The conflict between monetization-focused standard-essential patent (SEP) holders and implementers (the latterg group also including major SEP holders who are nevertheless primarily interested in making products) appears to be everlasting. At times it even looks like both sides are ever more deeply entrenched. But at least they're still talking to each other, and not just about each other.
Yesterday the IP policy unit of the European Commission's Directorate-General for the Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) held a webinar on "FRAND licensing & valuation" with a very balanced roster of high-profile speakers and a sizable worldwide audience. The webinar took place via Microsoft Teams and was moderated by DG GROW official Elena Kostadinova, who might have been a TV news anchor in a former life.
You can find the detailed agenda on this webpage. If time permitted, I could have done a post on each of the three parts.
A survey by the Commission crystallized what SEP holders and implementers are primarily interested in. Among implementers, "license to all" was by far the most popular subject. I know I'm a bit difficult to please with terminology, and in my recent commentary on the SEP Expert Group report I explained why I oppose the terms "access for all"/"license to all" as "access for all" paints too rosy a picture while "license to all" sounds like built-in redundancy (though it's actually about giving the implementing side the choice of the level at which to take a license). But I recognize I'm the only one out there to criticize those terms, so to my dismay they're here to stay.
The component-level licensing panel--the third and final part of yesterday's webinar--was indeed the one where the different views of the two camps became clearest, not only in the webinar itself but also in the parallel Q&A chat.
Professor Damien Geradin, founder of the Geradin Partners antitrust boutique, acknowledged that both sides of the debate make interesting arguments. In his experience, "most reasonable people" agree that license agreements shouldn't be concluded at multiple levels of a given supply chain--but there are divergent views on which level it should be.
Qualcomm licensing chief Alex Rogers accused those advocating the smallest salable patent-practicing unit (SSPPU) as the royalty base of just seeking to "devalue technology" with the effect of "disincentivizing from doing this extraordinarily important research" that enables a $4.8 trillion value of all cellular technology worldwide, while SEP royalties are on the order of just $8-13B.
His concern was well-stated, but not well-founded in my opinion. The problem is that the multi-trillion-dollar value he referred to involves gigantic investments of various sorts, and everyone else could also point to that total value and complain about being undercompensated. I'm not worried about Qualcomm or other major SEP holders laying off talented engineers anytime soon.
Bird & Bird partner Richard Vary, formerly Nokia's litigation chief and now its outside counsel in connection with automotive SEP licensing matters, equated the concept of patent exhaustion with a "windfall" for downstream members of a supply chain. In my view, the opposite is true: the reason courts around the globe adopted patent exhaustion was to avoid "double dipping"--in other words, an ill-gotten windfall for patent holders. Mr. Vary is extremely knowledgeable and persuasive, but I don't agree with his agenda in the SEP licensing context. I'll give you another example in a moment.
Marianne Frydenlund of Nordic Semiconductor discussed SEP licensing from her company's perspective, and Nordic Semi is pretty successful, but nowhere near as large as Qualcomm.
Munich University of Technology professor Joachim Henkel explained from an economic perspective why small and medium-sized IoT companies are not really equipped to deal with SEP licensing at the level of their own end products--and better off if their suppliers take care of it. Professor Henkel just published a paper on this subject, and yesterday's presentation was like a summary of that paper.
It's unfortunate that some major SEP holders just don't care about the collateral damage those IoT startups suffer from a refusal to license component makers and from the practice of privateering (providing patents to trolls, which no one does on a larger scale than Nokia and Ericsson, and some of the trolls they feed then shake down every implementer they find even some very small companies). Mr. Vary, whose opinions in this context are materially consistent with--or even 100% identical to--Nokia's, was dismissive of those concerns over IoT startups' ability to deal with the SEP licensing challenge. However, when small organizations without much of a legal department receive demand letters listing hundreds of declared-essential patents (the fewest of which are actually essential), that is a problem. Patent trolls taxing innovative startups is economically and politically undesirable.
This takes us full circle back to the official long-form name of the organizer of yesterday's conference: it's not DG Patent Monetization or DG SEP Overleveraging. It's the DG for the Internal Market, Industry, Entrepreneurship and SMEs. It's unfortunate that IoT startups aren't even 1% as active in Brussels as Nokia or Ericsson. But I hope the Commission will take their concerns in mind when shaping its policies in this field, and when crafting its input to the European Court of Justice with respect to component-level licensing of SEPs.
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