ACT | The App Association (The App Association), a trade association championing small tech innovators, today (Wednesday) called on the European Commission to announce a prohibition on any form of use-based pricing of technology essential to the development of the internet of things (IoT).
The Commission is expected to publish a Communication on standard-essential patents (SEPs) in the coming weeks containing guidance on how they should be licenced to help foster the development of an IoT sector in Europe, which the Commission estimates could exceed €1 trillion to the European economy by 2020.[1]
It appears, however, the Commission is considering including use-based pricing in a list of accepted licencing models in the Communication. This would allow SEP patent holders to charge IoT developers higher fees to use their technology and deter investment and innovation — a serious mistake that could hamper, not help, the development of the IoT in Europe.
“The potential impact of the IoT is huge, not just in economic terms but for the way we live and work,” said Mike Sax, founder and chairman of the App Association during a breakfast debate in Brussels on Wednesday. “But that potential won’t be fully realised if obstacles to innovation are placed in its path.”
“Basing the price of a licence for an essential patented technology on how it is used is toxic to innovation. It isn’t fair or reasonable, and it discriminates against many tech firms and developers along the supply chain,” Sax continued.
In return for gaining access to a mass market, SEP-protected technologies are supposed to be licenced on fair, reasonable, and non-discriminatory (FRAND) terms.
Up to now, use-based pricing has only been applied to the licencing of communications technologies used in some smartphones and tablet computers, sparking many legal disputes all over the world.
The patent holders of these important enabling technologies are looking to maximize their licencing revenue by seeking to extend use-based pricing to the entire range of IoT technologies.
“To list use-based pricing in the Communication would be to endorse its use in Europe. This would give an unfair advantage to a small number of patent holders – companies like Qualcomm, Nokia, and Ericsson – when they negotiate the licensing of their communication chips with firms developing IoT applications. Many of these downstream developers are small firms or start-ups, including our members,” he said.
“Use-based pricing is a form of levy on innovation. For that reason, we strongly urge the Commission not only to exclude them from any list of acceptable licencing practises, but to also introduce a prohibition on its use in the area of IoT in Europe,” Mr. Sax said.
“The SEP holders’ efforts to get these types of licences accepted in the much broader world of IoT are a massive licencing grab that risks raising the price of IoT technologies and deterring innovation in Europe due to the cost uncertainties this licencing approach entails,” Mr Sax said.
Mr Sax was speaking at a breakfast conference in Brussels alongside prominent patent experts and policymakers including: Michał Boni MEP; Thomas Vinje, partner at the law firm Clifford Chance and chairman of its Global Antitrust Group; and Sébastien Deletaille, CEO of Real Impact Analytics, a Belgian scale-up specialising in telecom data, which hosted the event.
Mr Deletaille said: “The US and Asia are out-investing Europe two-to-one in digital networks, which means that Europe is already lagging behind these regions in terms of IoT development. Any initiative that will further widen this gap and prevent EU tech start-ups to profitably innovate in this field is likely to damage EU citizens’ future prosperity.”
[1] https://ec.europa.eu/digital-single-market/en/policies/internet-things