Posts Tagged: "SEPs"

Drilling Down on Criticism of Top-Down Approach to Determining Essentiality

Last week, an article was published on the Social Science Research Network (SSRN) website by Matteo Sabattini, who is the director of IP Policy at Ericsson. SSRN is an open research paper repository that does not peer-review any articles that are uploaded. Sabattini’s new article, a summary of which was also recently published on IPWatchdog, is titled, “When is a portfolio probably standard-essential?” and cites several studies that determined the overall essentiality rate for 4G and 5G. Here, Sabattini cites the Concur IP study that was part of the expert witness report of witness Dr. Zhi Ding in the TCL v. Ericsson litigation case, as well as several studies published by David Edward Cooper from Hillebrand Consulting, who is an Ericsson commissioned subject matter expert and who also testified in court, e.g. for the Unwired Planet v. Huawei case. Finally, Sabattini also mentions the EU commission 2017 study conducted by IPlytics:

The Burden of Proof regarding Cellular Wireless Standard Related Patents: Final Thoughts for Our Critics

Do owners of patents for which licensing declarations have been made enjoy more rights than other patent holders? Do such licensing declarations impose obligations on potential licensees rather than on patent holders? Should prospective licensees have no right to challenge such patents? In another responsive article, that is what one commentator claims our series of articles on IPWatchdog asserted, although we never wrote or suggested anything of the sort. In doing so the commentator employs intentionally misleading language like “declared essential patents” to characterize such licensing declarations as claims of essentiality, and “prov[ing]… licenses are needed” which, as will be explained, is not possible. These hyperbolic assertions are commonplace in the world of standards related patents, as are straw-man arguments concocted by implementers trying to escape the need to take a license. While we appreciate that all of this comes down to innovators wanting to be paid for their innovations embodied in standards and implementers wanting to pay less, or nothing, for using those innovations, we’d prefer the debate to be without histrionics and hyperbole. We hope this final response will clear up any remaining misconceptions. 

Determining When a Patent Portfolio is Standard-Essential: A Probabilistic Approach

In recent years, several patent experts and commentators have claimed that there are too many “low-quality” patents being granted by patent offices around the world, or that a large percentage of patents are often found invalid by courts and judges. Until a patent is found to be invalid by a court or another tribunal, during licensing negotiations both licensor and licensee can only consider the likelihood that such patent is eventually found invalid based on the incomplete information available to them. Similarly, it has been claimed that a patent-by-patent analysis of a large patent portfolio could determine, without any uncertainty, whether a portfolio is infringed or standard essential. For example, several studies have been published or presented in courts that try to determine which patents in a portfolio are “truly” essential….. A better model, in the author’s opinion, is a probabilistic model that tries to estimate the likelihood of a portfolio to be infringed, valid and/or essential.

FRAND Royalty Base Statements and Cellular Wireless Standard Essential Patents: A Reply to a Responsive Article

In a previous series of articles that were published on IPWatchdog, we analyzed and categorized various fair, reasonable and non-discriminatory (FRAND)-related statements made by a variety of entities, including those that are primarily licensors of Standard Essential Patents (SEPs), those who sell network equipment products or components and who are also significant licensors of SEPs, those who sell end user products and who are significant licensees of SEPs, an association focused on FRAND policy development, and a patent pool. One of those articles considered statements made in relation to the appropriate royalty base to which FRAND licensing rates should be applied, with one camp apparently favoring use of the end product and another clearly favoring using a component thereof (oftentimes referred to as the smallest saleable patent practicing unit, or “SSPPU”). Conscious of the fact that there is a wide range of opinions on issues related to FRAND licensing, we intentionally chose to avoid putting forth any subjective views as to the way things should be, instead choosing to simply report such statements, highlight the main differences, and sprinkle in some FRAND-related decisions and court guidelines that appeared relevant, and sometimes contradictory, to such statements. Despite our approach, a recent responsive article, “The SSPPU is the Appropriate Royalty Base for FRAND Royalties for Cellular SEPs,”accuses us of “fail[ing] to present a balanced view” and supporting the extraction of “excessive revenues for SEP patent owners”.

