IPPro Issue 002

SEP Debate
Standard setters
IP Europe brings its own arguments to bear as Europe’s SEP debate continues
Barney Dixon reports
Despite appearing to cool down, Europe’s standard-essential patent
war continues to boil. The debate has temporarily shifted from a
regulatory setting, to a competition between two competing best
practice workshops on standards licensing.
IP Europe, an organisation representing research and development
intensive wireless technology developers in Europe—both small- and
medium-sized enterprises (SMEs) and larger corporations such as
Ericsson, Nokia and Orange—now shares its frustration within this
context, arguing that Silicon Valley giants are hijacking its attempts to
maintain fair, reasonable and non-discriminatory (FRAND) outcomes
to licensing negotiations.
Francisco Mingorance, executive secretary of IP Europe, says
that despite these frustrations, there are early signs that the recent
European Commission Communication on SEP licensing has improved
outcomes in the market. We spoke to Mingorance to find out more.
What is the difference between IP Europe’s CEN/CENELEC
workshop and other workshops aimed at SEPs in Europe?
We launched our CEN/CENELEC workshop initiative, the ‘Best
Practices and a Code of Conduct for Licensing Industry Standard
Essential Patents in the Internet of Things (IoT) / Industrial Internet’,
last October, to document the best practices used over the last 15 to
20 years in licensing standardised technology.
We want this exercise to support constructive working relationships
between standards developers and implementers as we make the
transition into the internet of things and 5G environment.
An additional goal of this exercise is to help inform the many SMEs
who, attracted by the market potential of the Internet of Things, will
be entering the standards environment for the first time. They need to
be well informed about the legal and financial obligations of licensing
and using the open wireless technology standards.
On the other hand, a group of Silicon Valley giants, who initially
attempted to hijack our workshop before leaving with copies
of our documentation, have established a parallel workshop,
titled ‘Industry Best Practices and an Industry Code of Conduct
for Licensing of Standard Essential Patents in the field of 5G
and Internet of Things’, aimed at rewriting 20 years of licensing
practices to their specifications. Sadly, this is part of an ongoing
pattern of behaviour from a few companies that are trying to
diminish and undercut the value of innovative open wireless
technology standards like 4G and 5G.
We are trying to develop and document existing best practices, they
are attempting to squeeze the returns, and ultimately the sustainability,
of European innovators like Ericsson, Nokia and Orange, which are
investing heavily in developing revolutionary technology for inclusion
in open standards. Unfortunately, despite these significant differences,
the title of the opposing workshop is confusing some organisations.
What is at the root of these different approaches?
The sole focus of this group of Silicon Valley giants is to try to
undermine the tried-and-tested licensing valuation model by putting
forward new ways of calculating royalties based on the fraction of
the value of a microchip. Unfortunately, we have seen this behaviour
repeatedly: for example, in their hijack of the intellectual property
Rights policy at the Institute of Electrical and Electronics Engineers
Standards Association (which is now being investigated by the US
Department of Justice), and their unsuccessful lobbying around the
European Commission’s Communication on SEP licensing.
None of these companies has ever produced or licensed any cellular
technology, but they benefit greatly from being able to implement
open standard technologies in their products.
If you reduce the licence fees by a factor of 30 or more, which is what
these companies are proposing, then there is no longer an incentive
for companies and universities to contribute IP to open standards.
There would be no more investment in open standards, only private
technology held privately by companies and that is the end of it.
They need to recognise that if there is no remuneration, there will be
no more innovation in open standards to support the development of
their businesses. In this instance, wireless innovators would be forced
to sell their innovations to private buyers, leading to a fragmented
marketplace of competing wireless technologies and a decline in
interoperability. But perhaps this is what they want.
What does IP Europe hope to achieve from its second CEN/
CENELEC workshop?
We are trying to educate tech users who are new to this field. In the past
there have always been limited players in the telecoms market: everyone
knows each other and they all know the rules of the game. Now, we are
talking of bringing in new sectors, like the automotive industry, or the
health sector or energy sector, transportation, you name it.
Companies in these new sectors will start using the internet of things
and 5G technology in completely new ways and most of them don’t
yet fully understand how these new specifications will work. What
we’re trying to do is document and explain how it works and how
it can be used to the mutual advantage of both those who use the
technology and those who develop it.
Sometimes with the internet of things, you will have small companies
that will also develop the wireless technologies and will want to license
it out. As such, it is also important for them to be able to operate in
a stable and predictable IP licensing environment, rather than one in
which they may be forced to find expensive legal remedies, just in
order to receive payment for their inventions.
We want to document the best practices and promote what we call
good behaviour in licensing negotiations between patent holders
and the licensee (not just from one perspective) and to promote
the behaviours that prevent litigation by making more information
available and explaining how licensing works. Then eventually we
want to encourage more investment in 5G and to improve technology
standards for small and large companies, as opposed to undermining
any fair and reasonable expectation of returns.
Were you pleased with the European Commission’s communication
on SEPs? Could they have gone further?
We were happy with the communication, but it could have been even
better. Both the communication and the conclusions of the European
Council supported the tried-and-tested principle of access to all in
licensing negotiations, which was our primary goal. The alternative
license to all approach, being advocated for by the Silicon Valley
cabal, would have obligated our members to provide licenses for the
technology to every single member of product value chain that requested
one. This was seen as another attempt to force us to license our world
changing innovations at the fraction of the value of a chip. However,
when judging success, it is important to remember that the political and
legal wrangling can only be viewed as beneficial if it helps create a more
positive market dynamic, and I’m pleased to say that has been the case.
It was felt by some of our members that in the build up to the
communication that a number of negotiations had stalled as
implementers were questioning whether the outcome of the
communication may offer them a chance to renegotiate. However,
two days following the decision BMW became the first automotive
manufacturer to agree a licensing deal for using the 2G, 3G and 4G
patented technologies in the AVANCI patent pool.
That is the really great news, because despite the talk of industry
winners or losers, standardisation is, at its heart, an exercise in
balance and collaborative innovation that is intended to make
sure consumers can benefit from shared access to the best
technologies globally.
Is the debate going the way you’d hoped?
Despite this positive trend though, it
remains a great shame that this ongoing
campaign to undermine open standards
continues to distract energy and
resources away from development and
commercialisation of these revolutionary
open technology standards
Gradually, yes. I think there is a growing appreciation in the US
particularly, but also in Europe, that some of the more outlandish
positions and actions taken by opponents of the IP rights have
been potentially damaging to a very important and advanced area
of innovation.
Despite this positive trend though, it remains a great shame that
this ongoing campaign to undermine open standards continues
to distract energy and resources away from development and
commercialisation of these revolutionary open technology
standards; especially, when we are just about to see again the huge
benefits the system brings, in the shape of the first full technical
specification for 5G. IPPro
Francisco Mingorance, executive secretary, IP Europe
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