Patent licensing: 5G & the Internet of Things

The next telecommunications standard, 5G, and the nascent Internet of Things (IoT), promise a world of high-speed interconnectivity. We’re already accustomed to people talking to smart devices to ask them to play music, or to order a taxi or takeaway. The technology for truly smart homes and even smart cities is following closely (see here for examples of how the IoT is already being used).

Standardisation will be essential to maximising the benefits of both the IoT and 5G. After all, there’s no point in having a smart thermostat that can be adjusted remotely if you can’t connect to it whilst out of the house because your phone is made by a different manufacturer. Standardisation will ensure that 5G/IoT devices and systems can connect and work together.

There will be thousands of patents essential to the operation of the standards developed. As the IoT grows and 5G is rolled out, the issue of how these patents are licensed will become increasingly important. Standard essential patents (SEPs) have to be licensed on a FRAND basis, but determining a FRAND royalty rate is a challenging task.

The Commission’s Roadmap

Following two studies on SEPs published at the end of last year (see here), on 10 April 2017, the Commission released a Roadmap that sets out its plan to publish a ‘Communication on Standard Essential Patents for a European digitalised economy’ later this year, possibly as early as May or June. The Communication (which will not have the binding force of a Directive or Regulation) is intended to complement the Commission’s Digital Single Market project, and to help work towards the goal of having 5G rolled out across the EU by 2025. 

The Roadmap identifies three main issues that the Commission will seek to address in its Communication to ensure a balanced, flexible framework for SEP licensing:

  • Opaque information about SEP exposure: the lack of effective tools for potential licensees too identify which patents they need to take licences for in order to implement relevant standardised technologies.
  • Unclear valuation of patented technologies: the difficulties in assessing the value of new technology (for both licensors and licensees), including the lack of any widely accepted methodology.
  • Risks of uncertainty in enforcement: the general framework provided by the CJEU in Huawei v ZTE is a starting point for agreeing a FRAND royalty rate, but it does not provide complete guidance. There are many technical issues that aren’t addressed, such as how portfolio licensing, related damages claims, and ADR mechanisms should be dealt with. (NB: some of these issues have been recently addressed in the UK case Unwired Planet v Huawei, see our initial thoughts on that case here.)

It is unclear if the Communication will address other issues with standardisation and SEP licensing, such as over-declaration, hold-up, hold-out, the appropriate royalty base (a particularly difficult challenge in the diverse world of the IoT) or whether a total aggregate royalty burden is appropriate.

Use-based licensing?

The Roadmap does not offer any specific details as to how the Commission intends to solve the issues it identifies. However, according to MLex (here – subscription required), an outline of the Commission’s Communication seen in February suggested that the Commission was considering a licensing model that would enable licensors to offer licensees different royalty rates depending on how the relevant technology is used. This could extend to allowing licensors to refuse to offer a licence if the final use of the technology cannot be identified and tracked.

This suggestion has caused concern amongst a number of companies. ACT | The App Association, an organisation sponsored by Apple, Facebook, Microsoft, PayPal & others which represents more than 5,000 small technology firms, has written to the Commission claiming that such a licensing model poses a substantial threat to innovation. It argues that in order for suppliers to obtain licences under this model, they might be required to monitor their customers’ business practices and potentially to charge different customers different prices depending on how they use the technology. It also claims that this model could appropriate the value created by new innovators. If a company succeeds in developing a new use for a particular sensor by incorporating it into a health app for example, it might find itself being charged higher royalties for this new use of the sensor.   

We have reported before on how new licensing models may be required to make best use of the IoT. Qualcomm, Ericsson and Royal KPN (among others) have backed a new licensing platform called Avanci. This is designed to remove the need for lengthy bi-lateral licence negotiations by making flat rate FRAND licences available for particular patent portfolios. However, it is now over six months since Avanci launched and there have been no reports yet of it successfully concluding any licence agreements.

The proper royalty base for patent licences has been a controversial topic for a number of years now. There has been considerable debate over whether licences should be based upon the price of the smallest component in which the patent is implemented, or the final price of the end product. This issue has been addressed by the courts on occasion, particularly in the US (see our post on CSIRO v Cisco here for example).

