Three New Papers on SEPs

1.  Peter Picht has posted a paper on ssrn titled FRAND Determination in TCL v. Ericsson and Unwired Planet v. Huawei:  Same Same but Different?.  Here is a link to the paper, and here is the abstract:

Unwired Planet/Huawei (UK) and TCL/Ericsson (US) are remarkable rulings on the FRAND-licensing of SEPs, not least because they tackle the task of a full-blown FRAND-royalty determination. Equally remarkable is a comparison between them since the two courts looked – it seems – at a similar set of facts but reached quite different results. The present paper focusses on a key reason for these differing outcomes, namely the courts’ treatment of “top-down” and “Comparables”, two core approaches in FRAND royalty calculation. It argues, i.a., that it creates more problems than solutions to treat the public announcement of royalty rates as a “pledge”; that FRAND commitments made under EU (Member State) law and regarding EU patents ought to be interpreted with a view to EU law; that the two courts interpret the “ND”-requirement differently; and that the weighing and adjusting of Comparables may be distortive. As to the relative importance of the calculation approaches, Comparables seem more relevant regarding the facts at issue.

2.  Kirti Gupta and Georgios Effraimidis have posted a paper on ssrn titled IEEE Patent Policy Revisions: An Empirical Examination of Impact.  Here is  a link, and here is the abstract: 

In February 2015, the Institute of Electrical and Electronics Engineers-Standards Association (IEEE-SA) -- one of the largest Standards Development Organizations (SDOs) -- adopted highly controversial changes to its intellectual property rights (IPR) policy. Specifically, the IEEE-SA introduced a specific definition of Fair, Reasonable and Non-Discriminatory (FRAND) licensing terms. The updated policy rules and the position of the Department of Justice (DoJ) -- stated in a Business Review Letter (BRL) -- have attracted much discussion from academic scholars and industry practitioners.

The aim of this paper is to explore how the new patent policy has impacted different aspects of standards development within IEEE. Particularly, our analysis focuses on the IEEE 802 LAN/MAN Standards Committee (IEEE 802 LMSC), whose Working Groups (WGs) have been responsible for the design and development of widely used wireless technologies such as Wi-Fi and Ethernet. The first part of the analysis examines the submission pattern of Letters of Assurances (LoA), i.e., documents outlining the declaration of patents potentially essential to the standard (commonly referred to as Standard Essential Patents (SEPs)) and terms under which the submitter is willing to license its SEPs. We examine LoA submissions before and after the implementation of the new policy within the 802.11 WG, which covers the Wi-Fi technology. Next, we analyze how the comment resolution process (CRP), that is, the process of resolving comments made by 802.11 voters has changed after the policy update. More specifically, we investigate whether there is a delay in the approval process of 802.11 standards. Finally, we examine how the number of submitted Project Authorization Requests (PARs), or documents that trigger the development or revision of a standard by defining the scope and requirements for a new technical project across all IEEE 802 WGs, has changed after the policy update. PARs can be used as a proxy of new activity related to the development of standards.

The empirical findings suggest a decline in LoAs with several SEP holders reluctant to license under the new IPR policy terms. More importantly, uncertainty on implementers’ side has increased, as new standards have been approved under the presence of negative and/or missing LoAs, and other standards are being developed under this “mixed bag” of LoAs. The CRP analysis reveals that the first two rounds of the process last on average longer after the policy change. Such a finding implies that the 802.11 balloting process has become more time consuming, which in turn results in a (potential) delay of approval/publication of standards. We also find that the number of new projects initiated (or PARs) in the IP-intensive IEEE standards (namely the 802 WGs) have decreased, suggesting a potential slowdon of the growth rate of innovation after the policy change.

3.  J. Gregory Sidak has published a paper titled The FRAND Contract, 3 Criterion Journal on Innovation 1 (2018). Here is a link to the paper, and here is the abstract:

Government agencies in various countries have issued guidelines to facilitate private negotiation to license the use of standard-essential patents (SEPs) that a patent holder has voluntarily committed to a standard-setting organization (SSO) to offer to license on fair, reasonable, and nondiscriminatory (FRAND) terms (or on reasonable and nondiscriminatory (RAND) terms, as the case may be) to a third-party seeking to implement the standard. In effect, these jurisdictions are competing in a tournament of sorts to identify the best legal framework for resolving FRAND licensing disputes. A leading candidate is the existing body of U.S. contract law.

In this article, I examine the FRAND licensing of SEPs through the lens of U.S. contract law. I will eschew the phrase “FRAND commitment” in favor of the bulkier but more precise phrase “the FRAND contract between the SEP holder and the SSO.” That terminology helps to clarify that the license agreement potentially formed between the SEP holder and the implementer on FRAND terms is a separate, subsequent contract that is entirely distinct from the preexisting contract into which the SEP holder and the SSO have entered.

I begin by asking in Part I whether the FRAND contract is enforceable. U.S. courts have found that it is, yet commentators, courts, and other tribunals have flagged various theories of unenforceability when analyzing a FRAND commitment as a contract.

In Part II, I analyze the anatomy of the FRAND contract, as informed by first principles of U.S. contract law. Whether, with respect to a given implementer, a given SEP holder has discharged its FRAND duty to the SSO turns on whether the SEP holder has offered to license its SEPs to that implementer on FRAND terms. An implementer loses its rights as a third-party beneficiary of the SEP holder’s FRAND contract with the SSO if the third-party beneficiary rejects a FRAND offer or if it fails to accept that offer within a reasonable time. By underscoring the applicability of these fundamental principles of U.S. contract law, judges, arbitrators, and other decision makers would encourage both the SEP holder and the implementer to avoid dilatory tactics and orthogonal bargaining positions when negotiating license terms for the use of SEPs.

In Part III, I examine some of the frameworks that other countries have recently proposed for guiding negotiations for SEPs. Although these frameworks supposedly identify principles that would facilitate the license negotiation between an SEP holder and an implementer of an industry standard, they ignore the relevance of first principles of contract law. Instead, they try to reinvent the wheel—by fashioning a sui generis bargaining protocol for SEP license negotiations that ignores the transactional efficiency of preexisting contract principles of offer and acceptance. These proposals are unlikely to be more efficacious than U.S. contract jurisprudence in defining a clear protocol that encourages the expeditious execution of bilaterally negotiated FRAND licenses.

In Part IV, I offer preliminary observations on how a given SEP holder and a given implementer might agree to opt out of the FRAND contract so as to create a superior structure for concluding their bilateral negotiation of a license or, in the event of an impasse, for achieving a more expeditious and cost-effective resolution of their dispute.