Essential Patents Research Articles

Abuse of a Dominant Position by the Holder of a Standard Essential Patent

Abuse of a Dominant Position by the Holder of a Standard Essential Patent

Emergence of Intellectual Property Ecosystem of Connected Cars and its Analysis

Connected Car has attracted a high interest in the automotive industry. V2X is a standard and a core technology of Connected Car. There are many standard essential patents (SEP) in V2X. In addition, OSS is also used in platforms of Connected Cars. To date, there have been many patent infringement lawsuits based on essential patents in the telecommunications industry around the world, and antitrust authorities in various countries have established guidelines to curb such lawsuits. In other words, patent holders are required to promise licenses based on FRAND declarations, and patent licensees are also required to negotiate licenses in good faith. In the connected car business as well, disputes and lawsuits between patent holders and patent implementers over patents related to SEP and others are unfolding, and an IPR ecosystem is being formed through cooperation among companies to deal with these disputes and lawsuits. In this paper, the formation of IPR ecosystems around connected cars and the battles between patentees and licensees in these ecosystems are summarized and explained.

SEP Royalty Rate Calculation on the Basis of the Present Value Added (PVA): A Model and its Application in the German Legal Order

The most common method for standard essential patent (SEP) valuation and to determine a fair, reasonable and non-discriminative (FRAND) royalty rate is based on comparable license agreements. This method is relatively simple to apply, but has several disadvantages. Firstly, license agreements are often not comparable on important points. Secondly, they are usually based on a selection by the submitting party, who has an interest to select only favorable license agreements for comparison. And thirdly, those selected agreements might not result from a fair negotiation, because of possible market power by either of the two sides. In this paper, we therefore suggest how the present value added (PVA) methodology can be used to calculate the FRAND value of specific SEP technologies, avoiding biases that are intrinsically linked to the comparable licensing approach. The PVA approach can also serve as valuation methodology for the whole standard in the context of the Top-Down approach. To illustrate the approach, we present a simple interperiodical valuation model. To derive a FRAND royalty rate, we then suggest how the PVA created can be apportioned between the SEP holders and the implementer. The second contribution of this paper is therefore the normative discussion of the apportionment of the PVA. Finally, we show how the PVA methodology can be practically applied by running a hypothetical example of a full FRAND royalty estimation. The German legal framework has been chosen, since it is the European jurisdiction where an increasingly large number of legal disputes related to SEPs are adjudicated.

Issues and Challenges in Standard Essential Patents: Indian Perspective

This Paper shall examine the synchronization between the technology and law so that the fruits of technology which can be used as a standardized technology and patents (SEP) can be granted to the patent holders so that it becomes a win- win situation to the innovator of technology and society at large. It shall also examine the global issues in standard essential patents and how India has handled such issues by complying with FRAND terms. Since the body granting the SEP is called Standard Setting Organization , therefore the historical prospective of SEP along with the issues arising in SEP shall also be analyzed with emphasis on FRAND terms and the specific case studies of United states, Germany, Japan and China including India shall be analysed mainly on Patent hold up and royalty issues and suggest the remedial measures; taking lessons from other countries and suggest the way forward in the form of recommendation in order to handle the SEP challenges in India in a timely, cost effective manner; as this is also one of the key factor for ease of doing business in India and providing sufficient protection to the Patent holder and avoid any misuse.

An Empirical Test of Patent Hold-Out Theory: Evidence from Litigation of Standard Essential Patents

The theory of patent “hold-out” posits that frictions in the market for licensing standard-essential patents (SEPs) provide incentive for prospective licensees to opportunistically delay taking licenses. We derive empirically testable predictions from the literature supporting hold-out theory—namely that hold-out should be positively associated with the size and international breadth of licensors’ SEP portfolios, but negatively associated with the “quality” of licensors’ SEPs—and we test those predictions using measures of pre- and in-litigation hold-out constructed from information disclosed in U.S. SEP cases filed 2010-2019. We find some evidence of an association between in-litigation hold-out and both SEP portfolio size and patent quality; however, we find no evidence associating pre- or in-litigation hold-out with the international breadth of SEP rights. Overall, our results provide little empirical support for hold-out theory, particularly in the context of pre-litigation licensing negotiations, which are the literature’s primary focus to date.