The new Communication is intended to provide best practice guidance on SEP licensing. If the Commission does opt for a use-based licensing model, this would be a controversial choice. However, whatever the Commission decides, given the number of conflicting interests and amounts of money at state, it is unlikely to satisfy everyone. 

Compulsory Licencing: the Brave New World for (non-personal) data in Europe?

The Commission has published its Data Economy Package for non-personal data*, which is the final building block of its Digital Single Market (DSM) strategy – see our previous posts on the DSM here, here; and here.

With its new package, the Commission aims to: 

  • review the rules and regulations impeding the free flow of non-personal data and present options to remove unjustified or disproportionate data location restrictions; and
  • outline legal issues regarding access to and transfer of data, data portability and liability of non-personal, machine-generated digital data.
The package includes a Consultation on Building the European Data Economy, a Communication and Staff Working Paper.

Why is the Commission acting on data?

The economic rationale is that the EU data economy was worth €272 billion in 2015, and is experiencing close to 6% growth a year.  It is estimated that it could be worth up to €643 billion by 2020, if appropriate policy and legal measures are taken. Data also forms the basis for many new technologies, such as the Internet of Things and robotics.  The Commission’s ambition is for the EU to have a single market for non-personal data, which the EU is a long way from achieving.  The Commission refers to the issues in terms of – the “free movement of data”, suggesting something akin to a fifth EU fundamental freedom. 

What action is the Commission proposing to take? 

The Consultation sets out options for addressing the legal barriers to the free flow of non-personal data, in particular in relation to:

  • data access and transfer;
  • unjustified localisation of data centres;
  • liability related to data-based products and services; and
  • data portability.
Some of the more eye-catching (and interventionist) options set out by the Commission are the introduction of:

  • legislation to define a set of non-mandatory contract rules for B2B contracts when allocating rights to access, use and re-use data;
  • creation of a sui generis data producer right for non-personal machine-generated data, with the aim of enhancing tradability; an obligation to license data generated by machines, tools or devices on fair, reasonable and non-discriminatory (FRAND) terms; and
  • technical standards to facilitate the exchange of data between different platforms.
The Consultation is also seeking evidence on whether anti-competitive practices are restricting access to data.  In particular, the Consultation refers to: the use of unfair business practices; the exploitation of bargaining power when negotiating licences; and abuses of a dominant position.  Interestingly, it also asks whether current competition law and its enforcement mechanisms sufficiently address the potentially anti-competitive behaviour of companies holding or using data.

So where are we headed?

To date, competition law has mandated the compulsory licensing of IP rights only in exceptional circumstances, where the owner has a dominant position and there are no alternatives to the technology.  The Commission is now considering a range of regulatory options, of which the most interventionist could require access to be granted to non-personal data in a far wider range of contexts (albeit without any proposal to amend the existing database right and the new Trade Secrets Directive). These issues are likely to be of considerable concern for any company holding large amounts of non-personal data.  The Consultation runs until 26 April 2017. 


* Non-personal data includes personal data, where it has been anonymised

We need to talk…about Pharmaceuticals and Standard Essential Patents

At the end of last month, Commissioner Vestager gave a speech at the Chillin’ Competition Conference. The focus: how competition law can protect consumers from anti-competitive behaviours. The Commissioner gave examples of situations in which intervention could be justified, two of which are of particular interest in the competition/IP sphere - pharmaceutical goods and Standard Essential Patents (‘SEPs’)

Pharmaceutical goods

Commissioner Vestager noted that people’s health often relies on a drug sold by only one company. This can be because the company has a patent, but may also simply be because no other companies are interested in coming to the market due to low levels of demand. This isn’t a problem in itself if prices stay at a reasonable level but if prices go up, the Commission suggested it may warrant action by the competition authorities.

