Xiaomi February 04, WiFi Barcelona, Spain 2020 LTE Xiaomi August 01, 3G Netherlands 2019 4G-LTE
5.5. EU RESEARCH ON HYBRID PATENT POOLS AND NEED FOR POLICY It is in this backdrop, the EC conducted a study examining PAE activity164, and classified inter- alia Sisvel as a focused PAE (apart from a licence facilitating entity), however the study is silent on the definition of what constitutes a focused assertion entity. Further, the report observes the availability of injunctions in a bifurcated system like in Germany, utilized by PAEs as a primary modus operandi in revenue generation165. The Report is also silent on a finding of quality of pooled patents (quality indicating the quality of process through which the patent was granted for example, quality and closeness of prior art, claim scope etc.) being litigated by pool PAEs, although it does observe a higher likelihood of litigating low quality patents by pool PAEs, having a 73% and 56 % of patent enforced in court in UK and Germany respectively, by pool PAEs being found invalid166. That said, the report identifies the risk of forum shopping, once the Unified Patent Court (hereinafter ‘UPC’) becomes a part of the EU legal system (although, the German ratification has been recently been declared void by the Constitutional Court as transfer of sovereign function167).
163 Data taken from Darts-Ip database, Darts-Ip available here, last accessed on May 3, 2020 164 Thumm (2016) at p. 133 165 Thumm (2016) at p. 136 166 Thumm (2016) at p. 21. Also see, Love B. et al, Patent assertion entities in Europe, (2015) Patent Assertion Entities and Competition Policy, Cambridge University Press Edn. 167 Bundesverfassungsgericht, German Federal Constitutional Court, (February 13,2020), 2 BvR 739/17. Also see Horn A., The German Constitutional Court’s Decision – an Imminent Breakdown for a Unitary Patent in the EU?, (April 16, 2020), available here, last accessed on May 24, 2020
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However, the UPC has negated such apprehensions168, basis a preliminary assessment of the type of suing entity as well as uniformity in application of the UPC, suggesting that injunctions (and other reliefs) maybe less readily available to PAEs.
Nevertheless, the JRC report points towards need of clarity in policy towards EC treatment of PAEs (including patent pools) as well as improvement of information sets of companies by increasing patent ownership transparency as well as clarity of FRAND commitments for SEPs. However, the report remains silent on the modality by which this may be executed.
5.6. CONCLUSION Based on the discussion of the previous sections, it appears that Sisvel operates on monetization through licensing (including their own patents) as well as assertion activities. In the context of 5G and IoT, as wireless technologies get integrated with newer sectors, the complexities in the way technologies interoperate has and shall increase and with it has increased (and will increase), complexities in pool practices in the complementarity/essentiality determinations for patent aggregation169. Aggregation practices have changed and pools like Sisvel have evolved into assertion entities, which defeat the very purpose of patent pools – avoid costly litigation. Lack of information in patent ownership and in litigation data has furthered the opaqueness in information, necessary to assess potential anti-competitive effects of aggregation such as market dominance based on patent positions. Accordingly, there are research gaps on pool aggregation models and their impact on competition and innovation which need to be filled.
168 Unified Patent Court, Impact of the UPC, available here, last accessed on May 11, 2020 169 Audenrode M. et al, Over-Declaration of Standard Essential Patents and Determinants of Essentiality, (2017), SSRN Electronic Journal. 10.2139/ssrn.2951617, available here, last accessed on May 23, 2020. Licensors are given the option of self-declaration of patents as proud, which are assessed based on patent term, geographical coverage, preferred standard feature mapping (preferred feature maybe a mandatory or a valuable optional feature) and its intrinsic value, clarity of mapping to the standard disclosure, litigation assertions etc.
