ITU Undertakes Work On Standards Essential Patents 12/10/2012 by William New, Intellectual Property Watch Leave a Comment Share this Story:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Google+ (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Much of our best content is available only to IP Watch subscribers. We are a non-profit independent news service, and subscribing to our service helps support our goals of bringing more transparency to global IP and innovation policies. To access all of our content, please subscribe now. The United Nations International Telecommunication Union (ITU) has tasked an expert group on intellectual property rights with coming up with ways to update ITU patent policy with an eye toward clarifying litigation involving “standards-essential patents.” This has drawn the attention of some of the world’s largest tech companies. The expert group meeting on 11-12 October was asked to start a process that could take up to a year, according to ITU officials. The group meets regularly during the year. A one-day Patent Roundtable on 10 October of stakeholders included regulators, IP offices, other international organisations, academics, and representatives of Apple, Motorola and other companies. The meeting saw divergences and at times “heated debate,” said Malcolm Johnson, director of the ITU Telecommunication Standardization Bureau (TSB), who concluded, “In my view, providing further clarification to the meaning of RAND commitments would be beneficial.” RAND or FRAND terms – fair, reasonable, and non-discriminatory (RAND in the United States) – apply to patents which are essential to established standards, aimed at helping ensure others can licence the patented technologies. “ITU has a determination to take a leading role in the development of effective RAND-based policies in the ICT sector,” Johnson said, echoing a point made by ITU Secretary-General Hamadoun Touré in his opening remarks. The ITU said there has been a rise in litigation involving standards-essential patents (SEPs), which led it to call for the 10 October Patent Roundtable. And at the meeting it heard evidence of a role for it to play. “Litigation involving SEPs and the role of standards development organisations is a ‘hot topic,’” Johnson told reporters afterward. “Although some participants in today’s event argue that the current SEP litigation is not necessarily indicative of a harm to the standards ecosystems, others share a concern that, through SEP litigation, intellectual property can be used as a tool to reduce innovation. In this context, I believe that providing market players with clear, transparent, effective and up-to-date patent policies works for the benefit of the industry as a whole.” After hearing from stakeholders, Malcolm said there are two key issues to be addressed: the availability of injunctive relief in SEPs, and the meaning of “reasonable” in RAND. An injunction prevents another company from using the technology, and ITU asked if it should be allowed by SEP owners who have committed to making their technology available under RAND terms. Some companies argue that committing to licence under RAND terms should represent a limitation on their right to seek injunctive relief. There could be certain circumstances allowing it, and some argued to leave it in place. “Those in favour of maintaining injunctive relief for SEP owners have noted that imposing limitations on the right of these companies to enforce their intellectual property rights would or could deter them from participating in the standardisation process,” Johnson said. On what constitutes “reasonable,” the ITU patent policy – and possibly that of other standards bodies – does not provide explicit guidance, Johnson said. Currently, the determination of a reasonable royalty is left to the bilateral negotiations. But as some failed negotiations have led to litigation involving SEPs, Johnson said some are requesting more transparency and consistency on interpretation. He also said the ITU would stay out of bilateral negotiations. The expert group will work toward a recommendation “aimed at providing high level principles clarifying the meaning of reasonable, and the issue of injunctive relief, in the RAND context,” Johnson said. Two other issues raised in the roundtable were reciprocity and transferability, which ITU said it has already been addressed in an agreement. It was questioned whether FRAND terms carry through when a patent is sold to another owner. Also, it was raised that a company like Apple has concerns that royalties should relate only to the component in question, not the value of the larger product. Regulators Issue Warning At the event, US and European regulators highlighted problems of patent “holdup,” by which owners of SEPs may use their advantage to exclude a competitor from a market or obtain an unjustifiably high price for its invention. Raising the issue sends a message to industry to address the problem themselves or regulators will begin to step in. “The world at this moment is awash in lawsuits related to patented technologies used to make mobile devices which have raised competition concerns around the globe,” said Renata Hesse, deputy assistant attorney general in the Antitrust Division of the US Department of Justice. “Standards bodies whose members choose to take steps such as these will help the market for the standardized