Following up on Sophie’s recent blog, it was my pleasure to be the Bristows’ attendee at the second of this week’s FRAND/standardisation conferences, along with IP partner Alan Johnson. The conference, organised by the Competition Law Forum, was well attended with a high quality panel of speakers. Among the attendees, it was very good to catch up with a couple of Bristows alumni, including David George, until recently a prolific CLIP Board blogger and now at the CAT as a referendaire – perhaps we’ll be able to persuade him to contribute a few guest blogs in future.
On substance, as with the LCII conference on Monday, there was quite a bit of debate about the implications of recent judicial and SSO pronouncements for hold-up theories as well as the usual disagreement about where innovation in markets reliant on standardised technology really takes place and how best to incentivise it.
An interesting point made by a couple of people was the need to recognise that those engaged in innovation through the standardisation process, and those who use standardised technology and innovate in other ways to develop products that will attract users, rely on each other to make money. Often a company will innovate in both fields, sometimes contributions are more in one aspect of innovation than the other, but the commercial success of the technology and the resultant financial rewards depend on efforts in both fields.
On hold-up and hold-out, a number of the usual arguments were articulated. In summary, some argued that hold-up had always been theoretical, with no empirical evidence to show it had ever been a practical problem, and that following the Judgment in Huawei v ZTE (see our earlier posts here and here) it was no longer possible at all. As on Monday, however, others were not so sure.
Those who saw remaining hold-up concerns pointed to distinctions between the clear obligations imposed on those who gave FRAND declarations under the new IEEE IP policy (no injunctions unless an implementer refuses to accept a third party adjudicated rate) described here and the less certain position under Huawei v ZTE which focuses on procedure and imposes obligations on both parties.
The basic approach under Huawei v ZTE was not widely criticised, but it was noted that a number of aspects of the procedure provided in the CJEU judgment were not entirely clear, leaving scope for debate and uncertainty about when the procedural requirements had been fulfilled. Given the possibility of different approaches by the courts in different member states when interpreting those requirements, some risk of injunction was still argued to exist (even for a party which had sought to comply with the CJEU’s process) implying that risks of hold up continued in the absence of some clear boundary – as under the IEEE policy. Others felt that the ability to seek an injunction was a basic right, that a threat to seek an injunction was not an abuse and that there was no need for ‘unnecessary and revolutionary changes’ such as those in the new IEEE IP policy. Such views underpinned challenges to the adoption of the policy as described here.
As is almost always the case at such conferences, following recent case law in the US (see here and here) and the adoption of the IEEE policy, the linked questions of the place in the value chain at which licensing should/must take place (component manufacturer or end device manufacturer) and the appropriate royalty base (end device or smallest saleable patent practising unit (“SSPPU”) were hotly debated. Recent US cases were discussed and some expressed scepticism about importing the SSPPU concept to Europe – although the Commission’s Rambus settlement was mentioned as an example of an approach of that type. Commissioner Vestager’s comments (reported here) on the need to offer licences to all comers were also discussed.
It was noted that a reason that these questions are so hotly contested is because they go to the fundamental question (mentioned above) of how great a share of the profits from the success of a standardised system should go to those who develop the underlying standardised technology and how great a share should go to those who design and manufacture products which consumers want to buy and to continue buying/upgrading. Not surprisingly, no resolution was reached. As ever, and as noted by Sophie in her comments on Monday’s conference, identifying what is FRAND when granting or taking a licence remains a difficult question – and central to all these debates.
The economists present appeared to agree, broadly, with the Commission’s position in the horizontal guidelines that, while incentives to innovate should not be undermined, nevertheless in principle patented innovations incorporated in a standard should not be rewarded in a way which captures value beyond the value of the particular innovation. The economists present also appeared to agree that this was a difficult approach to apply in practice! Regular readers of this blog will recall that the recently created Fair Standards Alliance enshrines this as one of its key principles for FRAND licensing (see here).
Finally, one company (and as this was a conference under Chatham house rules, I can’t reveal which one!) introduced an initiative to try and resolve some of the problems of SEP licensing in the forthcoming Internet of Things by creating a multiparty licensing platform to reduce transaction costs when licensing standardised technology. Guidance on the competition law treatment of patent pools can be found in the Technology Transfer Guidelines as discussed briefly here, and such initiatives have been tried in the past (including for 3G, where a pool arrangement was approved by DG Comp, when such things were still possible). It will be interesting to see how this one fares and we shall be looking out for more information…