Patent pools are the means to simplify the FRAND world
Over two days at WIPO HQ in Geneva, attendees at a groundbreaking event looked at how to tackle the complexities of the SEP licensing market. One option may be staring them straight in the face
By Joff Wild
It is sometimes tempting to see the FRAND/SEP world as being composed of two competing camps with entirely different outlooks and incompatible agendas: something like standardised technology developers are from Venus while implementers are from Mars. If you based your view solely on reports of litigation or lobbying around proposed policy changes, such a perspective might be understandable. It does sometimes get contentious out there.
But there is an alternative world. It’s one in which people on all sides mostly get along, deals usually get done without the need for court intervention and everyone in the market is grappling with similar challenges and looking for similar outcomes. This is the one that was on display in Geneva recently during the inaugural WIPO Symposium on Standard Essential Patents.
Held at the organisation’s HQ on 18th and 19th September, under the title “A SEPtember Symphony” (see what they did there?), the event attracted hundreds of attendees and a stellar line-up of speakers covering a wide range of issues.
Agree and disagree
What delegates heard a lot of over the two days was agreement. The FRAND/SEP world is a complex one was a consistent message. For anyone looking from the outside in it can seem impenetrable. With the best will in the world, it is expensive to navigate. Transparency around royalty rates and essentiality are often issues. The market can be inefficient. Information is frequently hard to come by. Most licensors, licensees and policy makers in the room nodded along as such statements were made.
If you were looking for disagreement, though, you could certainly find it. On the litigation front, for example, there were polite arguments about injunctive relief: when (or even if) it should be available and who to. An excellent judges’ panel revealed differences in how they see their roles. Are they problem solvers or enforcers of the law?
The willingness of some courts, such as those in the UK and China, to set global FRAND rates attracted criticism, while the recent CJEU decision in BSH v Electrolux, which expanded the long arm jurisdiction of the UPC, also drew some scepticism. We are only in the foothills of exploring its "huge consequences", observed English High Court judge Richard Meade.
Race to the bottom
Another area of contention was licensing negotiation groups (LNGs). The recent European Commission and German Bundeskartellamt decisions to approve an auto LNG proposed by BMW, Mercedes Benz, VW and Thyssen Krupp were put under the microscope, as was the Commission’s general acceptance of LNGs (under certain conditions) in the draft Technology Transfer Guidelines (TTG) released in early September.
For some, allowing groups of competitors to come together to negotiate FRAND licences was just a matter of efficiency and good sense. But not everyone agreed. In the Approaches to Group Licensing session, Sisvel Government Affairs Executive Adviser Matteo Sabattini explained some of the objections.
Transparent patent pools are already available offering clear FRAND rates, Sabattini argued, while the objective of any LNG would be to reduce that rate. This is nothing but a race to the bottom, he said. LNGs cannot be compared to joint purchasing groups, as some claim, Sabattini explained. If negotiations with the latter fail, there is no transaction. However, with the LNG the transaction has already taken place: group members are using the patents before any licensing negotiation and carry on doing so during it. The only way they can be stopped in the absence of a deal is via expensive and time-consuming litigation.
Sabattini also observed that pool licensors are not in competition with each other as their patents are complementary. Members of an LNG are, by definition, competitors. Patent pools have very clear incentives to close deals, he concluded, but there is no similar incentive for LNGs.
Pools are the answer
All that said, it would be wrong to see the revised TTG draft solely in a negative light. There is much to welcome in them, Sabattini stated – in particular, with regards to pools. They affirm practices Sisvel and many other operators are already following, he said. However, Sabattini reminded attendees that compliance with the Guidelines is a burden for pool administrators and licensors – it takes time and costs money to ensure the highest levels of transparency. It can also be risky: once you publish patents you are inviting invalidation attacks – and they happen.
Overall, pools turned out to be another subject on which there was near unanimity among attendees and speakers. When properly constructed and adhering to the standards set out by the TTG draft, they solve many, if not all, of the problems around market transparency and efficiency that were identified in various sessions.
Acting Principal Counsel and Director for Patent Policy at the USPTO, Chris Hannon, described the prevailing sentiment well. “I would be remiss to not mention and encourage the establishment and use of patent pools in the SEP arena,” he said.
The aggregation of complementary SEPs from different holders into a single licensing entity drastically reduces transaction costs and negotiation complexity, Hannon stated. “Well managed pools increase transparency around royalty rates, questions of essentiality and patent scope,” he continued, before observing this can be incredibly helpful for SMEs “that may not have the resources to secure an untold number of licences to practise a standard in good faith”.
Given this and given the decades of legal and regulatory scrutiny pools have already been subject to, perhaps there should be more focus on them as the means to work through the complexities of the FRAND world.
Instead of spending years talking about LNGs and - bearing in mind the global nature of most SEP licensing deals - how they might be constructed to win acceptance from multiple competition and antitrust authorities, it would surely be much easier for policy makers to focus their attentions on incentivising more engagement from all parts of the market with pools. This would almost certainly be by far the quickest way to the end results that most of those in Geneva made clear they want to see.
Joff Wild is Sisvel’s Head of Content and Strategic Communications
