ITU Talks Aim to Update Policy on Licensing for Standard Essential Patents

GENEVA -- Talks have begun in ITU on a possible update to a patent policy for standard essential patents (SEPs) that is currently shared with the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC), and which could affect licensing policies used by other standards development organizations, participants said after a “patent roundtable.” Industry appeared largely wary of the process, according to submissions. Regulators are “in sync” on the need to bring more clarity to certain aspects, ITU’s senior legal advisor said. A SEP is a patent that is essential to the implementation of a standard, the ITU website said.

The role that standards development organizations’ patent policies play in litigation over SEPs is “a hot topic,” said Malcolm Johnson, director of the ITU Telecommunication Standardization Bureau (TSB). Talks helped clarify positions on the effectiveness of reasonable and non-discriminatory (RAND) commitments, and the impact of litigation involving SEPs, he said. All the key players took part in the debate, he said referring to participants from industry, regulatory agencies, international organizations, academia, standards development bodies and law firms.

Neither the meeting speakers nor their commercial affiliation could be divulged by participants under the rules for the meeting. Participants included executives from Apple, Google, Samsung, Microsoft, Motorola Mobility, Cisco, Alcatel-Lucent USA, Huawei Technologies, and other companies, and officials from U.S. and other government agencies, the ITU website said.

The so-called “patent wars” in the mobile communications industry are an ordinary commercial dispute, Qualcomm said in a submission. Altering the balance of incentives embodied in the well-functioning RAND-based licensing practices may mean that the next generation of mobile communications technologies will suffer because the incentives to create them are no longer in place, it said.

The two critical issues that emerged during talks were on injunctive relief and the difficult subject of the meaning of “reasonable” in the RAND context, Johnson said. Some said the current litigation over SEPs isn’t indicative of harm to the standards eco-system, he said. Some said litigation over SEPs can be used as a tool to reduce innovation, he said. Private companies are “split” on the issues, said Antoine Dore, ITU senior legal officer. Regulators are “in sync” on the need to bring more clarity to better define the limits of RAND commitments, Dore said.

The meeting is the start of a process that aims to clarify ITU’s patent policy “and put confidence back into the system,” Johnson said. Views on some topics were “divergent,” he said. Some said there isn’t a problem, he said, while others said there is an issue that needs to be addressed by standards development organizations to provide more clarity on implementing the policy.

Any attempt to provide clear, transparent, effective and up to date patent policies and implementation guidelines would help industry, Johnson said. Further clarification, in particular on the meaning of RAND commitments “would be very beneficial,” he said. ITU “will not interfere with bilateral negotiations,” he said referring to the organization’s existing patent policy. ITU could make “a significant contribution” in addressing the concerns over the effectiveness of RAND commitments, and the impact of SEP litigation on the standards eco-system, he said.

There are various ways of clarifying what is “reasonable” in the RAND context, Johnson said. How to do it will depend in part on discussion in the TSB advisory group on intellectual property rights (IPR), he said. Talks won’t be easy, he said. Recommendations from the group will be used for possible revision of guidelines for implementing ITU’s patent policy, he said. The group is largely responsible for the shared patent policy between ITU, the ISO and IEC, he said.

It’s very difficult to know what the outcome of the discussion will be, Dore said. Talks will likely address high level principles “not detailed regulation,” he said. Most of the companies at the round table talk will continue discussions this week, he said. Talks may also tackle the “very sensitive issue” of injunction relief, he said, and whether it’s compatible with a RAND-based policy, whether there are any limits to use of injunction relief, and generally whether “RAND commitments constrain the right to injunction relief.” High level principles on these questions “will be a good step forward,” he said.

The international standards system works well because firms that contribute to standards promise to make their essential patents available to others on fair, reasonable and nondiscriminatory terms, Microsoft said in a submission. Consumers and the entire industry will suffer if firms try to block others from shipping products on the basis of such standard essential patents, it said.

Proposals to “clarify” the meaning of RAND often seek to artificially and arbitrarily restrict or reduce license fees in a manner that diminishes the value of SEPs, particularly as compared to non-SEP technologies incorporated into products implementing the standard, thereby shrinking the return on risky investments by innovators, Qualcomm said in the submission to the meeting. A “clarified” meaning may allow implementers to obtain cheaper access to proven technologies for which the risks have already been assumed, it said, but the “game” can only be played in the short run.