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CHAPTER VI
RECOMMENDATIONS & SUGGESTIONS
The Master Thesis posits that in general, patent pools play an increasingly important role as an industry solution in facilitating SEP licenses, by reducing transaction costs and avoiding litigation, and is set to play a greater role to further the work done by the EC in attaining a Digital Single Market. In this regard, the EU must make mechanisms for SEP holders and potential licensees to be incentivized to join pools. As elaborated in Chapter I, the emergence of global interoperability in the age of 5G and IoT has set into motion a disruption of markets particularly, the non-cellular markets. The CJEU in the Huawei v ZTE decision, observed the formation of a ‘legitimate expectation’ arising out of a FRAND commitment,170 however, questions in non-cellular markets would arise as to who the potential implementers are, for example, connected car manufacturers or component makers171. Chapter II illustrates that, while pools have the potential to facilitate licensing, a pure industry driven pool design may not suffice, for example, SEPs in the video compression technology standard, H.265 divided between the pools, MPEG-LA, HEVC and Velos Media, which charge their own royalty rates172 demonstrating fracturing of pools.
Accordingly, and as pointed out in Chapter III, there is a greater need for regulation of patent pools. While the TTBER of 2014 does not exempt patent pools, the corresponding TT Guidelines as soft law, create legitimate expectations that patent pools can potentially be pro-competitive within its ‘safe harbors’, by amongst others, bundling of essential patents. However and as pointed out in Chapter IV, essentiality being a creature of SSO policy, will differ in its interpretations, based on the SSO to which the commitment is made, and therefore, the standard of good faith negotiations (assuming that SSO/ETSI commitment creates an obligation to negotiate) between the SEP holder and implementer will also differ, based on the standard being negotiated. This is not a viable scenario in the 5G and IoT space, given the enormous eco-system of standards coupled to each other. A useful step could be the review of intention of the parties in arriving at the FRAND commitment vis-à-vis essentiality.
170 Case C-170/13 Huawei v ZTE at para 58 171 See Case No. 5:19-cv-02520, Continental Automotive v. Avanci, at supra 20 172 Pepe S. et al, Opportunities and IP Risks Surrounding 5G:The Next Dominant Cellular Technology – Professional Perspective, (October 30, 2019), available here, last accessed on May 24, 2020
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Patent pools can potentially bridge this gap between different essentiality interpretations, by clubbing commercial non-infringing alternatives within the pooled patents, in respect of which, the EU policy needs clarification on several issues such as understanding the scope of essentiality and classification and treatment of patent pools on a model-by-model specific manner, instead of a one-size fits all approach. Further and as elaborated in Chapter IV, over-declarations of essentiality places a higher burden on licensees to assess essentiality in licensing negotiations, which can be placed on check by independent assessment by patent pools. While there is the need for a higher degree of essentiality scrutiny, such independent assessments by patent pools are costly and therefore, the scrutiny requirement must be balanced against the cost for performing such scrutiny, in respect of which, collaborations with SSOs could play a vital role.
On the same note and as illustrated in Chapter V, dilution of essentiality standards to include commercial essentiality inter-alia have led to newer forms of pooling models - some pools transforming into patent trolls, with licensors/pool members trying to make profits out of less valuable patents. Therefore, there is a greater need for conducting exploratory quantitative and qualitative research to better understand the extent and forms of aggregation on a pool-by-pool basis.
In view of the above, the Thesis tries to elicit a set of brief recommendations below - a. FOSTERING AND INCENTIVIZING POOL FORMATION Enablement of an effective self-assessment of patent pool, based on the existing law is a precursor to formation and promotion of patent pools. The TTBER of 2014 and the corresponding TT Guidelines are silent on any standard, by way of which, patent pools may be formed (the previous norm of comfort letters, albeit costly was eliminated) as well as whether patent pool licenses may fall within the block exemption. SSOs and public institutions can play a useful role. b. ROLE OF SSOS IN ESSENTIALITY DETERMINATIONS ETSI policy results in over-declaration of patents and independent declaration of essentiality within a pool involves significant costs. Incentivizing potential licensees to be a part of a pool could be basis an active participation of ETSI (and other SSOs) for bearing essentiality determination costs. Further and in the interest of transparency, means could be envisaged by SSOs to encourage licensors and submitting members to join a pool during the standard development process. Given that a patent is ideally covered over multiple jurisdictions and scope thereof,