This could not be more topical – just today the Competition and Markets Authority’s (‘CMA’) has taken a decision in the Pfizer/Flynn case, which relates to excessive pricing of an anti-epilepsy drug previously branded as Epanutin (we reported previously on this investigation here). We’ll be providing a more detailed update on the CMA’s decision soon but in the meantime, our readers will be interested to know that both Pfizer and Flynn Pharma have already announced that they intend to appeal. 

The Pfizer/Flynn case follows the CMA’s recently launched investigation into excessive pricing in the pharmaceutical sector in the UK. Concordia International announced that it was in talks with the CMA about this. However, the investigation is still at the information gathering stage, with a decision on whether or not to proceed expected in February of next year.  

An article published in the Times last week suggested that certain generics drugs continue to be subject to significant price increases – the only manufacturer of lithium carbonate tablets is reported to have raised the price of its product by £39 in the last month, and from £3.22 to £87 over the last year. 

Similarly, the Italian Competition Authority recently investigated Aspen, a supplier of cancer drugs to the Italian Medicines Agency, and in October 2016 fined it over €5 million for increasing the price of its cancer drugs by up to 1500% (see here for our report on this).  

Pharmaceutical investigations continue outside of the EU as well. Last month Bloomberg reported that the first charges in the US DOJ’s antitrust investigation into collusion over generic price increases investigation (spanning over two dozen companies) are expected by the end of the year.

The prevalence of investigations relating to pricing regulation in the pharmaceutical sector represents a major change in policy from the days when competition authorities were wary of acting as price regulators. Perhaps, as is evidenced by Vestager’s recent speech, this is largely due to a renewed focus on consumer interests.  But it is far from clear that it is sensible policy for the competition authorities to have to intervene in cases which arguably result from regulatory failures.

SEPs

In her speech, Commissioner Vestager also suggested that in some situations, phone makers may be forced to accept whatever terms they are presented with, regardless of whether these are actually FRAND (fair, reasonable and non-discriminatory).  This is particularly problematic where this takes place under threat of an injunction, and can mean that they end up paying unjustified royalties, with customers also paying more as a result. While FRAND disputes have been around for many years, the Commissioner emphasised that this remains a topical issue – with 5G and the Internet of Things, more and more products will be connected with each other; innovation is increasingly important and restrictive practices could stifle development.  

The issue of whether offers are FRAND has a reflection closer to home in the UK at the moment.  This week marks the closing submissions in the Unwired Planet v Huawei FRAND trial, which looks set to become the first EU case to determine what a FRAND offer is. A judgment in this case is likely to be handed down in the first few months of 2017… 

Resetting Competition Policy Frameworks

Earlier this month, the GSMA – an association representing various mobile operators – published a report: ‘Resetting Competition Policy Frameworks for the Digital Ecosystem’ – see here for an Executive Summary. The GSMA proposes a more nuanced approach to competition policy in the digital economy following the EU Commission’s Digital Single Market initiatives (see previous posts here and here). The GSMA suggests that it is necessary to create a regulatory environment fit for the digital age. We summarise the four main themes below.

Market definition and market power

The study points to: 
  • an unprecedented uptake in new technologies: 
  • an increasing use of big data to gain a competitive advantage (see our opinions here); and 
  • a rising number of cases where price is not the critical factor for consumer decision-making. 
In the light of these findings, it is suggested that competition authorities need to adapt their approach to defining product and geographic markets. Recommendations include:
  • Focussing on the products and services consumers genuinely view as viable substitutes to inform market definition;
  • Investigating how the quality of goods and services which are provided at no monetary cost can be used as part of a market power analysis; and
  • Revising market definitions where there is substantial evidence to do so.
Adopting a total welfare standard in digital markets

The GSMA has urged competition authorities to take into account the effect of conduct on product quality, innovation and economic efficiencies (‘Total Welfare’) rather than simply pricing effects. It proposes that looking at the bigger picture could entail positive effects on investments, quality of products and services and performance in digital markets. Recommendations include:
  • Adopting a total welfare standard to support productivity growth /higher living standards;
  • Focussing on dynamic effects when assessing mergers and competition in digital markets. This might enable certain mergers to be cleared that could benefit society; and
  • Adapting the approach to efficiencies by use of experts, identifying efficiencies in earlier transactions and utilising new analytical techniques. 
Rebalancing ex ante and ex post regulation

