Posts Tagged: "SEPs"

On January 12, a coalition of 28 property rights groups signed a letter addressed to U.S. Attorney General Merrick Garland and Assistant Attorney General for Antitrust Jonathan Kanter asking those officials to reconsider and withdraw a draft policy statement issued in early December regarding licensing negotiations and remedies for standard-essential patents (SEPs) subject to voluntary fair, reasonable and non-discriminatory (FRAND) commitments. According to the coalition, the U.S. Department of Justice’s (DOJ) statement will only serve to bolster the fortunes of China, the major economic rival to the United States, by allowing Chinese tech implementers to infringe SEPs without respect to the rights of U.S. innovators.

In Part I of this series of articles, we provided an overview of the 2013 and 2019 policy statements that preceded the 2021 Draft Policy Statement. In this Part II, we consider the language of a specific licensing commitment made to European Telecommunications Standards Institute (ETSI), and various legal pronouncements that have been made in relation thereto.

Much like a biological ecosystem, the development, commercialization, and licensing of standardized technologies involves a delicate balance among many diverse and competing participants. The 2021 Draft Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (hereinafter “the 2021 Draft Policy Statement”), however, appears to be primarily concerned with an issue faced exclusively by implementers when dealing with owners of larger patent portfolios, but without explicitly saying so. This observation is based on the 2021 Draft Policy Statement’s reference to the vague and ill-defined notion of patent “hold-up”.

The Justice Department’s December 6, 2021 Draft Policy Statement on Licensing Negotiations and Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (“2021 DPS”) badly misses the mark and merits a failing grade. By contrast, the 2019 PS (issued by the Justice Department, NIST, and the U.S. PTO) is eminently sound, and merits being reaffirmed. The DPS should be viewed in the context of the benefits conferred on society by patents that read on standards, commonly referred to as standard essential patents (SEPs). Given the economic importance of SEPs, public policy should encourage investment in them and ensure that they receive adequate legal protection. Such sound policies inform the New Madison Approach (NMA), publicly described by Assistant Attorney General for Antitrust Makan Delrahim in 2018.

Even as Europe and the rest of the world continued to face the unprecedented challenges of the COVID-19 pandemic in 2021, the development of 5G and other Standard Essential Patent (SEP)-enabled technology standards has continued at an unabated pace. While the year has not yet ended, more than 100,000 technical contributions have already been submitted at 3GPP meetings for 2G, 3G, 4G and 5G in 2021 – a near-record yearly contribution count. The invention and standardization of massive, complex communication technologies continues to generate significant numbers of SEPs. According to IPlytics data, the cumulative number of self-declared SEP families has surpassed 72,000 in 2021, indicating a five-fold increase in just 10 years.

This is Part II of a two-part article discussing FRAND (fair, reasonable, and non-discriminatory) licensing developments taking place in the United States in 2021. Read Part I here. After a slow summer on the FRAND licensing front, the Court of Appeals for the Fifth Circuit’s ruling in the matter of HTC v. Ericsson came in the dog days of August. As we wrote about here, the August 31 ruling dealt with, amongst other things, an appeal challenging the district court’s instructions to the jury regarding whether or not the license terms offered by Ericsson were FRAND and, more specifically, with respect to the issue of apportionment. Beyond finding that the failure to give instructions on an undisputed issue did not impair HTC’s ability to present its claims, the majority found that HTC’s proposed instructions “were not ‘substantially correct’ statements of law”.

On December 6, the Department of Justice – Antitrust Division (DOJ), U.S. Patent and Trademark Office (USPTO), and National Institutes of Standards and Technology (NIST) issued for public comment a “draft revised statement on remedies for the infringement of standards-essential patents (or SEPs) that are subject to a RAND or F/RAND licensing commitment, which also provides guidance on what demonstrates good-faith negotiation in this context.” The 2021 SEP Licensing Draft Statement responds to President Biden’s Executive Order on Competition, which called on the agencies to review the 2019 Trump Administration Statement dealing with SEP infringement remedies. The 2019 Statement in turn excised the anti-IP language from a 2013 Obama Administration Statement on this topic.

The U.S. Department of Justice – Antitrust Division (DOJ) is requesting public comment on a new iteration of the Joint DOJ-USPTO-NIST Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary FRAND Commitments. The announcement comes in response to President Joe Biden’s July 2021 Executive Order on Promoting Competition in the American Economy, which asked the three agencies to review the 2019 statement.