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carried over in several forms such as in patent-continuations and divisional applications, the SSO may benefit from conducting an essentiality exercise in conjunction with a patent pool. Setting an independent merit-based standard of essentiality declaration would ensure transparency and filter out non-essential patents at the stage of standard development. c. ROLE OF EDUCATIONAL AND RESEARCH INSTITUTIONS Educational, Research and public funded research institutions which reportedly, have a unused patent share of about 27-51%173, may be encouraged to opt for patent pool mechanisms for licensing of their SEPs. d. IDENTIFICATION OF DISTRIBUTION CHAIN In view of multi-component devices being used in several portions of a distribution chain, the EC may review the TT Guidelines on mandating pool licenses to license only at a particular point in a particular distribution chain, or establish a standard framework for identifying the distribution points/devices that a patent pool chooses to license its patents into. This will also help in administration of a pool license program vis-à-vis scouting for potential licensors in the entire distribution chain. Effective identification of licensors will help avoid potential litigations. e. DEVICE ESSENTIALITY VERSUS STANDARD ESSENTIALITY In the context of emerging technology such as 5G or IoT, the scope of pool licenses will revolve around multiple standards incorporated in a multi-component device. Accordingly, rather than the perspective of standard-essentiality, there could also be an emphasis on device-essentiality of the pooled patents. An argument of device essentiality will ipso facto include the analysis of whether there has been bundling of non-essential patents (from technical and commercial perspectives) as a part of the pool license. f. NEED FOR A NEW CATEGORIZATION OF PAES Patent aggregation may be redefined by the EC and a good starting point may be to create a taxonomy of the ways in which patent monetization may be achieved. There is the need of a clear dichotomy between patent pools acting as licensing facilitators vis-à-vis patent trolls (like Sisvel), the treatment whereof must be separate.
173 Giuri (2015) at p. 19
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BIBLIOGRAPHY
LEGISLATION
• Commission Regulation (EC) No 2659/2000 of 29 November 2000 on the application of Article 81(3) of the Treaty to categories of research and development agreements, OJ L 304, 5.12.2000, p. 7–12, [No longer in force, Date of end of validity: 31/12/2010], available here, last accessed on May 13, 2020
• Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements, Official Journal L 123 , 27/04/2004 P. 0011 – 0017, [No longer in force, Date of end of validity: 30/04/2014], available here, last accessed on May 13, 2020
• Commission Regulation 316/2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements, Official Journal L 93/17 (28 March 2014), available here, last accessed on May 13, 2020
• Commission Regulation on the Transfer Technology Block Exemption Regulation no. 240/96, OJ L 31, 9.2.1996, p. 2–13, available here, [No longer in force, Date of end of validity: 30/04/2004] available at, last accessed on April 13, 2020
• Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty establishing the European Community (TEC), Official Journal L 001, 04/01/2003 P. 0001 – 0025, available here, last accessed on May 23, 2020.
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• Treaty establishing the European Community (Nice Consolidated), Official Journal C 325, 24.12.2002, p. 64–65, available here, last accessed on May 13, 2020
• Treaty on the Functioning of the European Union, Official Journal C 326 , 26/10/2012 P. 0001 – 0390, available here, last accessed on May 13, 2020
GUIDELINES
• Commission Notice Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements, Official Journal C 101 , 27/04/2004 P. 0002 – 0042, available here, last accessed on May 13, 2020
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• Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements, Official Journal C 89/03 (28 March 2014), available here, last accessed on May 13, 2020
CASE LAWS
US
• Apple Inc. v Motorola Inc., 757 F.3d 1286 (Fed. Cir. Apr. 25, 2014).
• Continental Automotive v. Avanci, Case No. 5:19-cv-02520 case brief filed in May 2019 at in the Northern District Court of California
• CSIRO v. Cisco (6:11-CV-343, 2014 WL 3805817 (E.D. Tex. July 23, 2014)).
• Dell Computer Corp. (F.T.C. 1996)
• Ericsson Inc. v. D-Link Sys., 773 F.3d 1201 (Fed. Cir. 2014)
• In re: Innovatio IP Ventures, LLC Patent Litig., MDL No. 2303, 2013 WL 5593609 (N.D. Ill. Oct. 3, 2013)
• Microsoft Corp. v Motorola, Inc., No. 10-cv-1823, Order of Findings of Fact and Conclusions of Law, April 25, 2013, at paras 425 and 465 (W.D. Wash.).