Anti-suit Injunctions and Geopolitics in Transnational SEPs Litigation: the EU, U.S., and China Scenarios

Anti-suit injunctions (ASIs) have recently emerged as a phenomenon significantly affecting the dynamics of standard essential patent (SEP) litigation. The enhanced role played by these patents in the Internet of Things scenario and the willingness of national courts to set themselves up as global licensing tribunals have spurred a race to the courthouse, incentivising forum shopping and the adoption of countermeasures such as anti-anti suit injunctions (AASIs) and anti-anti-anti suit injunctions (AAASIs). The implications of these litigation strategies have become a matter of geopolitics, as countries fear that the intellectual property rights of their companies may be undervalued by foreign courts to promote domestic economic interests. Against this backdrop, this paper aims to provide a comparative overview of European, U.S., and Chinese SEP disputes in which these injunctions have been issued or claimed and to identify some policy recommendations to curb the frictions affecting SEP licensing.

The Pro-Patent Holder Approach in Unwired V. Huawei in Interpreting the ‘Fair, Reasonable and Non- Discriminatory’ Rule for the Licensing of Standard Essential Patents

The English Supreme Court case of Unwired Planet International Ltd v. Huawei Technologies (UK) Co Ltd demonstrated a pro-patent holder approach when interpreting the ‘fair, reasonable and non-discriminatory’ (‘FRAND’) rule/ undertaking. This article argues that this is a welcomed decision, because this approach pays due regard to commercial reality and the commercial needs of the patent holder. Understanding this approach is very important, because it helps in applying the rule. This approach also vitally provides more certainty by supplementing the existing, yet limited and vague, guidance on the interpretation of this rule. Furthermore, this comment rebuts the concern that the Court may have demoted the usefulness of the ‘non-discriminatory’ limb by allowing differential pricing. It is argued that this approach is both legally correct and makes practical sense. The impact of differential pricing to prospective licensees should not be over-exaggerated. English Supreme Court case, Unwired Planet International Ltd v. Huawei Technologies (UK) Co Ltd, patents

UK Courts’ Determination of Global FRAND Rates: There Is a Will but Is There a Way? UKSC Judgment in Unwired Planet v Huawei, Huawei v Conversant, and ZTE v Conversant

On 26 of August 2020, the United Kingdom Supreme Court (UKSC) published its judgment1 on the cases Unwired Planet v Huawei, Huawei v Conversant and ZTE v Conversant2 in a single decision on the appeal of two decisions3 corresponding to two (three) cases related to Standard Essential Patents (SEPs), namely Unwired Planet v Huawei4 and Huawei and ZTE v Conversant.5 The decision – which upheld both decisions from the Civil Division, dismissing all five grounds of appeal – is the first chance that the UKSC has had to deal with key aspects of SEP litigation, notably with regards to the reach of the FRAND commitment included within the ETSI IPR Policy6 and to jurisdictional aspects. The judgment substantially confirms the decisions of the lower courts and stresses the willingness and the aptitude of UK courts to establish themselves as an appropriate...

The Supreme Court's decision in Unwired Planet – what comes next?

The Supreme Court's decision in two appeals relating to telecommunications licensing disputes and ‘Standard Essential Patents’, or ‘SEPs’, has profound implications for patent owners and implementers. It established that UK courts have the power to settle the terms of global licences for SEPs, and developed the meaning of the non-discrimination component of ‘FRAND’ (Fair, Reasonable and Non-Discriminatory) terms. However, these appeals leave unanswered a number of related questions – from the proper role of foreign courts to the drafting and practical operation of ‘adjustment’ clauses – that courts are likely to have to grapple with in future. This article summarizes the issues at stake in the two appeals, examines the arguments in the lower courts and the Supreme Court's reasoning, and looks ahead to the potential impacts of this long-awaited judgment.

Application of standard essential patents in automotive industry: An analytical perspective

AbstractA limited number of companies own the majority of patents related to automotive safety systems. Absorption and implementation of such innovations in large markets require solutions that would go beyond what is protected through exclusive means namely, patents. Taking learnings from the field of communication, wherein by implementing what is known as standard‐essential patents, a horizontal deployment of a similar concept is required in other areas, most notably, automotive safety systems are necessitated. This study aims to explore the need for a practical approach to a broader technological, commercial, and social cause.