The report notes that technologies such as cloud computing, social media, and the use of the Internet of Things are no longer entirely novel but they do continue to alter how businesses operate, and products and services are being offered in new and sometimes unpredictable ways. As entire industries are adapting to this changing digital environment there is a concern that regulating on the basis of predictions (‘ex ante’) could distort competition and deter innovation. GSMA’s study argues that applying competition law in the light of experience and facts (‘ex post’), is more flexible and can be tailored to experience of changing market conditions. Recommendations include:
  • Reviewing the thresholds for ex ante regulation to ensure that the potential negative impact on investment and modernisation that may arise is analysed against any possible gains;
  • Focussing ex ante regulation on enduring market power; and
  • Ensuring consistent and streamlined regulation that conforms to competition law.
Institutional Arrangements 

While noting that there is no ‘one-size-fits-all’ institutional arrangement, the report calls for competition authorities to be independent and transparent; to adopt policies which support investment and innovation; and to cooperate closely with regulators in moving towards ex post enforcement. 

The GSMA is careful not to criticise the principles currently underpinning competition policy and enforcement in Europe. However, it is firm in the view that features of the competition regulatory framework must be updated to allow digital services the right environment to flourish and to ensure appropriate conditions for competition. That view is not necessarily universal, and it will be interesting to see how others react to the GSMA’s recommendations.

The European Commission’s E-commerce Conference

On 6 October, the Commission held a conference on its Preliminary Findings of the E-commerce Sector Inquiry: the entire day was made available via webcast (no geo-blocking for the Commission…).  

This follows the publishing of its Preliminary Report last month (which we covered here and here).  The conference was an opportunity for those working in industry, academia and competition authorities around the EU to comment on the findings.  A list of the speakers can be found here.  We have provided a summary of the main issues raised below.

Distribution

In today’s digital world, selective distribution systems are used for a very wide range of products and they are no longer limited to those products which are accompanied by a service.  It was suggested that using selective distribution to ban the use of third party platforms raised important competition law and political questions.

In the context of consumer goods, selective distribution can be beneficial, allowing brands to maintain consistency across retail channels and strengthening consumer protection.  However, it was noted that they can be detrimental to SME retailers, which often struggle to gain market share as a result of restrictive distribution practices.  The need for clear and objective criteria was also raised as an issue.  Some industry representatives called for greater parity between online and brick and mortar stores in terms of the products they are allowed to sell.  This view was not shared by all – others were quick to emphasise the differences between online and physical stores and the benefits of differentiating between these types of sales.  

Turning to the media content sector, the focus was on the use of exclusivity which gives rise to a similar dynamic to selective distribution in the goods economy.  On the one hand, the competition for exclusivity among media organisations has been a driver of innovation and investment in the production of new technologies (e.g. Ultra HD TVs) and has facilitated the creation of more choice among content providers.  On the other hand, distribution contracts are often awarded for lengthy terms and – in the Commission’s view – certain terms risk giving rise to anti-competitive effects.  One example which was discussed was the use of automatic renewal provisions, extending the duration of exclusivity; however, such terms may be justified on the basis of the considerable investment needed to create new content. Such terms will need to be considered on a case-by-case basis.

Cross-border access to content

The paradox that 50% of EU citizens shop online but only 15% shop cross-border was raised as an important issue.  The volume of complaints about geo-blocking directed to National Competition Authorities varied significantly.  Opinions differed on the prioritisation of geo-blocking and territorial restrictions generally.  

The discussion on consumer goods focused on the ability to sell across borders.  Legal fragmentation and lack of harmonisation, personalised products and distribution capacity were all identified as reasons why cross-border sales may be limited.  In addition to technical and logistical barriers, selective distribution systems were also considered to play a part in the availability of products in specific regions. 

