Gathering in Shenzhen, local licensing execs call for SEP solutions built on transparent terms, commercial understanding and deep technical expertise. Jake Schindler reports

The connectivity landscape is shifting. At the Fourth IP Forefront ICT Forum, held this week in Shenzhen, companies from across the tech ecosystem wrestled with new and emerging licensing paradigms in Wi-Fi, IoT and cellular technology.

What became apparent throughout the discussions is that uncertainty itself has emerged as one of the primary pain points. Cost forecasts are top-of-mind in China’s tech heartland here in Shenzhen, as device makers continue to grapple with soaring memory costs and a cloudy macroeconomic outlook. These conditions put pressure on internal teams to provide corporate leaders with an accurate royalty outlook – both incoming and outgoing.

It’s no surprise, then, that much of the discussion was focused not on the latest litigation stratagems, but on how to create mechanisms that bring counterparties’ positions closer together.

Transparency welcome in Wi-Fi market

Wi-Fi is an area in which the market has long been hungry for more data points.

Major recent changes in the licensing landscape were the focus of a discussion moderated by Sisvel China managing director Yixiong Zou. The panel brought together three key Wi-Fi implementers – one of which, Panasonic, is also a patent owner in the Sisvel Wi-Fi Multimode patent pool.

Pools play an important role in facilitating transparency, Sisvel’s Yixiong Zou said

Two important differences from the cellular space – fewer court rulings focused on the latest generations of the standard and less granularity in the SEP declarations required of contributors – have put a premium on information about Wi-Fi SEPs and generated demand for transparent running royalty rates.

It is fortunate, Zou pointed out, that major patent owners in the space have established a pool programme that has put reams of new information into the public domain: patent numbers matched to relevant sections of the standard; royalty rates and licence terms; and lists of licensees who have accepted the pool terms, many of which are major market players.

It’s positive that pools are emerging, participants agreed. But it’s not easy. “Pool manager is probably the most difficult job,” remarked Lenovo executive John Mulgrew. “If you do it well, everyone is a little bit mad at you, because the only way to succeed is to get everyone to compromise.”

Panasonic IP Management Co chief IP counsel Andrew Yen said that market acceptance of pool licences will generate reference points that bring greater clarity to the space over time. He also noted that the Wi-Fi patent landscape is relatively manageable in terms of overall patent counts.

Commercial, technical insights are crucial

All panellists agreed, however, that Wi-Fi licensing requires sophisticated understanding of both the commercial context and technical nuances.

Research reports claiming to landscape the Wi-Fi space range significantly in the number of essential rights they identify. Effective licensors must be able to list the rights they believe are relevant and identify the parts of the standard they map onto – standard practice in best-in-class patent pools.

Tech expertise is similarly required to explain the value of the portfolio and how its adoption improves licensed products. In a later panel focused on 5G technology, representatives from Qualcomm and Nokia agreed on this point.

“The qualitative aspect of the technical discussion is critical,” said Nokia vice president, IP policy & advocacy Collette Rawnsley. “If you just engage with reports and charts without insight into what they mean in practice, you miss something that informs the commercial discussion.” “Not all patents are equal,” agreed Nancy Yu, VP, legal counsel & licensing at Qualcomm, adding that value encompasses factors including whether a right is fundamental or incremental, mandatory or optional.

Xiaomi Group licensing director Ji Liechao pointed out that the company’s diverse product lineup differs significantly in how Wi-Fi functionality is implemented. His department provides guidance to product teams on the potential costs involved in implementing various generations of the Wi-Fi standard.

The 5G discussion identified a convergence of two trends that is adding to complexity: more companies are taking part in standards setting, introducing new patent owners with less licensing experience; meanwhile, the spread of connectivity to new verticals is creating companies that need a licence but have no knowledge of the space.

This scenario, which his not limited to cellular, creates potential situations where both sides of the licensing relationship have limited experience. It’s a clear opportunity for the pool model to bring greater efficiency. A panel on IoT explored this idea in depth, looking specifically at how SMEs fit into the picture.

SMEs need support to navigate IoT landscape

Wang Yanfang, a professor at the East China University of Political Science and Law, shared a striking anecdote during an afternoon discussion devoted to IoT. Just that morning, she said, an attorney acquaintance had called her up and told her of an SME client facing an SEP-related challenge. The attorney said he had advised his client just to ignore the issue. “I was shocked,” Professor Wang said. “You can’t simply neglect the risk.”

Panellists welcomed SEP owners’ recent commitment to mediation with IoT SMEs

As the remainder of the discussion made clear, there are various types of resources available to smaller players confronting SEP issues for the first time. The biggest challenge, it seems, is making sure they (and their outside advisers) are aware of this.

Oppo IP director and IP strategy head Fannie Yu pointed to the WIPO mediation pledge by SEP owners to IoT SMEs – launched by Ericsson, Huawei, Nokia, Qualcomm and Sisvel last November (ZTE has also now signed up) – as an important step. Such assurances can create space for SMEs to engage and learn without fear of sudden litigation. But again, they need to know the policy exists. China Mobile’s Rui Gao, herself a mediator in Beijing, noted that no SEP-specific initiatives have emerged among China-based ADR organisations. Perhaps the emergence of one would create more general awareness among local IoT companies.

Education, though, is the most critical need. There was discussion of the role module makers can play in facilitating deals given their knowledge of both the technology and their customers’ use cases. Professor Wang said there may be a role for courts, ADR bodies or governments to help clarify things too. But she called on attendees from industry to lead the way, urging SEP counterparties to meet halfway and understand each other’s positions.

Speakers and attendee at the event appeared to agree that all these are early steps in what will be a sustained process for the IoT market. “Settle in for the long-run,” Professor Wang advised.