By William New
Technology companies have long recognised the importance to their economic growth of patents and standards, but increasingly they are focusing on the intersection of the two in order to seek changes to the patent system, industry experts told an event at the World Intellectual Property Organization on 29 November.

The presenters were Tim Frain, director of IPR in the regulatory affairs department of Nokia Corporation, and Paul Davey, director of intellectual property at the Vodafone Group.

Both industry representatives encouraged government officials in the audience to consider legislative remedies to problems they perceive in patents interfering with standards related to technological innovation.

Davey and Frain discussed concerns that some holding licenses for technology may not be willing to recognise the need for access to standard-related patents in order to ensure the interoperability of technologies. Frain argued that the current patent regime “may no longer be sufficient,” and suggested a legislative change might be necessary.

In his presentation [.pdf], Davey said the competitive market for technology in standards is “not working properly,” and that consumer price and innovation suffer. He also said that patent speed does not match market speed, there are jurisdictional differences in patent laws, variation in patent quality, and legal uncertainty for businesses. He suggested that it may sometimes be better to proceed without full knowledge of all patent regimes. “Ignorance is the best defence!” he said.

Davey suggested greater transparency of licensing terms for technology, earlier transparency of patents, better quality patents. He said the group is urging policy makers to promote strong disclosure policies, the adoption of early publication rules (under 18 months), faster processes for patents, and harmonised protection regimes and interpretation practices. Finally, he said, “grant quality patents, not numerous patents, to promote innovation.”

Frain’s paper [.pdf] provided an overview of a related project at the European Telecommunications Standards Institute (ETSI), which is currently reviewing its internal intellectual property rights policy.

“Interoperability is the cornerstone of the information and communications technology sector, and has an ever-growing role in the era of digital convergence, where the traditional boundaries between distinct computing and communications products are becoming increasingly blurred,” Frain said.

Frain described different kinds of standards, and said there is an “innate tension” between patents and interoperability “because patents could be used to hinder interoperability and prevent others from developing new solutions that can talk to existing solutions.” As a result, standards-setting bodies oblige members to license their essential patents on “reasonable and non-discriminatory” terms so standards are not blocked.

But, he said, “There is growing concern in the market whether the standard-setting bodies’ IPR regimes can be potent enough to relieve that tension in the case of an unwilling – or indeed an unreasonable – licensor (or licensee).” He added that patent owners who are not standard body members present an additional problem.

There are different potential ways to address this, Frain said. For instance, there is external legislation such as competition law, which prevents misuse of the dominant position a patent provides.

There also are “internal” legislative measures such as creating a “narrow, well-defined” exception to the patent holder’s exclusive rights; providing a compulsory licensing framework for interoperability purposes; or creating a misuse approach that would render a patent unenforceable under certain specific circumstances, he said.

For use of compulsory licenses, Frain cited Article 31 of the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which allows for use without authorisation of the right holder.

The review of its IP policy by ETSI, an independent organisation based in France with 654 members from 59 countries, was begun in January 2006. The review is examining perceived shortcomings in the body’s policy, which leaves open patent owners’ interpretation to the requirement that licensing be permitted on “fair, reasonable and non-discriminatory (FRAND) terms.”

Frain said the group is looking at a problem of “royalty stacking,” which arises from the continuous development of technologies that build on previous patented technologies. In addition, there are problems of participants who possess patents but do not themselves manufacture standard-compliant products, or patent holders who are not at all active in the technology field but seek merely to receive royalties, entities referred to as “patent trolls.”

Nokia along with Ericsson and Motorola have submitted a proposal to ETSI for a clarification of the meaning of the FRAND terms. It would strengthen dispute resolution mechanisms, increase transparency of essential patents and clarify what is essential.

Francis Gurry, WIPO deputy director general in charge of patents, said in an interview, that the patent and standards issue represents “the intersection of two policy areas: the generation of technology where there is a patent incentive, and the diffusion of technology where there is an interoperability incentive.” These two areas are essential to economic growth in a knowledge economy, he said.

Gurry said a choice of a technology means by extension a choice of a patent or patents related to that technology.

William New may be reached at wnew@ip-watch.ch.