Standard Essential Patents and Legal Risks Across Industries

The next industrial revolution will not only impact the smartphone and computer world but will spread to many more industrial verticals. Automotive, manufacturing, energy, health care, and MedTech are among the industries most likely to be impacted by connectivity, as they have high-value equipment that is constantly networked and needs to handle massive amounts of data. Standards such as 5G or Wi-Fi 6 (802.11ax) will connect industrial machinery and robots allowing for remote control, monitoring, and repair, as well as industrial automation. From smart grids to drone control, energy and utility, companies will rely on standards to handle massive data. Connectivity standards will be used by hospitals and medical equipment manufacturers to provide data to a variety of tablets and fixed machines, as well as to enable remote surgery. Enhanced monitoring and automation are likely to assist industries as diverse as agriculture and finance. Online shops will increasingly turn to virtual reality experiences. 5G based tracking will emerge in the logistic sector. Edge computing and low latency of 5G and the improved compression of the versatile video coding (VVC) standard will be used in the gaming business, as well as in general augmented and virtual reality applications. As transportation operators rely on connectivity standards to connect smart city infrastructure, media companies will boost mobile streaming speeds and quality. Over the next few years, when advanced cellular, wireless and video standards replace existing protocols, these developments will occur swiftly.

Using AI to Valuate and Determine Essentiality for SEPs

One of the major challenges when licensing, transacting, or managing Standard Essential Patents (SEPs) is that there is no public database that provides information about verified SEPs. Standard-setting organizations (SSOs) such as ETSI (4G / 5G), IEEE (Wi-Fi), or ITUT (HEVC/VVC) maintain databases of so-called self-declared patents to document the fair, reasonable and non-discriminatory (FRAND) obligation. However, SSOs do not determine whether any of the declared patents are essential, nor are the declarants required to provide any proof or updates. As a result, in the course of licensing negotiations, patent acquisitions, or litigation, the question about which patents are essential and which are not is one of the most debated when negotiating SEP portfolio value, royalties, or infringement claims. Artificial Intelligence (AI) solutions have started to support the process of understanding how patent claims relate to standards to assess larger SEP portfolios without spending weeks and months and significant dollars on manual reviews by technical subject matter experts and counsel.

The DOJ Antitrust Division: Regulatory Capture at the Expense of U.S. Interests

Historically an esoteric area of law, in recent years, antitrust policy is drawing broader attention as a tool to curb the exercise of monopolistic market power, especially by big tech behemoths. Congressional reports on both Democratic and Republican sides of the aisle, multiple legislative initiatives to reform U.S. antitrust law, and a recent book by Senator Amy Klobuchar (D-MN), Chair of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, are some indicators of this trend. Along these lines, broad outcry broke out against rumored Department of Justice (DOJ) Antitrust Division leadership appointments of candidates representing big tech interests, such as Karen Dunn (Apple, Amazon), Renata Hesse (Google, Amazon), Susan Davies (Facebook), and against Deputy Attorney General Lisa Monaco’s (Apple, Google) involvement in deliberations over the nomination of a DOJ Assistant Attorney General (AAG) for Antitrust.

Nokia and Harting at the CJEU: The Issues Explained

Two cases pending at the EU Court of Justice (CJEU) address, respectively, questions on the licensing of standard essential patents (SEPs), and the availability of interim measures in litigation. With the hearings expected later this year, IPWatchdog looks at the key issues raised. It is relatively rare for patent cases to come before the CJEU, as there are no EU Directives or Regulations directly governing patents. However, the Court does hear patent cases when they also involve other aspects of EU law, such as Article 102 TFEU, concerning abuse of a dominant position; the Enforcement Directive; and the Biotechnology Directive. In the past few months, the German courts have referred questions in two important patent cases.

Transparency in 3G/4G/5G FRAND Licensing and ETSI’s IPR Database

A disturbing trend has recently emerged whereby an alleged lack of transparency associated with the European Telecommunications Standards Institute (ETSI) intellectual property rights database (IPR Database) is being used in support of antitrust allegations and to propose radical changes to the fair, reasonable and non-discriminatory (FRAND) licensing framework for 3G, 4G and 5G wireless technology. But is there really such a transparency problem or is this yet another attempt to tilt balance of power in favor of implementers and excuse hold-out? 

Unpacking 5G SEPs and Standards Contribution Data

With multiple reports published by many different entities on 5G leadership, it is hard to know who to believe, as there is little transparency about where the data comes from and what types of analysis were applied to retrieve the results, let alone how to try to reproduce any such analysis yourself. Most of the time, understanding standard essential patents (SEPs), standards and patents requires access to multiple databases, the valuable time of your subject matter experts, as well as both in-house and outside counsel. In the end, it can appear that you are spending far more resources on gathering the data than on gaining actionable knowledge from it to understand what it means to your business, your portfolio and your strategy.