• Microsoft Corp. v. Motorola Inc., 795 F.3d 1024 (9th Cir. 2015)
• Nokia Corporation v InterDigital Technology Corporation, EWHC 2006
• Nokia Corporation v. InterDigital Technology Corporation, EWHC 2004.
• Qualcomm Inc. v. Broadcom Corp. (Fed. Cir. 2008, 1008)
• Rambus, Inc. (F.T.C. 2006)
• Realtek Semiconductor Corp. v LSI Corp., 946 F. Supp. 2d 998, United States District Court, N.D. California (2013)
• Rembrandt v. Samsung (2:13-CV-213-JRG, 2014 WL 3385125 (E.D. Tex. July 10, 2014))
• TCL Communication Tech. Holdings, Ltd. v. Telefonaktiebolaget LM Ericsson (C.D. Cal. 2017)
EU
• Huawei Technologies Co. Ltd v. ZTE Corp & ZTE Deutschland GmbH, [2015], C-170/13, ECLI:EU:C:2015:477
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GERMANY
• Bundesverfassungsgericht, German Federal Constitutional Court, (February 13,2020), 2 BvR 739/17
• Sisvel v Haier, 4a O 144/14 und 4a O 93/14, Düsseldorf District Court, 2015
• St. Lawrence Communication v Vodafone, 4a O 73/14, Düsseldorf District Court, 2016
• Sisvel v. Haier, Düsseldorf District Court, 4a O 144/14 und 4a O 93/14,
• Sisvel v. Haier, Düsseldorf Court of Appeal, Decisions of 13 January 2016 – 15 U 65/15 und 15 U 66/15
UNITED KINGDOM
• Unwired Planet v Huawei [2017] EWHC 711 (Pat), Appeal
• Unwired Planet Intl. Ltd. v. Huawei Technologies Co., Ltd., EWHC 2015
INSTITUTIONAL DOCUMENTS
EU
• Commission Communication to the European Parliament, the Council and the European Economic and Social Committee, Setting out the EU approach to Standard Essential Patents, COM(2017) 712 final, available here last accessed on May 03, 2020
• Commission Communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A Digital Single Market Strategy for Europe, COM(2015) 192 Final, May 06, 2015, available here, last accessed on May 22, 2020
• Commission Communication to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions, A Coherent Framework for Building Trust in the Digital Single Market for E-Commerce and Online Services, COM(2011) 942 Final, April 08, 2011, available here, last accessed on May 22, 2020
• Commission Communication, Intellectual Property Rights and Standardization, (1992), COM (92) 445 final, available here, last accessed on April 20, 2020.
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• Commission Communication, Summary Report on Public consultation on patents and standards: A modern framework for standardisation involving intellectual property rights, October 27, 2015, Brussels, available here, last accessed on April 20, 2020
• Commission evaluation report on the Transfer Technology Block exemption regulation NO. 240/96 Technology Transfer Agreements under Article 81 of the Treaty, available here, last accessed on May 13, 2020
• Commission Staff Working Document, Impact Assessment accompanying the TTBER of 2014 and TT Guidelines, SWD(2014) 139 final available here, last accessed on May 23, 2020.
• Commission Staff Working Document: A Digital Single Market Strategy for Europe - Analysis and Evidence, SWD(2015) 100 Final, available here, last accessed on May 22, 2020
• Commission, Public consultation on patents and standards: A modern framework for standardisation involving intellectual property rights, October 14, 2014 – February 15, 2015, available here, last accessed on April 16, 2020.
• Commission’s XXXth Report on Competition Policy, 2000, available here, last accessed on May 13, 2020
• Communication from the Commission to the European Parliament, the Council and the European Economic And Social Committee, Setting out the EU approach to Standard Essential Patents COM (2017) 712, Brussels, November 29, 2017, available here, last accessed on May 23, 2020
US • United States Patent & Trademark Office, White Paper on Patent Pooling (2001), available here, last accessed on April 30, 2020
• US - DOJ - 2002–3GPP Letter, Letter from Charles A. James, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, to Ky P. Ewing, Vinson & Elkins LLP (Nov. 12, 2002)
• US - DOJ - RFID Letter. Letter from Thomas O. Barnett, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, to William F. Dolan & Geoffrey Oliver, Jones Day (Oct. 21, 2008)
• US - DOJ -1999–DVD6C Letter, Letter from Joel I. Klein, Assistant Att’y Gen., U.S. Dep’t of Justice, to Carey R. Ramos, Paul, Weiss, Rifkind, Wharton & Garrison LLP (Jun. 10, 1999)
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• US - DOJ -2002–3GPP Letter. Letter from Charles A. James, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, to Ky P. Ewing, Vinson & Elkins LLP (Nov. 12, 2002)
• US - DOJ -1997–MPEG-2 Letter. Letter from Joel I. Klein, Acting Assistant Attorney Gen., Antitrust Div., U.S. Dep’t of Justice, to Garrard R. Beeney, Sullivan & Cromwell LLP (Jun. 26, 1997).
