Who is driving technological innovation today? Is it a few companies that focus only on development of interoperability standards, or is it an entire ecosystem of companies that develop standards, create products, and integrate new technologies in new and useful ways? While it may seem obvious that modern technological progress is not the province of just a few “lone wolf” companies, some policymakers seem to be focusing undo attention on a small subset of the innovation ecosystem that powers the modern economy, rather than taking a holistic view of how innovation happens in practice.
Specifically, a small group of companies whose business is focused on the monetization of patents included in technical interoperability standards (claimed to be standard-essential patents – or “SEPs”) continue to dedicate a surprisingly high amount of energy to perpetuate a claim that they as SEP licensors, and none others, are the modern economy’s only “innovators.” According to such SEP licensors, those with other business models, especially those who develop or utilize standardized technologies to compete, are mere “implementers” that simply take and use the fruits of their labor. Therefore, the argument continues, these few “innovators’ interests” should be prioritized as a matter of policy over the thousands of other inventers that innovate, develop, use, and build on standardized technologies.
By their logic, the only “real” innovation in a Tesla automobile is its ability to connect to the internet wirelessly via LTE and 5G wireless technology. And the only “real” innovation in a mobile MRI machine is the chip that connects it wirelessly to the internet.
Any purported dichotomy between “innovators” (monetizing SEP owners) and “implementers” (those who use standardized tech to create follow-on innovations that compete in the marketplace) is false and perpetuates a damaging narrative that mischaracterizes the source of innovation driving the IoT. This false premise ignores the very purpose of technical interoperability standards and harms the ability of other innovators, including members of ACT | The App Association, to develop new technologies that can greatly benefit consumers.
The App Association represents the global digital economy small business community. Our members are at the forefront of the mobile revolution in both rural and urban areas, and innovate for a variety of sectors including healthcare, agriculture, finance, and entertainment. We lead the $1.7 trillion annual global app economy that employs more than 5.9 million Americans.
Beyond the App Association’s community, countless household name companies spend tens of millions annually on research and development and capital expenditures, creating critical jobs for the economy. The App Association represents thousands of small U.S. and European businesses focused on developing the next generation of products and technologies based on standards that create a platform for interoperability among those innovations. For example, App Association member Podimetrics has developed the SmartMat™, a mat enabled by wireless connectivity and real-time big data analytics detect diabetic foot ulcers about five weeks before they present clinically, avoiding skin grafts and amputations. Other App Association members are large multinational companies that innovate and create value in multiple ways. For example, Intel, a household name and an American technology leader, recently blogged explaining how it contributes many inventive ideas to standards and invents numerous new products that implement those standards.
Likewise, App Association members make important technical contributions to develop the standards they implement. They innovate and invent on top of standards to create differentiated products that consumers and companies demand. Countless consumer and enterprise verticals—including but not limited to healthcare, automotive, finance, and public safety—devote significant R&D resources and assume considerable risk to bring compelling products to market.
For example, medical products are available to save lives because of (i) the physics, chemistry, mathematical, computational, and engineering innovations they embody, and (ii) the resources dedicated to ensuring their features and functionality comply with extensive government regulations and safety certifications.
Infrastructure standards likewise play an important role in increasing product functionality, but infrastructure SEPs are not more important nor should they be more costly to license than different patents related to innovations and inventions developed by other talented people. This stacking of innovations on top of standards is precisely how we realize the promise of the internet of things (IoT).
Standardization is critical for App Association members and their customers. Technologies are evolving to leverage standardized communications to provide, among other things, real-time analysis of data collected through sensors, enabling improved efficiencies in processes, products, and services. For example:
- In healthcare, new miniaturized and embedded connected medical devices are being developed that can automatically communicate bi-directionally in real-time. This capability enables a healthcare practitioner to monitor a patient’s biometric data as well as for the patient to be able to communicate with a caregiver in the event of a medical emergency. Cutting edge healthcare devices that utilize internet connectivity and sensors to enable real-time analytics for improved treatment decisions will include numerous patented technologies to enable both their medical functionality (e.g., blood glucose reading technology) and internet connectivity (antennae, processing, etc.).
- Wearable devices developed to monitor behavioral and biometric data from individual farm animals allow operations managers to gain faster and greater insights on the performance and health of their cattle, enabling them to pinpoint which animals may need specific attention or care. Specifically, the data allow managers to identify sick animals, which enables faster diagnosis and treatment, and prevents diseases from spreading by catching problems in their infancy while they’re still easily treatable, rather than allowing them to fester and cause harm to the entire herd.
- Unmanned aerial vehicles (UAVs), paired with software platforms, are being developed to allow public safety organizations to manage public safety and health crises such as wildfires. These UAV systems communicate wirelessly and utilize advanced data analytics to enable the best decisions to be made by public safety authorities in a timely way.
These and countless other examples from the App Association’s membership clearly represent critical innovations utilizing standardized technologies. De-prioritizing these inventions would undermine America’s innovation ecosystem, our digital economy, and the benefits of our patent system at a time when we really need to strengthen them.
Indeed, the need for building robust innovation ecosystems has never been greater. The ongoing COVID-19 pandemic, for example, cannot be overcome without new innovations that rely on the interoperability that open standards provide (e.g., contact tracing, GPS tracking, alerts, telemedicine, and even filling prescriptions). Such critical circumstances seriously undermine the false “innovator vs. implementer” argument and its call for the de-prioritizing the interests of the developer of the connected healthcare product.
New industries and markets, some utilizing wireless standards to provide additional functionality, are just now being created. In both developed and new markets, so-called “downstream” innovative technologies utilize these “upstream” standardized communication technologies to develop a panoply of unique and diverse products. This mixing and matching will bring with it the need for broad SEP license availability on truly fair, reasonable, and non-discriminatory (FRAND) terms.
The value of an invention, whether a SEP or a non-SEP, always is and must be determined by its own merits and the technical advancements it embodies – not by whether it is created by an upstream or a downstream producer. Standards typically incorporate numerous SEPs, sometimes thousands or even tens of thousands per standard. Complex technology products often incorporate hundreds of standards.
Of course, the App Association supports the well-established principle that SEP owners should be reasonably compensated for the use of their SEPs. Indeed, such compensation is at the center of the FRAND bargain: in exchange for inclusion of the patented technology into the standard, the patent holder agrees to license any implementer on FRAND terms. Potential users of the standard choose to use a standard because they feel confident that they will be able to compete based on their ability to license the patents essential to the standard on FRAND terms. Contributors to standards gain access to a broad market of easily identifiable potential licensees (anyone using the standard). The law always has required that patent compensation is based on the value of the patented invention as determined by its technical merits and scope, and not by the fact that it has been standardized. Such an approach ensures that the rewards for invention are appropriately distributed in the value chain.
In order to realize the true potential of IoT, it is essential that policymakers and all members of the SEP community—both patent holders and SEP users alike—realize that ingenuity comes in many different forms, and at different levels in the value chain. It is time, finally, to leave the self-aggrandizing and preposterous “innovator vs. implementer” differentiation behind. Invention is, in reality, occurring throughout the value chain and needs to continue for the United States lead in a 5G and IoT world.