Geo-blocking occupied a large part of the discussion on online content distribution.  Industry representatives argued that the territoriality identified in the report is not the result of active efforts by distributors to fragment the market.  Instead, it was said to reflect diverging national demands and differences in the level of investment that broadcasters are prepared to make in each territory.  The possibility of pan-European licences was dismissed as being prohibitively expensive as well as having the potential to be anti-competitive. 

Pricing

Issues surrounding pricing and pricing mechanisms were raised throughout the day.  There was general agreement that the competitive impact of such mechanisms in e-commerce will depend heavily on the level of market power of those imposing the prices.

An interesting point on price discrimination was raised in the context of consumer goods.  If price discrimination is banned, firms adapt by changing their pricing and product strategies, which could harm or benefit consumers depending on the market.  It was noted that vertical restraints could be used strategically by suppliers in the marketplace. 

Pricing mechanisms were also raised as a concern in relation to online digital content.  It was suggested that it might be necessary for the Commission to examine restrictive payment structures in contracts and perhaps regulate the area to ensure a level playing field between mobile platform providers and application developers.

The Commission has invited stakeholders to submit comments on its Preliminary Report by 18 November 2016.  It remains to be seen whether the commentary put forward during the conference and the divergence of industry views will be reflected the Final Report.  Past sector inquiries tend to suggest that the changes between the preliminary and final reports may be few and far between…

Competition policy v IP: striking a balance is a tricky exercise

In this article in Competition Law Insight we consider how intellectual property rights and competition law can appear to be at odds: the former grants temporary monopolies and the latter protects and encourages market competition.  We go on to discuss how this potentially difficult relationship has been increasingly at the heart of competition policy.

More on mythical creatures – FRAND and hold up revisited

Those of you who are interested in FRAND and standardisation issues will, I hope, have read with interest the twin blogs that Sophie and I put up a couple of months ago reporting on a couple of conferences about standard setting, one in Liege and one in London. The organisers of the Liege conference, the Liege Competition and Innovation Institute, have now produced a more detailed summary of the proceedings at their conference. We thought we’d draw it to your attention, and you can find it here.

Keeping a weather eye on competition and innovation

Last week we updated our CLIP of the month to an article on the theme of innovation, as considered through the lens of competition law.  Pablo Ibanez Colomo’s article focuses on the identification of harm to innovation in competition cases (across the behavioural / merger spectrum).  He distinguishes between cases where such analysis has been just one factor among many (referred to as cases where innovation considerations have had an “indirect” role), and cases where "direct" harm to innovation is central.  

This academic contribution is timely, as innovation is now a topic at the forefront of debate in competition circles.  Last month, Commissioner Vestager gave a speech addressing this topic head-on, in particular in relation to digital markets - the trend of favouring disruptive innovation over repeat innovation by an ‘incumbent’ remains evident.  

DG Comp also focuses on innovation in its recently published Competition Merger Brief.  The brief notes how innovation concerns have been key in mergers relating to industries as diverse as gas turbines (GE/Alstom) and biosimilar medicines (Pfizer/Hospira).  The discussion of the Pfizer/Hospira merger decision (see p.12 of the Merger Brief) is likely to be of particular interest to readers of this blog, as it is the first case in which the Commission has engaged in detail with the markets for biological and biosimilar drugs, concluding that they belong in the same market, but observing considerable differences compared to the dynamic between originator and generic versions of small molecule medicines.  (And for those with a deeper interest in this area, Bristows’ own 2015 Biotech Review  carried an article (by two of the regular writers on this blog) looking at how innovation, in the form of competition between pipeline products, played a significant role in a couple of earlier mergers - see p.17.)

The current concern with innovation does not extend only to product innovation, but also encompasses changing business models - another subject which is a particularly hot topic at present - with the CMA’s Alex Chisholm having recently noted the fragility of such innovation, and the challenge of ensuring “an economic and regulatory environment in which new business models and consumer-friendly innovations can emerge and thrive”.  It was this concern that late last year led the CMA to reject proposals from Transport for London that would have curtailed the advances made by Uber on London’s taxi scene. 

We at the CLIP Board will continue to keep a weather eye on discussions of innovation and competition law - just click on the “innovation” tag on our home page to see more.

