IEEE Patent Policy Changes Seek To Put Brakes On Surging Litigation03/03/2016 by Dugie Standeford for Intellectual Property Watch Leave a CommentShare 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)IP-Watch is 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. You also have the opportunity to offer additional support to your subscription, or to donate.Intense debate, reignited by a 2012 International Telecommunication Union roundtable on rampant patent litigation and the “innovation-stifling” use of intellectual property, together with the growing lack of standards bodies’ patent policies, prompted the IEEE Standards Association (IEEE) last year to revisit parts of its patent policy that had been causing some concerns, Managing Director Konstantinos Karachalios said at a 17 February Oxfirst webinar.The changes aim to clear up some ambiguities. Perhaps predictably, however, some pushback has arisen among industries affected by the change. Given the broad consensus in the patent world that “a patent policy which is overly ambiguous is worse than no policy at all,” the New Jersey-based IEEE (Institute of Electrical and Electronics Engineers) last year revisited parts of its patent policy that had been causing concerns, Karachalios wrote in a January article for The Patent Lawyer. The changes aim to help alleviate the rampant patent litigation noted by the UN ITU and other standardisation bodies, Karachalios said.Earlier Clarification Efforts UnsuccessfulIEEE uses patent policy to make more informed technology selections by developing information on the existence of potential Essential Patent Claims (EPCs, also called standards-essential patents), Dorsey & Whitney LLP attorney Michael Lindsay, IEEE external counsel, said at the webinar. Such a policy also protects patent holders and users by clearly describing their obligations and offering assurance to implementers.IEEE standards can include “use of Essential Patent Claims” and the body asks standards-development participants to identify holders of potential essential patents, Lindsay said. If IEEE receives notice that a proposed standard may require the use of a potential EPC, it asks the patent holder for licensing assurance on an IEEE Standards Board-approved Letter of Assurance (LOA) form, a request that must be made “without coercion.”Under a request for licensing assurance a submitter agrees to make a licence for EPC available to an unrestricted number of applicants on a worldwide basis, without compensation or under reasonable rates, with other reasonable terms and conditions that are “demonstrably free of any unfair discrimination, for any compliant implementation that practices the EPC for use in conforming with the IEEE standard,” Lindsay said.A patent holder then has several possible response options, he said. It can deny awareness of an EPC, submit an LOA committing to licence its EPC royalty-free or with a reasonable royalty, or agree not to enforce the EPC. The patent holder could also decline to give any assurance about its licensing intentions, or simply not respond.LOAs are voluntary, and participants in IEEE standards-development are not required to provide licensing assurance in order to participate, said Lindsay. The IEEE doesn’t bar patent holders from seeking royalties, nor does it set reasonable rates, he said. Parties are free to seek injunctions, and the IEEE doesn’t determine patent validity, essentiality or infringement.In a 2007 update, the IEEE tried to clarify what a “reasonable” royalty rate is, said Lindsay. The compromise language says the LOA submitter may, but isn’t required to, disclose its maximum rates and other sample terms and conditions. However, he noted, companies failed to use that option, leaving the meaning of “reasonableness” ambiguous.That problem, and the 2012 ITU roundtable on surging patent litigation, led the IEEE to revisit its patent policy. The updated policy, which took effect in March 2015, now offers more clarity on how to determine “reasonable” royalty rates, what products which implement a particular standard are entitled to a licence, when injunctions for infringement are available and when reciprocal cross-licensing can be requested, Lindsay said.Devaluing Essential Patents?The revised policy won a favourable business review from the US Department of Justice Antitrust Division, said Lindsay.However, IEEE’s American National Standards Institute (ANSI) accreditation was challenged on other grounds by seven technology-creating companies – Qualcomm, Ericsson, Alcatel-Lucent, Siemens, Philips, Orange and Fraunhofer – Ericsson IP & Competition Director Dina Kallay said in a 1 March interview. Many other significant technology players, including IBM and BlackBerry, Panasonic and GE, also oppose the new policy, she said.The appellants argued that the updated policy was developed through a closed, ad hoc procedure dominated by technology users (licensees), Kallay said. The IEEE sought public comments but those responses were vetted by the closed group, which generally didn’t accept comments from technology creators, she said. At the end of the process, the group approved a patent policy which “clearly devalues essential patents,” she said.There were two main grounds for appeal, said Kallay. On the process side, appellants contended that IEEE failed to follow the global standards-development standards of the World Trade Organization Technical Barriers to Trade Agreement, she said. The WTO TBT contains a code of good practice which sets out how to create an “international standard” and requires, among other things, that the process be transparent, open and balanced.The second ground for challenge concerned allegations that the text of the new IEEE policy was inconsistent with ANSI’s Essential Requirements, said Kallay. Among other things, the new policy severely limits injunctive relief, and defines “reasonable rate” of royalty, something ANSI has always left open to bilateral negotiations, she said.The IEEE policy states that companies are free to negotiate, but the changes mean that where parties fail to reach amicable agreement, courts evaluating essential patents subjected to the new policy will deem them less valuable than under existing patent law due to the new policy’s severe restrictions on injunctive relief, specific “reasonable rate” factors, new definition of “compliant implementation” and other revisions, Kallay said.The market is already seeing the results of the policy in the fact that many companies are declining to give LOAs, thereby refusing to give assurance of access to their standards-essential patents, Kallay said. Some businesses, including Ericsson, are choosing to give their assurances under the pre-existing policy, she said. All of this creates uncertainty and leaves technology users implementing IEEE standards potentially vulnerable to patent challenges, she added.Appeal DeniedIn its 25 February decision, the ANSI Executive Standards Council (ExSC) dismissed both grounds for appeal.The claim by Ericsson and others that the process IEEE used to develop the revisions to its patent policy failed to reflect a consensus of all interested stakeholders was unpersuasive because it rested on the “false premise” that the Essential Requirements apply to the development of a standards-setting organisation’s procedures, rather than the approval of standards, the ExSC wrote. Moreover, the panel said, the WTO TBT code of good practice and other documents cited do not require a different interpretation of the Essential Requirements.Additionally, IEEE’s patent policy does comply with ANSI’s Essential Requirements, the panel said. The fact that there are differences between IEEE’s patent policy and ANSI’s doesn’t in itself signal non-compliance, it said. As long as a standardisation body’s customised policies align with the requirements in ANSI’s patent policy, “they will be deemed to be in compliance,” the decision said.Moreover, while IEEE’s patent policy may be “more stringent” than the laws in the US or abroad, “there is nothing in ANSI’s Patent Policy that forbids that,” the panel said.The appellants have until 17 March to appeal the decision to the ANSI Appeals Board. Ericsson would not comment on whether it plans to appeal.IEEE webinar slides are available here.ANSI’s appeal process is available here. Image Credits: IEEEShare 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)RelatedDugie Standeford may be reached at email@example.com."IEEE Patent Policy Changes Seek To Put Brakes On Surging Litigation" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.