IPPro Patents Issue 049

Case Report
However, the court was not persuaded by Ericsson’s arguments to
reject Concur IP’s analysis and used the number of industry-wide
SEPs determined by Concur IP and Dr Ding, after some adjustments,
as the denominator for the top down calculation.
Contribution count not an indicator of patent portfolio strength
Ericsson proposed the use of technical contribution counting as a
means to determine the strength of its portfolio.
The court rejected the idea citing two major flaws: a lack of
correspondence between technical contributions and patents, and
its inability to account for transferred and expired patents.
Importance of individual patents difficult to quantify
TCL experts analysed the importance and contribution of Ericsson
SEPs and used the analysis to calculate a value share for Ericsson’s
SEPs relative to the value-distribution of all SEPs in the standard.
While the court did find some value in the importance and contribution
analysis, particularly to show that Ericsson’s patent portfolio is
certainly not as strong or essential as it has claimed, it found the
application of this analysis to calculate the overall rates too flawed
to be used.
The court cited three flaws:
Lack of similar analysis on rest of the SEPs for comparison with
importance and contribution of Ericsson’s SEPs
Lack of analysis on whether the alternatives identified for various
Ericsson SEPs would be mutually consistent with each other,
who owned the alternatives, whether the alternatives were
unpatented, expired, or part of a previous standard
Lack of justification to map specific importance and contribution
ratings to quantifiable values
Broad interpretation of similarly situated firms
The court took a broad interpretation of similarly situated firms and
found Apple and Samsung to be similarly situated as TCL for licence
comparison along with Huawei, LG, HTC, and ZTE.
The court made following observations in this regard:
Sales volume alone does not justify giving lower rates to otherwise
similar firms
Factors such as the firm’s overall financial success or risk,
brand recognition, the operating system of their devices, or the
existence of retail stores have no bearing on whether Ericsson’s
royalty rates for its SEPs are discriminatory
Local kings, such as Karbonn and Coolpad, are not similarly
situated to TCL
Competitive harm to a firm sufficient to prove discrimination
While Ericsson argued that discrimination must have the effect of
impairing the development or adoption of standards, the court took
a much broader view and found that harm to the competitor firm
offered discriminatory rate is sufficient to prove discrimination.
Impact on future SEP licences
It would be interesting to see how this judgement and the underlying
findings impact SEP licences going forward, both new licences
(particularly for the upcoming 5G technology) and the existing ones
when they are up for renewal. Are we going to see another series
of disputes when licensees at the higher end of the range try to
negotiate rates closer to the ones determined by the court or will
the SEP owners and implementers develop an understanding and
commonly agreed upon rate? If one goes by the history, the latter
looks less likely.
Patent portfolios are dynamic due to acquisition and sale, as well as
filing of new patent applications, and so will be the FRAND rate for each
of these portfolios. This will give both SEP owners and implementers
opportunity to renegotiate the rates once the existing licences end.
The approach adopted by the court for royalty calculation is certainly
going to play an important role in future SEP licenses.
Particularly, the top down approach may gain more popularity
going forward. The cellular industry has been demanding more
transparency in royalty rate setting and this judgement will go a long
way in addressing that. IPPro
The cellular industry has been
demanding more transparency in royalty
rate setting and this judgement will go a
long way in addressing that
Sachin Sinha, co-founder, Concur IP
23 IPPro Patents