Friday, February 21, 2014

TIPLJ Session 6: Laurie Fitzgerald (McKool Smith) on "Standardization, Essentiality, and Estimating Patent Strength"

3 topics:  How is an open standard created?  What makes a patent essential?  And how to estimate a patent owner's essential patent strength?

Wireless tech now being adopted beyond the telecom industry--medical devices, automotives, etc.  As standardized technologies spread to other industries, many more lawyers will have to deal with these issues.

Standardization;  a collaborative and competitive process.  Requirements agreed upon at the outset.  Concurrent R&D by participants who make competing technical contributions.  Consensus selection of "approved contributions."  Jointly owned standard.

Making these technical contributions is a risky endeavor.  R&D performed years before adoption.  Why would a company submit a technical contribution?  That's where FRAND comes into play.  You're guaranteed FRAND licensing revenue if your technical contribution is adopted.  And there may be other strategic purposes of participating.  A company that develops a portfolio of SEPs can be in a better position to offset its own licensing costs through cross-licensing.  Or your products may incorporate a standard and you want to help influence the selection of a good standard.

What makes a standard essential?  Look to SSO bylawss.  File declarations that patents are essential, obligated to license on FRAND terms.  No oversight by SSO whether it really is essential.  In re Innovatio IP Ventures case has most comprehensive analysis of essentiality by a U.S. court.  3 key aspects of decision:  who has burden of proof to establish existence of RAND obligation?  Comparable to existence of license, so defendant bears burden of proving this; it's a limitation on damages.  Defendant proving essentiality of patent.  In a sense, defendant is proving the fact of infringement.  [I hadn't thought about that way before; very interesting.]  Does the RAND commitment apply on a patent-by-patent or claim-by-claim basis?  Claim-by-claim, looking to IEEE bylaws.  Finally, what is the meaning of "essential patent claim"?  Two-part test from IEEE bylaws cited by Judge Holderman.  Rejected argument that presence of claim elements not required by standard don't necessarily render claim nonessential.

OneBlue case before Judge Stark in Delaware will address the essentiality issue as well and will reverse bifurcate, as did Judge Holderman.

Estimating an innovator's essential patent strength in a standard.  Why does an innovator's essential patent strength relative to others matter?  Relevant to cross-licensing and to FRAND offers.  Is it possible to determine precisely who owns each patent essential to a standard?  Probably not.  Can't determine exactly how many patents are essential to a standard and who owns them; would need to know all the cross-licensing deals.  

Four possible approaches for estimating an innovator's essential patent strength in a standard.  Declaration counting is one.  Most commonly used database is ETSI's.  Seems reasonable on surface, though time consuming, but declarations are self-policing.  May skew results.  Also, declarations may cover some patent applications that were never granted or were limited in scope.  Another approach is keyword searching.  Flaws:  no guarantee that just because a particular phrase (such as "LTE") are in a patent doesn't mean it's a SEP, or that the word even appears in the claims.  Third, could try limited analysis of declared essential patents.  Depends on the quality of your analysis; requires deep technical understanding and understanding of patent law.  Resource-intensive.  

Fourth, most reliable is to focus on approved contributions.  Assumption that companies seek patent protection on these contributions; application that corresponds to an approved contribution is likely to be essential.   Identify relevant technical contributions to standard during pertinent time period. Then identify the subset of relevant technical contributions that were approved.  Then assign credit to companies that authored the approved contributions.  Less subjective.  

Question from the audience:  when you are the defendant in a case and want the benefit of FRAND, but also want to avoid a finding of infringement, how do you do that?  Response:  may have to pick your poison, argue the other matter in the alternative.  Or make your case through other side's expert.  Or just agree to fight over damages only.

Contreras:  are the studies publicly available?  Response:  Yes.      



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