• US - DOJ Response To Hitachi, Ltd.'s, Matsushita Electric Industrial Co., Ltd.'s, Mitsubishi Electric Corporation's, Time Warner Inc.'s, Toshiba Corporation's, And Victor Company Of Japan, Ltd.'s Request For Business Review Letter, available here, last accessed on April 30, 2020
• US - DOJ Response To Koninklijke Philips Electronics, N.V.'s, Sony Corporation Of Japan's And Pioneer Electronic Corporation Of Japan's Request For Business Review Letter, available here, last accessed on April 30, 2020
BOOKS & ARTICLES
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• Beeney, G.R., Pro-competitive aspects of intellectual property pools: a proposal for safe harbor provisions (A submission to the United States Department of Justice Antitrust Division and the Federal Trade Commission Joint Hearings on Competition and Intellectual Property Law and Policy in the Knowledge-Based Economy) (2002), available here, last accessed on April 30, 2020
• Bekkers R. et al, Intellectual Property Rights and Standardization: the case of GSM, (2002), 26 Telecommunications Policy 171. The article enunciates the historical development of GSM and particularly notes that till 1988, GSM was being developed within CEPT, the European Conference of Postal and Telecommunications Administrations (CEPT)
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• Bekkers. R et al, A Study of IPR Policies and Practices of a Representative Group of Standard Setting Organizations Worldwide, (2012) Presented at National Academies of Science Symposium on Management of IP in Standards-Setting Processes, available here, last accessed on April 26, 2020
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• Carter E., IPR Policy of the DVB Project: Negative Disclosure, FRAND Arbitration Unless Pool Rules OK, Part 1, (2008), 6 International Journal of IT Standards & Standardization Research 21
• CEN and CENELEC, Position paper on: SEPs and FRAND Commitments, available here, last accessed on May 3, 2020
• CEN Workshop Agreement 95000, Core Principles and Approaches for SEP Licensing (CWA), published on 12th June, 2019, available here, last accessed on April 17, 2020
• Contreras J. L., et al, Litigation of Standards-Essential Patents in Europe: A Comparative Analysis, (2017), Berkeley Tech. Law Journal 32, 1457, available here last accessed on May 14, 2020
• Contreras J., Patents, Technical Standards and Standard-Setting Organizations: A Survey of the Empirical, Legal and Economics Literature, Research Handbook on the Economics of Intellectual Property Law, Vol. II – Analytical Methods, Edward Elgar Publishing, 2019.
• Contreras, J., Essentiality and Standards-Essential Patents, The Cambridge Handbook of Technical Standardization Law: Competition, Antitrust, and Patents (2017), Cambridge: Cambridge University Press at pp. 209-230
• Contreras, J., Fixing FRAND: A Pseudo-Pool Approach to Standards-Based Patent Licensing, (2013), 79 Antitrust Law Journal 47
• Dessy C., Competition law analysis of patent licensing arrangements: the particular case of 3G3P, Competition Policy Newsletter, (2003), Number1-Spring, available here, last accessed on April 30, 2020
• Dykman H., Patent Licensing within The Manufacturer’s Aircraft Association (MAA), (1964), United States Air Force Jag Bulletin 6, no. 5, pp. 28-34
• Fairfield Resources International, Analysis of Patents Declared as Essential to GSM as of June 6, 2007, (2008) available here, last accessed on April 26, 2020.
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• Fairfield Resources International, Review of Patents Declared as Essential to WCDMA Through December, 2008, (2009) available here, last accessed on April 26, 2020.