Standard Essential Patents (SEPs) are on the rise; the number of newly declared patents per year has almost tripled over the past five years. There were 17,623 new declared patent families in 2020, compared to 6,457 in 2015 (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 the shift in connectivity standards (eg, 4G/5G, Wi-Fi) that in the past were mostly used in computers, smartphones and tablets, but are now increasingly implemented in connected vehicles, smart homes, smart factories, smart energy and healthcare applications. Another reason why litigation may rise further is the belief that large SEP owners such as Huawei, ZTE or LG Electronics may soon sell parts of their SEP portfolios, which may likely end up in the hands of patent assertion entities (PAEs). One way or another, it is anticipated that the majority of patent holders will actively monetize their SEPs covering standards such as 5G, Wi-Fi 6 or VVC in this fast-moving, high-investment environment. Any company adopting these standards must decrease operational risk and expense exposure by taking a proactive strategy towards SEPs rather than a reactive one.

Last week, IPWatchdog hosted its annual SEP conference, which once again took place in virtual format. I either moderated or directed/produced all the panels, so I stayed busy throughout the week, but still managed to pay attention to what was being said by the panelists. For some panels I participated more, making it a bit more challenging to take notes, so when I say what follows are statements that particularly piqued my interest, I am by no means suggesting there weren’t many more golden nuggets of wisdom imparted to the over 900 registrants over our four-day program.

tandard Setting Organizations (SSOs) exist as a mechanism for industry innovators to work together to collectively identify and select the best and most promising innovations that will become the foundation for the entire industry to build upon for years to come. Those disclosing patented technologies to an SSO during the development of a standard commit to offering a license at a FRAND (which stands for Fair, Reasonable and Non-Discriminatory) rate to the extent the patent is essential, as explained by Curtis Dodd, Chief IP Counsel for Harfang IP, during the second panel of SEP 2021 yesterday, which focused on FRAND and patent damages. Indeed, the myriad issues surrounding FRAND obligations and the disclosure of innovations to SSOs were the focus of the three panels that took place on day 1 of SEP 2021, hosted by IPWatchdog.

A judge has affirmed the ability of the UK courts to settle FRAND terms of a patent license covering foreign patents, despite the defendants challenging the court’s jurisdiction. But in his judgment, published on November 4 20201, His Honour Judge Hacon noted that the current framework for settling a global license between owners of standard essential patents (SEPs) and implementers “is plainly not satisfactory.” He explained: “[I]t does encourage expensive parallel litigation in several jurisdictions and more uncertainty than is necessary. I doubt that it can be sustained in the long term.” The case is one of many that SEP owners have brought before the courts since the UK Supreme Court judgment in the Unwired Planet and Conversant litigation established English courts’ jurisdiction to set global FRAND terms in August 2020.

The intersection of intellectual property (IP) and antitrust law is again a hot debate after a recent speech by the U.S. Department of Justice Antitrust Division’s (“DOJ” or “Division”) Economics Director of Enforcement, Jeffrey Wilder, titled Leveling the Playing Field in the Standards Ecosystem: Principles for a Balanced Antitrust Enforcement Approach to Standards-Essential Patents. Before we dive in on the key takeaways from the speech, and our thoughts on potential ramifications, it bears briefly mentioning how we got here.

5G—the next generation of telecommunications standards provided by the Third Generation Partnership Project (3GPP)—began implementation in 2019. It boasts significant technical benefits over prior generations, including higher speeds, greater bandwidth, lower latency, and larger coverage areas. Unlike previous 3GPP standards, 5G is not limited to cellular phones. Rather, 5G will support a plethora of technologies ranging from Enhanced Mobile Broadband to Massive Internet of Things. Accordingly, 5G will support a tremendous amount of economic activity: by 2026, 5G will have 3.5 billion subscribers and will account for 84% of mobile subscriptions in the United States. By 2035, 5G is expected to underly $13.1 trillion in global economic activity, accounting for 0.2% of the 2.7% projected annual global GDP growth.

On July 20, President Joe Biden nominated Jonathan Kanter as Assistant Attorney General, a position that would place him at the head of the Antitrust Division at the Department of Justice. Kanter is an antitrust lawyer with over 20 years of experience. He is currently a partner at The Kanter Law Group LLP, which is a boutique antitrust law firm that advocates in favor of federal and state antitrust law enforcement. Prior to founding the The Kanter Law Group, he was Co-Chair of the antitrust practice at Paul, Weiss, Rifkind, Wharton, and Garrison LLP. Kanter also served as an attorney for the U.S. Federal Trade Commission’s Bureau of Competition.