product to work efficiently by lowering costs, increasing transparency and reducing uncertainty – all of which benefit innovation and competition.” Hesse offered several suggestions from the division on changes to standards bodies’ patent policies, noting that implementation of the proposals are not mandated by her agency. These include: – Establish procedures to identify in advance whether proposed patented technology without FRAND terms should be included in the standard. – Clarify that licensing commitments made to standards bodies bind both the current patent holder and subsequent purchasers of patents. – Give licensees the option to licence patents under FRAND on a cash-only basis and prohibit mandatory cross-licensing of patents that are not essential to a standard. “To my mind,” Hesse said, “a patent holder who participates in the standard-setting activities and makes a F/RAND licensing commitment is implicitly saying that she will license the patent claims that must be used to implement the standard to any licensee that is willing and able to comply with the licensing terms embodied in the commitment.” So, she said, “it would seem appropriate to limit a patent holder’s right to seek an injunction to situations where the standards implementer is unwilling to have a neutral third-party determine the appropriate F/RAND terms or is unwilling to accept the F/RAND terms approved by such a third party.” – Lower transaction cost of determining FRAND licensing terms. “Standards bodies might want to explore setting guidelines for what constitutes a F/RAND rate for devising arbitration requirements to reduce the cost of lack of clarity in F/RAND commitments,” Hesse said. – Consider ways to increase the certainty that “patent holders believe that disclosed patents are essential to the standard after it is set.” Recent litigation in the US has shown that a number of patents declared essential to a standard are not, she said. Answering the Call Rudi Bekkers of the Eindhoven University of Technology, laid out the state of affairs to the patent roundtable, saying that litigation is a “cornerstone” of the FRAND system, and the FRAND system is not broken, while noting that SEPs are far more likely to be litigated than non-SEPs. But he reinforced the notion that there are areas that could be addressed by standards bodies, as changing market dynamics and a rise in the transfer of ownership of SEPs. There are wide interpretations of FRAND in legal disputes, and judges and juries lack experience and knowledge of it. In addition, information quality is low on standards lists for identifying SEPs, and in general there is “a lot of gaming going on in the system.” There are thousands of SEPs already, he said, asking, “Are they all really useful, or just there to serve their owners?” Touré justified the meeting beforehand, saying, “We have … called this meeting in line both with our broader mandate, as a specialized agency of the United Nations, to connect the world, as well as the standardization sector’s mission to produce high-quality, demand-driven international standards, with the principles of global connectivity; openness; affordability; interoperability; and security.” “Clearly,” he said, “the current cases of SEP litigation could have a negative impact on our ability to fulfil this mission.” “With our unique membership mix – comprising 193 Member States and some 700 Sector Members, including both private sector organizations and academic institutions – we are well qualified to provide a global platform where all stakeholders can come together to discuss such an important issue,” Touré said. ITU’s Johnson insisted there is a recognised concern. “In recent months we have seen what seems to be a rise in cases of conflicts relating to standards essential patents,” he said at the outset of the meeting. Johnson explained the ITU patent policy as such: “With the increasing convergence of information and communications technology, the ITU, ISO and IEC began to discuss harmonizing IPR policy approaches through our World Standards Cooperation and in March 2007 we agreed on a Common Patent Policy for ITU/ISO/IEC.” “The Common Patent Policy allows for companies’ innovative technologies to be included in standards as long as intellectual property is made available to all implementers under reasonable and non-discriminatory terms and conditions. We also developed a set of guidelines on the implementation of this policy which includes the need for early disclosure of any related patent.” “So we very much hope that the discussion today will identify whether we need to improve our policy, or clarify our guidance on its implementation, to help overcome these difficulties,” he said. And apparently, the need was identified. Johnson even signalled that IPR issues can arise in all of the other areas of ITU’s work as well, such as multimedia, IPTV, video, broadband cable and TV, security, ICTs for climate change, and accessibility. Doubters Add Perspective There were some doubts around ITU’s move into this area. One industry representative said it appears to be a “land grab,” while others feared it might be part of a tendency to over-regulate. Some people also said another standards body, the European Telecommunications Standards Institute (ETSI), is already working on this issue. ETSI has established over 125,000 declared essential standards and is at the centre