• Fairfield Resources International, Review of Patents Declared as Essential to LTE and SAE (4G Wireless Standards) Through June 30, 2009, (2010), available here, last accessed on April 26, 2020.
• Gilbert, R. Deal or No Deal? Licensing Negotiations in Standard‐Setting Organizations Antitrust Law Journal, (2011), Vol. 77, pp. 855–888
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• Gordon, G.G., Analyzing IP License Restrictions Under the Antitrust Laws: A General Outline of Issues. (A submission to the United States Department of Justice Antitrust Division and the Federal Trade Commission Joint Hearings on Competition and Intellectual Property Law and Policy in the Knowledge-Based Economy), (2002) available here, last accessed on April 30, 2020.
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• Kastler H., FRAND Case Law in Europe After Huawei v. ZTE, (April 09, 2019), available here, last accessed on May 22, 2020
• Königs M, The Guidelines on technology transfer agreements: the second edition and its consequences on patent pools, (2014) Journal of Intellectual Property Law & Practice, Volume 9, Issue 12, pp. 1012–1016
• Korah, V., Technology Transfer Agreement in the EC Competition Rules, 1996, Oxford: Clarendon Press at p.104-105.
• Lampe R. et al, Patent Pools, Competition, and Innovation—Evidence from 20 US Industries under the New Deal, (March 2016), The Journal of Law, Economics, and Organization, Volume 32, Issue 1, pp. 1–36
• Lang, J.T., Defining legitimate competition: Companies’ duties to supply competitors, and access to essential facilities, Annual proceedings of the Fordham corporate law institute: International antitrust law & policy (1995), B. Hawk (Edn.), New York: Juris Publishing
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• Layne-Farrar A. et al, To Join or Not to Join: Examining Patent Pool Participation and Rent Sharing Rules, (November 15, 2006), available here, last accessed on April 27, 2020
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• Love B. et al, Patent assertion entities in Europe, (2015) Patent Assertion Entities and Competition Policy, Cambridge University Press Edn.
• Lundqvist B., Standardization Under EU Competition Rules and US Antitrust Laws: The Rise and Limits of Self-Regulation (2014), Edward Elgar Publishing
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• Merges, Robert P. et al, Measuring the Costs and Benefits of Patent Pools, (2016), Ohio State Law Journal, UC Berkeley Public Law Research Paper No. 2759027 available here, last accessed on April 27, 2020
• Mutimear J., International FRAND: The last 18 months and what lies ahead for a brief summary and understanding of the contentious issues involved and the stand of the innovators and the alleged infringers, available here, last accessed on 03 May 2020.
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• Pepe S. et al, Opportunities and IP Risks Surrounding 5G:The Next Dominant Cellular Technology – Professional Perspective, (October 30, 2019), available here, last accessed on May 24, 2020
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OTHERS
POLICY
• ETSI 1993–Policy
• ETSI 2019 – Policy
• IEEE Policy and Bylaws, available here, last accessed on May 14, 2020
PRESS RELEASE
• Commission approval for the DVD licensing program, available here, last accessed on May 13, 2020
• Commission approval for the MPEG – 2 Licensing program, available here, last accessed on May 13, 2020
• Investigation of the EC into the Philips CD-Recordable Disc, available here, last accessed on April 15, 2020
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• 3G Licensing S.A. Enforces its 3G Patents at IFA 2016, 3G Licensing S.A., available here, last visited on May 3, 2020.
• Unified Patent Court, Impact of the UPC, available here, last accessed on May 11, 2020
MISCELLANEOUS
• Data taken from Darts-Ip database, Darts-Ip available here, last accessed on May 3, 2020
• Forbes, Sisvel: The patent troll we actually like, (2012) available here, last accessed on May 3, 2020
• Overview of Via Licensing Corp. managed programs, available here, last accessed on April 30, 2020
• Overview of Via Licensing Corporation, available here, last accessed on April 30, 2020
• Sisvel International S.A., Licensing Programs Background, available here, last accessed on May 3, 2020
• Submission of Via Licensing Corporation Addressing Key Issue No. 5 in respect of European Commission’s call to Public Consultation on Patents and Standards, February 13, 2015
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