The Institute of Electrical and Electronics Engineers (IEEE) is considering weakening its rules regarding Fair, Reasonable and Non-Discriminatory (FRAND) licensing of patented technology required to implement its standards due to concerns raised by a few larger patent holders. These companies argue the existing policy threatens future participation in the organization’s standards development efforts, but all available evidence suggests these concerns are overblown at best.
Adding to this, the U.S. Department of Justice (DOJ) Antitrust Division recently restored its 2015 Business Review Letter in support of IEEE efforts to update its patent policy by clarifying and strengthening its fair, reasonable, and non-discriminatory (FRAND) licensing requirements. The policy provided much-needed certainty on the meaning of the FRAND commitment that patent holders make when volunteering their technology for inclusion in an IEEE standard, including a “License to All” requirement and important clarifications on the availability of prohibitive orders, the valuation of standards-essential patents (SEPs), and other important matters.
At the center of the debate are updates IEEE made to its patent policy in 2015. These changes followed increasing attempts by some owners of SEPs to exploit the lack of specificity in FRAND agreements, particularly in cellular standards like (3G and LTE) to push the boundaries of accepted policy. The updates clarified the narrow set of circumstances when SEP holders can employ prohibitive orders (such as an injunction from a federal court) against someone using a standard, reiterated that the FRAND commitment required SEP holders to license to all willing licensees, and provided explicit guidance on what “reasonable” means in the context of royalty analysis.
The companies that have long been pushing the boundaries of FRAND commitments in order to maximize the rents they can extract from innovators that use standards unsurprisingly viewed the updated policy as a threat and fought it from the start. The policy limited some of these companies’ anti-FRAND tactics and their potential licensing revenue. They argued, without evidentiary support, the effect of these changes would be fewer participants in IEEE standard making processes; fewer patented contributions from those who do participate; and more uncertainty and confusion about FRAND license
After an unrelenting, multiyear corporate and political pressure campaign, the IEEE had no choice but to open a review of its patent policy. For companies whose profitability is dependent on SEP licensing revenue, IEEE’s 2015 patent policy was a threat to their profiteering ambitions. To preserve the continued participation in IEEE standardization processes, these companies argued that the IEEE should align its policy with ETSI, the European standards organization that manages cellular wireless standards like 3G and LTE.
The only problem: in the five (plus) years since the policy updates went into effect, there is zero evidence to support the catastrophic predictions and increasing evidence of the benefits of IEEE Standards Association’s approach in comparison to ETSI.
Total Technical Contributions to IEEE Standards Have Increased Since 2015
The research firm IPLytics analyzed technical contributions to the IEEE Standards Association before and after the policy updates and found a clear and consistent increase since the policy was adopted. After two years of declining technical contributions to IEEE standards in 2013 and 2014, total contributions rebounded after the new policy was enacted in 2015 and IEEE had a record number in 2017.
In the IEEE 802 working groups, which are responsible for Wi-Fi standards, technical contributions continued to increase after the policy update leading to a record number in 2018. This finding led them to conclude that “patent policy considerations have not been a significant factor in companies’ decisions about whether to invest in and submit technologies to IEEE 802 working groups.” Even in the most patent-heavy IEEE 802 working groups, IPLytics found that contributions increased in line with total technical contributions to all 802 working groups.
Uncertainty & Confusion in ETSI FRAND Terms Responsible for 75% of All SEP Litigation in Past 20 Years
One of the clearest indicators of uncertainty and confusion within contracts and other legal texts is the amount of litigation that they spawn. Litigation over SEPs in digital communications standards like LTE has grown exponentially in recent years, more than quadrupling between 2009 and 2017 alone according to analysis from darts-ip.
Source: data-jp
Additionally, IPLytics analyzed twenty years of worldwide SEP litigation, from 2001-2021, and found that more than 75 precent of that litigation was related to 2G, 3G, 4G and 5G standards. Meanwhile, just two percent of SEP litigation during the same time period was related to IEEE’s Wi-Fi standards.
IEEE is Delivering on its Mission & The True Goals of Standardization
Each standards setting organization picks the approach that fits its goals best. Time and time again, the IEEE’s approach has proven to be a better approach for delivering on the organization’s standardization goals and the well-established role of technical interoperability standards.
The goal of IEEE’s standards development process, according to its Standards Development Principles, is to develop technical standards that “enable innovation, and open new market opportunities to their users by allowing interoperability of products, services, and processes; and they create ecosystems that promote economies of scale and healthy competition. These attributes are essential to help ensure that markets remain open, allowing consumers to have choice and allowing new entrants to successfully enter markets.”
IEEE’s Wi-Fi standards unequivocally meet these goals. The dynamic ecosystem of companies that build Wi-Fi compatible products is unparalleled. Competition at every level of the Wi-Fi technology industry is fierce and startups are able to compete and thrive in the marketplace. Moreover, Wi-Fi is at the center of the Internet of Things and nearly every industry has adopted the standard for connecting their products wirelessly to the internet.
In 2020 alone, the Wi-Fi Alliance, which drives global Wi-Fi adoption and evolution through thought leadership, spectrum advocacy, and industry-wide collaboration, certified 8752 devices from 306 companies. These numbers actually downplay the size and scope of the Wi-Fi ecosystem because a large percentage of companies that build Wi-Fi compatible products don’t pursue certification through the Alliance.
IEEE’s requirement that SEP holders must license their patents to companies at both the product and component level allows companies with little experience in wireless networking or SEP licensing to integrate Wi-Fi into their products rapidly and seamlessly.
Keep in mind that maximizing the royalty rates for patent contribution has never been, and is not, the goal for a standardization processes. Companies that wish to maximize the competitive benefit or royalties from specific inventions have always had the option to keep them proprietary and compete in the marketplace. Contributing technology to standards has always been a choice to forgo those opportunities in favor of collaboration with competitors and customers to build a common technical foundation. The FRAND commitment was developed as an add-on to the standards process to ensure that anyone can access and use the standard while providing licensing reassurance for those patent owners that choose to monetize their patented contribution to the standard.
The evidence is clear, however, that the public arguments made against the IEEE’s updated policy are without merit. The updates have had no negative effects on participation or contributions of patented technology to IEEE standards and they helped ensure that IEEE’s Standardization Association continues to deliver on its mission. The IEEE-SA should put its mission and the Wi-Fi ecosystem first and reject the self-serving demands of a few patent profiteers.