Open Source Software and Standards Development: Competition Law Implications

Technical standards developed by standards development organizations (“SDOs”) increasingly involve software-based solutions that implicate open source software (“OSS”). SDOs generally operate pursuant to policies and procedures based on principles of consensus, due process, balance, and openness, and subject to consensus-defined intellectual property rights (“IPR”) policies that contemplate inclusion of patented solutions in standards. Consequently, SDO policies help incentivise IPR owners to contribute their new and innovative technologies to standards by providing owners of Standard Essential Patents (“SEPs”) the opportunity to offer licenses for their IPR on fair, reasonable and non-discriminatory (“FRAND”) terms. Open source projects are often pursued in consortia or similar forums, which typically do not fully observe such procedural principles, and do not contemplate FRAND patent licensing, or patent licensing at all. However, traditional SDO standards activities and open source projects are not mutually exclusive, and both can drive innovation and competitiveness. As noted by the European Commission’s 2017 communication on the EU’s approach to SEPs, integration between open source projects and standards development processes may be “a win-win situation,” and “[f]lexible and effective interactions between standardisation and open source communities will promote and accelerate the uptake of advanced technology developments.” This paper considers the competition law implications of integrating standards development and open source efforts, to help facilitate that potential “win-win” outcome, and achieve the procompetitive goals of standards development, rather than create risks of competitive harm that will deter innovation. This paper submits that consensus-based approaches to standards development, where account is taken of all stakeholder interests, and which abide by principles of openness, balance and due process, should apply equally when SDOs accommodate open source projects. Experience shows that such procedural safeguards are fundamental to avoid potential anticompetitive effects resulting from imposiing IPR policies that favour discrete stakeholder interests. This paper further explains that EU and US competition law provide the necessary tools to challenge conduct related to standardization and open source licensing that may diminish competition and innovation.

The Regulation of Injunctive Relief on Standard Essential Patents Within China’s Anti-monopoly Law

Competition concerns arising from the seeking of injunctions by FRAND-encumbered (fair, reasonable and non-discriminatory) standard essential patent (SEP) owners have become a contentious issue. This issue has attracted the attention of many competition enforcement authorities and no consensus is reached as to the compatibility of such injunctive relief with competition law. This is also a hard and challenging problem faced by China. A coherent and balanced response is urgently needed under current China’s legal framework. Therefore, this article proposes that a basic regulating approach should be established first to treat the seeking of injunctions by FRAND-encumbered SEP owners as an independent anti-competitive practice prohibited by the Anti-monopoly Law. Then, an analysis framework should be established to consider the circumstances in which and the extent to which such seeking of injunctions should be limited from the perspective of competition enforcement. The behaviour of both SEP owners and SEP users should be properly examined. standard, standard essential patent (SEP), injunctive relief, injunction, competition, antitrust, Anti-monopoly law, competition law, fair, reasonable and non- discriminatory (FRAND), reasonable and non-discriminatory (RAND).

Sensible Open Source Licenses For Standards Development Organizations

New technologies such as 5G, IoT, blockchain and many others are implemented as ecosystems with many interoperable products and services designed to communicate seamlessly through a developing web of technical standards. Today’s standards are far more software-driven than in the past. As a result, standards development organizations (SDOs) are increasing their use of open source software (OSS) to promote both the rapid development of new standards and the deployment of standards-conformant products and services in the marketplace. Although SDOs have traditionally avoided requiring the use of any specific software code for conformance to its standards, SDOs have relied on OSS communities to develop tools, test suites, and independent implementations to assist implementers in developing products and services utilizing the standard. Today, however, there is a growing movement for SDOs to initiate their own OSS projects so that the standards and open source development efforts can be better integrated. SDOs understandably seek to replicate the benefits of collaborative development associated with OSS projects. In doing so, SDOs are also selecting the most common OSS licenses for the software they develop through these projects, such as the BSD or Apache licenses. These common licenses are ones that have been certified by the Open Source Initiative (OSI) as being compliant with its open source definition (OSD). While OSI does not hold a trademark on the term “open source” nor is it the arbiter of which software is considered OSS, OSI discourages others from referring to software as open source if the applicable software is licensed under a license that does not meet the requirements of the OSD. As OSS has become more commercial, the OSS development community has increasingly formulated OSS licenses that are more tailored to their respective objectives even when those licenses do not satisfy the terms of the OSD. SDOs, however, have not for the most part considered using an OSS license tailored to the intended use of the software being developed nor to their unique goals. Rather, by default, SDOs most often select a common OSI-approved license for their OSS projects. SDOs have long balanced the rights and interests of stakeholders through intellectual property (IP) policies that have permitted their contributors to commit to negotiate licenses for their essential patent claims on reasonable and non-discriminatory terms and conditions (RAND). While all open source licenses are royalty free, they do not require that the OSS be “patent-free” in the sense that no patent licenses would be required for use of the OSS. Nonetheless, OSI advocates that a RAND licensing commitment from a patent holder is incompatible with OSI’s approved licenses. Some innovators who have committed to license their essential patent claims on RAND terms have raised concerns about the use of OSI-approved licenses for SDO software projects. These innovators are discouraged from participating in such SDOs’ OSS projects because these innovators’ business models are not consistent with OSI’s requirements for unrestricted royalty free licensing. If an SDO’s OSS project becomes fundamental to the way standards are implemented in the marketplace, the lack of participation from these innovators may (i) deprive the community of valuable contributions, and (ii) skew the resulting SDO-approved OSS implementation in a way that is no longer vendor neutral. OSI-approved open source licenses also authorize unrestricted modifications and distribution of the modified software which is antithetical to an SDO’s goal of promoting conformant products and services. If the software can be modified without restriction, then it can be modified in ways that fail to conform to the standard, disrupting the market and thwarting widespread adoption of the standard. The vast majority of SDOs restrict recipients of their specifications, the documents which set forth the requirements of the standard, from making any modifications. Similarly, RAND commitments are made with respect to conforming products and services, not non-conforming ones. It is rather inexplicable then that SDOs are selecting OSI- approved open source licenses that are contrary to their goals of conformance, inconsistent with their existing balanced IP policies, and creating tension among stakeholders. This paper, using real world examples, explores some of the business motivations that have led to the common use of OSI-approved licenses in SDO OSS projects and the challenges created by using those licenses. The paper concludes by offering sample licenses that SDOs may consider that will promote their goals, foster consistency across their standards and software development efforts, and reduce IP-related friction among different stakeholder groups.