The SSPPU is the Appropriate Royalty Base for FRAND Royalties for Cellular SEPs

A recent series of five articles on IPWatchdog address various aspects of licensing cellular standard essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms by examining statements from entities involved with licensing. The authors also provide their commentary on the statements and cite various authorities that they suggest are consistent or inconsistent with principles advocated in the statements. The articles lean heavily in favor of the positions of a few companies that derive significant revenue from SEP licensing. For this reason, they fail to present a balanced view. Indeed, to read the series, one might conclude that the major priority for SEP licensing should be to extract excessive revenues for SEP patent owners. Quite the contrary, a key priority should be applying FRAND safeguards against outsized, windfall profits resulting from abuse of SEPs to the detriment of innovative companies that engage in research and development and supply products to the marketplace. Those safeguards include applying well-established principles of patent law to SEPs, including when it comes to patent valuation and patent litigation, where a patent holder is rewarded with fair royalties that reflect the incremental value of any infringed and valid SEP.

A New Trial is Ordered with Respect to Damages in Optis Wireless v. Apple, Despite No FRAND Claims at Issue

On April 14, 2021, in a somewhat surprising about face, Judge Rodney Gilstrap ordered a new trial with respect to damages in Optis Wireless Technology, LLC et al. v. Apple Inc., Civil Action No. 2:19-cv-00066-JRG (E.D. Texas), despite previously ruling that no FRAND based claims remained in the case. This ruling adds even more silt to the already murky waters of damages for patents related to standardized technology. In a previous article, we discussed the confusing and problematic convergence of FRAND licensing rates and reasonable royalty damages for patent infringement, despite these two concepts having different origins and seeking to achieve different objectives: i.e., patent damages being a creature of statute and case law and seeking to compensate a patent owner for infringement, whereas FRAND commitments are rooted in contract and seek, amongst other things, to ensure that licenses can be obtained for standardized technology and that royalty stacking does not become an issue (e.g. as reflected in “top-down” approaches used to determine FRAND rates for standards essential patents). As noted in that article, one problem with this convergence is that it facilitates hold out. Why put money in the parking meter if the fine is no more that the fee?

SEP Litigation Trends: What Does the Data Say?

Standard-essential patents (SEPs) are on the rise as the number of yearly newly declared patents has almost tripled over the past five years; there were 6,457 net new declared patent families in 2015 compared to 17,623 yearly net new declared patent families in 2020 (see figure 1). The 5G standard alone counts over 150,000 declared patents since 2015. Similarly, litigation around SEPs has increased. One of the driving factors of recent patent litigation is, on the one hand, the sharply increasing number of SEP filings, and on the other, the shift from connectivity standards (e.g. 4G/5G, Wi-Fi) mostly incorporated in computers, smart phones, and tablets to new industry applications where standards are implemented in connected vehicles, smart homes, smart factories, smart energy and/or healthcare applications.

A Standard Essential Patent Valuation Perspective on Ericsson v. Samsung

As the battle over the adequate forum for Ericsson v. Samsung continues, the question arises as to how the court will eventually deal with the valuation of the standard essential patents (SEPs) at stake. Here, the U.S. courts are at an advantage. After all, the United States has from the outset illustrated global thought leadership on the valuation of SEPs. Historically, courts have accepted two principal methods to determine the value of SEPs: the Comparable Licenses Approach and the Top Down Approach. These methods have come to be seen as compatible with the Georgia Pacific Criteria, which set out the core valuation principles in the United States and, increasingly so, even beyond U.S. borders.

5G RAN Developments: Landscape and Liability

Changes in the 5G radio access network (RAN) are likely to increase interest in monetizing patents essential to RAN equipment and operations (RAN SEPs). One of these changes is the significant increase in the volumes of equipment like radio units (RUs) expected over the next decade. For example, China alone plans to deploy 6 million 5G cells by 2027, at an average cell spend of $28,500. Other changes likely to spur 5G RAN licensing are the increase of new entrants to the RAN equipment market and the use of open source software and off-the-shelf hardware in new RAN deployments. These latter changes are driven by the new Open RAN model promoted by operators seeking to break vendor lock in and foster equipment democratization and price competition. These changes naturally could pose a threat to the traditional RAN equipment businesses