National Research Council Publishes "Patent Challenges for Standard-Setting in the Global Economy"

As reported earlier this week at the Essential Patents Blog, the National Research Council of the National Academies just published a 162-page document titled Patent Challenges for Standard-Setting in the Global Economy:  Lessons from Information and Communications Technology (Keith Maskus & Stephen A. Merrill, eds.).  You can download a copy, or order a hard copy, here.  I may have more to say about the report after I’ve had time to read through and digest more of it, but here are some highlights that may be of interest for now.

The report begins with a summary, followed by an introductory chapter and a chapter comparing SSO policies and practices.  Chapters 3-8 then discuss a variety of issues and make recommendations.  One series of recommendations (chapters 3-4) calls on SSOs to clarify their policies relating to FRAND licensing commitments and disclosure.  Another series of recommendations (chapter 5) calls for SSOs to require that successors in interest remain bound by an SEP owner's licensing commitments, and that "public recordation with the patent office of transfers of all patents should be required by legislation of regulation."  

Chapter 6 discusses the issue of whether the owners of FRAND-encumbered SEPs should be able to obtain injunctive relief.  It provides an overview of the case law in the U.S. and Europe to date; section 6.4 is titled “Industry Views” and notes a variety of competing positions. At the end, the committee makes only one unanimous recommendation and reports two that were supported only by a majority of the committee.  Here is what it says (from pages 111-12):

6.5 Recommendations to SSOs, Courts, and Government Agencies

 The committee believes that a FRAND commitment limits a licensor’s ability to seek injunctive relief, including exclusion orders, and recommends the following steps to help avoid or resolve disputes, prevent anti-competitive conduct, and ensure reasonable compensation to SEP holders whose patents are infringed.

Recommendation 6:1

SSOs active in industries where patent holdup is a concern should clarify their policies regarding the availability of injunctions for FRAND-encumbered SEPs to reflect the following principles:

· Injunctive relief conflicts with a commitment to license SEPs on FRAND terms and conditions [sic] should be rare in these cases;

· Injunctive relief may be appropriate when a prospective licensee refuses to participate in or comply with the outcome of an independent adjudication of FRAND licensing terms and conditions; and

· Injunctive relief may be appropriate when a SEP holder has no other recourse to obtain compensation.

The committee could not reach unanimous agreement on appropriate venues for adjudicating FRAND disputes. However, a majority of the committee members endorse the following:

Majority Recommendation 6:2

SSOs should clarify that disputes over proposed FRAND terms and conditions should be adjudicated at a court, agency, arbitration or other tribunal that can assess the economic value of SEPs and award monetary compensation.³⁸

The committee also could not reach unanimous agreement on the scope of any limitations that a FRAND commitment might place on SEP holders’ rights to seek injunctive relief. However, a majority of the committee members endorse the following recommendation in that regard:

Majority Recommendation 6:3

SSOs should clarify that, before a SEP holder can seek injunctive relief, disputes over proposed FRAND terms and conditions should be adjudicated at a court, agency, arbitration, or other tribunal that allows either party to raise any related claims and defenses (such as validity, enforceability and non-infringement).³⁹

 

³⁸ A minority of committee members endorse this alternative recommendation: Courts, agencies, arbitration bodies or other tribunals (including the USITC) that consider patent essentiality, FRAND determination, or public interest factors should be presented with the facts and render injunctive relief decisions based on existing law, such as the eBay decision and/or ITC Section 337.

³⁹ A minority of committee members endorse this alternative recommendation: SSOs should clarify that a SEP owner that has made an offer and offered to negotiate, with a prospective licensee, a license that will embody FRAND terms should be allowed to include injunctive relief in its pleadings when a FRAND dispute is brought to a court, agency, arbitration, or other tribunal that can consider equities, party conduct, reciprocity, and FRAND factors (including FRAND rates and terms).

Note that, in recommendation 6.1, the word "conditions" probably should read "injunctions," as it does in the summary at p.9.  (On the substance, I’ve expressed my own views on the matter many times by now and need not repeat them here.  If you’re interested, see my recent paper on the comparative law and economics of standard-essential patents and FRAND royalties.)

Finally, chapter 7 addresses Patent Office-SSO cooperation, and chapter 8 IPR standards and emerging economies (specifically, China, India, and Brazil).  Page 131 discusses the case between InterDigital and Huawei, in which a Chinese court calculated a FRAND royalty rate of 0.019% of the price of Huawei products.  (I blogged on this here.)