Unfair Pricing and Standard Essential Patents

Technical standards that are agreed within a Standard Development Organization (SDO) often cover several ‘essential’ patents for the implementation of a standard (i.e., Standard Essential Patents, SEPs). In order to allow for the standard implementation, the SEP holder commits to license its patents to any potential licensee on the basis of Fair and Reasonable and Non-Discriminatory (FRAND) conditions. In view of the recent ruling of the UK Supreme Court in Unwired Planet and the judgement of the German Bundesgerichtshof in Sisvel v. Haier, the paper assumes that the FRAND commitment implies a ‘range’ rather than a ‘single’ royalty rate. On the other hand, a royalty rate ‘beyond the outer boundary of the range’ should be considered ‘unfair’, and thus incompatible with the FRAND commitment. Besides representing a breach of the FRAND commitment, an ‘unfair’ royalty rate might also be considered an abuse of a dominant position by the SEP holder, in breach of Art. 102(a) TFEU. This paper analyses whether, and under what circumstances, Art. 102(a) TFEU can be relied upon by a competition authority in Europe to sanction a case where an ‘unfair’ royalty rate has been set by the SEP holder. To this regard, the paper provides a detailed analysis of the EU Court of Justice’s jurisprudence on Art. 102(a) TFEU. In particular, the latter jurisprudence is relied as a ‘yardstick’ to assess ‘when’ competition policy should sanction a request of unfair royalty rate by the SEP holder, ‘how’ a competition agency should assess the case and, eventually, ‘what’ remedies the competition authority might adopt. Economists have elaborated a number of ‘filters’ to define ‘when’ EU competition policy should sanction unfair pricing cases. In particular, antitrust intervention would be justified only in markets that are characterized by high and stable entry barriers, in which a firm enjoys a super-dominant position. Due to the phenomenon of over-declaration, not every SEP is indeed ‘essential’; the market power of the SEP holder thus requires a case-by-case analysis of the ‘essentiality’ of every SEP. A number of authors have also argued that excessive pricing cases should not be sanctioned in industries characterized by dynamic efficiencies. The paper argues that innovation considerations could be considered as efficiency defences in the context of antitrust investigations, rather than in excluding a priori competition policy enforcement in this field. The paper argues that a competition agency should rely on the case law of the Court of Justice of the European Union (CJEU) on Art. 102(a) TFEU to analyse a case of unfair royalty rate. In particular, United Brands cost/price test is not suitable for assessing an unfair royalty rate requested by the SEP holder, since it is de facto impossible to determine the ‘costs of production’ of individual SEPs. On the other hand, in accordance with the CJEU case law, the competition agency might rely on a number of benchmark methods with which to assess the alleged unfairness of the rate. In particular, the agency should verify its findings under multiple benchmark tests, in order to minimize the risk of false negative errors. Finally, the SEP holder could argue that the requested royalty rate is justified by its past R&D investments. In terms of remedies, the paper argues that a competition agency could require the SEP holder to license its ‘essential’ patent; such behavioral remedy is well established in the practice of the European Commission. In light of the recent Broadcom interim decision, if the competition authority was confident about its preliminary findings of unfair pricing, the agency might require the SEP holder to license its ‘essential’ patents via an interim decision; the scope, duration and exact obligations of such a duty would later be refined in the final commitment decision.