of many of the standards issues relating to mobile telephony and smart phones, such as 3G and LTE. Dirk Weiler, chair of the ETSI General Assembly and its IPR Special Committee, told the 10 October gathering that it was “wise” of ITU to invite ETSI, as it is “THE place where the vast majority of the standards for mobile communications is developed.” ETSI’s membership reaches around the world, and it is already working on these issues, in discussions that involve all stakeholders including the ITU, Weiler said. “We have started a series of meetings addressing the questions related to FRAND commitments, use of injunctive relief, reciprocity and obligation in the case of transfer of patents,” he said. The next meeting of the ETSI IPR special committee will be held next week, and will involve many of the participants of the ITU meeting. Weiler noted that many speakers said that non-SEP litigation “clearly outnumbers” the SEP-related litigation. He also said that ETSI’s patent policy was drafted in vague terms on purpose, in order to leave compensation or reciprocity or limitations to be left to the market. Weiler said that since 2007, ETSI has offered the possibility for patent owners to disclose their licensing terms but that none have opted to do so yet. While FRAND has been very successful, the ETSI IPR committee is “actively working” to “further clarify FRAND and the consequences of such commitment in licensing negotiations.” “I have a clear expectation that ETSI will agree on proposed changes [regarding] the obligations in case of a transfer of a patent,” Weiler said. But he noted that ETSI is member-driven and policy changes require consensus or “large majority.” In its contribution to the event, Qualcomm [corrected] describes the markets, and downplays the concern about litigation. “The so-called ‘patent wars’ should be seen for what they are: a small number of participants in a highly competitive industry in which change and innovation occur at lightening speed are locked in a ferocious battle to establish market positions for competing operating systems, with litigation being a marginal aspect of this contest,” it said. Contributions to the event are here. Nick Ashton-Hart of the Computer and Communications Industry Association (CCIA), spoke at the event and told Intellectual Property Watch afterward: “The issues discussed by the panel are very important, and the only way an international discussion of FRAND and RAND licensing is possible is if the WTO, WIPO, and ETSI itself are at the centre of any work plan to discuss these issues, as those institutions have the expert knowledge of the substance and these issues cannot be resolved in isolation from understanding the broader context and implications for unintended consequences.” WTO is the World Trade Organization and WIPO is the World Intellectual Property Organization. “It has to be remembered that any substantive discussion of licensing in the ICT industry is of huge importance to SMEs [small and medium-sized enterprises] everywhere, including in developing countries,” Ashton-Hart said. “The ITU panel was very visibly lacking in SME and developing country participation. This area of public policy is too important to economic and social development worldwide for up-front fees to be a requirement for participation, as would be the case at the ITU.” A representative of an international organization speaking at the ITU event offered some perspective on the current patent wars and efforts emerging at the ITU. “We know that smartphones are not the first technology to generate patent wars,” he said. “There were similar periods of intense litigation, for example, with fixed wing aircraft and television. What we see now differs in scale and pace, and dollars at stake, but essentially reflects the system at work to settle property rights that were granted to incentivize the development of game-changing technology.” “While looking at the factors that lead to litigation and its potentially chilling effects,” he said, “we should consider all phases of the process, from quality in the granting of patents, to the inefficiencies and uncertainties of international arbitrage itself, where varying national laws lead to a special kind of arbitrage.” But most importantly, the complexity of the patent “ecosystem” should be remembered, so that it should not be assumed that variables can be adjusted with substantial risk. An example would be to deny exclusionary relief to anyone that has embraced a FRAND commitment, he said. “This may seem elegant, but it’s a very blunt instrument and should be compared with more nuanced approaches that balance the obvious consequences of an open commitment to licence with the need to preserve an incentive for infringers to seek a licence rather than litigate,” he said. Adding definitions can also be counterproductive, he said, as “layering on rules risks replacing flexibility with rigidity while failing to enhance predictability.” In short, the official said, “as with all complex systems, our deliberations should be deeply respectful of the law of unintended consequences.” Share this Story:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Google+ (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Related William New may be reached at email@example.com."ITU Undertakes Work On Standards Essential Patents" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.