Competition law no bar to patent licence royalties

Advocate General Wathelet has delivered a significant Opinion on the relationship between Article 101(1) and patent licences. This arose from a disputed arbitration award between Genentech and Sanofi-Aventis, and followed a reference to the Court of Justice of the European Union (CJEU), from the Paris Court of Appeal. 

The AG noted that Article 101(1) is not there to protect the efficacy of commercial arrangements, and will be engaged only where an agreement between undertakings has the object or effect of restricting or preventing competition and affects trade between member states. 

What was the case about? 

The original arbitration concerned a dispute over unpaid royalty payments under a patent licence where one of the underlying patents had been revoked. The arbitrator found that the licensee should continue to pay royalties, notwithstanding the revocation of the patent. This was on basis that the licensee had entered into the licence to enable it to use the relevant technology without the risk of litigation. The licensee contested the award. The French Court of Appeal referred various questions to the CJEU including whether paying royalties for a revoked patent had put the company at a competitive disadvantage to competitors who had not been required to pay for the technology and therefore infringed Article 101(1).

What about Article 101 and Patent royalties?

Wathelet commended the reasoning in Ottung (1989 CJEU) that an obligation to pay royalties in a licensing agreement after patent expiry “may infringe Article 101(1) TFEU where the licence agreement either does not grant the licensee the right to terminate the agreement by giving reasonable notice, or seeks to restrict the licensee’s freedom of action after termination.” 

Applying that approach, Wathelet considered that there was no infringement of Article 101(1) here, as Genentech was freely able to terminate the agreement with a “very short” notice period of two months, and its “freedom of action was not restricted in any way during the period after termination, and it was not subject to any clause preventing it from challenging the validity or infringement of the patents at issue”. He also observed that the licence contained no restrictions on the licensee’s ability to set prices or conduct research.

The AG therefore held that Article 101(1) was not engaged and that Genentech should pay Hoechst EUR 110 million in back royalties even though a licensed patent had been revoked. In the circumstances:  “the mere use of the technology at issue during the term of the licence agreement was sufficient to trigger the obligation to pay”. 

The position taken by the Advocate-General reflects the views set out in the Technology Transfer Guidelines (paragraph 184) which regards royalty arrangements in technology licences as generally outside the scope of Article 101 and falling into the realm of commercial negotiation.
 
Arbitration disputes and Article 101? 

The AG also confirmed that competition issues arising in the context of arbitrations can always be referred by national courts to the CJEU. 

He gave short shrift to arguments that dealing with Article 101(1) issues through the  preliminary ruling process would infringe French law. It had been argued that French law prevented international arbitration awards being subject to judicial review, save in circumstances where there has been a flagrant infringement of international public policy. 

The AG considered that the CJEU was bound to give a preliminary ruling upon request by a national court, unless the request related to a fictitious dispute, or was on general or hypothetical questions, where the questions to the CJEU bore no relation to the facts.

So where does the case leave patentees?

This case is important for many patent owners and licensees, as it clarifies that Article 101(1) is not a bar to enforcing a licensing agreement and receiving royalties even when a licensed patent has been declared invalid (or, by implication, expired). 

This is in direct contrast to the US Supreme Court’s decision in Kimble v Marvel of June 2015, which confirmed that a patent holder cannot charge royalties for the use of his invention in the US after its patent term has expired. 

It will be interesting to see the CJEU’s final decision, as AG opinions are only persuasive (but in practice usually followed).

Genentech Inc. v Hoechst GmbH, formerly Hoechst AG, Sanofi-Aventis Deutschland GmbH (Case C-567/14).

A week of Standard Setting Conferences – Part II, the London Leg

Following up on Sophie’s recent blog, it was my pleasure to be the Bristows’ attendee at the second of this week’s FRAND/standardisation conferences, along with IP partner Alan Johnson. The conference, organised by the Competition Law Forum, was well attended with a high quality panel of speakers. Among the attendees, it was very good to catch up with a couple of Bristows alumni, including David George, until recently a prolific CLIP Board blogger and now at the CAT as a referendaire – perhaps we’ll be able to persuade him to contribute a few guest blogs in future. 

