New Papers on FRAND, Trolls

1. Dennis Carlton and Allan Shampine have posted a paper on ssrn titled Identifying Benchmarks for Applying Non-Discrimination in FRAND.  Here is a link to the paper, and here is the abstract:

Standard setting organizations have for many years asked members to commit to license patents essential to use of standards on Fair, Reasonable and Non-discriminatory, or FRAND, terms. Previous work has shown how standard setting that incorporates patents can lead to complicated situations in which the patent owner, sometimes in collaboration with rival firms, can exploit the market power that is created by being designated a standard essential patent, but that the non-discriminatory provision of FRAND can be interpreted so as to mitigate the inefficiencies that can result when patent owners try to exploit their market power conferred by the standard setting process. This paper discusses the availability of appropriate benchmarks for implementing the non-discriminatory provision and shows how even when license terms for patents are not set in advance, FRAND terms can protect members of an SSO and that this protection can be implemented by using various benchmarks.

2.  Nicolas Petit has posted a paper on ssrn titled "Stealth Licensing"--or Antitrust Law and Trade Regulation Squeezing Patent Rights.  Here is a link to the paper, and here is the abstract:

A “stealth licensing” paradigm is emerging across the globe. It can be seen through subtle interventions from policy makers, judicial organs and administrative agencies. Those interventions seek to facilitate compulsory licenses outside the TRIPS agreement exceptions and/or to water down those exceptions. Altogether, they ramp up pressure on patent owners to give away their freedom – it is actually a “right” – to exploit their innovations as they see fit. The present paper submits that stealth licensing is a significant phenomenon that adversely impacts the social welfare functions of the patent system. It risks undermining investment in technology, technology creation and the dissemination functions of the patent system at a critical juncture in time, as new critical technologies like green technology, the internet of things, machine to machine technology, smart medical devices or biotechnologies are being called for, and rolled out, across the globe. Moreover, stealth licensing is occurring despite the fact that both private and public investment in R&D is critical to help developed economies back on the path to growth, competitiveness, employment and prosperity.  

This paper explores the concept and policy of “stealth licensing”. To that end, it first surveys the literature on the social functions of the patent system, and in particular, on the role of patents to incentivise (risky) R&D efforts and to disseminate successful technological innovations (I). In this context, it recalls that whilst divided on the exact function of patent law, scholars broadly concur that patents have social utility. This paper then shows the emergence a “stealth licensing” paradigm adversary to the social functions of the patent system. To aid understanding, it starts with a definition of the concept of “stealth licensing” (II). It then describes its emergence in international trade regulation where a “flexible” interpretation of the TRIPS compulsory licensing exceptions is making way (III); and in antitrust law, where a distinct though equally problematic “undercover” licensing paradigm is gaining prominence (IV). Finally, it explains the perils of squeezing patent rights through stealth licensing with two metaphors: that of a black swan (V) and that of a butterfly (VI). 

3.  Lauren Cohen, Umit G. Gurun, and Scott Duke Kominers have posted a paper on ssrn titled Patent Trolls.  Here is a link, and here is the abstract:

We provide theoretical and empirical evidence on the evolution and impact of non-practicing entities (NPEs) in the intellectual property space. Heterogeneity in innovation, given a cost of commercialization, results in NPEs that choose to act as “patent trolls” that chase operating firms' innovations even if those innovations are not clearly infringing on the NPEs' patents. We support these predictions using a novel, large dataset of patents targeted by NPEs. We show that NPEs on average target firms that are flush with cash (or have just had large positive cash shocks). Furthermore, NPEs target firm profits arising from exogenous cash shocks unrelated to the allegedly infringing patents. We next show that NPEs target firms irrespective of the closeness of those firms' patents to the NPEs', and that NPEs typically target firms that are busy with other (non-IP related) lawsuits or are likely to settle. Lastly, we show that NPE litigation has a negative real impact on the future innovative activity of targeted firms.

4.  Paul Rosenich has published a paper titled Defensivpublikation--Schutz vor Patenttrollen und anderen Trittbrettfahrern ("Defensive Publication--Protection against Patent Trolls and Other Free Riders") in the July 2014 issue of Mitteilungen der deutschen Patentanwälten (pp. 306-09)  The abstract reads (my translation from the German):

Defensive publications are no longer to be ignored in modern IP strategy.  Worldwide, there are several ways to make a defensive publication. 

The author discusses means for making defensive publications under U.S., European, and Chinese law.  Following this article is another one, titled Defensivpublikationen--Der Dritte Weg zwischen Patentanmeldung und Geheimhaltung? ("Defensive Publications--The Third Way Between Patent Application and Secrecy?") by Jan G. Tönnies, arguing that under German case law an accessible publication should be understood as one that is "discoverable with reasonable effort" ("mit vertretbarem Aufwand ermittelbar").

5.  Finally, I just came across a notice on the Antitrust & Competition Policy Blog for a new book by Björn Lundkvist titled Standardiaation Under EU Competition Rules and US Antitrust Laws:  The Rise and Limits of Self-Regulation (Edward Elgar Press 2014).  I'll see if I can get our library to acquire a copy.  In the meantime, here's the book description from Elgar's website:

Standardization under EU Competition Rules and US Antitrust Laws offers comparative insight into how technology standards and the standard setting process are regulated under United States antitrust law and European Union competition rules respectively. The current focus on single firms’ use of patents to exclude competition, for example, patent and FRAND ambush, is discussed, as well as the forms of collaboration making up the standardization process. Bjorn Lundqvist analyses the standardization process, looking, for example, at the agreements and the conduct of firms prior to the enactment of a technology standard by a Standard Setting Organisation. Lundqvist asks whether these collaborations are more of an antitrust problem in themselves than the problems (such as ‘patent thickets’, ‘anticommons’, ‘royalty stacking’ and patent/FRAND ambush) they are designed to resolve. . . .

Standardization under EU Competition Rules and US Antitrust Laws is a comprehensive and detailed legal analysis of standard-setting procedure and the regulation of standard essential patents. It deals with the competition law aspects of competitors' collaboration to create technical standards, as well as the contentious antitrust issues regarding access to standards and standard essential patents.

The book shows that there is a clear difference between how standardization is scrutinized and judged in the two jurisdictions. In general, US courts use intellectual property law to address access to standard essential patents, while European courts utilize antitrust rules. Both avenues hold their specific benefits and disadvantages. However, the dichotomy between the tools used in the two jurisdictions also, according to the author, mirror a more fundamental change in attitude to central notions and values such as property, fairness, equity, public interest and competition.

Offering in-depth analysis of the case law currently being written in courtrooms all over the world under the so-called ‘patent war’, the book puts forward a new method for applying competition law to standards and standard-setting – in both its collusive and monopolistic aspects – that will be of special interest to students, academics and practitioners.