The UK Supreme Court’s Approach to Standard Essential Patent Protection in Unwired Planet v Huawei — Balancing tensions between patents and standards as well as between global business and national patent systems – an international conundrum

The UK Supreme Court’s Approach to Standard Essential Patent Protection in Unwired Planet v Huawei — Balancing tensions between patents and standards as well as between global business and national patent systems – an international conundrum

The Deterioration of Appropriate Remedies in Patent Disputes

The Deterioration of Appropriate Remedies in Patent Disputes

Understanding the Architectural Control of Opened Complex Systems under Cooperative Standardization

Drawing on the case of the mobile telecommunication sector, the article attempts to elucidate why and how leading firms can control opened technologies of complex systems under cooperative standardization. Different from the case of a proprietary standard by a leading firm, even leading firms can hardly control complex systems of technologies opened under cooperative standardization. Cooperative standardization and related patenting can widely cause technology spillover from leading firms to others including new entrants. However, at the same time, such spillovers are presumed to increase leading firms’ control over technologies, architectural control, in the sector concerned. We conduct a longitudinal network analysis of patent citations by proprietary patents (Non-SEPs) from standard essential patents (SEPs), which are declared as essential for the implementation of technology specifications to product systems. The data shows that even though the technology development and standardization become conducted more dispersively by a variety of firms, the networks of SEP citations have increasingly converged upon a few leading firms. While declaring a number of SEPs with causing technology spillovers, such leading firms have outstandingly accumulated system knowledge covering and interrelating multiple technology domains. The finding reveals that system knowledge as well as the number of patents (SEPs) helps firms nurture and preserve architectural control to drive technology development and innovation even under an open technology environment.

Empirical Analysis of License Policy for Declared Standard Essential Patents in Standard Setting

Standard-setting organizations (SSOs) generally request their participants to commit to offering licenses ex ante to implementers on fair, reasonable, and non-discriminatory (FRAND or RAND) terms. To adjust for the RAND context, court judges adopt modified Georgia- Pacific rules to determine patent damages ex post in infringement lawsuits involving standard essential patents (SEPs). In this paper, we review the literature on intellectual property rights policy in SSOs and modified Georgia-Pacific rules from court practices and, accordingly from technical and legal aspects, explore the determinants of licensing terms in the RAND context. By employing a novel dataset that consists of over a thousand declared SEPs in the Internet Engineering Task Force (IETF), we find that, in general, technical and legal characteristics are significantly associated with reciprocal licensing terms, despite that most of their associations with royalty-free (or royalty-bearing) terms are nonetheless trivial.

Use and Abuse of Bargaining Models in Antitrust

Bargaining is all around us. Bargaining is how prices are set across a range of economic activities such as between licensors and licensees of intellectual property, employees and employers, content providers and distributors, health insurers and hospitals, and in many intermediate product markets. Recently, bargaining has played a central role in a number of high-profile antitrust matters. In 2018, the U.S. Department of Justice challenged AT&T’s acquisition of Time Warner — largely on the basis of a bargaining model. Also, in 2018, the U.S. Federal Trade Commission argued that Qualcomm’s market position in cellular chipsets allowed it to leverage higher royalty rates for its standard essential patents (“SEPs”), in violation of its commitment to license its SEPs on fair, reasonable, and non-discriminatory (“FRAND”) terms. In this article, we assess the value of economic bargaining models to predict outcomes for both horizontal and vertical mergers and for unilateral conduct. To that end, we first provide an overview of the economics of bargaining models and their primary features, including the vertical GUPPI variant. We then discuss these models in the context of recent antitrust cases and detail the uneven judicial adoption of bargaining models. Next, we examine whether the current judicial reticence is justified. We review a body of emerging scholarship that suggest some caution on the use of methodologies to predict harm based on bargaining models. This suggests that a healthy degree of judicial skepticism is warranted — whether coherently articulated in opinions or not. In conclusion, we offer some policy recommendations for the use of bargaining models, which we believe will lead to a more balanced approach regarding their use in antitrust matters.

Access to standard essential patents and antitrust enforcement: the case for licensing component manufacturers

The ability to compete on numerous markets today depends on access to technological standards. When standards are protected by standard essential patents (SEP), a license to use such SEPs will be required. There have been numerous disputes in various jurisdictions over refusals to license SEPs. Most recently, disputes concern access to SEPs by the manufacturers of components. Some SEP holders deny access to their standard essential patents to component manufacturers and prefer to license end product producers. This practice has become a highly contentious issue around the world. In particular, manufacturers of components who are denied access to SEPs claim that such refusals amount to violations of competition rules. The author examines this highly contested practice is an attempt to show when denying access to an SEP license could harm competition.