On substance, as with the LCII conference on Monday, there was quite a bit of debate about the implications of recent judicial and SSO pronouncements for hold-up theories as well as the usual disagreement about where innovation in markets reliant on standardised technology really takes place and how best to incentivise it. 

An interesting point made by a couple of people was the need to recognise that those engaged in innovation through the standardisation process, and those who use standardised technology and innovate in other ways to develop products that will attract users, rely on each other to make money. Often a company will innovate in both fields, sometimes contributions are more in one aspect of innovation than the other, but the commercial success of the technology and the resultant financial rewards depend on efforts in both fields. 

On hold-up and hold-out, a number of the usual arguments were articulated. In summary, some argued that hold-up had always been theoretical, with no empirical evidence to show it had ever been a practical problem, and that following the Judgment in Huawei v ZTE (see our earlier posts here and here) it was no longer possible at all. As on Monday, however, others were not so sure. 

Those who saw remaining hold-up concerns pointed to distinctions between the clear obligations imposed on those who gave FRAND declarations under the new IEEE IP policy (no injunctions unless an implementer refuses to accept a third party adjudicated rate) described here and the less certain position under Huawei v ZTE which focuses on procedure and imposes obligations on both parties.
  
The basic approach under Huawei v ZTE was not widely criticised, but it was noted that a number of aspects of the procedure provided in the CJEU judgment were not entirely clear, leaving scope for debate and uncertainty about when the procedural requirements had been fulfilled. Given the possibility of different approaches by the courts in different member states when interpreting those requirements, some risk of injunction was still argued to exist (even for a party which had sought to comply with the CJEU’s process) implying that risks of hold up continued in the absence of some clear boundary - as under the IEEE policy. Others felt that the ability to seek an injunction was a basic right, that a threat to seek an injunction was not an abuse and that there was no need for ‘unnecessary and revolutionary changes’ such as those in the new IEEE IP policy. Such views underpinned challenges to the adoption of the policy as described here

As is almost always the case at such conferences, following recent case law in the US (see here and here) and the adoption of the IEEE policy, the linked questions of the place in the value chain at which licensing should/must take place (component manufacturer or end device manufacturer) and the appropriate royalty base (end device or smallest saleable patent practising unit (“SSPPU”) were hotly debated. Recent US cases were discussed and some expressed scepticism about importing the SSPPU concept to Europe – although the Commission’s Rambus settlement was mentioned as an example of an approach of that type. Commissioner Vestager’s comments (reported here) on the need to offer licences to all comers were also discussed. 

It was noted that a reason that these questions are so hotly contested is because they go to the fundamental question (mentioned above) of how great a share of the profits from the success of a standardised system should go to those who develop the underlying standardised technology and how great a share should go to those who design and manufacture products which consumers want to buy and to continue buying/upgrading. Not surprisingly, no resolution was reached. As ever, and as noted by Sophie in her comments on Monday’s conference, identifying what is FRAND when granting or taking a licence remains a difficult question - and central to all these debates. 

The economists present appeared to agree, broadly, with the Commission’s position in the horizontal guidelines that, while incentives to innovate should not be undermined, nevertheless in principle patented innovations incorporated in a standard should not be rewarded in a way which captures value beyond the value of the particular innovation. The economists present also appeared to agree that this was a difficult approach to apply in practice! Regular readers of this blog will recall that the recently created Fair Standards Alliance enshrines this as one of its key principles for FRAND licensing (see here). 

Finally, one company (and as this was a conference under Chatham house rules, I can’t reveal which one!) introduced an initiative to try and resolve some of the problems of SEP licensing in the forthcoming Internet of Things by creating a multiparty licensing platform to reduce transaction costs when licensing standardised technology. Guidance on the competition law treatment of patent pools can be found in the Technology Transfer Guidelines as discussed briefly here, and such initiatives have been tried in the past (including for 3G, where a pool arrangement was approved by DG Comp, when such things were still possible). It will be interesting to see how this one fares and we shall be looking out for more information…

Pat Treacy