The current fair, reasonable, and non-discriminatory (FRAND) licensing framework, with the possibility of using injunctive relief to protect a SEP holder’s rights, has created wider choices for consumers and helped to reduce prices and improve product quality in the telecom sector, Ericsson said in a submission. Incentives to engage in risky and costly research and development of complex technologies, and to contribute those technologies to standards, must be maintained, it said.

Patent litigation frequency and intensity can be significantly reduced by ensuring a high quality of granted patents, as well as by ameliorating institutional cooperation between the standardization and the patent systems, the European Patent Office said in a submission. The wealth of information and knowledge realized through cooperative and collaborative relationships between standards bodies and patent offices can greatly improve the quality of patents issued and help reduce patent litigation, the IEEE said in a submission.

The current RAND licensing approach, long a feature of all major standard setting organizations, is effective in supporting the adoption and broad deployment of standardized technologies, said Innovation Insights, an initiative by GE, Qualcomm, P&G and Inovent, in a submission. The existing ITU-T approach has provided a foundation for the exceptional innovation, competition, and growth in the wireless sector in recent years, and it should be maintained, it said. Courts are best positioned to resolve disputes involving alleged infringement, as reflected in the ITU-T’s long-standing IPR policy, it said.

It would be misguided to seek to scale back or restrict intellectual property protection for standard essential patents in the absence of any empirical data suggesting the current system of standardization does not adequately serve consumer interests or fairly balance the interests of participants of standards setting organizations, the Innovation Alliance submission said.

Standards bodies and their members, have long recognized the inherent ambiguity of a commitment to license patents essential to a standard on reasonable and nondiscriminatory terms, said Renata Hesse, deputy assistant attorney general of the Department of Justice Antitrust Division, according to her prepared remarks. It would likely be in the interest of all firms that benefit from standards to “seize the opportunity to eliminate some of the ambiguity” that requires difficult ex post deciphering of the scope of a F/RAND commitment, she said.

Hesse spelled out some policy choices that standards bodies could use to spur competition by implementers of the standard. A standards body could set up procedures “that seek to identify, in advance, proposed technology that involves patents” that a patent holder “has not agreed to license on F/RAND terms” and determine whether that technology should be included in the standard, Hesse said. F/RAND refers to both to fair, reasonable, and non-discriminatory (FRAND) and RAND terms.

The organization could make clear that licensing commitments made to the standards body are intended to bind both the current patent holder and subsequent purchasers of the patents and that these commitments extend to all implementers of the standard, whether or not they are a member of the standards body, she said.

The standards body could “give licensees the option to license RAND-encumbered patents” that are essential to a standard on a cash-only basis and prohibit the mandatory cross-licensing of patents that are not essential to the standard or a related family of standards, while permitting voluntary cross-licensing of all patents, she said. It could also place some limitations on the right of the patent holder who has made a F/RAND licensing commitment who seeks to exclude a willing and able licensee from the market through an injunction, she said.

A patent holder who participates in the standard-setting activities and makes a F/RAND licensing commitment is implicitly saying it will license the patent claims that must be used to implement the standard to any licensee that is willing and able to comply with the licensing terms embodied in the commitment, Hesse said. “It would seem appropriate to limit a patent holder’s right to seek an injunction to situations where the standards implementer is unwilling to have a neutral third-party determine the appropriate F/RAND terms or is unwilling to accept the F/RAND terms approved by such a third-party,” she said.

The standards body could make certain improvements to lower the transactions cost of determining F/RAND licensing terms, Hesse said. They might explore setting guidelines for what constitutes a F/RAND rate or devising arbitration requirements to reduce the cost of lack of clarity in F/RAND commitments, she said. Standards group VITA’s patent policy creates an arbitration procedure to resolve disputes over members’ compliance with the patent policy, she said. It might also consider ways to boost the certainty for patent holders that disclosed patents are essential to the standard after it is set, she said. The number of “essential” patents encumbered by F/RAND licensing commitments at certain standards bodies has increased exponentially in recent years, she said.

Johnson said positions in a formal setting such as the round table talk are often less conciliatory. Less formal discussions during the meeting began to address the difficulties, the ITU officials said. Those talks will continue this week, he said. Any efforts to “clarify” RAND policies should only be undertaken carefully, so as to avoid favoring some stakeholders at the expense of others, the Berkeley Research Group said in a submission.